Read Drafting - Model Debtor in Possession text version

ST. JOHN'S UNIVERSITY SCHOOL OF LAW LL.M. IN BANKRUPTCY PROGRAM DRAFTING BANKRUPTCY AGREEMENTS Fall 2005 Professor Alec Ostrow MODEL DEBTOR IN POSSESSION LOAN AND SECURITY AGREEMENT (SAME PRE- & POST-PETITION LENDER)

SL1 572527v1/099999.00875

DEBTOR IN POSSESSION LOAN AND SECURITY AGREEMENT

AGREEMENT made this _____ day of ____________, 200____, by and between XYZ Corp., a (State of Incorporation) Corporation, having a principal place of

business at _____________________________________ ("Debtor"), and ABC Bank, N.A., a national banking association, having an office at ____________________________ ("Bank"). WITNESSETH: WHEREAS, on _________________, 200__, Debtor filed [or Debtor intends to file] a voluntary petition under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the ___________ District of _______________ (the "Bankruptcy Court"); and WHEREAS, prior to the filing of such chapter 11 petition, on _________________, Debtor and Bank entered into a loan and security agreement [or other identified agreements] (the "Prepetition Agreement"), pursuant to which Debtor had borrowed the principal sum of $________________ from Bank, evidenced by a note, which sum, together with interest and other charges provided for by the Prepetition Agreement, totals as of the date of the filing of the petition $________________(the "Prepetition Obligations"); and WHEREAS, the Prepetition Obligations are secured by a security interest in all of Debtor's accounts receivable, inventory and deposit accounts maintained at Bank [or other specific collateral] (the "Prepetition Collateral"); and WHEREAS, after the filing of the chapter 11 petition, Debtor wishes to obtain from Bank debtor in possession financing, and Bank is willing to provide Debtor with debtor in possession financing, pursuant to the terms and conditions set forth herein.

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NOW, THEREFORE, in consideration of the promises, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND CONSTRUCTION 1.1 Definitions. As used in this Agreement, the following terms shall have the following definitions: "Account" means any currently existing or hereafter arising account, contract right, or any form of obligation, owing to Borrower arising out of the sale or lease of goods or the rendition of services by Borrower, irrespective of whether earned by performance, and any and all credit insurance, guaranties, or security therefor. "Account Debtor" means any Person who is or who may become obligated under, with respect to, or on account of, an Account. "Additional Reserves" means any additional reserves against the Borrowing Base created by Bank (a) for any amount subject to a Permitted Protest, (b) for amounts owing to landlords or other Persons entitled to assert a statutory Lien in respect of any of the Collateral, or (c) as determined by Bank in its reasonable credit judgment. "Advances" has the meaning set forth in section 2.1. "Affiliate" has the meaning set forth in section 101 of the Bankruptcy Code. "Agreed Administrative Expense Priorities" means that administrative expenses with respect to Borrower shall have the following order of priority: (a) first, U.S. Trustee Fees; (b) second, all Postpetition Obligations; and (c) third, all other allowed administrative expenses, pursuant to section 503(b) of the Bankruptcy Code, provided that nothing contained in this definition shall limit or otherwise restrict the payment of allowed Profession Expenses (i) in the absence of an Event of Default and

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(ii) during the continuance of an Event of Default to the extent such fees and expenses are paid from amounts in the Professional Expenses Escrow Account in an aggregate amount not to exceed the Permitted Professional Expenses Amount. "Agreement" has the meaning set forth in the preamble hereto. "Average Unused Portion of Maximum Amount" means, as of any date of determination, the Maximum Amount, less the average Daily Balance of Advances that were outstanding during the immediately preceding month. "Avoidance Actions" means all causes of action of the Borrower, as a debtor or debtor in possession under sections 510, 542, 544, 545, 547, 548, 549, 550 and 553 of the Bankruptcy Code. "Bank" has the meaning set forth in the preamble. "Bankruptcy Case" means the case commenced by Borrower under chapter 11 of the Bankruptcy Code in the Bankruptcy Court. "Bankruptcy Code" has the meaning set forth in the preamble. "Bankruptcy Court" has the meaning set forth in the preamble. "Bank's Expenses" means all: costs or expenses (including taxes and insurance premiums) required to be paid by Borrower under any of the Loan Documents that are paid or incurred by Bank; fees or charges paid or incurred by Bank in connection with Bank's transactions with Borrower, including without limitation, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation and UCC searches and including searching with the patent and trademark office, the copyright office, or the department of motor vehicles), filing, recording, publication, appraisal (including periodic Collateral appraisals), real estate surveys, real estate title policies and endorsements, and environmental audits; costs and expenses incurred by Bank in the disbursement of Funds to Borrower (by wire transfer or otherwise); charges paid or incurred by

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Bank resulting from the dishonor of checks; costs and expenses paid or incurred by Bank to correct any default or enforce any provision of the Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated; costs and expenses paid or incurred by Bank in examining Borrower's Books; costs and expenses of third party claims or any other suit paid or incurred by Bank in enforcing or defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents or Bank's relationship with Borrower or any guarantor; and Bank's reasonable attorneys' fees and expenses incurred in advising, structuring, drafting, reviewing, administering, amending, terminating, enforcing (including attorneys' fees and expenses incurred in connection with the Bankruptcy Case or any "workout" or "restructuring" concerning Borrower or any guarantor of the Postpetition Obligations), defending, or concerning the Loan Documents, irrespective of whether suit is brought. "Benefit Plan" means a "defined benefit plan" (as defined in section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower or any affiliated Person has been an "employer" (as defined in section 3(5) of ERISA) within the past six years. "Borrower" means Debtor. "Borrower's Books" means all of Borrower's books and records including: ledgers; records indicating, summarizing, or evidencing Borrower's properties or assets (including the Collateral) or liabilities; all information relating to Borrower's business operations or financing condition; and all computer programs, disk or tape files, printouts, runs, or other computer prepared information. "Borrowing Base" means the result of: (a) []% of Eligible Accounts, less, the amount, if any, of the Dilution Reserve, plus

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(b) the lowest of (i) the sum of (A) []% of the value of the Eligible Inventory consisting of finished goods and (B) the lower of (1) []% of the value of the Eligible Inventory consisting of raw materials, and (2) $[], (ii) []% of the appraised orderly liquidation value of the Eligible Inventory as determined by an appraiser acceptable to the Bank, and (iii) the amount of credit availability created by clause (a) above, plus (c) any amount deposited as cash collateral by any guarantor or an irrevocable standby letter of credit established by any guarantor in favor of Bank, in form and substance satisfactory to Bank, minus (d) the aggregate amount of the Inventory Reserves and the Additional Reserves. "Budget" means the weekly cash requirements forecast, substantially in the form set forth in Exhibit B-1, which sets forth the Borrower's weekly projected sales, cash receipts, disbursements, receivables, Inventory, Advances, Borrowing Base and availability for the week covered thereby and which is acceptable to Bank at the time of delivery. "Business Day" means any day that is not a Saturday, Sunday, or other day on which national banks are authorized or required to close. "Closing Date" means the date of the making of the initial Advance. "Collateral" means the Prepetition Collateral and the Postpetition Collateral. "Collateral Access Agreement" means a landlord waiver, mortgagee waiver, bailee letter, or acknowledgment agreement of any warehouseman, processor, lessor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in the Equipment or Inventory, in each case, in form and substance satisfactory to Bank. "Collections" means all cash, checks, notes, instruments, and other items of payment (including, insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds). "Compliance Certificate" means a certificate substantially in the form of Exhibit C-1 hereto and delivered by the chief accounting officer of Borrower to Bank.

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"Daily Balance" means the amount of a Postpetition Obligation owed at the end of a given day. "Default" means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default. "Designated Account" means [bank account number] at Designated Account Bank, or such other deposit account of Borrower (located within the United States) which has been designated, in writing from time to time, by Borrower to Bank. "Designated Account Bank" means [bank name, address and ABA number]. "Dilution" means in each case based upon the experience of the immediately prior 12 month period or such lesser period as Bank shall determine, the result of dividing the dollar amount of (a) bad debt write downs, discounts, advertising, returns, promotions, credits, or other dilution with respect to Accounts, by (b) Borrower's Collections (excluding extraordinary items) plus the dollar amount of clause (a). "Dilution Reserve" means, as of any date of determination, an amount sufficient to reduce Bank's advance rate against Eligible Accounts by one percentage point by which Dilution is in excess of 5%. "Disbursement Letter" means an instructional letter executed and delivered by Borrower to Bank regarding the extensions of credit to be made on the Closing Date, the form and substance of which shall be satisfactory to Bank "Eligible Accounts" means those Accounts created by Borrower in the ordinary course of business that arise out of Borrower's sale of goods or rendition of services, that strict comply with each and all of the representations and warranties respecting Accounts made by Borrower to Bank in the Loan Documents, and that are and at all times continue to be acceptable to Bank in all respects; provided, however, that standards of eligibility may be fixed and revised from time to time by Bank in Bank's reasonable credit judgment. Eligible Accounts exclude the following:

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(a) Accounts that the Account Debtor has failed to pay within 120 days of invoice date or Accounts that are 60 days or more past the due date therefor; (b) Accounts owed by an Account Debtor or its Affiliates where 50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a) above; (c) Accounts with respect to which the Account Debtor is an employee, Affiliate, or agent of Borrower; (d) Accounts with respect to which goods are placed on consignment, guaranteed sale, sale or return, sale on approval, bill and hold, or other terms by reason of which the payment by the Account Debtor may be conditional; (e) Accounts not payable in U.S. dollars or with respect to which the Account Debtor: (i) does not maintain its chief executive office in the United States, or (ii) is not organized under the laws of the United States or any State thereof, or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or any political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, unless such Account is supported by an irrevocable letter of credit or covered by credit insurance, which letter of credit or insurance is in form, substance and amount satisfactory to Bank; (f) Accounts with respect to which the Account Debtor is either (i) the United States or any department, agency, public corporation, or other instrumentality thereof (exclusive, however, of Accounts with respect to which Borrower has complied, to the satisfaction of Bank, with the Assignment of Claims Act, 31 U.S.C. § 3727), or (ii) any State of the United States (exclusive, however, of Accounts owed by any State that does have a statutory counterpart to Assignment of Claims Act);

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(g) Accounts with respect to which the Account Debtor is a creditor of Borrower, has or has asserted a right of setoff, has disputed its liability, or has made any claim with respect to the Account; (h) Accounts with respect to which an Account Debtor whose total obligations to Borrower exceed 10% of all Eligible Accounts; (i) Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business; (j) Accounts the collection of which Bank, in its reasonable credit judgment, believes to be doubtful by reason of the Account Debtor's financial condition; (k) Accounts with respect to which the goods giving rise to such Account have not been shipped and billed to the Account Debtor, the services giving rise to the Account have not been performed and accepted by the Account Debtor, or the Account otherwise does not represent a final sale; (l) Accounts with respect to which the Account Debtor is located in the State of New Jersey, Minnesota, Indiana, West Virginia (or any other state that requires a creditor to file a business activity report or similar document in order to bring suit or otherwise enforce its remedies against such Account Debtor in the courts of or through the judicial process of such state, unless Borrower is qualified to do business in such state, or has filed such business activity report or similar document, or Borrower is exempt from such requirement; and (m) Accounts that represent progress payments of other advance billings that are due prior to the completion of performance by Borrower of the subject contract for goods or services. "Eligible Inventory" means Inventory consisting of first quality finished goods held for sale in the ordinary course of Borrower's business and raw materials for such finished goods, that are located at or in-transit to Borrower's premises identified on Schedule I-1, that

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strict comply with each and all of the representations and warranties respecting Inventory made by Borrower to Bank in the Loan Documents, and that are and at all times continue to be acceptable to Bank in all respects; provided, however, that standards of eligibility may be fixed and revised from time to time by Bank in Bank's reasonable credit judgment. Eligible Inventory excludes the following: (a) Inventory that is not owned solely by Borrower or Borrower does not have good, valid, and marketable title thereto; (b) Inventory that is not located at one of the locations set forth on Schedule I-1; (c) Inventory that is not located on property owned or leased by Borrower or in a contract warehouse, in each case, subject to a Collateral Access Agreement, and that is not separately identifiable from the goods of others, if any, stored on the premises; (d) Inventory that is not subject to a valid and perfected first priority security interest in favor of Bank; (e) Inventory consisting of goods returned or rejected by Borrower's customers; (f) Inventory that is defective, obsolete, out of season, slow moving or to be sold as "seconds," a restrictive or custom item, work-in-process, a component that is not part of finished goods, or constitutes spare parts, packaging and shipping materials, supplies used or consumed in Borrower's business; (g) Inventory that is the subject of a Lien in favor of any third Person, or is acquired on consignment; and (h) Inventory in transit, unless such inventory is subject to documents of title possession of which has been delivered to Bank, and such inventory is insured against all types of loss, damage, hazards, and risks, and in amounts satisfactory to Bank in its sole discretion.

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"Entry Date" means the date upon which the Interim Financing Order is signed by the Bankruptcy Court and entered upon the docket maintained by the Clerk of the Bankruptcy Court in the Bankruptcy Case. "Equipment" means all of Borrower's present and hereafter acquired machinery, machine tools, motors, equipment, furniture, furnishings, fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods (other than consumer goods, farm products or Inventory), wherever located, including (a) any interest of Borrower in any of the foregoing and (b) all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1000 et seq., amendments, thereto, successor statutes, and regulations or guidance promulgated thereunder. "Estate" means the estate of the Borrower created and defined by the Bankruptcy Code. "Event of Default" has the meaning set forth in article 9. "Filing Date" means the date of commencement of the Bankruptcy Case. "Final Financing Order" means the final order of the Bankruptcy Court, in form, scope and substance acceptable to Bank, approving this Agreement and the Loan Documents, including the Advances made and to be made to Borrower in accordance with this Agreement, substantially in the form of the Interim Financing Order, as the same may be amended, modified or supplemented from time to time with the express written joinder or consent of Bank, which order shall be in full force and effect and has not been vacated, modified, amended (without the express written joinder or consent of Bank), reversed, overturned or stayed in any respect, and, in the event that such order is the subject of a pending appeal, the performance of any obligation of the Borrower shall not be the subject of a stay pending appeal.

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"GAAP" means generally accepted accounting principles as in effect from time to time in the United States, consistently applied. "General Intangibles" means all of Borrower's present and future general intangibles and other personal property (including contract rights, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, patents, trade names, trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, infringement claims, computer programs, information contained on computer disks or tapes, literature, reports, catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax refund claims) other than goods, Accounts and Negotiable Collateral. "Governing Documents" means the certificate or articles of incorporation, by-laws, or other organizational or governing documents of any Person. "Governmental Authority" means any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through Stock or capital ownership or otherwise, by any of the foregoing. "Hazardous Materials" means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as "hazardous substances," "hazardous materials," "hazardous wastes," "toxic substances," or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitablility, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP toxicity," (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or

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any radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million. "Indebtedness" means: (a) all obligations of Borrower for borrowed money, (b) all obligations of Borrower evidenced by bonds, debentures, notes or other similar instruments and all reimbursements or other obligations of Borrower in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations of Borrower under capital leases, (d) all obligations or liabilities of others secured by a Lien on any property or asset of Borrower, irrespective of whether such obligation or liability is assumed, and (e) any obligation of Borrower guaranteeing or intended to guarantee (whether guaranteed, endorsed, comade, discounted, or sold with recourse to Borrower) any indebtedness, lease, dividend, letter of credit, or other obligation of any other Person. "Indemnified Liabilities" has the meaning set forth in section 12.3 "Indemnified Person" has the meaning set forth in section 12.3. "Insolvency Proceeding" means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement or similar relief. "Intangible Assets" means, with respect to any Person, that portion of the book value of all of such Person's assets that would be treated as intangibles under GAAP. "Intellectual Property" has the meaning set forth in section 16.15. "Interim Financing Order" means the order of the Bankruptcy Court, substantially in the form as set forth on Exhibit O-1, as the same may be amended, modified or supplemented from time to time with the express written joinder or consent of Bank, which order shall be in full force and effect and has not been vacated, modified, amended (without the express written

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joinder or consent of Bank), reversed, overturned or stayed in any respect, and, in the event that such order is the subject of a pending appeal, the performance of any obligation of the Borrower shall not be the subject of a stay pending appeal. "Inventory" means all present and future inventory in which Borrower has any interest, including goods held for sale or lease or to be furnished under a contract of service and all of Borrower's present and future raw materials, work in process, finished goods, and packing and shipping materials, wherever located. "Inventory Reserves" means reserves (determined from time to time by Bank in its discretion) for (a) the estimated costs relating to unpaid freight charges, warehousing or storage charges, taxes, duties, and other similar unpaid costs associated with the acquisition of Eligible Inventory by Borrower, plus (b) the estimated reclamation claims of unpaid sellers of Inventory sold to Borrower. "IRC" means the Internal Revenue Code of 1986, as amended, as the regulations thereunder. "Lien" means any interest in property securing an obligation owed to, or a claim by, any Person other than the owner of the property, whether such interest is based on the common law, statute, contract, whether such interest is recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the lien or security interest arising from a mortgage, deed or trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, adverse claim or charge, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also including reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Real Property. "Loan Account" has the meaning set forth in section 2.8.

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"Loan Documents" means this Agreement, the Disbursement Letter, the Lockbox Agreements, and any note or notes executed by Borrower payable to Bank, and any other agreement or document entered into, now or in the future, in connection with this Agreement. "Lockbox Account" means a depository account established pursuant to a Lockbox Agreement, and controlled by Bank. "Lockbox Agreement" means an agreement among Borrower, Bank, and a depository bank to be designated, into which the payment of all Accounts will be directed by Borrower. "Material Adverse Change" means (a) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Borrower, (b) the material impairment of Borrower's ability to perform its obligations under the Loan Documents, or of Bank to enforce the Postpetition Obligations or realize upon the Collateral; (c) a material adverse effect on the value of the Collateral or the amount Bank would be likely to receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of the Collateral, or (d) a material impairment of the priority of Bank's Liens with respect to the Collateral. "Material Adverse Deviation" means with respect to any weekly period covered by the Budget, the actual cumulative net cash inflow/outflow for such period is less than the cumulative net cash inflow/outflow set forth on the Budget by an amount greater than or equal to $[]. "Maximum Amount" means (a) during the period when the Interim Financing Order is in effect, $[], and (b) during the period when the Final Financing Order is in effect $[]. "Mortgages" means one or more mortgages, deeds of trust, or deeds to secure debt, executed by Borrower in favor of Bank, the form and substance of which shall be satisfactory to Bank, that encumber the Real Property Collateral and the related improvements thereto.

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"Multiemployer Plan" means a "multiemployer plan" (as defined in section 4003(a)(3) of ERISA) to which Borrower, any of its subsidiaries, or any affiliated Person has contributed, or was obligated to contribute, within the past six years. "Negotiable Collateral" means all of Borrower's present and future letters of credit, notes, drafts, instruments, investment property, securities entitlements, securities, documents, personal property leases (wherein Borrower is the lessor), chattel paper, and Borrower's Books relating to any of the foregoing. "Obligations" means the Prepetition Obligations and the Postpetition Obligations. "Overadvance" has the meaning set forth in section 2.3. "Participant" means any Person to which Bank has sold a participation interest in its rights under the Loan Documents. "PBGC" means the Pension Benefit Guaranty Corporation as defined in Title IV of ERISA, or any successor thereto. "Permitted Liens" means (a) Liens held by Bank and the Prepetition Lender; (b) Liens for unpaid taxes that either (i) are not yet due or payable or (ii) are the subject of Permitted Protests; (c) Liens set forth on Schedule P-1; (d) the interests of lessors under operating leases and purchase money leases and purchase money Liens of lessors under capital leases to the extent that the acquisition or lease of the underlying asset is permitted under the Agreement, and so long as the Lien only attaches to the asset purchased or acquired and only secures the purchase price of the asset; (e) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, suppliers, incurred in the ordinary course of business of Borrower, and not in connection with the borrowing of money, and which Liens either (i) are for sums not yet due and payable, or (ii) are the subject of Permitted Protests; (f) Liens arising from deposits made in connection with obtaining worker's compensation or other unemployment insurance; (g) Liens or deposits to secure performance of bids, tenders, or leases (to the extent

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permitted under this Agreement), incurred in the ordinary course of business of Borrower, and not in connection with the borrowing of money; (h) Liens arising by reason security for surety or appeal bonds in the ordinary course of business of Borrower; and (i) Liens of or resulting from any judgment or award that would not have a Material Adverse Change and as to which the time for appeal or petition for rehearing of which has not yet expired, or in respect of which Borrower is in good faith prosecuting an appeal or proceeding for a review, and in respect of which a stay of execution pending such appeal or proceeding has been secured. "Permitted Professional Expenses Amount" means the aggregate payment of $[], plus all interest thereon, for the payment of allowed Professional Expenses; provided that such amount shall not be used for the payment or reimbursement of any fees or disbursements of the Borrower or any official or unofficial committee incurred in connection with the assertion or joinder in any claim, counterclaim, action, proceeding, application, motion, objection, defenses or other contested matter, the purpose of which is to seek an order, judgment, determination or similar relief (a) commencing or prosecuting any Avoidance Action against Bank or the Prepetition Lender with respect to the Obligations and Liens and security interests of Bank and the Prepetition Lender securing such Obligations; (b) invalidating, setting aside, avoiding or subordinating, in whole or in part, (i) the Obligations, (ii) Bank's Liens on and security interests in the Collateral, (iii) the Prepetition Lender's Liens on and security interests in the Prepetition Collateral or (iv)the Prepetition Lender's Replacement Liens; or (c) preventing, hindering or delaying, whether directly or indirectly, (i) Bank's assertions or enforcement of its Liens on and security interests in any Collateral, (ii) the Prepetition Lender's assertions or enforcement of its Liens on security interests in the Prepetition Collateral, or (iii) the Prepetition Lender's assertions or enforcement of its Replacement Liens. "Permitted Protest" means the right of Borrower to protest any Lien other than any such Lien that secures the Obligations, tax (other than payroll taxes or taxes that are the subject of a

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United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on the books of Borrower in an amount that is reasonably satisfactory to Bank, (b) any such protest is instituted and diligently prosecuted by Borrower in good faith, and (c) Bank is satisfied that while any such protest is pending, there will be no impairment of the enforceablility, validity, or priority of any of the Liens of Bank in the Collateral. "Person" means any natural person, corporation, limited liability company, limited partnership, general partnership, limited liability partnership, joint venture, trust, land trust, business trust, or other organization, irrespective of whether it is a legal entity, and government, agency or political subdivision thereof. "Postpetition Collateral" means all now owned or hereafter acquired assets and property of the Estate, including, without limitation, each of the following: (a) all Accounts; (b) Borrower's Books; (c) the Equipment; (d) the General Intangibles; (e) the Inventory; (f) the Negotiable Collateral; (g) the Real Property Collateral; (h) the Avoidance Actions; (i) any money, or other assets of Borrower that now or hereafter come into the possession, custody or control of Bank; (j) the Prepetition Collateral; (k) all proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any of all of the Postpetition Collateral.

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"Postpetition Obligations" means all indebtedness, obligations and liabilities of the Borrower and its Subsidiaries to Bank incurred or arising on or after the Filing Date, arising from or in connection with this Agreement and the Loan Documents. "Prepetition Agreement" has the meaning set forth in the preamble. "Prepetition Collateral" has the meaning set forth in the preamble. "Prepetition Lender" means Bank in its capacity as a "Lender" under the Prepetition Agreement. "Prepetition Obligations" has the meaning set forth in the preamble. "Professional Expenses" means the fees and expenses of attorneys, accountants, financial advisers and consultants retained by the Borrower or any official unsecured creditors' committee appointed in the Bankruptcy Case pursuant to section 327 or 1103 of the Bankruptcy Code. "Professional Expenses Escrow Account" means the escrow account to be established by the Borrower for the payment of allowed Professional Expenses. "Real Property Collateral" means any estates or interests in real property and the related improvements thereto now owned or hereafter acquired by Borrower. "Reference Rate" means the rate of interest announced by _________(name of money center bank) as its "prime rate."

"Retiree Health Plan" means an "employee welfare benefit plan" within the meaning of section 3(1) of ERISA that provides benefits to individuals after termination of their employment, other than as required by section 601 of ERISA. "Subsidiary" of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls ownership interests having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) or such corporation, partnership, limited liability company, or other entity.

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"UCC" means the ____(state)______ Uniform Commercial Code. "U.S. Trustee Fees" means amounts payable pursuant to 28 U.S.C. § 1930(a)(6). 1.2 Construction. Unless the context of this Agreement or any other Loan Document

clearly requires otherwise: references to the plural include the singular, references to the singular include the plural; "includes" or "including" is not limiting; "or" is not exclusive; accounting terms not otherwise defined herein shall be construed in accordance with GAAP; and all exhibits and schedules attached to this Agreement shall be deemed incorporated by reference. ARTICLE II LOAN AND TERMS OF PAYMENT 2.1 Revolving Advances. Subject to the terms and conditions of this Agreement, Bank agrees to make advances ("Advances") to Borrower in an amount outstanding not to exceed at any one time the lesser of the Maximum Amount or the Borrowing Base. Amounts borrowed hereunder may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement. For purposes of calculating the Borrowing Base, Bank shall have the right to have the Inventory reappraised by a qualified appraiser selected by Bank from time to time after the Closing Date. 2.2 Procedure for Borrowing. Each borrowing shall be made upon Borrower's irrevocable request therefor delivered to Bank and received by Bank not later than noon on the Business Day of the requested funding date, specifying (a) the amount of the borrowing, and (b) the funding date, which shall be a Business Day. 2.3 Overadvances. If, at any time or for any reason, the amount of the Postpetition Obligations owed by Borrower to Bank is greater than the amount permitted by section 2.1 of this Agreement (an "Overadvance"), Borrower shall immediately pay to Bank, in cash, the amount of such excess. 2.4 Interest, Payments and Calculations.

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(a) Interest Rate. Except as otherwise provided in this Agreement, all Postpetition Obligations shall bear interest at a per annum rate of []% above the Reference Rate. Upon the occurrence and during the continuation of an Event of Default, all Postpetition Obligations shall bear interest at a per annum rate of []% above the Reference Rate. (b) Minimum Interest. In no event shall the rate of interest chargeable hereunder for any day be less than []% per annum. To the extent that interest accrued hereunder at the rate set forth herein would be less than the foregoing minimum daily rate, the interest rate chargeable hereunder for such day automatically shall be deemed increased to the minimum rate. (c) Payments. Interest payable hereunder shall be due and payable, in arrears, on the first day of each month during the term hereof. Borrower hereby authorized Bank, at its option, without prior notice to Borrower, to charge such interest and all Bank's Expenses (as and when incurred), and all other amounts due under any Loan Document to Borrower's Loan Account, which amounts thereafter shall accrue interest at the rate then applicable to Advances hereunder. Any interest not paid when due shall be compounded and shall thereafter accrue interest at the rate then applicable to Advances hereunder. (d) Computation. The Reference Rate as of the date of this Agreement is []%. In the event the Reference Rate is changed from time to time hereafter, the applicable rate of interest hereunder automatically and immediately shall be increased or decreased by an amount equal to the change in the Reference Rate. All interest and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual number of days elapsed. (e) Maximum Lawful Rate. In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection therewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. Borrower and Bank, in executing and delivering this

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Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, however, that anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then ipso facto as of the date of this Agreement, Borrower is liable only for the payment of such maximum as allowed by law, and any payment received from Borrower in excess of such legal maximum, shall be applied to reduce the principal balance of the Postpetition Obligations to the extent of such excess. 2.5 Collection of Accounts. Borrower shall at all times maintain lockboxes and immediately after the Closing Date, shall instruct all Account Debtors with respect to the Accounts, General Intangibles, and Negotiable Collateral to remit all Collections in respect thereof into a Lockbox Account established pursuant to a Lockbox Agreement. 2.6 Crediting Payments; Application of Collections. The receipt of any Collections by Bank (whether through the Lockbox Account or otherwise) immediately shall be applied provisionally to reduce the Postpetition Obligations outstanding under section 2.1, but shall not be considered a payment on account unless such Collection item is a wire transfer of immediately available federal funds or unless and until such Collection item is honored when presented for payment. Bank shall be entitled to charge Borrower for four Business days of "clearance" or "float" at the applicable interest rate on all Collections, regardless of how received or whether provisionally applied. This across-the-board four Business Day clearance or float charge is acknowledged by the parties to constitute an integral part of the pricing aspect of the Bank's funding. Should any Collection item not be honored when presented for payment, then Borrower shall be deemed not to have made such payment, and interest shall be recalculated accordingly. 2.7 Borrowing Authorizations; Designated Account. Bank is authorized to make Advances under this Agreement based on telephonic or other instructions received from anyone

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purporting to have authority to make a borrowing request. Borrower agrees to establish and maintain the Designated Account with the Designated Account Bank for the purpose of receiving the proceeds of Advances requested by Borrower and made by Bank hereunder. Unless otherwise agreed in writing, all Advances shall be made to the Designated Account. 2.8 Loan Account. Bank shall maintain an account on its books in the name of Borrower (the "Loan Account") on which Borrower will be charged with all Advances made by Bank, and with all accrued interest, Bank's Expenses, and any other Postpetition Obligations. In accordance with section 2.6, the Loan Account will be credited with all payments received by Bank from Borrower or for Borrower's account, including all amounts received by Bank from any Lockbox Account. Bank shall render statements regarding the Loan Account to Borrower, including principal, interest, fees, and including an itemization of all charges and expenses constituting Bank's Expenses owing, and such statements shall be conclusively presumed to be correct and accurate and constitute an account stated between Bank and Borrower, unless, within 30 days after receipt thereof by Borrower, Borrower shall deliver to Bank written objection thereto describing the error or errors contained in any such statements. 2.9 Fees. Borrower shall pay to Bank the following fees: (a) Closing Fee. A closing fee of $[], which is earned in full on the Closing Date, but shall be payable as follows: [ immediately, or terms, such as 50% on the Closing Date, 25% on an intermediate date, and 25% on the termination date ] (b) Unused Line Fee. On the first day of each month during the term of this Agreement, an unused line fee in an amount equal to []% per annum times the Average Unused Portion of the Maximum Amount. (c) Examination and Documentation Fees. For each financial analysis and examination of Borrower performed by Bank personnel, the Bank's ordinary and customary fee of $[] per day per examiner. For each appraisal of the Collateral, or any portion thereof,

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performed by Bank personnel, the Bank's ordinary and customary fee of $[] per day per appraiser. (d) Servicing Fee. On the first day of each month during the term of this Agreement, and thereafter so long as any Postpetition Obligations are outstanding, a servicing fee of $[] per month. (e) Early Termination Fee. In the event, Borrower terminates this Agreement in accordance with section 2.13, an early termination fee of [ $, or calculation based on missed interest ]. 2.10 Repayments. The Borrower shall repay in full the unpaid principal of, and interest on, each Advance and all other Postpetition Obligations in accordance with the terms of this Agreement, including, without limitation, on the date of termination of this Agreement. 2.11 Term. This Agreement shall become effective upon the execution and delivery hereof by Borrower and Bank and shall continue in full force and effect for a term ending on the earliest of (a) the date that is ____ months after the Closing Date; (b) the date that is 30 days after the Entry Date, if the Final Financing Order has not been entered by such date; (c) the date a sale of substantially all the assets of the Borrower, pursuant to section 363 of the Bankruptcy Code, is closed; and (d) the effective date of a plan of reorganization, which is confirmed by the Bankruptcy Court, pursuant to section1129 of the Bankruptcy Code. Notwithstanding the foregoing, Bank shall have the right to terminate its obligations under this Agreement immediately and without notice, except as otherwise provided in this Agreement, upon the occurrence and during the continuation of an Event of Default. 2.12 Effect of Termination. On the date of the termination of this Agreement, all Postpetition Obligations immediately shall become due and payable without notice or demand. No termination of this Agreement, however, shall relieve Borrower or Borrower's duties, Obligations, or covenants hereunder or under the other Loan Documents, and Bank's continuing

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security interests in the Collateral shall remain in effect until all Postpetition Obligations have been fully discharged. 2.13 Early Termination by Borrower. Borrower has the option, at any time upon ten days prior written notice to Bank, to terminate this Agreement by paying Bank, in cash, the Postpetition Obligations in full. ARTICLE III CONDITIONS 3.1 Conditions Precedent to Initial Advance. The obligation of Bank to make this initial Advance, is subject to the fulfillment, to the satisfaction of Bank and its counsel, of each of the following conditions on or before the Closing Date: (a) the closing date shall have occurred on or before []; (b) Bank shall have received all appropriate financing statements and fixture filing required by Bank, all in form and substance satisfactory to Bank, duly executed by Borrower, and Bank shall have received searches reflecting no financing statements, judgment liens, tax liens or fixture filings against any of the Collateral, except those approved by Bank; (c) Bank shall have received the Disbursement Letter and one or more Lockbox Agreements, duly executed, and in full force and effect; (d) Bank shall have received a certificate from the Secretary of the Borrower attesting the resolutions of Borrower's Board of Directors authorizing Borrower's execution, delivery and performance of this Agreement and the other Loan Documents, and authorizing specific officers of Borrower to execute the same; (e) Bank shall have received copies of Borrower's Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of Borrower;

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(f) Bank shall have received a certificate of good standing of Borrower issued by the appropriate officer of the jurisdiction of the organization of Borrower, and of the jurisdictions in which Borrower does business; (g) Bank shall have received a certificate of insurance, together with the endorsements thereto, as required by this Agreement, in form and substance satisfactory to Bank and its counsel; (h) Bank shall have received Collateral Access Agreements from those Persons required by Bank; (i) Borrower shall have paid all fees and Bank's Expenses due as of the Closing Date; (j) Bank shall have received a certificate from the Secretary of the Borrower certifying the names and true signatures of all officers of the Borrower authorized to execute the Loan Documents; (k) Bank shall have received a certificate from the Secretary of the Borrower certifying as to the satisfaction of the conditions set forth in section 3.2; (l) the Liens in favor of Bank pursuant to this Agreement and the Interim Financing Order shall be legal, valid, continuing and fully-perfected first priority Liens on the Collateral, which shall be subject to no other Liens except the Permitted Liens; (m) Bank shall have received the Budget for the period []; (n) Bank shall have received an opinion of Borrower's counsel in form and substance satisfactory to Bank in its sole discretion; (o) Borrower shall have obtained from the Bankruptcy Court such orders as required by this Agreement [ e.g. for the retention of professionals, or for the conduct of certain operations out of the ordinary course of business]; and

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(p) all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed or recorded in form and substance satisfactory to Bank and its counsel. 3.2 Conditions Precedent to All Advances. The following shall be conditions precedent to all Advances: (a) the representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all respects on and as of the date of such Advance, as though made on such date (except for those representations and warranties that relate solely to an earlier date); (b) no Default or Event of Default shall have occurred and be continuing on the date of such Advance, nor shall either result from the making thereof; (c) no injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the Advance shall have been issued and remain in force by any Governmental Authority against Borrower, Bank or their Affiliates; (d) on or prior to the date of such Advance, the Interim Financing Order or the Final Financing Order, as the case may be, shall have been signed and entered by the Bankruptcy Court, and Bank shall have received a certified copy of same and such order shall be in full force and effect and shall not have been reversed, stayed, modified or amended absent the express written joinder therein or expressly consented thereto in writing, there shall be no motion pending (i) to reverse, modify or amend (without Bank's consent) the Interim Financing Order or the Final Financing Order, (ii) to permit any administrative expense against Borrower to have administrative priority equal to or superior to Bank in respect of the Postpetition Obligations, or (iii) grant or permit the grant of a Lien on any of the Collateral; and (e) the Borrower shall have paid all fees, costs, expenses, and taxes then payable by the Borrower, including without limitation, the fees required by this Agreement.

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3.3 Conditions Subsequent. As a condition to the Closing Date, Borrower shall perform or cause to be performed the following, and the failure of Borrower to do so shall be an Event of Default: [any condition in 3.1 or 3.2 agreed to be postponed until some time after the Closing Date]. ARTICLE IV CREATION OF SECURITY INTEREST 4.1 Grant of Security Interest. Borrower hereby grants to Bank a continuing security interest in and Lien on all of Borrower's right, title and interest in and to all currently existing and hereafter acquired Postpetition Collateral in order to secure prompt repayment of any and all Obligations and in order to secure prompt performance by Borrower of each of its duties and covenants under the Loan Documents. Bank's security interests in and Liens on the Postpetition Collateral shall attach to all Postpetition Collateral without further act on the part of Bank or Borrower. 4.2 Borrower's Permitted Use of Postpetition Collateral. Borrower shall have no right to use or dispose of the Postpetition Collateral or any portion thereof, without the prior written consent of Bank, except that Borrower may sell Inventory to buyers in the ordinary course of business. This section does not prevent Borrower from using the proceeds of Advances to pay Postpetition Obligations and any and all other items set forth in the Budget or Agreed Administrative Expense Priorities. 4.3 Delivery of Negotiable Collateral. In the event that any Postpetition Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, Borrower, immediately upon request of Bank, shall endorse and deliver physical possession of such Negotiable Collateral to Bank. 4.4 Additional Documentation. At any time upon the request of Bank, Borrower shall execute and deliver to Bank all financing statements, collateral assignments, continuation

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financing statements, fixture filings, security agreements, endorsements of certificates of title, and other documents that Bank may reasonably request to perfect and continue perfection of Bank's security interests in and Liens on the Postpetition Collateral. 4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and appoints Bank (and any of Bank's officers, employees or agents designated by Bank) as Borrower's true and lawful attorney, with power to (a) if Borrower refuses to, or fails to timely execute and deliver documents described in section 4.4, sign the name of Borrower on any such document; (b) at any time an Event of Default has occurred and is continuing or Bank deems itself insecure (as such term is used in section 1-208 of the UCC), sign Borrower's name on any invoice or bill of lading relating to any Account, drafts against Account Debtors, schedules and assignments of Accounts, verification of Accounts, and notices to Account Debtors; (c) send requests for verification of Accounts; (d) endorse Borrower's name on any Collection item that may come into Bank's possession; (e) at any time an Event of Default has occurred and is continuing or Bank deems itself insecure (as such term is used in section 1-208 of the UCC), notify the post office authorities to change the address for delivery of Borrower's mail to an address designated by Bank, to receive and open mail addressed to Borrower, and to retain all mail relating to the Postpetition Collateral and forward all other mail to Borrower; (f) at any time an Event of Default has occurred and is continuing or Bank deems itself insecure (as such term is used in section 1-208 of the UCC), make, settle, and adjust all claims under Borrower's policies of insurance and make all determinations and decisions with respect to such policies of insurance, and (g) at any time an Event of Default has occurred and is continuing or Bank deems itself insecure (as such term is used in section 1-208 of the UCC), settle and adjust disputes and claims respecting the Accounts directly with the Account Debtors, for amounts and on terms that Bank determines to be reasonable, and Bank may cause to be executed and delivered any documents and releases that Bank determines to be necessary. The appointment of Bank as Borrower's

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attorney, and each and every one of Bank's rights and powers, being coupled with an interest, is irrevocable until all of the Postpetition Obligations have been fully and finally repaid and performed and Bank's obligation to extend credit hereunder is extinguished. 4.6 Right to Inspect. Bank (through any of its officers, employees or agents) shall have the right from time to time, during normal business hours, to inspect, and to check, test, and appraise the Postpetition Collateral. 4.7 Superpriority. The Borrower hereby agrees that the Postpetition Obligations shall constitute allowed administrative expenses in the Bankruptcy Case, and pursuant to section 364(c)(1) of the Bankruptcy Code, shall have priority over any and all administrative expenses of any kind and nature specified in section 503(b) or 507(b) of the Bankruptcy Code, subject, as to priority, only to (a) U.S. Trustee Fees, and (b) allowed Professional Expenses to the extent such fees and expenses are paid from amounts in the Professional Expenses Escrow Account, provided that the aggregate amount deposited into the Professional Expenses Escrow Account shall not exceed the Permitted Professional Expenses Amount. 4.8 Status, Survival and Perfection of Liens. All Liens and security interests granted hereunder shall be deemed validly perfected against Borrower, the Estate, any trustee appointed in the Bankruptcy Case, Borrowers's successors and assigns and all creditors and parties in interest in the Bankruptcy Case. Bank shall not be required to file financing statements or making recordings on real property records to perfect the liens and security interests granted hereunder. Notwithstanding the foregoing, Bank may file financing statements and make recordings on real property records to evidence the Liens and security interests granted hereunder, and in accordance with sections 4.4 and 4.5 Borrower shall cooperate with Bank in executing and delivering such documents as the Bank may reasonably require to make such filings. The Liens and security interests granted to Bank shall be legal, valid, continuing and fully-perfected first priority Liens on the Collateral, which shall be subject to no other Liens,

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whether no existing or hereafter arising, except the Permitted Liens. The Liens and security interests granted hereunder shall not be modified, altered or impaired in any manner by any other financing or extension of credit or incurrence of debt by Borrower (pursuant to section 364 of the Bankruptcy Code or otherwise), or by any dismissal or conversion of the Bankruptcy Case, or by any act or omission whatsoever. No claim of any kind or nature, including without limitation claims under section 506(c) of the Bankruptcy Code, shall be asserted against Bank's Liens and security interests in the Postpetition Collateral, except for (a) U.S. Trustee Fees, and (b) allowed Professional Expenses to the extent such fees and expenses are paid from amounts in the Professional Expenses Escrow Account, provided that the aggregate amount deposited into the Professional Expenses Escrow Account shall not exceed the Permitted Professional Expenses Amount. ARTICLE V ACKNOWLEDGMENT OF PREPETITION OBLIGATIONS 5.1 Prepetition Obligations. Borrower hereby acknowledge, confirms and agrees that Borrower is indebted to the Prepetition Lender for the Prepetition Obligations, as of the Filing Date in the aggregate principal amount of $[], in respect of the Prepetition Agreement, together with interest accrued and accruing thereon, and costs, expenses, fees (including attorneys' fees) and other charges now or hereafter owed by Borrower to the Prepetition Lender under the Prepetition Agreement, all of which is unconditionally owing by Borrower to the Prepetition Lender, without offset, defense, or counterclaim of any kind, nature and description whatsoever. 5.2 Acknowledgment of Security Interests. The Borrower hereby acknowledges, confirms and agrees that the Prepetition Lender has and shall continue to have valid, enforceable and perfected first priority and senior Liens and security interests in the Prepetition Collateral heretofore granted to the Prepetition Lender to secure the payment of the Prepetition Obligations, as well as valid, enforceable, first priority and senior Liens on and security interests in all

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Collateral granted to the Prepetition Lender as adequate protection pursuant to the Interim Financing Order and the Final Financing Order. 5.3 Binding Effect of Prepetition Agreements. The Borrower hereby acknowledges, confirms and agrees that: (a) the Prepetition Agreement is valid, binding and in full force and effect; (b) all agreements and obligations of Borrower in the Prepetition Agreement constitute legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, and that Borrower has no valid, defense, offset or counterclaim to the enforcement of such obligations; and (c) the Prepetition Lender is and shall be entitled to all of the rights, remedies and benefits provided in the Prepetition Agreement. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce Bank to enter into this Agreement, Borrower makes the following representations and warranties which shall be true, correct and complete in all respects as of the date hereof, and shall be true, correct and complete in all respects as of the Closing Date, and shall be true, correct and complete in all respects as of the date of each Advance, as though made on the date of such Advance (except to the extent such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement: 6.1 No Encumbrances. Borrower has good and indefeasible title to the Collateral, free and clear of Liens, except for Permitted Liens. 6.2 Eligible Accounts. The Eligible Accounts are bona fide existing obligations created by the sale and delivery of Inventory or the rendition of services to Account Debtors in the ordinary course of Borrower's business, unconditionally owed to Borrower without defenses,

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disputes, offsets, counterclaims, or rights of return or cancellation. The property giving rise to such Eligible Accounts has been delivered to the Account Debtor, or the Account Debtor's agent for immediate shipment to and unconditional acceptance by the Account Debtor. Borrower has not received any notice of actual or imminent bankruptcy, insolvency or material impairment of the financial condition of any Account Debtor regarding any Eligible Account. 6.3 Eligible Inventory. All Eligible Inventory is of good and merchantable quality, free from defects. 6.4 Equipment. All of the Equipment is used or held for use in Borrower's business and is fit for such purpose. 6.5 Location of Inventory and Equipment. The Inventory and Equipment are not stored with a bailee, warehouseman, or similar party (without Bank's prior written consent) and are located only at the locations identified on Schedule __, or otherwise permitted by Bank. 6.6 Inventory Records. Borrower keeps correct and accurate records itemizing and describing the kind, type, quality, and quantity of the Inventory, and Borrower's cost therefor. 6.7 Location of Chief Executive Office The chief executive office of Borrower is located at the address indicated in the preamble to this Agreement. 6.8 Federal Employment Identification Number. Borrower's federal employment identification number is []. 6.9. Due Organization and Qualification. Borrower is a corporation validity organized and existing under the laws of its state of incorporation. Borrower is authorized to do business in the state of its chief executive office and in each state in which is located Prepetition Collateral or Postpetition Collateral. 6.10 Due Authorization; No Conflict. Subject to approval of the Bankruptcy Court, Borrower is duly authorized to enter into this Agreement. By entering into and performing under this Agreement, Borrower is not violating any law, judgment, decree or order. By entering into

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and performing under this Agreement, Borrower is not breaching any contract, covenant or enforceable promise made with or to any Person. 6.11 Litigation. There are no actions or proceedings pending by or against Borrower before any court or administrative agency and Borrower does not have any knowledge or belief of any pending, threatened, or imminent litigation, governmental investigations, or claims, complaints, actions, or prosecutions involving Borrower or any guarantor of the Obligations, except for: (a) ongoing collection actions in which Borrower is the plaintiff; (b) matters disclosed on Schedule ___; and (c) matters arising after the date hereof that, if decided adversely to Borrower, would not constitute a Material Adverse Change. 6.12. No Material Adverse Change. All financial statements relating to Borrower or any guarantor of the Obligations that have been delivered by Borrower to Bank have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subjected to year-end audit adjustments) and fairly present Borrower's (or guarantor's, as applicable) financial condition as of the date thereof and Borrower's results of operations for the period then ended. There has not been a Material Adverse Change with respect to Borrower (or guarantor, as application) since the latest financial statements submitted to Bank on or before the Closing Date, except for events that customarily occur as result of events leading up to and following the commencement of the Bankruptcy Case. 6.13 Employee Benefits. None of Borrower, any of its Subsidiaries, or any affiliated entity maintains or contributes to a Benefit Plan, other than those listed on Schedule ___. Borrower, each of its Subsidiaries and any affiliated entity have satisfied the minimum funding requirements of ERISA and the IRC with respect to each Benefit Plan to which it is obligated to contribute. 6.14. Environmental Condition. None of Borrower's properties or assets has ever been used by Borrower or, the best of Borrower's knowledge, by previous owners or operators in the

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disposal of, or to produce, store, handle, treat, release or transport, any Hazardous Materials. None of Borrower's properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a Hazardous Materials disposal site, or a candidate for closure pursuant to any environmental protection statute. Borrower has not received a summons, citation, notice or directive from the United States Environmental Protection Agency or any other federal or state governmental agency concerning any act or omission by Borrower resulting in the releasing or disposing of Hazardous Materials into the environment. 6.15 Intellectual Property. Borrower owns or possesses adequate licenses or other rights to use all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, trade secrets and know-how (collectively the "Intellectual Property") that are necessary for the operation of its business as currently conducted. No claim is pending or threatened to the effect that Borrower infringes upon, or conflicts with, the asserted rights of any Person under any Intellectual Property, and to the best of Borrower's knowledge there is no basis for any such claim (whether pending or threatened). 6.16 Brokerage Fees. No brokerage commission or finders fees has or shall be incurred or payable in connection with or as a result of Borrower's obtaining financing from Bank under this Agreement, and Borrower has not used the services of any broker or finder in connection with Borrower's obtaining financing from Bank under this Agreement. 6.17 Insurance. Borrower and its Subsidiaries maintain (a) insurance to such extent and against such risks, including fire, as is customary with companies in the same or similar businesses; (b) workers compensation insurance in the amount required by applicable law; (c) public liability insurance in the amount customary with companies in the same or similar businesses against claims for personal injury or death on properties owned or operated or

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controlled by it; and (d) such other insurance as may be required by law or by the Loan Documents. 6.18 Budget. The Budget has been thoroughly reviewed by the Borrower, and sets forth the working capital and other cash needs of the Borrower for the period covered thereby. Borrower will attempt to act strictly in accordance with the Budget, and Bank has relied on the Budget in determining to enter into this Agreement. Borrower has not and will not allow a Material Adverse Deviation to occur. ARTICLE VII BORROWERS' AFFIRMATIVE COVENANTS Borrower covenants and agrees, that, so long as any credit hereunder shall be available and until full and final payment of the Postpetition Obligations, and unless Bank shall otherwise consent in writing, Borrower shall do all of the following: 7.1 Records, Reporting and Inspection. Maintain such records that will enable Borrower to produce financial statements in accordance with GAAP and to generate accurate reports on the status, condition and value of the Collateral, as may be requested by Bank [or itemize]. Borrower shall also furnish to Bank copies of all pleadings, motions, applications and other papers filed with the Bankruptcy Court, and monthly operating statements filed with the United States Trustee, on or promptly after the date such documents are filed. Borrower shall also furnish with copies of all tax returns within 30 days of filing. Borrower shall permit Bank's representatives reasonable access during normal business hours to Borrower's books and records for purposes of inspection and copying 7.2 Maintenance of Equipment. Maintain the Equipment in good operating condition and repair (ordinary wear and tear excepted) and make all necessary repairs and replacements thereto to preserve value and operating efficiency. Borrower shall not permit any item of Equipment to become a fixture on any real property.

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7.3 Maintenance of Location of Chief Executive Office, Inventory and Equipment. Maintain the location of Borrower's chief executive office, and the location of all Inventory and Equipment, as identified in this Agreement. Borrower shall not change any such location without the express written consent of the Bank. 7.4 Maintenance of Insurance with Bank as Additional Insured or Loss Payee. Maintain all necessary and customary insurance against all risks, and hazards. Borrower shall also have the Bank named as an additional insured, and with respect to items of Collateral, as a loss payee. Borrower shall deliver certificates of insurance, in form, scope and substance satisfactory to Bank, showing compliance with the foregoing. 7.5 Payment of Current Obligations. Pay all items as set forth in the Budget and all Agreed Administrative Expense Priorities, including all payroll, rent, utility, insurance and tax obligations. 7.6 Compliance with Applicable Law and Court Orders. Comply with applicable law, and comply with all orders of the Bankruptcy Court. ARTICLE VIII BORROWER'S NEGATIVE COVENANTS Borrower covenants and agrees, that, so long as any credit hereunder shall be available and until full and final payment of the Postpetition Obligations, and unless Bank shall otherwise consent in writing, Borrower shall not do any of the following: 8.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except: (a) Indebtedness evidenced by this Agreement; (b) Indebtedness in existence immediately prior to the Filing Date; and (c) Indebtedness secured by Permitted Liens.

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8.2 Liens. Create, incur, assume, or permit to exist, directly or indirectly, any Lien on or with respect to any of its property or assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens. 8.3 Corporate Structure. Enter into any merger, consolidation, reorganization, or recapitalization, or reclassification of its equity securities. 8.4 Disposal of Assets. Sell, lease, assign, transfer, or otherwise dispose of any of its assets or properties, other than sales of Inventory to buyers in the ordinary course of Borrower's business. 8.5 Change Name. Change its name, or conduct business under any new trade or fictitious name. 8.6 Change Accounting Methods. Change its accounting methods, or the manner in which its books and financial records are maintained. 8.7 Change or Discontinue Business Operations. Change the nature of its business operations, or suspend, wind down, liquidate, or cease operations. 8.8 Compensation of Officers and Directors. Increase the compensation of officers and directors by more than []%. 8.9 Capital Expenditures. Make any capital expenditures during the term of this Agreement. ARTICLE IX DEFAULT The occurrence or existence of one of more of the following events shall constitute an event of default ("Event of Default") under this Agreement: 9.1 Borrower fails to make any payment of Postpetition Obligations when due in accordance with article II of this Agreement;

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9.2 Borrower fails to grant any Lien or security interest provided in article IV or V of this Agreement; 9.3 Borrower acts inconsistently with any acknowledgment or agreement contained in article V of this Agreement; 9.4 Borrower breaches any representation or warranty contained in article VI of this Agreement; 9.5 Borrower breaches any covenant contained in article VII or VIII of this Agreement; 9.6 There is a Material Adverse Change; 9.7 There is a Material Adverse Deviation; 9.8 The appointment of a chapter 11 trustee; 9.9 The appointment of an examiner with any powers other than those set forth in section 1106(a)(3)-(4), unless Bank consents to such powers; 9.10 The conversion of the Bankruptcy Case to chapter 7; 9.11 The dismissal of the Bankruptcy Case; or 9.12 The granting of relief from the automatic stay to permit any party to recover possession of any property used in the operation of Borrower's business having a value in excess of $[]. ARTICLE X DEFAULT REMEDIES 10.1 Remedies Without Notice or Court Order. Notwithstanding the provisions of section 362 of the Bankruptcy Code and without order of or application or motion to the Bankruptcy Court, upon the occurrence and during the continuation of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by the Borrower: (a) Declare all Postpetition Obligations immediately due and payable;

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(b) Cease advancing money or extending credit; or (c) Terminate this Agreement. 10.2 Remedies After Court Order on Limited and Shortened Notice. Upon the occurrence and during the continuation of an Event of Default, Bank may, at its election, submit to the Bankruptcy Court, on such limited and shortened notice as is set forth in the Interim Financing Order or the Final Financing Order, an order granting relief from the automatic stay under section 362(d) of the Bankruptcy Code, to permit Bank to do any one or more of the following, all of which are authorized by the Borrower: (a) Require the Borrower immediately to surrender possession of the Collateral to Bank; (b) Notify all Account Debtors to send all payments to an address designated by Bank; (c) Settle or adjust disputes and claims directly with Account Debtors for amounts and upon terms which Bank considers advisable; (d) Sell or otherwise dispose of any and all items of Collateral, by public or private sale, in a commercially reasonable manner, upon five days notice to Borrower, and Bank shall have the right to credit bid at any such sale; and (e) Exercise such other rights and remedies as are available to Bank under the UCC, applicable law or in equity, or pursuant to the Loan Documents or the Prepetition Agreement. 10.3 Remedies Cumulative. Bank's rights and remedies under this Agreement, the Loan Documents, the Prepetition Agreement, and all other agreements shall be cumulative. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of an Event of Default shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election or acquiescence by it.

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ARTICLE X TAXES AND EXPENSES If Borrower fails to pay any moneys (whether taxes, assessments, insurance premiums, or, in the case of leased properties or assets, rents, or other amounts payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, then to the extent Bank determines that such failure would result in a Material Adverse Change, Bank may in its discretion and without prior notice to Borrower, do any or all of the following: (a) make payment of the same or any part thereof; (b) set up reserves in Borrower's Loan Account as Bank deems necessary to protect Bank from any exposure created by such failure; and (c) obtain and maintain replacement insurance policies, and take any action with respect to such policies as Bank deems prudent. Any amounts paid by Bank shall constitute Bank's Expenses. ARTICLE XII WAIVERS; INDEMNIFICATION 12.1 Demand, Protest, Etc. Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Bank on which Borrower may be liable. 12.2 Bank's Liability for Collateral. Borrower hereby agrees that: (a) so long as Bank complies with its obligations, if any, under section 9-207 of the UCC, Bank shall not in any way or manner be liable or responsible for: (i) the safekeeping of the Collateral; (ii) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (iii) any diminution in value; or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency or other Person; and (b) all risk of loss, damage, destruction of the Collateral shall be borne by Borrower.

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12.3 Indemnification. Borrower shall pay, indemnify, defend, and hold Bank, each Participant, and each of their respective officers, directors, employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified Person") harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith (as and when they are incurred irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them in connection with or as a result of or related to the execution, delivery, enforcement, performance, administration of this Agreement and the Loan Documents or the transaction contemplated herein, and with respect to any investigation, litigation, or proceeding, related to this Agreement, and any other Loan Document, or the use of proceeds of the credit provided hereunder, or any act, omission, event or circumstance in any manner related thereto (all of the foregoing, collectively, the "Indemnified Liabilities"). Borrower shall have no obligation to any Indemnified Person with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement and the repayment of the Postpetition Obligations. ARTICLE XIII NOTICES Notices pursuant to this Agreement shall be in writing and shall deemed given when sent if sent by (a) hand delivery; (b) facsimile; or (c) e-mail at the addresses for the parties listed below. Otherwise notices shall be deemed given when received. Unless the following addresses are changed pursuant to notice given under this Agreement, notice shall be sent to: Debtor: with a copy to:

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[ person and address ] [ Debtor's counsel ]

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Bank: with a copy to:

[ person and address ] [ Bank's counsel ]

ARTICLE XIV CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER 14.1 Choice of Law. The validity of this agreement and the other loan documents (unless expressly provided to the contrary in another loan document in respect of such loan document), the construction, interpretation, and enforcement hereof, and the rights of the parties hereto and thereto with respect to all matters arising hereunder shall be determined under, governed by and construed in accordance with the laws of the state of [], exclusive of such state's conflict of laws rule, except to the extent governed by the bankruptcy code. 14.2 WAIVER OF JURY TRIAL. BORROWER AND BANK HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF BORROWER AND BANK REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

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ARTICLE XV GENERAL PROVISIONS 15.1 Entire Agreement. This Agreement represents the entire agreement of the parties with regard to the subject of use of cash collateral. No prior or contemporaneous agreement, written or oral, may be used to supplement, amend, or modify any of the provisions of this Agreement. 15.2 Modification. This Agreement may be modified only in a writing signed by the party to be charged with such modification. 15.3 Severability. In the event any portion of this Agreement is held unenforceable, the enforceability of any other provision shall not be affected. 15.4 Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 15.5 Assignability, Binding Effect and Survival. This Agreement shall inure to the benefit of and shall be binding upon the parties, their successors and assigns. Borrower may not assign this Agreement without Bank's consent. Bank may assign this Agreement to any assignee to which it assigns its rights under the Prepetition Agreements. 15.6 Signature in Counterparts or by Facsimile. This Agreement may be signed in counterpart originals, which taken together shall constitute one Agreement. This Agreement may be signed by facsimile signatures, which shall be deemed the equivalent of original signatures for all purposes. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.

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XYZ CORP.

By:____________________ Its:_____________________

ABC BANK, N.A.

By:____________________ Its:____________________

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