IN RE DECOR GRAVURE CORPORATION, (Bankr.N.D.Ala. 2002)

TAMARA MITCHELL, United States Bankruptcy Judge

By Motion (the "Motion") dated February 4, 2002, Decor Gravure Corporation ("Decor"), New Decor Holdings ("Holdings") and Decor Decorative Moldings, Inc. ("New Stiles") as pre-petition debtors and as debtors-in-possession (each a "Debtor" and collectively, the "Debtors"), moved this Court for the entry of an interim order and a final order (as defined below) in the captioned chapter 11 cases (collectively, the "Cases") (1) authorizing them to enter into certain financial arrangements with Heller Financial, Inc. ("Heller"), as Agent ("Agent") and the banks and other financial institutions party to the Amended Credit Agreement (as defined below) as Lenders ("Lenders"), and to obtain post-petition extensions of credit thereunder, (2) granting Agent, for the benefit of itself and the Lenders, security interests and liens and granting Agent and Lenders priority claims pursuant to 11 U.S.C. § 364, (3) granting adequate protection, (4) modifying the automatic stay and (5) setting a final hearing on the Motion. Pursuant to Rule 4001(c) of the Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules"), due notice of the Motion was given and a preliminary hearing (the "Preliminary Hearing") was held before this Court on February 5, 2002. Following the Preliminary Hearing, the Court entered an Interim Order (1) Authorizing Decor Gravure Corporation, New Decor Holdings and Decor Decorative Moldings, Inc. as Debtors-In-Possession, to Incur Post-Petition Secured Indebtedness, (2) Granting Security Interests and Priority pursuant to 11 U.S.C. § 364, (3) Granting Adequate Protection, (4) Modifying Automatic Stay and (5) Setting Final Hearing (the "Interim Order"). Due notice of the final hearing (the "Final Hearing") on the Motion was given, and such Final Hearing was held on February 27, 2002, pursuant to Paragraph 30 of the Interim Order as provided for under § 364 of the Code and Bankruptcy Rule 4001(c). Having reviewed and considered the Motion, together with all declarations (and exhibits) filed in support thereof, having completed the Preliminary Hearing and the Final Hearing, and upon all other proceedings held before this Court and, in accordance with sections 363 and 364 of chapter 11 of title II of the United States Code, 11 U.S.C. § 101, et seq. (the "Code") and Bankruptcy Rule 4001, upon all of the pleadings filed with this Court, and after due deliberation and consideration and sufficient cause appearing therefor:

THE COURT MAKES THE FOLLOWING FINDINGS OF FACT AND CONCLUSIONS OF LAW:

A. Filing of Petition. On February 4, 2002 (the "Petition Date"), the Debtors filed with this Court petitions for relief ("Petition") under the Code. Pursuant to §§ 1107 and 1108 of the Code, each Debtor has retained possession of its assets and is authorized to continue the operation and management of its business as debtor-in-possession. An official committee of unsecured creditors (the "Committee") has been appointed in these Cases pursuant to § 1102 of the Code.

B. The Motion Notice. The Motion was filed on February 4, 2002. The Debtors served by regular U.S. Mail and/or telecopy on February 4 and 5, 2002, the Motion on (i) the Bankruptcy Administrator for the Northern District of Alabama, (ii) the District Counsel for the Internal Revenue Service, (iii) the twenty largest creditors listed on the respective schedules filed by the Debtors pursuant to Bankruptcy Rule 1007(d), (iv) each Debtor's known secured creditors, including Agent and Lenders and (v) the Debtors' respective landlords and warehousemen. In addition, the Debtors served a copy of the Interim Order (including the Assumption Agreement and Amendment as an exhibit thereto) and the notice of the Final Hearing by first-class United States mail upon the parties identified in clauses (i) through (v) in the first sentence of this paragraph, counsel to the Committee and any other party which theretofore filed in these Cases a request for special notice with this Court and served such request upon Debtors' counsel. Such notice is appropriate and adequate under the circumstances. Consequently, adequate notice and opportunity for a hearing has been given in accordance with the provisions of §§ 363 and 364 of the Code and Bankruptcy Rules 2002, 4001 and 9014, and any other applicable law, and no further notice relating to this proceeding is necessary or required.

C. Jurisdiction; Core Proceeding. Consideration of the Motion constitutes a "core proceeding" as defined in 28 U.S.C. § 157(b)(2), This Court has jurisdiction over this proceeding and the parties and property affected hereby pursuant to 28 U.S.C. § 157(b)(1) and 1334(b).

D. Nature of Business and History. Decor is an Alabama corporation; Holdings and New Stiles are Delaware corporations. Decor is headquartered in Birmingham, Alabama, and has manufacturing facilities in Asheboro, North Carolina, Elkhart, Indiana, Fort Worth, Texas, Phoenix, Arizona, Tualatin, Oregon, Valdosta, Georgia and Bensenville, Illinois. Decor is engaged in the manufacture of decorative vinyl laminated wallboard in the United States. Holdings is a holding company which owns one hundred percent (100%) of the capital stock of Decor. New Stiles is a wholly owned subsidiary of Decor, and its assets have been previously sold to a third party or have otherwise been liquidated prior to the Petition Date.

E. Debtors' Present Financial Condition; Pre-Petition Defaults. Prior to the Petition Date, several Events of Default (as defined in the Credit Agreement) occurred and continued through the Petition Date, which allowed Agent and Lenders to refuse any funding requests of Decor. The Debtors do not expect to generate sufficient Cash Collateral (as defined below) to operate their business and do not believe that they have the ability to adequately protect Agent's security interests in a manner that would enable the Debtors to obtain authority to use Cash Collateral over Agent's and Lenders' objection or to obtain alternative financing.

F. Need For Funding. As a result of their financial condition, the Debtors have been unable to obtain alternative sources of cash or credit either in the form of unsecured credit allowable as an administrative expense under § 503(b)(1) of the Code, unsecured credit allowable under §§ 364(a) and 364(b) of the Code, or secured credit pursuant to § 364(c) or (d) of the Code on terms and conditions more favorable to the Debtors' Estates (as defined below) than those set forth in the DIP Credit Documents (as defined below) and the Order. If the Debtors' financing were to be abruptly discontinued, their Operations would be severely disrupted, they would be unable to pay operating expenses and unable to operate their business in an orderly manner, thereby severely impairing the value of their assets and their ability to sell their business as a going concern. Accordingly, the Debtors and their Estates will suffer immediate and irreparable harm unless the Debtors are immediately authorized to obtain credit on terms and conditions set forth herein.

G. Plans in Chapter 11: Sale of Debtors' Assets. The Debtors intend to operate their business and dispose of their assets through a going concern sale. During the months preceding the Petition Date, the Debtors, with the assistance of their financial advisor, extensively marketed the sale of the Debtors as a going concern to numerous prospective buyers. As a result of this sale process, Adorn LLC ("Adorn"), one of the Debtors' competitors, emerged as the highest bidder, and immediately prior to the Petition Date, the Debtors and Adorn entered into an asset purchase agreement (the "Adorn Asset Purchase Agreement") providing for the sale of substantially of the Debtors' operating assets (other than certain real property owned by Decor) as a going concern pursuant to § 363 of the Code to Adorn (or, if applicable, to any other party making the highest and best bid at an auction conducted pursuant to sale procedures to be approved by the Court) (such sale transaction, the "Sale"). The Sale transaction with Adorn provides for a purchase price of $11,500,000, subject to, among other things, a working capital adjustment and certain escrow arrangements. On the Petition Date, the Debtors filed a motion to approve to the Sale to Adorn, subject to higher and better bids, and to approve the procedures governing the post-petition sale process. The Debtors believe that the Chapter 11 sale process, under the supervision of this Court and with the participation of key employees and secured creditors, will enable the Debtors to maximize the value of their assets as promptly as is practicable under the circumstances.

H. Lenders' Willingness to Extend Interim DIP Financing. The Court has been advised that certain of the Lenders are willing to advance post-petition funds (the "DIP Financing") in the form of revolving loans (the "DIP Revolving Loans") to Decor pursuant to the Approved Budget (as defined below) and subject to a borrowing base formula set forth in the Amended Credit Agreement from the date of the Interim Order through the Loan Payment Date, on substantially the same terms and conditions as applied prior to the Petition Date, all as more fully set forth in the Assumption Agreement and Ninth Amendment to Credit Documents (the "Assumption Agreement and Amendment") and the other DIP Credit Documents (as defined below). The Credit Agreement (as defined below), as amended by the Assumption Agreement and Amendment, shall be referred to herein as "Amended Credit Agreement." Unless otherwise specified, all capitalized terms used herein without definition shall have the respective meanings given such terms in the Amended Credit Agreement. It is a condition to Lenders' willingness to make DIP Revolving Loans that the Interim Order and this Order shall have been entered and that the Debtors, Agent and Lenders shall have executed and delivered to Agent the Assumption Agreement and Amendment. In the event of any conflict between the terms and provisions of the Order and the DIP Credit Documents, the terms and provisions of the Order shall control; provided, however, that except to the extent that specific provisions of this Order expressly contradict or expressly limit specific provisions of the DIP Credit Documents, nothing in this Order shall be construed as limiting any rights and remedies of Agent and Lenders, or the obligations of the Debtors, under the DIP Credit Documents.

The Lenders electing to participate in the DIP Financing include Heller Financial, Inc., Key Corporate Capital, Inc., Bank of America, N.A. and The Prudential Insurance Company of America. Nothing in this Order (including, without limitation, references to "Lenders" with respect to the making of post-petition extensions of credit) shall impose any obligation on any other Lender to make any DIP Revolving Loans or other post-petition extensions of credit.

I. [Intentionally deleted.]

J. Budget for DIP Financing. The Debtors have previously delivered to Agent and Lenders a twenty-five page, detailed budget captioned "initial Approved Budget", which sets forth all projected cash receipts, sales and cash disbursements (by line item) on a weekly basis for the time period from and including February 4, 2001, through May 3, 2002 (that portion of budget ending on March 22, 2002, the "Initial Approved Budget"). Attached as Exhibit A to the Interim Order is a summary of the Initial Approved Budget. The Initial Approved Budget may be modified or supplemented from time to time by additional budgets (covering any time period covered by a prior budget or covering additional time periods) to which Agent, Requisite Lenders and the Debtors agree in their respective sole discretion (each such additional budget, a "Supplemental Approved Budget"). The aggregate, without duplication, of all items approved by Agent in the Initial Approved Budget and any and all Supplemental Approved Budgets (acceptable to Agent in its sole discretion) shall constitute an "Approved Budget." The Initial Approved Budget is an integral part of the Order and has been relied upon by Agent and Lenders in deciding to agree to entry of the Order and to provide the DIP Financing.

K. Cash Collateral. For purposes of the Order, "Cash Collateral" shall consist of all of the respective property of the Debtors that constitutes cash collateral in which any or all of the Agent and Lenders have an interest as provided in § 363(a) of the Code and shall include, without limitation:

(1) All cash proceeds arising from the collection, sale, lease or other disposition, use or conversion of any property upon which any or all of the Agent and Lenders hold a lien or a replacement lien, whether as part of the Pre-Petition Collateral or other DIP Collateral (as defined below) or pursuant to an order of the Court or applicable law or otherwise, and whether such property that has been converted to cash existed as of the commencement of these Cases or arose or was generated thereafter; and

(2) All of the respective deposits, refund claims and rights in retainers of the Debtors upon which any or all of the Agent and Lenders hold a lien or replacement lien, whether as part of the Pre-Petition Collateral or other DIP Collateral (as defined below) or pursuant to an order of the Court or applicable law or otherwise. All of each Debtor's cash on hand and cash flow from operations consists of proceeds of pre-petition Loans (as defined in the Credit Agreement), or Accounts or Inventory that are Pre-Petition Collateral and, therefore, all such cash is Cash Collateral.

Decor is authorized to use Cash Collateral consisting of proceeds of DIP Revolving Loans solely in accordance with and pursuant to the terms and provisions of the Order and the DIP Credit Documents and only to the extent required to pay expenses enumerated in the Approved Budget.

L. Good Faith. The Agent and Lenders have acted in good faith in agreeing to extend credit and other financial accommodations to the Debtors in accordance with the DIP Credit Documents and the Order. The terms of the DIP Financing authorized by the Order set forth below are for reasonably equivalent value and fair consideration. The agreements and arrangements authorized in the Order have been negotiated at arms' length with all parties represented by experienced counsel, are fair and reasonable under the circumstances, are enforceable in accordance with their terms and have been entered into in good faith. Any credit extended and loans made to any Debtor by any or all of the Agent and Lenders pursuant to this Order and/or the DIP Credit Documents shall be deemed to have been extended in good faith, as that term is used in § 364(e) of the Code.

M. Cause Shown. Good cause has been shown for the entry of the Order. Among other things, entry of the Order will maximize the possibility of maximizing the value of the Debtors' assets through a going concern sale and will avoid immediate and irreparable harm to, and is in the best interests of, the Debtors, their creditors and their Estates.

N. Pre-Petition Indebtedness to Agent and Lenders and Security Therefor; Pre-Petition Credit Documents. Subject to the reservation of rights provisions of Paragraph 12 hereof, on the Petition Date, the Debtors were indebted to Agent and Lenders as described below:

1. Decor, Agent and Lenders are parties to that certain Amended and Restated Credit Agreement dated as of June 29, 1998 (as amended in writing prior to the Petition Date, the "Credit Agreement" and together with all Loan Documents (as defined in the Credit Agreement) and all other agreements and documents relating to the Pre-Petition Indebtedness (as defined below) and executed prior to the Petition Date, collectively, the "Pre-Petition Credit Documents"). Pursuant to the Credit Agreement, Agent and Lenders provided certain revolving and term loans and other financial accommodations to Decor, in an aggregate principal amount not to exceed $55,000,000. Pursuant to that certain Guaranty dated as of July 17, 1995 (the "Holdings Guaranty"), Holdings, the parent of Decor, unconditionally guaranteed to the Agent for the benefit of the Lenders and the Agent, the punctual and complete payment and satisfaction when due and at all times thereafter, and the performance, of all of the Indebtedness (as defined below) of Decor. Pursuant to that certain Stiles Guaranty dated as of January 30, 1998 ("Stiles Guaranty") by New Stiles as successor to Stiles, Inc., New Stiles unconditionally guaranteed to the Agent for the benefit of the Lenders and the Agent, the punctual and complete payment and satisfaction when due and at all times thereafter, and the performance, of all of the Indebtedness (as defined below) of Decor. A list of the principal Pre-Petition Credit Documents shall be contained in a Proof of Claim (the "Proof of Claim") that Agent intends to file with the Court. A copy of the Credit Agreement shall be included in the Proof of Claim. Agent shall be entitled to amend or supplement the Proof of Claim, and any failure by Agent to list or include any Pre-Petition Credit Document, Pre-Petition Financing Statement or other loan, security or perfection document shall not be deemed a waiver by Agent or any Lender. Copies of the Credit Agreement and the other principal Pre-Petition Credit Documents were made available at the preliminary Hearing.

2. As of the Petition Date, the principal amount of the Pre-Petition Indebtedness owed to Agent and Lenders by Debtors, exclusive of accrued but unpaid interest (but including capitalized interest evidenced by notes), costs, fees, and expenses (the right to receive payment of which is expressly reserved by Agent and Lenders and not waived), was not less than approximately $41,476,240.67, consisting of not less than $6,664,598.38 in pre-petition revolving loans and $34,792,371.99 in term loans.

3. Pursuant to that certain Security Agreement dated as of July 17, 1995, by and between Decor and Agent (the "Security Agreement"), and the other Pre-Petition Credit Documents, Decor granted to Agent (for the benefit of itself and Lenders) a continuing lien and security interest to secure the Pre-Petition Indebtedness in all of Decor's personal property, including without limitation, the following types of property (the following subparagraphs (i) through (xiii) are substantially identical to the collateral grant in the Security Agreement): (i) all Accounts; (ii) Documents; (iii) Equipment; (iv) General Intangibles; (v) Goods; (vi) Fixtures; (vii) Instruments; (viii) Inventory; (ix) all deposit accounts, and all cash deposited therein; (x) all other monies and property of Decor in the possession or under the control of Agent or any Lender; (xi) all books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data and data processing software that at any time evidence or contain information relating to any of the foregoing property; (xii) to the extent not otherwise included, all Proceeds and products of the foregoing and all accessions to, substitutions and replacements for, and rents and profits of, each of the foregoing; and (xiii) any other property of Decor which Decor may have delivered to Agent or Lenders to secure the Obligations of Decor owed to Agent or any lender and the proceeds of such property. Pursuant to that certain Stiles Security Agreement dated as of January 30, 1998 by New Stiles and other security documents, New Stiles granted to Agent (for the benefit of itself and Lenders) a continuing lien and security interest in substantially all of its assets as security for its obligations under the Stiles Guaranty. In a transaction entered into on or about May 2001, most of the assets of New Stiles were sold, and the remainder were liquidated shortly thereafter. In addition, pursuant to that certain Pledge Agreement dated as of July 17, 1995 ("Holdings Pledge Agreement"), Holdings granted to Agent (for the benefit of itself and the Lenders) a first priority lien on all of the capital stock of the Decor.

Capitalized terms used in these descriptions have the meaning ascribed to such terms in the Security Agreement.

4. Pursuant to those certain Mortgages, Security Agreements Assignment of Leases and Rents, Financing Statements and Fixture Filings dated as of July 14, 1995, (as amended, the "Mortgages"), Decor granted to Agent (for the benefit of itself and the Lenders) a lien on Decor's fee interest in certain property located in Fairfield, Alabama, Fort Worth, Texas and Elkhart, Indiana.

5. For purposes of the Order, all of the indebtedness and obligations of Debtors (including all Obligations, as defined in the Credit Agreement) to Agent and Lenders pursuant to the Pre-Petition Credit Documents, together with all pre-petition and post-petition interest and expenses now or hereafter accrued on such indebtedness and obligations, shall hereinafter collectively be referred to as the "Pre-Petition Indebtedness." All Collateral (as defined in the Credit Agreement, the Security' Agreement and any other Pre-Petition Credit Document) of any Debtor that existed as of the Petition Date and all pre-petition and post-petition proceeds thereof shall hereafter be referred to as the "Pre-Petition Collateral."

O. Perfection of Agent's Security Interests. Subject to the reservation of rights provisions of Paragraph 12 hereof, Agent perfected its security interests in the Pre-Petition Collateral by the filing of a series of UCC-1 financing statements against the applicable Debtor (the "Pre-Petition Financing Statements") with the proper state and county offices for the perfection of such security interests and by recording the Mortgages in the proper county offices for the perfection of such security interests.

P. Validity and Allowance of Pre-Petition Indebtedness. Subject to the reservation of rights provisions of Paragraph 12 hereof, as of the Petition Date, (i) the Pre-Petition Credit Documents are valid and binding agreements and obligations of the Debtors, (ii) the Pre-Petition Indebtedness, all of which is due and payable to Agent and Lenders, is allowable in an amount not less than the amount set forth in finding paragraph (2) above plus only to the extent (if any) permitted by § 506(b) of the Code, post-petition interest on the Pre-Petition Indebtedness, as well as pre-petition and post-petition fees, costs and charges related to the Pine-Petition Indebtedness, all as provided in the Pre-Petition Credit Documents, (iii) Agent's liens on and security interests in the Pre-Petition Collateral are valid, perfected, enforceable, non-avoidable and, except as specifically permitted under the Pre-Petition Credit Documents, first priority liens and security interests, and Agent's and Lenders' pre-petition claims against the Debtors, and the estates created by the filing of the Petitions (collectively, the "Estates") are allowed and are valid, enforceable and non-avoidable in the amount of the Pre-Petition Indebtedness, and (v) the Debtors (or any party acting by, through or on behalf of any Debtor) may not assert any claim, counterclaim, setoff or defense of any kind or nature which would in any way affect the validity, enforceability and non-avoidability of the Pre-Petition Indebtedness or Agent's security interests in and liens on the Pre-Petition Collateral or reduce or affect the obligation to pay the Pre-Petition Indebtedness. Subject to the reservation of rights provisions of Paragraph 12 hereof each of the Debtors and their Estates hereby releases and discharges Agent and Lenders, together with their respective affiliates, agents, attorneys, officers, directors and employees, from any and all claims and causes of action arising out of, based upon or related to, in whole or in part, any of the Pre-Petition Credit Documents, any aspect of the pre-petition relationship between any Debtor or its Affiliates relating to any of the Pre-Petition Credit Documents or any transaction contemplated thereby, on the one hand, and any or all of the Agent and the Lenders and their respective Affiliates, on the other hand, or any other acts or omissions by any or all of the Agent and Lenders in connection with any of the Pre-Petition Credit Documents or their pre-petition relationship with any Debtor or any Affiliate thereof relating to any of the Pre-Petition Credit Documents or any transaction contemplated thereby.

Q. Inability to Distinguish Between Collateral. It would be practically difficult and costly not only to trace and allocate the cash proceeds received by any Debtor to particular items of DIP Collateral (as defined below), but to determine the extent to which such proceeds are attributable to Pre-Petition Collateral as distinguished from DIP Collateral not constituting Pre-Petition Collateral.

R. Basis for Partial Relief from Stay. Debtors' financial position is precarious because they have no assurance that they will be able to obtain a final order that is a condition precedent to continued DIP Financing beyond the Loan Payment Date (as defined in the Interim Order). Accordingly, this Court hereby finds, and the Debtors agree, that good cause exists for the modifications of the automatic stay provided for herein.

S. No Liability to Third Parties. The Debtors stipulate that in making decisions to advance loans to any Debtor, in administering any loans, in accepting the initial Approved Budget or any future Supplemental Approved Budget or in taking any other actions permitted by the Order or the DIP Credit Documents, Agent and the Lenders shall not be deemed to be in control of the operations of any Debtor or to be acting as a "responsible person or owner or operator" with respect to the operation or management of any Debtor.

THEREFORE, IT IS HEREBY ORDERED THAT:

1. Authorization to Borrow, DIP Credit Documents. The Motion is granted, and the Debtors are authorized to enter into or assume, as applicable, and be bound by the following documents and to borrow money (in the case of Decor) and perform their obligations thereunder in accordance with the terms thereof:

(a) the Assumption Agreement and Amendment, in substantially the form attached as Exhibit B to the Interim Order;

(b) the Amended Credit Agreement;

(c) all other Pre-Petition Credit Documents, as amended by the Assumption Agreement and Amendment;

(d) all such financing statements, notices, schedules, other security agreements, deeds of trust, mortgages, instruments, guaranties, subordination agreements, acceptance agreements and documents as may be necessary or required to evidence their obligations to Agent and Lenders, to consummate the terms and provisions of the Motion and the Order and to evidence perfection of the liens and security interests to be given to Agent (for itself and the Lenders) pursuant hereto and thereto, and such other agreements and documents as are set forth in the foregoing documents as a condition to Lenders' willingness to make loans pursuant thereto or as Agent shall reasonably require in connection with or to evidence the DIP Financing whether now or hereafter executed by or on behalf of any Debtor and delivered to Agent.

For purposes of the Motion and the Order, the documents listed in subparagraphs (a) through (d) above shall hereinafter collectively be referred to as the "DIP Credit Documents." The DIP Credit Documents shall be incorporated as part of this Order and shall be deemed binding on and enforceable against the Debtors, their Estates, and their successors and assigns. The Debtors are further authorized to execute and deliver any amendments or modifications to any of the DIP Credit Documents or the terms of the DIP Financing set forth herein and/or any waivers as may be agreed upon in writing by the Debtors, the Agent, and Committee without the need of further notice, hearing or order of this Court. All indebtedness and obligations incurred on or after the date of this Order by the Debtors to Agent and Lenders pursuant to the DIP Credit Documents (including principal, accrued and unpaid interest and costs and expenses, including reasonable attorneys' fees and expenses) are referred to herein as the "DIP Indebtedness," and together with the Pre-Petition Indebtedness, as the "Indebtedness."

2. Maximum Amount of Borrowing. The maximum aggregate amount of the Indebtedness consisting of the pre-petition revolving loans and the DIP Revolving Loans that may be outstanding at any time shall not exceed the lesser of $8,433,868.68, the Revolving Loan Commitment then in effect or the Borrowing Base then in effect; provided, however, that if Agent and/or Lenders advance funds in excess of these limitations or any borrowing base or other limitations or restrictions set forth herein or in the DIP Credit Documents, such advances shall constitute part of the DIP Indebtedness and shall be entitled to the benefits of the DIP Credit Documents and the Order.

3. Interest; Fees; Professional Expenses. The rate of interest to be charged for Loans (as defined in the Amended Credit Agreement) and other extensions of credit to any Debtor under the Amended Credit Agreement shall be the rates set forth in the Amended Credit Agreement. Interest on the DIP Indebtedness shall be payable monthly, and such interest and all post-petition fees and reimbursable expenses set forth in the Amended Credit Agreement and relating to the DIP Indebtedness may be charged to the loan account in accordance with the Amended Credit Agreement. Notwithstanding any provision of the Order or the DIP Credit Documents, no payments of post-petition interest, fees or expenses in respect of the Pre-Petition Indebtedness may be made to any or all of Agent and Lenders except to the extent permitted by § 506(b) of the Code.

4. Termination of DIP Revolving Loans; Term of Amended Credit Agreement. The Amended Credit Agreement shall immediately and automatically terminate (except as Agent may otherwise agree in writing), and all Indebtedness shall be immediately due and payable (except as Agent may otherwise agree in writing) upon the earliest to occur of (such earliest date, the "Loan Payment Date"):

(a) March 22, 2002 (or such later date to which Agent and Requisite Lenders have consented in writing in their sole discretion);

(b) the date of final payment and satisfaction in full in cash of the Indebtedness and termination of all commitments pursuant to the Amended Credit Agreement;

(c) the effective date of any confirmed chapter 11 plan of reorganization or liquidation in any Case;

(d) the dismissal or conversion to Chapter 7 of any Case;

(e) the date of appointment of a Chapter 11 Trustee or examiner with expanded powers in any Case;

(f) the closing of the Sale (to Adorn or any other party with the highest and best bid); or

(g) any Event of Default under the Amended Credit Agreement or any other DIP Credit Document.

5. Security for indebtedness. Subject only to the limitations in Paragraph 6 hereof and as adequate protection for Agent's and Lenders' interest in the Pre-Petition Collateral, the Indebtedness shall be secured by, and Agent is hereby granted (for the benefit of itself and the Lenders) pursuant to §§ 361, 363(e), 364(c)(2), 364(c)(3) and 364(d)(1) of the Code, a first lien subject only to Prior Claims (as defined below), on all DIP Collateral, which lien shall be senior to, among other things (i) the rights of the Debtors, (ii) the liens and security interests of any creditor holding pre-petition liens or security interests junior or subordinate to Agent's liens on the Pre-Petition Collateral, and (iii) the pre-petition and post-petition liens and security interests securing the Pre-Petition Indebtedness. As used herein, the term "DIP Collateral" shall mean all of the Collateral (as defined in any DIP Credit Document) and shall include all of the Debtors' respective real and personal property and assets, of any kind or nature whatsoever, whether now owned or hereafter acquired by any Debtor, and all proceeds, rents or profits thereof, including all of the Pre-Petition Collateral and subject to the limitations of Paragraph 6 hereof, all claims of each Debtor under the Code (including, without limitation, avoidance claims under §§ 544, 545, 547, 548, 551 and/or 553, which avoidance claims shall collectively be referred to as the "Avoidance Actions"). As used herein, the term "Prior Claims" shall mean (i) any non-avoidable, valid, enforceable and perfected liens and security interests in favor of any person or entity on or in the assets of any Debtor, as a pre-petition debtor, which existed on the Petition Date (including any valid liens and security interests in existence on the Petition Date that are perfected after the Petition Date as permitted by § 546(b) of the Code) and are not subject to § 552(a) of the Code, but only to the extent such liens and security interests are superior in priority to Agent's pre-petition liens and security interests, after giving effect to any existing subordination or intercreditor arrangements (provided that this clause (i) shall exclude the pre-petition and post-petition liens and security interests securing the Pre-Petition Indebtedness, which liens and security interests shall be subordinate to the liens and security interests securing the DIP Indebtedness), and (ii) the Carve-Out (as defined below). Other than the first priority liens and security interests in favor of Agent pursuant to the DIP Credit Documents and this Order and the Prior Claims, no other claims, liens or security interests whether prior to or pari passu with the claims, liens or security interests of Agent shall attach to the DIP Collateral in this or any subsequent or superseding case (including, without limitation, any conversion of any Case to a case under chapter 7 of the Code or any other proceeding related hereto or thereto (collectively, "Successor Case")), without the express written consent of Agent (which consent may be withheld in its sole discretion). Agent at its option may release at any time from its liens and security interests any assets determined by Agent to have a risk of environmental liabilities which Agent in its sole discretion deems unacceptable. Nothing herein shall be construed to divest any Debtor of control over the exercise or non-exercise of the rights or powers under the Code that may give rise to recoveries under Avoidance Actions. In addition, except to the extent otherwise expressly set forth in this Order or in a written instrument duly executed by Agent, no post-petition liens or security interests granted to Agent, and no claim of Agent or any Lender, shall be subject to subordination to any other liens, security interests or claims under § 510 of the Code or Otherwise: provided, however that this sentence shall not be binding on any trustee appointed in these Cases or any Successor Case. Any security interest or lien upon the DIP Collateral which is avoided or otherwise preserved for the benefit of any Estate under § 551 or any other provision of the Code shall be subordinate to the post-petition security interests in and liens of Agent upon the DIP Collateral.

6. Limitations on Cross-Collateralization and Liens on Avoidance Actions. Subject to the provisions in the immediately following sentence, the post-petition liens and security interests granted under the DIP Credit Documents and hereunder in any DIP Collateral not constituting (x) Pre-Petition Collateral or (y) DIP Collateral acquired by any Debtor on or after Petition Date of the same category, type or nature as the Pre-Petition Collateral ("Similar DIP Collateral") shall secure the Indebtedness in an amount equal to the sum of (i) the amount by which the value of the Pre-Petition Collateral and the Similar DIP Collateral as of any post-petition date of determination is less than the value of the Pre-Petition Collateral as of the Petition Date (whether such decline in value is attributable to physical deterioration, consumption, use, shrinkage, decline in market value, or otherwise), plus (ii) the maximum amount by which the Indebtedness as of any post-petition date exceeds the amount of Pre-petition Indebtedness which is outstanding as of the Petition Date (such maximum amount, the "Indebtedness Priority Amount"). In addition, Agent's post-petition liens and security interests on or in Avoidance Actions and the proceeds thereof (a) shall be limited to the aggregate amount (such aggregate amount, the "Avoidance Proceeds Amount") of the Carve-Out and any other professional fees and disbursements of the DIP's Professionals and the Committee Professionals which are funded at any time from the proceeds of any Loans or any other extensions of credit or any Pre-Petition Collateral or other DIP Collateral; and (b) shall be subordinate to allowed claims, if any, of any trustee or examiner appointed in the Cases, and any professional retained by any such trustee or examiner, for fees and expenses allowed under sections 326, 327, 328, 329, 330 or 331 of the Code related to the collection of the Avoidance Actions.

7. Automatic Perfection of New Liens. All liens and security interests on or in the DIP Collateral granted to Agent by this Order and the DIP Credit Documents shall be, and they hereby are, deemed duly perfected and recorded under all applicable federal or state or other laws as of the date hereof, and no notice, filing, mortgage recordation, possession, further order, landlord or warehousemen lien waivers or other act, shall be required to effect such perfection; provided, however, that notwithstanding the provisions of § 362 of the Code, (i) Agent may, at its sole option, file or record or cause any Debtor to execute, file or record, at the Debtors' expense, such UCC financing statements, notices of liens and security interests, mortgages and other similar documents or obtain landlord or warehousemen lien waivers or other third party consents as Agent may require, and (ii) Agent may require any Debtor to deliver to Agent any chattel paper, instruments or securities evidencing or constituting any DIP Collateral, and the Debtors are directed to cooperate and comply therewith. If Agent, in its sole discretion, shall elect for any reason to cause to be obtained any such landlord or warehousemen lien waivers or other third party consents or cause to be filed or recorded any such notices, financing statements, mortgages or other documents with respect to such security interests and liens, or if Agent, in its sole discretion, shall elect to take possession of any DIP Collateral, all such landlord or warehousemen lien waivers or other third party consents, financing statements or similar documents or taking possession shall he deemed to have been filed or recorded or taken in the Cases as of the commencement of the Cases but with the priorities as set forth herein. Agent may (in its discretion) but shall not be required to file a certified copy of this Order in any filing or recording office in any county or other jurisdiction in which any Debtor has real or personal property and such filing or recording shall be accepted and shall constitute further evidence of perfection of Agent's interests in the DIP Collateral. Neither the granting of the liens and security interests to Agent in the DIP Collateral nor the exercise of any rights or remedies by Agent and/or any Lender in connection therewith will result in any breach, violation or infringement of (i) any trademark, copyright or other intellectual property right of any Debtor or any third party, or (ii) any contract to which any Debtor or any of its properties is subject.

8. Waiver of DIP Rights. Each of the Debtors and their Estates irrevocably waives, and any party in interest acting by, through or on behalf of any Debtor or any Estate is barred from asserting or exercising, any right, (a) without Agent's prior written consent, or (b) without prior payment and satisfaction in full of the Indebtedness: (i) to grant or impose, or request that the Court grant or impose, under § 364 of the Code or otherwise, liens on or security interests in any DIP Collateral, equal or superior to Agent's liens on and security interests in such DIP Collateral; (ii) to use Cash Collateral (other than proceeds of DIP Revolving Loans as provided in the Order); (iii) to return goods pursuant to § 546(h) of the Code (or otherwise return goods on account of any pre-petition indebtedness) to any creditor of any Debtor or to consent to any creditor taking any setoff against any of its pre-petition indebtedness based upon any such return pursuant to § 553(b)(1) of the Code or otherwise; or (iv) to modify or affect any of Agent's or Lenders' rights under the Order, the Amended Credit Agreement or the other DIP Credit Documents with respect to the Indebtedness by any plan of reorganization confirmed in any Case or any order entered in any Case. No costs or expenses of administration or other charge, lien, assessment or claim incurred at any time (including, without limitation, any expenses set forth in the Approved Budget) by any Debtor or any other person or entity shall be imposed against the Agent, Lenders, their claims, or their collateral under § 506(c) of the Code or otherwise, unless, prior to incurring such costs or expenses: (i) the party proposing to incur such cost or expense shall obtain the written consent of the Lenders allowing such charge to be imposed against Lenders, their claims or their collateral under § 506(c) of the Code, or (ii) after notice to Agent and Lenders and a hearing, this Court enters an order allowing such charge to be imposed against Lenders, their claims or their collateral under § 506(c) of the Code; provided, however, that in consideration of the carve-out provisions set forth in paragraph 11 hereof, the DIP's Professionals and the Committee Professionals shall not be entitled under any circumstances to any rights against any or all of Agent and the Lenders, their claims or their collateral under § 506(c) of the Code or otherwise, with respect to professional fees or expenses incurred at any time by the DIP's Professionals or the Committee Professionals. Nothing in this Order shall constitute the consent by any or all of the Agent and the Lenders to the imposition of any costs or expense of administration or other charge, lien, assessment or claim (including, without limitation, any amounts set forth in the Approved Budget) against the Agent, the Lenders, their claims or their collateral under § 506(c) of the Code or otherwise. Agent and Lenders shall not be subject to the equitable doctrine of "marshalling" or any other similar doctrine with respect to any of their Pre-Petition Collateral or other DIP Collateral.

9. Modification of Automatic Stay.

(a) Except as set forth in subparagraph (b) of this paragraph, which exclusively governs the applicability of the automatic stay to any action by Agent and/or Lenders to foreclose on Agent's liens on any Pre-petition Collateral or other DIP Collateral or to exercise any other default-related remedies (other than those specifically referenced in the last sentence of this subparagraph (a) (collectively, the "Specified Lender Actions")), (x) the automatic stay pursuant to § 362 of the Code is hereby vacated as to Agent and Lenders to permit them to perform in accordance with, and exercise, enjoy and enforce their rights, benefits, privileges and remedies pursuant to, the DIP Credit Documents without further application or motion to, or order from the Court, and (y) neither § 105 of the Code nor any other provision of the Code or applicable law shall be utilized to prohibit Agent's or any lender's exercise, enjoyment and enforcement of any of such rights, benefits, privileges and remedies regardless of any change in circumstances (whether or not foreseeable). Agent and Lenders are hereby granted leave, among other things, to (i) receive and apply payments of the Indebtedness and collections on and proceeds of the DIP Collateral to the Indebtedness in the manner specified in this Order and the DIP Credit Documents, (ii) file or record any financing statements, mortgages or other instruments or other documents to evidence the security interests in and liens upon the DIP Collateral, (iii) charge and collect any interest, fees, costs and other expenses accruing at any time under the DIP Credit Documents as provided therein, (iv) give any Debtor any notice provided for in any of the DIP Credit Documents or this order, and (v) upon the occurrence of an Event of Default (as defined in the Amended Credit Agreement or any other DIP Credit Document), and without application and motion to, or order from the Court or any other court and without any interference from any Debtor or any other party in interest, (A) terminate the Amended Credit Agreement and/or the other DIP Credit Documents, (B) cease making Loans or incurring Risk Participation Liability and/or suspend or terminate the commitments under the DIP Credit Documents, (C) declare all Indebtedness immediately due and payable and require that all Risk Participation Liability be cash collateralized or terminated without lability to Agent and Lenders as provided in the Amended Credit Agreement, (D) revoke any Debtor's right if any, under the DIP Credit Documents to use Cash Collateral, and (E) take any actions reasonably calculated to preserve or safeguard the DIP Collateral or to prepare the DIP Collateral for sale.

(b) Upon the occurrence of any Event of Default, Agent and Lenders shall be entitled (i) to file an emergency motion for relief from the automatic stay for the purpose of foreclosing or otherwise enforcing their security interests in or liens on any or all of the DIP Collateral and/or to exercise any other default-related rights and remedies under the DIP Credit Documents, the Pre-Petition Credit Documents or applicable law, and (ii) to obtain an expedited hearing on such motion upon three (3) days' notice to counsel for the Debtors and counsel for the Committee (subject to the Court's calendar). If such Event of Default is monetary or otherwise material (a "Specified Default"), the Agent and Lenders shall be entitled to such relief from the automatic stay upon a showing at the emergency hearing that such Specified Default has occurred and is continuing, and neither § 105 of the Code nor any other provision of the Code or applicable law shall he utilized to prohibit Agent and Lenders from exercising or enforcing such default-related rights and remedies, regardless of any change in circumstances (whether or not foreseeable). With respect to any motion for relief from the automatic stay by Agent and/or Lenders that is not based on a Specified Default, Agent and Lenders' entitlement to relief from the automatic stay shall be governed by the applicable provisions of the Bankruptcy Code.

(c) If Agent and Lenders are entitled, and have elected in accordance with the provisions hereof, to enforce Agent's liens or security interests or exercise any other default-related remedies, and provided that Agent and Lenders in their sole discretion have made available to the Debtors (through additional post-petition loans or by consenting to Debtors' use of Cash Collateral) sufficient funds to pay the reasonable and necessary costs thereof, if any, the Debtors shall cooperate with Agent and the Lenders in connection with such enforcement action by, among other things, (i) providing access to Debtors' premises to representatives of the Agent and the Lenders (including any collateral liquidator or consultant retained by Agent and/or the Lenders), (ii) providing Agent and the Lenders and their representatives access to the Debtors' books and records and any information or documents requested by Agent, Lenders or their representatives, (iii) performing all other obligations set forth in the DIP Credit Documents, and (iv) taking reasonable steps to safeguard and protect the DIP Collateral until Agent and the Lenders can make adequate provision to protect and safeguard the DIP Collateral, and Debtors and the Committee shall not otherwise interfere or actively encourage others to interfere with the Agent's and the Lenders' enforcement of their rights. In addition, at any time after the Agent and Lenders are granted relief from the automatic stay to exercise their default-related rights and remedies, and provided that Agent and the Lenders in their sole discretion have made available to Debtors (through additional post-petition loans or by consenting to Debtors' use of Cash Collateral) sufficient funds to pay the reasonable and necessary costs thereof, the Debtors shall, at the written request of the Agent, use commercially reasonable efforts to sell or otherwise dispose of any or all of the DIP Collateral on terms and conditions acceptable to Agent, and in connection thereof to obtain approval of the Court for each such sale or other disposition, and shall turn over the proceeds of such sale(s) or other disposition(s) to the Agent for application to the Indebtedness in accordance with the provisions hereof and the DIP Credit Documents.

10. Priority Claims. Except for the limited provisions for professional fees contained in the following paragraph, in addition to the liens granted to Agent hereunder, that portion of the Indebtedness equal to the Indebtedness Priority Amount shall constitute an administrative priority equivalent in priority to a claim under § 364(c)(1) of the Code (the "Super-Priority Administrative Claim"), and shall have priority over all other costs and expenses of administration of any kind, including those specified in, or ordered pursuant to, §§ 105, 326, 330, 331, 503(b), 507(a) or 507(b) or any other provision of the Code or otherwise (whether incurred in any Case or any Successor Case), and shall at all times be senior to the rights of any Debtor and any successor trustee or estate representative in any Case or any Successor Case. In addition, the Agent and Lenders shall have all of the rights accorded them pursuant to § 507(b) of the Code in respect of the adequate protection provided herein.

11. Professional Fees. Subject to the remaining provisions of this paragraph, Agent and Lenders agree that funds loaned pursuant to the Amended Credit Agreement and the proceeds of the DIP Collateral may be used to pay, and Agent's and Lenders' liens and administrative priority claims granted herein shall be subordinate only to (a) the administrative expense claims approved by the Court for the fees, expenses and costs incurred at any time during the post-petition period ending on the Carve-Out Termination Date (as defined below) (i) by professionals retained by the Debtors pursuant to § 327 of the Code (the "DIP's professionals") in an amount not to exceed (A) $300,000 in the aggregate for Morrison Cohen Singer Weinstein, LLP, Burr Forman LLP and Nixon Peabody LLP, and (B) $275,000 for Gulf Atlantic Capital Corporation, and (ii) by the professionals retained by the Committee pursuant to § 1103(a) of the Code (collectively, the "Committee Professionals") in an aggregate amount not to exceed $23,000, and (b) the payment of any unpaid fees payable pursuant to 28 U.S.C. § 1930 and any unpaid fees payable to the Clerk of this Court or the Bankruptcy Administrator; provided, however, in the event that any of the DIP's Professionals has any unpaid fees and disbursements after exhausting the applicable carve-out amount set forth in clause (a)(i)(A) or (B) (collectively, the "Specified Carve-Out Amounts"), then Agent's and Lenders' liens and administrative priority claims solely with respect to any of the real property (or interests in real property) that are retained by any Debtor after the Sale and not conveyed to the purchaser as part of the Sale or the proceeds (such real property and the proceeds thereof, collectively, the "Excluded Real Property") thereof shall be subordinated to the payment of such unpaid fees and disbursements (the carve-out amounts set forth in clauses (a) and (b) above and the proviso above, together with the limitations set forth therein, collectively, the "Carve-Out"). DIP Professionals shall submit to the Debtors, with a copy to Agent, copies of their bills for fees and expenses on a monthly basis. Prior to the Carve-Out Termination Date, Agent shall promptly pay (provisionally, subject to final approval and allowance by the Court) to the DIP Professionals 75% of fees billed and 100% of the expenses billed monthly, but in no event shall such payments exceed the applicable Specified Carve-Out Amounts. In order to effectuate the funding of the Carve-Out amounts set forth in clauses (a)(i)(A) or (B) above, Agent will set aside and retain for the benefit of the applicable DIP's Professionals and Committee Professionals an amount of proceeds from the Sale (which proceeds shall remain subject to Agent's pre-petition and post-petition liens) equal to the aggregate unused portion of the Specified Carve-Out Amounts as of the closing of the Sale (the "Professional Fee Reserve"), and Agent shall distribute funds (provisionally subject to final approval and allowance by the Court) from the Professional Fee Reserve from time to time promptly after receipt of the applicable invoices to the applicable DIP's Professionals or Committee Professionals for payment of any unpaid fees and disbursements of such DIP's Professionals or Committee Professional that accrued or incurred prior to the Carve-Out Termination Date (in the case of each such DIP's Professionals or Committee Professionals, in an aggregate amount not to exceed the unused portion of such DIP's Professionals' or Committee Professionals' Specified Carve-Out Amount), and any funds remaining in the Professional Fee Reserve after the disposition of all final fee applications of the DIP's Professionals and Committee Professionals shall be applied to the Indebtedness in accordance with the provisions of this Order. After the Carve-Out Termination Date, Agent shall continue to promptly pay (provisionally subject to final approval and allowance by the Court) monthly payments to DIP Professionals (75% of fees billed and 100% of expenses) to extent (i) such fees and expenses accrued or were incurred prior to the Carve-Out Termination Date and (ii) funds are available from such DIP's Professionals' share of the Professional Fee Reserve. To the extent that any DIP's Professionals has any unpaid fees and expenses (incurred prior to the Carve-Out Termination Date) after exhausting its portion of the Professional Fee Reserve, such DIP's Professionals shall be entitled to have such unpaid fees and expenses from the Excluded Real Estate. Notwithstanding anything to the contrary in this Order or the DIP Credit Documents, no proceeds of pre-petition or post-petition Loans or other extensions of credit, or, prior to payment in full in cash of the Indebtedness, any DIP Collateral (or proceeds thereof) may be used to pay, any and all claims for services rendered by any of the DIP's Professionals or Committee Professionals in connection with the assertion of or joinder in any claim, counterclaim, action, proceeding, application, motion, objection, defense or other contested matter, the purpose of which is to seek or the result of which would be to obtain any order, judgment, determination, declaration or similar relief (i) invalidating, setting aside, avoiding or subordinating, in whole or in part, the indebtedness or Agent's liens and security interests in the Pre-Petition Collateral or other DIP Collateral, (ii) for monetary, injunctive or other affirmative relief against any or all of the Agent and the Lenders or their collateral, or (iii) preventing, hindering or otherwise delaying the exercise by any or all of the Agent and the Lenders of any of their respective rights and remedies under this Order, the Pre-Petition Credit Documents, the DIP Credit Documents or applicable law, or the enforcement or realization (whether by foreclosure, credit bid, further order of this Court, or otherwise) by Agent or any Lender upon any Pre-Petition Collateral or other DIP Collateral; provided, however, that such funds and proceeds may be used by the Committee Professionals to investigate such matters. The dollar amounts available to be paid under the Carve-Out shall be deemed reduced to the extent proceeds of any pre-petition or post-petition Loans or proceeds of any Pre-Petition Collateral or other DIP Collateral are used to pay (i) fees or expenses of any DIP's Professionals or Committee Professionals and (ii) any retainer of any DIP's Professionals or Committee Professionals. Agent and Lenders shall retain the rights they have as parties in interest to object to any claims of any of the DIP's Professionals or Committee Professionals. Agent may in its sole discretion increase the amount of any reserves against the Borrowing Base up to an amount equal to any Carve-Out. As used herein, the term "Carve-Out Termination Date" means the earliest of (i) the date of delivery by Agent of the filing of a motion for relief from the automatic stay for the purpose of exercising any default-related rights and remedies under the DIP Credit Documents, the Pre-Petition Credit Documents or applicable law, (ii) the date of delivery by Agent of a notice advising the respective counsel to the Debtors and the Committee that Agent and/or the applicable Lenders have exercised any or all of their default-related rights and remedies described in any or all of clauses (A), (B) and (C) of the last sentence of Paragraph 9(a) hereof, or (iii) August 21, 2002, or such later date to which Agent has consented in writing in its sole discretion.

12. Preservation of Third-Party Rights. Notwithstanding anything contained herein to the contrary, and except as provided in the last proviso hereof, the extent, validity, perfection and enforceability of the Pre-Petition Indebtedness and Agent's liens on the Pre-Petition Collateral are for all purposes subject to the rights of any party in interest other than the Debtors and the Committee to file a complaint pursuant to Bankruptcy Rule 7001, seeking to invalidate, subordinate or otherwise challenge the Pre-Petition Indebtedness and/or Agent's pre-petition liens upon and security interests in the Pre-Petition Collateral; provided, however, that if such complaint is not timely filed within the post-petition period ending on May 1, 2002, (i) the Pre-Petition Indebtedness and Agent's security interests in and liens upon the Pre-Petition Collateral shall be recognized and allowable as valid, binding, in full force and effect, not subject to any claims, counterclaims, setoff or defenses, perfected and senior to all other liens upon and claims against the Pre-Petition Collateral to the extent provided herein, and the Pre-Petition Indebtedness shall be allowed in the full amount specified in clause (i) of Paragraph P hereof pursuant to §§ 502 and 506 of the Code, and (ii) the provisions of Paragraphs N, O and P shall be binding on all parties in interest; provided, further, that any trustee appointed in these Cases or any Successor Case shall not be bound by the first proviso. The Debtors and the Committee hereby consent to the allowance of the Agent's and the Lenders' claims in respect of the Pre-Petition Indebtedness as provided in clause (i) of the proviso to the immediately preceding sentence, and shall be bound by the provisions of Paragraph N, O and P hereof.

13. Cash-Collection Procedures. At all times until the Indebtedness has been paid in full in cash, all collections of accounts receivable, Cash Collateral and all proceeds from the sale or other disposition of any other DIP Collateral or services provided by any Debtor and all other cash which is now or shall come into any Debtor's possession or control, or to which any Debtor is now or shall become entitled, shall be deposited in the same accounts into which the collections and proceeds of the Pre-Petition Collateral were deposited under the Credit Agreement (collectively, the "Collection Account"), and such collections and proceeds upon such deposit shall become the sole and exclusive property of Agent and Lenders and shall be applied against the Pre-Petition Indebtedness and the DIP Indebtedness as provided in this Order and the Amended Credit Agreement. All cash and cash equivalents of any Debtor currently in any Collection Account of any Debtor or otherwise in the possession or control of any Debtor constitutes proceeds of the Pre-Petition Collateral and shall be remitted to Agent for application against the Pre-Petition Indebtedness. All financial institutions in which any lockboxes, blocked accounts or other accounts of any Debtor are authorized and directed to comply with any request of Agent to turnover to Agent all funds therein without offset or deduction of any kind.

14. Use of Proceeds of DIP Financing; Sale Covenant. Subject to the terms and conditions set forth below, and except as Agent otherwise consents in writing, funds borrowed under the Amended Credit Agreement shall be used by the Debtors solely for the purposes and up to the amounts set forth in the Approved Budget for the applicable line item during the applicable seven-day Period:

(a) For each period beginning on the Petition Date and ending on the last day of each seven-day period set forth in the Approved Budget, the aggregate cumulative expenditures by Debtors shall not exceed one hundred percent (100%) of the aggregate cumulative amount budgeted for such cumulative time period pursuant to the Approved Budget.

(b) Debtors' expenditures under any line item for any seven-day period shall not exceed the greater of (i) the sum of the budgeted amount for such line item for such seven-day period plus any excess of the cumulative amounts budgeted for such line item for the immediately preceding three seven-day periods (or if shorter, the post-petition period ending on the last day of the immediately preceding seven-day period) over the cumulative amount of Debtors' actual expenditures under such line item for such prior time period and (ii) one hundred ten percent (110%) of the budgeted amount for such line item for such seven-day period.

(c) To the extent any additional line item is added to the Approved Budget in accordance with the provisions of this Order, such line items shall be subject to such variance provisions as the Debtors and Agent may mutually agree in writing in their respective sole discretion.

(d) Except as expressly set forth above, no unused portion of any line item in the Approved Budget may be carried forward or carried backward to the same or any other line item for any prior or subsequent seven-day period in the Approved Budget.

The proceeds of any Loans or any extensions of credit made by Agent and/or Lenders to Debtors pursuant to this Order and DIP Credit Documents and all proceeds of DIP Collateral shall be used only as follows: (i) prior to the Loan Payment Date, for the payment of the expenses set forth in the Approved Budget (subject to the limitations and exceptions set forth in this paragraph), any fees and expenses of the DIP's Professionals and Committee Professionals (to the extent permitted by order of the Court) and any portion of the Indebtedness, and (ii) on or after the Loan Payment Date, first, for the payment any amounts constituting any part of the Carve-Out up to an aggregate amount not to exceed the unused portion of the Carve-Out, second, for the payment of the Indebtedness, and third, upon payment in full thereof in cash, then for the payment of any allowed administrative expenses or other claims in accordance with the provisions of the Code and orders of this Court. It is understood that Agent and Lenders may assume that the Debtors will comply with the Approved Budget, that Agent and Lenders shall have no duty to monitor such compliance and that Agent and Lenders shall not be obligated to pay (directly or indirectly from the DIP Collateral) any unpaid expenses incurred or authorized to be incurred pursuant to any Approved Budget. It is further understood that the line items in the Approved Budget for payment of post-petition interest, expenses and other amounts to the Agent and Lenders are estimates only, and that the Debtors remain obligated to pay any and all Indebtedness in accordance with the terms of the DIP Credit Document and this Order. All advances and extensions of credit shall be based upon the terms and conditions of the Amended Credit Agreement, including all borrowing base restrictions, as the same may be adjusted from time to time. Agent and Lenders shall have the right but not the obligation to extend DIP Revolving Loans independent of any Approved Budget line item restrictions or borrowing base restrictions on loan availability set forth in the Amended Credit Agreement, and all such Loans shall be entitled to the benefits and protections of the Order. The sales revenue achieved by Decor from the sale of inventory in the ordinary course of Decor's business for each seven-day period ending on February 8, 2002, and each Friday thereafter shall be no less than ninety percent (90%) of the projected sale revenue specified in the Approval Budget for such seven-day period; and any failure by Decor to achieve the minimum required sales revenue for any such seven day period shall constitute an Event of Default.

15. Application of Collateral Proceeds. Except to the extent Agent otherwise directs in writing in accordance with the provisions of this Order and the DIP Credit Documents, and without prejudice to the manner in which such proceeds and payments are allocated among the Agent and Lenders pursuant to Section 6 of the Assumption Agreement and Amendment or as otherwise agreed to by the Agent and the Lenders, and subject to the provisions of Paragraph 6 hereof, all proceeds of Pre-Petition Collateral and other DIP Collateral and all other payments received by Agent and/or on account of Indebtedness shall be applied (i) first, to the DIP Indebtedness until paid in full, and (ii) then, to the Pre-Petition indebtedness. The Debtors shall not have the right to direct the manner of application of any payments to Agent and/or Lenders or any other receipts by Agent and/or Lenders of proceeds of any of the Pre-Petition Collateral or other DIP Collateral other than in the manner set forth in this paragraph and in the Amended Credit Agreement.

16. Covenants. The Debtors shall timely comply with all of the covenants set forth in the Amended Credit Agreement and the other DIP Credit Documents, including, without limitation, the covenants in Section 2.7 of the Amended Credit Agreement relating to the sale process.

17. Asset Dispositions. The Debtors shall immediately pay, or cause to be paid to, Agent for application to the Indebtedness all of the proceeds of any sale, lease or other disposition of any Pre-Petition Collateral or other DIP Collateral (after payment of any Prior Claims secured by valid, perfected and enforceable senior liens on such DIP Collateral) and shall comply with all other provisions in the DIP Credit Documents in this Order in connection with any such sale, lease or other disposition. Except to the extent otherwise expressly provided in the DIP Credit Documents, the Debtors shall not sell or otherwise dispose of any Pre-Petition Collateral or other DIP Collateral (other than inventory in the ordinary course of business) without the Prior written consent of the Agent. Agent's and Lenders' rights to credit bid all or any portion of the Indebtedness in connection with any proposed sale of Pre-Petition Collateral or other DIP Collateral (other than the sale of inventory in the ordinary course of Debtors' business) shall be preserved through the closing of such sale.

18. Agent's and Lenders' Consultants. Agent and Lenders are authorized to retain the services of any consultants and other advisors they shall designate, and Debtors agree to provide such consultants and/or advisors and their employees, designees and agents (as well as Agent and Lenders and their employees and other representatives) with (i) full access to the operations and books and records of the Debtors to enable Agent and Lenders to monitor the Pre-Petition Collateral and the other DIP Collateral and (ii) reasonable access to the Debtors' management in connection with enforcement of Agent's and Lenders' rights hereunder and under the DIP Credit Documents.

19. No Requirement to Accept Title to Collateral. Agent and Lenders shall not be obligated to accept title to any portion of the DIP Collateral in payment of any of the Indebtedness, in lieu of payment in cash or cash equivalents, nor shall Agent and Lenders be obligated to accept payment in cash or cash equivalents that is encumbered by any interest of any person or entity other than Agent and Lenders.

20. Affiliate Payments. Except as otherwise agreed in writing by Agent in its sole discretion, Debtors shall not make any loans, advances, distributions, transfers or other payments of any kind whatsoever to any Affiliate, including any equity interest holder of Holdings.

21. Holdings and Stiles Guaranties. Nothing herein shall affect the continuing validity, enforceability or effectiveness of the Holdings Guaranty or the Stiles Guaranty or any other Pre-Petition Credit Document to which Holdings or New Stiles is a party, and accordingly, the Holdings Guaranty, the Stiles Guaranty and the other Pre-Petition Credit Documents to which Holdings or New Stiles is a party shall continue to be in full force and effect, and all references in the Holdings Guaranty or the Stiles Guaranty to the "Obligations" shall include all Indebtedness (including, without limitation, the DIP Indebtedness), and all references to the Credit Agreement and/or any other Pre-Petition Credit Documents in the Holdings Guaranty, the Stiles Guaranty or any other Pre-Petition Credit Document to which Holdings or New Stiles is a party shall also be deemed to include the Amended Credit Agreement and/or any other DIP Credit Documents, as the case may be.

22. Effect of Plan. The liens, security interests, rights and remedies granted to Agent and Lenders pursuant to the Order shall not be modified, altered or impaired in any manner by any plan of reorganization for any Debtor.

23. Authorized Signatories. The signature of David Stry or N.T. Russell, each an officer of each Debtor, appearing on any one or more of the DIP Credit Documents to be executed after the entry of the Order shall bind the Debtors. No board of directors or other approval shall be necessary.

24. Additional Rights of Agent and Lenders. Agent and Lenders may petition this Court for any such additional adequate protection or other protection as they may require with respect to the Pre-Petition Indebtedness, the DIP Indebtedness or otherwise. Except as otherwise specifically provided herein, Agent and Lenders do not waive any rights they have pursuant to the Pre-Petition Credit Documents, and Agent and Lenders shall retain all rights available pursuant to the Code or any other applicable law.

25. No Waiver. The rights and obligations of the Debtors and the rights, claims, liens, security interests and priorities of Agent and Lenders arising under the Order are in addition to, and not intended as a waiver or substitution for, the rights, obligations, claims, liens, security interests and priorities granted by Debtors under the Pre-Petition Credit Documents. Agent's and Lenders' failure, at any time or times hereafter, to require strict performance by the Debtors (or by any Chapter 7 or Chapter 11 trustee or estate representative hereinafter appointed in any Case or Successor Case) of any provision of the Order or the Pre-Petition Credit Documents or DIP Credit Documents shall not waive, affect or diminish any right of Agent and Lenders hereafter to demand strict compliance and performance therewith. No delay on the part of Agent or any Lender in the exercise of any right or remedy under the Order or the Pre-Petition or DIP Credit Documents shall preclude any other or further exercise of any such right or remedy or the exercise of any other right or remedy. None of the rights or remedies of Agent and Lenders under the Order or the Pre-Petition or DIP Credit Documents shall be deemed to have been suspended or waived by Agent or any Lender unless such suspension or waiver is in writing, signed by a duly authorized officer of Agent or such Lender, as applicable, and directed to the Debtors specifying such suspension or waiver.

26. Service of Pleadings; Other Reports and Data. The Debtors shall deliver to Agent and Lenders, their counsel of record and any other persons reasonably requested by Agent from time to time, as soon as is practicable, copies of any pleading, notice or other document filed by any Debtor in any Case. Any budgets, financial statements, borrowing base certificates, or other financial data delivered by any Debtor to Agent and Lenders after the Petition Date shall contemporaneously be delivered by such Debtor to counsel for the Committee.

27. Order Binding Successors. The provisions of this Order shall be binding upon and inure the benefit of Agent, Lenders, the Debtors and their respective successors and assigns (including any trustee or other estate representative appointed as a representative of any Estate or of any estate in any Successor Case). Except as otherwise explicitly set forth in this Order, no third parties are intended to be or shall be deemed third party beneficiaries of this Order or the DIP Credit Documents.

28. No Dismissal. If any Case is dismissed, converted, otherwise superseded or substantively consolidated, Agent's and Lenders' rights and remedies under the Order and the DIP Credit Documents shall be and remain in full force and effect as if such Case had not been filed or such Case had not been dismissed, converted or superseded. Furthermore, notwithstanding any such dismissal, conversion, supercission or consolidation, all of the terms and conditions of the Order, including, without limitation, the liens and the priorities granted hereunder, shall remain in full force and effect.

29. Effect of Modification of Order. Having been found to be making Loans and other financial accommodations to the Debtors in good faith, Agent and Lenders shall be entitled to the fall protection of § 364(e) of the Code with respect to the Indebtedness and the liens and priorities created or authorized by the Order in the event that the Order or any authorization contained herein is stayed, vacated, reversed or modified on appeal. Each of the terms and conditions set forth in this Order constitutes a part of the authorization under § 364, and is therefore, subject to the protections contained in § 364(e) of the Code. Any stay, modification, reversal or vacatur of the Order shall not affect the validity of any Indebtedness outstanding immediately prior to the effective time of such stay, modification or vacatur, or the validity or enforceability of any lien, priority, right, privilege or benefit authorized hereby with respect to any such indebtedness. Notwithstanding any such stay, modification or vacatur, any Indebtedness outstanding immediately prior to the effective time of such modification, stay or vacatur shall be governed in all respects by the original provisions of this Order, and Agent and Lenders shall be entitled to all of the rights, privileges and benefits, including, without limitation, the security interests and priorities granted herein, with respect to all such Indebtedness.

30. Proceeds Sharing Arrangement with Unsecured Creditors.

(a) Subject to the satisfaction of the Specified Conditions (as defined below), Agent and Lenders agree to permit a portion of the proceeds from the Sale of the Purchased Assets (as defined in the Adorn Asset Purchase Agreement) equal to the Specified Sale Proceeds Amount (as defined below) to be distributed to pre-petition general unsecured creditors (other than the Agent and Lenders with respect to their deficiency claims). At the closing of the Sale, the Agent shall retain Sale proceeds equal to the Specified Sale Proceeds Amount, and upon satisfaction of the Specified Conditions, the Agent shall make such proceeds available for distribution to pre-petition general unsecured creditors (other than the Agent and the Lenders with respect to the their deficiency claims) pursuant to procedures to be established by the Court.

(b) Subject to the satisfaction of the Specified Conditions, and the payment to Agent for application to the indebtedness of proceeds from Avoidance Actions equal to the Avoidance Proceeds Amount, any further proceeds from Avoidance Actions shall be distributed pursuant to procedures to be established by the Court to all pre-petition general unsecured creditors (including the Agent and Lenders with respect to their deficiency claims) pro rata based on the respective amount of their claims. Agent and Lenders agree to share with other pre-petition unsecured creditors any proceeds of Avoidance Actions otherwise distributable to Agent and Lenders on account of their Super-Priority Administrative Claim to the extent necessary to effectuate the provisions of the immediately preceding sentence.

(c) As used herein, the term "Specified Conditions" shall mean each of the following:

(i) the Debtors' motion to approve the Sale shall have been granted on or before March 15, 2002 pursuant to an order reasonably satisfactory to the Agent and the Requisite Lenders, and the Committee shall have supported the Debtors' Sale motion and shall have cooperated with the Debtors, Agent and the Lenders' to effectuate the Sale,

(ii) the Sale shall have been consummated,

(iii) all of the proceeds of the Sale shall have been remitted to the Agent for application to the Indebtedness other than proceeds equal to the Specified Sale Proceeds Amount which Agent shall retain and, upon satisfaction of the Specified Conditions, shall make available for distribution to Pre-Petition general unsecured creditors (other than the Agent and the Lenders with respect to their deficiency claims) pursuant to procedures to be established by the Court, and

(iv) pursuant to the terms of this Order or any other final and non-appealable order of this Court, the Agent's and the Lenders' claims in respect of the Pre-Petition Indebtedness shall have been allowed in full, and the provisions of Paragraphs N, O and P and clause (i) of the proviso to Paragraph 12 hereof shall be binding on all parties in interest, and without limiting the generality of the foregoing, the Agent and the Lenders shall be entitled to receive all proceeds of all DIP Collateral for application to the Indebtedness, subject to the proceeds sharing arrangement set forth in this Paragraph.

(d) As used herein, the term "Specified Sale Proceeds Amount" shall mean the difference between (i) $400,000 and (ii) the aggregate amount of post-Petition payments (collectively, the "Critical Vendor Payments") made by the Debtors, on or before the first date on which all of the Specified Conditions have been satisfied, to any creditor on account of any pre-petition unsecured claims, including, without limitation, the $41,000 payment to IHLO (the "IHLO Payment").

(e) The Debtors agree not to make any Critical Vendor Payments other than the IHLO Payment without the Committee's prior written consent or after the entry of an order of this Court after notice to the Committee and a hearing. The Order entered on Debtors' Motion for Authority to Pay Essential Vendors is hereby amended to effectuate the provisions of this subparagraph.

(f) Without limiting the Agent's right to establish other reserves in accordance with the provisions of the DIP Credit Documents, the Agent shall be entitled to establish a reserve against the Borrowing Base in an amount equal to $400,000 minus the aggregate amount of Critical Vendor Payments which have been made as of the date of determination.

31. Service of Final Order. The Debtors shall serve a copy of this Order by regular mail no later than five days after the date hereof, upon (i) the Bankruptcy Administrator for the Northern District of Alabama, (ii) the District Counsel for the Internal Revenue Service, (iii) all known secured creditors of the Debtors, including the Agent and the Lenders, (iv) the Committee and its counsel, (v) all landlords and warehousemen of each of the Debtors, and (vi) and all other parties which heretofore have filed in these Cases a request for special notice with this Court and served such request upon Debtors' counsel.

32. Order Effective. The Order shall be effective upon the entry thereof, and shall be effective nunc pro tunc as of the conclusion of the Final Hearing on February 27, 2002 as of the date of signature by the Court.

IT IS SO ORDERED.