EXHIBIT 10.31
THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
IN RE: BANKRUPTCY CASE
INTELOGIC TRACE INC., NO. 94-52172-C-11
DEBTOR. (CHAPTER 11)
FINAL ORDER (1) AUTHORIZING THE DEBTOR TO INCUR SECURED PRIORITY
ADMINISTRATIVE INDEBTEDNESS PURSUANT TO SECTION 364(C) OF THE BANKRUPTCY
CODE, (2) GRANTING SECURITY INTERESTS, (3) APPROVING AGREEMENT RELATED TO
THE FOREGOING AND (4) GRANTING OTHER RELIEF
On September 16, 1994, this Court considered the Motion Regarding
Incurrence of Secured Priority Administrative Indebtedness Pursuant to
Section 364(c) of the Bankruptcy Code, Granting Security Interests,
Approving Agreement Related to the Foregoing, and Other Relief (the
"Financing Motion") filed by Intelogic Trace, Inc. (the "Debtor"). After
reviewing the Financing Motion and having heard the testimony presented and
the arguments of counsel to the Debtor, Fidelity Capital & Income Fund
("Fidelity"), and such other parties in interest as reflected in the record
of the interim hearing on the Financing Motion on September 16, 1994, this
Court entered the Interim Order (1) Authorizing the Debtor to Incur Secured
Priority Administrative Indebtedness Pursuant to Section 364(c) of the
Bankruptcy Code, (2) Granting Security Interests, (3) Approving Agreement
Related to the Foregoing and (4) Granting Other Relief, dated September 16,
1994 (the "Interim Order"). Pursuant
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to the Interim Order, this Court set a final hearing on the Financing
Motion for October 4, 1994. After further reviewing the Financing Motion,
the Interim Order, the testimony presented, and the arguments of counsel to
the Debtor, Fidelity Capital & Income Fund ("Fidelity"), and such other
parties in interest as reflected in the record of the final hearing on the
Financing Motion on October 4, 1994, this Court makes the following
FINDINGS OF FACT:
1. On August 5, 1994 (the "Petition Date"), the Debtor filed a
voluntary petition for relief under chapter 11, title 11, United States
Code (the "Bankruptcy Code"). Pursuant to sections 1107 and 1108 of the
Bankruptcy Code, the Debtor has retained possession of its assets and is
authorized to continue the operation and management of their business.
2. No Unsecured Creditors' Committee has been formed by the United
States Trustee.
3. The Debtor has provided actual notice of the terms of the
Financing Motion, to the United States Trustee, the Internal Revenue
Service, the largest unsecured creditors of the Debtor as listed pursuant
to Rule 1007(d), and all counsel of record. Such notice is appropriate and
adequate under the circumstances set forth herein and presented to this
Court; consequently, adequate notice and opportunity for a hearing has been
given in accordance with the provisions of sections 102, 105, 361, 362,
363, and 364 of the Bankruptcy Code and Rules 2002 and 4001 of the
Bankruptcy Rules.
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4. The Debtor is one of North America's largest independent support
organizations for end users, manufacturers, and resellers of computer and
telecommunications equipment. The Debtor provides technical support and on-
site services and specializes in support for local area networks, WANG
computing systems, microcomputers and peripherals.
5. A need exists for the Debtor to obtain funds in order to continue
operation of its business. Without such funds, the Debtor will not have
sufficient funds to meet its operating expenses in the ordinary course of
business. Failure to provide such financing could lead to disruption to a
major portion of the Debtor's business and a loss of the going concern
value. The relief sought in the Financing Motion is necessary to the
Debtor, its creditors, and other parties in interest.
6. In order to continue the operation of the Debtor's business and
to preserve the value of its assets, the Debtor requires the post-petition
credit to be extended by Fidelity to the Debtor, in the form of a credit
facility in the amount of $1.3 million, bearing interest at the annual rate
of 15% (payable monthly), the proceeds of which will provide working
capital needs. This loan facility is hereafter referred to as the "Post-
Petition Credit." As provided in the DIP Financing Documents (as defined
herein), the Debtor will execute documents, including security agreements
and other collateral documents to secure the Debtor's obligations, deemed
necessary by Fidelity. Without all of the credit described above, there is
a substantial risk that the value of the Debtor's assets will immediately
and substantially diminish, and that the Debtor will have no reasonable
prospect of continuing to operate as a
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going concern, preserving the value of its assets, or effecting a
reorganization in these cases, and that the Debtor would suffer immediate
and irreparable injury. All amounts lent or credit to be extended by
Fidelity pursuant to this Order are sometimes referred to as the "Fidelity
Post-Petition Indebtedness." The Fidelity Post-Petition Indebtedness is to
be governed by the terms of this Order and the DIP Financing Documents (as
defined herein).
7. The Debtor has been unable, pursuant to 11 U.S.C.
364(a), (b) or (c), despite substantial effort, to obtain unsecured credit
or to obtain secured debtor-in-possession financing on terms equal to or
more beneficial than those provided herein and as provided in the DIP
Financing Documents. Representatives of the Debtor have sought to obtain
credit from other sources. Neither Foothill Capital Corporation
("Foothill"), nor any other lender, is willing to extend new credit on the
basis of administrative expense priority, on the basis of priority over any
or all administrative expenses of the kind specified in sections 503(b) and
507(b) of the Bankruptcy Code, or on the basis of a lien on unencumbered
property, or a lien junior to existing liens, or a lien equal to existing
liens, on terms as favorable to the Debtor as those extended by Fidelity.
8. Due to the nature of the Debtor's business, without the Fidelity
Post-Petition Indebtedness, trade credit is restricted due to the filing of
the chapter 11 cases.
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9. Fidelity has indicated a willingness to extend credit and other
financial accommodations to the Debtor only upon the terms and conditions
set forth in this Order.
10. The terms of the Post-Petition Indebtedness sought by the Debtor
are for reasonably equivalent value and fair consideration. The agreements
and arrangements sought to be entered into have been negotiated at arm's
length, are fair and reasonable under the circumstances, and have been
entered into in good faith.
11. To secure repayment of the Post-Petition Indebtedness, the Debtor
has agreed to grant to Fidelity (a) a junior lien on all of the Debtor's
assets, subject to the existing lien of Foothill and (with respect to
accounts receivable) Fidelity has agreed to a standstill until Foothill is
paid in full, and (b) a senior lien on and security interest in inventory,
the Debtor's IRS tax refund, and all stock owned by the Debtor in Datapoint
Corporation and Canal Capital Corporation, with priority over the existing
lien of Foothill (together, the "DIP Collateral").
12. Except for such valid, perfected, enforceable and non-avoidable
liens and security interests of Foothill as may have existed as of the
Petition Date, or pursuant to specific order of this Court in, to, or
against the Debtor's property or as provided by Court order ("Existing
Liens"), there is no party with a security interest or lien in the property
of the Debtor's estate, including the DIP Collateral.
13. All conclusions of law which are, or which could be deemed to be,
findings of fact are hereby incorporated as findings of fact.
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14. The Court, having reviewed the Financing Motion and the evidence
presented at the preliminary and final hearings, having heard the
statements of counsel, and being otherwise fully advised of the premises,
makes the following CONCLUSIONS OF LAW:
15. Consideration of the Financing Motion constitutes a core
proceeding as defined in 28 U.S.C. S 157(b)(2)(A), (D), (G), (K), (M) and
(0). Fidelity is entitled to the benefits of the provisions of section
364(e) of the Bankruptcy Code.
16. Good cause has been shown for the entry of this Order. Among other
things, entry of this Order will minimize disruption of the Debtor's
existing business, will increase the possibility for successful
reorganization of the Debtor, and is in the best interests of the Debtor,
its creditors, and other parties in interest.
17. The Post-Petition indebtedness is being extended by the Lender in
good faith, as contemplated by section 364(e) of the Bankruptcy Code.
18. The Debtor has provided adequate notice under the circumstances
pursuant to Bankruptcy Rule 4001 of the hearing to consider entry of this
Order to all persons who are entitled to receive such notice.
19. Good cause has been shown for the entry of this Order. The entry
of this Order is in the best interests of the Debtor, its creditors, and
its estates. The terms of this Order, including the terms of the Post-
Petition Credit, the DIP Financing Documents, and the security interests,
liens, rights, and priorities granted hereunder, are fair under the
circumstances.
20. This Order is immediately valid and fully effective upon its
entry.
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21. Based upon the foregoing Findings of Fact and Conclusions of Law,
which are fully incorporated by reference into this Order as set forth
below,
IT IS ORDERED THAT:
1. The paragraphs contained in the preamble to this Order are
incorporated herein by this reference and the Debtor, Foothill and Fidelity
consent to the entry of this Order.
2. The Debtor is hereby authorized to incur the Post-Petition
Indebtedness and seek other financial accommodations from Fidelity in
accordance with the provisions of this Order and the DIP Financing
Documents (as defined herein).
3. Immediately upon the issuance of this Order, the Debtor is
authorized to borrow up to $1.3 million under the terms of the DIP
Financing Documents (as defined herein) to be executed and delivered by the
Debtor to Fidelity. The Debtor is further authorized, empowered, and
directed to execute and deliver any and all necessary documents or
amendments to documents to ratify the DIP Financing Documents (as defined
herein) or, where necessary, to modify, clarify or amend the DIP Financing
Documents to conform to this Order or otherwise make nonmaterial changes to
the DIP Financing Documents. The Promissory Note and the Pledge and
Security Agreement attached hereto as Exhibits A and B respectively, and
incorporated by reference herein, together with the other instruments and
documents executed in connection therewith, are hereinafter referred to as
the "DIP Financing Documents." The specific language contained in Exhibits
A and B hereto, particularly regarding the description of the assets
subject to Fidelity's security
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interest, controls over the more general language contained in this Order.
The Debtor is authorized, empowered, and directed to execute such other
documents and agreements and to take all necessary actions to complete and
effectuate the financing directed by this Order.
4. The Debtor shall make debt payments on the outstanding amount of
the Post-Petition Indebtedness as set forth in the DIP Financing Documents.
5. Fidelity shall make the Post-Petition Credit available if, and only
if, the Debtor (i) has complied with the terms of this Order; and (ii) has
complied with the terms of the DIP Financing Documents.
6. Any diminution in value of the DIP Collateral that causes all or
any part of the Post-Petition Indebtedness to become unsecured (the
"Collateral Diminution") shall be and hereby is (a) deemed a claim entitled
to the priority granted pursuant to section 507(b) of the Bankruptcy Code,
and (b) deemed part of the amount which must be paid to Fidelity in order
to adequately protect its interest in the DIP Collateral (the "Adequate
Protection Amount").
7. Fidelity's security interests in the DIP Collateral shall be (a)
junior to the Existing Liens of Foothill on the DIP Collateral, (b) except
that they will be senior to all Existing Liens on the inventory, tax
refund, Datapoint stock, and the Canal Capital stock, including the
Existing Liens (if any) of Foothill. Fidelity's security interests in the
DIP Collateral shall at all times be senior to the rights of Debtor or its
successors-in-interest, including, without limitation, any chapter 11
trustee appointed in any of this chapter 11 case or any trustee in a case
under
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chapter 7 of the Bankruptcy Code into which this chapter 11
case may be converted. Fidelity shall not be obligated to accept title to
any portion of its DIP Collateral in payment of the Post-Petition
Indebtedness or the Adequate Protection Amount in lieu of payment in cash
or cash equivalents, nor shall Fidelity be obligated to accept payment in
cash or cash equivalents that is encumbered by the interest of any party
other than Fidelity. Foothill and Fidelity shall assert no right of
marshalling to compel each other to proceed first against any assets as to
which either believes the other has greater potential equity.
8. In addition to the liens and security interests granted pursuant to
section 364(c), all Post-Petition Indebtedness and the Adequate Protection
Amount shall have priority pursuant to the provisions of section 364(c)(1)
of the Bankruptcy Code to the extent permitted by law over all
administrative and priority expenses incurred in this chapter 11 or any
subsequent chapter 7 case, including, without limitation, expenses of the
kind specified in sections 503(b), 507(a), and 507(b) of the Bankruptcy
Code, subject to the payment of professional fees and expenses and the
statutory fees of the United States Trustee and shall at all times be
senior to the rights of the Debtor, its creditors, or the successors-in-
interest of the Debtor or its creditors, including, without limitation, any
superseding trustee in this chapter 11 case or any trustee in a case under
chapter 7 of the Bankruptcy Code into which this case may be converted.
9. The Debtor shall incur no post-petition obligations for borrowed
money pursuant to section 364(c) and (d) of the Bankruptcy Code and shall
grant no post-petition liens or superpriority claims, other than to
Fidelity, unless provided for
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under the DIP Financing Documents, or under the Final Cash Collateral
Order entered by this Court with respect to Foothill or unless mutually
agreed by Fidelity and the Debtor.
10. No costs or expenses of administration or other obligations which
have been or may be incurred in these proceedings, any conversion of this
case pursuant to section 1112 of the Bankruptcy Code, or in any other case
or proceeding related hereto, and no priority claims, other than the
Existing Liens of Foothill Capital Corporation, are or shall be prior to or
on a parity with the claims of Fidelity against the Debtor arising out of
the Post-Petition Indebtedness and the Adequate Protection Amount, or with
the security interests and liens of Fidelity upon the DIP Collateral, and
no such costs, expenses of administration, or other obligations shall be
imposed or assessed against Fidelity, its claims, or its DIP Collateral. No
costs shall be assessed or attributed to Fidelity or its DIP Collateral
pursuant to the provisions of section 506(c) of the Bankruptcy Code, or
otherwise.
11. All agreements, security interests, mortgages, deeds of trust, and
liens contemplated or granted by this Order are effective, perfected, and
enforceable as of the commencement of this chapter 11 case without further
filing or recording by Fidelity in compliance with any state or federal
law. Fidelity shall not be required to file financing statements or other
documents in any jurisdiction or take any other actions in order to perfect
its security interests and liens granted under or pursuant to this order.
If Fidelity, in its sole discretion, chooses to file any financing
statements, deeds of trust, mortgages, or other documents to otherwise
confirm perfection of such
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security interests and liens, all such documents shall be deemed to have
been filed or recorded at the time and on the Petition Date. However, the
failure of the Debtor to execute any such documentation, or the failure of
Fidelity otherwise to attach or perfect its security interest in the DIP
Collateral under state or federal law, shall in no way affect the validity,
perfection, or priority of the security interests, mortgages, and liens
granted to Fidelity by this Order or otherwise. Fidelity is authorized to
file this Order in lieu of any financing statement or other document which
may otherwise be specified by applicable law, to reflect the above security
interests and liens, and all recording officers are directed to accept this
Order for filing.
12. The terms and conditions of this Order relating to liens and
priorities shall be binding upon the Debtor, its creditors, and all other
parties in interest, and all successors in interest thereof, including,
without limitation, any chapter 11 trustee that may be appointed in this
chapter 11 case or any trustee in a case under chapter 7 of the Bankruptcy
Code into which this chapter 11 case may be converted. This binding effect
is an integral part of this financing transaction.
13. In addition to any notice required under applicable law, the
Debtor shall transmit to Fidelity by telecopy or overnight mail a copy of
any pleading, notice, or other document filed by the Debtor in this chapter
11 case, not later than the next business day following the filing of such
pleading, notice, or other document.
14. The terms and conditions of this Order relating to liens and
priorities cannot be materially modified or changed by any plan or plans of
reorganization
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relating to the Debtor, whether or not proposed by the Debtor, without
the consent of Fidelity.
15. The automatic stay presently in effect in this case pursuant to
section 362 of the Bankruptcy Code is modified with respect to Fidelity,
(a) to the extent necessary to execute and render effective the DIP
Financing Documents to be executed in connection with the transactions
approved by this Order, and (b) to permit Fidelity to enforce against the
Debtor such provisions of the DIP Financing Documents as are necessary to
carry out the provisions of this Order SAVE and EXCEPT that Fidelity may
not exercise any rights arising out of a default, except upon further
application to and order by this Court. The Debtor is authorized and
directed to do and perform all acts, to make, execute and deliver all
instruments and documents (including, without limitation, the execution of
additional security agreements, mortgages and financial statements), to pay
fees which may be required pursuant to the terms of this Order, including,
without limitation, (x) the execution and performance of the DIP Financing
Documents and (y) the payments to Fidelity of the fees and amounts provided
for in this Order and the and the DIP Financing Documents including,
without limitation, reasonable attorneys' fees and disbursements incurred
in transactions giving rise to the Post-Petition Credit and the preparation
of the DIP Financing Documents.
16. Philip D. Freeman is hereby designated by this Court as authorized
signatory for the Debtor for purposes of handling and disbursing all funds
and
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executing all documents in connection with the financing arrangements
described herein.
17. Fidelity may petition this Court for such additional protection as
it may reasonably require with respect to continued financing of the Debtor
or otherwise. Except as otherwise specifically provided herein, Fidelity
shall retain all rights available pursuant to the Bankruptcy Code or any
other applicable law including, without limitation, Fidelity's right for
the purpose of protecting its rights in the DIP Collateral and its rights
under the DIP Financing Documents, to seek additional restrictions upon the
Debtor's activities or use of proceeds of the Post-Petition Credit, to seek
termination or modification of this Order, or to seek termination or
modification of the automatic stay pursuant to section 362 of the
Bankruptcy Code.
18. Any subsequent stay, modification, or vacation of this Order shall
not affect the validity of any debt owed by the Debtor to Fidelity incurred
pursuant to this Order or otherwise, nor shall any such stay, modification,
or vacation affect the validity, enforceability, or perfection of any
security interest, mortgage, lien, or priority in connection therewith.
Notwithstanding any such stay, modification, or vacation of this Order, all
rights of the Debtor and Fidelity up to and including the date of such
stay, modification, or vacation of this Order shall be governed in all
respects by the original provisions of this Order and the security
agreements, deeds of trust, mortgages, and collateral mortgages between
Debtor and Fidelity, and Fidelity shall be entitled to all the rights,
privileges, and benefits, including the security interests, mortgages,
liens, and priorities granted herein.
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19. In making decisions to advance monies or extend financial
accommodations of any nature under this Order or the DIP Financing
Documents, in administering the Debtor's use of any advances, loans,
issuance of letters of credit, or financial accommodations of any sort
under this Order or the DIP Financing Documents, or in taking any other
action related to or in connection with any of the forgoing, Fidelity shall
have no liability to any third party, and shall not be deemed to be in
control of the operations of the Debtor, or to be acting as a "responsible
person" or "owner or operator" with respect to the operation or management
of the Debtor (as such terms or any similar terms, are used in the United
States Comprehensive Environmental Response, Compensation and Liability
Act, as amended or any similar federal or state statute).
20. The Post-Petition Credit will immediately cease and terminate
without further notice, and the Post-Petition Indebtedness, together with
any then outstanding interest, fees, costs, expenses, or other amounts
payable in connection therewith shall be immediately due and payable
without further notice, upon the earliest to
a. December 31, 1994;
b. The occurrence of a violation of the terms of this Order or the
occurrence and continuation of an Event of Default under the Promissory
Note attached hereto as Exhibit A, under the Pledge and Security Agreement
attached hereto as Exhibit B, under the DIP Financing Documents, or under
the Final Cash Collateral entered by this Court with respect to Foothill;
or
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c. The Effective Date of any plan of reorganization in this Chapter 11
case.
21. The Post-Petition Indebtedness, and any advances, borrowings or
extension of credit thereunder by Fidelity to the Debtor shall be
conditioned upon the observance and performance by the Debtor of the terms,
conditions, covenants, and agreements specified in the DIP Financing
Documents and this Order. Agreements by Fidelity to lend money or extend
credit or other financial accommodations to the Debtor, to forebear from
exercising remedies contained herein or the DIP Financing Documents, may be
terminated by Fidelity according to the terms of this Order or the DIP
Financing Documents; PROVIDED, HOWEVER, that the obligations and rights of
Fidelity and the Debtor with respect to all transactions which have
occurred prior to such termination by Fidelity shall remain unimpaired and
unaffected by any such termination and shall survive any such termination.
22. If, for any reason, any or all of the provisions of this Order are
hereafter modified, vacated or stayed, including by subsequent order of
this or any other Court, then in such event: (a) Fidelity shall be under no
obligation to provide loans, extension of credit, or financial
accommodations hereunder or under the DIP Financing Documents; and (b) the
then outstanding Post-Petition Indebtedness, together with all interest,
fees, costs, expenses, and charges of any nature which may have accrued in
connection therewith, shall be due and payable at the office of Fidelity in
Boston Massachusetts, on the tenth (10th) day thereafter; all without
notice, demand, motion, or any other action by Fidelity.
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23. If this chapter 11 case is dismissed, superseded, or consolidated,
neither the entry of this Order nor the dismissal of the case shall affect
Fidelity's rights under the DIP Financing Documents, and all of Fidelity's
rights and remedies thereunder shall be and remain in full force and
effect. Furthermore, notwithstanding any such dismissal, suppression, or
consolidation, all of the terms and conditions of this Order including the
security interests and liens granted hereunder shall remain in full force
and effect.
24. This Order shall not operate to modify, alter, impair, affect,
abrogate, amend, restrict, or nullify any rights of Fidelity with respect
to any entity other than the Debtor, nor to release, alter, impair, affect,
or abrogate any debts, claims, demands, actions, and causes of action in
law and equity, whether known or unknown, which Fidelity may have as to any
entity other than the Debtor.
25. The Debtor has determined, in the exercise of its independent
business judgment, to enter into and comply with the terms of this Order
and the DIP Financing Documents. The Debtor has covenanted that, to the
extent required or reasonably requested by Fidelity, it will obtain all
necessary approvals to enter into the DIP Financing Documents including,
without limitation, approvals from its board of directors.
26. The Debtor has waived any right it may have to seek ex parte
relief from this Court with respect to Fidelity.
27. In consideration of the loans and other financial accommodations
made by Fidelity pursuant to this Order, the Debtor is hereby authorized
without further
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order of this Court to reimburse Fidelity for all filing and recording
fees and the reasonable attorneys' fees incurred by Fidelity in connection
with the Post-Petition Indebtedness and all matters related thereto.
DATED: San Antonio, Texas
October __, 1994
UNITED STATES BANKRUPTCY JUDGE
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APPROVED AS TO FORM AND SUBSTANCE:
WEIL, GOTSHAL & MANGES
700 Louisiana, Suite 1600
Houston, Texas 77002
(713) 546-5000
(713) 224-9511 (FAX)
By: _________________________
Wendy K. Laubach
Texas State Bar No. 119878000
ATTORNEYS FOR FIDELITY
CAPITAL & INCOME FUND
COX & SMITH INCORPORATED
112 East Pecan, Suite 1800
San Antonio, Texas 78205
(210) 554-5500
(210) 226-8395 (FAX)
By: _________________________
Deborah D. Williamson
Texas State Bar No. 21617500
Patrick L. Huffstickler
Texas State Bar No. 10199250
ATTORNEYS FOR INTELOGlC TRACE, INC.
BRACEWELL & PATTERSON, L.L.P.
2900 South Tower, Pennzoil Place
Houston, Texas 77002
By: _________________________
ATTORNEYS FOR FOOTHILL CAPITAL CORPORATION
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