BARRY SCHERMER, Bankruptcy Judge
This matter came before this Court on the motion (the "Motion") of Falcon Products, Inc., Shelby Williams Industries, Inc., Sellers Josephson Inc., Epic Furniture Group, Inc., Howe Furniture Corporation, Johnson Industries, Inc., Madison Furniture Industries, Inc., Falcon Holdings, Inc., and Falcon Companies International, Inc. (each, a "Debtor" and collectively, "Debtors") requesting that this Court enter an order authorizing Debtors to: (a) use cash collateral on an emergency basis; and (b) grant certain liens and other relief to Fleet Capital Corporation, as Agent ("Agent"), and Lenders. Unless otherwise indicated, all capitalized terms used as defined terms herein have the meanings ascribed thereto in Exhibit A attached hereto and by this reference made a part hereof.
This Order shall constitute findings of fact and conclusions of law pursuant to Fed.R.Bankr.P. 7052 and shall take effect and be fully enforceable as of the Filing Date.
Having examined the Motion, being fully advised of the relevant facts and circumstances surrounding the Motion and having completed a hearing pursuant to Code § 363 and Fed.R.Bankr.P. 4001(b), and objections, if any, having been withdrawn or resolved or overruled by the Court, THE MOTION IS GRANTED, AND THE COURT HEREBY FINDS THAT:
A. On the Filing Date, Debtors filed voluntary petitions for relief under chapter 11 of the Code. Debtors have retained possession of their property and continue to operate their businesses as debtors in possession pursuant to Code §§ 1107 and 1108.
B. The Court has jurisdiction over the Case and this proceeding pursuant to 28 U.S.C. § 1334. Determination of the Motion constitutes a core proceeding as defined in 28 U.S.C. § 157(b)(2). Venue over this Motion is proper under 28 U.S.C. § 1409(a).
C. Debtors have stipulated and represented to the Court that: (1) the Prepetition Documents evidence and govern the Prepetition Debt, the Prepetition Liens and the prepetition financing relationship among Debtors, Agent, and Lenders, and are valid and enforceable by Agent against Debtors; (2) as of the Filing Date, Debtors are liable for payment of the Prepetition Debt, and the Prepetition Debt shall be an allowed claim, in an amount not less than $92,107,579.41 (exclusive of accrued and accruing interest and fees), consisting of Revolving Credit Obligations in the amount of $18,141,968.08 (exclusive of accrued and accruing interest and fees), Term Component Loans in the amount of $3,000,000 (exclusive of accrued and accruing interest and fees) and a Term Loan in the amount of $70,965,611.33 (exclusive of accrued and accruing interest and fees); (3) the Prepetition Debt constitutes the legal, valid and binding obligation of Debtors, enforceable in accordance with the terms of the Prepetition Documents; (4) no offsets, defenses or counterclaims to the Prepetition Debt exist, and no portion of the Prepetition Debt is subject to avoidance or subordination pursuant to the Code or applicable nonbankruptcy law; (5) the Prepetition Liens, among other things, secure payment of all of the Prepetition Debt; and (6) the Prepetition Liens are First Priority Liens, subject only to Permitted Liens.
D. Debtors represent, and the Court finds that, for purposes of Code §§ 506(c) and 507(b) and Fed.R.Bankr.P. 3012, as of the Filing Date, the going-concern value of the Prepetition Collateral as of the Filing Date was not less than the amount of the Prepetition Debt as of the Filing Date and the liquidation value of the Prepetition Collateral as of the Filing Date was not less than the aggregate amount of the Revolving Credit Loans and Term Component Loans as of the Filing Date, and therefore Agent is entitled to interest on the Prepetition Debt and its Allowable 506(b) Amounts related to the Prepetition Debt; provided, however, that Agent and Lenders shall each have the right to challenge such representations and such findings at any time.
E. No Committee has been appointed in this Case.
F. An immediate need exists for Debtors to use Cash Collateral in order to minimize disruption to and avoid the termination of their business operations, and to enhance the possibility of a successful reorganization.
G. In order to prevent immediate and irreparable harm to Debtors' estates, pending the Final Hearing, Debtors need to use Cash Collateral on an emergency basis as provided herein through the conclusion of such Final Hearing.
H. Under the circumstances of the Case, the terms and conditions of this Order are a fair and reasonable response to Debtors' request to use Cash Collateral, and the entry of this Order is in the best interests of Debtors' estates and their creditors.
I. The notice provided by Debtors of the Motion, the hearing on the Motion, and the entry of this Order satisfy the requirements of Fed.R.Bankr.P. 2002, 4001(b) and 9014 and Code §§ 102(1) and 363 and were otherwise sufficient and appropriate under the circumstances.
WHEREFORE, IT IS HEREBY ORDERED THAT:
Authorization to Use Cash Collateral. Debtors are authorized and directed to use Cash Collateral solely: (a) to the extent of Positive Borrowing Availability and in accordance with and pursuant to the terms and provisions of this Order; and (b) to the extent required to pay those expenses enumerated in the Budget as and when such expenses become due and payable. Prior to the Termination Date, Debtors may not use or seek to use Cash Collateral other than pursuant to the terms of this Order and the DIP Financing Order. Notwithstanding anything to the contrary in this Paragraph 1, however, Debtors are authorized and directed to use Cash Collateral to pay the Carveout, and authorized, directed, and obligated (which obligation shall survive the Termination Date) to: (a) immediately pay the Additional Availability Fee upon entry of this Order; and (b) pay Allowable 506(b) Amounts (other than interest with respect to the Term Loan, which shall continue to accrue and be paid upon the earlier of (i) the date the DIP Financing Order becomes final and there has been an initial funding of loans under the final DIP Financing Order or (ii) February 28, 2005) and the Indemnification Carveout immediately upon receipt of invoices therefor.
1. Procedure for Use of Cash Collateral.
(a) Delivery of Cash Collateral to Agent/Return of Cash Collateral to Debtors. Debtors are authorized and directed to deposit all Cash Collateral, regardless of the source of such Cash Collateral, now or hereafter in their possession or under their control into the Blocked Accounts (or to otherwise deliver all such Cash Collateral to Agent in a manner satisfactory to Agent) promptly upon receipt thereof. Such Cash Collateral (including Cash Collateral which Agent has applied to the Prepetition Debt subsequent to the Filing Date pursuant to Paragraph 5(d) of this Order) shall be remitted to Debtors by Agent and used by Debtors solely to the extent permitted by Paragraph 1 of this Order.
(b) Account Debtors. Without further order of court, Agent may direct Debtors to instruct all account Debtors of existing and future accounts receivable included in the Aggregate Collateral to make payments directly into the Blocked Accounts or such other accounts satisfactory to Agent, in which event all such proceeds shall be treated in accordance with the provisions of this Order.
(c) Cash Collateral in Agent's Possession. Agent is authorized to collect upon, convert to cash and enforce checks, drafts, instruments and other forms of payment now or hereafter coming into its possession or under its control which constitute Aggregate Collateral or proceeds of Aggregate Collateral.
2. Carveout Terms. (a) The Carveout shall consist of the lesser of (i) $500,000 and (ii) the aggregate amount of allowed fees and expenses incurred by the Carveout Professionals prior to the Termination Date, (b) the Carveout shall be reduced on a dollar-fordollar basis by any payments of fees or expenses of the Carveout Professionals, (c) any other property of Debtors' estates (other than property subject to an unavoidable lien in favor of Agent) shall be used to pay any allowed fees and expenses of the Carveout Professionals before any payments of such fees or expenses are made from the Prepetition Debt or the Collateral, (d) Agent shall have the right to establish a reserve, on Monday, February 7, 2005, of $500,000 for the Carveout under Section 1.1.1 of the Loan Agreement, (e) upon the Termination Date, Agent shall have no obligation to fund any fees or expenses of the Carveout Professionals in excess of the Carveout and, if the Termination Date occurs as a result of the entry of a DIP Financing Order, shall have no obligation to, and shall not, fund the Carveout, and (f) the Carveout shall not include, and no Prepetition Debt or Collateral may be used to pay, any fees or expenses incurred by any entity, including Debtors, any Committee, or the Carveout Professionals, in connection with claims, actions or services adverse to Agent, any Lenders or any of their interests in any of the Collateral, including (i) preventing, hindering or delaying Agent's enforcement or realization upon any of the Collateral once an Event of Default has occurred, (ii) using or seeking to use Cash Collateral or selling any other Collateral outside of the ordinary course of business without Agent's consent, (iii) incurring indebtedness outside of the ordinary course of business without Agent's consent, or (iv) objecting to or contesting in any manner, or in raising any defenses to, the validity, extent, amount, perfection, priority or enforceability of the Prepetition Debt or the Prepetition Liens, or any other rights or interests of Agent or any Lenders or in asserting any claims or causes of action, including, without limitation, any actions under chapter 5 of the Code, against Agent or any Lenders; provided, however, that up to $25,000 may be used by counsel for any Committee to investigate the validity, extent, amount, perfection, priority, or enforceability of the Prepetition Liens. Nothing herein shall be construed as consent to the allowance of any fees or expenses of the Carveout Professionals or shall affect the right of Agent to object to the allowance and payment of such fees, costs or expenses; provided that the Carveout Professionals may be paid such fees, costs and expenses under Local Rule 2016-2 (subject to the provisions with respect to objections set forth therein).
3. Termination of Right To Use Cash Collateral.
(a) Termination Date. Unless extended by the Court upon the written agreement of Agent, this Order and Debtors' authorization to use Cash Collateral pursuant to this Order will automatically terminate on the Termination Date without further notice or order of Court.
(b) Rights Upon Termination. On the Termination Date, Agent and Debtors shall be entitled to apply to this Court for all appropriate relief, upon such notice as may be appropriate under the circumstances; provided, however, that: (1) the obligations of Debtors and the rights of Agent and Lenders with respect to all transactions which have occurred prior to the Termination Date shall remain unimpaired and unaffected; and (2) Agent and Debtors shall retain all of their respective rights and remedies under the Code, including, without limitation, Debtors' right (subject to Paragraph 5(g) of this Order) to request the continued use of Cash Collateral and Agent's right to oppose the Debtors' further use of Cash Collateral and to move for relief from the automatic stay. Should Agent resign as Agent, upon request of the Term Component Loan Lenders or Term Loan Lenders, Agent agrees to defend any challenges under Paragraph 7(a) on behalf of the Term Component Loan Lenders or Term Loan Lenders, as applicable, on terms and conditions to be agreed upon (in connection with the Payment In Full) by all of the Agent, in its sole discretion, the Term Component Loan Lenders, in their sole discretion, and Term Loan Lenders, in their sole discretion.
4. Adequate Protection of Interests of Agent in the Aggregate Collateral. As adequate protection of the interests of Agent and Lenders in the Aggregate Collateral:
(a) Priority of Prepetition Liens/Allowance of Agent's Claim. Subject to the reservation of rights set forth in Paragraph 7(a) of this Order: (1) the Prepetition Liens shall constitute First Priority Liens, subject only, as of the Filing Date, to Permitted Liens; (2) the Prepetition Debt constitutes the legal, valid and binding obligation of Debtors; (3) no offsets, defenses or counterclaims to the Prepetition Debt exist, and no portion of the Prepetition Debt is subject to avoidance or subordination pursuant to the Code or applicable nonbankruptcy law; and (4) the Agent's claim with respect to the Prepetition Debt shall constitute an allowed claim in an amount not less than $92,107,579.41 (exclusive of accrued and accruing interest and fees), consisting of $18,141,968.08 (exclusive of accrued and accruing interest and fees) with respect to the Revolving Credit Obligations, $3,000,000 (exclusive of accrued and accruing interest and fees) with respect to the Term Component Obligations and $70,965,611.33 (exclusive of accrued and accruing interest and fees) with respect to the Term Loan.
(b) Replacement Liens.
(1) Revolving Credit Replacement Liens. Agent, for the benefit of itself and each of the Revolving Credit Lenders, is hereby granted the Revolving Credit Replacement Liens. The Revolving Credit Replacement Liens: (1) are and shall be in addition to the Prepetition Liens; (2) are and shall be First Priority Liens, subject only to Permitted Liens, that are properly perfected, valid, and enforceable without any further action by Debtors, Agent, or Lenders and without the execution, filing or recordation of any financing statements, security agreements, mortgages or other documents or instruments; and (3) shall remain in full force and effect notwithstanding any subsequent conversion or dismissal of the Case (provided that, upon Payment In Full of the Revolving Credit Obligations, such Revolving Credit Replacement Liens shall be subordinated to the DIP Permitted Liens and shall secure the "Contingent Claims" (as that term is defined in the DIP Financing Order)). Notwithstanding the foregoing, Debtors are authorized and directed to execute and deliver to Agent such financing statements, mortgages, instruments and other documents as Agent may deem necessary or desirable from time to time.
(2) Term Component Loan Replacement Liens. Agent, for the benefit of itself and each of the Term Component Loan Lenders, is hereby granted the Term Component Loan Replacement Liens. The Term Component Loan Replacement Liens: (1) are and shall be in addition to the Prepetition Liens; (2) are and shall be First Priority Liens, subject only to Prepetition Liens (to the extent such Prepetition Liens secure the Revolving Credit Obligations), Revolving Credit Replacement Liens, and Permitted Liens that are properly perfected, valid, and enforceable without any further action by Debtors, Agent, or Lenders and without the execution, filing or recordation of any financing statements, security agreements, mortgages or other documents or instruments; and (3) shall remain in full force and effect notwithstanding any subsequent conversion or dismissal of the Case (provided that, upon Payment In Full of the Term Component Obligations, such Term Component Loan Replacement Liens shall be subordinated to the DIP Permitted Liens and shall secure the "Contingent Claims" (as that term is defined in the DIP Financing Order)). Notwithstanding the foregoing, Debtors are authorized and directed to execute and deliver to Agent such financing statements, mortgages, instruments and other documents as Agent may deem necessary or desirable from time to time.
(3) Term Loan Replacement Liens. Agent, for the benefit of itself and each of the Term Loan Lenders, is hereby granted the Term Loan Replacement Liens. The Term Loan Replacement Liens: (1) are and shall be in addition to the Prepetition Liens; (2) are and shall be First Priority Liens, subject only to Prepetition Liens (to the extent such Prepetition Liens secure the Revolving Credit Obligations and the Term Loan Component Obligations), Revolving Credit Replacement Liens, Term Component Loan Replacement Liens, Permitted Liens, Permitted Priority Liens (as such term may be defined in the DIP Financing Order), and DIP Permitted Liens that are properly perfected, valid, and enforceable without any further action by Debtors, Agent, or Lenders and without the execution, filing or recordation of any financing statements, security agreements, mortgages or other documents or instruments; and (3) shall remain in full force and effect notwithstanding any subsequent conversion or dismissal of the Case. Notwithstanding the foregoing, Debtors are authorized and directed to execute and deliver to Agent such financing statements, mortgages, instruments and other documents as Agent may deem necessary or desirable from time to time.
(c) Allowed Code § 507(b) Claim. If and to the extent the adequate protection of the interests of Agent in the Aggregate Collateral granted to Agent or any Lender pursuant to this Order proves insufficient, Agent, for the benefit of itself and each of the Lenders, shall have an allowed claim under Code § 507(b) in the amount of any such insufficiency, with priority (except with respect to the Carveout) over: (1) all costs and expenses of administration of the Case that are incurred under any provision of the Code, including, without limitation, Code §§ 503(b), 506(c), 507(a), or 552(b); and (2) the claims of any other party in interest under Code § 507(b).
(d) Application of Cash Collateral. Subject to Agent's obligation to remit Cash Collateral to Debtors pursuant to Paragraph 2(a) of this Order, Agent is authorized to apply all Cash Collateral now or hereafter coming into Agent's possession or control as follows: (1) first, to payment of Prepetition Debt consisting of Allowable 506(b) Amounts which may be paid under Paragraph 1 of this Order; and (2) second, to payment of other Prepetition Debt. All such applications shall be final, subject only to the right of parties in interest to object to such applications to Allowable 506(b) Amounts under and in accordance with Paragraph 6(a) of this Order. Agent's remittance of Cash Collateral to Debtors pursuant to this Paragraph and Paragraph 2(a) of this Order shall not constitute an extension of credit to Debtors pursuant to Code § 364.
(e) Continuing Super-Priority Claim For Future Costs and Expenses. Notwithstanding anything contained herein to the contrary or the Payment In Full of the Revolving Credit Obligations and the Term Component Obligations, Agent and Lenders shall be granted a super-priority administrative claim of up to $1,000,000 (with priority over the rights and claims of the DIP Lenders or their agent) for any expenditures incurred, whether prior to or after the Filing Date, by or on behalf of Agent and Lenders that would be entitled to reimbursement or indemnity from Debtors under the Loan Agreement or Prepetition Documents, including without limitation, any amounts due with respect to returned checks, cash management services, or defense of any challenges under Paragraph 7(a) (the "Indemnification Carveout"). The Indemnification Carveout shall at all times be senior to the Carveout. The provisions of this Paragraph 5(e) shall survive the Payment In Full of the Revolving Credit obligations and the Term Component Obligations and the Termination Date; provided that the Indemnification Carveout shall terminate and be of no further force and effect upon the earlier of: (1) the expiration of the period for challenging the stipulations, representations and findings in Paragraph C of this Order in accordance with Paragraph 7(a) of this Order, if no such challenge is pending; and (2) a final nonappealable order determining any challenge to the stipulations, representations and findings in Paragraph C of this Order.
(f) No Surcharge. None of the surcharge provisions of Code § 506(c), the enhancement of collateral provisions of Code § 552, or any other legal or equitable doctrine (including, without limitation, unjust enrichment) shall, either before, on, or after the Termination Date, be imposed upon Agent, any of the Lenders, or any of the Aggregate Collateral for the benefit of any party in interest, including, without limitation, Debtors, any Committee, any of the Carveout Professionals, or any Trustee at any time during this Case unless, prior to rendering services or incurring expenses, the amount of which they may thereafter seek to recover from Agent, Lenders or the Aggregate Collateral pursuant to such sections of the Code, Debtors, any Committee, any of the Carveout Professionals, or any Trustee, as the case may be, first obtains the Agent's express written consent to the rendering of such specific services or the incurring of such specific expenses. The foregoing requirement shall be in addition to all (and not in lieu of any) of the requirements under applicable law for a recovery from Agent, any Lenders, or the Aggregate Collateral pursuant to such sections of the Code; provided, however, that nothing in this Order shall be deemed to constitute the consent to any claim under Code § 506(c) asserted for the benefit of any party in interest, and Agent and Lenders shall retain all rights to contest any such claims.
(g) Adequate Protection Payment Due On Termination Date. As further adequate protection of the interests of Agent in the Aggregate Collateral, and notwithstanding the provisions of Paragraph 4(b) of this Order, on and at all times following the Termination Date until Payment In Full of the Revolving Credit Obligations and Term Component Obligations, Debtors shall not be entitled to use any Cash Collateral unless, in addition to compliance with all other terms and conditions of this Order, Debtors pay to Agent: (1) an amount equal to the then outstanding Additional Availability plus (2) an amount equal to the difference between (A) Positive Borrowing Availability as of the Filing Date (without taking into account the Additional Availability) and (B) Positive Borrowing Availability as of the date of Debtors' proposed use of Cash Collateral (without taking into account the Additional Availability but taking into account the Carveout).
(h) Post-Petition Financing. In connection with Debtors' efforts to comply with the DIP Financing Covenants, Debtors acknowledge and agree that any proposed debtor in possession financing shall not be secured by liens on Debtors' assets senior or equal to the Prepetition Liens that secure the Revolving Credit Obligations or the Term Component Obligations or the Revolving Credit Replacement Liens or Term Component Replacement Liens prior to Payment In Full of the Revolving Credit Obligations and Term Component Obligations, and Debtors will not grant any liens senior or equal to the Prepetition Liens that secure the Revolving Credit Obligations or Term Component Obligations or the Revolving Credit Replacement Liens or Term Component Replacement Liens unless the DIP Financing Order granting such liens provides for payment of the Revolving Credit Obligations and Term Component Obligations.
5. Miscellaneous Provisions.
(a) Notice of and Objections to Allowable 506(b) Amounts. Agent shall provide Debtors' counsel, counsel for the DIP Lenders, counsel for any Committee, and the United States Trustee with copies of all invoices (edited to delete any attorney-client or other confidential information) with respect to Agent's attorneys' fees and related costs and expenses asserted as Allowable 506(b) Amounts that are incurred after the entry of this Order. Any such party may object to the reasonableness of any such fees, costs and expenses. However, any such objection shall be forever waived and barred unless, within 10 days of receipt of the invoice to which the objection relates: (1) the objection is filed with the Court and served upon Agent and its counsel; and (2) the objection describes with particularity the items or categories of fees, costs and expenses that are the subject of the objection and provides the specific basis of the objection to each such item or category of fees, costs and expenses. Any hearing on an objection to the fees, costs and expenses of Agent set forth on any invoice shall be limited to the reasonableness or necessity of the particular items or categories of the fees, costs and expenses which are the subject of such objection and all fees, costs and expenses which are not objected to with particularity and for which the specific basis of the objection is not set forth in accordance with this Paragraph 6(a), shall be deemed allowed. The disallowance of any such fees and expenses shall not affect Agent's right to collect such amounts from any person or entity other than Debtors.
(b) Force and Effect of Prepetition Documents. To the extent there exists any conflict among the Motion, the Prepetition Documents and the terms of this Order, this Order shall govern and control.
(c) Modification of Stay. The automatic stay of Code § 362 is hereby modified with respect to Agent to the extent necessary to effectuate the provisions of this Order.
(d) Financial Information. Debtors are hereby directed to deliver to Agent such financial and other information concerning the business and affairs of Debtors and any of the Aggregate Collateral as may be required pursuant to the Prepetition Documents and/or as Agent shall reasonably request from time to time, including, on Wednesday of each week: (1) reports comparing actual collections, new invoiced sales, and expenditures (broken down by expense category) to those set forth in the Budget for the previous week ended Friday; and (2) a report showing all accrued accounts payable as of the close of business on such previous Friday; and (3) a certificate calculating Positive Borrowing Availability as the close of business on such previous Friday. Debtors are also directed to allow Agent access to the premises in accordance with the Loan Agreement for the purpose of enabling Agent to inspect and audit the Collateral and the Debtors' books and records. Such access for such purpose shall be permitted during normal business hours on reasonable notice to Debtors; provided, however, that if Agent alleges fraud or gross mismanagement, Agent shall be permitted access to the premises for such purpose at any time without notice. Debtors are further directed to deliver to Agent evidence, satisfactory to Agent, that the Aggregate Collateral is insured for the full replacement value thereof, that all insurance policies required by the Prepetition Documents or obtained in connection with the Aggregate Collateral are maintained in full force and effect, and that Agent is named as loss payee on all such property insurance policies and named as additional insured on all such liability policies as its interests may appear.
(e) No Waiver. Neither Agent nor any Lender's failure, at any time or times hereafter, to require strict performance by Debtors (or by any Trustee) of any provision of this Order or Prepetition Documents shall waive, affect or diminish any right of Agent or such Lenders, as the case may be, thereafter to demand strict compliance and performance therewith. No delay on the part of Agent or any of the Lenders in the exercise of any right or remedy under this Order or the Prepetition Documents shall preclude any other or further exercise of any right or remedy. Neither Agent nor any of Lenders shall be deemed to have suspended or waived any of its rights or remedies under this Order, the Prepetition Documents, the Code, or other applicable law unless such suspension or waiver is in writing, signed by a duly authorized officer of such party, and directed to Debtors.
(f) "Responsible Person." By taking any actions pursuant to this Order, neither Agent nor any Lenders shall: (1) be deemed to be in control of the operations or liquidation of Debtors; or (2) be deemed to be acting as a "responsible person" with respect to the operation, management or liquidation of Debtors.
6. Binding Effect.
(a) Stipulations and Findings. The stipulations, representations and findings contained in Paragraphs C and D of this Order shall be binding on all parties in interest in the Case and their respective successors and assigns, including any Trustee, subject only to the right of any Committee to file an adversary proceeding challenging the stipulations, representations and findings in Paragraph C of this Order within 60 days of the appointment of such Committee.
(b) Order. Except as provided in Paragraph 7(a) herein, this Order shall be binding on all parties in interest in the Case and their respective successors and assigns, including any Trustee, except that any Trustee shall have the right to terminate this Order after notice and a hearing. If this Order does not become a Final Order, if a Trustee terminates this Order, or if any of the provisions of the Order are hereafter modified, amended, vacated or stayed by subsequent order of this Court or any other court, such termination or subsequent order shall not effect: (a) the stipulations, representations, and findings contained in Paragraph C and D of this Order; or (b) the priority, validity, enforceability or effectiveness of any lien, security interests or any other benefit or claim authorized hereby with respect to any Cash Collateral used prior to the effective date of such termination or subsequent order. All liens, security interests, claims and other benefits authorized hereby shall be governed in all respects by the original provisions of this Order. Except as otherwise explicitly set forth in this Order, no third party is intended to be, or shall be deemed to be, a third party beneficiary of this Order.
(c) Survival. The provisions of this Order (including, without limitation, the provisionsof Paragraph 1 and 5(h)), and any actions taken pursuant to or in reliance upon the terms hereof, shall survive entry of, and govern in the event of any conflict with, any order which may be entered in the Case: (1) confirming any chapter 11 plan; (2) converting the Case to a case under chapter 7; or (3) dismissing the Case.
IT IS FURTHER ORDERED, that the no later than three (3) business days after the date of this order, the Debtors are directed to serve a copy of the order in accordance with the Court's order establishing notice procedures and are directed to file a certificate of service no later than two (2) business days after.
EXHIBIT A DEFINED TERMS AND RULES OF CONSTRUCTION Defined Terms
1. Additional Availability. An amount equal to: (a) $1,000,000; plus (b) the amount of the Term Component Loans outstanding on the Filing Date.
2. Additional Availability Fee. In consideration of the Additional Availability provided pursuant to this Order, a fee in the amount of $100,000, payable to Agent for credit to the Revolving Credit Lenders (as such term is defined in the Loan Agreement).
3. Aggregate Collateral. Collectively, the Prepetition Collateral and the Postpetition Collateral.
4. Allowable 506(b) Amounts. Interest at the rate set forth in Section 2.1.2 of the Loan Agreement and in Amendment No. 1 (as the case may be), and all fees, costs, expenses, and other charges due or coming due under the Prepetition Documents or in connection with the Prepetition Debt (regardless of whether such fees, costs, interest and other charges are included in the Budget or are incurred before, on, or after the Termination Date) to the extent allowable under Code § 506(b), including all reasonable out-of-pocket filing and recording fees, attorneys' and paralegals' fees and expenses, external and internal audit fees and expenses, closing fees, unused facility fees, letter of credit fees, and all other costs and expenses incurred by Agent under the Prepetition Documents with respect to the Prepetition Debt, including such fees, costs and charges incurred before, on, or after the Filing Date in connection with: (a) the negotiation, preparation and submission of this Order and any other order or document related hereto; and (b) the representation of Agent in and in connection with the Case.
5. Amendment No. 1. Amendment No. 1 to the Loan Agreement, dated as of January 19, 2005.
6. Blocked Accounts. Collectively, all lockbox, dominion and blocked accounts, all as referenced in Section 6.2.4 of the Loan Agreement.
7. Budget. The budget covering the period from the Filing Date through and including February 28, 2005, as reflected on the budget attached to this Order as Exhibit B, as amended, modified or supplemented from time to time, for different amounts or different periods, all as may be agreed to by Agent from time to time without the necessity for further Court approval.
8. Business Day. Any Business Day (as that term is defined in the Prepetition Loan Agreement).
9. Carveout. For the purposes of enabling Debtors' estates to pay allowed fees and disbursements of the Carveout Professionals as may be awarded from time to time pursuant to Code § 330 and in accordance with Local Rule 2016-2, the aggregate amount set forth in Paragraph 3 of this Order; provided, however, that the Carveout may be used only subject to the terms and provisions of Paragraph 3 of this Order.
10. Carveout Professionals. Stutman, Treister Glatt P.C., Thompson Coburn LLP, Dechert LLP, Imperial Capital, LLC, Alavarez Marsal, LLC, Eisner, LLP, any "ordinary course" professionals retained by Debtors pursuant to order of this Court and any professionals retained by the Committee pursuant to order of this Court.
11. Case. This chapter 11 case or any superseding chapter 7 case of the Debtors.
12. Cash Collateral. All "cash collateral," as that term is defined in Code § 363(a) in which Agent has an interest, all deposits subject to setoff rights in favor of Agent, and all cash arising from the collection or other conversion to cash of the Aggregate Collateral, including, without limitation, from the sale of inventory and the collection of accounts receivable. To the extent any such cash collected or received is not clearly identifiable as attributable to Prepetition Collateral or Postpetition Collateral, such cash shall be deemed to be proceeds of Prepetition Collateral.
13. Code. The United States Bankruptcy Code ( 11 U.S.C. § 101 et seq.), as amended, and any successor statute. Unless otherwise indicated, all statutory section references in this Order are to the Code.
14. Committee. Any official creditors' committee appointed to represent unsecured creditors in this Case pursuant to Code § 1102.
15. DIP Financing Covenants. Debtors shall: (a) within 3 days of the entry of this Order, file a motion, in form and in substance satisfactory to Agent, requesting the entry of the DIP Financing Order; and (b) the DIP Financing Order shall have been entered on or before February 12, 2005, and shall have become a final order on or before February 28, 2005.
16. DIP Financing Order. An interim order pursuant to Code § 364, in form and substance acceptable to Agent, dated as of February 2, 2005, authorizing Debtors to obtain debtor in possession financing from DIP Lenders and to use such debtor in possession financing to pay the Prepetition Debt consisting of: (a) the Revolving Credit Obligations; and (b) the Term Component Obligations.
17. DIP Lenders. DDJ Capital Management, LLC, as administrative and collateral agent, and the financial institutions party to that certain Post-Petition Credit Agreement entered into in connection with the DIP Financing Order.
18. DIP Permitted Liens. Any liens granted to DIP Lenders pursuant to the DIP Financing Order.
19. Event of Default. Any one or more of the following: (a) Debtors commit any Event of Default under Section 10.1 of the Loan Agreement (other than by reason of Section 10.1.8 of the Loan Agreement with respect to Debtors); (b) Debtors fail to perform any of their obligations in strict accordance with the terms of this Order; (c) Debtors fail to comply with any of the Performance Covenants or the DIP Financing Covenants; (d) Debtors, over Agent's objection, seek the use of Cash Collateral; (e) Debtors shall not, over Agent's objection, file a motion to incur debt secured by a lien with priority equal to or superior to the Prepetition Liens or which is given superpriority administrative expense status under Code § 364(c) unless such motion provides for, and a portion of such debt is incurred to enable, the indefeasible and final payment in full of the Revolving Credit Obligations and the Term Component Obligations; (f) Debtors file a motion to conduct a Code § 363 sale of all or part of the Aggregate Collateral on terms unacceptable to the Agent; (g) any key management of the Debtors are removed or lost; (h) Debtors files a chapter 11 plan that is not acceptable to Agent; (i) there is a deadlock among any board of directors of Debtors on any material issue; (j) any representation or warranty made by Debtors in any certificate, report or financial statement delivered to Agent subsequent to the Filing Date proves to have been false or misleading in any material respect as of the time when made or given (including by omission of material information necessary to make such representation, warranty or statement not misleading); (k) the Case is converted to a case under chapter 7 of the Code; or (1) a Trustee is appointed or elected in the Case, or an examiner with the power to operate Debtors' businesses is appointed in the Case.
20. Filing Date. January 31, 2005.
21. Final Hearing. The final hearing on the Motion conducted in accordance with Fed.R.Bankr.P. 4001.
22. Final Order. A final order authorizing Debtors to use Cash Collateral entered by this Court at or in connection with the Final Hearing that has not been reversed or stayed and: (a) as to which either no appeal has been made, or in the event of an appeal, no stay has been obtained; or (b) as to which the time for filing a notice of appeal has expired.
23. First Priority Liens. Liens which are first priority, properly perfected, valid and enforceable security interests, which are not subject to any claims, counterclaims, defenses, setoff, recoupment or deduction, and which are otherwise unavoidable and not subject to avoidance or subordination pursuant to any provisions of the Code, applicable nonbankruptcy law, or any agreement.
24. Lenders. Collectively, all financial institutions which are or become party to the Loan Agreement.
25. Loan Agreement. That certain Second Amended and Restated Loan and Security Agreement dated as of October 6, 2004 by and among, inter alia, Debtors, Agent, and Lenders, as amended, modified and supplemented from time to time, including, without limitation, by Amendment No. 1.
26. Payment In Full. "Payment in Full", as that term is defined in the DIP Financing Order.
27. Performance Covenants. Debtors shall be required to: (a) as of Friday, February 4, 2005 or any Friday thereafter, generate collections in an amount equal to at least 90% of the amount set forth in the Budget for the cumulative period commencing on the Filing Date and ending on each such testing date, (b) as of Friday, February 4, 2005, or any Friday thereafter, generate new, invoiced sales in an amount equal to at least 90% of the amount set forth in the Budget for the cumulative period commencing on the Filing Date and ending on each such testing date, and (c) as of Friday, February 4, 2005 or any Friday thereafter, maintain aggregate expenditures no greater than 10% more than the aggregate amount projected by the Budget to be expended during the cumulative period commencing on the Filing Date and ending on each such testing date.
28. Permitted Liens. Collectively, (a) liens in favor of third parties upon the Prepetition Collateral, which third party liens, as of the Filing Date (i) had priority under applicable law over the Prepetition Liens, (ii) were not subordinated by agreement or applicable law, and (iii) were non-avoidable, valid, properly perfected and enforceable; (b) the Carveout; and (c) the claim of the United States Trustee for the payment of fees under 28 U.S.C. § 1930(a).
29. Positive Borrowing Availability. The amount of positive borrowing availability under the collateral advance formulas set forth in Section 1.1.1 of the Loan Agreement (exclusive of the Term Component Loans), plus the Additional Availability; provided, however, that the Postpetition Collateral and the Agent's applications of Cash Collateral to the Prepetition Debt pursuant to Paragraph 5(d) of this Order shall be included in the calculations of such borrowing availability. Notwithstanding the foregoing: (1) Agent shall have the right to establish such reserves against such availability as Agent, in its sole and absolute discretion, deems appropriate, including, without limitation, such reserves which may be established under the Loan Agreement, and (2) Agent shall have the right to increase Positive Borrowing Availability hereunder from time to time by up to an aggregate of $1,000,000, on such terms as it deems appropriate, without the need for further Court hearing.
30. Postpetition Collateral. All of the real and personal property of Debtors of any description whatsoever, wherever located, and whether existing or hereafter acquired, including all cash, cash equivalents, bank accounts, accounts, other receivables, chattel paper, contract rights, inventory, instruments, documents, securities (whether or not marketable), equipment, fixtures, real property interests, franchise rights, patents, tradenames, copyrights, intellectual property, general intangibles (excluding claims and proceeds under Code §§ 544, 547, 548, 549, 550 and 553), tax refunds, actions, investment property, leases, and all other Collateral (as that term is defined in the Loan Agreement), and all proceeds, rents, issues, profits, products, substitutions and accessions, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any of the foregoing.
31. Prepetition Collateral. All of the Collateral (as that term is defined in the Loan Agreement) existing as of the Filing Date, and all proceeds, rents, issues, profits and products thereof.
32. Prepetition Debt. All indebtedness or obligations under the Prepetition Documents as of the Filing Date, including all fees, costs, interest, and expenses, including Allowable 506(b) Amounts.
33. Prepetition Documents. The Loan Agreement and the Loan Documents (as that term is defined in the Loan Agreement), as amended, modified, or supplemented from time to time, including, without limitation, and cash management, lockbox, blocked account, control or dominion agreements.
34. Prepetition Liens. Agent's asserted security interests in the Prepetition Collateral under the Prepetition Documents, subject only to Permitted Liens.
35. Replacement Liens. Collectively, the Revolving Credit Replacement Liens, the Term Component Loan Replacement Liens, and the Term Loan Replacement Liens.
36. Revolving Credit Lenders. The "Revolving Credit Lenders" as that term is defined in Appendix A of the Loan Agreement.
37. Revolving Credit Obligations. The "Revolving Credit Obligations" as that term is defined in Appendix A of the Loan Agreement.
38. Revolving Credit Replacement Liens. First Priority Liens in the Postpetition Collateral granted to Agent pursuant to this Order, subject only to the Permitted Liens.
39. Term Component Loan Replacement Liens. First Priority Liens in the Postpetition Collateral granted to Agent pursuant to this Order, subject only to the Prepetition Liens, the Revolving Credit Replacement Liens, the Permitted Liens, and the DIP Permitted Liens.
40. Term Component Loans. The "Term Component Loans" as that term is defined in Amendment No 1.
41. Term Component Obligations. All of Debtors' obligations with respect to the Term Component Loans, as set forth in Amendment No 1.
42. Term Loan. The "Term Loan" as that term is defined in Appendix A of the Loan Agreement.
43. Term Loan Lenders. Collectively, all Lenders who constitute a "Term Loan Lender" as that term is defined in Appendix A of the Loan Agreement.
44. Term Loan Replacement Liens. First Priority Liens in the Postpetition Collateral granted to Agent pursuant to this Order, subject only to the Prepetition Liens, the Revolving Credit Replacement Liens, the Term Component Loan Replacement Liens, the Permitted Liens, the Permitted Priority Liens (as such term may be defined in the DIP Financing Order) and the DIP Permitted Liens.
45. Termination Date. At Agent's election, the earliest to occur of: (a) the second Business Day following the date on which Agent provides, via facsimile or overnight mail, written notice to counsel for Debtors and counsel for any Committee of the occurrence of an Event of Default (or, if any cure period is applicable with respect to such Event of Default under the Loan Agreement, the expiration of such cure period); (b) the entry of the DIP Financing Order; (c) the date of the Final Hearing; (d) February 28, 2005; or (e) the day on which Debtors provide written notice to Agent and counsel for Agent of Debtors' election to terminate this Order.
46. Trustee. Any trustee appointed or elected in the Case.
EXHIBIT B