EXHIBIT 10.16
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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:
In re: : (Chapter 11)
:
RANCH *1, INC., ET AL., : Case Nos. 01-41853 (AJG)
: through 41881 (AJG)
Debtors. :
: Jointly Administered
:
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FINAL ORDER AUTHORIZING DEBTORS TO OBTAIN POST-PETITION
SECURED FINANCING PURSUANT TO SECTIONS 364(C)(1), 364 (C)(2) AND 364(C)(3)
OF THE BANKRUPTCY CODE, AND APPROVING
JOINT FRANCHISE MARKETING AGREEMENT
THIS MATTER having come before the Court upon the Application dated July 3,
2001 (the "APPLICATIOn") of the Debtors seeking entry of orders (a) authorizing
Ranch*1, Inc. (the "PARENT DEBTOR"), and the other above-captioned debtors
(collectively, the "SUBSIDIARY DEBTORS", and together with the Parent Debtor,
each a "DEBTOR" and collectively the "DEBTORS") to obtain credit and incur debt,
all on a permanent basis pursuant to the Bankruptcy Code, Title 11, United
States Code, 11 U.S.C. ss.ss. 101 ET SEQ. (the "BANKRUPTCY CODE"), and Sections
364(c)(1), 364(c)(2) and 364(c)(3) thereof, and the Federal Rules of Bankruptcy
Procedure (the "BANKRUPTCY RULES") and Rule 4001(c)(2) thereof, having priority,
as to administrative expenses, pursuant to Section 364(c)(1) of the Bankruptcy
Code (the "FINAL ORDER"), (b) scheduling a hearing to consider the Final Order
(the "FINAL HEARING") and (c) pending entry of the Final Order authorizing the
Debtors to:
(i) On an interim basis, pending the Final Hearing on the Application,
obtain credit and incur debt secured by liens (as defined in Section 101(37) of
the Bankruptcy Code and referred to herein as "LIENS") on property of the
Debtors' estates pursuant to Sections 364(c)(2) and 364(c)(3) of the Bankruptcy
Code and with priority, as to administrative expenses, as provided in Section
364(c)(1) of the Bankruptcy Code.
(ii) Establish on an interim basis, that emergency financing arrangement
(the "DIP CREDIT FACILITY") with Ranch*1 Acquisition, L.L.C., the predecessor in
interest to R1 Franchise Systems LLC (in such capacity, herein the "LENDER"), an
Arizona Limited Liability Company with offices at 7730 E. Greenway Road, Suite
104, Scottsdale, Arizona 85260, which is contemplated by the
Debtor-In-Possession Loan and Security Agreement (as the same may be
supplemented, modified, amended, restated or replaced from time to time in the
manner provided therein and in accordance with Paragraph 29 of this Order, the
"DIP LOAN AGREEMENT"), substantially in the form annexed to the Application as
EXHIBIT A, in the aggregate principal amount of $2,500,000.00 and to incur the
liabilities provided for in and as contemplated by the DIP Loan Agreement (the
"DIP LIABILITIES").
(iii) On an interim basis, provide the Lender with Liens upon the Debtors'
property as provided in and contemplated by the DIP Loan Agreement.
(iv) On an interim basis, grant the Lender a Super-Priority Claim over any
and all administrative expenses other than as set forth in Paragraph 13, below.
(v) Set a date for the Final Hearing.
It appearing that absent the relief requested herein, the Debtors will
suffer immediate and irreparable harm; and it further appearing that notice of
the Application is sufficient and complies with the requirements of Bankruptcy
Rules 4001(c) and 4001(d); and the Court having considered the Application, the
Exhibits thereto, including, without limitation, the DIP Loan Agreement and the
affidavit filed in support of the Application; and in accordance with Bankruptcy
Rules 4001(c)(1) and (2), due and proper notice of the Application having been
given; and interim hearings to consider approval of the DIP Credit Facility
having been held and concluded on July 5, 2001 and July 13, 2001; and a final
hearing to consider approval of the DIP Credit Facility having been held and
concluded July 31, 2001 (the "FINAL HEARING"); and upon all of the pleadings
filed with the Court and all of the proceedings held before the Court, and after
due deliberation and consideration and for good and sufficient cause shown;
THE COURT HEREBY FINDS THAT
A. On July 3, 2001 (the "PETITION DATE"), each of the Debtors filed a
voluntary petition under Chapter 11 of the Bankruptcy Code. The Debtors have
sought to have their cases jointly administered for procedural purposes only.
B. The Debtors have continued in the management and operation of their
businesses and properties as debtors in possession pursuant to Bankruptcy Code
Sections 1107 and 1108. No trustee or examiner has been appointed in these
cases. On July __, 2001, the Office of the United States Trustee formed an
official committee of unsecured creditors (the "Committee").
C. By Order dated July 5, 2001, the Court authorized the Debtors to borrow
on an interim basis up to $220,000.00 under the DIP Credit Facility in
accordance with the terms and conditions set forth in the Interim Order
Authorizing Debtors To Obtain Post-Petition Secured Financing Pursuant To
Sections 364(C)(1), 364 (C)(2) And 364 (C)(3) Of The Bankruptcy Code And
Scheduling Final Hearing Pursuant To Bankruptcy Rule 4001(C)(2) On The Debtors'
Application To Incur Such Financing On A Permanent Basis, Approving Joint
Franchise Marketing Agreement And Approving The Form And Method Of Notice
Thereof (the "First Interim Order").
D. By Order dated July 13, 2001, the Court authorized the Debtors to borrow
on an interim basis up to $500,000 under the DIP Credit Facility (inclusive of
the amounts permitted to be borrowed under the First Interim Order) in
accordance with the terms and conditions set forth in the Second Interim Order
Authorizing Debtors to Obtain Post-Petition Secured Financing Pursuant To
Sections 364(C)(2) And 364(C)(3) Of The Bankruptcy Code And Scheduling Final
Hearing Pursuant To Bankruptcy Rule 4001(C)(2) On The Debtors' Application To
Incur Such Financing On A Permanent Basis, Approving Joint Franchise Marketing
Agreement And Approving The Form And Method Of Notice Thereof (the "Second
Interim Order, and, together with the First Interim Order, the "Interim
Orders").
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E. This Court has jurisdiction, pursuant to 28 U.S.C. ss.ss. 157(b) and
1334, over these proceedings, and over the persons and property affected hereby.
Consideration of the Application constitutes a "core proceeding" under Section
157(b)(2) of Title 28 of the United States.
F. An immediate need exists for the Debtors to obtain emergency funds with
which to purchase inventory, continue their ordinary operations, and administer
and preserve the value of their estates. The ability of the Debtors to finance
their operations requires the additional availability of working capital, the
absence of which would immediately and irreparably harm the Debtors, their
estates, and their creditors and the possibility for a successful
reorganization.
G. The Debtors are unable to obtain unsecured credit allowable solely under
Bankruptcy Code Section 503(b)(1) as an administrative expense.
H. The Debtors are also unable to obtain secured credit, allowable only
under Bankruptcy Code Sections 364(c)(2) and 364(c)(3), except under the terms
and conditions provided in this Order. The Debtors are unable to obtain credit
for borrowed money without the Debtors' granting to the Lender (i) Liens on all
or substantially all of the assets of the Debtors pursuant to Bankruptcy Code
Sections 364(c)(2) and 364(c)(3), and (ii) super-priority administrative expense
claim status as provided in Section 364(c)(1) of the Bankruptcy Code (such
super-priority administrative expense claim having priority as provided herein
except with respect to the Carve Out (as hereinafter defined)) and as provided
by this Final Order.
I. The ability of the Debtors to finance their operations and the
availability of sufficient working capital through the incurrence of
indebtedness for borrowed money and other financial accommodations is vital to
the Debtors' ability to pay their operating expenses, including (without
limitation) employees' salaries and wages, and to preserve and maintain their
going concern value and their ability to consummate a successful reorganization.
J. The relief requested in the Application is necessary, essential, and
appropriate for the continued operation of the Debtors' business and the
management and preservation of their property.
K. It is in the best interest of Debtors' estates to be allowed to
establish the DIP Credit Facility contemplated by the DIP Loan Agreement and the
other DIP Loan Documents (as defined in the DIP Loan Agreement).
L. The terms and conditions of the DIP Credit Facility, including, without
limitation, those which provide for the payment of interest to, and fees of, the
Lender at the times and in the manner provided under the DIP Credit Facility are
believed to be fair, reasonable, and the best available under the circumstances
and reflect the Debtors' exercise of prudent business judgment consistent with
their fiduciary duties and are supported by reasonably equivalent value and fair
consideration.
M. The DIP Credit Agreement and other DIP Loan Documents were negotiated in
good faith and at arm's length between the Debtors, on the one hand, and the
Lender, on the other. Credit to be extended under the DIP Credit Facility
pursuant to this Final Order and the Interim Orders will be so extended in good
faith, in consequence of which the Lender is entitled to the protection and
benefits of Bankruptcy Code Section 364(e). Capitalized terms used and not
otherwise defined herein shall have the meanings respectively assigned to them
in the DIP Loan Agreement.
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N. The notice of the Hearing at which this Final Order was entered, which
notice was provided by the Debtors to (i) the United States Trustee, (ii)
counsel to the Lender, (iii) the Debtors' consolidated twenty (20) largest
unsecured creditors, (iv) counsel for the Committee, and (v) all parties who
have filed a notice of appearance and request for service of pleadings in these
cases, constitutes sufficient and adequate notice in accordance with and for all
purposes under the Bankruptcy Code, including, without limitation, Bankruptcy
Rule 4001(c) and Bankruptcy Code Section 102(1), as required by Bankruptcy Code
Section 364(c), and no other notice need be given for entry of this Order.
O. Good and sufficient cause has been shown for the entry of this Final
Order. Among other things, the entry of this Final Order will enable the Debtors
to continue the operation of their businesses, increase the possibility for a
successful reorganization, and is therefore in the best interest of the Debtors,
their creditors, and their estates.
NOW, THEREFORE, on the Application of the Debtors and the record before the
Court with respect to the Application, and with the consent of the Debtors and
the Lender to the form and entry of this Final Order, and good cause appearing,
IT IS ON THIS 31st day of July, 2001, ORDERED, ADJUDGED AND DECREED that:
APPROVAL OF AND AUTHORIZATION AS TO BORROWING
1. The Application is hereby granted, and the terms and the conditions of
the DIP Credit Facility are hereby approved. The Debtors are authorized on a
permanent basis, to:
(a) Establish the DIP Credit Facility;
(b) Execute and deliver each of the DIP Loan Agreement and other Loan
Documents referred to (and as defined) in the DIP Loan Agreement (the "DIP
LOAN DOCUMENTS") therein; and
(c) Borrow up to $2,000,000.00 under the DIP Credit Facility
(inclusive of amounts borrowed in accordance with the Interim Orders).
2. Upon execution and delivery of the DIP Loan Agreement and the other DIP
Loan Documents, such agreements, documents and instruments shall constitute
valid, binding obligations of the Debtors, enforceable against each of the
Debtors who are parties thereto in accordance with their respective terms and
provisions. The Debtors are hereby authorized, empowered, and directed to do and
perform all acts and to make, execute, and deliver all instruments and documents
that may be requisite, necessary or desirable for the performance by the Debtors
of their obligations under the DIP Loan Documents and the creation and
perfection of the Liens described in and provided for by the DIP Loan Documents,
having the priority contemplated hereby, with respect to the borrowings
authorized herein.
3. The Debtors are hereby authorized to grant, and are hereby deemed to
have granted, to the Lender in order to secure the prompt payment and
performance in full of the DIP Liabilities, valid, binding, enforceable and
perfected Liens in and to all real (except that, with respect to leasehold
interests, such liens shall extend only to the proceeds thereof) and personal
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assets of the Debtors including, without limitation, as described in the DIP
Loan Agreement or below (the "COLLATERAL"), exclusive of Avoidance Actions
defined below:
All inventory, accounts, equipment, general intangibles, investment
property, franchise agreements and franchise fees, chattel paper, deposit
accounts, rights to payment under letters of credit (whether or not
written), insurance claims, tort claims, and goods, in each case, whether
now owned or in which the Debtors have any interest (and without regard to
whether acquired prior or subsequent to the Petition Date) or hereafter
acquired or in which the Debtors obtain an interest; all present and future
real property and proceeds of leasehold interests in which the Debtors have
an interest (and without regard to whether acquired prior or subsequent to
the Petition Date); and the products and proceeds thereof.
The term "AVOIDANCE ACTIONS", as used herein, shall mean avoidance actions
by or on behalf of the Debtors or their estates pursuant to Chapter 5 of the
Bankruptcy Code and the proceeds thereof with the exception of actions brought
pursuant to Bankruptcy Code Section 549 to recover any transfers after the
Petition Date of the Collateral, or proceeds thereof. The foregoing first
priority security interest and Liens shall be subject only to (i) the Permitted
Liens (as hereinafter defined) and (ii) the Carve-Out. Except as specifically
provided herein, the security interests and Liens granted to the Lender shall
not be made on a parity with, or subordinated to, any other security interest or
lien under Section 364(d) of the Bankruptcy Code or otherwise.
4. The automatic stay imposed under Bankruptcy Code Section 362(a)(4) is
hereby lifted to permit the Debtors to grant and the Lender to perfect the
aforesaid Liens and to otherwise consummate and perform their respective
liabilities and rights under the DIP Credit Facility and in respect of the other
DIP Loan Documents, all pursuant to and subject to the terms and provisions of
this Final Order.
5. Without limiting the independence of each of the Debtors acting as a
single entity, each officer of the Parent Debtor as may be so authorized by its
Board of Directors, and each officer of the Debtors as may be so authorized by
the respective Boards of Directors of each of the Debtors or Parent Debtor
(acting on behalf of the Parent Debtor or all of the Debtors as contemplated in
the DIP Loan Agreement), acting singly, is hereby authorized and empowered to
execute and deliver all the DIP Loan Documents to which such Debtor (or each of
the Debtors in the case of a signing officer of the Parent Debtor) is a party,
such execution and delivery to be conclusive of their respective authority to
act in the name of and on behalf of the Debtors.
6. The Liens to be created and granted to the Lender as security for the
DIP Liabilities, as provided in Paragraph 3, above, are created pursuant to
Bankruptcy Code Sections 364(c)(2) and 364(c)(3). With the exception of (a) the
Carve Out (as described below) (b) those Liens expressly permitted under the DIP
Loan Agreement, (c) valid, perfected and unavoidable Liens existing as of the
Petition Date (collectively, the items in (a), (b) and (c), the "PERMITTED
LIENS"), and (d) the statutory fees of the United States Trustee as provided in
28 U.S.C. ss. 1930(a) and fees to the clerk of the Bankruptcy Court
(collectively, the "MANDATORY FEES"), the Liens to be created and granted to the
Lender, as provided in Paragraph 3, above, are first, prior, perfected, and
superior to any security, mortgage, or collateral interest or Lien or claim to
the Collateral. The Liens securing the DIP Liabilities shall not be subject to
Section 551 of the Bankruptcy Code.
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7. This Final Order shall be sufficient and conclusive evidence of the
creation, attachment, validity, perfection, and priority of the Lender's Liens
upon the Collateral, without the necessity of filing or recording any financing
statement or other instrument or document that may otherwise be required under
the law of any jurisdiction or the taking of any other action to validate or
perfect the Liens of the Lender in and to the Collateral or to entitle the
Lender to the priorities granted herein, which Liens and the financing
statements in respect thereof shall be deemed to have been recorded at the time
and on the date of the commencement of these Chapter 11 cases, PROVIDED,
HOWEVER, that the Debtors shall, if requested by the Lender (the Lender is
hereby granted relief from the automatic stay imposed by Bankruptcy Code Section
362 in order to make such request), execute and the Lender may file or record
financing statements, mortgages, deeds of trust or other instruments in respect
of the Liens authorized hereby, PROVIDED FURTHER, HOWEVER, that no such filing
or recordation shall be necessary or required in order to create, evidence or
perfect any such Lien.
8. The Lender, in its discretion, may file a copy of this Final Order as a
financing statement, mortgage, or deed of trust with any recording officer
designated to file financing statements or with any registry of deeds or similar
office in any jurisdiction in which the Debtors have real or personal property,
and in such event, the subject filing or recording officer is authorized and
directed to file or record such copy of this Final Order.
9. The DIP Loan Agreement and each of the DIP Loan Documents, respectively,
shall constitute and evidence the valid and binding obligations of the Debtors,
as applicable, which obligations shall be enforceable against the respective
parties in accordance with their respective terms and provisions, subject to the
provisions of this Final Order.
10. Pursuant to Sections 363(b)(1) and 364(c)(2) of the Bankruptcy Code,
any provisions in any of the Leasehold Interests that require the consent or
approval of one or more of the Debtors' landlords in order for the Debtors to
pledge or mortgage proceeds of such Leasehold Interests, are and shall be deemed
to be inconsistent with the provisions of the Bankruptcy Code as provided for
below and are and shall have no force and effect with respect to the granting of
the Liens, security interests, mortgages, and/or deeds of trust by the Debtors
in favor of the Lender in accordance with the terms of the DIP Loan Agreement,
the Interim Orders, and this Final Order.
ADMINISTRATIVE CLAIM
11. The liabilities under the DIP Credit Facility shall be an allowed
administrative expense claim (the "SUPER-PRIORITY CLAIM") with priority under
Bankruptcy Code Section 364(c)(1) and otherwise over all administrative expense
claims and unsecured claims against the Debtors, now existing or hereafter
arising, of any kind or nature whatsoever including, without limitation,
administrative expenses of the kinds specified in or ordered pursuant to
Bankruptcy Code Sections 105, 326, 330, 331, 503(a), 503(b), 506(c), 507(a),
507(b), 546(c), 726 and 1114, subject only to the Mandatory Fees, the Carve Out
and recoveries on Avoidance Actions.
12. Except for Mandatory Fees and the Carve Out no costs or expenses of
administration including, without limitation, professional fees allowed and
payable under Bankruptcy Code Sections 330 and 331 that have been or may be
incurred in these Chapter 11 cases, or in any case or cases pursuant to Chapter
7 of the Bankruptcy Code into which this case may be converted, or in any other
proceeding related thereto (hereinafter, any "SUCCESSOR CASE"), and no other
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claims to the Collateral are, or will be, prior to or on a parity with the
liabilities under the DIP Credit Facility.
13. The term "Carve Out" means the sum of $320,000.00, which shall be
deposited following entry of this Final Order by the Debtors into a separate
account ("RESERVE ACCOUNT") maintained with Buchanan Ingersoll, P.C. (the
"ESCROW LENDER") and which shall be available for distribution to (A) (x) total
accrued and unpaid and future fees and disbursements incurred by the Debtors'
professionals and the Committee's professionals and (y) the expenses of members
of the Committee, as allowed by the Bankruptcy Court (collectively, the
"PROFESSIONALS"), and (B) Mandatory Fees, in each case following the occurrence
of an Event of Default under the DIP Loan Agreement (a "CARVE OUT EVENT").
Notwithstanding anything contained herein to the contrary, the Lender's Liens
granted pursuant to this Order in the Reserve Account shall be second and junior
only to the claims of the Professionals and the U.S. Trustee therein for the
fees referred to in (A) and (B), above. The Lender shall not have any duties or
responsibilities with respect to the distribution of the Carve Out by the Escrow
Lender and shall have no liability on account of any distribution,
misdistribution, or nondistribution thereof. Upon the later of: (i) the date on
which all Professionals are granted a final allowance of fees and expenses or
(ii) the occurrence of any of the events set forth in clauses 18(a), 18(b) or
18(c) hereof, the balance of the Carve Out (if any) not distributed or required
to be distributed on account of such fees and expenses of the Professionals and
the Mandatory Fees shall be distributed to the Lender, to the extent of any then
remaining deficiency in the DIP Liabilities and then as this Court may
determine. Any amounts paid to the Professionals prior to the occurrence of a
Carve Out Event shall not be credited or applied against the Carve Out. No
amount of the Carve Out and no amounts advanced under the DIP Credit Facility
shall be used in any event to pay any fees and expenses (x) arising out of or
related to the prosecution of any claims or causes of action against the Lender,
including without limitation relating to (a) preventing, hindering, or delaying
the Lender's enforcement or realization upon any of the Collateral, (b) using
cash collateral or selling any other Collateral without the Lender's consent, or
(c) objecting to or contesting in any manner, or raising any defenses to, the
validity, extent, perfection, priority, or enforceability of the Lender's DIP
Liabilities or any mortgages, liens, or security interests with respect thereto
or any other rights or interests of Lender's, or in asserting any claims or
causes of action, including without limitation, any actions under Chapter 5 of
the Bankruptcy Code, against the Lender and (y) arising after conversion of the
Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code or arising
after the appointment of a chapter 11 trustee.
14. Notwithstanding the foregoing, as long as a Carve Out Event has not
occurred, the Debtors shall be permitted to pay compensation and reimbursement
of expenses allowed and payable under Sections 330, 331, 503(b)(2) and
503(b)(3)(F) of the Bankruptcy Code, as the same may become due and payable. The
foregoing shall not be construed as consent to the allowance of any such fees
and expenses and shall not affect the rights of the Lender to object to the
allowance and payment of any such amounts, nor shall the foregoing obligate the
Lender to make loans and advances under the DIP Credit Agreement for payment
thereof. Upon the occurrence of a Carve Out Event, the fees of Professionals and
the Mandatory Fees shall be paid solely out of the Reserve Account and the
proceeds of recoveries on Avoidance Actions, unless the Lender has provided its
prior written consent to payment from an alternative source.
15. No cost or expense which is incurred in connection with or on account
of the preservation and/or disposition of any Collateral or which otherwise
could be chargeable to the Lender or the Collateral pursuant to Bankruptcy Code
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Section 506(c) or otherwise, shall be chargeable to the Lender or the
Collateral. 16. Unless the Lender has provided its prior written consent or all
DIP Liabilities to the Lender have been irrevocably paid in full and the
commitment to extend credit under the DIP Credit Facility has been terminated in
accordance with the terms thereof, no order entered in these proceedings, or in
any Successor Case, shall have the effect of permitting or authorizing:
(a) the obtaining of credit or the incurring of indebtedness by any of
the Debtors that is (i) secured by a security, mortgage, or collateral
interest or other Lien on all or any portion of the Collateral, other than
the Permitted Liens, and/or (ii) entitled to priority administrative status
which is equal or senior to that granted to Lender herein, other than the
indebtedness or credit expressly permitted by the DIP Loan Agreement
("PERMITTED INDEBTEDNESS"); or
(b) the enforcement (i.e. the granting of relief from the automatic
stay) of any claimed security, mortgage, or collateral interest or other
Lien of any person other than of the Lender on all or any portion of the
Collateral, other than by the holder of a senior Permitted Lien against the
subject asset or property; or
(c) the Debtors' return of goods constituting Collateral pursuant to
Sections 546(h) and Section 546(g) of the Bankruptcy Code other than for
returns for damaged goods in the ordinary course of business consistent
with historical practices or consent to any creditor taking any set-off
against any claim arising prior to the Petition Date based upon any such
return pursuant to Section 553(b)(1) of the Bankruptcy Code or otherwise.
17. Without limiting the provisions and protections of Paragraph 16, above,
if at any time prior to the repayment in full in cash of all DIP Liabilities
under the DIP Credit Facility and the termination of the Lender's obligation to
make loans and extend credit under the DIP Loan Agreement, including (without
limitation) subsequent to the confirmation of any plan of reorganization
respecting the Debtors, the Debtors or any Trustee subsequently appointed shall
obtain credit or incur debt pursuant to Bankruptcy Code Sections 364(b), 364(c)
or 364(d) (other than Permitted Liens), then all of the consideration for such
credit or debt shall immediately be turned over to the Lender to reduce the DIP
Liabilities.
18. All DIP Liabilities of the Debtors to the Lender are due and payable
upon the earliest to occur on:
(a) JULY 5, 2002;
(b) The acceleration of the DIP Liabilities by the Lender following
the occurrence of an Event of Default; or
(c) The effective date of any plan of reorganization for any of the
Debtors in these Chapter 11 Cases.
Unless and until the DIP Liabilities are repaid in full in cash and the
obligations of the Lender to make loans and extend credit are terminated, the
protection afforded to Lender under the DIP Loan Documents, the Interim Orders
and this Final Order, and any actions taken pursuant thereto, shall survive the
entry of any order confirming a plan of reorganization or converting this case
into a Successor Case, and the Liens in and to the Collateral and the
Super-Priority Claim shall continue in these Chapter 11 Cases and in any
Successor Case, and such security, mortgage, and collateral interests and other
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Liens, and Super-Priority Claim shall maintain their status and priority as
provided by this Order.
19. The time and manner of payment of the DIP Liabilities pursuant to the
DIP Loan Agreement and the creation, scope, perfection and priority of the Liens
in and to the Collateral (with the priorities specified herein) and the
Super-Priority Claim shall not be altered or impaired by any plan of
reorganization that may hereafter be confirmed or by any further order that may
hereafter be entered.
EVENTS OF DEFAULT
20. Any automatic stay otherwise applicable to the Lender is hereby
modified so that upon the occurrence of any Event of Default and acceleration of
the DIP Liabilities and at any time thereafter, after five (5) business days'
notice of such occurrence, which notice by the Lender is filed with this Court
(with a copy to chambers), together with proof of service thereof, and served by
telecopy and overnight courier service on the Debtors, counsel to the Debtors,
counsel to the Committee appointed in these Chapter 11 cases, the United States
Trustee, and any other person filing a notice of appearance and a request for
service of pleadings in these cases, the Lender shall be entitled to exercise
the Lender's rights and remedies upon such Event of Default as provided in the
DIP Loan Documents and applicable non-bankruptcy law. Following the giving of
notice by the Lender of the occurrence of an Event of Default and acceleration
of the DIP Liabilities:
(a) The Debtors shall continue to deliver and cause the delivery of
the proceeds of Collateral to the Lender, as provided in the DIP Loan
Agreement;
(b) The Lender shall continue to apply such proceeds in accordance
with the provisions of this Order and the DIP Loan Agreement;
(c) Except as to the Carve Out, the Debtors shall have no right to use
any of such proceeds, nor any other cash collateral (as defined in
Bankruptcy Code Section 363(a)) of the Lender other than towards the
satisfaction of the DIP Liabilities; and
(d) Any obligation otherwise imposed on the Lender to provide any loan
or advance to the Debtors pursuant to the DIP Loan Agreement shall be
suspended.
21. In the Lender's exercise of its rights and remedies upon default in
accordance with the DIP Loan Agreement and this Order, the Debtors are directed
to cooperate with the Lender in the exercise of such rights and remedies (unless
the Court orders otherwise). Without limitation of the foregoing, the Lender
shall have the right to cause, in a commercially reasonable manner, the
immediate sale or other disposition of the Collateral constituting real estate
or leasehold interests by directing the Debtors to file an application with the
Court for authorization to assume, assign, sell or otherwise dispose of any or
all of such real estate or leasehold Collateral pursuant to Sections 363 and 365
of the Bankruptcy Code. The Liens shall attach to the proceeds of any such sale
or other disposition of the real estate or leasehold Collateral, which proceeds
shall be immediately turned over to the Lender for application in accordance
with the provisions of the DIP Loan Agreement. In no event shall the Lender be
subject to the equitable doctrine of "marshaling" or any other similar doctrine
with respect to any of the Collateral or otherwise.
22. Nothing included herein shall prejudice, impair, or otherwise affect
the Lender's right to seek any other or supplemental relief in respect of the
Debtors' or the Lender's right, as provided in the DIP Loan Agreement, to
suspend or terminate the making of loans under the DIP Loan Agreement.
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MISCELLANEOUS PROVISIONS
23. If any provision of this Order is hereafter modified, vacated or stayed
by subsequent order of this or any other Court for any reason, such
modification, vacation, or stay shall not affect the validity of any liability
incurred pursuant to this Order nor the validity, perfection, priority, or
enforceability of any Lien granted by the Debtors to the Lender prior to the
later of (a) the effective date of such modification, vacation, or stay, or (b)
the entry of the order pursuant to which such modification, vacation, or stay
was established. The binding effect of this Order is an integral part of this
Order.
24. Debtors shall compensate Lender a commission of fifty percent (50%) of
the entire initial franchise fee and fifty percent (50%) of the entire area
development agreement fee (as such terms are defined in Debtors' standard
franchise agreement) (the "IFF Commission" and the "ADA Commission",
respectively), collected from any newly executed post-petition franchise and/or
area development agreement initiated by Lender, irrespective of whether the
third party franchisee is a current franchisee of one of Lender's current
franchise concepts ("Lender Initiated Franchisees"). The IFF Commissions or ADA
Commissions shall be paid to Lender within fifteen (15) days of receipt by
Debtors of the initial franchise fee or area development agreement fee from the
Lender Initiated Franchisees. Debtors and Lender shall coordinate any franchise
sales during the term of the Loan Agreement and Lender and Debtors shall
mutually agree on any new sale of a franchise or area development agreement.
Debtors further agree to consummate sales to all qualified prospective Lender
Initiated Franchisees.
25. The payments made, and the Liens and Super-Priority Claims granted to
the Lender under the DIP Credit Facility and this Order, and the priority
thereof, shall be binding on the Debtors, the Lender, and their respective
successors and assigns, any successor trustee for the Debtors, and all creditors
of the Debtors (whether appointed in these Chapter 11 cases or in the event of
the conversion of any Chapter 11 case to a liquidation under chapter 7 of the
Bankruptcy Code), as provided in Bankruptcy Code Section 364(e), even if this
Order is reversed, vacated, stayed by subsequent order, or modified on appeal.
26. Any request by the Debtors for entry of an Order, to the extent the
Debtors obtain Lender's prior written consent, authorizing the Debtors to sell
any of the Collateral outside the ordinary course of business shall provide that
all proceeds of such Collateral after satisfaction of other senior Permitted
Liens shall be remitted directly to the Lender for application against the DIP
Liabilities until all the DIP Liabilities have been indefeasibly paid in full.
27. The Debtors are authorized but not directed (unless requested by the
Lender) to: (i) continue existing or establish and maintain various lockboxes,
concentration accounts and blocked accounts in favor of the Lender and to enter
into similar arrangements with other banks as are designated for such purposes
pursuant to the DIP Loan Agreement (collectively, the "BLOCKED ACCOUNTS"); (ii)
deposit or cause to be deposited, or to remit, in kind, immediately and directly
to the Lender, all monies, checks, credit card sales drafts, credit card sales,
or charge slips or receipts, or other forms of store receipts, drafts and any
other payment or proceeds of the Collateral into the Blocked Accounts
established for the benefit of the Lender; (iii) instruct all parties now or
hereafter in possession of monies, claims, or other payments for the account of
the Debtors or other property of the Debtors' estate in which the Lender has a
Lien to remit such payments to the Blocked Accounts; and (iv) enter into such
normal and customary agreements as may be necessary to effectuate the foregoing.
10
28. The Lender's failure to seek relief or otherwise exercise its rights
and remedies under the DIP Credit Facility, or this Final Order shall not
constitute a waiver of any of the rights and remedies of the Lender's rights
thereunder, hereunder or otherwise.
29. The Debtors and the Lender may amend or waive any provision of the DIP
Loan Agreement and the other DIP Loan Documents in accordance with the terms
thereof, PROVIDED that such amendment or waiver, in the judgment of the Debtors
and the Lender, is either nonprejudicial to the rights of third parties or is
not material. Except as otherwise provided herein, no waiver, modification, or
amendment of any of the provisions of the DIP Loan Documents shall be effective
unless set forth in writing, signed by the parties hereto and approved by the
Court.
30. Any notice required to be made by the Debtors pursuant to the DIP Loan
Documents shall also be made to Committee's counsel. Debtors shall serve
Committee's counsel, VIA hand delivery or facsimile, with any notice it receives
from the Lender pursuant to the DIP Loan Documents within twenty-four (24) hours
of receiving such notice from the Lender.
31. This Order shall be without prejudice to the Committee to assert, upon
the occurrence of an Event of Default, that the Lender's application of proceeds
of Collateral received by Lender and all other payments in respect of the DIP
Liabilities were not authorized or permitted by this Final Order or the DIP Loan
Documents.
32. Except as specifically set forth in the Budget, Debtors shall make no
expenditures without Debtors giving prior notice to Committee, unless
individually each is less than $2,500.00, and cumulatively the same do not
exceed the sum of $20,000.00 in any thirty (30) day period. Debtors shall not
request any advances from Lender in excess of those set forth in the Budget
without Debtors giving prior notice to the Committee.
33. With respect to any advances made by the Lender to the Debtors under
the DIP Loan Documents by wire transfer, or otherwise, all such transfers shall
be remitted directly to Court approved accounts as the Debtor shall from time to
time designate
34. This Final Order does not create any rights for the benefit of any
third party, creditor, or any direct, indirect, or incidental beneficiary (other
than the Lender or the Committee as expressly provided for herein).
35. In the event of any inconsistency between the terms and conditions of
any DIP Loan Document and of this Order, the provisions of this Final Order
shall govern and control. This Final Order constitutes findings of fact and
conclusions of law and takes effect and become enforceable immediately upon
execution hereof.
36. The provisions of this Final Order and any actions taken pursuant
hereto shall survive the entry of any order: (a) confirming any plan of
reorganization under any of the Chapter 11 cases (and to the extent not
satisfied in full, the obligations shall not be discharged by the entry of any
such order, or pursuant to Bankruptcy Code section 1141(d)(4), each of the
Debtors having hereby waived such discharge); (b) converting any of the Chapter
11 Cases to a chapter 7 case; or (c) dismissing any of the Chapter 11 Cases, and
the terms and provisions of this Order as well as the Super-Priority Clams and
Liens granted pursuant to this Final Order and the DIP Loan Documents shall
11
continue in full force and effect notwithstanding the entry of any such order
and such super-priority claims and liens shall maintain their priority as
provided by this Final Order and to the maximum extent permitted by law until
all of the DIP Liabilities are indefeasibly paid in full and discharged.
37. Except as otherwise provided in this Final Order, pursuant to Section
552(a) of the Bankruptcy Code, all property acquired by the Debtors after the
Petition Date, including, without limitation, all Collateral pledged to the
Lender pursuant to the DIP Loan Agreement and this Final Order, is not and shall
not be subject to any lien of any entity resulting from any security agreement
entered into by the Debtors prior to the Petition Date, except to the extent
that such property constitutes proceeds of property of the Debtors that is
subject to a valid, enforceable, perfected and unavoidable lien existing as of
the Petition Date.
38. The DIP Liabilities of the Debtors hereunder and under the DIP Loan
Documents shall be joint and several.
39. Upon entry of this Final Order, the Lender shall be and shall be deemed
to be, without any further action or notice, named as additional insured and
loss payee on each insurance policy maintained by the Debtors that in any way
relates to the Collateral.
40. R1 Franchise Systems L.L.C. shall be deemed to be the successor in
interest to Ranch*1 Acquisition, L.L.C as Lender pursuant to the Interim Orders,
and all rights and benefits granted to Ranch*1 Acqusition, L.L.C. pursuant to
the Interim Orders , the DIP Loan Agreement and the other Loan Documents shall
inure to the benefit of R1 Franchise Systems L.L.C. All references in the
Interim Orders to "Lender" shall be deemed to refer to "R1 Franchise Systems
L.L.C.", and, in that regard, among other things, all amounts heretofore
advanced to the Debtors pursuant to the Interim Orders shall be deemed to have
been advanced by R1 Franchise Systems L.L.C. as Lender, the superpriority claims
and security interests granted pursuant to the Interim Orders shall be deemed to
have been granted to R1 Franchise Systems L.L.C. as Lender, and all DIP
Liabilities shall be payable to R1 Franchise Systems L.L.C.
41. Service of a copy of this Final Order by hand delivery, first class
mail, or deposit with a reputable overnight courier service within three (3)
days after entry hereof, upon (i) the Office of the United States Trustee, (ii)
Kaye Scholer, LLP, attorneys for the Lender, (iii) Silverman, Perlstein &
Acampora LLP, attorneys for the Committee, (iv) the Debtors' consolidated twenty
(20) largest unsecured creditors, (v) the District Director for the Internal
Revenue Service, and (v) all parties having filed requests for notices in the
Debtors' cases shall constitute good and sufficient service of this Final Order,
the Application, the Final Hearing, and all proceedings held thereon.
Dated: July 31, 2001
New York, New York
/s/ ARTHUR J. GONZALEZ
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HONORABLE ARTHUR J. GONZALEZ
UNITED STATES BANKRUPTCY JUDGE
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SCHEDULE I
SCHEDULE OF DEBTORS
BORROWER OR GUARANTOR
DEBTOR UNDER DIP CREDIT FACILITY
- ------ -------------------------
Ranch*1, Inc. Borrower
Ranch*1 Group, Inc. Borrower
Ranch*1 Metro, Inc. Borrower
Ranch*1 Pearl, Inc. Borrower
Ranch*1 of America, Inc. Borrower
Ranch *1 Downtown, Inc. Borrower
Ranch*1 Eighth Avenue, Inc. Borrower
Ranch*1 of Broadway, Inc. Borrower
Ranch*1 on 34th Street, Inc. Borrower
Ranch*1 Fashion, Inc. Borrower
Ranch*1 Metro Tech, Inc. Borrower
Ranch*1 52nd, Inc. Borrower
Ranch*1 Palisades, Inc. Borrower
Ranch*1 Number 0135, Inc. Borrower
Ranch*1 Number 0202, Inc. Borrower
Ranch*1 Number 0117, Inc. Borrower
Ranch*1 Number 0125, Inc. Borrower
Ranch*1 Number 0112, Inc. Borrower
Ranch*1 Number 0113, Inc. Borrower
Ranch*1 Number 0128, Inc. Borrower
Ranch*1 Number 0150, Inc. Borrower
Ranch*1 Number 1701, Inc. Borrower
Ranch*1 Number 0207, Inc. Borrower
Ranch*1 Number 0118, Inc. Borrower
Ranch*1 Number 0137, Inc. Borrower
Ranch*1 Number 1904, Inc. Borrower
OME, Inc. Borrower
Dome Enterprises, Inc. Borrower
Morgrho, Inc. Borrower
Franchise Concepts Group, Inc. Borrower