1024-00001 · Driftwood Absolute Return Fund Ltd · Court Filings

proposed-interim-dip-order.docx DOCUMENT Finance & Banking

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

INTERIM ORDER (I) AUTHORIZING THE DEBTORS TO OBTAIN SENIOR SECURED SUPERPRIORITY DEBTOR-IN-POSSESSION FINANCING PURSUANT TO 11 U.S.C. §§ 105, 361, 362, 364(c)(1), 364(c)(2), 364(c)(3), AND 364(d); (II) GRANTING INTERIM PRIMING LIENS AND SUPERPRIORITY ADMINISTRATIVE EXPENSE CLAIMS; (III) GRANTING ADEQUATE PROTECTION TO PRE-PETITION SECURED LENDERS; (IV) MODIFYING THE AUTOMATIC STAY; AND (V) SCHEDULING A FINAL HEARING

Upon the motion (the "DIP Motion") of the above-captioned debtors and debtors in possession (collectively, the "Debtors") for entry of interim and final orders, pursuant to sections 105, 361, 362, 363, 364(c)(1), 364(c)(2), 364(c)(3), and 364(d) of title 11 of the United States Code (the "Bankruptcy Code"), Rules 2002, 4001(b), 4001(c), and 4001(d) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and Rules 2002-1 and 4001-2 of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the "Local Rules"), authorizing the Debtors to obtain senior secured superpriority debtor-in-possession financing, granting interim priming liens and superpriority administrative expense claims, granting adequate protection to pre-petition secured lenders, modifying the automatic stay, and scheduling a final hearing; and the Court having reviewed the DIP Motion, the declarations filed in support thereof, the DIP Credit Agreement (as defined below) and all exhibits and schedules thereto, and all objections filed, if any; and the Court having held an interim hearing on September 15, 2023 (the "Interim Hearing"); and the Court having considered the evidence presented at the Interim Hearing, the arguments of counsel, and the record in these Chapter 11 cases; and due and sufficient notice of the DIP Motion and the Interim Hearing having been given under the circumstances; and it appearing that the relief requested in the DIP Motion on an interim basis is in the best interests of the Debtors, their estates, their creditors, and all other parties in interest; and after due deliberation and good and sufficient cause appearing therefor;

RECITALS

THE COURT HEREBY FINDS AND DETERMINES AS FOLLOWS:

A. Filing and Jurisdiction. On September 8, 2023 (the "Petition Date"), each of Cascabel Financial Holdings, Inc. ("CFH"), a Delaware corporation, and Cascabel Asset Management LLC ("CAM," and together with CFH, the "Debtors"), a Delaware limited liability company, filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in this Court, thereby commencing these Chapter 11 cases. The Debtors continue to operate their respective businesses and manage their respective properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or other fiduciary has been appointed in these Chapter 11 cases. Ridgeline Community Bank, a Delaware state-chartered commercial bank and a wholly owned subsidiary of CFH (the "Bank Subsidiary"), was excluded from the Chapter 11 filing and continues to operate outside of bankruptcy under the ongoing regulatory supervision of the Delaware Office of the State Bank Commissioner (the "DOSBC") and the Federal Deposit Insurance Corporation (the "FDIC"). This Court has jurisdiction over these Chapter 11 cases and the DIP Motion pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference of the United States District Court for the District of Delaware, dated as of February 29, 2012. This matter constitutes a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409.

B. The Motion. On the Petition Date, the Debtors filed the Motion of the Debtors for Entry of Interim and Final Orders Authorizing Debtor-in-Possession Financing, Granting Priming Liens, and Approving Roll-Up [Dkt. No. 12] (the "DIP Motion"). The DIP Motion was prepared by Calderwood & Harkness LLP, counsel to Driftwood Absolute Return Fund Ltd. (the "DIP Lender"), in coordination with Whitfield, Graves & Sato LLP, counsel to the Debtors (lead partner Jonathan R. Whitfield; lead associate Rachel P. Dumont). In connection with the DIP Motion, the Debtors sought authority to enter into that certain Senior Secured Superpriority Debtor-in-Possession Credit Agreement (together with all exhibits, schedules, annexes, and amendments thereto, the "DIP Credit Agreement"), by and between the Debtors, as borrowers, and Driftwood Absolute Return Fund Ltd. ("Driftwood" or the "DIP Lender"), a Cayman Islands exempted company with its principal office located at 280 Park Avenue, 38th Floor, New York, New York 10017, as lender, substantially in the form attached to the DIP Motion as Exhibit A.

C. The DIP Facility. The DIP Credit Agreement provides for a senior secured superpriority debtor-in-possession credit facility in the aggregate principal amount of $75,000,000 (the "DIP Facility"), structured as follows:

(i) A new money tranche in the aggregate principal amount of $43,000,000 (the "New Money DIP Tranche"), to be made available in two draws:

(a) Draw 1 (the "Interim Draw"): $18,000,000 in aggregate principal amount, available upon entry of this Interim Order; and

(b) Draw 2 (the "Final Draw"): $25,000,000 in aggregate principal amount, available upon entry of the Final DIP Order (as defined herein); and

(ii) A roll-up tranche in the aggregate principal amount of $32,000,000 (the "Roll-Up Tranche"), which will convert Driftwood's pre-petition first lien claims under the Pre-Petition First Lien Facility (as defined below) on a dollar-for-dollar basis into obligations under the DIP Facility upon entry of the Final DIP Order.

This Interim Order authorizes borrowing only under Draw 1 in the amount of $18,000,000. The Roll-Up Tranche and Draw 2 shall not become effective unless and until the Court enters the Final DIP Order, as more fully set forth herein and in the DIP Credit Agreement.

D. The Pre-Petition Secured Debt. The Debtors are parties to that certain Credit Agreement, dated as of January 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Pre-Petition First Lien Credit Agreement"), among the Debtors, as borrowers, the lenders party thereto from time to time (collectively, the "Pre-Petition First Lien Lenders"), and Velthorn National Bank, N.A. ("Velthorn"), as administrative agent (in such capacity, the "Pre-Petition Agent"), providing for a $120,000,000 senior secured first lien term loan facility (the "Pre-Petition First Lien Facility"), maturing January 15, 2026, and bearing interest at a rate of Adjusted Term SOFR plus 425 basis points per annum. As of the Petition Date, the outstanding principal balance under the Pre-Petition First Lien Facility was $120,000,000, held by the following Pre-Petition First Lien Lenders:

In addition to the Pre-Petition First Lien Facility, the Debtors are obligors under $45,000,000 in aggregate principal amount of 10.50% Senior Secured Second Lien Notes due 2027 (the "Second Lien Notes"), issued pursuant to that certain Indenture, dated as of June 1, 2022 (the "Second Lien Indenture"), by and among the Debtors, as issuers, and Zynvaro Trust Company, as indenture trustee (in such capacity, the "Second Lien Indenture Trustee"). The Second Lien Notes are secured by second-priority liens on substantially the same collateral securing the Pre-Petition First Lien Facility, subject to the terms of that certain Intercreditor Agreement, dated as of June 1, 2022, by and among the Pre-Petition Agent, the Second Lien Indenture Trustee, and the Debtors. The Debtors also have outstanding $18,500,000 in aggregate principal amount of unsecured notes bearing interest at a fixed rate of 8.00% per annum, maturing March 1, 2025 (the "Unsecured Notes"). As of the Petition Date, the Debtors' total pre-petition funded debt obligations aggregated approximately $183,500,000.

E. Debtors' Financial Condition. As of the Petition Date, the Debtors had total consolidated assets of approximately $620,000,000 and total consolidated liabilities of approximately $710,000,000, reflecting a negative consolidated equity position of approximately $90,000,000. Ridgeline Community Bank, the Bank Subsidiary, had total deposits of approximately $385,000,000 as of the Petition Date. CAM managed approximately $1,200,000,000 in client assets under management across its various advisory mandates. The Debtors' financial distress was precipitated by a confluence of adverse factors, including: (i) concentrated commercial real estate loan losses at Ridgeline Community Bank; (ii) the failed acquisition of a financial technology lending platform in the fourth quarter of 2022, which resulted in significant write-downs and impairments; and (iii) a severe liquidity crisis triggered by depositor outflows at Ridgeline Community Bank during the first and second quarters of 2023, exacerbated by broader market concerns regarding the stability of regional and community banking institutions.

F. Driftwood's Pre-Petition Position. Driftwood acquired $32,000,000 in face value of participations and assignments under the Pre-Petition First Lien Facility on the secondary market during the period from March 2023 through July 2023, at an average purchase price of $0.68 per dollar of face value, representing an aggregate cost basis of approximately $21,760,000. As of the Petition Date, Driftwood's $32,000,000 in aggregate principal amount of claims under the Pre-Petition First Lien Facility constitutes approximately 26.67% of the total $120,000,000 outstanding under the Pre-Petition First Lien Facility.

G. Need for DIP Financing. The Debtors have demonstrated, and the Court finds, that the Debtors have an immediate and critical need for access to post-petition financing to (i) fund ongoing operations and maintain the value of their assets pending a restructuring, (ii) satisfy costs of administration of these Chapter 11 cases, (iii) make adequate protection payments as set forth herein, and (iv) preserve going-concern value for the benefit of all stakeholders. Solstice Partners LLC (the Debtors' investment banker, David R. Chin, Managing Director) conducted a pre-petition marketing process for debtor-in-possession financing commencing on or about August 10, 2023, in which multiple potential DIP lenders were contacted and solicited. Based on the proposals received, the DIP Facility proposed by Driftwood was determined by Solstice Partners LLC and the Debtors to be on the best available terms, taking into account all relevant factors including pricing, structure, flexibility, and overall economics. Alderpoint Advisory Partners LLC, the Debtors' financial advisor, through Terrence M. Kowalski, the Debtors' Chief Restructuring Officer (appointed by the board of directors of CFH on August 25, 2023), has reviewed the DIP Facility and the terms of the DIP Credit Agreement and has expressed support for its approval as being in the best interests of the Debtors' estates.

H. Interim Hearing. The Court held the Interim Hearing on the DIP Motion on September 15, 2023. Notice of the DIP Motion and the Interim Hearing was provided in accordance with Bankruptcy Rules 2002, 4001(b), 4001(c), and 4001(d), the Local Rules, and the emergency hearing procedures of this Court, including by service upon the United States Trustee for the District of Delaware, the Pre-Petition Agent, counsel to each of the Pre-Petition First Lien Lenders, the Second Lien Indenture Trustee, the holders of the thirty (30) largest unsecured claims, and all other parties entitled to notice under the applicable rules and orders of this Court. Such notice was sufficient and adequate under the circumstances, and no further notice of the Interim Hearing is or shall be required.

I. Findings of Good Cause. Good cause has been shown for entry of this Interim Order pursuant to Bankruptcy Rules 4001(b)(2) and 4001(c)(2). The Court finds that:

(i) The Debtors were unable to obtain sufficient unsecured credit allowable as an administrative expense under section 503(b)(1) of the Bankruptcy Code, or credit or indebtedness under section 364(c) of the Bankruptcy Code alone, on terms reasonably acceptable to the Debtors and consistent with their fiduciary obligations. The Debtors demonstrated that multiple alternative sources of post-petition financing were explored and that no willing lender was prepared to extend post-petition credit to the Debtors on an unsecured or junior secured basis on terms comparable to or better than those offered by the DIP Lender.

(ii) The Debtors exercised sound and reasonable business judgment in selecting the DIP Facility proposed by Driftwood, and such selection was the product of arm's-length negotiations between the Debtors and the DIP Lender and was informed by the competitive process conducted by the Debtors' investment banker.

(iii) The terms of the DIP Facility, including the interest rate, commitment fee, exit fee, and other charges and fees, are fair and reasonable and reflect the Debtors' current financial circumstances, the risks inherent in extending post-petition credit to the Debtors, the nature and extent of the collateral package, and prevailing conditions in the market for debtor-in-possession financing.

(iv) The DIP Facility is essential to the Debtors' ability to preserve value, maintain operations, and pursue an orderly restructuring for the benefit of all stakeholders, and entry of this Interim Order is necessary to prevent immediate and irreparable harm to the Debtors' estates.

(v) The adequate protection provided to the Pre-Petition First Lien Lenders and the Pre-Petition Second Lien Noteholders pursuant to this Interim Order is sufficient to protect their interests in the DIP Collateral against any diminution in value resulting from the priming liens granted herein, the use of cash collateral, and the imposition of the automatic stay.

NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED AS FOLLOWS:

I. AUTHORIZATION OF INTERIM DIP BORROWING

A. Authorization. The Debtors are hereby authorized and empowered, pursuant to sections 105, 361, 362, 364(c)(1), 364(c)(2), 364(c)(3), and 364(d)(1) of the Bankruptcy Code, to borrow up to $18,000,000 in aggregate principal amount (the "Interim DIP Loan") under the New Money DIP Tranche of the DIP Credit Agreement from the DIP Lender on an interim basis, subject to and in accordance with the terms and conditions of this Interim Order and the DIP Credit Agreement. The Debtors are further authorized and empowered to execute and deliver the DIP Credit Agreement, substantially in the form attached to the DIP Motion as Exhibit A, and all related documents, instruments, promissory notes, security agreements, pledges, guarantees, and other agreements contemplated thereby or necessary or desirable in connection therewith (collectively, the "DIP Documents"), and to perform all obligations required thereunder. Each of the Debtors' officers is authorized to execute and deliver the DIP Documents on behalf of the respective Debtor, and all actions heretofore taken by any officer, director, agent, or representative of the Debtors in furtherance of the DIP Facility, including any actions taken prior to the entry of this Interim Order, are hereby ratified, confirmed, and approved in all respects.

B. DIP Credit Agreement Terms Approved on Interim Basis. The following material terms and conditions of the DIP Credit Agreement are hereby approved on an interim basis, subject to the entry of the Final DIP Order:

(i) Interest Rate. The Interim DIP Loan shall bear interest at a rate per annum equal to Adjusted Term SOFR (as defined in the DIP Credit Agreement) plus 900 basis points, with a SOFR floor of 4.00%, resulting in a minimum all-in interest rate of 13.00% per annum. Interest shall be payable monthly in arrears in cash on the first business day of each calendar month, commencing on the first such date occurring after the initial draw under the DIP Facility.

(ii) Default Rate. Upon the occurrence and during the continuance of an Event of Default (as defined in the DIP Credit Agreement), the outstanding principal balance and all other amounts due under the DIP Facility shall bear interest at an additional rate of 200 basis points per annum above the otherwise applicable rate (i.e., Adjusted Term SOFR plus 1,100 basis points, with a minimum all-in default rate of 15.00% per annum).

(iii) Commitment Fee. A non-refundable commitment fee in the amount of 2.00% of the total $75,000,000 DIP commitment, equaling $1,500,000, shall be deemed fully earned upon entry of this Interim Order and shall be payable from the proceeds of Draw 1 on the date of the initial borrowing under the DIP Facility.

(iv) Exit Fee. An exit fee in the amount of 1.50% of all amounts drawn under the DIP Facility shall be due and payable upon the earliest to occur of (a) the stated maturity of the DIP Facility, (b) the repayment in full of all outstanding obligations under the DIP Facility, or (c) the acceleration of the DIP Facility following an Event of Default (the "Exit Fee"). Based on the Interim DIP Loan amount of $18,000,000, the Exit Fee attributable to the Interim DIP Loan would equal $270,000; provided that the Exit Fee shall be recalculated upon any additional draws under the DIP Facility. In the event the full $75,000,000 DIP Facility is drawn, the Exit Fee shall equal $1,125,000.

(v) Unused Line Fee. An unused line fee in the amount of 0.50% per annum shall accrue on the undrawn and uncommitted portion of the New Money DIP Tranche, calculated on the basis of the actual number of days elapsed and a 360-day year, and payable quarterly in arrears.

(vi) Maturity. The DIP Facility shall mature on the earliest of (a) September 8, 2024 (twelve months from the Petition Date), (b) the effective date of a confirmed Chapter 11 plan in these cases, (c) the date of consummation of a sale of substantially all of the Debtors' assets pursuant to section 363 of the Bankruptcy Code, or (d) the date on which the DIP Facility is accelerated or the commitment thereunder is terminated following an Event of Default in accordance with the terms of the DIP Credit Agreement (the "Maturity Date").

(vii) Budget. The Debtors shall maintain a 13-week rolling cash flow budget (the "Approved Budget"), which shall be updated every four (4) weeks and delivered to the DIP Lender, the Pre-Petition Agent, counsel to any official committee appointed in these cases, and the United States Trustee. The permitted variance from the Approved Budget shall be ±10% on revenue line items and ±15% on disbursement line items, in each case tested on a cumulative bi-weekly basis. The initial Approved Budget is attached to the DIP Credit Agreement as Exhibit B.

The DIP Credit Agreement and all of the terms, conditions, covenants, representations, warranties, and other provisions thereof are hereby approved on an interim basis, subject to final approval by the Court upon entry of the Final DIP Order. The Debtors are authorized and directed to comply with and perform all obligations under the DIP Credit Agreement and the DIP Documents.

C. Use of Interim DIP Loan Proceeds. The proceeds of the Interim DIP Loan shall be used solely in accordance with the DIP Credit Agreement and the Approved Budget, and for no other purposes. Without limiting the foregoing, the proceeds of the Interim DIP Loan shall be applied as follows:

(i) Payment of the $1,500,000 non-refundable commitment fee to the DIP Lender on the date of the initial draw under the DIP Facility;

(ii) Funding of the $3,500,000 adequate protection reserve (the "Adequate Protection Reserve") for the benefit of the Pre-Petition First Lien Lenders (other than Driftwood in its capacity as DIP Lender), as more fully described in Section IV below;

(iii) Working capital and general corporate purposes of the Debtors in the ordinary course of business, excluding Ridgeline Community Bank, whose assets are subject to regulatory restrictions imposed by the DOSBC and the FDIC and shall not be available to fund the Debtors' Chapter 11 cases;

(iv) Payment of costs of administration of these Chapter 11 cases, including professional fees and expenses of professionals retained by the Debtors and any official committee appointed in these cases, in each case subject to the limitations of the Carve-Out (as defined herein) and in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, and orders of this Court; and

(v) Payment of adequate protection obligations as set forth in Section IV of this Interim Order.

Under no circumstances shall the proceeds of the Interim DIP Loan be used for any purpose not authorized by this Interim Order or the DIP Credit Agreement, including any purpose prohibited by Section VIII of this Interim Order.

D. Milestones. The DIP Credit Agreement contains certain milestones (the "Milestones") with which the Debtors are required to comply as a condition to the continued availability of the DIP Facility. The Court acknowledges the following Milestones, which are incorporated herein by reference and with which the Debtors have complied or shall be required to comply:

(i) Interim DIP Order. This Interim Order shall be entered within five (5) business days of the Petition Date. The entry of this Interim Order on September 15, 2023 satisfies this Milestone.

(ii) Final DIP Order. A final order approving the DIP Facility in its entirety, including the Roll-Up Tranche and Draw 2 (the "Final DIP Order"), shall be entered within thirty-five (35) days of the Petition Date (i.e., on or before October 13, 2023).

(iii) Filing of Plan and Disclosure Statement. The Debtors shall file a Chapter 11 plan of reorganization and an accompanying disclosure statement within ninety (90) days of the Petition Date.

(iv) Confirmation Order. An order confirming the Debtors' Chapter 11 plan of reorganization (the "Confirmation Order") shall be entered within one hundred fifty (150) days of the Petition Date.

(v) Plan Effective Date. The effective date of the confirmed Chapter 11 plan shall occur within one hundred eighty (180) days of the Petition Date.

Failure to satisfy any Milestone within the time period specified above (as may be extended with the prior written consent of the DIP Lender) shall constitute an Event of Default under the DIP Credit Agreement.

II. SUPERPRIORITY ADMINISTRATIVE EXPENSE CLAIMS

A. DIP Superpriority Claims. Pursuant to section 364(c)(1) of the Bankruptcy Code, all obligations of the Debtors arising under the DIP Facility, the DIP Credit Agreement, and the DIP Documents, including all principal, interest (including default interest), fees (including the commitment fee, exit fee, and unused line fee), costs, expenses, indemnification obligations, and all other amounts due thereunder (collectively, the "DIP Obligations"), shall constitute allowed superpriority administrative expense claims against each of the Debtors and their respective estates (the "DIP Superpriority Claims"). The DIP Superpriority Claims shall have priority over all administrative expense claims and all unsecured claims of any kind or nature whatsoever against the Debtors and their estates, whether now existing or hereafter arising, of the kind specified in or ordered pursuant to sections 105, 326, 328, 330, 331, 365, 503(b), 506(c), 507(a), 507(b), 726, 1113, and 1114 of the Bankruptcy Code, or otherwise, whether or not such claims may become allowed claims under section 502 of the Bankruptcy Code. The DIP Superpriority Claims shall be subject and subordinate only to the Carve-Out (as defined in Section V below). No claim having a priority superior to or pari passu with the DIP Superpriority Claims shall be granted or allowed in these Chapter 11 cases or any successor cases at any time, unless the DIP Lender shall have provided its prior written consent.

B. DIP Lender Professional Fees. All reasonable and documented fees and out-of-pocket expenses of Calderwood & Harkness LLP, as counsel to the DIP Lender, incurred in connection with the negotiation, documentation, approval, administration, enforcement, and protection of the DIP Facility, the DIP Credit Agreement, and the DIP Lender's rights hereunder and thereunder, shall be reimbursed by the Debtors' estates as administrative expenses pursuant to section 11.04 of the DIP Credit Agreement. Such fees and expenses shall be payable by the Debtors promptly upon presentation of invoices in summary form (without the requirement to disclose privileged or confidential information), without the necessity of filing formal fee applications with this Court and without further order of this Court. The foregoing is without prejudice to the right of the United States Trustee or any party in interest to seek review of such fees and expenses for reasonableness upon appropriate motion and notice, provided that payment of such fees and expenses shall not be delayed pending resolution of any such motion.

III. INTERIM PRIMING LIENS

A. Grant of DIP Liens. Pursuant to sections 364(c)(2), 364(c)(3), and 364(d)(1) of the Bankruptcy Code, as security for the DIP Obligations, the DIP Lender is hereby granted, effective as of the date of this Interim Order and on an interim basis, valid, binding, continuing, enforceable, fully perfected, first priority senior priming liens on, and security interests in, substantially all assets of the Debtors, whether now existing or hereafter acquired (collectively, the "DIP Collateral"), including, without limitation, the following:

(i) all personal property of the Debtors, whether tangible or intangible, including, without limitation, all accounts, chattel paper, commercial tort claims, deposit accounts, documents, equipment, financial assets, general intangibles (including payment intangibles and software), goods, instruments, intellectual property (including patents, trademarks, copyrights, trade secrets, and licenses), inventory, investment property, letter-of-credit rights, money, securities, and supporting obligations;

(ii) all real property interests of the Debtors, whether owned, leased, or held under contract, together with all improvements, fixtures, easements, and appurtenances thereto;

(iii) all proceeds of avoidance actions and other causes of action arising under Chapter 5 of the Bankruptcy Code (including under sections 502(d), 544, 545, 547, 548, 549, 550, 551, and 553 of the Bankruptcy Code) and any recoveries therefrom;

(iv) all equity interests in subsidiaries of the Debtors, including, without limitation, equity interests in CAM held by CFH, but excluding regulatory-restricted equity interests in Ridgeline Community Bank to the extent that the granting of a lien or security interest therein is prohibited by applicable law or regulation, or by order of the DOSBC or the FDIC;

(v) all proceeds, products, offspring, rents, revenues, and profits of any and all of the foregoing, in whatever form and wherever located; and

(vi) all books and records and other documentation related to the foregoing.

(the "DIP Liens"). The DIP Liens shall exclude: (a) any assets of Ridgeline Community Bank that are subject to regulatory restrictions imposed by the DOSBC or the FDIC, to the extent that the granting of a lien or security interest therein is prohibited or restricted by applicable banking law, regulation, or regulatory order; and (b) any other assets specifically excluded from the DIP Collateral under the terms of the DIP Credit Agreement.

B. Priority of DIP Liens. The DIP Liens shall be senior in priority to, and shall prime, all other liens, claims, encumbrances, and security interests of every kind and nature on the DIP Collateral, whether now existing or hereafter arising, including, without limitation, (i) all liens and security interests securing the Pre-Petition First Lien Facility, (ii) all liens and security interests securing the Second Lien Notes, and (iii) all other liens and encumbrances, whether statutory, consensual, or judicial. The DIP Liens shall be subject and subordinate only to:

(i) the Carve-Out; and

(ii) certain valid, perfected, and non-avoidable liens existing as of the Petition Date that are senior to the liens of the Pre-Petition First Lien Lenders and that are specifically identified as "Permitted Prior Liens" in the DIP Credit Agreement (if any).

The DIP Liens shall prime the liens of the Pre-Petition First Lien Lenders on the DIP Collateral pursuant to section 364(d)(1) of the Bankruptcy Code, and the adequate protection provided in Section IV of this Interim Order shall constitute adequate protection of the Pre-Petition First Lien Lenders' interests in the DIP Collateral within the meaning of sections 361 and 364(d)(1)(B) of the Bankruptcy Code. The DIP Liens shall also prime the liens of the Pre-Petition Second Lien Noteholders on the DIP Collateral, subject to the adequate protection provided in Section IV of this Interim Order.

C. Perfection. The DIP Liens shall be deemed automatically and fully perfected upon entry of this Interim Order, without the necessity of the DIP Lender's filing financing statements under the Uniform Commercial Code, mortgages, deeds of trust, notices of lien, or other instruments or documents in any jurisdiction or taking any other action that may otherwise be required under federal or state law or regulation to create or perfect such liens and security interests. Notwithstanding the foregoing, the DIP Lender may, in its sole discretion, file or record any UCC financing statements, mortgages, deeds of trust, notices, or other documents with respect to the DIP Liens, and the Debtors shall cooperate with and assist the DIP Lender in connection with any such filing or recording. All such financing statements, mortgages, deeds of trust, notices, or other documents shall be deemed to have been filed or recorded as of the date and time of entry of this Interim Order. The DIP Liens shall not be subject to avoidance, reduction, disallowance, impairment, subordination, or recharacterization under any applicable law, including, without limitation, under sections 510, 544, 545, 547, 548, 549, 550, or 551 of the Bankruptcy Code or under applicable state law.

IV. ADEQUATE PROTECTION FOR PRE-PETITION SECURED LENDERS

A. Adequate Protection for Pre-Petition First Lien Lenders. As adequate protection for the priming of the Pre-Petition First Lien Lenders' liens on the DIP Collateral pursuant to section 364(d)(1) of the Bankruptcy Code, and for any diminution in the value of the Pre-Petition First Lien Lenders' interests in the Pre-Petition Collateral (as defined in the Pre-Petition First Lien Credit Agreement) resulting from the DIP Liens, the use of cash collateral, the imposition of the automatic stay pursuant to section 362 of the Bankruptcy Code, and any other cause, the following adequate protection is hereby provided to the Pre-Petition First Lien Lenders, including Velthorn, Pinnacle, Brindoval, and Driftwood (solely in its capacity as a Pre-Petition First Lien Lender and with respect to claims not constituting DIP Obligations):

1. Replacement Liens. Pursuant to sections 361(2) and 363(e) of the Bankruptcy Code, the Pre-Petition First Lien Lenders are hereby granted valid, binding, continuing, enforceable, and automatically perfected replacement liens on, and security interests in, the DIP Collateral (the "Replacement Liens"). The Replacement Liens shall secure all pre-petition obligations of the Debtors under the Pre-Petition First Lien Facility, including all outstanding principal, accrued and unpaid interest, fees, costs, expenses, and other amounts due thereunder. The Replacement Liens shall be junior in priority only to (i) the DIP Liens, (ii) the Carve-Out, and (iii) any valid, perfected, and non-avoidable liens that existed as of the Petition Date and that were senior in priority to the liens securing the Pre-Petition First Lien Facility. The Replacement Liens are granted on the same collateral, and in the same relative priority as among the Pre-Petition First Lien Lenders inter se, as existed under the Pre-Petition First Lien Credit Agreement and related security documents immediately prior to the Petition Date. The Replacement Liens shall be deemed perfected without the necessity of filing financing statements or other instruments of perfection.

2. Section 507(b) Superpriority Claims. Pursuant to section 507(b) of the Bankruptcy Code, the Pre-Petition First Lien Lenders are hereby granted allowed superpriority administrative expense claims against each of the Debtors and their respective estates (the "Adequate Protection Superpriority Claims"), to the extent that the adequate protection provided herein proves to be insufficient to compensate for any diminution in the value of the Pre-Petition First Lien Lenders' interests in the Pre-Petition Collateral. The Adequate Protection Superpriority Claims shall be junior in all respects to the DIP Superpriority Claims and the Carve-Out, and shall have priority over all other administrative expense claims and unsecured claims of any kind against the Debtors and their estates, including, without limitation, claims arising under sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 726, 1113, and 1114 of the Bankruptcy Code (other than the DIP Superpriority Claims and the Carve-Out).

3. Adequate Protection Payments. The Debtors shall make monthly cash payments of current-pay interest on the outstanding aggregate principal amount of the Pre-Petition First Lien Facility held by the Pre-Petition First Lien Lenders other than Driftwood (i.e., on an outstanding aggregate principal amount of $88,000,000) at the non-default contractual interest rate of Adjusted Term SOFR plus 425 basis points per annum. Based on an assumed Adjusted Term SOFR rate of approximately 5.33% as of the Petition Date, the all-in adequate protection interest rate is approximately 9.58% per annum, yielding an estimated monthly adequate protection payment of approximately $702,133. Such adequate protection payments shall be made on the first business day of each calendar month, commencing on the first such date occurring after the date of entry of this Interim Order. All adequate protection payments shall be made to Velthorn, in its capacity as Pre-Petition Agent, for distribution on a pro rata basis to the Pre-Petition First Lien Lenders (other than Driftwood with respect to its rolled-up claims, once the Roll-Up Tranche becomes effective upon entry of the Final DIP Order). Nothing herein shall prejudice any Pre-Petition First Lien Lender's right to seek additional adequate protection at the Final Hearing or at any time thereafter.

4. Adequate Protection Reserve. The sum of $3,500,000 from the proceeds of Draw 1 of the Interim DIP Loan shall be deposited into a segregated, interest-bearing reserve account (the "Adequate Protection Reserve") for the benefit of the Pre-Petition First Lien Lenders (other than Driftwood), to be held and maintained by the Pre-Petition Agent or as otherwise agreed among the Debtors, the DIP Lender, and the Pre-Petition Agent. The Adequate Protection Reserve shall serve as additional security for the Debtors' adequate protection payment obligations to the Pre-Petition First Lien Lenders as set forth herein. Funds on deposit in the Adequate Protection Reserve shall be released to the Pre-Petition First Lien Lenders or returned to the Debtors' estates in accordance with and subject to the terms and conditions of the DIP Credit Agreement and the Final DIP Order. The Adequate Protection Reserve, and any interest accrued thereon, shall be subject to the DIP Liens.

5. Payment of Ad Hoc Group Counsel Fees. As additional adequate protection, the Debtors shall reimburse the reasonable and documented fees and out-of-pocket expenses of Hartwell & Crane LLP, counsel to the Ad Hoc Group of First Lien Lenders (consisting of Velthorn National Bank, N.A. and Pinnacle Credit Partners Fund II, LP, which together hold $66,000,000 in aggregate principal amount, representing 55.0% of the total outstanding Pre-Petition First Lien Facility), in an aggregate amount not to exceed $1,200,000 during the pendency of the DIP Facility. Such fees and expenses shall be payable monthly upon the submission of invoices in summary form (without the requirement to disclose privileged or confidential information) and without the necessity of filing formal fee applications with this Court, subject to the right of the United States Trustee or any party in interest to seek review of such fees and expenses for reasonableness upon appropriate motion and notice.

B. Adequate Protection for Pre-Petition Second Lien Noteholders. As adequate protection for any diminution in the value of the interests of the holders of the Second Lien Notes (the "Pre-Petition Second Lien Noteholders," including Ashford Mezzanine Capital, LP, which holds approximately $30,000,000 of the $45,000,000 in aggregate principal amount of the outstanding Second Lien Notes) in the DIP Collateral, the Pre-Petition Second Lien Noteholders are hereby granted the following adequate protection:

(i) Replacement Liens. The Pre-Petition Second Lien Noteholders are hereby granted valid, binding, continuing, enforceable, and automatically perfected replacement liens on, and security interests in, the DIP Collateral, junior in priority to (a) the DIP Liens, (b) the Carve-Out, (c) the Replacement Liens granted to the Pre-Petition First Lien Lenders pursuant to Section IV.A.1 above, and (d) any other liens as set forth in the DIP Credit Agreement. The replacement liens granted to the Pre-Petition Second Lien Noteholders shall be in the same relative priority as among such noteholders inter se as existed under the Second Lien Indenture and related security documents immediately prior to the Petition Date.

(ii) Section 507(b) Superpriority Claims. The Pre-Petition Second Lien Noteholders are hereby granted allowed superpriority administrative expense claims pursuant to section 507(b) of the Bankruptcy Code, to the extent that the adequate protection provided herein proves to be insufficient to compensate for any diminution in the value of the Pre-Petition Second Lien Noteholders' interests in the DIP Collateral. Such superpriority claims shall be junior in all respects to (a) the DIP Superpriority Claims, (b) the Adequate Protection Superpriority Claims of the Pre-Petition First Lien Lenders, and (c) the Carve-Out.

For the avoidance of doubt, the Pre-Petition Second Lien Noteholders are not entitled to adequate protection payments of current-pay interest under this Interim Order.

V. CARVE-OUT

A. Definition and Amount. As used in this Interim Order, the term "Carve-Out" shall mean and consist of the following:

(i) All fees required to be paid to the Clerk of the United States Bankruptcy Court for the District of Delaware and to the Office of the United States Trustee under 28 U.S.C. § 1930(a), together with interest thereon as required under 31 U.S.C. § 3717, in an aggregate amount not to exceed $250,000 (the "Statutory Fees Carve-Out"); and

(ii) All allowed and unpaid fees and expenses incurred by professional persons retained by the Debtors pursuant to sections 327 or 328 of the Bankruptcy Code and by any Official Committee of Unsecured Creditors (once appointed) pursuant to section 1103 of the Bankruptcy Code, in an aggregate amount not to exceed $2,500,000 (the "Professional Fees Carve-Out"); provided, however, that of the $2,500,000 Professional Fees Carve-Out, no more than $750,000 shall be allocable to or available for the payment of fees and expenses of professional persons retained by any Official Committee of Unsecured Creditors.

The total aggregate Carve-Out shall not exceed $2,750,000. For the avoidance of doubt, the Carve-Out shall not include any fees or expenses of professional persons retained by the DIP Lender (which are provided for separately under Section II.B of this Interim Order) or of Hartwell & Crane LLP, counsel to the Ad Hoc Group of First Lien Lenders (which are provided for separately under Section IV.A.5 of this Interim Order).

B. Carve-Out Priority. The Carve-Out shall be senior in priority to (i) the DIP Liens, (ii) the DIP Superpriority Claims, (iii) the Replacement Liens, (iv) the Adequate Protection Superpriority Claims of the Pre-Petition First Lien Lenders, and (v) all other claims and liens of any kind or nature. The DIP Lender, the Pre-Petition First Lien Lenders, and the Pre-Petition Second Lien Noteholders shall not be entitled to sweep or otherwise recover cash or other proceeds of the DIP Collateral to the extent that such recovery would impair the Carve-Out. Notwithstanding the foregoing, no portion of the Carve-Out may be used to pay any fees or expenses incurred in connection with the investigation, assertion, joinder in, commencement, or prosecution of any claim, counterclaim, action, objection, contest, or proceeding against the DIP Lender, its affiliates, agents, attorneys, advisors, or representatives, or their respective rights, obligations, liens, or claims arising under the DIP Credit Agreement or this Interim Order.

VI. MODIFICATION OF THE AUTOMATIC STAY

The automatic stay imposed under section 362 of the Bankruptcy Code is hereby modified, on an interim basis, to the extent necessary to permit the following:

(i) The DIP Lender to exercise all rights and remedies available to it under the DIP Credit Agreement, the DIP Documents, this Interim Order, and applicable non-bankruptcy law upon the occurrence and during the continuance of an Event of Default under the DIP Credit Agreement, subject in all respects to the notice and cure provisions set forth in the DIP Credit Agreement and any applicable provision of the Final DIP Order, including, without limitation, the right to (a) declare all DIP Obligations immediately due and payable, (b) terminate any remaining commitment under the DIP Facility, (c) set off any amounts owed to the DIP Lender against any deposits or other amounts held by the DIP Lender or its affiliates for the account of the Debtors, and (d) exercise remedies against the DIP Collateral, in each case subject to the five (5) business day notice period set forth in Section VII below;

(ii) The Debtors to grant the DIP Liens, incur the DIP Obligations, and perform all of their respective obligations under the DIP Credit Agreement, the DIP Documents, and this Interim Order, including, without limitation, the payment of interest, fees, costs, expenses, and other amounts as and when due thereunder; and

(iii) The Pre-Petition Agent and the Pre-Petition First Lien Lenders to receive adequate protection payments and all other amounts to which they are entitled pursuant to Section IV of this Interim Order.

No other modification of the automatic stay is authorized or effected by this Interim Order. Nothing in this Interim Order shall authorize the Pre-Petition First Lien Lenders or the Pre-Petition Second Lien Noteholders to exercise any remedies against the Debtors or the DIP Collateral, or shall constitute a modification of the automatic stay for any purpose other than as expressly set forth herein.

VII. EVENTS OF DEFAULT AND REMEDIES

The Events of Default under the DIP Credit Agreement are hereby acknowledged and incorporated herein by reference, and include, without limitation, the following:

(i) Failure by the Debtors to comply with any Milestone set forth in the DIP Credit Agreement within the time period specified therein (as may be extended with the prior written consent of the DIP Lender);

(ii) Variance from the Approved Budget exceeding the permitted thresholds (i.e., revenue variance exceeding ±10% or disbursement variance exceeding ±15%), in each case tested on a cumulative bi-weekly basis;

(iii) Failure by the Debtors to make any adequate protection payment when due in accordance with Section IV of this Interim Order and the DIP Credit Agreement;

(iv) Entry of an order by this Court or any other court of competent jurisdiction converting these Chapter 11 cases to cases under Chapter 7 of the Bankruptcy Code, or dismissing these Chapter 11 cases;

(v) The appointment of a Chapter 11 trustee in these cases or the appointment of an examiner with expanded powers (beyond those set forth in section 1106(a)(3) and (4) of the Bankruptcy Code) in these cases;

(vi) Any material breach by the Debtors of any representation, warranty, covenant, or other obligation under the DIP Credit Agreement, the DIP Documents, or this Interim Order; and

(vii) Any other Event of Default as defined in the DIP Credit Agreement.

Upon the occurrence and during the continuance of an Event of Default, and after the expiration of any applicable notice and cure period set forth in the DIP Credit Agreement, the DIP Lender may exercise all rights and remedies available to it under the DIP Credit Agreement, the DIP Documents, this Interim Order, and applicable law, including, without limitation, (a) the acceleration of all DIP Obligations, (b) the termination of any remaining commitment under the DIP Facility, and (c) the exercise of remedies against the DIP Collateral. Provided, however, that the DIP Lender shall provide not less than five (5) business days' prior written notice (the "Remedies Notice Period") to the Debtors, counsel to the Debtors, the Office of the United States Trustee, and counsel to any official committee appointed in these cases, before taking any enforcement action against the DIP Collateral (including, without limitation, foreclosure, seizure, or attachment). During the Remedies Notice Period, the Debtors and any other party in interest may seek an emergency hearing before this Court to contest the existence or continuation of the Event of Default or to seek other appropriate relief, and the automatic stay shall remain in effect to the extent not otherwise modified by this Interim Order. For the avoidance of doubt, the five (5) business day Remedies Notice Period shall not apply to the DIP Lender's right to (x) declare all DIP Obligations immediately due and payable or (y) terminate the commitment under the DIP Facility, each of which may be exercised immediately upon the occurrence of an Event of Default (subject to any applicable cure period under the DIP Credit Agreement).

VIII. LIMITATIONS ON USE OF DIP PROCEEDS AND CARVE-OUT

Notwithstanding anything in this Interim Order, the DIP Credit Agreement, or any other order of this Court to the contrary, no proceeds of the DIP Facility, the Carve-Out, or any cash collateral of the Pre-Petition First Lien Lenders or the Pre-Petition Second Lien Noteholders may be used, directly or indirectly, to:

(i) Object to, contest, challenge, or raise any defense to the validity, perfection, priority, extent, or enforceability of the DIP Liens, the DIP Superpriority Claims, or any of the obligations arising under the DIP Facility, the DIP Credit Agreement, or the DIP Documents, or to assert any claims or causes of action seeking avoidance, reduction, subordination, recharacterization, disallowance, or impairment of any of the foregoing;

(ii) Assert, investigate (except as expressly provided below), prosecute, join in, commence, or support any claim, counterclaim, cause of action, objection, contest, or proceeding against the DIP Lender, its affiliates, partners, members, managers, directors, officers, employees, agents, attorneys, advisors, or representatives, arising out of or relating to the DIP Facility, the DIP Credit Agreement, the DIP Documents, or this Interim Order; provided, however, that the Official Committee of Unsecured Creditors (once appointed) may use up to $50,000 of the Carve-Out solely to investigate (but not to prosecute, without first obtaining further order of this Court) potential claims and causes of action against the DIP Lender arising out of or in connection with the DIP Facility, the DIP Lender's pre-petition conduct, or the DIP Lender's pre-petition claims; or

(iii) Seek to modify, amend, stay, vacate, or otherwise alter any of the rights, remedies, liens, priorities, protections, or other benefits granted to the DIP Lender under this Interim Order, the DIP Credit Agreement, or the DIP Documents, without the DIP Lender's prior written consent.

IX. RESERVATION OF RIGHTS REGARDING ROLL-UP AND CHALLENGE PERIOD

The Roll-Up Tranche, in the aggregate principal amount of $32,000,000, which would convert Driftwood's pre-petition first lien claims under the Pre-Petition First Lien Facility into obligations under the DIP Facility on a dollar-for-dollar basis, is not authorized by this Interim Order. The Roll-Up Tranche shall not become effective, and Driftwood's pre-petition first lien claims shall not be deemed rolled up into the DIP Facility, unless and until the Court enters the Final DIP Order expressly approving the Roll-Up Tranche.

Nothing in this Interim Order shall prejudice, impair, or otherwise affect the right of any party in interest, including, without limitation, any Official Committee of Unsecured Creditors (once appointed), the Pre-Petition First Lien Lenders, the Pre-Petition Second Lien Noteholders, the United States Trustee, or any other creditor or party in interest, to object to the Roll-Up Tranche, Draw 2, or any other provision of the DIP Facility at the Final Hearing.

The Challenge Period provisions, pursuant to which (a) the Official Committee of Unsecured Creditors (once appointed) shall have a period of seventy-five (75) days from the date of its appointment (or such longer period as may be ordered by the Court) to investigate and, if warranted, to commence a challenge proceeding contesting the validity, extent, priority, perfection, or enforceability of the pre-petition liens and claims of any Pre-Petition Lender, including Driftwood, and to challenge the Roll-Up Tranche, and (b) other parties in interest shall have a period of sixty (60) days from the date of entry of the Final DIP Order (or such longer period as may be ordered by the Court) to investigate and challenge such liens, claims, and the Roll-Up Tranche, shall be established by the Final DIP Order and are not the subject of this Interim Order.

Entry of this Interim Order shall not constitute a finding, determination, or ruling by this Court as to the validity, extent, perfection, or priority of the pre-petition liens, security interests, or claims of any Pre-Petition Lender, including Driftwood, or of the Pre-Petition Second Lien Noteholders, except as expressly set forth herein with respect to the interim adequate protection package granted to the Pre-Petition First Lien Lenders and the Pre-Petition Second Lien Noteholders. All rights of all parties in interest with respect to the foregoing are expressly reserved and preserved.

X. BINDING EFFECT; SUCCESSORS AND ASSIGNS

This Interim Order shall be binding upon and shall inure to the benefit of the DIP Lender, the Debtors, the Pre-Petition Agent, the Pre-Petition First Lien Lenders, the Pre-Petition Second Lien Noteholders, Zynvaro Trust Company (in its capacity as Second Lien Indenture Trustee), any official committee appointed in these cases, all creditors of the Debtors, and all other parties in interest, and their respective successors, assigns, heirs, executors, administrators, and representatives. The provisions of this Interim Order and any actions taken pursuant hereto shall survive the entry of any order (i) confirming a Chapter 11 plan in these cases, (ii) converting these Chapter 11 cases to cases under Chapter 7 of the Bankruptcy Code, or (iii) dismissing these Chapter 11 cases. The DIP Liens, the DIP Superpriority Claims, the Replacement Liens, and the Adequate Protection Superpriority Claims shall remain valid, binding, enforceable, and fully perfected against any trustee or other fiduciary appointed in these cases or in any successor cases, and against the Debtors, their estates, and all creditors and parties in interest.

XI. NO WAIVER OF PRE-PETITION LENDER RIGHTS

Nothing in this Interim Order shall be deemed a waiver, release, relinquishment, or other modification of any rights, claims, defenses, setoff rights, or counterclaims of the Pre-Petition First Lien Lenders, the Pre-Petition Agent, the Pre-Petition Second Lien Noteholders, the Second Lien Indenture Trustee, or any other party in interest, whether arising under the Pre-Petition First Lien Credit Agreement, the Second Lien Indenture, applicable law, or otherwise, except as expressly set forth herein. Without limiting the generality of the foregoing, the Pre-Petition First Lien Lenders, the Pre-Petition Second Lien Noteholders, and any party in interest expressly reserve all rights to object to the DIP Facility, including, without limitation, the Roll-Up Tranche, the terms of the DIP Credit Agreement, and any other provision thereof, at the Final Hearing. The receipt of adequate protection by any Pre-Petition Lender shall not be deemed an acceptance of or consent to the terms of the DIP Facility or a waiver of any right to object to the DIP Facility at the Final Hearing or at any other time.

XII. SECTION 506(c) WAIVER

Subject to the entry of the Final DIP Order, no costs or expenses of administration of these Chapter 11 cases or any successor cases, including, without limitation, costs or expenses arising under section 506(c) of the Bankruptcy Code, shall be charged against or recovered from the DIP Lender, the DIP Collateral, or the Pre-Petition Collateral (as defined in the Pre-Petition First Lien Credit Agreement), without the prior written consent of the DIP Lender and the Pre-Petition Agent. The Debtors and all parties in interest (other than as expressly preserved for the Final Hearing) hereby waive, on an interim basis, any and all rights to surcharge the DIP Collateral or the Pre-Petition Collateral under section 506(c) of the Bankruptcy Code or any other applicable law. Nothing in this paragraph shall prejudice the right of any party in interest to object to the scope of this waiver at the Final Hearing.

XIII. SECTION 552(b) APPLICABILITY

The DIP Lender and the Pre-Petition Secured Lenders (including the Pre-Petition First Lien Lenders and the Pre-Petition Second Lien Noteholders) shall be entitled to all of the rights and benefits of section 552(b) of the Bankruptcy Code with respect to the DIP Collateral and the Pre-Petition Collateral, as applicable. The "equities of the case" exception set forth in section 552(b)(1) of the Bankruptcy Code shall not apply to the DIP Liens, the Replacement Liens, or any other liens or security interests granted or recognized under this Interim Order, and no party in interest shall assert or seek to apply such exception against the DIP Lender or any Pre-Petition Secured Lender with respect to such liens or security interests.

XIV. GOOD FAITH UNDER SECTION 364(e)

The Court finds and determines that the DIP Lender has extended credit to the Debtors under the DIP Facility and has acted in good faith in connection with the negotiation, documentation, and approval of the DIP Facility, the DIP Credit Agreement, and this Interim Order, within the meaning of section 364(e) of the Bankruptcy Code. The DIP Lender is entitled to all of the protections afforded to a good-faith lender under section 364(e) of the Bankruptcy Code. The Court further finds that the terms of the DIP Credit Agreement, including, without limitation, the interest rate (Adjusted Term SOFR plus 900 basis points per annum, with a minimum all-in rate of 13.00%), the commitment fee ($1,500,000), the exit fee (1.50% of amounts drawn, estimated at $1,125,000 if the DIP Facility is fully drawn), the unused line fee, and all other fees, charges, and economic terms, are fair, reasonable, and the best terms available to the Debtors under the prevailing market conditions and the Debtors' financial circumstances, and reflect arm's-length negotiations between the Debtors and the DIP Lender.

In the event that any or all of the provisions of this Interim Order are hereafter reversed, modified, amended, or vacated by a subsequent order of this Court or any other court, such reversal, modification, amendment, or vacatur shall not affect the validity, enforceability, or perfection of any DIP Liens, DIP Superpriority Claims, or any other obligations or liens incurred, granted, or authorized prior to the date of such reversal, modification, amendment, or vacatur. Any DIP Obligations incurred by the Debtors to the DIP Lender prior to the effective date of any such reversal, modification, amendment, or vacatur shall be governed by the original terms of the DIP Credit Agreement, this Interim Order, and any applicable Final DIP Order.

XV. NO MARSHALING; NO EQUITABLE SUBORDINATION

The DIP Lender shall not be subject to the equitable doctrine of marshaling or any similar doctrine with respect to the DIP Collateral, the Pre-Petition Collateral, or any other assets of the Debtors' estates, and no party in interest shall assert or seek to apply any such doctrine against the DIP Lender. The DIP Liens, the DIP Superpriority Claims, and all other rights and protections granted to the DIP Lender under this Interim Order shall not be subject to equitable subordination under section 510(c) of the Bankruptcy Code or under any other provision of applicable law, and no party in interest shall assert or seek to apply any theory of equitable subordination or equitable disallowance against the DIP Lender with respect to the DIP Obligations, the DIP Liens, or the DIP Superpriority Claims.

XVI. REPORTING OBLIGATIONS

The Debtors shall comply with all reporting obligations set forth in the DIP Credit Agreement, including, without limitation, the following:

(i) Delivery of updated 13-week rolling cash flow budgets (i.e., updated Approved Budgets) every four (4) weeks, in form and substance satisfactory to the DIP Lender;

(ii) Delivery of variance reports comparing actual results to the Approved Budget, tested on a cumulative bi-weekly basis, within five (5) business days following the end of each bi-weekly testing period; and

(iii) Delivery of monthly unaudited financial statements of the Debtors (on a consolidated and consolidating basis), including balance sheets, income statements, and cash flow statements, within twenty (20) days following the end of each calendar month.

Copies of all reports, budgets, variance analyses, and financial statements required to be delivered under this Section XVI shall be provided simultaneously to the DIP Lender, the Pre-Petition Agent, counsel to any official committee appointed in these cases, and the Office of the United States Trustee for the District of Delaware. The DIP Lender and the Pre-Petition Agent shall have the right to request reasonable access to the Debtors' books and records and to communicate with the Debtors' management, financial advisors, and professionals in connection with the Debtors' compliance with the DIP Credit Agreement and this Interim Order.

XVII. FINAL HEARING

A. Scheduling. A final hearing on the DIP Motion (the "Final Hearing") shall be held on October 13, 2023, at 10:00 a.m. (Eastern Time) before the Honorable Karen F. McAllister, United States Bankruptcy Judge, in Courtroom No. 5 of the United States Bankruptcy Court for the District of Delaware, 824 North Market Street, Wilmington, Delaware 19801, or at such other date and time as the Court may designate.

B. Notice of Final Hearing and Objection Deadline. Within three (3) business days following entry of this Interim Order, the Debtors shall serve notice of the Final Hearing and a copy of this Interim Order, together with the DIP Credit Agreement and all exhibits thereto, upon the following parties:

(i) the Office

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
INTERIM ORDER (I) AUTHORIZING THE DEBTORS TO OBTAIN SENIOR SECURED SUPERPRIORITY DEBTOR-IN-POSSESSION FINANCING PURSUANT TO 11 U.S.C. §§ 105, 361, 362, 364(c)(1), 364(c)(2), 364(c)(3), AND 364(d); (II) GRANTING INTERIM PRIMING LIENS AND SUPERPRIORITY ADMINISTRATIVE EXPENSE CLAIMS; (III) GRANTING ADEQUATE PROTECTION TO PRE-PETITION SECURED LENDERS; (IV) MODIFYING THE AUTOMATIC STAY; AND (V) SCHEDULING A FINAL HEARING
Upon the motion (the "DIP Motion") of the above-captioned debtors and debtors in possession (collectively, the "Debtors") for entry of interim and final orders, pursuant to sections 105, 361, 362, 363, 364(c)(1), 364(c)(2), 364(c)(3), and 364(d) of title 11 of the United States Code (the "Bankruptcy Code"), Rules 2002, 4001(b), 4001(c), and 4001(d) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and Rules 2002-1 and 4001-2 of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the "Local Rules"), authorizing the Debtors to obtain senior secured superpriority debtor-in-possession financing, granting interim priming liens and superpriority administrative expense claims, granting adequate protection to pre-petition secured lenders, modifying the automatic stay, and scheduling a final hearing; and the Court having reviewed the DIP Motion, the declarations filed in support thereof, the DIP Credit Agreement (as defined below) and all exhibits and schedules thereto, and all objections filed, if any; and the Court having held an interim hearing on September 15, 2023 (the "Interim Hearing"); and the Court having considered the evidence presented at the Interim Hearing, the arguments of counsel, and the record in these Chapter 11 cases; and due and sufficient notice of the DIP Motion and the Interim Hearing having been given under the circumstances; and it appearing that the relief requested in the DIP Motion on an interim basis is in the best interests of the Debtors, their estates, their creditors, and all other parties in interest; and after due deliberation and good and sufficient cause appearing therefor;
RECITALS
THE COURT HEREBY FINDS AND DETERMINES AS FOLLOWS:
A. Filing and Jurisdiction. On September 8, 2023 (the "Petition Date"), each of Cascabel Financial Holdings, Inc. ("CFH"), a Delaware corporation, and Cascabel Asset Management LLC ("CAM," and together with CFH, the "Debtors"), a Delaware limited liability company, filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in this Court, thereby commencing these Chapter 11 cases. The Debtors continue to operate their respective businesses and manage their respective properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or other fiduciary has been appointed in these Chapter 11 cases. Ridgeline Community Bank, a Delaware state-chartered commercial bank and a wholly owned subsidiary of CFH (the "Bank Subsidiary"), was excluded from the Chapter 11 filing and continues to operate outside of bankruptcy under the ongoing regulatory supervision of the Delaware Office of the State Bank Commissioner (the "DOSBC") and the Federal Deposit Insurance Corporation (the "FDIC"). This Court has jurisdiction over these Chapter 11 cases and the DIP Motion pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference of the United States District Court for the District of Delaware, dated as of February 29, 2012. This matter constitutes a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409.
B. The Motion. On the Petition Date, the Debtors filed the Motion of the Debtors for Entry of Interim and Final Orders Authorizing Debtor-in-Possession Financing, Granting Priming Liens, and Approving Roll-Up [Dkt. No. 12] (the "DIP Motion"). The DIP Motion was prepared by Calderwood & Harkness LLP, counsel to Driftwood Absolute Return Fund Ltd. (the "DIP Lender"), in coordination with Whitfield, Graves & Sato LLP, counsel to the Debtors (lead partner Jonathan R. Whitfield; lead associate Rachel P. Dumont). In connection with the DIP Motion, the Debtors sought authority to enter into that certain Senior Secured Superpriority Debtor-in-Possession Credit Agreement (together with all exhibits, schedules, annexes, and amendments thereto, the "DIP Credit Agreement"), by and between the Debtors, as borrowers, and Driftwood Absolute Return Fund Ltd. ("Driftwood" or the "DIP Lender"), a Cayman Islands exempted company with its principal office located at 280 Park Avenue, 38th Floor, New York, New York 10017, as lender, substantially in the form attached to the DIP Motion as Exhibit A.
C. The DIP Facility. The DIP Credit Agreement provides for a senior secured superpriority debtor-in-possession credit facility in the aggregate principal amount of $75,000,000 (the "DIP Facility"), structured as follows:
(i) A new money tranche in the aggregate principal amount of $43,000,000 (the "New Money DIP Tranche"), to be made available in two draws:
(a) Draw 1 (the "Interim Draw"): $18,000,000 in aggregate principal amount, available upon entry of this Interim Order; and
(b) Draw 2 (the "Final Draw"): $25,000,000 in aggregate principal amount, available upon entry of the Final DIP Order (as defined herein); and
(ii) A roll-up tranche in the aggregate principal amount of $32,000,000 (the "Roll-Up Tranche"), which will convert Driftwood's pre-petition first lien claims under the Pre-Petition First Lien Facility (as defined below) on a dollar-for-dollar basis into obligations under the DIP Facility upon entry of the Final DIP Order.
This Interim Order authorizes borrowing only under Draw 1 in the amount of $18,000,000. The Roll-Up Tranche and Draw 2 shall not become effective unless and until the Court enters the Final DIP Order, as more fully set forth herein and in the DIP Credit Agreement.
D. The Pre-Petition Secured Debt. The Debtors are parties to that certain Credit Agreement, dated as of January 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Pre-Petition First Lien Credit Agreement"), among the Debtors, as borrowers, the lenders party thereto from time to time (collectively, the "Pre-Petition First Lien Lenders"), and Velthorn National Bank, N.A. ("Velthorn"), as administrative agent (in such capacity, the "Pre-Petition Agent"), providing for a $120,000,000 senior secured first lien term loan facility (the "Pre-Petition First Lien Facility"), maturing January 15, 2026, and bearing interest at a rate of Adjusted Term SOFR plus 425 basis points per annum. As of the Petition Date, the outstanding principal balance under the Pre-Petition First Lien Facility was $120,000,000, held by the following Pre-Petition First Lien Lenders:
In addition to the Pre-Petition First Lien Facility, the Debtors are obligors under $45,000,000 in aggregate principal amount of 10.50% Senior Secured Second Lien Notes due 2027 (the "Second Lien Notes"), issued pursuant to that certain Indenture, dated as of June 1, 2022 (the "Second Lien Indenture"), by and among the Debtors, as issuers, and Zynvaro Trust Company, as indenture trustee (in such capacity, the "Second Lien Indenture Trustee"). The Second Lien Notes are secured by second-priority liens on substantially the same collateral securing the Pre-Petition First Lien Facility, subject to the terms of that certain Intercreditor Agreement, dated as of June 1, 2022, by and among the Pre-Petition Agent, the Second Lien Indenture Trustee, and the Debtors. The Debtors also have outstanding $18,500,000 in aggregate principal amount of unsecured notes bearing interest at a fixed rate of 8.00% per annum, maturing March 1, 2025 (the "Unsecured Notes"). As of the Petition Date, the Debtors' total pre-petition funded debt obligations aggregated approximately $183,500,000.
E. Debtors' Financial Condition. As of the Petition Date, the Debtors had total consolidated assets of approximately $620,000,000 and total consolidated liabilities of approximately $710,000,000, reflecting a negative consolidated equity position of approximately $90,000,000. Ridgeline Community Bank, the Bank Subsidiary, had total deposits of approximately $385,000,000 as of the Petition Date. CAM managed approximately $1,200,000,000 in client assets under management across its various advisory mandates. The Debtors' financial distress was precipitated by a confluence of adverse factors, including: (i) concentrated commercial real estate loan losses at Ridgeline Community Bank; (ii) the failed acquisition of a financial technology lending platform in the fourth quarter of 2022, which resulted in significant write-downs and impairments; and (iii) a severe liquidity crisis triggered by depositor outflows at Ridgeline Community Bank during the first and second quarters of 2023, exacerbated by broader market concerns regarding the stability of regional and community banking institutions.
F. Driftwood's Pre-Petition Position. Driftwood acquired $32,000,000 in face value of participations and assignments under the Pre-Petition First Lien Facility on the secondary market during the period from March 2023 through July 2023, at an average purchase price of $0.68 per dollar of face value, representing an aggregate cost basis of approximately $21,760,000. As of the Petition Date, Driftwood's $32,000,000 in aggregate principal amount of claims under the Pre-Petition First Lien Facility constitutes approximately 26.67% of the total $120,000,000 outstanding under the Pre-Petition First Lien Facility.
G. Need for DIP Financing. The Debtors have demonstrated, and the Court finds, that the Debtors have an immediate and critical need for access to post-petition financing to (i) fund ongoing operations and maintain the value of their assets pending a restructuring, (ii) satisfy costs of administration of these Chapter 11 cases, (iii) make adequate protection payments as set forth herein, and (iv) preserve going-concern value for the benefit of all stakeholders. Solstice Partners LLC (the Debtors' investment banker, David R. Chin, Managing Director) conducted a pre-petition marketing process for debtor-in-possession financing commencing on or about August 10, 2023, in which multiple potential DIP lenders were contacted and solicited. Based on the proposals received, the DIP Facility proposed by Driftwood was determined by Solstice Partners LLC and the Debtors to be on the best available terms, taking into account all relevant factors including pricing, structure, flexibility, and overall economics. Alderpoint Advisory Partners LLC, the Debtors' financial advisor, through Terrence M. Kowalski, the Debtors' Chief Restructuring Officer (appointed by the board of directors of CFH on August 25, 2023), has reviewed the DIP Facility and the terms of the DIP Credit Agreement and has expressed support for its approval as being in the best interests of the Debtors' estates.
H. Interim Hearing. The Court held the Interim Hearing on the DIP Motion on September 15, 2023. Notice of the DIP Motion and the Interim Hearing was provided in accordance with Bankruptcy Rules 2002, 4001(b), 4001(c), and 4001(d), the Local Rules, and the emergency hearing procedures of this Court, including by service upon the United States Trustee for the District of Delaware, the Pre-Petition Agent, counsel to each of the Pre-Petition First Lien Lenders, the Second Lien Indenture Trustee, the holders of the thirty (30) largest unsecured claims, and all other parties entitled to notice under the applicable rules and orders of this Court. Such notice was sufficient and adequate under the circumstances, and no further notice of the Interim Hearing is or shall be required.
I. Findings of Good Cause. Good cause has been shown for entry of this Interim Order pursuant to Bankruptcy Rules 4001(b)(2) and 4001(c)(2). The Court finds that:
(i) The Debtors were unable to obtain sufficient unsecured credit allowable as an administrative expense under section 503(b)(1) of the Bankruptcy Code, or credit or indebtedness under section 364(c) of the Bankruptcy Code alone, on terms reasonably acceptable to the Debtors and consistent with their fiduciary obligations. The Debtors demonstrated that multiple alternative sources of post-petition financing were explored and that no willing lender was prepared to extend post-petition credit to the Debtors on an unsecured or junior secured basis on terms comparable to or better than those offered by the DIP Lender.
(ii) The Debtors exercised sound and reasonable business judgment in selecting the DIP Facility proposed by Driftwood, and such selection was the product of arm's-length negotiations between the Debtors and the DIP Lender and was informed by the competitive process conducted by the Debtors' investment banker.
(iii) The terms of the DIP Facility, including the interest rate, commitment fee, exit fee, and other charges and fees, are fair and reasonable and reflect the Debtors' current financial circumstances, the risks inherent in extending post-petition credit to the Debtors, the nature and extent of the collateral package, and prevailing conditions in the market for debtor-in-possession financing.
(iv) The DIP Facility is essential to the Debtors' ability to preserve value, maintain operations, and pursue an orderly restructuring for the benefit of all stakeholders, and entry of this Interim Order is necessary to prevent immediate and irreparable harm to the Debtors' estates.
(v) The adequate protection provided to the Pre-Petition First Lien Lenders and the Pre-Petition Second Lien Noteholders pursuant to this Interim Order is sufficient to protect their interests in the DIP Collateral against any diminution in value resulting from the priming liens granted herein, the use of cash collateral, and the imposition of the automatic stay.
NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED AS FOLLOWS:
I. AUTHORIZATION OF INTERIM DIP BORROWING
A. Authorization. The Debtors are hereby authorized and empowered, pursuant to sections 105, 361, 362, 364(c)(1), 364(c)(2), 364(c)(3), and 364(d)(1) of the Bankruptcy Code, to borrow up to $18,000,000 in aggregate principal amount (the "Interim DIP Loan") under the New Money DIP Tranche of the DIP Credit Agreement from the DIP Lender on an interim basis, subject to and in accordance with the terms and conditions of this Interim Order and the DIP Credit Agreement. The Debtors are further authorized and empowered to execute and deliver the DIP Credit Agreement, substantially in the form attached to the DIP Motion as Exhibit A, and all related documents, instruments, promissory notes, security agreements, pledges, guarantees, and other agreements contemplated thereby or necessary or desirable in connection therewith (collectively, the "DIP Documents"), and to perform all obligations required thereunder. Each of the Debtors' officers is authorized to execute and deliver the DIP Documents on behalf of the respective Debtor, and all actions heretofore taken by any officer, director, agent, or representative of the Debtors in furtherance of the DIP Facility, including any actions taken prior to the entry of this Interim Order, are hereby ratified, confirmed, and approved in all respects.
B. DIP Credit Agreement Terms Approved on Interim Basis. The following material terms and conditions of the DIP Credit Agreement are hereby approved on an interim basis, subject to the entry of the Final DIP Order:
(i) Interest Rate. The Interim DIP Loan shall bear interest at a rate per annum equal to Adjusted Term SOFR (as defined in the DIP Credit Agreement) plus 900 basis points, with a SOFR floor of 4.00%, resulting in a minimum all-in interest rate of 13.00% per annum. Interest shall be payable monthly in arrears in cash on the first business day of each calendar month, commencing on the first such date occurring after the initial draw under the DIP Facility.
(ii) Default Rate. Upon the occurrence and during the continuance of an Event of Default (as defined in the DIP Credit Agreement), the outstanding principal balance and all other amounts due under the DIP Facility shall bear interest at an additional rate of 200 basis points per annum above the otherwise applicable rate (i.e., Adjusted Term SOFR plus 1,100 basis points, with a minimum all-in default rate of 15.00% per annum).
(iii) Commitment Fee. A non-refundable commitment fee in the amount of 2.00% of the total $75,000,000 DIP commitment, equaling $1,500,000, shall be deemed fully earned upon entry of this Interim Order and shall be payable from the proceeds of Draw 1 on the date of the initial borrowing under the DIP Facility.
(iv) Exit Fee. An exit fee in the amount of 1.50% of all amounts drawn under the DIP Facility shall be due and payable upon the earliest to occur of (a) the stated maturity of the DIP Facility, (b) the repayment in full of all outstanding obligations under the DIP Facility, or (c) the acceleration of the DIP Facility following an Event of Default (the "Exit Fee"). Based on the Interim DIP Loan amount of $18,000,000, the Exit Fee attributable to the Interim DIP Loan would equal $270,000; provided that the Exit Fee shall be recalculated upon any additional draws under the DIP Facility. In the event the full $75,000,000 DIP Facility is drawn, the Exit Fee shall equal $1,125,000.
(v) Unused Line Fee. An unused line fee in the amount of 0.50% per annum shall accrue on the undrawn and uncommitted portion of the New Money DIP Tranche, calculated on the basis of the actual number of days elapsed and a 360-day year, and payable quarterly in arrears.
(vi) Maturity. The DIP Facility shall mature on the earliest of (a) September 8, 2024 (twelve months from the Petition Date), (b) the effective date of a confirmed Chapter 11 plan in these cases, (c) the date of consummation of a sale of substantially all of the Debtors' assets pursuant to section 363 of the Bankruptcy Code, or (d) the date on which the DIP Facility is accelerated or the commitment thereunder is terminated following an Event of Default in accordance with the terms of the DIP Credit Agreement (the "Maturity Date").
(vii) Budget. The Debtors shall maintain a 13-week rolling cash flow budget (the "Approved Budget"), which shall be updated every four (4) weeks and delivered to the DIP Lender, the Pre-Petition Agent, counsel to any official committee appointed in these cases, and the United States Trustee. The permitted variance from the Approved Budget shall be ±10% on revenue line items and ±15% on disbursement line items, in each case tested on a cumulative bi-weekly basis. The initial Approved Budget is attached to the DIP Credit Agreement as Exhibit B.
The DIP Credit Agreement and all of the terms, conditions, covenants, representations, warranties, and other provisions thereof are hereby approved on an interim basis, subject to final approval by the Court upon entry of the Final DIP Order. The Debtors are authorized and directed to comply with and perform all obligations under the DIP Credit Agreement and the DIP Documents.
C. Use of Interim DIP Loan Proceeds. The proceeds of the Interim DIP Loan shall be used solely in accordance with the DIP Credit Agreement and the Approved Budget, and for no other purposes. Without limiting the foregoing, the proceeds of the Interim DIP Loan shall be applied as follows:
(i) Payment of the $1,500,000 non-refundable commitment fee to the DIP Lender on the date of the initial draw under the DIP Facility;
(ii) Funding of the $3,500,000 adequate protection reserve (the "Adequate Protection Reserve") for the benefit of the Pre-Petition First Lien Lenders (other than Driftwood in its capacity as DIP Lender), as more fully described in Section IV below;
(iii) Working capital and general corporate purposes of the Debtors in the ordinary course of business, excluding Ridgeline Community Bank, whose assets are subject to regulatory restrictions imposed by the DOSBC and the FDIC and shall not be available to fund the Debtors' Chapter 11 cases;
(iv) Payment of costs of administration of these Chapter 11 cases, including professional fees and expenses of professionals retained by the Debtors and any official committee appointed in these cases, in each case subject to the limitations of the Carve-Out (as defined herein) and in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, and orders of this Court; and
(v) Payment of adequate protection obligations as set forth in Section IV of this Interim Order.
Under no circumstances shall the proceeds of the Interim DIP Loan be used for any purpose not authorized by this Interim Order or the DIP Credit Agreement, including any purpose prohibited by Section VIII of this Interim Order.
D. Milestones. The DIP Credit Agreement contains certain milestones (the "Milestones") with which the Debtors are required to comply as a condition to the continued availability of the DIP Facility. The Court acknowledges the following Milestones, which are incorporated herein by reference and with which the Debtors have complied or shall be required to comply:
(i) Interim DIP Order. This Interim Order shall be entered within five (5) business days of the Petition Date. The entry of this Interim Order on September 15, 2023 satisfies this Milestone.
(ii) Final DIP Order. A final order approving the DIP Facility in its entirety, including the Roll-Up Tranche and Draw 2 (the "Final DIP Order"), shall be entered within thirty-five (35) days of the Petition Date (i.e., on or before October 13, 2023).
(iii) Filing of Plan and Disclosure Statement. The Debtors shall file a Chapter 11 plan of reorganization and an accompanying disclosure statement within ninety (90) days of the Petition Date.
(iv) Confirmation Order. An order confirming the Debtors' Chapter 11 plan of reorganization (the "Confirmation Order") shall be entered within one hundred fifty (150) days of the Petition Date.
(v) Plan Effective Date. The effective date of the confirmed Chapter 11 plan shall occur within one hundred eighty (180) days of the Petition Date.
Failure to satisfy any Milestone within the time period specified above (as may be extended with the prior written consent of the DIP Lender) shall constitute an Event of Default under the DIP Credit Agreement.
II. SUPERPRIORITY ADMINISTRATIVE EXPENSE CLAIMS
A. DIP Superpriority Claims. Pursuant to section 364(c)(1) of the Bankruptcy Code, all obligations of the Debtors arising under the DIP Facility, the DIP Credit Agreement, and the DIP Documents, including all principal, interest (including default interest), fees (including the commitment fee, exit fee, and unused line fee), costs, expenses, indemnification obligations, and all other amounts due thereunder (collectively, the "DIP Obligations"), shall constitute allowed superpriority administrative expense claims against each of the Debtors and their respective estates (the "DIP Superpriority Claims"). The DIP Superpriority Claims shall have priority over all administrative expense claims and all unsecured claims of any kind or nature whatsoever against the Debtors and their estates, whether now existing or hereafter arising, of the kind specified in or ordered pursuant to sections 105, 326, 328, 330, 331, 365, 503(b), 506(c), 507(a), 507(b), 726, 1113, and 1114 of the Bankruptcy Code, or otherwise, whether or not such claims may become allowed claims under section 502 of the Bankruptcy Code. The DIP Superpriority Claims shall be subject and subordinate only to the Carve-Out (as defined in Section V below). No claim having a priority superior to or pari passu with the DIP Superpriority Claims shall be granted or allowed in these Chapter 11 cases or any successor cases at any time, unless the DIP Lender shall have provided its prior written consent.
B. DIP Lender Professional Fees. All reasonable and documented fees and out-of-pocket expenses of Calderwood & Harkness LLP, as counsel to the DIP Lender, incurred in connection with the negotiation, documentation, approval, administration, enforcement, and protection of the DIP Facility, the DIP Credit Agreement, and the DIP Lender's rights hereunder and thereunder, shall be reimbursed by the Debtors' estates as administrative expenses pursuant to section 11.04 of the DIP Credit Agreement. Such fees and expenses shall be payable by the Debtors promptly upon presentation of invoices in summary form (without the requirement to disclose privileged or confidential information), without the necessity of filing formal fee applications with this Court and without further order of this Court. The foregoing is without prejudice to the right of the United States Trustee or any party in interest to seek review of such fees and expenses for reasonableness upon appropriate motion and notice, provided that payment of such fees and expenses shall not be delayed pending resolution of any such motion.
III. INTERIM PRIMING LIENS
A. Grant of DIP Liens. Pursuant to sections 364(c)(2), 364(c)(3), and 364(d)(1) of the Bankruptcy Code, as security for the DIP Obligations, the DIP Lender is hereby granted, effective as of the date of this Interim Order and on an interim basis, valid, binding, continuing, enforceable, fully perfected, first priority senior priming liens on, and security interests in, substantially all assets of the Debtors, whether now existing or hereafter acquired (collectively, the "DIP Collateral"), including, without limitation, the following:
(i) all personal property of the Debtors, whether tangible or intangible, including, without limitation, all accounts, chattel paper, commercial tort claims, deposit accounts, documents, equipment, financial assets, general intangibles (including payment intangibles and software), goods, instruments, intellectual property (including patents, trademarks, copyrights, trade secrets, and licenses), inventory, investment property, letter-of-credit rights, money, securities, and supporting obligations;
(ii) all real property interests of the Debtors, whether owned, leased, or held under contract, together with all improvements, fixtures, easements, and appurtenances thereto;
(iii) all proceeds of avoidance actions and other causes of action arising under Chapter 5 of the Bankruptcy Code (including under sections 502(d), 544, 545, 547, 548, 549, 550, 551, and 553 of the Bankruptcy Code) and any recoveries therefrom;
(iv) all equity interests in subsidiaries of the Debtors, including, without limitation, equity interests in CAM held by CFH, but excluding regulatory-restricted equity interests in Ridgeline Community Bank to the extent that the granting of a lien or security interest therein is prohibited by applicable law or regulation, or by order of the DOSBC or the FDIC;
(v) all proceeds, products, offspring, rents, revenues, and profits of any and all of the foregoing, in whatever form and wherever located; and
(vi) all books and records and other documentation related to the foregoing.
(the "DIP Liens"). The DIP Liens shall exclude: (a) any assets of Ridgeline Community Bank that are subject to regulatory restrictions imposed by the DOSBC or the FDIC, to the extent that the granting of a lien or security interest therein is prohibited or restricted by applicable banking law, regulation, or regulatory order; and (b) any other assets specifically excluded from the DIP Collateral under the terms of the DIP Credit Agreement.
B. Priority of DIP Liens. The DIP Liens shall be senior in priority to, and shall prime, all other liens, claims, encumbrances, and security interests of every kind and nature on the DIP Collateral, whether now existing or hereafter arising, including, without limitation, (i) all liens and security interests securing the Pre-Petition First Lien Facility, (ii) all liens and security interests securing the Second Lien Notes, and (iii) all other liens and encumbrances, whether statutory, consensual, or judicial. The DIP Liens shall be subject and subordinate only to:
(i) the Carve-Out; and
(ii) certain valid, perfected, and non-avoidable liens existing as of the Petition Date that are senior to the liens of the Pre-Petition First Lien Lenders and that are specifically identified as "Permitted Prior Liens" in the DIP Credit Agreement (if any).
The DIP Liens shall prime the liens of the Pre-Petition First Lien Lenders on the DIP Collateral pursuant to section 364(d)(1) of the Bankruptcy Code, and the adequate protection provided in Section IV of this Interim Order shall constitute adequate protection of the Pre-Petition First Lien Lenders' interests in the DIP Collateral within the meaning of sections 361 and 364(d)(1)(B) of the Bankruptcy Code. The DIP Liens shall also prime the liens of the Pre-Petition Second Lien Noteholders on the DIP Collateral, subject to the adequate protection provided in Section IV of this Interim Order.
C. Perfection. The DIP Liens shall be deemed automatically and fully perfected upon entry of this Interim Order, without the necessity of the DIP Lender's filing financing statements under the Uniform Commercial Code, mortgages, deeds of trust, notices of lien, or other instruments or documents in any jurisdiction or taking any other action that may otherwise be required under federal or state law or regulation to create or perfect such liens and security interests. Notwithstanding the foregoing, the DIP Lender may, in its sole discretion, file or record any UCC financing statements, mortgages, deeds of trust, notices, or other documents with respect to the DIP Liens, and the Debtors shall cooperate with and assist the DIP Lender in connection with any such filing or recording. All such financing statements, mortgages, deeds of trust, notices, or other documents shall be deemed to have been filed or recorded as of the date and time of entry of this Interim Order. The DIP Liens shall not be subject to avoidance, reduction, disallowance, impairment, subordination, or recharacterization under any applicable law, including, without limitation, under sections 510, 544, 545, 547, 548, 549, 550, or 551 of the Bankruptcy Code or under applicable state law.
IV. ADEQUATE PROTECTION FOR PRE-PETITION SECURED LENDERS
A. Adequate Protection for Pre-Petition First Lien Lenders. As adequate protection for the priming of the Pre-Petition First Lien Lenders' liens on the DIP Collateral pursuant to section 364(d)(1) of the Bankruptcy Code, and for any diminution in the value of the Pre-Petition First Lien Lenders' interests in the Pre-Petition Collateral (as defined in the Pre-Petition First Lien Credit Agreement) resulting from the DIP Liens, the use of cash collateral, the imposition of the automatic stay pursuant to section 362 of the Bankruptcy Code, and any other cause, the following adequate protection is hereby provided to the Pre-Petition First Lien Lenders, including Velthorn, Pinnacle, Brindoval, and Driftwood (solely in its capacity as a Pre-Petition First Lien Lender and with respect to claims not constituting DIP Obligations):
1. Replacement Liens. Pursuant to sections 361(2) and 363(e) of the Bankruptcy Code, the Pre-Petition First Lien Lenders are hereby granted valid, binding, continuing, enforceable, and automatically perfected replacement liens on, and security interests in, the DIP Collateral (the "Replacement Liens"). The Replacement Liens shall secure all pre-petition obligations of the Debtors under the Pre-Petition First Lien Facility, including all outstanding principal, accrued and unpaid interest, fees, costs, expenses, and other amounts due thereunder. The Replacement Liens shall be junior in priority only to (i) the DIP Liens, (ii) the Carve-Out, and (iii) any valid, perfected, and non-avoidable liens that existed as of the Petition Date and that were senior in priority to the liens securing the Pre-Petition First Lien Facility. The Replacement Liens are granted on the same collateral, and in the same relative priority as among the Pre-Petition First Lien Lenders inter se, as existed under the Pre-Petition First Lien Credit Agreement and related security documents immediately prior to the Petition Date. The Replacement Liens shall be deemed perfected without the necessity of filing financing statements or other instruments of perfection.
2. Section 507(b) Superpriority Claims. Pursuant to section 507(b) of the Bankruptcy Code, the Pre-Petition First Lien Lenders are hereby granted allowed superpriority administrative expense claims against each of the Debtors and their respective estates (the "Adequate Protection Superpriority Claims"), to the extent that the adequate protection provided herein proves to be insufficient to compensate for any diminution in the value of the Pre-Petition First Lien Lenders' interests in the Pre-Petition Collateral. The Adequate Protection Superpriority Claims shall be junior in all respects to the DIP Superpriority Claims and the Carve-Out, and shall have priority over all other administrative expense claims and unsecured claims of any kind against the Debtors and their estates, including, without limitation, claims arising under sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 726, 1113, and 1114 of the Bankruptcy Code (other than the DIP Superpriority Claims and the Carve-Out).
3. Adequate Protection Payments. The Debtors shall make monthly cash payments of current-pay interest on the outstanding aggregate principal amount of the Pre-Petition First Lien Facility held by the Pre-Petition First Lien Lenders other than Driftwood (i.e., on an outstanding aggregate principal amount of $88,000,000) at the non-default contractual interest rate of Adjusted Term SOFR plus 425 basis points per annum. Based on an assumed Adjusted Term SOFR rate of approximately 5.33% as of the Petition Date, the all-in adequate protection interest rate is approximately 9.58% per annum, yielding an estimated monthly adequate protection payment of approximately $702,133. Such adequate protection payments shall be made on the first business day of each calendar month, commencing on the first such date occurring after the date of entry of this Interim Order. All adequate protection payments shall be made to Velthorn, in its capacity as Pre-Petition Agent, for distribution on a pro rata basis to the Pre-Petition First Lien Lenders (other than Driftwood with respect to its rolled-up claims, once the Roll-Up Tranche becomes effective upon entry of the Final DIP Order). Nothing herein shall prejudice any Pre-Petition First Lien Lender's right to seek additional adequate protection at the Final Hearing or at any time thereafter.
4. Adequate Protection Reserve. The sum of $3,500,000 from the proceeds of Draw 1 of the Interim DIP Loan shall be deposited into a segregated, interest-bearing reserve account (the "Adequate Protection Reserve") for the benefit of the Pre-Petition First Lien Lenders (other than Driftwood), to be held and maintained by the Pre-Petition Agent or as otherwise agreed among the Debtors, the DIP Lender, and the Pre-Petition Agent. The Adequate Protection Reserve shall serve as additional security for the Debtors' adequate protection payment obligations to the Pre-Petition First Lien Lenders as set forth herein. Funds on deposit in the Adequate Protection Reserve shall be released to the Pre-Petition First Lien Lenders or returned to the Debtors' estates in accordance with and subject to the terms and conditions of the DIP Credit Agreement and the Final DIP Order. The Adequate Protection Reserve, and any interest accrued thereon, shall be subject to the DIP Liens.
5. Payment of Ad Hoc Group Counsel Fees. As additional adequate protection, the Debtors shall reimburse the reasonable and documented fees and out-of-pocket expenses of Hartwell & Crane LLP, counsel to the Ad Hoc Group of First Lien Lenders (consisting of Velthorn National Bank, N.A. and Pinnacle Credit Partners Fund II, LP, which together hold $66,000,000 in aggregate principal amount, representing 55.0% of the total outstanding Pre-Petition First Lien Facility), in an aggregate amount not to exceed $1,200,000 during the pendency of the DIP Facility. Such fees and expenses shall be payable monthly upon the submission of invoices in summary form (without the requirement to disclose privileged or confidential information) and without the necessity of filing formal fee applications with this Court, subject to the right of the United States Trustee or any party in interest to seek review of such fees and expenses for reasonableness upon appropriate motion and notice.
B. Adequate Protection for Pre-Petition Second Lien Noteholders. As adequate protection for any diminution in the value of the interests of the holders of the Second Lien Notes (the "Pre-Petition Second Lien Noteholders," including Ashford Mezzanine Capital, LP, which holds approximately $30,000,000 of the $45,000,000 in aggregate principal amount of the outstanding Second Lien Notes) in the DIP Collateral, the Pre-Petition Second Lien Noteholders are hereby granted the following adequate protection:
(i) Replacement Liens. The Pre-Petition Second Lien Noteholders are hereby granted valid, binding, continuing, enforceable, and automatically perfected replacement liens on, and security interests in, the DIP Collateral, junior in priority to (a) the DIP Liens, (b) the Carve-Out, (c) the Replacement Liens granted to the Pre-Petition First Lien Lenders pursuant to Section IV.A.1 above, and (d) any other liens as set forth in the DIP Credit Agreement. The replacement liens granted to the Pre-Petition Second Lien Noteholders shall be in the same relative priority as among such noteholders inter se as existed under the Second Lien Indenture and related security documents immediately prior to the Petition Date.
(ii) Section 507(b) Superpriority Claims. The Pre-Petition Second Lien Noteholders are hereby granted allowed superpriority administrative expense claims pursuant to section 507(b) of the Bankruptcy Code, to the extent that the adequate protection provided herein proves to be insufficient to compensate for any diminution in the value of the Pre-Petition Second Lien Noteholders' interests in the DIP Collateral. Such superpriority claims shall be junior in all respects to (a) the DIP Superpriority Claims, (b) the Adequate Protection Superpriority Claims of the Pre-Petition First Lien Lenders, and (c) the Carve-Out.
For the avoidance of doubt, the Pre-Petition Second Lien Noteholders are not entitled to adequate protection payments of current-pay interest under this Interim Order.
V. CARVE-OUT
A. Definition and Amount. As used in this Interim Order, the term "Carve-Out" shall mean and consist of the following:
(i) All fees required to be paid to the Clerk of the United States Bankruptcy Court for the District of Delaware and to the Office of the United States Trustee under 28 U.S.C. § 1930(a), together with interest thereon as required under 31 U.S.C. § 3717, in an aggregate amount not to exceed $250,000 (the "Statutory Fees Carve-Out"); and
(ii) All allowed and unpaid fees and expenses incurred by professional persons retained by the Debtors pursuant to sections 327 or 328 of the Bankruptcy Code and by any Official Committee of Unsecured Creditors (once appointed) pursuant to section 1103 of the Bankruptcy Code, in an aggregate amount not to exceed $2,500,000 (the "Professional Fees Carve-Out"); provided, however, that of the $2,500,000 Professional Fees Carve-Out, no more than $750,000 shall be allocable to or available for the payment of fees and expenses of professional persons retained by any Official Committee of Unsecured Creditors.
The total aggregate Carve-Out shall not exceed $2,750,000. For the avoidance of doubt, the Carve-Out shall not include any fees or expenses of professional persons retained by the DIP Lender (which are provided for separately under Section II.B of this Interim Order) or of Hartwell & Crane LLP, counsel to the Ad Hoc Group of First Lien Lenders (which are provided for separately under Section IV.A.5 of this Interim Order).
B. Carve-Out Priority. The Carve-Out shall be senior in priority to (i) the DIP Liens, (ii) the DIP Superpriority Claims, (iii) the Replacement Liens, (iv) the Adequate Protection Superpriority Claims of the Pre-Petition First Lien Lenders, and (v) all other claims and liens of any kind or nature. The DIP Lender, the Pre-Petition First Lien Lenders, and the Pre-Petition Second Lien Noteholders shall not be entitled to sweep or otherwise recover cash or other proceeds of the DIP Collateral to the extent that such recovery would impair the Carve-Out. Notwithstanding the foregoing, no portion of the Carve-Out may be used to pay any fees or expenses incurred in connection with the investigation, assertion, joinder in, commencement, or prosecution of any claim, counterclaim, action, objection, contest, or proceeding against the DIP Lender, its affiliates, agents, attorneys, advisors, or representatives, or their respective rights, obligations, liens, or claims arising under the DIP Credit Agreement or this Interim Order.
VI. MODIFICATION OF THE AUTOMATIC STAY
The automatic stay imposed under section 362 of the Bankruptcy Code is hereby modified, on an interim basis, to the extent necessary to permit the following:
(i) The DIP Lender to exercise all rights and remedies available to it under the DIP Credit Agreement, the DIP Documents, this Interim Order, and applicable non-bankruptcy law upon the occurrence and during the continuance of an Event of Default under the DIP Credit Agreement, subject in all respects to the notice and cure provisions set forth in the DIP Credit Agreement and any applicable provision of the Final DIP Order, including, without limitation, the right to (a) declare all DIP Obligations immediately due and payable, (b) terminate any remaining commitment under the DIP Facility, (c) set off any amounts owed to the DIP Lender against any deposits or other amounts held by the DIP Lender or its affiliates for the account of the Debtors, and (d) exercise remedies against the DIP Collateral, in each case subject to the five (5) business day notice period set forth in Section VII below;
(ii) The Debtors to grant the DIP Liens, incur the DIP Obligations, and perform all of their respective obligations under the DIP Credit Agreement, the DIP Documents, and this Interim Order, including, without limitation, the payment of interest, fees, costs, expenses, and other amounts as and when due thereunder; and
(iii) The Pre-Petition Agent and the Pre-Petition First Lien Lenders to receive adequate protection payments and all other amounts to which they are entitled pursuant to Section IV of this Interim Order.
No other modification of the automatic stay is authorized or effected by this Interim Order. Nothing in this Interim Order shall authorize the Pre-Petition First Lien Lenders or the Pre-Petition Second Lien Noteholders to exercise any remedies against the Debtors or the DIP Collateral, or shall constitute a modification of the automatic stay for any purpose other than as expressly set forth herein.
VII. EVENTS OF DEFAULT AND REMEDIES
The Events of Default under the DIP Credit Agreement are hereby acknowledged and incorporated herein by reference, and include, without limitation, the following:
(i) Failure by the Debtors to comply with any Milestone set forth in the DIP Credit Agreement within the time period specified therein (as may be extended with the prior written consent of the DIP Lender);
(ii) Variance from the Approved Budget exceeding the permitted thresholds (i.e., revenue variance exceeding ±10% or disbursement variance exceeding ±15%), in each case tested on a cumulative bi-weekly basis;
(iii) Failure by the Debtors to make any adequate protection payment when due in accordance with Section IV of this Interim Order and the DIP Credit Agreement;
(iv) Entry of an order by this Court or any other court of competent jurisdiction converting these Chapter 11 cases to cases under Chapter 7 of the Bankruptcy Code, or dismissing these Chapter 11 cases;
(v) The appointment of a Chapter 11 trustee in these cases or the appointment of an examiner with expanded powers (beyond those set forth in section 1106(a)(3) and (4) of the Bankruptcy Code) in these cases;
(vi) Any material breach by the Debtors of any representation, warranty, covenant, or other obligation under the DIP Credit Agreement, the DIP Documents, or this Interim Order; and
(vii) Any other Event of Default as defined in the DIP Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default, and after the expiration of any applicable notice and cure period set forth in the DIP Credit Agreement, the DIP Lender may exercise all rights and remedies available to it under the DIP Credit Agreement, the DIP Documents, this Interim Order, and applicable law, including, without limitation, (a) the acceleration of all DIP Obligations, (b) the termination of any remaining commitment under the DIP Facility, and (c) the exercise of remedies against the DIP Collateral. Provided, however, that the DIP Lender shall provide not less than five (5) business days' prior written notice (the "Remedies Notice Period") to the Debtors, counsel to the Debtors, the Office of the United States Trustee, and counsel to any official committee appointed in these cases, before taking any enforcement action against the DIP Collateral (including, without limitation, foreclosure, seizure, or attachment). During the Remedies Notice Period, the Debtors and any other party in interest may seek an emergency hearing before this Court to contest the existence or continuation of the Event of Default or to seek other appropriate relief, and the automatic stay shall remain in effect to the extent not otherwise modified by this Interim Order. For the avoidance of doubt, the five (5) business day Remedies Notice Period shall not apply to the DIP Lender's right to (x) declare all DIP Obligations immediately due and payable or (y) terminate the commitment under the DIP Facility, each of which may be exercised immediately upon the occurrence of an Event of Default (subject to any applicable cure period under the DIP Credit Agreement).
VIII. LIMITATIONS ON USE OF DIP PROCEEDS AND CARVE-OUT
Notwithstanding anything in this Interim Order, the DIP Credit Agreement, or any other order of this Court to the contrary, no proceeds of the DIP Facility, the Carve-Out, or any cash collateral of the Pre-Petition First Lien Lenders or the Pre-Petition Second Lien Noteholders may be used, directly or indirectly, to:
(i) Object to, contest, challenge, or raise any defense to the validity, perfection, priority, extent, or enforceability of the DIP Liens, the DIP Superpriority Claims, or any of the obligations arising under the DIP Facility, the DIP Credit Agreement, or the DIP Documents, or to assert any claims or causes of action seeking avoidance, reduction, subordination, recharacterization, disallowance, or impairment of any of the foregoing;
(ii) Assert, investigate (except as expressly provided below), prosecute, join in, commence, or support any claim, counterclaim, cause of action, objection, contest, or proceeding against the DIP Lender, its affiliates, partners, members, managers, directors, officers, employees, agents, attorneys, advisors, or representatives, arising out of or relating to the DIP Facility, the DIP Credit Agreement, the DIP Documents, or this Interim Order; provided, however, that the Official Committee of Unsecured Creditors (once appointed) may use up to $50,000 of the Carve-Out solely to investigate (but not to prosecute, without first obtaining further order of this Court) potential claims and causes of action against the DIP Lender arising out of or in connection with the DIP Facility, the DIP Lender's pre-petition conduct, or the DIP Lender's pre-petition claims; or
(iii) Seek to modify, amend, stay, vacate, or otherwise alter any of the rights, remedies, liens, priorities, protections, or other benefits granted to the DIP Lender under this Interim Order, the DIP Credit Agreement, or the DIP Documents, without the DIP Lender's prior written consent.
IX. RESERVATION OF RIGHTS REGARDING ROLL-UP AND CHALLENGE PERIOD
The Roll-Up Tranche, in the aggregate principal amount of $32,000,000, which would convert Driftwood's pre-petition first lien claims under the Pre-Petition First Lien Facility into obligations under the DIP Facility on a dollar-for-dollar basis, is not authorized by this Interim Order. The Roll-Up Tranche shall not become effective, and Driftwood's pre-petition first lien claims shall not be deemed rolled up into the DIP Facility, unless and until the Court enters the Final DIP Order expressly approving the Roll-Up Tranche.
Nothing in this Interim Order shall prejudice, impair, or otherwise affect the right of any party in interest, including, without limitation, any Official Committee of Unsecured Creditors (once appointed), the Pre-Petition First Lien Lenders, the Pre-Petition Second Lien Noteholders, the United States Trustee, or any other creditor or party in interest, to object to the Roll-Up Tranche, Draw 2, or any other provision of the DIP Facility at the Final Hearing.
The Challenge Period provisions, pursuant to which (a) the Official Committee of Unsecured Creditors (once appointed) shall have a period of seventy-five (75) days from the date of its appointment (or such longer period as may be ordered by the Court) to investigate and, if warranted, to commence a challenge proceeding contesting the validity, extent, priority, perfection, or enforceability of the pre-petition liens and claims of any Pre-Petition Lender, including Driftwood, and to challenge the Roll-Up Tranche, and (b) other parties in interest shall have a period of sixty (60) days from the date of entry of the Final DIP Order (or such longer period as may be ordered by the Court) to investigate and challenge such liens, claims, and the Roll-Up Tranche, shall be established by the Final DIP Order and are not the subject of this Interim Order.
Entry of this Interim Order shall not constitute a finding, determination, or ruling by this Court as to the validity, extent, perfection, or priority of the pre-petition liens, security interests, or claims of any Pre-Petition Lender, including Driftwood, or of the Pre-Petition Second Lien Noteholders, except as expressly set forth herein with respect to the interim adequate protection package granted to the Pre-Petition First Lien Lenders and the Pre-Petition Second Lien Noteholders. All rights of all parties in interest with respect to the foregoing are expressly reserved and preserved.
X. BINDING EFFECT; SUCCESSORS AND ASSIGNS
This Interim Order shall be binding upon and shall inure to the benefit of the DIP Lender, the Debtors, the Pre-Petition Agent, the Pre-Petition First Lien Lenders, the Pre-Petition Second Lien Noteholders, Zynvaro Trust Company (in its capacity as Second Lien Indenture Trustee), any official committee appointed in these cases, all creditors of the Debtors, and all other parties in interest, and their respective successors, assigns, heirs, executors, administrators, and representatives. The provisions of this Interim Order and any actions taken pursuant hereto shall survive the entry of any order (i) confirming a Chapter 11 plan in these cases, (ii) converting these Chapter 11 cases to cases under Chapter 7 of the Bankruptcy Code, or (iii) dismissing these Chapter 11 cases. The DIP Liens, the DIP Superpriority Claims, the Replacement Liens, and the Adequate Protection Superpriority Claims shall remain valid, binding, enforceable, and fully perfected against any trustee or other fiduciary appointed in these cases or in any successor cases, and against the Debtors, their estates, and all creditors and parties in interest.
XI. NO WAIVER OF PRE-PETITION LENDER RIGHTS
Nothing in this Interim Order shall be deemed a waiver, release, relinquishment, or other modification of any rights, claims, defenses, setoff rights, or counterclaims of the Pre-Petition First Lien Lenders, the Pre-Petition Agent, the Pre-Petition Second Lien Noteholders, the Second Lien Indenture Trustee, or any other party in interest, whether arising under the Pre-Petition First Lien Credit Agreement, the Second Lien Indenture, applicable law, or otherwise, except as expressly set forth herein. Without limiting the generality of the foregoing, the Pre-Petition First Lien Lenders, the Pre-Petition Second Lien Noteholders, and any party in interest expressly reserve all rights to object to the DIP Facility, including, without limitation, the Roll-Up Tranche, the terms of the DIP Credit Agreement, and any other provision thereof, at the Final Hearing. The receipt of adequate protection by any Pre-Petition Lender shall not be deemed an acceptance of or consent to the terms of the DIP Facility or a waiver of any right to object to the DIP Facility at the Final Hearing or at any other time.
XII. SECTION 506(c) WAIVER
Subject to the entry of the Final DIP Order, no costs or expenses of administration of these Chapter 11 cases or any successor cases, including, without limitation, costs or expenses arising under section 506(c) of the Bankruptcy Code, shall be charged against or recovered from the DIP Lender, the DIP Collateral, or the Pre-Petition Collateral (as defined in the Pre-Petition First Lien Credit Agreement), without the prior written consent of the DIP Lender and the Pre-Petition Agent. The Debtors and all parties in interest (other than as expressly preserved for the Final Hearing) hereby waive, on an interim basis, any and all rights to surcharge the DIP Collateral or the Pre-Petition Collateral under section 506(c) of the Bankruptcy Code or any other applicable law. Nothing in this paragraph shall prejudice the right of any party in interest to object to the scope of this waiver at the Final Hearing.
XIII. SECTION 552(b) APPLICABILITY
The DIP Lender and the Pre-Petition Secured Lenders (including the Pre-Petition First Lien Lenders and the Pre-Petition Second Lien Noteholders) shall be entitled to all of the rights and benefits of section 552(b) of the Bankruptcy Code with respect to the DIP Collateral and the Pre-Petition Collateral, as applicable. The "equities of the case" exception set forth in section 552(b)(1) of the Bankruptcy Code shall not apply to the DIP Liens, the Replacement Liens, or any other liens or security interests granted or recognized under this Interim Order, and no party in interest shall assert or seek to apply such exception against the DIP Lender or any Pre-Petition Secured Lender with respect to such liens or security interests.
XIV. GOOD FAITH UNDER SECTION 364(e)
The Court finds and determines that the DIP Lender has extended credit to the Debtors under the DIP Facility and has acted in good faith in connection with the negotiation, documentation, and approval of the DIP Facility, the DIP Credit Agreement, and this Interim Order, within the meaning of section 364(e) of the Bankruptcy Code. The DIP Lender is entitled to all of the protections afforded to a good-faith lender under section 364(e) of the Bankruptcy Code. The Court further finds that the terms of the DIP Credit Agreement, including, without limitation, the interest rate (Adjusted Term SOFR plus 900 basis points per annum, with a minimum all-in rate of 13.00%), the commitment fee ($1,500,000), the exit fee (1.50% of amounts drawn, estimated at $1,125,000 if the DIP Facility is fully drawn), the unused line fee, and all other fees, charges, and economic terms, are fair, reasonable, and the best terms available to the Debtors under the prevailing market conditions and the Debtors' financial circumstances, and reflect arm's-length negotiations between the Debtors and the DIP Lender.
In the event that any or all of the provisions of this Interim Order are hereafter reversed, modified, amended, or vacated by a subsequent order of this Court or any other court, such reversal, modification, amendment, or vacatur shall not affect the validity, enforceability, or perfection of any DIP Liens, DIP Superpriority Claims, or any other obligations or liens incurred, granted, or authorized prior to the date of such reversal, modification, amendment, or vacatur. Any DIP Obligations incurred by the Debtors to the DIP Lender prior to the effective date of any such reversal, modification, amendment, or vacatur shall be governed by the original terms of the DIP Credit Agreement, this Interim Order, and any applicable Final DIP Order.
XV. NO MARSHALING; NO EQUITABLE SUBORDINATION
The DIP Lender shall not be subject to the equitable doctrine of marshaling or any similar doctrine with respect to the DIP Collateral, the Pre-Petition Collateral, or any other assets of the Debtors' estates, and no party in interest shall assert or seek to apply any such doctrine against the DIP Lender. The DIP Liens, the DIP Superpriority Claims, and all other rights and protections granted to the DIP Lender under this Interim Order shall not be subject to equitable subordination under section 510(c) of the Bankruptcy Code or under any other provision of applicable law, and no party in interest shall assert or seek to apply any theory of equitable subordination or equitable disallowance against the DIP Lender with respect to the DIP Obligations, the DIP Liens, or the DIP Superpriority Claims.
XVI. REPORTING OBLIGATIONS
The Debtors shall comply with all reporting obligations set forth in the DIP Credit Agreement, including, without limitation, the following:
(i) Delivery of updated 13-week rolling cash flow budgets (i.e., updated Approved Budgets) every four (4) weeks, in form and substance satisfactory to the DIP Lender;
(ii) Delivery of variance reports comparing actual results to the Approved Budget, tested on a cumulative bi-weekly basis, within five (5) business days following the end of each bi-weekly testing period; and
(iii) Delivery of monthly unaudited financial statements of the Debtors (on a consolidated and consolidating basis), including balance sheets, income statements, and cash flow statements, within twenty (20) days following the end of each calendar month.
Copies of all reports, budgets, variance analyses, and financial statements required to be delivered under this Section XVI shall be provided simultaneously to the DIP Lender, the Pre-Petition Agent, counsel to any official committee appointed in these cases, and the Office of the United States Trustee for the District of Delaware. The DIP Lender and the Pre-Petition Agent shall have the right to request reasonable access to the Debtors' books and records and to communicate with the Debtors' management, financial advisors, and professionals in connection with the Debtors' compliance with the DIP Credit Agreement and this Interim Order.
XVII. FINAL HEARING
A. Scheduling. A final hearing on the DIP Motion (the "Final Hearing") shall be held on October 13, 2023, at 10:00 a.m. (Eastern Time) before the Honorable Karen F. McAllister, United States Bankruptcy Judge, in Courtroom No. 5 of the United States Bankruptcy Court for the District of Delaware, 824 North Market Street, Wilmington, Delaware 19801, or at such other date and time as the Court may designate.
B. Notice of Final Hearing and Objection Deadline. Within three (3) business days following entry of this Interim Order, the Debtors shall serve notice of the Final Hearing and a copy of this Interim Order, together with the DIP Credit Agreement and all exhibits thereto, upon the following parties:
(i) the Office