Proposed Cash Collateral Order (Doc. 143-2) — In re Kabbage, Inc. d/b/a KServicing (Bankr. D. Del.)
- Date
- 2022-10-24
Summary
Doc 143-2, Exhibit A to the debtors' cash collateral motion, is a proposed order in In re Kabbage, Inc. d/b/a KServicing, et al., Case No. 22-10951 (CTG), jointly administered Chapter 11 cases in the U.S. Bankruptcy Court for the District of Delaware, filed October 24, 2022. The proposed order would authorize the debtors to use cash collateral and grant adequate protection to the Federal Reserve Bank of San Francisco for indebtedness under the Paycheck Protection Program Liquidity Facility. In its stipulations, KServicing acknowledges liability to the Reserve Bank of approximately $536,450,940 in outstanding Advances as of the October 3, 2022 petition date, secured by a first priority lien on PPP loans pledged as collateral. The document closes with a cash collateral budget stating a Cash Collateral Cap of $8,500,000 for the six-month budget.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 1 of 35
Exhibit A
Proposed Order
RLF1 28146913v.1
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 2 of 35
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
----------------------------------------------------------- x
In re : Chapter 11
:
KABBAGE, INC. d/b/a KSERVICING, et al., : Case No. 22-10951 (CTG)
:
:
Debtors.1 : (Jointly Administered)
----------------------------------------------------------- x
ORDER UNDER 11 U.S.C. §§ 105, 361, 362, AND 363,
AND BANKRUPTCY RULES 2002, 4001, 6004, AND 9014
(I) AUTHORIZING DEBTORS TO USE CASH COLLATERAL AND
(II) GRANTING ADEQUATE PROTECTION TO SECURED LENDER
This matter is before the Court pursuant to the motion (the “Motion”)2 filed by Kabbage,
Inc. d/b/a KServicing (“KServicing”) and its Debtors affiliates, as Debtors and Debtors in
possession in the above-captioned chapter 11 cases (collectively, the “Debtors”), pursuant to
sections 105, 361, 362 and 363 of Title 11 of the United States Code, 11 U.S.C. §§ 101, et seq.
(the “Bankruptcy Code”), Rules 2002, 4001, 6004, and 9014 of the Federal Rules of Bankruptcy
Procedure (the “Bankruptcy Rules”) and Rule 4001-2 of the Local Rules of Bankruptcy Practice
and Procedure of the United States Bankruptcy Court for the District of Delaware (the “Local
Rules”), seeking, among other relief, the entry of an order (this “Order”):
(i) authorizing the Debtors to use the Cash Collateral (as defined below) as
contemplated by section 363 of the Bankruptcy Code in accordance with the terms set forth herein
effective as of the entry of the Order;
1
The Debtors in these chapter 11 cases, along with the last four digits of each Debtors’ federal tax identification
number, as applicable are: Kabbage, Inc. d/b/a KServicing (3937); Kabbage Canada Holdings, LLC (N/A); Kabbage
Asset Securitization LLC (N/A); Kabbage Asset Funding 2017-A LLC (4803); Kabbage Asset Funding 2019-A
LLC (8973); and Kabbage Diameter, LLC (N/A). Kabbage is a trademark of American Express used under license;
Kabbage, Inc. d/b/a KServicing is not affiliated with American Express. The Debtors’ mailing and service address
is 925B Peachtree Street NE, Suite 383, Atlanta, GA 30309.
2
All capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Motion.
WEIL:\98835065\9\55894.0003
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 3 of 35
(ii) subject to the Carve-Out, granting and affirming the adequate protection being
given to the Federal Reserve Bank of San Francisco (the “Reserve Bank”) with respect to
Indebtedness (as defined below) owed under the Paycheck Protection Program Liquidity Facility
(the “PPPLF”) pursuant to (a) that certain Paycheck Protection Program Liquidity Facility Letter
of Agreement (the “Letter of Agreement”), dated May 12, 2020 (as amended January 14, 2021),
by and among KServicing and the Reserve Bank, and (b) the Federal Reserve’s Operating Circular
No. 10, effective July 16, 2013 (the “Operating Circular” and, together with the Letter of
Agreement, the “Program Agreements”); and
(iii) modifying the automatic stay to the extent hereinafter set forth and waiving the
fourteen (14) day stay provisions of Bankruptcy Rules 4001(a)(3) and 6004(h).
The Court having held a hearing on November 7, 2022 (the “Hearing”) to consider the
entry of this Order approving the Motion pursuant to Bankruptcy Rule 4001(b)(2), and having
found that notice of the Motion and Hearing was provided as authorized by Bankruptcy Rule
4001(b)(3); and the Court having heard and resolved or overruled any and all objections to the
relief requested in the Motion; and it appearing that the relief requested in the Motion is in the best
interests of the Debtors, their estates (the “Estates”), and creditors; and upon the record herein and
after due deliberation thereon; and good and sufficient cause appearing therefor,
IT IS HEREBY FOUND AND DETERMINED THAT:3
A. Petition Date. On October 3, 2022 (the “Petition Date”), the Debtors commenced
this chapter 11 case (the “Chapter 11 Case”) by filing a voluntary petition for relief under chapter
11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the
3
Findings of fact shall be construed as conclusions of law, and conclusions of law shall be construed as findings of
fact, as applicable, and vice versa, pursuant to Bankruptcy Rule 7052.
2
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 4 of 35
“Court”). The Debtors operates their business and manage their affairs as a Debtors in possession
pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. As of the date hereof, no trustee,
examiner, or official committee of creditors holding unsecured claims (a “Creditors’ Committee”)
has been appointed in the Chapter 11 Case.
B. Jurisdiction and Venue. The Court has jurisdiction over the Chapter 11 Case, the
parties, and the Debtors’ property pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant
to 28 U.S.C. § 157(b)(2)(D). The Court is a proper venue for the Chapter 11 Case and this Motion
under 28 U.S.C. §§ 1408 and 1409.
C. Notice. The Hearing was held pursuant to Bankruptcy Rules 2002 and 4001 and
Local Rule 4001-2(c). Notice of the Motion and of the Hearing was given by the Debtors on
October 24, 2022 (Docket No. [•]). Notice of the Motion was provided to: (i) the Office of the
United States Trustee for the District of Delaware; (ii) the holders of the 30 largest unsecured
claims against the Debtors on a consolidated basis; (iii) the Reserve Bank; (iv) Customers Bank;
(v) Cross River Bank; (vi) the United States Department of Justice; (vii) the Federal Trade
Commission; (viii) the Small Business Administration; (ix) the Internal Revenue Service; (x) the
Securities and Exchange Commission; (xi) the United States Attorney’s Office for the District of
Delaware; (xii) the Banks; and (xiii) any party that has requested notice pursuant to Bankruptcy
Rule 2002, in each case by telecopy, email, overnight courier, and/or hand delivery and otherwise
in accordance with Local Rule 9013(m) (together the “Notice Parties”). Notice of the Hearing and
the relief requested in the Motion has been provided as authorized by Bankruptcy Rule 4001(b)
and (d).
D. Acknowledgments and Stipulations. Subject only to the rights of parties in interest
specifically set forth in Paragraph 21 of this Order, in exchange for and as a material inducement
3
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 5 of 35
for the Reserve Bank to agree to the relief sought herein, the Debtors acknowledge, represent,
stipulate and agree as follows:
(i) KServicing services a series of Paycheck Protection Program loans (the “PPP
Loans”) which are pledged as Collateral (as defined in the Operating Circular) for the Obligations
(as defined in the Operating Circular) under the Program Agreements (including any proceeds and
offspring of such Collateral, the “PPPLF Collateral”) and are guaranteed by the U.S. Small
Business Administration (“SBA”).
(ii) KServicing admits that, as of the Petition Date, KServicing was justly and lawfully
liable to the Reserve Bank (x) in the aggregate principal amount of approximately $536,450,940
in respect of outstanding Advances under the Program Agreements, plus (y) accrued and unpaid
interest and costs and expenses including, without limitation, attorney’s fees, agent’s fees, other
professional fees and disbursements and other obligations owing under the Program Agreements
(collectively, the “Indebtedness”).
(iii) KServicing’s Obligations under the Program Agreements are secured by the
Reserve Bank’s valid perfected first priority lien (the “Prepetition Lien”) upon and in all of the
PPPLF Collateral.
(iv) Any payments to the Reserve Bank made on account of the Program Agreements
before the Petition Date were (a) payments on account of the PPPLF Collateral or (b) otherwise
not subject to any avoidance, offset, recharacterization, subordination (whether equitable,
contractual, or otherwise), recoupment, counterclaim, or defense (including, without limitation,
under sections 105, 506, 510, 544, 547, 548, 549, 550, 552, and/or 553 of the Bankruptcy Code).
4
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 6 of 35
(v) (a) all of the cash in the Debtors’ Synovus Servicing Account4 other than (1) cash
proceeds (if any) on account of KS PPP Loans5 (which funds (if any) shall be promptly segregated
from proceeds of the PPPLF Collateral) and (2) any portion of the Additional Cash (as defined
herein) held in the Synovus Servicing Account, (b) all of the cash in the Debtors’ Primis Account6
other than any portion of the Additional Cash and (c) all payments and proceeds received in respect
of the PPP Loans that constitute PPPLF Collateral, wherever held, constitute PPPLF Collateral
and Cash Collateral of the Reserve Bank, subject to the reservation of rights as set forth in
Paragraph 19 herein.
(vi) All outstanding Obligations under the Program Agreements to the extent under-
secured shall at all times be entitled to priority treatment under section 507(a)(2) of the Bankruptcy
Code (the “Reserve Bank Priority Claim”) and shall have priority over any and all unsecured
claims against the Debtors now existing or hereafter arising, of any kind or nature whatsoever.
The Reserve Bank Priority Claim shall survive any conversion of the Chapter 11 Case to a case
under chapter 7 of the Bankruptcy Code or the dismissal of the Chapter 11 Case.
(vii) In (a) making the decision to make the loans and financial accommodations under
the Program Agreements, (b) administering the loans and financial accommodations extended
under the Program Agreements, (c) making the decision to collect upon the indebtedness and
Obligations of the Debtors, (d) cooperating in the Debtors’ efforts toward the winddown of their
operations in an orderly manner, or (e) otherwise engaging in transactions and communications
4
As defined in the Motion of Debtors for Entry of Interim and Final Orders (I) Authorizing Debtors to (A) Continue
Using Existing Cash Management System, Bank Accounts, and Business Forms, (B) Implement Changes to Cash
Management in the Ordinary Course of Business; and (II) Granting Related Relief [Docket No. 12] (the “Cash
Management Motion”).
5
As defined in the Cash Management Motion.
6
As defined in the Cash Management Motion. The Primis Account is a correspondent bank account established in
connection with the KServicing’s participation in the PPPLF.
5
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 7 of 35
with the Debtors, in each case prior to the entry of the Order, the Reserve Bank shall not by reason
thereof be considered to have been or be exercising control over any operations of the Debtors or
acting in any way as a responsible person, or as an owner or operator under any applicable law or
regulation, including, without limitation, any environmental law, any labor law, or any other
statute, regulation, or doctrine.
(viii) The Obligations are secured by valid, binding, enforceable, duly perfected and
unavoidable security interests in and liens on the PPPLF Collateral, and the Obligations and
Program Agreements and the security interests granted in respect thereof are not subject to any
challenge or defense, including, without limitation, respectively, avoidance, reductions,
recharacterization, subordination (whether equitable, contractual, or otherwise), claims,
counterclaims, cross claims, offsets, recoupment, defenses, or any other challenges under the
Bankruptcy Code or any applicable law or regulation by any person or entity.
(ix) The Debtors have waived, discharged, and released any right they may have to
challenge the Obligations underlying the Program Agreements or the liens on the PPPLF
Collateral, or to assert any offsets, recoupment, defenses, claims, objections, challenges, avoidance
actions, causes of action, and/or choses of action against the Reserve Bank, with respect to their
obligations under the Program Agreements, the liens on the PPPLF Collateral, or any other matters
arising therefrom or relating thereto.
E. Cash Collateral. For purposes of this Order, the term “Cash Collateral” shall mean
all “cash collateral,” as defined in section 363 of the Bankruptcy Code, in or on which the Reserve
Bank holds a lien, security interest, or other interest, whether existing on the Petition Date, arising
pursuant to this Order, or otherwise, namely:
(i) all cash proceeds of the PPP Loans that comprise the PPPLF Collateral;
6
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 8 of 35
(ii) (a) all cash held in any Synovus Servicing Account other than (1) cash
proceeds on account of KS PPP Loans7 (which funds shall be promptly segregated from proceeds
of the PPPLF Collateral), (2) any portion of the Additional Cash held in the Synovus Servicing
Account, and (b) all cash held in the Primis Account other than any portion of the Additional Cash
held in the Primis Account; and
(iii) cash held as of the Petition Date or received thereafter in the Debtors’
general operating accounts, disbursement-only accounts, and custody accounts as it relates to the
PPP Loans that comprise the PPPLF Collateral or proceeds thereof;
The Debtors represent and stipulate that all of the Debtors’ cash, cash equivalents, deriving
from the above-mentioned accounts as it relates to the PPPLF Collateral, constitute Cash
Collateral.
F. Use of Cash Collateral. The terms of the use of Cash Collateral pursuant to this
Order are fair and reasonable, reflect the Debtors’ exercise of prudent business judgment consistent
with their fiduciary duties and constitute fair consideration. Good and sufficient cause has been
shown for entry of this Order. The Debtors have a need to use a portion of the Cash Collateral, in
accordance with the terms and limitations set forth herein, to operate their business and effectuate
an organized wind-down of their business, which will be used in accordance with the terms of this
Order and consistent with the Cash Collateral Budget subject to any Permitted Variance. The
Debtors intend to use Cash Collateral for general corporate purposes, including to service loans
and pay related fees and expenses associated with the administration of the Chapter 11 Case, which
will aid in an efficient wind-down of the Debtors’ business. The adequate protection provided
herein is consistent with and authorized by the Bankruptcy Code and adequately protects the
7
As defined in the Cash Management Motion.
7
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 9 of 35
Reserve Bank’s interests in the PPPLF Collateral. The Debtors will not have sufficient sources of
working capital to operate their business in the ordinary course of business, including to service
the PPP Loans that are pledged as PPPLF Collateral, throughout the Chapter 11 Case without
authorized use of Cash Collateral. Absent authorization to use Cash Collateral, the Debtors, their
Estates, their creditors, and the borrowers of the PPP Loans would suffer immediate and
irreparable harm.
G. Cash Collateral Budget. The Reserve Bank is willing to consent to the Debtors’
use of Cash Collateral solely in accordance with the Cash Collateral Budget (as defined herein) as
set forth in Paragraph 2 herein (as such budget may be modified from time to time by the Debtors
upon prior written consent as set forth in this Order, the “Cash Collateral Budget”), including the
limited use of the Cash Collateral as provided in the Cash Collateral Budget during the Budget
Period (as defined herein), solely upon the protections, terms and conditions provided for in this
Order.
H. Adequate Protection. The Reserve Bank shall receive, pursuant to sections 361 and
363(e) of the Bankruptcy Code, adequate protection in the form of:
(i) the Debtors working cooperatively with the Reserve Bank to timely
implement direct payments from the SBA to the Reserve Bank on all PPP loans constituting PPPLF
Collateral by November 7, 2022 (or as soon as practicable thereafter solely to the extent that such
delay is solely on account of any action or inaction by the SBA) including, but not limited to, (a)
delivering written instructions to the SBA to direct all payments on KS PPP Loans to the Reserve
Bank and (b) delivering a list to the Reserve Bank of all the KS PPP Loans, in each case, in a form
and manner reasonably acceptable to the Reserve Bank.
8
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 10 of 35
(ii) the Debtors not, at any point, depositing or maintaining proceeds of the
PPPLF Collateral in any other account, and if such funds are received in any other account,
KServicing immediately (within one business day) remitting such funds to the Reserve Bank or to
the Synovus Servicing Account for the sole benefit of the Reserve Bank or another segregated
bank account satisfactory to the Reserve Bank.
(iii) the Debtors shall provide weekly reporting (including bank balances) on all
amounts in the Synovus Servicing Account, including whether any payments in connection with
KS PPP loans have been deposited in, or transferred from, the Synovus Servicing Account.
(iv) the Debtors continuing to service the PPP Loans constituting PPPLF
Collateral in the ordinary course in accordance with the Program Agreements and remitting all
payments received to the Reserve Bank weekly, subject to the terms hereof, including Paragraph
19 hereof.
(v) subject to the receipt of underlying reports and data from the SBA, the
Debtors deliver to the Reserve Bank on Monday of each week (a) PPPLF reduction reports
(“PPPLF Reduction Reports”) and (b) a list of KS PPP Loans on which SBA has made payments
and, for each such loan, the amount paid by the SBA during the prior week (“KS PPP Loan
Payment Report”), in each case, in a form and manner acceptable to the Reserve Bank.
(vi) the Debtors working cooperatively with the Reserve Bank to identify
potential third party loan servicers for the remaining PPP Loans that constitute PPPLF Collateral
and cooperate and reasonably assist in the transfer of the loan portfolio to a third-party servicer;
subject to the parties determining the costs of such transfer and how such costs to effectuate such
transfer shall be borne.
9
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 11 of 35
(vii) the Debtors not granting any liens or security interests with respect to the
PPPLF Collateral.
(viii) the Debtors obtaining the consent of the Reserve Bank (such consent not to
be unreasonably withheld, conditioned, or delayed) with respect to any settlement with Cross River
Bank, Customers Bank, or any non-governmental party.
(ix) the Debtors providing to the Reserve Bank (a) any accounting or financial
disclosures provided to the U.S. Department of Justice (“DOJ”) and/or the Borrower’s Depository
Institution (as defined in the Letter of Agreement), or any successor thereof, and (b) any additional
reporting with respect to the PPPLF Collateral and the Debtors’ administration of the processing
of PPP Loans in connection therewith as may be reasonably requested by the Reserve Bank from
time to time.
(x) to the extent not included in (vi), the Debtors providing the Reserve Bank
with a weekly report of their cash balances including both PPP Loan proceeds that constitute
PPPLF Collateral as well as other cash through to the earlier of (x) the closing of the Chapter 11
Case or (y) if applicable, the date on which all Indebtedness has been indefeasibly paid in full;
provided that weekly reporting of borrower payment remittances due to Cross River Bank or
Customers Bank shall not be provided to the Reserve Bank.
(xi) the Debtors providing real-time weekly reporting to the Reserve Bank on
all payments to the Debtors or their affiliates from the SBA, recipients of the PPP Loans (the “PPP
Borrowers”) or any other source with regard to the PPP Loans that constitute PPPLF Collateral.
(xii) the Debtors’ payment of the Reserve Bank’s professional fees in the
amounts not to exceed the amounts set forth in the Cash Collateral Budget and solely from the
Cash Collateral, of each of (i) Cleary Gottlieb Steen & Hamilton LLP, (ii) Young Conaway
10
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 12 of 35
Stargatt & Taylor, LLP, and (iii) Chilmark Partners LLC in connection with the Chapter 11 Case
(collectively, the “Reserve Bank Professional Fees”), subject to reasonableness review solely as
set forth in this Order.8
(xiii) the Debtors granting to the Reserve Bank valid perfected first priority
replacement liens on all of the Debtors’ unencumbered property and assets owned or held as of the
Petition Date and all property acquired or obtained after the Petition Date, and junior liens on all
of the Debtors’ property and assets encumbered as of the Petition Date, subject to and limited to
the extent of any diminution in value, which may result from the Debtors’ use of Cash Collateral;
provided that such replacement liens shall not apply to any borrower payment remittances made
in accordance with the Partner Bank Agreements9 due to Cross River Bank or Customers Bank;
provided further that nothing herein shall limit the Debtors’ right to seek recharacterization of
adequate protection as being applied to the Obligations.
(xiv) Entry of this Order is in the best interests of the Debtors’ estates and
creditors as its implementation will, among other things, allow for the continued operation of the
Debtors’ business and enhance the prospects of a successful chapter 11.
Based upon the foregoing findings, acknowledgements, and conclusions, and upon the
record made before this Court at the Hearing, and good and sufficient cause appearing therefor,
8
Nothing in this Order limits or waives the Reserve Bank’s right to assert a claim for any unpaid professional fees
that are owed under the PPPLF.
9
As defined in the Motion of Debtors for Entry of Interim and Final Orders Authorizing Debtors to (I) Continue
Servicing and Subservicing Activities and (II) Perform Related Obligations [Docket No. 11].
11
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 13 of 35
IT IS HEREBY ORDERED THAT:
1. Disposition. The Motion is granted on the terms set forth in this Order. Any
objection to the relief sought in the Motion that has not previously been withdrawn or resolved is
hereby overruled on its merits.
2. Authorization for Use of Cash Collateral. Subject to the terms and conditions of
this Order, including the Cash Collateral Cap established under Paragraph 4, and upon entry of
this Order, the Debtors are hereby authorized to use the Cash Collateral in accordance with the
terms, conditions, and limitations set forth in this Order, during the period beginning on the date
of entry of this Final Order until the occurrence of the Termination Date (as defined below) (the
“Budget Period”), subject to the terms and conditions of this Final Order and in accordance with
the 13-week budget attached as Exhibit 1 to this Final Order (the “Initial Budget,” as such budget
may be extended or modified from time to time in accordance herewith, the “Cash Collateral
Budget”); provided that for each rolling four-week testing period, with the first such period
beginning with the week in which this Final Order is entered and ending four weeks thereafter (and
each week thereafter) (each four-week period, a “Testing Period”), the actual disbursements for the
line items labeled: “Operating Expenses (Incl. Payroll),” “Insurance (Incl. Incremental D&O),”
and “Taxes” (together the “Tested Disbursement Line Items”) of the Debtors for such Testing
Period on an aggregate basis shall not be greater than 115% of the amount estimated therefore set
forth in the Budget for such period (such percentage, a “Permitted Variance”). No later than
Friday of the fourth week covered by the Initial Budget (and every fourth week after), the Debtors
shall provide to the Reserve Bank a proposed updated 13-week cash flow forecast, substantially in
the form of the Initial Budget, which updated Budget shall only become the Budget upon the prior
express written consent of the Reserve Bank to be granted in its sole discretion (but shall not be
12
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 14 of 35
required to be filed with the Court); provided, that if the Reserve Bank does not object to the
proposed updated 13-week cash flow forecast by the following Friday or such later time as agreed
to by the Debtors and the Reserve Bank, the updated Budget shall become the Budget. Further, on
Wednesday of each calendar week, the Debtors shall provide the Reserve Bank, Chilmark Partners
LLC, and Cleary Gottlieb Steen & Hamilton LLP with a variance report comparing, on an
aggregate and line item basis, actual results for the previous individual week and cumulative
preceding weeks (up to four consecutive weeks) to the amounts set forth in the Budget for such
periods. Each variance for Tested Disbursement Line Items in excess of 5% shall be accompanied
by a qualitative explanation. The expenditures authorized in the Cash Collateral Budget shall be
adhered to on a line-by-line basis, on a cumulative basis during the Budget Period (i.e. unused
amounts shall carry forward to successive weeks on a line-by-line basis), with no carry-over
surplus to any other line item(s) or to a subsequent budget period, if any, except to the extent
agreed to in writing as set forth in this paragraph. The Reserve Bank may, in its sole discretion,
agree in writing to the use of Cash Collateral in a manner or amount which does not conform to
the Cash Collateral Budget (each such use of Cash Collateral, a “Non-Conforming Use”). If such
written consent is given, the Debtors shall be authorized pursuant to this Order to expend Cash
Collateral for such Non-Conforming Use without further Court approval, and the Reserve Bank
shall be entitled to all of the protections specified in this Order for any such Non-Conforming Use.
3. Approved Budget. Cash Collateral used pursuant to this Order shall be used by the
Debtors only in accordance with the Cash Collateral Budget and this Order.
4. Scope of the Cash Collateral. For purposes of the Cash Collateral Budget, the Cash
Collateral available to the Debtors during the Budget Period shall be (a) amounts held by the
Debtors in the Synovus Servicing Account and Primis Account as of the Petition Date, totaling
13
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 15 of 35
$1,468,882 (“Additional Cash”);10 and (b)(x) payments that constitute Agreed Cash Amounts (as
defined herein) held by the Debtors as of the Petition Date totaling $631,854; and (y), without
duplication of (a) or (b)(x), amounts actually and subsequently paid to the Debtors after the Petition
Date that in each case of (x) and (y) constitute Agreed Cash Amounts (as defined in this
paragraph): (i) amounts actually paid by the SBA or the relevant PPP Borrower representing
interest on any PPP Loans pledged as PPPLF Collateral that is in excess of 35 basis points per
annum; (ii) without duplication of the amounts in (i), the “Excess Amounts,” 11 not to exceed
$6,653,313 in the aggregate, which constitute excess state and local tax amounts as agreed by the
Debtors and the Reserve Bank (“SALT”); and (iii) without duplication of the amounts in (i),
amounts actually paid by the SBA or the relevant PPP Borrower relating to principal and interest
payments for each PPP Loan not to exceed $7,725,403 in the aggregate (where (i), (ii) and (iii)
shall collectively constitute the “Agreed Cash Amounts”); provided that absent further prior
written consent from the Reserve Bank, the aggregate total Cash Collateral available during the
Budget Period, including in respect of any payments received from the Reserve Bank pursuant to
Paragraph 18 hereunder, shall be the capped amount as set forth in the Cash Collateral Budget (the
“Cash Collateral Cap”); provided further that, payments of amounts in (ii) would not be made until
the Advances under the Program Agreements are indefeasibly repaid in full; provided further that,
the Reserve Bank shall remit any Agreed Cash Amounts no later than seven (7) calendar days
10
Without limiting the Debtors’ rights to use such amounts in accordance with the terms of this Order, the Debtors
and the Reserve Bank each reserve their rights with respect to whether the Additional Cash constitutes Cash
Collateral and PPPLF Collateral.
11
For purposes of this subsection (ii), the “Excess Amount” for each “Inactive Loan” means any amount actually paid
by the SBA or the relevant PPP Borrower on such PPP Loan following the Petition Date. The “Excess Amount” for
each “Active Loan” means any amount actually paid by the SBA or the relevant PPP Borrower on such PPP Loan
following the Petition Date after such payments are first applied to make a payment of (1) principal on the Advances
in an amount equal to the “Net Balance Amount” for such PPP Loan, and (2) interest due and payable on the
Advances related to such payment of principal.
14
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 16 of 35
following (1) the receipt of such amounts by the Reserve Bank and (2) the delivery of the PPPLF
Reduction Report by the Debtors to the Reserve Bank on account of such amounts with no
discrepancies. With respect to PPP Loan payments received directly by the Reserve Bank from
the SBA, the Reserve Bank shall remit any funds that constitute Agreed Cash Amounts up to the
Cash Collateral Cap (less any Agreed Cash Amounts received directly and retained by the Debtors)
consistent with the terms of the Cash Collateral Budget and this Order.
5. Adequate Protection for the Reserve Bank. The Reserve Bank submits that
Adequate Protection, in accordance with Paragraph H hereunder, is required to avoid a diminution
of value of its PPPLF Collateral, if any; the Debtors (on their own behalf and on behalf of their
Estates) reserve the right to contest the Reserve Bank’s position with respect to potential
diminution in value, and by this Order the Court makes no findings with respect to diminution in
value, if any; however, as a compromise and settlement, to address any potential diminution in
value, the Reserve Bank is hereby granted the following (which shall be referred to collectively as
the “Adequate Protection Rights”):
a. Adequate Protection Payments. Pursuant to sections 361(1) and 363(e) of the
Bankruptcy Code, the Debtors shall pay, transfer, or otherwise convey from the Cash Collateral to
the Reserve Bank adequate protection payments in the form of all Reserve Bank Professional Fees
in the amounts not to exceed the amounts set forth in the Cash Collateral Budget incurred before
or after the Petition Date in connection with the Program Agreements, as provided in this Order,
subject to the procedures set forth in Paragraph 22 herein.
b. Replacement Liens. As further adequate protection against, and limited to the
extent of, any diminution in value, the Reserve Bank is hereby granted, subject and subordinate to
the Carve-Out, replacement liens on all of the Debtors’ unencumbered property and assets owned
15
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 17 of 35
or held as of the Petition Date and all property acquired or obtained after the Petition Date,
including, without limitation, proceeds of claims and causes of actions arising under chapter 5 of
the Bankruptcy Code, and junior liens on all of the Debtors’ property and assets encumbered as of
the Petition Date; provided that such replacement liens shall not apply to any borrower payment
remittances due to Cross River Bank or Customers Bank. For the avoidance of doubt, the Reserve
Bank’s existing liens will attach to any proceeds or offspring of the PPPLF Collateral, pursuant to
section 552 of the Bankruptcy Code.
c. Other Adequate Protections. The Debtors also agree to provide the Adequate
Protections in accordance with Paragraph H hereof.
6. Survival of Adequate Protection Rights. The Adequate Protection Rights shall
continue in the Chapter 11 Case and in any successor case under the Bankruptcy Code (a
“Successor Case”), and shall be and remain valid and enforceable (i) against any chapter 11 trustee
appointed in the Chapter 11 Case, (ii) against any chapter 7 trustee appointed in a Successor Case,
(iii) against any other representative of the Debtors’ estates or any assignee of assets or rights of
the Debtors’ estates, and (iv) upon any conversion or dismissal of the Chapter 11 Case or any
Successor Case; and all security interests shall maintain their perfected status and respective
priority as provided in this Order until the Adequate Protection obligations have been indefeasibly
paid in full in cash and satisfied.
7. Restrictions on Use of Cash Collateral. Notwithstanding anything to the contrary
in this Order, no PPPLF Collateral (including, without limitation, Cash Collateral) may be used to
request authorization from the Court to obtain any postpetition loans or other financial
accommodations pursuant to section 364(c) or (d) of the Bankruptcy Code without the consent of
the Reserve Bank or with respect to the investigation or the prosecution of the validity, perfection,
16
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 18 of 35
enforceability, and extent of the Obligations and valid perfected first priority liens in the PPPLF
Collateral or any potential claims of the Debtors’ estates against the Reserve Bank in respect of
the Program Agreements, or any other claims, causes of action, or defenses under chapter 5 of the
Bankruptcy Code or any other claims and causes of action (collectively, the “Claims and
Defenses”).
8. Carve-Out. Any security interests or claims granted herein as Adequate Protection
shall be subject in all respects and subordinate to the Carve-Out. “Carve-Out” shall mean the sum,
without duplication, of the following: (i) all fees required to be paid to the Clerk of the Bankruptcy
Court and to the U.S. Trustee under section 1930(a) of title 28 of the United States Code plus
interest at the statutory rate (without regard to the notice set forth in (iii) below); (ii) fees and
expenses up to $50,000 incurred by a trustee under section 726(b) of the Bankruptcy Code (without
regard to the notice set forth in (iii) below); (iii) to the extent allowed at any time, whether by
interim or final compensation order, all unpaid fees and expenses (the “Professional Fees”)
incurred by persons or firms retained by the Debtors pursuant to section 327, 328 or 363 of the
Bankruptcy Code (collectively, the “Debtors Professionals”) and the Creditors’ Committee (the
“Committee Professionals” and, together with the Debtors Professionals, the “Professional
Persons”) appointed in the Chapter 11 Case pursuant to section 1103 of the Bankruptcy Code at
any time before or on the first business day after delivery by the Reserve Bank of a Carve-Out
Trigger Notice (defined below), whether allowed by the Bankruptcy Court prior to or after delivery
of a Carve-Out Trigger Notice and without regards to whether such fees and expenses are provided
for in the Cash Collateral Budget; and (iv) Professional Fees of Professional Persons in an
aggregate amount not to exceed $500,000 incurred after the first business day following delivery
by the Reserve Bank, as applicable, of the Carve-Out Trigger Notice, to the extent allowed at any
17
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 19 of 35
time, whether by interim order, procedural order, or otherwise (the amount set forth in this clause
(iv), the “Post-Carve-Out Trigger Notice Cap”). For purposes of the foregoing, “Carve-Out Trigger
Notice” shall mean a written notice delivered by email (or other electronic means) by the Reserve
Bank, to the Debtors, their lead restructuring counsel, the U.S. Trustee, and counsel to the
Creditors’ Committee, which notice may be delivered following the occurrence and during the
continuation of an Event of Default, stating that the Post- Carve-Out Trigger Notice Cap has been
invoked.
a. The Debtors shall establish a segregated trust account not subject to the control of
any party, including the Reserve Bank (the “Professional Fee Reserve Account”) for the sole
purpose of paying unpaid Professional Fees. The Debtors shall, by no later than the end of the
calendar week in which this Order is entered, transfer from cash on hand into the Professional Fee
Reserve Account, the Professional Fees set forth in the Cash Collateral Budget for the preceding
calendar week into the Professional Fee Reserve Account, provided that the Debtors’ obligations
to pay Professional Fees shall not be limited or deemed limited to funds held in the Professional
Fee Reserve Account. The Professional Fee Reserve Account (including any and all funds held
therein) shall not be property of the Debtors’ estates and shall not be subject to the control of any
party, but shall be held in trust exclusively for the benefit of Professional Persons. Professional
Fees shall be first paid from the Professional Fee Reserve Account. Notwithstanding the
foregoing, the Reserve Bank shall retain a residual interest in the Professional Fee Reserve
Account (and any funds therein) to the extent such funds are not used to pay Professional Fees
under the terms of this Order.
b. On the day on which a Carve-Out Trigger Notice is given by the Reserve Bank to
the Debtors with a copy to counsel to the Committee (the “Carve-Out Trigger Declaration Date”),
18
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 20 of 35
the Carve-Out Trigger Notice shall constitute a demand to the Debtors to utilize all cash in the
Professional Fee Reserve Account, and, to the extent there are remaining unpaid Professional Fees
following the depletion of the Professional Fee Reserve Account, cash on hand as of such date and
any available cash thereafter held by any Debtors to increase the Professional Fee Reserve Account
in an amount equal to the then unpaid amounts of the Professional Fees plus the Post-Carve-Out
Trigger Notice Cap; provided that for the avoidance of doubt, (i) Post-Carve-Out Trigger Notice
Cap amounts shall be available only for payment of Professional Fees accrued after the Carve-Out
Trigger Declaration Date, and (ii) “available cash,” with respect to proceeds of PPPLF Collateral,
shall consist only of Agreed Cash Amounts held as of the Petition Date or actually received by the
Debtors after the Petition Date and prior to the Carve-Out Trigger Declaration Date. The Debtors
shall hold such amounts in trust to pay such Professional Fees prior to any and all other claims.
Notwithstanding anything to the contrary in this Order, following delivery of a Carve-Out Trigger
Notice, the Reserve Bank shall not foreclose on cash held by the Debtors (or KS PPP Loan
proceeds held by the Reserve Bank in trust to be remitted to the Debtors pursuant to Paragraph 20
herein) until the Professional Fee Reserve Account has been fully funded in the total amount of
outstanding Professional Fees as of the Carve-Out Trigger Declaration Date plus the Post-Carve-
Out Trigger Notice Cap. Further, notwithstanding anything to the contrary in this Order, (1) the
failure of the Professional Fee Reserve Account amounts to satisfy in full the Professional Fees
shall not affect the priority of the Carve-Out, and (2) in no way shall the Cash Collateral Budget,
Carve-Out, the Post-Carve-Out Trigger Notice Cap or any of the foregoing be construed as a cap
or limitation on the amount of the Professional Fees due and payable by the Debtors. For the
avoidance of doubt and notwithstanding anything to the contrary in this Order (x) funds transferred
to the Professional Fee Reserve Account shall not be subject to any liens or claims granted to the
19
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 21 of 35
Reserve Bank and shall not constitute Cash Collateral or Adequate Protection collateral, although
the Reserve Bank shall retain a residual interest in the Professional Fee Reserve Account (and any
funds therein) to the extent such funds are not used to pay Professional Fees under the terms of
this Order and (y) the Carve-Out shall be senior to any and all forms of adequate protection, liens,
or claims securing the Obligations.
c. So long as the Carve-Out Trigger Notice has not been delivered in accordance with
this Order, the Debtors shall be permitted to pay administrative expenses of Professional Persons
allowed and payable under the Bankruptcy Code, as the same may become due and payable,
including on an interim basis. Any payment or reimbursement made prior to the occurrence of the
Carve-Out Trigger Declaration Date in respect of any Professional Fees shall not reduce the Carve-
Out.
d. The Reserve Bank shall not be responsible for the payment or reimbursement of
any fees or disbursements of any Professional Person incurred in connection with the Chapter 11
Case or any Successor Case, and for the avoidance of doubt, shall not be responsible for the
payment of any amounts to the Debtors or any Professional Person to the extent the Professional
Fee Reserve Account is not actually funded in the amounts authorized by this Order. Nothing in
this Order or otherwise shall be construed to obligate the Reserve Bank, in any way, to pay
compensation to, or to reimburse expenses of, any Professional Person or to guarantee that the
Debtors have sufficient funds to pay such compensation or reimbursement.
e. Any payment or reimbursement made on or after the occurrence of the Carve-Out
Trigger Declaration Date in respect of any Professional Fees shall permanently reduce the Carve-
Out on a dollar-for-dollar basis. Any funding of the Carve-Out shall be entitled to the protections
granted under this Order, the Bankruptcy Code, and applicable law.
20
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 22 of 35
9. No Third Party Rights. Except as explicitly provided for herein, this Order does
not create any rights for the benefit of any third party, creditor, equity holder, or any direct, indirect,
or incidental beneficiary.
10. Termination; Events of Default. The Debtors’ right, and the right of any other
representative of the Estates, to use the Cash Collateral under this Order shall terminate,
automatically and without the need for notice or demand by the Reserve Bank or any further order
of the Court upon the occurrence of any of the following, unless waived by the Reserve Bank: (a)
the appointment of a chapter 11 trustee or of an examiner with expanded powers in the Chapter 11
Case (having powers beyond those set forth in sections 1106(a)(3) and (4) of the Bankruptcy
Code); (b) the conversion of the Chapter 11 Case to a case under chapter 7 of the Bankruptcy
Code; (c) the dismissal of the Chapter 11 Case; (d) a determination by the Court that a material
violation or breach of any of the provisions of this Order has occurred; (e) any other (i.e. not
material) violation or breach by the Debtors of any of the provisions of this Order that is not
disputed or cured within five (5) business days of written notice from the Reserve Bank (either (d)
or (e), an “Event of Default”); and (f) the effective date of any plan of liquidation in the Chapter
11 Case that has been confirmed by an order of the Court. The date on which the earliest of clauses
(a) through (f) occurs is referred to as the “Termination Date.”
11. Remedies and Stay Modification.
(i) The automatic stay provisions of section 362 of the Bankruptcy Code shall be
deemed, and are hereby, modified, without the need for further order of the Court, solely to permit
the Reserve Bank upon, or at any time after, the occurrence of any Termination Date (including,
without limitation, as a result of the occurrence of any Event of Default under this Order) to deliver
written notice by electronic mail to counsel for the Debtors, counsel for any Creditors’ Committee,
21
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 23 of 35
counsel for any trustee, and counsel for the U.S. Trustee, stating that the Reserve Bank elects to
commence the exercise of rights and remedies in respect of this Order and the Program
Agreements, and under applicable bankruptcy and non-bankruptcy law (a “Remedies Notice”).
(ii) Following the fifth (5th) business day following the delivery by the Reserve Bank
of a Remedies Notice (the “Remedies Notice Period”), and in the event that the Debtors have not
delivered notice of intent to contest the Remedies Notice or cured the alleged Event of Default
within five (5) business days following delivery of the Remedies Notice (“Remedies Objection
Deadline”), the automatic stay provisions of section 362 of the Bankruptcy Code shall be deemed,
and are hereby, modified, without the need for further order of the Court, to permit the Reserve
Bank to exercise all rights and remedies provided for in this Order or in the Program Agreements
or under applicable bankruptcy or non-bankruptcy law. The Reserve Bank and the Debtors reserve
their respective rights to schedule an expedited hearing on any Event of Default (including whether
an Event of Default has occurred or is continuing) or for the contested use of Cash Collateral
following the termination of the Remedies Notice Period.
(iii) Following the expiration of the Remedies Notice Period, and in the event that the
Debtors have not delivered notice of intent to contest the Remedies Notice prior to the Remedies
Objection Deadline or cured the alleged Event of Default, the Debtors (or any trustee in the Chapter
11 Case or in a Successor Case) shall cooperate with the Reserve Bank in connection with its
exercise of rights and remedies by, among other things, (i) providing access to the PPPLF
Collateral and the Debtors’ premises to the Reserve Bank and its representatives and agents, (ii)
providing access to the Debtors’ books and records to the Reserve Bank and its representatives
and agents, (iii) providing any information or documents reasonably requested by the Reserve
Bank or its representatives or agents, (iv) performing the other obligations of the Debtors in
22
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 24 of 35
connection with the Reserve Bank’s exercise of rights and remedies as required by the Program
Agreements, (v) taking reasonable steps to safeguard and protect the assets and property subject
to the liens in the PPPLF Collateral, and (vi) refraining from any interference with (and from any
encouragement of others to interfere with) the Reserve Bank’s enforcement of its rights and
remedies.
(iv) This Court shall retain jurisdiction to hear and resolve any disputes arising under
or related to this Order, including, without limitation, matters relating to the application or
continuation of the automatic stay of section 362(a) of the Bankruptcy Code or any other injunctive
relief that may be requested in accordance with this Order (together, the “Remedies Procedures”).
12. Application of Collateral Proceeds. Following the occurrence of any Termination
Date (including without limitation, as a result of the occurrence of any Event of Default under this
Order) and the expiration of the Remedies Notice Period, and in the event that the Debtors have
not delivered notice of intent to contest the Remedies Notice or cured the alleged Event of Default,
the Debtors or any subsequent agent or trustee thereof shall remit to the Reserve Bank one-hundred
percent (100%) of all collections on, and proceeds of, the PPPLF Collateral, including, without
limitation, all Cash Collateral, and the automatic stay provisions of section 362 of the Bankruptcy
Code are hereby modified, without the need for further order of the Court, to permit the Reserve
Bank to retain and apply all such collections, proceeds, and Cash Collateral to satisfy or reduce
the Obligations in accordance with the Program Agreements, until the Obligations are indefeasibly
satisfied in full. In furtherance of the foregoing, each bank, brokerage firm, and other financial
institution with an account of the Debtors is hereby authorized to comply (without the need for
consent of the Debtors or any other representative of the estates) with any instructions originated
by the Reserve Bank (or its designee) to such bank, brokerage firm, or financial institution
23
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 25 of 35
directing the disposition of cash, checks, instruments, securities, investment property, or other
items deposited by the Debtors (or other representative of the estates) from time to time, including,
without limitation, any instruction to send to the Reserve Bank (or its designee) by wire transfer
(to such account as the Reserve Bank (or its designee) shall specify) or in such other manner as
the Reserve Bank (or its designee) shall direct, all cash and other property held for, or owed by it
to (or for the credit or benefit of), the Debtors or the estates.
13. Limitation on Section 506(c) Claims. No costs or expenses of administration that
have been or may be incurred in the Chapter 11 Case or in any Successor Case at any time shall
be surcharged against, and no person may seek to surcharge any costs or expenses of administration
against, the Reserve Bank, or any of its claims, or any assets or property subject to the PPPLF
Collateral, pursuant to section 506(c) or section 105 of the Bankruptcy Code or otherwise. No
action, inaction, or acquiescence by the Reserve Bank shall be deemed to be, or shall be considered
evidence of, any alleged consent to a surcharge against the Reserve Bank, any of its claims, or any
assets or property subject to the PPPLF Collateral. The Debtors and the Reserve Bank agree to
have good faith discussions regarding the potential transfer of the servicing of the PPP Loans
pledged as PPPLF Collateral following the effective date of a plan of liquidation (to the extent
such transfer of servicing or the indefeasible payment in full of the Indebtedness has not occurred
earlier) and with respect to a reasonable budget for the orderly winddown of the Chapter 11 Cases.
14. No Marshaling. The Reserve Bank shall not be subject to the equitable doctrine of
“marshaling” or any other similar doctrine with respect to any of the assets or property subject to
the liens in the PPPLF Collateral or otherwise. Without limiting the generality of the foregoing,
no party other than the Reserve Bank shall be entitled, directly or indirectly, to direct the exercise
24
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 26 of 35
of rights or remedies or to seek (whether by order of this Court or otherwise) to marshal or
otherwise control the enforcement of the PPPLF Collateral.
15. Equities-of-the-Case Waiver. The Reserve Bank shall be entitled to all of the rights
and benefits of section 552(b) of the Bankruptcy Code, and no person may assert an “equities of
the case” claim under section 552(b) of the Bankruptcy Code against the Reserve Bank with
respect to any proceeds, product, offspring, or profits of any of the PPPLF Collateral, or otherwise.
16. Restrictions on Granting Post-Petition Liens. Except as otherwise provided in this
Order, it shall be an Event of Default (subject to the Remedies Procedures) if any claim or lien
having a priority superior or pari passu with those granted by this Order to the Reserve Bank is
granted or permitted by any order of this Court heretofore or hereafter entered in the Chapter 11
Case, while any portion of the Debtors’ obligations pursuant to the Program Agreements are
outstanding.
17. Additional Perfection Measures.
a. If the Reserve Bank, in its sole and absolute discretion, chooses to take any action
to obtain consents from any other party in interest, or to file or record any mortgages, financing
statements, notices of lien, or other notices, documents, or instruments, or to otherwise record or
perfect such security interests and liens (in each case subject to the terms and scope of the liens
granted to secure the PPPLF Collateral), the Reserve Bank is hereby authorized, but not directed,
to take such action and/or to request that the Debtors take such action on its behalf (and the Debtors
are hereby authorized to take such action) and: (i) any such notices, documents, or instruments
shall be deemed to have been recorded and filed as of the time and on the date of entry of this
Order; and (ii) no defect in any such act shall affect or impair the validity, perfection, and
enforceability of the liens granted under this Order.
25
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 27 of 35
b. In lieu of obtaining such consents or filing or recording any such mortgages,
financing statements, notices of lien, or similar documents or instruments, the Reserve Bank may,
in its sole and absolute discretion, choose to file or record a true and complete copy of this Order
in any place in which any such documents or instruments would or could be filed, together with a
description of collateral, and such filing by the Reserve Bank shall have the same effect as if such
mortgages, deeds of trust, financing statements, notices of lien, or similar documents or
instruments had been filed or recorded at the time and on the date of entry of this Order.
18. Delivery of Reports, Pleadings, and Documents. In addition to all other
requirements set forth in this Order, the Debtors shall contemporaneously deliver to the Reserve
Bank all financial reports, budgets, and forecasts delivered by the Debtors to the U.S. Trustee, DOJ
or to any Creditors’ Committee, its professionals, or advisors.
19. Assignment and Reservation of Rights. Pursuant to the Program Agreements, the
Reserve Bank hereby instructs and the Debtors irrevocably assign to the Reserve Bank all of its
right, title and interest in and to any and all amounts to which the Debtors are or may become
entitled related to the PPPLF Collateral, including without limitation, all amounts paid or payable
by any borrower in respect of PPP Loans that are pledged as PPPLF Collateral, and all amounts
paid or payable by the SBA in respect of such PPPLF Collateral, including any loan forgiveness,
guarantee amounts, or payments by PPP Borrowers in respect of the PPP Loans comprising the
PPPLF Collateral. Without limiting the foregoing, in connection with the relief granted hereunder,
the Reserve Bank agrees to remit to the Debtors for the Budget Period the Agreed Cash Amounts,
subject to the Cash Collateral Cap (less any Agreed Cash Amounts received directly and retained
by the Debtors) and the terms and limitations of this Order. Such Cash Collateral shall be used
only in accordance with and subject to the Cash Collateral Budget. The Debtors and the Reserve
26
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 28 of 35
Bank each reserve their rights with respect to whether the Agreed Cash Amounts constitute Cash
Collateral, and all rights and defenses thereto of each other Debtors and the Reserve Bank are
preserved; provided that any such challenge to the validity of the lien, the scope of the PPPLF
Collateral and rights, in each instance, with respect to the Agreed Cash Amounts shall be brought
prior to the end of the Challenge Period (as defined herein); provided further that to the extent the
outstanding Indebtedness (as defined herein) is indefeasibly paid in full and following expiration
of the Challenge Period and resolution of all timely Challenges, any remaining Agreed Cash
Amounts shall not constitute Cash Collateral.
20. KS PPP Loans. With respect to any KS PPP Loan Proceeds, the Reserve Bank
agrees that: (w) the KS PPP Loans and the KS PPP Loan Proceeds are not proceeds of Pledged
PPPLF Loans, (x) any KS PPP Loan Proceeds received by the Reserve Bank are property of the
Debtors and shall be held in trust, exclusively for the benefit of the Debtors until such amounts are
remitted to the Debtors pursuant to the terms of this Order, and (y) any KS PPP Loan Proceeds
received by the Reserve Bank shall be remitted, without offset or recoupment, to the Debtors. The
Reserve Bank shall remit any KS PPP Loan Proceeds no later than seven (7) calendar days after
receiving (i) such KS PPP Loan Proceeds and (ii) the KS PPP Loan Payment Report relating to
such KS PPP Loan Proceeds with no discrepancies.
21. Reservation of Certain Third-Party Rights and Bar of Challenges and Claims.
a. The Debtors’ acknowledgements, stipulations, and releases set forth in
Paragraph D above (collectively, the “Stipulations”) are final and binding upon the Debtors. The
Stipulations shall be binding upon each other party in interest, including, without limitation, a
Creditors’ Committee, unless, and only to the extent that, a Challenge (defined below) is
27
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 29 of 35
commenced by a party with standing within the Challenge Period and a final, non-appealable order
is entered sustaining any such Challenge.
b. No more than $25,000 of the proceeds of Cash Collateral may be used by
the Creditors’ Committee, solely to investigate, within the Challenge Period the Debtors’
stipulations. “Challenge” shall mean an adversary proceeding or contested matter against the
Reserve Bank challenging the admissions, stipulations, findings, or releases included in the
Stipulations.
c. Any Challenge under this paragraph must be commenced by a party in
interest, including, but not limited to, any Creditors’ Committee, with standing and requisite
authority to bring the Challenge by no later than the seventy-fifth (75th) calendar day following
the entry of the Order (the “Challenge Period”), provided, however, that if a trustee is appointed
prior to the expiration of the Challenge Period, such trustee will have until the later of the
expiration of the Challenge Period or ten (10) days after appointment (subject to a further order of
this Court) to assert a Challenge.
d. Absent the timely filing of a Challenge within the Challenge Period, upon
the next calendar day following the expiration of the Challenge Period and for all purposes,
including, without limitation, in the Chapter 11 Case and any Successor Case, (i) all payments
made to or for the benefit of the Reserve Bank (whether prior to, on, or after the Petition Date)
shall be indefeasible and shall not be subject to counterclaim, offset, recoupment, subordination,
recharacterization, defense, recovery, or avoidance; (ii) any and all Challenges not timely filed
within the Challenge Period by any party whatsoever shall be deemed to be forever released,
waived, and barred; (iii) the PPPLF shall be deemed to be secured by a valid, binding, enforceable,
duly perfected, and non-avoidable security interests and liens in the PPPLF Collateral; and (iv) the
28
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 30 of 35
Stipulations shall be binding on all parties whatsoever, including, without limitation, any
Creditors’ Committee and any trustee or trustees appointed in the Chapter 11 Case or in any
Successor Case.
22. Review of Adequate Protection Professional Fee Payments. The Debtors shall pay
all reasonable and documented professional fees in accordance with Paragraph H of this Order
within ten (10) business days of delivery of a monthly statement or invoice for such fees and
expenses (it being understood that such statements or invoices shall be sufficiently detailed to
enable a determination as to the reasonableness of such fees and expenses; provided, however, that
such statements or invoices shall not be required to be maintained in any particular format and
may be redacted to protect privileged, confidential, or proprietary information, nor shall any such
counsel or other professional be required to file any interim or final fee applications with the Court
or otherwise seek the Court’s approval of any such payments) to the Debtors, the U.S. Trustee,
and the Creditors’ Committee (if one is appointed), unless, within such ten (10) business day
period, the Debtors, the U.S. Trustee, or the Creditors’ Committee (if one is appointed) serve a
written objection upon the requesting party, in which case, the Debtors shall pay only such amounts
that are not the subject of any objection and the withheld amount subsequently agreed by the
objecting parties or ordered by the Court to be paid.
23. Binding Nature of Order; Successors and Assigns. It shall be an Event of Default
(subject to the Remedies Procedures) if the rights, remedies, powers, privileges, claims, liens, and
priorities of the Reserve Bank provided for in this Order or otherwise are adversely modified,
altered, eliminated, or impaired in any manner by any subsequent order or judgment (including,
without limitation, by any confirmation order or sale order), by any plan of liquidation in the
Chapter 11 Case, by the dismissal or conversion of the Chapter 11 Case, or in any Successor Case,
29
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 31 of 35
or to the extent the Debtors commence, support, or join in a motion, suit or other proceeding against
the Reserve Bank that seeks such relief. The provisions of this Order shall be binding upon, and
shall inure to the benefit of, the Debtors, the Estates, the Reserve Bank, any Creditors’ Committee,
and each of their respective successors and assigns, including, without limitation, any trustee
appointed under chapter 11 of the Bankruptcy Code, any examiner with expanded powers, any
responsible officer, any estates administrator or representative, any liquidation trustee, and any
similar person appointed in a case for the Debtors under any chapter of the Bankruptcy Code. The
provisions of this Order shall also be binding on all of the Debtors’ creditors and equity holders,
and all other parties in interest.
24. No Waiver. This Order shall not be construed in any way as a waiver or
relinquishment of any rights that the Reserve Bank may have to raise any matter or be heard on
any matter brought before the Court. Except as expressly provided in this Order, the Reserve Bank
retains and reserves all of its rights and remedies. For the avoidance of doubt, this Order and the
transactions contemplated hereby shall be without prejudice to (i) the rights of the Reserve Bank
to seek (and the Debtors’ ability to object to any such request for) additional or different adequate
protections (including any amount equal to accrued and unpaid interest under the Program
Agreements), move to vacate the automatic stay, move for the appointment of a trustee or
examiner, move to dismiss or convert the Chapter 11 Case, or to take another action in the Chapter
11 Case and to appear and be heard in any matter raised in the Chapter 11 Case, (ii) the rights of
the Reserve Bank to assert claims, arising prior to or after the Petition Date, with regards to the
PPPLF Collateral or Program Agreements, and (iii) any and all rights, remedies, claims and causes
of action which the Reserve Bank may have against any other party liable for the Indebtedness.
30
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 32 of 35
25. Limits on Liability. Nothing in this Order shall in any way be construed or
interpreted to impose upon the Reserve Bank any liability for any claims arising from any activities
by the Debtors in the operation of their business or in connection with their restructuring efforts.
26. Priority of Terms. In the event of any conflict between (a) any term or provision of
the Motion, on the one hand, and (b) the terms and provisions of this Order, on the other hand, the
terms and provisions of this Order shall govern.
27. Survival. Except as otherwise provided herein, or by a further order of this Court
after notice to the Reserve Bank, the protections afforded under this Order, and any actions taken
pursuant thereto, shall survive the entry of any order (a) dismissing the Chapter 11 Case or (b)
converting the Chapter 11 Case to a case pursuant to chapter 7 of the Bankruptcy Code. If any or
all of the provisions of this Order are hereafter reversed, modified, vacated, stayed that action will
not affect (i) the validity of any obligation, indebtedness or liability under this Order prior to the
date of receipt of written notice to the Reserve Bank of the effective date of such action or (ii) the
validity and enforceability of any lien, administrative expense, right, or priority authorized or
created hereby or pursuant to this Order.
28. Adequate Notice. The notice given by the Debtors of the Hearing was provided as
authorized by Bankruptcy Rule 4001(b)(3). The Debtors shall promptly mail copies of this Order
to the Notice Parties.
29. Immediate Binding Effect. This Order shall not be stayed and shall be valid and
fully effective immediately upon entry, notwithstanding the possible application of Bankruptcy
Rules 4001(a)(3), 6003(b), 6004(h), 7062, and 9014, or otherwise, and the Clerk of the Court is
hereby directed immediately to enter this Order on the Court’s docket in the Chapter 11 Case.
31
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 33 of 35
30. Proof of Claim. The Reserve Bank shall not be required to file a proof of claim in
the Chapter 11 Case or in any Successor Case with respect to the Obligations. The Debtors’
Stipulations shall be deemed to constitute a timely filed proof of secured claim for the Reserve
Bank upon entry of the Order, and the Reserve Bank shall be treated under section 502(a) of the
Bankruptcy Code as though it had filed a timely proof of claim, notwithstanding any order entered
by the Court concerning the establishment of a bar date for the filing of proofs of claim in the
Chapter 11 Case or in any Successor Case. The Reserve Bank is hereby authorized and entitled, in
their sole discretion, but not required, to file a proof of claim in the Chapter 11 Case or in any
Successor Case.
31. Retention of Jurisdiction. This Court shall retain jurisdiction over all matters
pertaining to the implementation, interpretation, and enforcement of this Order.
32
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 34 of 35
Exhibit 1
Cash Collateral Budget
Case 22-10951-CTG Doc 143-2 Filed 10/24/22 Page 35 of 35
KServicing ‐ Cash Collateral Budget
USD
Actuals through: 10/7/2022
Week Ending 10/7/2022 10/14/2022 10/21/2022 10/28/2022 11/4/2022 11/11/2022 11/18/2022 11/25/2022 12/2/2022 12/9/2022 12/16/2022 12/23/2022 12/30/2022 1/6/2023 1/13/2023 1/20/2023 1/27/2023 2/3/2023 18 Wk Total
Actual Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
Forecast Week 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Receipts
Legacy Loans
From Borrower ‐ KS‐owned loans $ 162 $ 143 $ 143 $ 143 $ 106 $ 106 $ 106 $ 106 $ 106 $ 119 $ 119 $ 119 $ 119 $ 88 $ 88 $ 88 $ 88 $ 88 $ 2,036
From Collection Agencies ‐ KS‐owned loans 147 239 ‐ ‐ 238 385 ‐ ‐ 308 462 ‐ ‐ ‐ 385 385 ‐ ‐ 77 2,625
PPP Loans
From Borrower ‐ CUBI‐owned loans 224 68 55 39 57 54 79 40 37 60 66 53 50 58 62 58 51 42 1,153
From Borrower ‐ CRB‐owned loans 575 31 20 38 73 23 35 33 60 29 36 17 54 60 37 13 53 57 1,244
From Borrower ‐ KS‐owned PPPLF loans (Excl. Interest) 343 24 96 75 65 41 95 58 83 42 44 108 62 63 32 98 74 58 1,462
From SBA/Borrowers ‐ KS PPP loans ‐ ‐ ‐ 77 77 77 77 77 77 77 77 78 78 78 78 78 78 80 1,159
From Borrowers ‐ KS‐owned PPPLF Interest (100bps) 13 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15
From CUBI ‐ Unpaid fees (Servicing and Referral Fees) ‐ ‐ ‐ ‐ ‐ ‐ ‐ 23,000 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 23,000
From Fed ‐ Excess SALT, Out‐of‐Pocket, Interest (65bps) (1) ‐ ‐ ‐ ‐ ‐ 1,983 398 397 259 292 292 285 282 267 268 309 308 309 5,651
Professional Fee Retainer Release ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ –
Synovus Bank Cash Collateral Release ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ –
Total Receipts $ 1,464 $ 506 $ 314 $ 372 $ 615 $ 2,668 $ 789 $ 23,710 $ 930 $ 1,080 $ 634 $ 661 $ 645 $ 999 $ 948 $ 644 $ 651 $ 712 $ 38,344
Disbursements
PPP Loans
To CUBI ‐ CUBI‐owned loans $ ‐ $ ‐ $ ‐ $ ‐ $ (255) $ ‐ $ ‐ $ ‐ $ ‐ $ (267) $ ‐ $ ‐ $ ‐ $ (229) $ ‐ $ ‐ $ ‐ $ ‐ $ (750)
To CRB ‐ CRB‐owned loans ‐ ‐ ‐ ‐ (664) ‐ ‐ ‐ ‐ (224) ‐ ‐ ‐ (136) ‐ ‐ ‐ ‐ (1,024)
To Fed "PPPLF" ‐ KS‐owned loans (Excl. Interest) (11,161) (11,106) (1,158) (96) (75) (65) (41) (95) (58) (83) (42) (44) (108) (62) (63) (32) (98) (74) (24,462)
To Fed "PPPLF" ‐ Interest (35bps) (86) (86) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (173)
SBA Refunds ‐ KS‐owned Loans ‐ ‐ (1,629) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (1,629)
Synovus Bank Cash Collateral ‐ ‐ ‐ (770) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (770)
Operating and Non‐Operating Expenses
Operating Expenses (Incl. payroll) (8) (540) (50) (728) (1,178) (24) (259) (24) (2,360) (160) (191) (31) (1,792) (316) (186) (26) (26) (1,316) (9,213)
Insurance (Incl. Incremental D&O) ‐ ‐ (72) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (3) ‐ (76)
Professional Fees ‐ ‐ (191) (2,607) (1,535) (1,219) (1,024) (849) (1,479) (681) (873) (681) (1,236) (681) (903) (699) (864) (1,113) (16,632)
US Trustee Fees ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (200) ‐ ‐ ‐ ‐ ‐ (200)
Taxes ‐ (67) ‐ ‐ ‐ ‐ (301) ‐ ‐ ‐ ‐ ‐ (300) ‐ ‐ ‐ ‐ ‐ (668)
Winddown Contingency Reserves ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ –
Total Disbursements $ (11,256) $ (11,799) $ (3,101) $ (4,201) $ (3,707) $ (1,308) $ (1,625) $ (968) $ (3,897) $ (1,413) $ (1,105) $ (756) $ (3,637) $ (1,424) $ (1,152) $ (756) $ (991) $ (2,503) $ (55,598)
Net Cash Flow $ (9,791) $ (11,293) $ (2,787) $ (3,829) $ (3,092) $ 1,360 $ (835) $ 22,742 $ (2,967) $ (333) $ (471) $ (95) $ (2,992) $ (425) $ (204) $ (112) $ (340) $ (1,791) $ (17,254)
Liquidity Detail
Cash
Beginning Bank Cash $ 37,457 $ 27,666 $ 16,373 $ 13,586 $ 9,757 $ 6,665 $ 8,025 $ 7,190 $ 29,932 $ 26,965 $ 26,632 $ 26,161 $ 26,066 $ 23,074 $ 22,649 $ 22,445 $ 22,333 $ 21,994 $ 37,457
Net Cash Flow (9,791) (11,293) (2,787) (3,829) (3,092) 1,360 (835) 22,742 (2,967) (333) (471) (95) (2,992) (425) (204) (112) (340) (1,791) (17,254)
Ending Bank Cash $ 27,666 $ 16,373 $ 13,586 $ 9,757 $ 6,665 $ 8,025 $ 7,190 $ 29,932 $ 26,965 $ 26,632 $ 26,161 $ 26,066 $ 23,074 $ 22,649 $ 22,445 $ 22,333 $ 21,994 $ 20,203 $ 20,203
Adjustments to Current Cash Balance
Total Amounts due to Fed, SBA, CRB & CUBI $ (15,961) $ (4,892) $ (2,275) $ (2,331) $ (1,531) $ (1,584) $ (1,752) $ (1,788) $ (1,910) $ (1,468) $ (1,572) $ (1,706) $ (1,764) $ (1,517) $ (1,584) $ (1,722) $ (1,802) $ (1,885) $ (1,885)
(2)
Current Cash Balance $ 11,705 $ 11,481 $ 11,311 $ 7,425 $ 5,133 $ 6,441 $ 5,437 $ 28,144 $ 25,056 $ 25,164 $ 24,589 $ 24,360 $ 21,310 $ 21,132 $ 20,861 $ 20,612 $ 20,192 $ 18,318 $ 18,318
(1)
In accordance with the terms of the Cash Collateral Budget, the Cash Collateral Cap for the six‐month budget shall be $8,500,000, where the Debtors and Reserve Bank also may agree in writing to a lower Cash Collateral Cap Amount for a period shorter than 6 months
(2)
Current Cash Balance represents the cash balance after deductions for amounts owed to the Fed, SBA, CRB & postpetition amounts on account of CUBI
File and source
- File
- gov.uscourts.deb.188293.143.2.pdf
- Size
- 775,457 bytes
- SHA-256
- 869af0fddc2a68365e0a300c17e10d7cd318a267af80bccb47ca67162c68070a
- Original
- archive.org