Counsel For The Official Committee of Unsecured Creditors of Innkeepers USA Trust, Et Al

ny-942574
MORRISON & FOERSTER LLP

1290 Avenue of the Americas
New York, New York 10104
Telephone: (212) 468-8000
Facsimile: (212) 468-7900
Brett H. Miller
Lorenzo Marinuzzi
Jordan A. Wishnew

Counsel for the Official Committee
of Unsecured Creditors of Innkeepers USA Trust, et al.

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
)
In re ) Chapter 11
)
Innkeepers USA Trust, et al., ) 10-13800 (SCC)
)
Debtors. ) Jointly Administered
)

DECLARATION OF LORENZO MARINUZZI IN SUPPORT OF THE
OBJECTION OF THE OFFICIAL COMMITTEE OF UNSECURED
CREDITORS TO THE LIMITED MOTION OF MIDLAND LOAN SERVICE,
INC. TO RECONSIDER FINAL ORDER AUTHORIZING THE DEBTORS TO (I)
USE THE ADEQUATE PROTECTION PARTIES CASH COLLATERAL AND
(II) PROVIDE ADEQUATE PROTECTION TO THE ADEQUATE
PROTECTION PARTIES PURSUANT TO 11 U.S.C. 361, 362 AND 363
Lorenzo Marinuzzi hereby declares as follows:

1. I am a partner at the law firm of Morrison & Foerster LLP, counsel to the
Official Committee of Unsecured Creditors in these Chapter 11 cases. I submit this
declaration in support of the Objection Of The Official Committee Of Unsecured
Creditors To The Limited Motion Of Midland Loan Service, Inc. To Reconsider Final
Order Authorizing The Debtors To (I) Use The Adequate Protection Parties Cash
Collateral And (II) Provide Adequate Protection To The Adequate Protection Parties
Pursuant To 11 U.S.C. 361, 362 and 363, which is being filed concurrently herewith.
ny-942574
2. Attached to this Declaration are true and correct copies of the following:
a. Exhibit 1: Excerpts from the September 8, 2010 transcript pertaining
to the contested cash collateral hearing before the Honorable Kevin
Gross in the Chapter 11 case of Caribbean Petroleum Corp., et al.
(Case No. 10-12553 (KG), Bankr. D. Del.).
b. Exhibit 2: Final Cash Collateral Order in Caribbean Petroleum Corp.,
et al., as entered by Judge Gross on September 10, 2010.

I declare under penalty of perjury that the foregoing is true and correct.
Executed at New York, New York on September 24, 2010.

__/s/ Lorenzo Marinuzzi____________________
Lorenzo Marinuzzi

Exhibit 1
1
2 UNITED STATES BANKRUPTCY COURT
3 DISTRICT OF DELAWARE
4 Case No. 10-12553(KG)
5 - - - - - - - - - -x
6 In the Matter of:
7
8 CARIBBEAN PETROLEUM CORP., et al.,
9
10
11
Debtors.
12
13
14
15
16
17
18
19
20
21 BEFORE:
- - - - - - - - - - - -x
United States Bankruptcy Court
824 North Market Street
Wilmington, Delaware
September 8, 2010
12:30 PM
22 HON. KEVIN GROSS
23 U.S. BANKRUPTCY JUDGE
24
25 ECR OPERATOR: GINGER MACE
1
2
1
2 HEARING re Debtors' Motion for Entry of Interim and Final
3 Orders (I) Authorizing Debtors to (A) Pay Certain Employee
4 Compensation and Benefits, and (B) Maintain and Continue Such
5 Benefits and Other Employee-Related Programs, (II) Directing
6 Banks to Honor Prepetition Checks for Payment of Prepetition
7 Employee Obligations and (III) Scheduling a Final Hearing
8 [Docket No. 4 - filed August 12, 210]
9
10 HEARING re Debtors' Motion for Entry of Interim and Final Order
11 (I) Authorizing Debtors to (A) Continue Using Existing Cash
12 Management System, (B) Continue Intercompany Transfers, and (C)
13 Maintain Existing Bank Accounts and Business Forms, (II)
14 Extending Time to Comply with 11 U.S.C. Section 345(b), and
15 (III) Scheduling a Final Hearing [Docket No. 5 - filed August
16 12' 2010]
17
18 HEARING re Debtors' Motion for Entry of Order Extending Time
19 Within Which Time to File Schedules and Statements [Docket No.
20 7 - filed August 12, 2010]
21
22
23
24
25
3
1
2 HEARING re Debtors' Application for Entry of an Order
3 Authorizing (I) Retention and Employment of Kurtzman Carson
4 Consultants LLC as Noticing, Claims, and Balloting Agent for
5 the Debtors and (II) Appointment of Kurtzman Carson Consultants
6 LLC as Agent of the Bankruptcy Court [Docket No. 56 - filed
7 August 19, 210]
8
9 HEARING re Debtors' Application for Entry of an Order Pursuant
10 to U.S.C. Sections 327(a) and 328(a), Fed. R. Bankruptcy. P.
11 2014 and Del. Bankr. L.R. 2014-1 Authorizing the Retention and
12 Employment of Richards, Layton & Finger, P.A. as Co-Counsel to
13 the Debtors, Nunc Pro Tunc to the Commencement Date [Docket No.
14 58 - file August 23, 210]
15
16 HEARING re Debtors' Application for Entry of an Order
17 Authorizing the Retention and Employment of Cadwalader,
18 Wickersham & Taft, LLP as Attorneys for the Debtors, Nunc Pro
19 Tunc to the Petition Date [Docket No. 59 - filed August 23,
20 2010]
21
22 HEARING re Debtors' Motion for Entry of an Order Establishing
23 Procedures for Interim Compensation and Reimbursement of
24 Expenses of Professionals [Docket No. 60 - filed August 24,
25 2010]
4
1
2 HEARING re Debtors' Motion for Entry of an Order Pursuant to 11
3 U.S.C. Sections 105(a) and 363(b) Authorizing the Payment of
4 Certain Franchise Taxes Owed to the State of Delaware [Docket
5 No. 91 - filed September 2, 2010]
6
8 Orders (I) Authorizing Debtors to (A) Obtain Postpetition
9 Senior Secured Financing, (B) Use Cash Collateral, (C) Grant
10 Limited Priming Liens and Superpriority Claims to the
11 Postpetition Lender, and (D) Provide Adequate protection to the
12 Prepetition Lender, (II) Scheduling a Final Hearing and (III)
13 Granting Related Relief [Docket No. 8 - filed August 12, 2010]
14
16 Orders (I) Prohibiting Utilities from Altering, Refusing or
17 Discontinuing Service, (II) Approving Debtors' Proposed Form of
18 Adequate Assurance of Payment, (III) Establishing Procedures
19 for Determining Adequate Assurance of Payment and
20 (IV)Scheduling a Final Hearing [Docket No. 6 - filed August 12,
21 2010]
22
23
24
25
5
1
2 HEARING re Debtors' Motion for Entry of (I) an Order (A)
3 Approving Bidding Procedures with the Sale of Substantially All
4 of the Debtors' Assets, (B) Authorizing Entry into Stalking
5 Horse Agreements and Approving Stalking Horse Protections, (C)
6 Approving Procedures Related to the Assumption and Assignment
7 of Executory Contracts and Unexpired Leases, (D) Scheduling
8 Auction and Sale Approval hearing, (E) Approving the Form and
9 Manner of the Sale Notice, and (F) Granting Certain Related
10 Relief, and (II) an Order (A) Approving the Sale of
11 Substantially all of the Debtors' Assets, (B) Authorizing the
12 Assumption and Assignment of Certain Executory Contracts and
13 Unexpired Leases, and (C) Granting Certain Related Relief
14 [Docket No. 9 - filed August 13, 2010]
15
16 HEARING re Puerto Rico's Treasury Department's Motion to
17 Transfer Venue to the United States Bankruptcy Court for the
18 District of Puerto Rico [Docket No. 55 - filed August 19, 2010]
19
20
21
22
23
24 Transcribed by: Sara Davis
25
80
CARIBBEAN PETROLEUM CORP., et al.
THE COURT: All right.
MR. MARINUZZI: It's two z's.
THE COURT: Yes.
1
2
3
4 MR. MARINUZZI: Good afternoon, Your Honor. We're
5 happy to report that we've made some progress on addressing
6 some of the issues that were raised by the committee in its
7 objection. But let's make no mistake about what this case is,
8 Your Honor. This is a sale in the Chapter 11 case of the pre-
9 petition secured creditors' collateral. That's what this case
10 is. And I've been in front of Judge Carey numerous occasions
11 and Judge Carey has said if you're going to sell your
12 collateral in my courtroom, you better be prepared to pay the
13 freight.
14 So let's just look at some of the modifications that
15 were made that the banks agreed to at our request. And let's
16 start with the inclusion and the carve-out of committee member
17 expenses. Your Honor, I've never ever had to argue that issue
18 with any lender. That's just to give up.
19
20
21
The timeline --
THE COURT: And they did, I think, right?
MR. MARINUZZI: Well, believe me, it was --
22 ultimately, yes. But there was a lot of discussion on all of
23 these points.
24 The timeline
25 THE COURT: Mr. Chehe is not easy.
81
1 MR. MARINUZZI: He is definitely not easy. I will say
2 that for Mr. Chehe, yes.
3 The timeline -- we never changed the outside date. We
4 just tried to make sense of it. From our perspective
THE COURT: Yes.
MR. MARINUZZI: why --
5
6
7 THE COURT: I agreed with you when I saw that. And it
8 does make sense now.
9 MR. MARINUZZI: Right. Because, again, this is a sale
10 of assets with a long sale timeline to maximize recovery for
11 the lenders and the plan process is secondary. That's changed,
12 thankfully.
13 As far as the fees, just order of magnitude, because
14 it sounds like a lot, but when you consider that the debtors
15 have budgeted for the months of December and January when we're
16 engaged in this plan process, 25,000 dollars for the
17 committee's financial advisor and 50,000 dollars for local and
18 lead counsel, it puts things into perspective. Our view is the
19 budget is still underfunded. This was -- take ten million
20 dollars and make it work and let's have a long sale process.
21 As Mr. Chehe advised the Court, we have proposed that
22 maybe the 506(c) waiver issue be addressed as part of the sale
23 hearing which is how we've done it in other cases where we
24 think the budget might be too skinny. So nobody is at risk.
25 If they funded the budget appropriately then they're not at
82
1 risk. We again think that that's an appropriate resolution
2 here.
3 Now, just a little bit of background information
4 cause I don't think it's -- it hasn't been volunteered by the
5 bank and it's certainly not in the pleadings or at least the
6 DIP motion.
7 Your Honor has to consider the background here. And
8 Banco Popular is owed 137 million dollars as of the petition
9 date. Now they acquired this position from the FDIC.
10
11
THE COURT: Yes.
MR. MARINUZZI: The FDIC took over for Western Bank.
12 And the obligations were transferred and contemporaneously with
13 that transfer, the bank and the FDIC entered into what's called
14 a loss sharing agreement. This is publicly available on the
15 FDIC's website. And looking at Banco Popular's public
16 disclosures, these are their numbers, they acquired 9.2 billion
17 dollars of Western Bank assets and assumed 2.5 billion dollars
18 of customer deposits and issued a note for 5.6 billion dollars.
19 Okay. So it looks to us like they bought these assets
20 including this loan which is an asset at a discount. We don't
21 know that. They haven't volunteered that. If we have to
22 figure it out, we will.
23 Now, the loss sharing agreement, as we understand it,
24 covers up to eighty percent of the bank's loss on enumerated
25 loans including this one measured against the face amount of
83
1 the loan. So they've effectively got from the FDIC a partial
2 guaranty depending upon what they paid for the loan. They also
3 have, as we understand it, a guaranty or -- Western Bank had a
4 guaranty from the ultimate equity holder here, Mr. Zeddy (ph.).
5 We understand, and the banks could correct me if I'm wrong on
6 that, but that also -- they've become the beneficiary of that
7 guaranty. So this bank who's having its assets sold in a
8 Chapter 11 case, funded with a ten million dollar budget that
9 they dictated, has, for its benefit, the FDIC loss sharing
10 agreement and a guaranty from Mr. Zeddy. It's not to say
11 they're all collectible but they have that.
12 Unsecured creditors, on the other hand, have the hope
13 that there's a homerun at the sale or that the committee
14 uncovers certain actions that are not part of the bank's
15 collateral. Now the bank says they have a lien on everything.
16 What do they not have a lien -- avoidance actions. They don't
17 have a lien on avoidance actions.
18 Now, in a case like this, where that's the only asset
19 potentially that's available to unsecured creditors, unsecured
20 creditors have to fight to preserve that asset. And whether
21 it's for the ten million dollar DIP or adequate protection
22 payments or for all of their secured positions, it doesn't
23 matter. Once we lose those assets and make them suggest to the
24 secured creditors' adequate protection and DIP liens, we've
25 lost them. Because effectively what we're doing is we're
84
1 investigating causes of action that they don't want us to do,
2 they don't want to pay for at least, to effectuate a recovery
3 for our constituents and then they're going to get the first
4 bite of the apple. And as we've argued in front of Judge
5 Walrath in cases where, for example, the debtors have tried to
6 sell those avoidance actions, now they belong to the estate and
7 the unsecured creditors. As we also argued in front of Judge
8 Chapman last week and were successful in that argument where
9 the debtors were proposing to give superpriority claims that
10 attach to avoidance actions as well as liens to cash collateral
11 lenders. We said, Your Honor, you can't do that in a case
12 where the only assets may be avoidance actions. And she
13 agreed.
14 So we go back to where we are. Your Honor
1
we're
15 happy that these concessions have been made. As I think I've
16 illustrated, some of them are just gimmees. Some of them still
17 don't work. To the extent the bank wants a 506(c) waiver, if
18 our financial advisors say the budget makes sense, and it
19 didn't as of yesterday because that additional funding was
20 dependent on additional sales proceeds which may or may not
21 actually happen during the case, then we're happy to concede
22 our 506(c) waiver. But I don't get that clarity. I don't get
23 that comfort from our financial advisors. I can't do that and
24 leave the estate professionals and other administrative
25 creditors at risk.
85
1
2
On the avoidance actions, Your Honor, I think our
papers speak to the issue. It's very important to the
3 unsecured creditors that those remain not subject to the
4 superpriority claims of Banco Popular and its DIP liens. Thank
5 you, Your Honor.
6 THE COURT: Thank you, Mr. Marinuzzi. Thank you for
7 highlighting some of these issues which have been resolved and
8 I think are an improvement and leave us with just the two
9 principle issues. Anyone else? All right.
10
11
12
13
14
15
16
They're difficult issues. Oh, I'm sorry.
MR. SMITH: I'm sorry, Your Honor.
THE COURT: Please.
MR. SMITH: I was just coming just in case --
THE COURT: Oh.
MR. SMITH: -- this isn't --
THE COURT: You can help me. No. Actually, I think I
17 have to do -- basically rule here. You know, I am -- it is
18 rare, you knowr that I'm not a gambler. And I'm not going
19 to gamble with other people's money. But at the same time
20 and unlike Chief Judge Carey, it's not really my sort of
21 blanket sort of doctrine that avoidance actions be available.
22 But I do think that in this case, it is appropriate. I
23 recognize that the bank may not be willing to lend without
24 those liens on the avoidance actions. But I'm not prepared to
25 grant those liens on the avoidance actions. And as far as the
86
1 506(c} waiver is concerned, I think that the committee's
2 suggestion that that await the sale is appropriate here. And
3 all parties would reserve their rights. So I will not approve
4 the financing as proposed at this point. And I'm not making
5 that a general blanket philosophy or doctrine.
6 But in this case where there really is nothing -- and
7 it's obvious that there may be nothing for unsecured creditors.
8 I think that they are entitled to more than just the
9 opportunity to investigate and the opportunity to participate
10 in the case. And that unsecured creditors should at least have
11 some opportunity for some recovery. And I think that -- I
12 recognize that the bank may not loan without those liens. But
13 I am prepared not to approve the financing otherwise. And
14 again, reserving on the 506(c} waiver as this committee has
15 suggested here.
16 I've had a couple of bad results lately where I
17 haven't
18
19
20
MR. CHEHE: Yeah.
THE COURT: -- stuck to those guns.
MR. CHEHI: Your Honor, there's a big difference
21 between a 506(c} waiver and the avoidance action.
22
23
THE COURT: No, no, I understand.
MR. CHEHI: Yeah, yeah. The 506(c} waiver I could
24 almost assure Your Honor, that that will be very difficult for
25 this lender to provide anything. We can go back to them and
106
1 THE COURT: You just said that would be provided to me
2 by Friday.
3
4
5
6
7
8
9
10
MR. SMITH: That would be provided.
THE COURT: I'm sorry.
MR. SMITH: Thank you, Your Honor.
THE COURT: Yes, all right. We'll stand in recess.
(Recess from 2:55p.m. until 3:49p.m.)
THE COURT: Please rise.
THE COURT: Thank you, everyone. Please be seated.
Thank you. I'm sorry if I've delayed you. I was trying to
11 resolve something else in another case.
12
13
14
MR. CHEHI: Very good, Your Honor.
THE COURT: Mr. Chehi.
MR. CHEHI: Yes, sir. We can report to the Court that
15 we're authorized to report that our client is willing to fund,
16 in the absence of having liens or superpriority claims, and the
17 like, on avoidance actions. Provided that we receive a 506(c)
18 waiver upon entry of the final order.
19 And as we understand 'it, the committee is agreeable to
20 the same assuming that they have a review of the budge in a
21 form satisfactory to them reflecting the concessions we made on
22 the professional fees and the shifting of the 100,000 dollars
23 of our adequate protection payment budgeted amount to payment
24 of those professional fees. And the order is going to,
25 obviously, have to be conformed to the satisfaction of all the
1 parties, and that would be submitted on certification of
2 counsel.
107
3 And I believe it has to be submitted and entered by no
4 later than Friday. So we were --
5 THE COURT: Friday's not a problem, or I can reach out
6 to another Judge, perhaps, to sign. But I'm always a little
7 reluctant to do that. And they may be, themselves.
8 MR. CHEHI: I think that by Friday morning, Your
9 Honor, you should --
10
11
12 transom.
13
14
15
16
17
THE COURT: Friday morning.
MR. CHEHI: have something coming across the
THE COURT: I'll be in early and I'll get it --
MR. CHEHI: Not too early. But --
THE COURT: It will hit the docket early.
MR. CHEHI: Very good.
THE COURT: Very good, that's very nice. But, Mr.
18 Marinuzzi, let me just hear your confirmation.
19 MR. MARINUZZI: Yes, Your Honor. Thank you very much
20 and thank you for the time.
21 We've yet to see the budget that's been described to
22 us. We hope to have it shortly and we'll mark up the order.
23 Just to clarify a point. As Mr. Chehi described,
24 100,000 dollars was being moved from the line entry for their
25 professional fees and to the committee professional fees, but
108
1 they were increasing the amount of the payment from -- by
2 150,000 dollars in the aggregate, so there's still a delta
3 there. And what the budget will reflect, I'm advised, is a
4 footnote that indicates to the extent there are nonbudgeted
5 sale proceeds received, or nonbudgeted revenue received by the
6 company, that that amount will go to pay the shortfall in the
7 interim.
8
9
THE COURT: That makes
MR. CHERI: And to the extent that it's proceeds of
10 our collateral, which we would expect it would be, we're
11 agreeable to that, Your Honor.
12 THE COURT: Oh, wonderful. All right, Mr. Chehi,
13 thank you.
14
15
MR. CHERI: Thank you.
THE COURT: I appreciate everyone's efforts. And I
16 think it makes an awful lot of sense for this debtor to have
17 this happen. And I'm pleased.
18 MR. MARINUZZI: So are we. Thank you for your time,
19 Your Honor.
20
21
UNIDENTIFIED SPEAKER: Thank you.
THE COURT: Absolutely. So I will look for those
22 orders Friday morning.
23 MR. SMITH: Yes, Your Honor. I was just going to say
24 the bidding procedures order will come as well.
25 THE COURT: Excellent. Counsel, thank you very much.

Exhibit 2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRJCT OF DELAWARE
----------------------------------X
'""
Chapter 11
CARIBBEAN PETROLEUM J!l,,
1
Case No. 10-12553 (KG)
Debtors.
Jointly Administered
Ro: Uo;:kct Nos. 8 ond 3l -r J '/J
--------------------------X
FINAL ORDER (I) AUTHORIZING DEBTORS
TO (A) OBTAIN POSTPETITION SENIOR SECURED
FINANCING, (B) USE CASH COLLATERAL, (C) GRANT LIENS AND
SUPERPRIOIUTY CLAIMS TO THE POSTPETITION LENDER, AND (D)
PROVIDE ADEQUATE PROTECTION TO THE PREPETITION LENDER
AND (ID GRANTING RELATED RELIEF
Upon the motion (the "Motion") of Caribbean Petroleum Corporation ("CPC"),
Catibbean Petroleum Refining L.P. ("CPR''), and Gulf Petroleum Refining (Puerto Rico)
Coiporalion ("GPC," and together with CPC and CPR, the "Debtors" or the "ill!::
Borrowersn), each as debtor and debtor in possession in the above-captioned cases (the
"Cases"), seeking, pursuant to sections 105, 361, 362, 363{c)(2), 364(o)(l), 364{c){2),
364{c)(3), 364{ d){ 1) and 364(e) of title 11 of the United States Code, 11 U.S C 1 0 I, e/
seq. (the "Bankruptcy Code"), and Rules 2002, 4001 and 9014 of the Federal Rules of
Bankruptcy Procedure (the "Bankruptcy Rules"), this Court's authoriza!lon:
(a) for the Debtors to obtain credit and incnr debt under a debtor in
possession senior secured superpriority priming non-revolving, multi-draw credit sob--
facility under the Revolving Loans (as defined in the Prepetition Loan Agreement (as
defined below)) (the "DIP Facilitv") from Banco Popular de Puerto Rico ("BPPR") in its
capacity EIS lender under the DIP Facility (the "Postoetirion Lender") in an aggregate
1
The Oebto" in tilese chapter II oases (along with lhe last four digits of each Mtor's foderoltax
identifioalion numb01) are: Caribbean Petroleum Co)])oration (7Sl6), C"ibbean Petroleum Refining L P
(14ll), and Gulf Refining (Puerto Rioo) Cor-poration (1417) The service oddtess for all D<btors
is: PO Box 36198&, San Juan, l'ueno Rico 00936.
Rlfll6015!l' I
principal amount up to $10,000,000 to be made available on the terms and conditions set
forth in definitive documentation evidencing the DlP Facility consistent with the DIP
Term Sheet, including, without limitation, an amendment to the Prepetition Loan
Agreement (as defined below) (os ma.y be amended, amended and restated, modified or
supplemented from time to time and including all exhibits thereto, the "Amendment'')
attached hereto as Exhibit I ,
1
and each DIP Borrower's obligation to pay the principal of,
and interest on, the loans (each, a "DlP Loan" and collectively, the "DIP Loans'') and
other obligations under the DIP Facility evidenced by a promissory note duly executed
and delivered by all of tbe DIP Borrowers substantially in the fonn of Exhibit B to the
Amendment (the ''Note," and togetha with the Amendment and all other document!;
entered into in connection with the DIP Facility, the "DIP Documents"), with such DIP
Facility and all DIP Obligations (as defined below):
(i) having superpriority administrative claim status, pursuant
to section 364( c)[l) of the Bankruptcy Co.de, over any and all administrative expenses of
!he kind specified in sections 503(b) and 507(b) of the Bankruptcy Code; and
(ii) being secured, pursuant to section 364(d)(l) of the
Bankruptcy Code, by perfected first priority, priming security interests and liens in and
on the Collateral (as defined below), not subject to subordination or any other liens,
including without limitation the prepetition liens (the
Liens'') granted to or for the benefit of BPPR
certain Loan and Security Agreement, dated as
modified or supplemented from time to
between the Prepetition Lender (as assignee
as bonowers, and certain guarantors, and the other
defined below), which liens in each II
subordinate tot n 1 DIP Liens
Liens shall be junior to
under that
'
(iii) being se\:ured, pursuant to section 364(c)(2) of the
Bankruptcy Co.de, by perfected first priority security interests and liens, not subje\:t to
subordination, in and on all Collateral (as defined below) that is not otherwise subject to a
valid, perfected and unavoidable lien existing as of the Petition Date (as defined below);
""'
(iv) being secured, pursuant to section 364(c)(3) of the
Bankruptcy Code, by perfected security interests and liens, not subject to subordination,
in and on all Collateral that is subject to the Pennitted Prepetition Liens (as defined
below), junior to such Permitted Prepetition Liens;
in each case subject only to the Carve-Out (as defined below) and any exceptions for
which the Postpetition Lenda has provided it!; prior written consent.
' Unl..., olhcrwise indiomed, copitati""d lellllS used bur not definod herein halt have the meaning
ascribed to uch lenns in the AmOJidmenr.
2
RlF I ) 6 0 / ~ i l I
-------------------------------------------------------------
(b) for the Debtors to use the cash collateral (as defined in section 363
of the Bankruptcy Code, the "Cash Collateral'') pursuant to sections 361, 363 and 507(b)
of tbe Bankruptcy Code, and all other collateral on which the Prepetition Lender has a
lien or security interest (together with the Cash Collateral, the "Prepetition Collateral")
and pursuant to sections !OS, 361,362, 363 and 364 of the Bankruptcy Code provide to
the Prepetition Lender the adequate protection set forth in the DIP Term Sheet of, and
pr()\ection against any diminution in, the value as of the Petition Date (as defined below)
of the Prepetition Lender's interests in the Ptepetition Cul!ateral resulting from the
implementation of the DIP Facility and the priming of the Prepetition Lender's liens on
the Prepetition Collateral to secure the DIP Facility as set forth herein, the use of the
Ca:;h Co!Iateral and the use, sale"' lease by the Debtors ("r other decline in value) of the
Prepetition Collateral and the imposition of the automatic stay pursuant to section 362 of
the Bankruptcy Code;
(c) modification of the automatic stay to the extent hereinafter set
forth; and
(d) the granting of certain related relief.
The Final Hearing having been held by this Court on September 8, 2010 and up(ln
the record made by the Debtors at the Final Hearing and after due deliberation and
consideration and sufficient cause appearing theref(lr;
IT IS FOUND, DETERMINED, ORDERED AND ADJUDGED, that:
1 . Pelilion. On August 12, 201 0 (the "Petition Date"), each Debtor filed a
volunt111y petition under chapter 11 of the Bankruptcy Code. The Debtors continue to
operate their business and manage their properties as debtnrs-in-possession pursuant to
sections 1107(a) and ll08 of the Bankruptcy Code. No request has been made for the
appointment of a trustee or an examiner in the Cases. The Cases are being jointly
administered for procedural purposes only under Case No. 10-12553 (KG).
2. Juriodlc!ion. This Court has core jurisdiction over the Cases, this Motion,
and the parties and property affected hereby pursuant to 28 U.S.C. l57(b) and 1334.
Venue is proper before this Court pursuant to 28 U.S.C. 1408 and \409.
3
RlFil6117!il I
3. Interim Hearing. An interim hearing on the Motion was held on
August 16,2010 (the "Interim Hearing") pursuant to which this Court entered an interim
order (Docket No. 32) (the "Interim Order") approving, among other things, the DIP
Facility on an interim basis and authorizing the Debtors to obtain credit pursuant to the
DIP Tenn Sheet (as defined in the Interim Order and attached to the Amendment as
Exhibit A) and the Interim Order np to an aggregate principal amount of $3,663,500.
4_ No/ice- Notice of the Motion, the relief requested therein and the Final
Hearing was served by the Debtors on (i) the United States Trustee for the District of
Delaware (the "US Trustee"), (ii) the holders of the thirty largest unsecured claims
against the Debtors on a consolidated basis, {iii) each of the Debtors' prepetition secured
lenders, (iv) the Securities and Exchange Commission, {v) the United States
Environmental Protection Agency, {vi) the Internal Revenue Service, and (vii) the United
States Department of Justice. Under the circumstances, the notice given by the Debtors
of the Motion, the relief requested therein, the Interim Hearing and the Final Hearing
constitutes due and sufficient notice thereof, complies with Bankruptcy Rules 4001(b)
and (c), and no further notice is necessary or required.
5. Commillee. On August 26, 2010, the U.S. Trustee appointed an Official
Committee of Unsecu1ed C1editors (the in the Cases pursuant to
Bankruptcy Code Section 1102.
6. Objections. All objections to the e11try of this Order, if any, are resolved
hereby or, to the extent not resolved, are overruled.
7. Amendment. The DIP Facility is and shall be, and shall be deemed to be
and shall be treated for all purposes as, a sub-credit facility under the revolving loan
4
Rlfl JW1l'IJ'' I
facility of the ?repetition Loan Ag.eement pursuant to the Amendment. The only
persons or entities liable for any repayment obligations incurred by the Debtors for funds
advanced under the DIP Facility shall be the D e b t m ~ and any successor chapter 7 or
chapter II trustee for any of the Debtors. The Guarantors and Personal Guarantors (each
as defined iu the DIP Term Sheet) shall incur no additional obligations as a result of the
DIP Facility, this Order, the DIP Term Sheet, and the Amendment: and the Debtors'
agreement to the foregoing and incurrence of obligations thereunder shall not impair or
reduce any obligations of the Guarantors and Personal Guarantors in respect of the
?repetition Loan Agreement and amounts owed to the Prepelition Lender under the
?repetition Loan Agreement as of the Petition Date. The DIP Facility and related
amendments to be performed to the ?repetition Loan Agreement by the parties to the DIP
Facility and Amendment are not intended to constitute an extinctive novation ("novaci6n
extintiva'') of the obligations and undertakings of any of the parties undc1 any of the
Prepetition Loan Documents (as defined below), as amended to date, and each of the
Debtors hereby agrees, consents to, confirms and acknowledges the foregoing.
8. Failure by the Debtms and the Postpetition Lender to execute and deliver
the Amendment shall not release the Debtors flom any of their obligations under the DIP
Facility, the DIP Term Sheet, the Note or this 01der.
9. Debtors' S!ip!1/rJiion5- Without prejudice to the rights of any other party
(but subject to the limitations thereon contained in paragraph 34 below), the Debtors
jointly and severally admit, stipulate and agree that:
(a) as of the Petition Date, (i) the DebloiS we1e truly and justly
indebted and liable to the ?repetition Lender, without defense, counterclaim or offset of
5
RlFilWJlilv I
any kind, in the aggregate principal amount of approximately $137 million in respect of
loans made by the ?repetition Lender pmsuant to, and in accordance with the tenns of,
the ?repetition Loan Agreement and Ielated documents, including without limitation, all
Financing Agreements and Security Agreements (each as defined in the ?repetition Loan
Agreement) and all other related agreements, documents and instnnnents executed and/01
delivered in cormection therewith (all of the foregoing as all of the same have heretofore
been amended, supplemented, modified, extended, renewed and/or replaced from time to
time before the Petition Date, collectively, the "Prepetition Loan Documents''), plus
accrued and unpaid interest thereon, fees, expenses (including attorneys fees and legal
expenses) and other obligations incuued in connectirm therewith as pr()Vided in the
Prepetition Loan Documents (collectively, the and
(b) the P1epetition Obligations constitute the legal, valid and binding
obligations of the Debtors, enforceable in accordance with their terms (other than in
reospect of the stay of enforcement aising from section 362 of the Bankruptcy Code); and
(c) the Debtors shall not assert any offsets, defenses or counterclaims
to any of the Prepetition Obligations, no portion of the Prepetition Obligations is subject
to avoidance, recharacterization, tecovery or subordination pursuant to the Bankruptcy
Code or applicable nonbankruptcy law !llld the Obligations constitute allowed
secured claims; and
(d) the Debtors hereby forever release, effective upon entry of this
Order, but subject to closing of the DIP Facility, any claims, counterclaims, causes of
action, defenses or setoff rights, whether arising under the Bankruptcy Code or olheTwise,
against the Prepetition Lender and its affiliates, agents, officers, directors, employees,
6
attorneys and advisors with respect to the Prepetition Obligations and hereby waive,
effective upon entry of this Order, but subject to closing of the DIP Facility, any right the
Oebtws may have to challenge or object to the ?repetition Obligations or the security for
the ?repetition Obligations, and to bring or pur:sue any claims, objections, challenges
and/or causes of action arising out of, based upon or related to the ?repetition LoiD
Ag,eement or otherwise; and
(e) liS of the Petition Date, the liens and security interests granted to
the ?repetition Lender pur:suant to and in connection with the ?repetition Loan
Documents (including, without !imitation, all security agreements, pledge agreements,
mortgages, leasehold mmtgages, deeds of trust and other security documents executed by
any of the Debtors in favor of the ?repetition Lender) are (i} valid, binding, perfected,
enforceable (other than in respect of the stay of enforcement arising from IICCtion 362 of
the Bankluptcy Code) first priority liens on and security interests in the ?repetition
Collateral, (ii) not subject to avoidance, recharacterization or subouiination pursuant to
the Bankruptcy Code or applicable non bankruptcy law, and (iii) subject only to (A) valid,
perfi:cted and unavoidable liens permitted under the Prepetition Loan Documents to the
extent that such pemriued liens are senior to the liens of the Prepetition Lender on the
Preperition Collateral in existence on or as of the Petition Date, and (B) s u ~ j e c t to the
!ntercreditor Agreement (as defined below) and to the extent valid, perFected, and
unavoidable, the liens gmnted to ond for the benefit of Firstbank Puerto Rico (together
with its successors and assigns, "Firstbonk"), as lendei under that certain Loan
Agreement by and between Firstbank and CPR, dated as of December 2, 1998 (as
atnended, restated, modified or supplemented from time to time, the "Fiistbank
RLr-l l60ll!lY I
Preoetition Loan Agreement," together with other related documents, the "Firstbank Loan
Documents") held as of the Petition Date on the dock property and pipelines of CPR as
set forth in that certain mortgage recorded at page 165 of volume 191 of the Regishy of
the Property of Guayuabo, in each instance, only for so long as and to the extent that such
liens set forth in clause (A) and (B) are and remain outstanding (clauses (A) and (B)
together, the "Permitted Prepetiticn Liens");
1
and
(f) the Prepetition Lender {as assignee ofWestembank Puerto Rico)
and Firstbank are parties to that ce1tain lntercreditor Agreement, dated as of March 24,
2003 (the "lntercreditor Agreement"), which lntercredilor Agreement is in full force and
effect, is a binding obligation of the parties thereto, is enforceable in these Cases pursuant
to section 51 O(a) of the Bankruptcy Code and governs the respective rights, obligations
and ptiotities of the parties thereto with respect to the matters referred to therein; and
(g) the ?repetition Lender shall not be required to file any proof of
claim in these Cases with respect to any obligations under the ?repetition Loan
Agreement, the Debtors' acknowledgements set forth in this paragraph 9 shall be deemed
a timely filed proof of claim on behalf of the ?repetition Lender on account of the
obligations under the ?repetition Loan and any order entered by the Court in
relation to the establishment uf a bar date in any of the Cases will so provide.
10. The Debtors juintly and severally amungst themselves acknuwledge,
represent, covenant, and agree with the Postpetition LendeJ that (i) the Debtors'
obligation to pay in full the uutstanding balance of principal of the loans and any other
' Nothing herein sholl oonstitute o finding or ruling by this Cou<l that the Peomitted ?repetition
L.oens re valid ond perfected Moreoer. any party in int<rest including but not limited to the Debtors, the
Peslpetition Lender, the Prepetition Lend01, Flrstl>ank and tho Committ<e (as defined below) may chollenge
the validity, p<rfe<liott and extent of any u<h lien or "'curity interest
8
Rl Fl JWJ>Ilv I
- ------ --- ---------------------'
sums due to the Postpetition Lender under the DIP Facility and the Amendment and the
other DIP Documents executed by the Debtors in connection thereto, including, without
limitation, accrued interest under the DIP Facility, is valid, binding and enforceable in all
respects; (li) the Debtors' obligations under the DIP Facility and the Amendment, as well
as any and all of the Debtors' other obligations under any of the ()!her DIP D<lcuments to
which they are a party in C<Jnnection with the DJP Facility and the DIP Documents are
valid, binding and enforceable in all respects; and (iii) the Debtors' obligations to the
Postpetition Lender under the DlP Documents are absolute and unconditionaL
11. Each of the Debtors hereby jointly and severally amongst themselves
ratifies, reaffirms, confirms, consents to and acknowledges all the terms, priority and
conditions of all security interests, mortgages or liens in or on the Collateral (as defined
below) provided for in the DIP Documents and the Debtors' obligations under such
documents, and further acknowledges that the Collateral (as defined below) secures and
shall continue to S!lcme, aU of the Debtors' past, present 11nd future obligations to the
Postpetition Lender under the DlP Facility, the DIP Documents, the Interim Order and
this Order. Each of the Debtors hereby agrees that all of the terms and conditions of the
DIP Facility and the DIP Documents are hereby ratified and restated in all respects.
12. Fi11dlngs Regarding /he DIP Facility.
(a) Good cause has been shown for the entry of this Order
(b) The Debtors have an immediate need to obtain the DIP Facility
and US!l the proceeds of the DIP Loans and the Prepetition Collateral, including the Cash
Collateral, for the pmposes and on the terms set forth in the Amendment and the DIP
Term Sheet in order to permit, among other things, (i) the marketing for sale of
9
RH1l607SB.lv I
substantially all assets of the Debtors (the "363 Sale") and effectuation of the 363 Sale;
(ii) catl'ying costs and limited startup costs attendant to the rehabilitation of tanks 10 I,
!02, 103,201 and related infrastructure located at the Debtors' tank farm in Bayam6n,
Puerto Rioo that are necessary to restore sef'lice to the Puerto Rico Electric Power
Authority (collectively, the in accordance with the Budget (as defined
below); provid!'d, .!1Jm the DIP Loans, Cash Collateral and/or Collateral (as defined below)
shall be used for the Rehabllitation (A) only in a manner satisfactory and agreeable to the
Postpetition Lender and the Debtors and (B) subject to the consent of the United States
Environmental Protection Agency; provided, further, that the DIP Loans, Cash Collateral
and/or Collateral may not be used for the Rehabilitation if such Rehabilitation would
reasonably be eXpected to result in administrative costs and expenses nat pravided far in
the Budget (as defined below); (iii) payment of the Postpetititm Lender's monthly interest,
out-nf-pocket costs, fees, and expenses related to the DIP Facility; (iv) employee
and general corporate purposes of the Debtors during the pendency of the Cases; (v)
payment of, or escrows/reserves for, budgeted pwfessional fees of counsel and financial
advisors to the DJP Borrowers, and the Committee incurred in connection with the
administration and prosecution of the Cases in accordance with the Budget (as defined
below); (vi) payment of the Adequate Protection Payments (as defined below); (vii) the
adequate assurance deposit for the Debtors' utility providers, in an amount ordered by the
Court (the Assurance Deposit''); Wid (viii) payment of quarterly fees to the
U.S. Trustee, in each instance subject to the Limitations (as defined below). The
Debtors' use of the Prepetition Collateral (including the Cash Collateral) is necessary in
mder to ensure that the Debtors have sufficient working capital and liquidity to preserve
10
l607l!l '
and maintain the value of their assets, to conduct an orderly sale process, and to propose
and confinn a liquidating chapter 1 I plan to maximize the value Clf the Debtors' estates
for the benefit of creditors,
(c) The Debtors are unable to obtain financing on more favorable
tenns from sources other than the Postpetition Lender under the DIP Documents. The
use of Cash Collateral alone would be insufficient to meet the Debtors' immediate
postpetition liquidity needs. The Debtors are unable to obtain the required funds (i) in the
forms of (A) unsecured credit or debt allowable under section 50J(bX1) of the
Bankruptcy Code as an administrative expense, pursuant to section 364(a) or (b) of the
Bankruptcy Code, (B) unsecured debt having the priority afforded by section 364( c)(l) of
the Bankruptcy Code, or (C) debt secured only as described in section 364(c)(2) or (3) of
the Bankruptcy Code or (ii) on te:rms more favorable than those offered by the
Postpetition Lender under the DIP Docwnents and this Order.
(d) The terms of the DIP Documents and the use of Cash Collateral are
fair, masonable, the best available under the circumstances, and reflect the Debtors'
exercise of prudent business judgment consistent with their fiduciwy duties, and the DIP
Loans provided for in the DIP Docwnents constitute reasonably equivalent value and fair
consideration.
(e) The DIP Documents and the use of Cash Collateral have been the
subject of extensive negotiations conducted in good faith and at am1 's length among the
Debtors, the Postpetition Lender and the Prepetition Lender, and all of the Debtors'
obligations and indebtedness a:rising under, in respect of or in connection with the DIP
Facility, including without limitation, all DIP Loans made to the Debtors pursuant to the
II
RL H Jlil.lllllv I
DIP Facility and the DlP Obligations
4
shall be deemed to have been extended by the
Postpetition Lender in "good faith" as that term is used in section 364(e) of the
Bankruptcy Code and in express reliance upon the protections offered by section 364(e)
of the Bankruptcy Code, and shall be entitled to the full protection of secticn 364(e) of
the Bankruptcy Code in the event that this Order or any provision hereof is vacated,
reversed or modified, on appeal or otherwise.
(f) The Debtors have prepared and delivered to the Postpetition
Lender and the Prepetition Lender a budget, which is annexed hereto as Exhibit 2 (the
"Budget") and incorporated herein. Such Budget has been thoroughly reviewed by the
Debtors and their management and sets forth, among other things, the projected
infonnation fnr the periods cDvered thereby. The Debtms represent that the Budget is
achievable in accordance with the tenns of the DIP Documents and this Order and will
allow the Debtors to operate at all times during these Cases without the accrual of unpaid
administrative expenses. The Postpetition Lender is relying upon the Debtors'
compliance with the Budget in accordance with the DIP Documents and this Order in
detennlnlng to enter into the postpetition financing arrangements provided for herein.
'As llS<d in the DIP Tettn Sheet, the Amendment, the other DIP O<>euments, thls Order and the
Final Order and ony certificate or other docurnont made or delivered pllrsuant here!o or thereto, the term
"DIP Oblialions m,.ns (o) the due and punctual poymenr by tile DIP Borrowers of (i) the unpoid
prlncipol omount of ond Interest on (including interest aocn.ting after lhe maturity of !he DIP Loans (os
defined below) and interost aoc:rulng after tho commencement of any <ase or proceeding by m- against o
DIP Borrower under ""Y fede!al or sto!e bankruptcy, Insolvency, rueivorship or similar low, or
not alloW<d In such case or proceeding) on the DIP loons (os defined and when due, whether.r
maruri!y, by acceloration or othorwi .. , and (ii) oil othet mon.rary oblig.rions, including foes, cos",
ond indemnities, whether primory, secondaty, dire<!, indtrO<t, ab,olute or fixed or
otherwise, of any DIP Borrowet 10 !he Postperition Lender under !he Amondmont, the DIP Term Sheer, the
o!l>er DIP Documents, tho lntertm Or<lor and !his Ordet, and (b) the due and punoruat payment and
perfmmanoe of all covenants, agreements, obligations ond liobilitlos of any DIP Borrower to the
l'oS!peti!ion lendor under 01" purSuont to tho Amondment, the DIP Term Sheet, the other DIP Documen!,
the lnrerim Order and this Or<ler
l2
(g) The Debtors have requested immediate entry of this Order
pursuant to Bankruptcy Rules 400\[b)(l) and 400I(c)(2). The ability of the Debtors to
mwdmize the value of their estates in an orderly liquidation fur the benefit of their
creditors under chapter 11 of the Bankruptcy Code depends upon the obtaining
postpetition financing, as provided for in the DIP Documents, and the use of Cash
Collateral. Absent granting the relief set forth in this Order, the Debtors' estates will be
immediately and irreparably harmed. Consummaticm of the DIP Facility and the use of
Cash Collateral in accordance with this Order and the DIP DO<:uments is therefore in the
best interest of the Debtors' estates.
(h) The Prepetition Lender has GOnsented and agreed, subject to the
terms and conditions contained herein and in the DIP Documents, that the ?repetition
Loan Agreement Liens shall be subordinate and junior to tbe DIP Liens.
13. Authorization of the DIP Facility and the DIP Term Sheet.
(a) The DIP Tenn Sheet and the IIIUiexes and exhibits thereto are
hereby approved as set forth in this Order and the Debtors are hereby authorized to obtain
credit pmsuant to the Amendment and this Order, up to an aggregate principal amount of
$10,000,000, which shall be used only for the purposes penni ned under the Amendment,
including, without limitation, to pay intetest, fees and ex:penses (including interest
payments on the DIP Loans and fees and of the Postpetition Lender and the
Prepetition Lender), to pay amounts approved by other orders of this Coutt and to
provide funding for the mallieting and effectuation of the 363 Sale.
(b) In furtherance of the foregoing and without further approval of the
Court, each DIP Borrower is authorized to perform all acts and to execute and deliver all
13
RLFI "07533 I
documents necessary for the DIP Borrowers' performance t>f their obligations under tile
DIP Documents and this Order.
(c) The Amendment, as approved by this Order, shall constitute the
valid and binding obligation of the Debtors and the Postpetition Lenders, enfoiceable
against the Debtors and the Postpetition Lenders in accordance with its terms and the
terms of this Order. No obligation, payment, lrnnsfer or grant of security under the
Amendment or this Order shall be stayed, subordinated, restrained, voidable, avoidable,
or recoverable under the Bankruptcy Code or under any applicable law (including
without limitation, under sections 502(d}, 548 and 549 of the Bankruptcy Code or under
any applicable state Uniform Fraudulent Transfer Act, Unifonn Fraudulent Conveyance
Act or similar statute or common law), or subject to any defense, reduction, setoff,
recoupment or counterclaim.
(d) The Postpetition Lender shall have no obligation to make any
extension of credit under the DIP Facility unless all of the conditions precedent to the
making of such extensions of credit under the Amendment are satisfied in fulL
14. Superpriority Claims. Pwsuant to section 364{c)(l) of the Bankruptcy
Code, all of the DIP Obligations shall constitute allowed claims against the Debtors with
priority over any and all administrative expenses, diminution claims (including all
Adequate Protection Obligations {as defined below)} and all other claims against the
Debtors, now existing or hereafter arising, of any kind whatsoever, including, without
limitation, aU administrative expenses of the kind specified in sections SOJ(b) and 507(b)
of the Bankruptcy Code, and over any and all administrative expenses or other claims
arising under sections Hl5, .126, 328, HO, 331, S03(b), 506(c), 507(a), 507(b), 726, 1113
14
Rl VI J601Silv I
or 1114 of the Bankruptcy Code (the "Supermioritv Claims"), whether or not such
expenses or claims may become secured by a judgment lien or other non-consensual lien,
levy or attachment, which allowed claims shall be payable from and have recourse to a!l
pre and postpetition property of the Debtors and all proceeds thetwf (other than
Avoidance Actions and their proceeds), subject only to the payment of the Carve-Out to
the extent specifically provided for herein.
IS. DIP l.iel1$. The DIP Obligations shall be secured by valid, binding,
enforceable, non-avoidable and automatically perfected postpetition fhst priority liens
(all such liens and security interests granted to the Postpetition Lender, pursuant to this
Order and the DIP Facility, the "DIP Liens") on and secmity interests in and upon all
p1epetition and postpetition properties and assets of such DIP Borrower, whether owned
on the DIP Closing Date or at any time thereafter acquired or created by such DIP
Borrower or in which such DIP Borrower now has or at any time in the future may
acquire any right, title or interest {collectively, the "Collateral"), as collateral security for
the prompt and complete payment and perfonnance when due (whether at the stated
maturity, by acceleration or otherwise, of such DIP Botrower's obligations under the DIP
Facility, including bul not limited to: (a) all the equity inteJests held by such DIP
Borrower, (b) all intercompany notes, accounts receivable, any other liabilities 01
payment or repayment obligatiollll, or other obligations owed to such DIP Borrower by
any of its affiliates, (c) all of such DIP Borrower's interest in or right to ini!Urance
pmceeds and payments of any kind under insurance policies, or otherwise, (d) the DIP
Borrowers' rights under section 506(c) of the Bankruptcy Code, and (e) all tangible and
intllllgible real (owned and leased) md perS<lnal property of such DIP Borrower
15
Rlfll607>Bl I
(including but not limited to accounts, chanel paper, contracts, dep<Jsit accounts, goods,
documents, inventory, equipment, genernl intangibles, investment property, inte!lcct\llll
property and intelleclual property licenses, inve.<;tment property, real property, cash,
securities accounts, commercial tort claims, other claims, choses in action, causes of
action, letter of credit rights, intercompany notes, leases, leasehold improvements, and all
proceeds and supporting obligations, all books and records pertaining to the Collateral,
and products and proceeds of any and all of the foregoing and all collateral security and
guarantees given with respect to any of the foregoing)/ all of the foregoing now owned
or in which the Debtors have any interest (and without regard to whethe1 acquired prio1
or subsequent to the Petition Date) or he.eafter acquired or in which the Debtors obtain
an interest and the products and proceeds thereof {but not including any action under
sections 544, 545, 547, 548 and 550 ofthe Bankruptcy Code {the "Avoidance Actions")
and the proceeds thereof); orovided, !hill, the Postpetition Lender shall receive a perfected
first priority security interest iu and lien on all of the DIP Borrowers' cash except for the
Adequate Assmance Deposit. The DIP Liens shall be effective and perfected upon the
date of the Interim Order and this Order, as applicable, and without the necessity of the
execution and recordation of filings by the Debtors of security agreements, control
agieements, pledge agn,ements, financing statements or other similar documents, subject
only in the event of the occurrence and during the continuance of an Event of Default to
the Cmve-Out (as defined below),
'Ti1e following terms which oro defined in the Unifotm Commoroiol Code in effect in the
Commonwealth of l'llorto RiO<l on the date hereof an: usod in this paragraph I) as so deflnod; ooeounts,
certifloatod security, ohartel popor, oommerdal tott claims, document., general intangibles,
goods, in.mumenls, inventory ond suppotting obligations
16
16. In no event shall (i) any lien or security interest that is avoided and
preserved for the benefit of the Debtors' estates under section 551 of the Bankruptcy
Code, and (ii) any person or entity who pays (or through the extension of credit to any
Debtor, causes to be paid) any of the DIP Obligations., be subrogated, in whole or in part,
to any rights, remedies, claims, privileges, liens or security interests granted in favor of,
or conferred upon the Postpetition Lender by the terms of the DIP Documents, the
Interim Order or this Order, until all of the DIP Obligations are indefeasibly paid in full
in accordance with the DIP Documents, the Interim Order and this Order.
17. DIP Lien Priori!)'. The DIP Liens are created pursuant to sections
364(c)(2), 364(c)(3) and 364(d} of the Bankruptcy Code and have the following priority:
(a) Firnt Lien on Unencumbered Property. Pursuant to section
364(c)(2) of the Bi!nlauptcy Code, a valid, binding, continuing, enforceable, fully-
perfected first priority senior security interest in and lien, not subject to subordination,
upon all Co!laternl that, on or as of the Petition Date is not subject to any valid, perfected
and non-avoidable liens existing as of the Petition Date (collectively, "Unencumbered
Property'')_
(b) Liens Priming Prepetition Liens. Pursuant to section 364(d)(l) of
the Bankruptcy Code, a valid, binding, continuing, enforceable, fully-perfected first
priority, senior priming security interest in and lien, not subject to subordination, upon all
Collateral (the "Primjng DIP Liens''). The Priming DIP Liens shall be senior in all
respects to the liens of the Prepetition Lender upon such Collateral of the Prepetition
Lender (including the Prepetition Loan Agreement Liens and the Adequate Protection
Liens (as defined below)), but shall be junior to any Permitted ?repetition Liens on such
Collateral existing immediately prior to the Petition Date,
(c) Liens Junior to Certain Other Liens. Pursuant to section 364(c)(3)
of the Bankruptcy Code, valid, binding, continuing, enforceable, fully-perfected security
interests in and junior liens, not subject to subordination, upon all Collateral that is
subject t<J valid, perfected, and unavoidable Permitted ?repetition Liens, if any, which
security interests and liens in fuvm of the Postpetition Lender shall b<: junior only to such
Permitted ?repetition Liens.
18. Liens Senior to Certain Other Liens. The DIP Liens and the Adequate
Protection Liens (as defined below) shall not be (i) subject, junior or subordinate to
{A) any lien or security interest that is avoided and preserved for the benefit of the
Debtors and their estates under section 55! of the Bankruptcy Code or (B) any liens
arising after the Petition Date including, without limitation, any liens or security interests
granted in favor of any federal, state, municipal or other governmental unit, commission,
board or court for any liability of the Debtors or {ii) subordinated to or made p a r i ~
with any other lien or security interest under section 363 or 364 of the Bankruptcy Code
or otherwise.
19 C<1rve-Oul The collateral that is subject to the DIP Liens, the Adequate
Protection Liens and the Prepetition Loan Agreement Liens shall be subject in all
respects to the Carve-Out (as defined below). The Carve-Out is subject to the
Limitations (as defined below) and may not be used for any purpose described in
paragraph 36 below. The purpose of the Carve-Out is to provide from the proceeds of
Collateral only the source of funding for accrued and unpaid professional fees of the Case
IS
Rl F I l601lal I
Professionals (as defined below), to the extent allowed by the Court, incurred in the
orderly wind-down of the DIP Borrowers' affairs and estates, following the earlier of (i)
consumrnaticm of the 363 Sale and (ii) the occurrence of an Event of Defuult (as defined
below) under or termination of the DIP Facility and the giving of a Carve-Out Trigger
Notice (as defined beluw).
{a) As used herein, the "Carve-Out" means an amount sufficient to
satisfy (i) all fees required to be paid to the Clerk of the Court and to the U.S. Trustee
under section 1930(a) of title 28 of the United States Code, (ii) subject to the Limit!ltions,
all unpaid pwfessional fees, expenses and disbursements of any professionals retained by
the Debtors or the Committee (the "Case Professionals") and out-of-pocket expenses (not
including professional fees and expenses) of individual Committee members incurred
prior to receipt of a notice delivered by the Postpetition Lender expressly stating that the
Carve-.Qut has been invoked {a "Carve-Out Trigger Notice"), and budgeted for unde-r the
Budget and incurred prior to receipt of a Carve-Out Trigger Notice (x) only to the extent
that such professional fees and disbursements do not exceed budgeted amounts and are
and have been previously or subsequently allowed by the Court, and (y) only if (A) the
Case Professionals make prompt and timely applications for allowance of such
professional fees and disbursements as is hereby required by this Order, {B) the DIP
Borrowers make prompt special requests for funding of allowed professional fees
and disbursements immediately following entry of any orders allowing snme, and {C) the
DIP Borrowers pay immediately to such professionals proceeds of the DIP Facility that
are funded to the DIP Borrowers for payment of such professional fees and
disbursements, and {z) only if the DIP Borrowers and such professionals have complied
19
RLfll601SSl' I
timely with all such terms of the Interim Order and this Order (and other orders of the
Court governing allowance of compensation to the Case Professionals) prior to such
Event of Default; and (iii) subject to the Limitations, and subject to the provisions of this
Order providing that neither the Prepetition Lender nor the Postpetition Lender shall be
subject to any Section 506(c) Claims (as defined below), all allowed unpaid fees and
eJ<penses of such Case Professionals {regardless of when allowed) incurred subsequent to
the earlier of (x) =eipt by the DIP Borrowers of a Carve-Out Trigger Notice and (y)
consummation of the 363 Sale, in the amount of (A) $750,000, with respect to
professional fees and expenses of counsel to the DIP Borrowers, (B) $250,000, with
respect to professional fees and expenses of the financial advisor to the DIP Borrowers,
(C) $350,000, with respect to professional fees and expenses of counsel to the Committee,
and (D) $\50,000, with respect to professional fees El!ld expenses of the financial advisor
to the Committee (clauses (A)- (D), collectively, the "Carve-Out Prospective Fee Caps"),
in each case reduced by the amounts of any unapplied retainers held by the respective
Case Professionals; provided, lhl!! the Carve-Out shall be reduced by and to the extent
that property or proceeds of property that (1) is cash, a cash equivalent, or readily
convertible to cash and (2) is not collateral of the Prepetition Lender, Firstbank and any
other holder of an allowed secured claim against the Borrowers is available in the DIP
Borrowers' estates to pay the professional fees and e x p e n ~ ~ e s identified above; provjded,
further, that the DIP Borrowers shall use reasonable best efforts to conven any such
property to cash. Notwithstanding any other term of Section 20 of the DIP Term Sheet or
any other term of the Amendment, the DIP Term Sheet, any other DIP Document, the
Interim Order or this Order, in the event that the DIP Borrowers seek and obtain
20
lU 1'1 l&lll!lv I
replacement, additional or alternative postpetition and/or debtor-in-possession financing
that replaces the DIP Facility or otherwise funds the Bankruptcy Cases following the
Maturity Date, the Carve-Out shall be limited for all purposes to solely the fees and
expenses set forth in clauses (i) and (ii) of this subparagraph 19(a) and not to any Carve-
Out amounts set forth in clause (iii) of subparagraph 19(a). Neither the Postpetition
Lender nor the Prepetilion Lender shall be responsible for the direct payment or
reimbursement of any fees or disbursements of any professionals incurred in connection
with the Cases under any chapter of the Bankruptcy Code, and nothing in the
Amendment or otherwise shall be construed to obligate the Postpetition Lender or the
Prepetition Lender, in any way, to pay compensation to or to reimburse expenses <;>f any
professional, (If to guarantee that the DIP Borrowers have sufficient funds to pay such
compensation or reimbursement, it being understood that the rights of the Prepetition
Lender and the Postpetition Lender to the proceeds of their Collateral shall be subject to
the Carve-Out.
(b) For the avoidance of doubt, so long as a Carve-Out Trigger Notice
has not been delivered, or the 363 Sale has not been consummated, the Carve-Out
Prospective Fee Caps shall not be reduced by the payment of fees m expenses allowed by
the Court (whether allowed before or after delivery of a Carve-Out Trigger Notice) and
payable under sections 328, 330 or 331 of the Bankruptcy Code, or 28 U.S.C. 1S6(c);
provided, however that in the event that the DIP Borrowets seek and obtain replacement,
additional or alternative postpetition and/or debtor-in-pos:re:;sion financing that replaces
the DIP Facility or otherwise funds the Bankruptcy Cases following the Maturity Date,
"
the Carve-Out shall not include the amounts specified in clause (iii) of the preceding
paragn1pb \9(a).
(o)
In connection with the Carve-Out, (i) the Case Professionals shall
make pmmpt and timely applications for allowance of their respective professional fees
and disbursements, (ii} the DIP Borrowers shall promptly submit Borrowing Requests for
funding of allowed professional fees and disbursements immediately fo!lowing ent;y of
any orders allowing same, and (iii) the DIP Borrowers shall pay immediately to the Case
Professionals any and aU proceeds of the DIP Facility that are funded to the DIP
Bonowers for payment of such Case Professionals' pmfessional fees and disbursements
Nothing in this Order shall be construed to impair the ability of the Postpetition Lender,
the Ptepetition Lender or any other plllty to object to any of the fees, expenses,
reimbursement or compensation described in clauses (i), (ii) and (iii) of paragraph 19(a)
above.
20. Events of Dfau/t. The occurrence t>r existence of any of tbe following
events shall constitute an event of default under this Order and the DIP Iron Sheet (each,
an uEvent of Default" and collectively, the "Events of Default''):
(a) This Order shall not have been entered by the Court, and the
Amendment shall not have been executed and delivered by the DIP Borrowers and the
Postpetition Lender, within 25 days after tbe date on which the Interim Order was entered;
"
(b) The DIP Borrowers shall fail to pay any of the obligations under
the DIP Facility on the due date tl1ereof, subject to a five (S) business day grace period
with respect to the payment of interest and fees; or
22
RLFll,D7l33v I
(c) Any representation, warranty or other written statement to the
Postpetition Lender by any DIP Borrower or by an authorized representative on behalf of
any DIP Borrower proves to have been false or misleading in any material respect when
made (except that such materiality qualifier shall not be applicable to any representation,
warranty or other wrillen statement that already is qualified or modified by materiality in
the text therwf) ; 01
(d) Any DIP Borrower sha!l breach any covenant or obligation
contained in the DIP Documents (subject to lillY applicable grace periods set forth in the
DIP Tenn Sheet including Exhibit A thereto) or fail to comply with or fail to perfonn
any of the terms, conditi(IUS or covenants or their obligations set forth in the Interim
Order or this Order; or
(e) The occurrence of any condition or event which permits the
Postpetition Lender to exercise any of the remedies set forth in the lnte1im Order or this
Order, including any "Event of Default" (as defined in this Order); or
{f) The occurrence of any event since the Petition Date that has or
would reasonably be expected to have a material adverse effect on (a) the condition
(financial or otherwise), businesses, operations or property of the DIP Bonowers, taken
as a whole, (b) the ability of any DIP Borrower to fully and timely perform its respective
obligations under the DIP Documents, the lntedm Order or this Order, or (c) the legality,
validity, binding effect or enforceability of any of the DIP Documents or the rights and
remedies of the Postpetition Lender undel' any of the DIP Documents, the Interim Order
or this Order; provided, 1Im (x) the filing of the Bankmptcy Cases and (y) any events of
2l
RiFI """'" 0
default (){:curring under the Prepetition Loan Agreement shall not be taken into
consideration (a "Material Adyerse Change"); or
(g) Prior to consummation of a 363 Sale, the ownership of any DIP
Borrower shall change from that set forth on the Otganizational Chart; or
(h) Any DIP BoTJ(Iwer or any of its affiliates shall challenge in any
action the validity or enforceability of any of the DlP i)Qcuments, the enforceability of
the obligations thereunder, or the perfection or priority of any lien granted to the
Postpetition Lender or any of the DIP Documents ceases to be in full force or effect; OI
(i) Any DIP Bmrower or officer of any DIP Borrower shall b<:
convicted under any criminal law that could reasonably be expected to result in a
forfeitute of any property of such DIP Borrower; or
OJ A trustee or an examiner with enlarged powers relating to the
operation of the business of any DIP Borrower {powers beyond those set furth in sections
l\06(a)(3) and (a)(4) of the Bankruptcy Code), shall be appointed in any of the
Banlauptcy Cases; or
(k) Any lien on any of the Collateral or saperpriority claim which is
pari passu with or senior to the DIP Liens or Superpriority DIP Claims of the Postpetition
Leader shall be granted (other than the Cmve-Out) or any DIP Borrower shall file a
motion seeking approval of any such lien or superpriority claim; or
(I) Other than payments authorized by the Cowl in respect of one or
more "first day" or other orders reasonably satisfactory to the Postpetition Leader and the
DIP Borrowers, the DIP Borrov.oers shall make any payment (whether by way of adequate
24
protection or otherwise) of principal or interest or otherwise on account of any prepetition
indebtedness or payables; or
(m) The Court shall enter an order granting relief from the automatic
stay (i) to the holder or holders of any security interest to penni! foreclosure (or the
g ~ a n t i n g of a deed in lieu of foreclosure or the like) on any assets of any DIP Borrower
which have an aggregate value in excess of $50,000, or (ii) to permit other actions that
would reasonably be expected to result in a Material Adverse Change; or
(n) Any material provision of any DIP Documents shaH cease to be
valid or binding on any DIP Borrower, or any DIP Borrower shall so assert in any
pleading filed in any court; or
(o) Any order shall be entered reversing, amending, supplementing,
staying for a period in excess of 5 days, vacating or otherwise modifying in any material
respect the Interim Order or this Order without the prior Wiitlen consent of the
Postpetition Lender (and no such consent shall be implied from any other authorization
by the Postpetition Lender}; or
(p} The DIP Borrowers shall effect a material change in the executive
management of the DJP Borrowers (other than any changes agreed to in writing by the
Pos\petition Lender), unless such default is cured to the reasonable satisfaction of the
Postpetition Lender within 5 business days following such material change; or
(q) A plan shall be confirmed in any of the Bankrnptcy Cases that does
not provide for the termination of the commitments under the DIP Facility and the
indefeasible payment in full in oash of the DIP Obligations on the effective date of such
plan in a manner acceptable to the Postpetition Lender; or
25
Rt!'l JOOlliJv 1
(r) The (a) filing by the DIP Borrowers of any plan of reorganization
or liquidation without the prior written app10val of the Postpetitlon Lender and the
Prepetition Lender, or (b) the tennination of any of the DIP Borrowe1s' exclusive rights
under section 1121 of the Bankruptcy Code; or
(s) (a) On a cumulative basis, the DIP Borrowers' actual cash
disbursements shall vary from the Budget in excess of the Permitted Variance, which
cumulative variance shall be measured on a weekly basis and subject to a five (5)
business day grace period, or (b) the DIP Borrowers shall fail to deliver the Budget, any
Variance Report, any I 3-week cash flows or any related reports or certificate with respect
to the Budget, in form and substance satisfactory to the Postpetition Lender, within two
(2) business days of the date when due; or
(I) Failure of the DIP Bonowers to meet any of the milestones in the
Milestone Schedule, or failure In seek and obtain any approval of the Prepetition Lender
or the Postpetition Lender required under Section 21 of the DJP Term Sheet, or failure to
implement or adhere to the Sale Process Protocol, subject to a grace period of five (5)
business days; proyided, that no Event of Default under the DIP Facility and no
termination of the DlP Borrowers' authorization to use Cash Collateral shall occur if the
failure to satisfy any milestone in the Milestone Schedule is due solely to umeasonable
delay caused by the Postpetition Lender or the Prepetition Lender or the Court's schedule
of hearing dates: provided further that the Milestone Schedule shall be modified as set
forth in paragraph 40 of this Order; or
26
RLFI li075RJv I
(u) The filing of any motion to approve a sale of all or a substantial
portion of any DIP Borrower's assets without the prior Wiitten approval of the
Postpetition Lender; or
(v) Any DIP Borrower seeking, or the filing of any motion by any DIP
Borrower or any other party to obtain, additional or replacement pllstpetition financing
for the DIP Borrowers; or
(w) Failure of the DIP Borrowers to comply with any of their adequate
protection obligations to the Prepetition Lender under the Interim Order and this Order;
"
(x) Failure of the DIP Borrowers to empllly upon and following the
Petition Date {subject to Court approval) at all times a chief restructuring officer
satisfactory to the Postpetition Lender and the DIP Borrowers and that has full and final
executive authority over all employees and other officers of DIP Borrowers; or
(y) Any of the Cases shall be dismissOO or converted into a chaplet 7
or
(z) The commencement or continuation of any judicial action or
proceeding in law or equity, by or with the support of the DIP Borrowers, against the
Postpetition Lender or the Prepelition Lender.
21. Protection of Postpetilion Righto, Relief From Stay.
(a) The automatic stay provisions of section 362 of the Bankruptcy
Code are vacated and modified, solely with respect to the DIP Facility, to the extent
necessary to pennit the Postpetition Lender to exercise, upon the occummce of an Event
of Default and after five {5) business days' prior wrillen notice of such Event of Default
( s u ~ h five (5) business day period, the "Remedies Notice Peri9d") (provided, for the
avoidance of doubt, that the automatic stay shall remain in full force and effect during the
Remedies Notice Period unless the Court shall have deteimined that an Event of Default
has occurred and is continuing), which written notice shall be provided by the
Postpetition Lender to the Debtors, counsel to the Debtors, the Committee, counsel to the
Committ<:e, and the U.S. Trustee, and which notice shall be filed with the Court, all rights
and remedies against the Collateral provided for in the DlP Documents, the Interim Order
or in this Order (including, without limitation, the right to setoff monies of the Debtors in
accounts maintained with or under the control of the Postpetition Lender or its affiliates,
requidng the Debtors' commercially reasonable efforts (subject to applicable law) to sell
the Collateral at the request of the Postpetition Lender, foreclosing on the Collateml or
otherwise selling the Collateral, and diroxting that the Postpetition Lender and its
representatives be granted access to all locations of the Collateral in support of the
enforcement and exercise of such remedies); provided, i.!Jal such stay shall not be
automatically terminated as provided above if, during the Remedies Notice Period, the
Court has detennined ~ l l l t an Event of Default has not occurred and/or is not continuing.
In any hearing regarding any exercise of dghts or remedies, the only issue that may be
raised by any party in opposition thereto shall be whether, in fact, an Event of Default has
occurred, and each of the Debtors hereby waives its right to seek relief, induding,
without limitation, under section 1 05 of the Bankruptcy Code, to the extent such relief
would in any way impair or restrict the rights and remedies of the Postpetition Lender set
forth in this Order or the DIP Documents; provided however that the foregoing waiver of
28
Rlfr J601lilv l
such rights under section 105 of the Bankruptcy Code shall not apply to the Committee or
the US. Trustee.
{b) If the Debtors do not contest during the Remedies Notice Period
the occurrence of an Event of Default, or if the Debtors do contest during the Remedies
Notice Period the occutrence of an Event of Default and the Coun after notice and
hearing declines to stay the enforcement of remedies, the automatic stay as to the
Postpetition Lender shall terminate upon the expiration of the Remedies Notice Period.
Upon expiration of the Remedies Notice Period, unlells ordered otheiWise by the Court,
the automatic stay as to the Postpetition Lender shall terminate {but solely with respect to
the DIP Facility).
(o) In no event shall the Postpetition Lender be subject to the equitable
doctrine of "marshaling" or any similar doctrine with respect to the Collatetal except as
provided in paragraph 27(c) below and paragmph 14 above. Entry of this Order shall be
without prejudice to the right of the Prepetition Lender or the Postpetition Lender to seek
any other or supplemental relief in the Cases and to appear and be heard on matters
before the Court. Neither the Postpetition Lendet's fuilure to seek relief or otherwise
exercise its rights and remedies under the DIP Documents, the Interim Order or this
Order, nor the Prepetition Lender's failure to seek any other or supplemental relief shall
constitute a waiver of any such parties' respoctive dghts hereunder, thereunder or
otherwise.
(d) Immediately upon the occutrence of and during the continuance of
an Event of Default, subject to the Remedies Notice Period, unless such Event of Default
has been waived in writing by the Postpetition Lender, (i) the commitment of the
29
Rl fll60153Jv L
Postpetition Lender to provide DIP Loans under the DIP Facility shall automatically
te)111inate (unless such termination has been waived by the Postpetition Lender in writing),
(il) the due date for p11yment of al! DIP Obligations shall be automatically accelerated, (iii)
interest on the DIP Obligations shall automatically accrue at the Default Rate, and (iv)
Debtors' right to use Cash Col!ateral or any proceeds of the Collateral shall immediately
terminate other than to satisfy the ?repetition Obligations, the DIP Obligations or the
Carve-Out: provided that the Debtors may use Cash Collateral during the Remedies
Notice Period to (A) satisfY payroll obligations in a manner consistent with the Budget,
(B) fund the Carve-Out, and (C) contest the occurrence and/or continuance of an Event of
Default.
(e) The automatic stay provisions of section 362 of the Bankruptcy
Code and any other restriction imposed by an order of the Court or applicable law are
hereby modified and vacated without further notice, application or order of the Court to
the extent necessary to permit the Postpetition Lender to perform any act authorized or
pennitted under or by virtue of this Order, the Interim Order or the DIP Documents to
(i) implement the postpetition financing arrangements authorized by this Order and
pursuant to the terms of the DIP Documents, (ii) to take any act to create, validate,
evidence, attach or perfect any lien, security interest, right or claim in the Collateral, and
(iii) to asses.'l, charge, collect, advance, deduct and receive paymen!s with respect to the
DIP Obligations, including, without limitation, all interest, fees, costs and expenses
pennitted under the DlP Documents, and apply such payments to the DIP Obligations
pursuant to the DIP Documents and this Order.
30
(I) Entry of this Order shall be without to the right of the
?repetition Lender or the Postpetition L<:nder to seek any other or supplemental relief in
the Cases and to appear and be heard on matters before the Court. The Postpetition
Lender's 01 the ?repetition Lender's failure to seek relief or otherwise exercise its rights
and remedie.s under the DIP Documents or the Prepetilion Loan Documents, as applicable,
01 this Order shall not constitute a waiver of any such rights hereunder, thereunder or
othenvise.
22. Limllalion on Charging Expenses Against Col/aleml. No costs and
expenses of preserving or disposing of the Collateral or the Prepetition Collateml, and no
expenses of administration of any of the Cases or any future proceeding that may result
therefrom (including liquidation in bankruptcy, the commencement of any action adverse
to the Postpeti1ion Lender or its rights hereunder, under the DIP Documents or under any
other order, or other proceedings under the Bankruptcy Code), except to the extent of the
Carve-Out, shall be charged against or recovered from the Collateral or the Prepetition
Collateral pursuant to section 506(c) of the Bankruptcy Code or any similar principle of
law, without the prior written consent of the Postpetition Lender or the ?repetition Lender,
as the case may be, and no such consent shall be implied from any other action, inaction,
or acquiescence by the Postpetition Lender or the Prepetition Lender.
23. Payments Free ond Clear. Any and all paytnents or proceeds remitted to
the Postpetition Lender or the ?repetition Lender pursuant to the provisions of the Interim
Order and this Order or any subsequent order of the Court shall be re\:eived free and clear
(except to the extent of the Carve-Out} of any claim, charge, assessment Ol other liability
including, without limitation, any such claim or charge arising out of or based on, directly
l'
Rlf"l)Gil158l' I
or indirectly, sootion 506(c) (whether asserted or assessed by, tlnough or on behalf of, the
Debto1s) or section 552(b) of the Bankruptcy Code.
24. /nteesl on DIP Obligarlons Interest on the DIJ> Obligations shall accrue
at the rates and shall be paid at the times as provided in the DIP Documents, the Interim
Order and this Order.
25. Establishment of DIP Facility Loan Accmml. The establishment of a new
loan account by the Postpetition Lender (the "DIP Facility Looo Account") in place of the
existing Master Account (as defined in the Motion of Debtors for Entry of Interim and
Final Orders (I) Authorizing the Debtors to (A) Continue Using Existing Cash
Management System, (B) Continue Intercompany TransfeiS, and (C) Maintain Existing
Bank Accounts and Business Fotms, (IJ) Extending Time to Comply with 11 U.S.C.
345(b), and (Ill) Scheduling a Fi!!lll Hearing, filed by the Debtors on the Petition Date
(the "ksh Management Motion'')) is hereby approved. The DlP Facility Loan Account
is and shall be a Postpetition LendeHontrolled loan account used as a central funding
mechanism for the D!P Facility pursuant to the DIP Documents The DIP Facility Loan
Account shall acwunt for all the Borrowing Requests by the Debtors. Upon receipt of a
Borrowing Request, the corresponding DIP Loans shall be deposited into the ACH
Account (as defined in the Cash Management Motion). ln addition, cash generated from
the postpetition operations of the Debtors shall be swept into the ACH Account and shall
be available to be used by the Debtors in accordance with the BudgeL
26. Use of Cash Co/lateral. The Debtors' cash, including without limitation,
all cash and other amounts on deposit or maintained in any account or accounts by the
Debtors, and any omounts generated by the collection of insurance proceeds, accounts
32
. ----------------------
receivable, sale of inventory or other disposition of the Prepetition Collateral, constitute
proceeds of the Prepetition Collateral and, therefore, are Cash Collateral of the
Prepetition Lender. T h ~ Deb\(ITS are hereby authorized to use the Cash Collateral of the
Prepetifi<>n Lender; provided, that the Prepetition Lender is granted adequate protection
as hereinafter set forth. The Debtors' dght to use Cash Collateral under this Order shall
temtinate automatically on the earliest to occur of (i) twenty-five {25) days after entry of
the Interim Order if this Order shall not have been entered by the Court in these Cases
and the Amendment shall not have been executed and delivered by the DIP Borrowets to
the Postpetition Lender, (ii) consummation of any consensual or nonwnsensual
{including under section l\29(b){2)(A)(i), (ii} and/or (iii) of the Banlauptcy Code}
chapter \] plan of reorganization or liquidation of or for the DIP Borrowers, whether
proposed by the DIP Borrowers, the Creditor's Committee or any other party, (iii} the
occurrence (subject to the Remedies Notice Period) of an Evwt of Default, or (iv) one
hundred eighty (180} days after the DIP Closing Date (the "T errnination Date''); provided,
that during the Remedies Notice Period the Obtors may use Cash Collateral solely to
satisfy payroll obligations in a manner consistent with the Budget and fund the C!liVe-Out.
The ?repetition Lender has consented to the Debtors' use of the Cash Collateral, subject
to the terms of this Order and the Interim Order.
27. Adequate Proteclion. As adequate protection for the use of the Prepetition
Collateral, the ?repetition Lender is entitled, pursuant to sections 361 , 363(c)(2), 363(e)
and 364(d)(i) of the Bankruptcy Code, to adequate protection of, and protection against
any diminution in, the value of its liens on and interest in the Prepetition Collateral as of
the Petition Date including, without limitation, any such diminution resulting from the
33
Rlfll601>8:w I
implementation of !he DlP Facility and the priming of the Prepetition Lender's liens on
the Prepetition Collate<al, the sale, lease or use by the Debtors (or other decline in value)
of the Prepetition Collateral, and the imposition of the automatic stay pursuant to section
362 of the Bankruptcy Code (collectively, the "Adequate Protection Obligations"). As
adequate protection, the Prepetition Lender is hereby granted the following:
(a} Adequate Protection Ljens. The Prepetition Lender is hea:by
granted (effective and perfected upon the date of the Interim Order and without the
necessity of the execution by the Debtors of agreentents, pledge agreements,
financing statements, control agreements or other agreements) valid and perfected
additional and replacement security interests in and liens upon all of the Collateral (the
"Adequate Protection Liens''), which Adequate Protection Liens shall be junior in priority
only to (i) the DlP Liens and (ii) the Pell)1itted Prepetition Liens, and shall be subject to
the Carve-Out; provided, that the Prepetition Lender shall receive a perfected security
interest in and lien on all of the DIP Borrowers' cash except for the Adequate Assurance
Deposit.
(b) Section 507fhl Claim. The Adequate Protection Obligations shall
constitute Superpriority Claims, junior only to the Superpriority Claims granted with
respect to the DIP Obligations and shall be subject to the Carve-Out, provided howevet
that Avoidance Actions and the proceeds thereof shall not be available for payment of
any Superprlority Claims granted under this Order-
( c) Repayment fium Unencumbered Assets As adequate protection
for the Prepetition lender, repayment of the obligations to the Postpetition Lender under
the DIP Facility and payment of the Adequate Protection Payments (as defined below) to
34
RlFilW1ll1 l
the Prepetitiou Lender, and any other adequate protection payments made in the Cases,
shall be made or deemed to be made with the proceeds ofp10perty of the DIP Bot rowers
that are not encumbered by perfected, valid, enforceable wtd unavoidable liens of the
Prepetition Lender; p r o v i d ~ however that the foregoing shall not apply to Avoidance
Actions or the proceeds thereof
(d) Payment of Fees and Expenses. The Prepetition Lender shall be
entitled to payment of all pmfessional fees and expenses incurred by the Prepetition
Lender in connection with the administration of the Cases and in accordance with the
Budget (the "Adequate Pmtection Payments''). Notwithstanding anything to the contrary
in the Amendment or the DIP Term Sheet, the ?repetition Lender and Postpetition Lender
shall have claims and administrative expenses (as the case may be) for payment of the
full amount of all professional fees and expenses of the ?repetition Lender and
Postpetition Lender incurred in connection with the Bankruptcy Cases, and such claims
and administrative expenses (as the case may be) are not subject to any limitation in the
Budget on the amount of professional fees or expenses payable as Mequate Protection
Payments, and payment of the full amount of all professional fees and expenses of the
?repetition Lender and Poslpetition Lender incurred in connection with the Banluuptcy
Cases shall constitute obligations of the DIP Borrowers whether or not the Budget and
the other DIP D<lcuments pTOvide for limited Adequate Protection Payments during the
period covered by the Budget. For the avoidance of doubt, the non-payment of the
Prepetition Lender's and the Postpetition Lender's professional fees and expenses m
excess of the amounts budgeted in the Budget shall not constitute an Event of Default,
35
RlFil607liJ r
(e) Escrowed Funds. The Debtors shall escrow all proceeds of the 363
Sale, pending distribution to creditors, including to the Prepetition Lender on account of
its allowed claims, upon consummation of a plan of liquidation for the DIP Borrowers
that is satisfactory and agreeable to the DIP Borrowers, the Postpetition Lender, and the
Prepetition Lender (the "Plan") or such other distribution of such proceeds as is ordered
by the Bankruptcy Court.
(0 Credit Bids. The ?repetition Lender shall have the right to credit
bid the indebtedness owed to the Prepetition Lender under the Prepetition Loan
Agreement, in whole or in part, in co=tion with any sale or disposition ofassets of the
Debtors (whether or not such asset sale or disposition is undertaken or proposed under or
pursuant to the terms of any consensual or nonconsensual (including under section
ll29(b)(2)(A)(i), (ii) and/or (iii) of the Bankruptcy Code) chapter II plan of
reorgani:mtion or liquidation of or for the Debtors, whether proposed by the Debtors, the
Committee or any other party, by motion unde! section 363 of the Bankruptcy Code, or
otherwise under applicable law) and the Debtors hereby waive all rights to oppose such
credit bid rights of the Prepetition L e ~ d e r .
(g) Insurance. The Prepetition Lender shall be named as a loss payee
(in respect of property/casualty insurance policies maintained by the DIP Borrowers) and
additioll!ll insured (in respect of liability insurance policies maintained by the DIP
Borrowers), and the DIP Borrowers shall deliver to the Prepetition Lender copies of any
and all insurance claims (including past, pending or future claims), whether or not funded,
of all non-privlleged documents and correspondence related to such insurance claims and
any claims that the DIP Borrowers are contemplating, and the Prepetition Lender shall be
RLfll6Cl158l I
provided with thirty {30) days' advance notice of all
renewallcancellationlamendment riders in respect of such p<)licies.
(h) Insurance Procee<:!s. The Prepetition Lender shall be entitle<:! to
payment, promptly and in any event no later than three (3) business days after receipt
thereof, of any proceeds and any other payments payable to any ofthe Debtors under any
of the Debtors' insurance policies and which ptocee<:!s and/or payments are received by
the Debtors during the pendency of the Cases (which payments of any such Insurance
Proceeds the Prepetition Lender is hereby authorized by the DIP Borrowers to pay to
Firstbank in accordance with the lntercreditor Agreement).
(i) Notice. As soon as possible and in any event within three (3)
business days after an officer of any DIP Borrower obtains actual knowledge, or after due
inquiry, would have obtained such knowle<:!ge by acting in good faith and in a prudent
manner in the perfonnance of his or her duties, provide to the Postpetition Lender notice
of the occurrence of (x) any material adverse development with respect to any loss,
damage, investigation, claim, litigation, action, proceeding or controversy involving the
DIP Borrowers, notice thereof and as soon as practicable thereafte1, to the extent the
Prepetition Lender requests, copies of all documentation relating thereto and (y) any
material adverse change in the business, properties, assets or condition (financial or
otherwise) of any DIP Borrower.
(j) Inspection Rights. 1l1e Prepetition Lender and its representatives
and designees shall be pennitted to visit and inspe<:t the properties, books and records of
the DIP Bofl"Owers upon reasonable notice at the Debtors' expense
37
Rtf! 360Jl!lv I
{k) 506fc) Waiver. The Prepetitirm Lender and its collateral shall not
be subject to or liable for any claims Wider section 506(c} of the Bankruptcy Code (the
"Section S06(c) Claims"), and the assertion of any such claims against the Prepetition
Lender or its collateral are prohibited by this Order.
(I) &;porting. The Debtors shall fumish or cause to be furnished to
the Prepetition Lender such budgets and other information respecting the Prepctition
Collateral, the sale or disposition of the Debtors' assets, and any draft proposed plan of
reorganization or liquidation (or plan term sheet) of or for the Debtors as the Prepetition
Lender, from time to time, may request, and the DIP Borrowers hereby irrevocably
authoriore and direct each of their accountants rmd advisors to deliver to the Prepetitioo
Lender, at the Debtors' expense, copies of all financial statements of the Debtors and
such other information respecting the Debtors' assets and business as the Prepetition
Lender may request
(m) Mileston<IS. The Prepetition Lender shall have the approval rights
piOvided for in the Milestone Schedule (as defined in the DIP Term Sheet) set fot1h in
Section 2! of the DIP Term Sheet; provided further that the Mil<:Btone Schedule shall be
modified as set forth in paragrnph 40 of this Order.
(n) Sale Process ProtocoL The Debtors shall provide the Prepetition
Lender with the status updates required by the Sale Process ProtoC<Jl (as defined in the
DIP Tenn Sheet) set forth in Section 21 of the DIP Term Sheet.
28. Sufficiency of Adequate Protection. The Court finds that the adequate
protection provided herein is reasonable and sufficient to protect the interests of the
?repetition Lender. Notwithstanding any other provision hereof, the g1ant of adeqnate
J8
Rlll lOOliRl; I
protectirm to the Prepetition Lender pursuant hereto is without prejudice to the right of
the Prepetition Lender to seek modification of the grnnt of adequate protection provided
hereby so as to provide different or additional adequate protection, and without prejudice
to the right of the Debtors or any other party in interest to contest any such modification.
The consent of the Prepetition Lender to the priming of its liens on the Prepetition
Collateral by the DIP Liens (a) is limited to the DIP Facility authorized pursuant to this
Order, and shall not extend to any other postpetition financing or to any modified version
or replacement ofthe DIP facility and (b) does not constitute, and shall not be construed
as constituting, 11n acknowledgement or stipulation by the Prepetition Lender that, absent
such consent, its interests in the Prepetition Collateral would be adequately protected
pursuant to this Order.
29. Collateral Rights. Until all of the DIP Obligations shall have been
indefeasibly paid and satisfied in full no other party shall foreclose or otherwise seek to
enforce any junior lien or claim in any Collateral, and upon and after the occurrence of an
Event of Default, subject to the Remedies Notice Period, in connection with a liquidation
of any of the Collateral, the Postpetition Lender (or any of its employees, agents,
consultants, contmctors or other professionals) shall have the right, at the sole cost and
expense of Debtors, to: {a} enter upon, tx;Cupy and use any real or personal property,
fixtures, equipment, leasehold interests or warehouse arrangements owned or leased by
Debtors and {b} use any and all trndemarks, tradenames, copyrights, licenses, patents or
any other similar assets of Debtors, which are owned by or subject to a lien of any third
party and which arc used by Debtors in their businesses, in each case, to the extent
peonitted by the documents governing the Debtors' use of such intellectual property.
39
RHIJ60JS8lv I
The Postpetition Lender will be responsible for the payment of any applicable fees.,
rentals, royalties or other amounts due such lessor, licensor or owner of such property for
the period of time tllat the Postpetition Lender actually uses the equipment or the
intellectual property (but in no event for any accmed and unpaid fees, rentals or other
amounts due for any period prior to the date that the Postpetition Lender actually
occupies or uses such assets or properties).
30. Release. Effective upon the date of the Interim Order, in consideration of
the Postpetition Lender's agreement to the making of postpetition loans, advances and
providing other credit and financial accommodations to the Debtors pursuant to the
provisions of the Amendment, the Note, the other DIP Documents, the Interim Order and
this Order, each Debtor, on behalf of and for itself (collectively, the "Releasors''), forever
release, diS<:harge and acquit the Postpetition Lender and its participants, ()fficers,
directors, aBents, attorneys and predecessors-in-interest in their capacities as such
(collectively, the "Releasees") of and from any and all claims, demands, liabilities,
responsibilities, disputes, remedies, causes of action, indebtedness and obligations, of
every kind, nature and description, including, wW1out limitation, any so-called "lender
liability" claims or defenses, that Releasors had, have or hereafter can 01 may have
against Releasees as of the date hereof, in respect of events that occurred on or prior to
the date hereof with .espect to the Debtors, the ?repetition Obligations, the DIP
Obligations, the Amendment, the Note, the other DIP Documents or other financial
accommodations made by the Postpetition Lender to the Debtors pursuant to the
Amendment, the Note and/or the other DIP Documents. In addition, upon the repayment
of all DIP Obligations owed to the Postpetition Lender by the Debtors and termination of
40
Rlfll0015!J I
the rights and obligations arising under the Amendment, the Note, the other DIP
Documents, the Interim Order and this Order (which p11)'ment and termination shall be on
terms and conditions acceptable to the Postpetition Lender), the Postpetition Lender in
such capacity shall be released from any and all obligations, liabilities, actions, duties,
responsibilities and causes of action arising or occurring in connection with or related to
the Amendment, the Note, the other DIP Documents, the Interim Order or this Order
(including without limitation any obligation or responsibility (whether ditect or indirect,
absolute or contingent, due or not due, primary or secondary, liquidated or unliquidated)
to pay or otherwise fund the Carve-Out}, on terms and conditions acceptable to the
Postpetition Lender.
31. 363 Sale Documentation Any motions, proposed o r d e ~ s , bidding or sale
procedures, asset purchase agreements or tetm sheets or other documentation or
pleadings relating to the 363 Sale shall be in form and substance satisfactory and
agteeable to the Postpetition Lender, the Prepetition Lender and the DIP Borrowers_ Any
bidding p10cedures proposed and/or approved in connection with the 363 Sale shall
require bidders to submit such bids to the Postpetition Lender contemporaneously with
submission to the Debtors, and the Postpetition Lender shall be entitled to participate in
the review and evaluation of any such bids by the Debtors.
32_ Perfeclion of DIP Liens 017d Adequo1e Proleclion Lien;.
{a) The Postpetition Lender and the Prepetition Lender are hereby
authorized, but not required, in their sole discretion to file or record fitu1ncing statements,
trademark filings, copyright filings, moll gages, notices of lien or similar instruments in
any jurisdicti<m or take any other action in order to validate and perfect the liens and
41
security interests granted to them hereunder (collectively, the "Lien Recording
Documents") and the automatic stay provisions of section 362 of the Bankruptcy Code
are hereby modified and vacated to permit the Postpetition Lender aud the Pupetition
Lender to take such actions. Whether or not the Postpetition Lender and the Prepetition
Lender shall, in their sole discretion, choose to file such financing statements, trademark
filings, copyright filings, mortgages, notices of lien or similar instruments or otherwise
confirm perfection of the liens and security interests granted to them hereunder, such
liens and security interests shall be deemed valid, perfected, allowed, enforceable, non-
avoidable and !!{)\ subject to challenge, dispute or subordination, at the time and on the
date of the Interim Order and this Order shall he sufficient and conclusive evidence of the
priority, perfuction end validity of the liens and security interests granted herein, effective
as of the date of the Interim Order.
(b) The Postpetition Lender and the Prepetition Lender are hereby
authorized, but not required to file a certified copy of this Order in any filing m recording
office in any county or other jurisdiction in which Debtors have an interest in real 01
personal property and, in such event, the subject filing or recording officer is authorized
311d directed to file or record such certified copy of this Order.
(c) To the extent that any applicable non-bankruptcy law would
otherwise restrict the grant, scope, enforceability, attachment or perfection of the liens
authorized or created hereby, or otherwise would impose filing or registration
requirements with respect thereto, such law is preempted to the maximum extent
permitted by the Bankruptcy Code, applicable federal law, and the judicial power of this
Court {provided, lhru if the Postpetition Lender and the Prepetition Lender take steps to
42
perfect their Hens under otherwise applicable state law, they dC> so without waiving the
benefits of this provision of this Ordet ).
(d) In the event that any Lien Recording Document which the
Postpetition Lender and the Prepetition Lender elect to file in accordance with this
paragraph 32 contains any limitatiC>ns, defects, deficiencies or other infom1ation which
might otherwise limit or adversely affect the Postpetition Lender's DIP Liens on the
Collateral, the Prepetition Lender's Adequate Protection Liens or any of the Prepetition
Lender's claims, rights, priorities and/or protections afforded under the Interim Order,
this Order El!1d/or the DIP Documents, such limitations, defu<:ts, deficiencies or other
information shall nC>t impair, limit, restrict or adversely affect in any way any of the
PC>S1petition Lender's DIP Liens in the the Ptepetition Lender's Adequate
Protection Liens or any of the claims, Tights, pdorities and/or protections granted onder
this Order and/or the DIP Documents.
(e) The DebtC>IS shall execute and deliver to the Postpetition Lender
the Prepetition Lender all such agreements, financing statements, instruments and
other documents as the Postpelition Lender and the Prepetition Lender may reasonably
request to evidence, wnfirm, validate or perfect the DIP Liens and Adequate Protection
Liens granted pursuant hereto,
(f) Any provision of any lease or othe. license, contract or other
agreement that requires (i) the consent or approval of one or more landlords or other
parties or {ii) the payment of any fees or obligations to any governmental entity, in order
for any Debtor to pledge, grant, sell, assign, or otherwise trll!lsfer any such leasehold
interest, or the proceeds thereof, or other postpelition collateral related thereto, is hereby
43
Rlfl Ji,OJS!lv I
deemed to be inconsistent with the applicable provisions of the Bankruptcy Code, Any
such provision shall have no force and effect with respect to the granting of the DJP Lien:;
or Adequate Pmtection Liens on such lei!Sebold interest or the ptoceeds of any
assignment and/or sale thereof by any Debtor, in favor of the Postpetition Lender 01 the
Prepetition Lender in accordance with the terms of the Amendment, the ather DIP
Documents, the Interim Order or this Order .
. B. of Granted Under the Orde1.
(a) Unless all DIP Obligations and Adequate Prntection Obligations
shall have been paid in full, the Debtors shall not seek, and it shall constitute an Event of
Default fllld a termination of the right to use Ci!Sh Collateral if any of the Debtors seek, or
if there is entered, (t) any modifications or extensions of this Order without the prior
written consent of the Postpetition Lender and the Prepetition LendeJ. (and no such
consent sha\1 be implied by any other action, inaction or acquiescence by the Postpetition
Lender or the Prepetition Lender), (ii) any order authorizing additional or different debtor
in possession financing in these cases without the prior written consent of the Postpetition
Lender and the Prepetition Lender (and no such consent shall be implied by any otJ-.,r
action, inaction 01 acquiescence by the Postpetition Lender or the Prepetition Lender), or
(iii) an order dismissing any nf tbe Cru:es or converting any of the Cases to cases under
chapter 7oft he Bankruptcy Code. If an order dismissing or converting to chapter 7 any
of the Cases under se<:tion 1112 of the Bankruptcy Code or otherwise is at any time
entered, such order shall provide (in accordance with sections !OS and 349 of the
Bankruptcy Code) that (x) the Superpriority Claims, liens, and security interests granted
to the Postpetition Lender and the Prepetition Lender pursuant to the Interim Order and
Rtf llWJ!Sl, r
this Order, shall continue in full force and effect and shall maintain their priorities as
provided in the Interim Order and this Order until all DIP Obligations and Adequate
Protection Obligations shall have been paid and satisfied in full (and that such
Snpeipriority Claims, liens and security interests shall, notwithstanding such dismissal,
remain binding on all parties in interest} and (y) this Court shall retain jurisdiction,
notwithstanding such dismissal, for the purposes of enforcing the claims, liens and
security interests referred to in clause (x) of this paragraph. Without the express written
consent of the Postpetition Lender, if at any time prior to the repayment in full of all
obligations arising under the DIP Facility, including subsequent to the confinnation of
any plan in these cases, any of the Debtors, any trwtee or any examiner with enlarged
powers subsequently appointed, shall obtain credit or incur debt pur:suant to section
364(b), 364(c) or 364(d) of the Bankluptcy Code in violation of the terms of this Order,
or shall receive proceeds from a sale of Collateral pursuant to section 363(b) of the
Bankruptcy Code or from a sale of any other Collateral after the satisfaction of liens that
are senior to those of the Postpetition Lender, then all of the cash proceeds derived from
such credit, debt, or sale shall immediately be escrowed for the benefit of the Postpetition
Lender.
(b) If any or all of the provisions of this Order are hereafter reversed,
modified, vacated or stayed, such reversal, modification, vacation or stay shall not affect
(i) the validity of any DIP Obligatinns or Adequate Protection Obligations incurred prinr
to the actual receipt of wrillen notice by the Postpetition Lender or the Prepctition Lender
as applicable, of tile effective date of such reversal, modification, vacation or stay or
(ii) the validity or enforceability of any lien or priority authorized or created hereby or
45
RLFI )60)5!lv 1
pursuant to the OlP Documents with respect to any DIP Obligations, the Interim Order or
this Order with respect to any Adequate Protection Obligations. Notwithstanding any
such reversol, modification, vacation or stay, any use of Cash Collateral, or DIP
Obligations or Adequate Protection Obligations incurred by the Debtors to the
Postpetition Lender or the Prepetition Lender (as the case may be) prior to the actual
receipt by the Postpetition Lender or the Prepetition Lender of written notice of such
reversal, modification, vacation or stay shall be governed in all respects by the original
provisions of this Order, and the Postpetition Lender and the Prepetition Lender {as
applicable) shall be entitled to all the rights, remedies, privileges and benefits granted in
section 364{e) ofthe Bankruptcy Code, the lnterim Order, this Order and pursuant to the
DlP faclity with respect to all uses of Cash Collate,al, DIP Obligations and Adequate
Protection Obligations.
{c) Except as expressly provided in this Order or in the DIP
Documents, the DIP Liens, the Superpriority Claims, the Adequate Protection
Obligations and all other tights and remedies of the Postpetition Lender and the
Prepetition Lender granted by the provisions of the Interim Order and this Order, the
Amendment, the Note and the other DIP Documents shaH survive, and shaH not be
modified, impaired or disdurrged by (i) the entry of an order converting any of the Cases
to a case under chapter 7 or dismissing any of the Cases or by any other act or omission,
or (ii) the entry of an order confinning a plan of reorganization or liquidation in any nf
the Cases and, pursuant to section 1141(d){4) of the Bankruptcy Code, the Debtors have
waived any discharge as to any remaining DIP Obligations or Adequate Protection
Obligations. The tenns and provisions of this Order, the Amendment, the Note and the
Rlf I l607l$l' 1
other DlP Documents shall continue in these Cases, in any succesllor cases if these Cases
cease to be jointly administered, or in any superseding chapter 7 cases under the
Bankruptcy Code, and the DIP Obligations, the Adequate Protection Obligations and all
other rights and remedies of the Postpetition Lender and the ?repetition Lender granted
by the provisions of the Interim Order, this Order, the Amendment, the Note and the
other DIP Thlcuments shall continue in full force and effect until the DIP Obligations and
Adequate Protection Obligations arc indefeasibly paid in fulL
34. Effect of Slipu/alions on Third Parliej. The stipulations, admissions,
releases and waivers contained in paragraphs 9, 10, 11, 30 and 35 of this Order shall be
binding Up<JD the Debtors in all circwnstances. The stipulations, admissions, releases and
waivers contained in paragraphs 9, 1 0, 11, 30 and 35 of this Order shall be binding upon
all other parties in interest, including, without limitation, any Committee, unless (and
only to the extent that) {a) a party in interest (including a trustee) has timely filed an
adversary proceeding or contested matter (any such action, a ''Challenge") {subject to the
Limitations) by no later than the date that is the latest of (i) 75 days after the entry of the
Interim Order, (ii) in the case of a Challenge being brought by the Committee, 90 days
after the appointment of the Committee, or (iii) such later date as has been agreed to, in
writing, by the Prepetition Lender in respect of Challenges that may be initiated against
the Prepetitinn Lender, in the sole discretion of the Prepetition Lender, and has been
ordered by the Court, challenging the validity, enforceability, priority or extent of the
Prepetition Obligations, or the Prepetition Loan Agreement Liens on the Prepetition
Collateral or otherwise asserting or prose<:uting any Avoidance Actions or any other
claims, counterclaims or causes of action, objections, contests or defenses (collectively,
47
Rlf I 3Ml1S!lv I
"Claims and J}efenses") against the ?repetition Lender m its respective agents, affiliates,
subsidiaries, directors, office1s, representatives, attorneys or advisors in connection with
matters related to the Prepetition Loan Documents, the ?repetition Obligations or the
Prepetition Collateral, and (b) there is a final order in favor of the plaintiff sustaining any
such Claims and Defenses in any such timely filed Challenge, provided, J:i!l!! as to the
Debtors, all such Claims and Defenses are hereby irrevocably waived and relinquished as
of the entry of the Interim Order. If no such Challenge is timely filed (or, if such
Challenge is timely filed, then to the extent not subject to successful Claims and Defenses
asserted therein), (x) the Prepetition Obligations shall constitute allowed claims, not
subject to counterclaim, setoff, subordination, recharacterization, defense or avoidance,
for all pu1poses in the Cases and any subsequent chapter 7 case, (y) the Prepetition Loan
Agreement Liens on the ?repetition Co!lateral shall be deemed to be legal, valid, binding,
perfected, not subject to recharacterization, subordination, avoidance or reduction and
(:;o;) the Ptepetition Obligations, the Prepetition Loan Agreement Liens, the ?repetition
Co!latera! and the ?repetition Lender shall not be subject to any other or further cha!lenge
by any party in interest, and any such party in interest shaH be enjoined from, seeking to
exercise the rights of any of the Debtors' estates, including, without limitation, any
successor thereto (including, without limitation, any estate representative or a chapter 7
or chapter II trustee appointed or elected for any of the Debtors) Nothing in this Order
or the Interim Order vests or confers on any Person (as defined in the Bankruptcy Code)
standing or authority to pursue any cause of action belonging to the Debtors or their
estates, including, without limitation, Claims and Defenses with respect to the Prepetition
Loan Agreement Liens or the ?repetition Obligations; provided howeyey that the
RLF! lWml !
Committee is he-reby confinned to maintain standing to pursue any cause of action
belonging to the Debtors' estates with respect to the DIP Liens and the DIP Obligations
and the Prepetition Loan Agreement Liens and the Prepetition Obligations.
35. Debtors' Waiver of Claims and Cmses of Action. Without prejudice to
the rights of any other party, including any Committee (but subject to the limitations
thereon in paragraphs 34 and 36 and s u ~ j e c t to the closing of the DIP Facility), the
Debtors have waived, upon entry of the Interim Order, any Ellld all claims and causes of
action against the Postpetition Lende< and the Prepetition Lender and their respective
agents, affiliatell, subsidiaries, directors, officers, representatives, attorneys or advisors,
directly related to the DIP Facility, the Interim Otder, this Order or the negotiation of the
terms thereof
36. Limilalion on Use of DIP Faci/1/y Proceeds and Colla/era/. The Debtors
shall use the proceeds of the DIP Facility and the Casb Collateral wlely as provided in
this Order and in the DIP Documents. Notwithstanding anything herein or in any other
order by this Court to the contrary, no Collateral, Cash Collateral, Carve-Out, DIP Loans,
proceeds of the Collateral, or advances under the Prepetition Loan Agreement, the DIP
Documents, the Inte-rim Order or this Order may be used to (a) investigate, object, contest
or raise any defense to the validity, perfe,tion, priority, extent or enforceability of any
amount due under the DJP Facility or the Prepetilion Loan Agreement or the Prepetilion
Loan Documents or the DIP Documents, or the liens or claims granted under the Interim
Order, this Order, the DIP Facility, tbe DIP Documents or the Prepetition Loan
Documents, (b) investigate, assert any claims, defenses or causes of action against tbe
Postpetition Lender, the Prepetition Lender or their respective agents, affiliates,
49
subsidiaries, directors, officers, representatives, attorneys or advisors, (c) investigate,
prevent, hinder or otherwise delay the Postpetition Lender's or the ?repetition Lender's
assertion, enforcement or realization on the Cash Collateral or the Collateral (as defined
below) in accordance with the lnterim Order, this Order, the DIP Facility, the DIP
Documents or the ?repetition Loan Documents, {d) investigate or seek to modify any of
the rights granted to the Postpetition Lender or the Prepetition Lender under the Interim
Order, this Order, the DIP Facility, the DIP Documents or the Prepetition Loan
Documents, (e) pay any professional fees or expenses incurred by my Case Professional
or other professional in conne<:tion with any ofthe foregoing (except to contest during the
Remedies Notice Period the occurrence and/or continuance of an Event of Default), or {f)
any act which has or could reasonably be expected to have a material adverse effect with
respect to the rights of the Postpetition Lender or the Prepetition Lende, or wbich is
rontrary to any tenn or condition set forth in or acknowledged by the DIP Documents,
the DIP Facility, the Interim Order or this Order, in each foregoing case without the
Postpetition Lender's and the ?repetition Lender's prior written consent. The foregoing
limitations set fo1th in clauses {a) through {f) above (collectively, the "Limitations") shall
apply in all instances: provided, however, up to $!00,000 may be used by the Committee
solely to investigate the liens and claims of the PTepetition Lender and/or other secured
creditors of the Debtors.
37. Notwithstanding anything herein, in the Amendment or in the other DlP
Documents, the Debtors shall be authorized to withdraw funds from any collateral
acconnt established or mainta.ined for purposes of funding DIP Facility advances to the
Debtors, only to the extent of, and with, the Postpetition Lender's express consent. All
50
Rl.FI J i ~ ' l l l I
funds in any such collateral account shall be deemed Collateral and under the control of
the Postpetition Lender whether or not subject to any account control agreement in favor
of the Postpetition Lender.
38. Credil Bidding Each of the Postpetition Lender and the ?repetition
Lender shall have and retain at all times the right to c1edit bid {pursuant to section 363(k)
of the Bankruptcy Code and/or pursuant to or under the terms of any consensual or
nonconsensual (including under section 1129{b)(2)(A)(i). (ii) and/or (iii) of the
Bankruptcy Code) chapter II plan of reorganization or liquidation or for tbe DIP
Borrowers, whether proposed by the DIP Borro"Wels, the Committee or any other party,
by motion under section 363 of the Bankruptcy Code, or otherwise, under applicable law)
the DIP Loans or the indebtedness owed to the ?repetition Lender under the ?repetition
Loan Agreement (as applicable), in whole or in part, in connection with any sale or
disposition of assets in the Bankruptcy Cases and the DIP B<lrrowers hereby waive any
and all rights to oppose such credit bid rights of the ?repetition Lender and the
Postpetition Lender.
39. [m;urance. Punmant to this Order, (i) the Postpetition Lender shall be and
shall be deemed to be, without any further action or notice, named as loss payee (in
mspect of property/casualty insurance policies maintained by the Debtors) and named as
an additional insured (in respect of liability policies maintained by the Debtors) an each
insurance policy maintained by any of the Debtors, and the Postpetiticm Lender shall be
provided with thirty {30) days' advance notice of all non
renewal/cancellation/amendment riders in respect of such policies and (ii) the ?repetition
Lender shall be named as loss payee (in respect of property/casualty insurance policies
!
maintained by the Debtors) and additional insured (in respect of liability insurance
policies maintained by the Debtors) on each insurance policy maintained by any of the
Debtors and the Prepetition Lender shall be provided with thirty (30) days' advance
notice of a!! non-renewal/concellation/amendment riders in respect of such policies.
40. Mile5/one Schedule. Notwithstanding anything in the DIP Term Sheet to
the contrary, the Debtors shall comply with the following Milestone Schedule: {a) by
November 10, 2010, (l) the Postpetition Lender, the ?repetition Lender and the Debtors
shall have identified a stalking horse bidder acceptable to and approved by the
Postpetition Lender, the ?repetition Lender and the DIP Bonowers, if any, to purchase
substantially all of the assets of the Debtors pursuant to the 363 Sale (the "Stalking
Horse") and (ii) the Debtors shall have entered into definitive documentation with the
Stalking Horse, if any, acceptable to and approved by the Postpetition Lender and the
Prepetition Lender; (b) by November 19, 10!0, the Debtors shall have filed a proposed
Plan acceptable to the ?repetition Lender and the Postpetition Lender and a
corresponding disclosure statement (the "Disclosure Statement'') with the Court; (c) by
December 22, 2010, (i) the Court shall have approved the Disclosure Statement with
respect to a proposed Plan acceptable to the ?repetition Lender and the Postpetition
Lender and (ii) the hearing on the 363 Sale shall have occurred; and (d) by Janulll)' 28,
20 1 0, the Court shall have confi1med the Plan.
41. Order Governs_ !n the event of any inconsistency between the provisions
of this Order and the DIP Documents, the provisions of this Order shall govern. For the
avoidance of doubt, the failure to include tmy term, condition, or provision of the
52
Amendment in this Order shall not affect the validity, enforceability, or binding nature of
any such terms, conditions, and provisions of the Amendment.
42. Fees and EqJen5es of the Pre pet ilion Lender 011d the Postpetil/on Lender
Notwithstanding anything to the conllllry in the DIP Term Sheet, the ?repetition Lender
and Postpetition Lender shall have claims and adrninisl!ative expenses (as the case may
be) for payment of the full amount of all professional fees and expenses of the Prepetition
Lender and Postpetition Lender incurred in connection with the Bankruptcy Cases, and
such claims and administwtive expenses (as the case may be) are not suQject to any
limitation in the Budget on the amount of professional fees or expenses payable as
Adequate Protection Payments, and payment of the full amount of all professiolllll fees
and expenses of the Prepetition Lender and Postpetition Lender incurred in connection
with the Bankruptcy Cases shall constitute obligations of the DIP Borrowers whether or
not the Budget and the other DIP Documents provide for limited Adequate Protection
Payments dwing the period covered by the Budget.
43. Binding Effect, Succenors and Assigns. The Amendment and the
provisions of this Order, including all findings herein, shall be binding U)XIn all parties in
interest in these Cases, including, without limitation, the Postpetition Lender, the
Prepetition Lender, Firstbank, the Comminee, and any of the Debtors and their respective
successors and assigns {including any chapter 7 or chapter II trustee hereinafter
appointed or elected for !he estate of any of the Debtors, an examiner appointed pursuant
to section 1104 of the Bankruptcy Code, or any other fiduciary hereafter appointed as a
legal representative of any of the Debtors or with respect to the property of the estate of
any of the Debtors) and shall inure to the benefit of Postpetition Lender, the Prepetition
53
lUFf lMJlSilv 1
Lender, Firstbank and the Debtors and each of their respective successors and assigns;
proyided, that the Postpetition Lender shall have no obligation I<:> extend any financing to
any cllapter 1 or chapter I l trustee or similar responsible person appointed for the estate
of any of the Debtors, and the Prepetition Lender shall have no obligation to or consent to
use of Cosh Collaterel in a chapter 1 =e m after appointment of a chapter II trustee or
other legal representative ofthe Debtors.
44. Limitation of Liability. In determining to make any loan under the
Amendment and/or the other DIP Documents or in exercising any rights or remedies as
and when pe1111itted puisuant to the Interim Order, this Order or the DIP Thlcuments, the
Postpetition Lender and the Prepetition Lender shall not be deemed to be in control of the
operations of any of the [){,btors or to be acting as a "responsible person" or "owner or
operator" with respect to the operation or management of any of the Debtors (as such
terms, or any similar terms, are used in the United States Comprehensive Environmental
Response, Compensation and Liability Act, 29 U.S.C. 9601 e/ oeq as amended, or any
similar federal C>r state statute). Furthermore, nothing in the Interim Order, this Order or
the DIP Documents related to this transaction shall in any way be constmed or interpreted
to impose or allow the imposition, upon tbe Postpetition Lender or the Prepetition Lender,
of any liability for any claims arising from the prepetition or postpetition activities by ruw
of tbe Debtors and their affiliates {as defined in section 101(2) of the Bankruptcy Code)
in the operation of their businesses, or in connection with their .estructuring efforts.
45. Righi of Access and Jnformalian. Upon reasonable notice, the Debtors
shall peimit representatives, agents and/or employees of the Postpetition Lender and
Prepetition Lender to have reasonable access to the Debtors' premises, management and
54
non-ptivileged records during normal business hours, ll!ld the Debtors and their advisors
and representatives shall cooperate and consult with, and provide to such persons all such
non-privileged infonnation as they may reasonably request
46 Section 552. In light of their agreement to sub<;>rdinate their liens and
superpriority claims to the Carve-Out in the case of the Postpetiti<;>n Lender, and the
Carve-Out and the DIP Liens in the case of the Prepe!iti<;>n Lender, the DlP Agent, the
Postpetition Lender and the Prepctition Lender are each entitled to all of the rights and
benefits of section 552(b) of the Bankruptcy Code and the "equities <;>[ the case"
exception shall not apply.
47. Effec//venws. This Order shall constirute fmdings of fact and conclusions
of law and, notwithstanding the possible application of Bankruptcy Rule 6004(h), shall
take effect immediately upon execution hereof.
Dated; September _jQ_, 2010
Wilmington, Delaware
Rlfll607S!l I
55

Counsel For The Official Committee of Unsecured Creditors of Innkeepers USA Trust, Et Al

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