UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
- -----------------------------------X
In re: Chapter 11
Case No. 899-83790-511
ALCOHOL SENSORS INTERNATIONAL, LTD., ORDER SCHEDULING HEARING
TO CONSIDER APPROVAL
OF A POST-PETITION
FINANCING AGREEMENT
WITH ACQUISITION FUNDING, LLC
Debtor.
- -----------------------------------X
Upon the annexed application (the "Application") of Alcohol Sensors
International, Ltd., debtor and debtor-in-possession (the "Debtor"), for entry
of an order pursuant to section 364(c) of the Bankruptcy Code (the "Code") and
Rule 4001(c) of the Federal Rules of Bankruptcy Procedure, to schedule a
preliminary and final hearing to consider the proposed financing order (the
"Proposed Financing Order") annexed as Exhibit "A" to the Application, pursuant
to which the Debtor proposes to ratify, assume, adopt and amend a certain
pre-petition financing, loan and security agreement (the "Pre-Petition
Agreement") by and between the Debtor and Acquisition Funding, LLC ("AFL"), in
accordance with a certain ratification and amendment agreement, which together
with the Pre-Petition Agreements shall be referred to hereinafter collectively
as the Financing Agreements, annexed as Exhibit "B" to the Application, pursuant
to which AFL shall make loans, advances and other financial accommodations to
the Debtor, all as more fully set forth in the Application, it is
ORDERED, that (i) a preliminary hearing (the "Preliminary Hearing") shall
be held before the undersigned bankruptcy judge on May 25, 1999 at 2 o'clock in
the afternoon of said day at the United States Bankruptcy Court, 601 Veterans
Memorial Highway, Hauppauge, NY 11788 to consider the Application for entry of
an order authorizing the Debtor to obtain postpetition financing in accordance
with the Financing Agreements, as approved by the Proposed Financing Order, (ii)
pending the Preliminary Hearing, the Proposed Financing Order is approved in all
respects, except that pending the interim hearing (1) no superpriority status to
AFL's claim shall be granted, and (2) no exit fee shall be granted and AFL shall
be entitled to the full benefits and protections of such Order with respect to
any advances made by AFL from the date hereof through and including the date of
the Preliminary Hearing, and (iii) in accordance with the Financing Agreements
and the Proposed Financing Order, AFL is hereby authorized to make loans,
advances and other financial accommodations to the Debtor in an amount not to
exceed $45,000 and such advances shall be secured by the liens, security
interests and super-priority claims granted under the Proposed Financing Order,
subject to the Carveout, as defined in the Financing Order, and it is further
ORDERED, that a final hearing (the "Final Hearing") on the Application is
hereby scheduled for June 7, 1999 at 1:30 o'clock in the afternoon of said day,
and it is further
ORDERED, that service by hand delivery or an overnight mail service of this
order scheduling hearing, the Application, the Financing Agreement and the
Proposed Financing Order upon AFL, c/o Law Offices of Donald T. Rave, 11 The
Plaza, Locust Valley, New York 11560, special corporate counsel for the Debtor,
Ruskin, Moscou, Evans & Faltischek, 170 Old Country Road, Mineola, NY 11501,
Attn: Jeffrey Wurst, Esq., the twenty (20) largest unsecured creditors of the
Debtor, all other creditors known to the Debtor to assert liens against the
Debtor's assets, the United States Trustee, 825 East Gate Blvd., Garden City, NY
11530, and all parties having filed a notice of appearance in this case, on or
before May 10, 1999 shall be deemed good and sufficient notice of the
Preliminary Hearing and the Final Hearing, this Application and the relief
requested therein, pursuant to Bankruptcy Rule 4001, and it is further
ORDERED, that responsive papers, if any, at the Preliminary Hearing and the
Final Hearing shall be set forth in writing, and served on bankruptcy counsel
for the Debtor, Marilyn Simon & Associates, 200 Park Avenue South, New York, NY
10003-1503, Attn: Marilyn Simon, Esq., special corporate counsel for the Debtor,
Ruskin, Moscou, Evans & Faltischek, 170 Old Country Road, Mineola, NY 11501,
attn: Jeffrey Wurst, Esq., attorneys for AFL, Law Offices of Donald T. Rave, 11
The Plaza, Locust Valley, New York 11560, the Office of the United States
Trustee, 825 East Gate Blvd., Garden City, NY 11530 and filed with the Court in
Hauppauge (with a copy to chambers) so as to be received no later than May 20,
1999 and June 2, 1999, respectively.
Dated: Hauppauge, New York
May 10, 1999
s/Melanie L. Cyganowski
-----------------------
UNITED STATES BANKRUPTCY JUDGE
Proof of service of this order must be filed by May 14, 1999. Debtor's
attorney and/or the proposed financing lender are directed to serve and
file a memorandum of law addressed to the issues raised by the request
for an exit fee, no later than May 19, 1999.
s/ Melanie L. Cyganowski
------------------------
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
- -----------------------------------X
In re: Chapter 11
Case No.
ALCOHOL SENSORS INTERNATIONAL, LTD., APPLICATION
Debtor.
- -----------------------------------X
TO THE HONORABLE UNITED STATES
BANKRUPTCY JUDGE IN THIS PROCEEDING:
The application of Alcohol Sensors International, Ltd., debtor and debtor
in possession (the "Debtor") respectfully represents:
1. Heretofore, the Debtor filed a petition for reorganization under chapter
11, 301 of the Bankruptcy Code (the "Code") and automatically remained in
possession of its assets and property as well as the operation of its business,
pursuant to 1107 and 1108 of the Code. No trustee or examiner has been
appointed.
2. The Debtor is a New York corporation in the business of designing,
marketing and selling electronic motor vehicle after-market safety products,
including a patent-pending line of breath alcohol ignition interlock devices
("BAIID") under the Sens-O-Lock name. The Sens-O-Lock BAIID is designed to
detect, evaluate and assist in the prevention of an alcohol impaired driver
operating a vehicle. The Debtor also markets and sells, under the Weather Eye
brand name, a line of modular products designed to automatically engage and
adjust the headlights and taillights of automobiles depending upon the weather
and sunlight conditions.
3. Prior to the filing of this case, the Debtor financed its operations
through secured loans and advances made available by Acquisition Funding, LLC
("AFL"), under a loan and security agreement dated April 30, 1999 pursuant to
which AFL made available to the Debtor a credit facility in an amount not to
exceed $1,000,000. Such loans are secured by accounts receivable, inventory,
furniture and fixtures, machinery and equipment, leasehold interests, and
general intangibles (including licenses, patents, trade names, trademarks and
tax refunds) (collectively, the "Pre-Petition Collateral"). The value of the
Pre-Petition Collateral approximates $337,852 estimated as follows:
Accounts receivable 0.00
Inventory 311,682.87
Interests in Patents Pending undetermined
Fixed assets 26,169.66
Prepetition advances by AFL against the Pre-Petition Collateral aggregate
$147,000, inclusive of the $50,000 retainer advanced to Debtor's bankruptcy
counsel and the $65,000 retainer advanced to Debtors special corporate counsel.
4. Simultaneously with the commencement of the case, the Debtor filed a
plan of reorganization (the "Plan") and disclosure statement pursuant to which
AFL shall acquire ninety-four (94%) percent of the equity interests in the
Debtor and fund a distribution to creditors in accordance with the priorities of
the Code.
5. The Debtor requires an immediate infusion of cash in order to continue
to operate, make payroll and obtain other services. The Debtor believes that the
financing available through AFL, as described in paragraph 7 hereof, will give
the Debtor sufficient capital to continue to operate.
6. AFL has agreed to continue to make loans, advances and other
accommodations to the Debtor in accordance with certain a certain pre-petition
financing, loan and security agreement (the "Pre-Petition Agreement") by and
between the Debtor and AFL, as ratified, assumed, adopted and amended by a
certain ratification and amendment agreement (the "Ratification Agreement"). The
Pre-Petition Agreement and Ratification Agreement shall be referred to
hereinafter collectively as the Financing Agreements, as annexed as Exhibit "B"
hereto. Annexed hereto as Exhibit "A" is a proposed financing order (the
"Proposed Financing Order") under which the parties seek to approve the
Financing Agreements.
7. The Proposed Financing Order and the Financing Agreements contain
substantially the following provisions:
a. AFL, in its sole discretion, shall make advances (the "Advances") to the
Debtor in an amount up to $1,000,000 (inclusive of the Pre-Petition
Indebtedness). Advances shall bear interest at the rate of eight (8%) percent
above the prime rate charged by Citibank from time to time. Said rate of
interest is identical to the amount charged by AFL prior to the date on which
this case was filed (the "Filing Date").
b. As security for post-petition advances by AFL, the Debtor shall grant to
AFL liens and security interests in and to the Debtor's post-petition assets
consisting of all now existing and hereafter acquired personal property,
wherever located, and of whatever kind or nature, whether acquired prior to or
after the Filing Date, including without limitation, accounts receivable,
inventory, furniture and fixtures, machinery and equipment, leasehold interests,
general intangibles, patents, patents pending, trade names, trademarks, tax
refunds and all property recovered as a result of transfers or obligations
avoided under sections 544, 545, 547, 548, 551 and 553 of the Code (the
"Post-Petition Collateral"). The grant of the security interests shall be senior
to any other interests, subject only to
(1) liens and security agreements granted AFL under the Pre-Petition
Agreements,
(2) validly perfected pre-petition liens which are superior to AFL's
security interests, and not subject to avoidance under the Code,
(3) the Carve-out, as such term is hereinafter defined.
c. AFL shall be granted a Super-Priority Claim under ?364(c)(1) of the
Code, having priority in right of payment over any and all other obligations,
liabilities and indebtedness of the Debtor, now in existence or hereafter
incurred by the Debtor and over all administrative expenses or priority claims
of a kind specified in or ordered pursuant to sections 326, 330, 331, 503(b),
506(c) or 507(a), subject only to the Carveout.
d. AFL will receive an exit fee of $45,000 following a default under or
other termination of the Financing Agreements, a sale of substantially all of
the Debtor's assets, or confirmation of a plan of reorganization which has not
been filed by Debtor and approved by AFL.
e. to the extent the Post-Petition Collateral of the Debtor is insufficient
to pay the fees to the Office of the United States Trustee, pursuant to 28
U.S.C. 1930(a) (6) (the "UST Fees") and the reasonable fees and expenses, fixed
by orders of this Court, of Marilyn Simon & Associates, bankruptcy counsel
retained by the Debtor ("MS&A"), net of any pre-petition retainers paid, the
liens, security interests and the Superpriority Claim recognized or granted to
AFL under the Financing Agreements or the Proposed Financing Order, shall be
junior and subordinate to the claims for UST Fees, without limit and the
post-petition claims of MS&A, not to exceed $25,000 in the aggregate
(collectively, the "Carveout").
8. Pending the hearing scheduled by the prefixed order, the Debtor
anticipates that it will need to borrow sums from AFL to continue operations,
pay necessary expenses including post-petition rent, gross payroll, utilities,
make certain purchases and pay other charges. Accordingly, the Debtor believes
that it is absolutely essential for its continued operation that the Proposed
Financing Order be approved on an interim basis pending the hearing scheduled
herein. As set forth in the affidavit pursuant to Local Rule 1007-3, the Debtor
will require approximately $105,000 during the first thirty (30) days of
operations. It is estimated that, if the hearing to consider the Proposed
Financing Order is conducted within the first two (2) weeks after the Filing
Date, the following expenses will have to be paid:
Gross Payroll $13,769.22
Rent $ 1,354.16
Purchases of Product $10,000.00
Operating Overhead $20,000.00
---------
TOTAL $45,123.38
9. Because of the Debtor's essential need for funds under the Proposed
Financing Order, the Debtor proposes to send notice of this application by hand
delivery or an overnight mail service upon AFL, the twenty (20) largest
unsecured creditors of the Debtor, all creditors known to assert liens against
the Debtor's assets, all parties having filed a notice of appearance in this
case and the United States Trustee. Applicants submit that, under the
circumstances, such notice fulfills the requirements of Rules 2002 and 4001 of
the Federal Rules of Bankruptcy Procedure. WHEREFORE, the Debtors respectfully
request that the Court enter the prefixed order scheduling hearing and for such
other and further relief as to this court is just and proper.
Dated: New York,
New York May 7, 1999
ALCOHOL SENSORS INTERNATIONAL, LTD.
Debtor and Debtor in Possession
By: s/Edward S. Gould
-----------------
EDWARD S. GOULD, President
MARILYN SIMON & ASSOCIATES
Attorneys for the
Debtor and Debtor in Possession
By: s/Marilyn Simon
---------------
Marilyn Simon MS-6537
200 Park Avenue South
New York, New York 10003-1503
(212) 529-4400
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
- -----------------------------------X
In re: Chapter 11
Case No.
ALCOHOL SENSORS INTERNATIONAL, LTD. ORDER APPROVING
FINANCING AGREEMENT WITH
ACQUISITION FUNDING, LLC
Debtor.
- -----------------------------------X
The above captioned debtor and debtor in possession (the "Debtor") having
moved by order scheduling hearing dated May 10, 1999 (the "Prior Order")
pursuant to section 364(c) of the Bankruptcy Code (the "Code") and Rule 4001(c)
of the Federal Rules of Bankruptcy Procedure, to ratify, assume, adopt and amend
a certain pre-petition financing, loan and security agreement (the "Pre-Petition
Agreement") by and between the Debtor and Acquisition Funding, LLC ("AFL"), in
accordance with a certain ratification and amendment agreement (the
"Ratification Agreement"), which together with the Pre-Petition Agreements shall
be referred to hereinafter collectively as the Financing Agreements, annexed as
Exhibit "B" to the Application, and notice of the hearing having been given to
AFL, the twenty (20) largest unsecured creditors of the Debtor, all creditors
known to assert liens against the Debtor's assets, all parties having filed a
notice of appearance in this case and the United States Trustee as provided in
the Prior Order and a preliminary hearing and final hearing thereon having been
held on May 25, 1999 and June 7, 1999, respectively, and upon the record taken
before me, after due deliberation and sufficient cause appearing therefor, and
THE COURT HAVING FOUND and determined that
1. the Debtor is unable to obtain unsecured credit allowable under section
503(b)(1) of the Code as an administrative expense;
2. the Debtor is unable to obtain secured credit, except under the terms
and conditions provided in this order; and
3. it is in the best interests of the estate that the Debtor be permitted
to enter into the Financing Agreements and, thereby, receive advances to pay for
operating expenses including rent, gross payroll, utilities, make certain
purchases and pay other charges; it is
ORDERED, that the Debtor is hereby authorized to enter into and perform the
Financing Agreements the terms of which are hereby approved except that the exit
fee is void and unenforceable, and it is further
ORDERED, that the Debtor be, and hereby is, authorized to execute and
deliver to AFL the Financing Agreements, including without limitation the
Ratification Agreement and such other documents as may be reasonably requested
by AFL to effectuate the transactions contemplated thereby, and it is further
ORDERED, that the Debtor be, and hereby is, authorized to borrow money from
time to time from AFL in accordance with and upon the terms and conditions set
forth in the Financing Agreements, and AFL is authorized to make such loans,
advances and other financial accommodations to the Debtor, and it is further
ORDERED, that payment to AFL of all indebtedness to AFL incurred by the
Debtor after the commencement of the Debtor's proceeding under chapter 11
("Indebtedness") shall be secured by a first lien and security interest on the
Debtor's post-petition assets consisting of all now existing and hereafter
acquired personal property, wherever located, and of whatever kind or nature,
whether acquired prior to or after the commencement of the chapter 11 case,
including without limitation, accounts receivable, inventory, furniture and
fixtures, machinery and equipment, leasehold interests, general intangibles,
patents, patents pending, trade names, trademarks, tax refunds and all property
recovered as a result of transfers or obligations avoided under sections 544,
545, 547, 548, 551 and 553 of the Code (the "Post-Petition Collateral"), and the
grant of the security interests shall be senior to any other interests, subject
only to;
a. liens and security agreements granted AFL under the Pre-Petition
Agreements,
b. validly perfected pre-petition liens which are superior to AFL's
security interests, and not subject to avoidance under the Code,
c. the Carve-out, as such term is hereinafter defined, and
and it is further
ORDERED, that to the extent the unsecured assets of the Debtor are
insufficient to pay the UST Fees and the reasonable fees and expenses, fixed by
orders of this Court, of Marilyn Simon & Associates, bankruptcy counsel retained
by the Debtor ("MS&A"), net of any pre-petition retainer paid, the liens, and
security interests granted to AFL under the Financing Agreements or this Order,
shall be junior and subordinate to (i) the claims for the fees payable to the
Office of the United States Trustee, pursuant to 28 U.S.C. 1930(a) (6) (the
"UST Fees"), without limit and (ii) the post-petition claims of MS&A, not to
exceed $25,000 in the aggregate (collectively, the "Carveout"), and it is
further
ORDERED, that except as provided in the Financing Agreements, the Debtor
may not at any time apply for or acquiesce in an application for an order which
authorizes (a) under section 363 of the Code, the use, sale or lease of property
of the estate in which AFL has a lien, or security interest, or (b) under
section 364 of the Code, the obtaining of credit or the incurring of
indebtedness (i) secured by a lien or security interest on property which is
equal or senior to that possessed by AFL or (ii) entitled to a priority as an
administrative expense which is superior to the administration claim AFL has
herein, unless AFL shall have consented thereto in writing, and it is further
ORDERED, that the automatic stay provided for under section 362(a) of the
Code be, and hereby is modified to the extent necessary to permit the Debtor to
permit the execution and filing of any financing statements or other similar
documents which may in AFL's discretion be desirable, though no such filing
shall be necessary for perfection of the liens and security interests granted to
AFL, and it is further
ORDERED, that the Debtor is authorized and directed to reimburse AFL for
all present and future reasonable costs and expenses incurred by AFL to
effectuate the financing transactions contemplated by this Order, including, but
not limited to filing fees, reasonable audit and field examination expenses,
other costs and expenses, and the reasonable fees of counsel to effectuate and
administer said transactions and to enforce AFL's rights hereunder. Copies of
such invoices shall be delivered to and reviewed by the committee of unsecured
creditors ("Committee"), if appointed, and the office of the United States
Trustee, and it is further
ORDERED, that in the event of the termination of the Financing Agreements
by AFL as to future transactions as a result of the occurrence of an event of
default thereunder, or the conversion of this case to a case under chapter 7 of
the Code, or at any time thereafter, then upon three business day's notice to
the Debtor and the Office of the United States Trustee, any chapter 11 trustee
that may be appointed, the chairman of the Committee, if appointed, and if there
be a counsel to a Committee, then to such counsel, AFL shall be relieved from
the automatic stay under section 362 of the Code and shall be permitted to
assert its rights as a secured party after default against its collateral, all
without further order of this Court; provided, however, nothing contained herein
shall limit the rights AFL may then already possess by reason of the financing
authorized herein, consisting of notification financing as contemplated by
section 9-502 of the Uniform Commercial Code as adopted by the State of New
York, and it is further
ORDERED, that the provisions of this Order shall survive entry of any
subsequent order whether the same be an order confirming a chapter 11 plan or
for relief under chapter 7 of the Code, and the provisions of this Order, as
well as the liens and security interests arising pursuant hereto in favor of
AFL, shall continue in this and any subsequent proceeding under the Code and
shall be binding on the Debtor's successors and assigns (including any Trustee
or other fiduciary hereafter appointed as a legal representative of the Debtor
or with respect to property of the Debtor's estate whether in this chapter 11
case or any subsequent chapter 7 case), and such liens and security interests
shall maintain their priority as provided for under this Order until all of the
Indebtedness is paid in full; and it is further
ORDERED, that no obligation arising under the Financing Agreements shall be
extended or affected by any plan confirmed in this chapter 11 case or by any
other action hereafter taken or relief sought in this chapter 11 case, and it is
further
ORDERED, that AFL shall be entitled to the full protection of 11 U.S.C.
section 364(e), and in the event any or all of the provisions of this Order are
hereafter modified, vacated or stayed by subsequent order of this Court or any
other Court, such stay, modification or vacatur shall not affect the validity of
any indebtedness to AFL incurred pursuant to this Order, and which is incurred
prior to the effective date of such stay, modification or vacatur, or the
validity and enforceability of any lien, security interest or priority
authorized herein with respect to any such debt to AFL; and, notwithstanding
such stay, modification or vacatur, any obligations of the Debtor to AFL
pursuant to this Order arising prior to the effective date of such stay,
modification or vacatur shall be governed in all respects by the original
provisions of this Order and AFL shall be entitled to all of its rights,
privileges and benefits, including, without limitation, the liens, security
interests, priorities and collection rights granted herein to or for the benefit
of AFL.
ORDERED, that all amounts, obligations, debts and liabilities of the Debtor
to AFL whether incurred pre-petition or post-petition, shall become immediately
due and payable in the event that the present chapter 11 case is dismissed and
shall become immediately due in the event the chapter 11 case is converted to a
liquidation under chapter 7 of the Code, and it is further
ORDERED, that if there is any inconsistency between this Order and the
Financing Agreements, the terms and provisions of this Order shall control; and
it is further
ORDERED, that the Debtor is authorized and directed to take such steps and
execute such instruments or documents as may be necessary to effectuate the
terms and conditions hereof.
Dated: New York, New York
May , 1999
------------------------
UNITED STATES BANKRUPTCY