Issues in DIP Roll-Up Financing

August 1,2009 2009 ABA Annual Meeting Chicago Business Law Section Commercial Finance Committee Subsection on Creditors' Rights Issues in DIP Roll-Up Financing

Early Roll-UpICross-Collateralization Cases Creditor and Intercreditor Agreement Considerations

Overview of DIP Financing Postpetition Debtor-In-Possession Financing A. Governed by section 364 of the Bankruptcy Code B. Types of Financing Addressed 1. Obtaining Unsecured Credit or lncurring Unsecured Debt in the Ordinary Course of Business a. Notice and hearing not required. b. Administrative expense priority. 2. Obtaining Unsecured Credit or lncurring Unsecured Debt Outside of the Ordinary Course of Business a. Notice and hearing required. b. Administrative expense priority.

Overview of DIP Financing 3. If Unsecured CrediVDebt is Not Available, CrediVDebt May be Available as Follows: a. Notice and hearing required. b. Superiority administrative expense status available. c. Liens on unencumbered property available. d. Junior liens on encumbered property available. 4. A Court May Authorize Credit and/or Debt Secured by a Priming Lien a. Must demonstrate need, i.e., credit/debt is not otherwise available. b. Adequate protection for liens that are primed. c. Debtor has the burden of showing adequate protection.

Overview of DIP Financing Adequate Protection 1. Governed by sections 361 and 363(e) of the Bankruptcy Code a. Three General Forms of Adequate Protection: 1) Cash payment or periodic cash payments; 2) An additional or replacement lien; or 3) Such other relief that will result in the "realization by such entity of the indubitable equivalent of such entity's interest in such property." b. Super Priority Status in the Event Adequate Protection Proves Inadequate:

Overview of DIP Financing Procedural Requirements Among other things, the DIP motion must detail the following: Amount of cash collateral or credit the party seeks to use andlor obtain. Material conditions to closing and borrowing, including budget provisions. Pricing and economic terms, including fees. The effect on existing liens of the granting of collateral or adequate protection provided to the lender and any priority or superpriority provisions. Must provide specific details (e.g., nature and priority of interdebtor claims) if one or more debtors are liable for the repayment of indebtedness for funds advanced to or for the benefit of another debtor.

Overview of DIP Roll-Up Financing Any cross-collateralization provision that elevates prepetition debt to administrative expense (or higher) status or that secures prepetition debt with liens on postpetition assets (which liens the creditor would not otherwise have by virtue of the prepetition security agreement or applicable law). Any carve-outs from liens or superpriorities. If the carve-out provides for disparate treatment for the professionals retained by a committee when compared to other professionals retained in the case, or if the carve-out omits fees payable to the court or the trustee, there must be a disclosure and a detailed explanation for such treatment. Any roll-up provision which applies the proceeds of postpetition financing to pay, in whole or in part, prepetition debt or which otherwise has the effect of converting prepetition debt to postpetition debt. Any provision that would limit the court's power or discretion in any material way, or would interfere with the exercise of fiduciary duties, or restrict the rights and powers of the trustee, debtor, or a committee, or any other fiduciar of the estate, in connection with the operation, financing, use or sale o the business or property of the estate. Y

Overview of DIP Roll-Up Financing Any limitation on the lender's obligation to fund certain activities of the trustee, debtor in possession or a committee. Termination or default provisions, including events of default. This includes any terms that provide that the use of cash collateral or the availability of credit will cease, inter alia, on (i) the filing of a challenge to the lender's prepetition lien or lender's prepetition claim based on the lender's prepetition conduct, or (ii) the expiration of a specified time for filing a plan. Any change of control provisions. Any provision establishing a deadline for, or otherwise requiring, the sale of property of the estate. Any provision that affects the debtor's right or ability to repay the financing in full during the course of the chapter 11 reorganization case.

Overview of DIP Roll-Up Financing Any provision for the funding of non-debtor affiliates with cash collateral or proceeds of the loan, as applicable, and the approximate amount of such funding. The duration of any challenge period to investigate prepetition claims or liens. The minimum challenge period is typically 60 days. If a challenge period is absent, the motion must explain why. Detail any provision providing for a waiver or modification of the Bankruptcy Code provisions relating to the automatic stay Detail any waiver or modification of any entity's authority or right to file a plan (or seek an extension to such right), use cash collateral or request authority to obtain credit. Detail any release or waiver or limitation on any claim or other cause of action belonging to the estate or the trustee. Any provision that grants liens on claims or causes of action arising under sections 544, 545, 547, 548 and 549 of the Bankruptcy Code [generally, avoidance type actions].

Overview of DIP Roll-Up Financing Roll-Up Overview - Very common - Types: Roll-up may take the form of a single advance. Roll-up may be accomplished through the postpetition collection of receivables being applied to a prepetition loan, with corresponding advances made under the DIP. This is otherwise known as the "creeping roll-up." - Roll-ups receive close scrutiny - there must be a business need for the roll-up - Single Lender (easier to accomplish) - Bank Group 1 Syndicated Loan (all lenders entitled to participate?)

Early Roll-UpICross-CoIIateraIization Cases In re Saybrook Manufacturing Co., Inc. Background Saybrook Manufacturing Co., Inc. ("Saybrook) sought new money DIP financing from Manufacturers Hanover ("MH") in the amount of $3 million. MH was a creditor of Saybrook in the amount of $34 million (of which $10 million was secured). MH agreed to lend Saybrook the additional $3 million to facilitate Saybrook's reorganization in exchange for a roll-up of all of MH's prepetition and post-petition debt. Proposed DIP Facility: $37 million total, composed of: $3 million new loan; and $34 million roll-up of existing loans. Objections Prepetition lenders claimed that cross-collateralization is not authorized under section 364 of the Bankruptcy Code because permitting cross-collateralization would undermine the entire structure of the Bankruptcy Code by allowing one unsecured creditor to gain priority over all other unsecured creditors simply by extending additional credit to a debtor.

Early Roll-Up/Cross-Col lateralization Cases In re Saybrook Manufacturing Co., lnc. Outcome Bankruptcy Court approved the DIP financing. The Creditors' appeal of the decision was dismissed by the District Court because the Bankruptcy Court did not stay its order approving the DIP financing pending the appeal pursuant to section 364(e) of the Bankruptcy Code. On appeal, the Eleventh Circuit reversed and remanded the decision. The Eleventh Circuit held that cross-collateralization is inconsistent with the Bankruptcy Code for the following reasons: 1. The Code does not authorize cross-collateralization as a method of post-petition financing under section 364; and 2. Cross-Collateralization is beyond the scope of the Bankruptcy Court's inherent equitable power because it is directly contrary to the fundamental priority scheme of the Bankruptcy Code.

Early Roll-UpICross-Collateralization Cases In re Texlon Corporation (Single Lender Case) Background Bankruptcy Court entered an ex parte financing order to allow the Debtor, Texlon Corp., to enter into factoring agreements with Manufacturers Hanover Commercial Corporation ("MHCC"). The agreements gave MHCC a security interest in the Debtor's inventory, equipment and accounts for amounts paid under the factoring agreement and for prepetition indebtedness owed to MHCC. The Debtor continued to suffer heavy losses and a trustee in bankruptcy was appointed to administer the estate. The trustee moved to modify the financing order to provide that any collateral held by MHCC after satisfaction of its postpetition indebtedness would be applied for the benefit of all prepetition creditors on a pro rata basis. After the district court overturned the financing order, MHCC appealed to the Second Circuit on the grounds that, among other things, the crosscollateralization of prepetition and post-petition collateral was permissible under the Bankruptcy Act.

Early Roll-UpICross-Collateralization Cases In re Texlon Corporation (Single Lender Case) Outcome The Second Circuit disapproved of cross-collateralization generally and stated that it "see['s] nothing in s 364(c) or in other provisions of that section that advances the case in favor of cross-collateralization." Despite its disapproval of cross-collateralization, the court went on to say that it "is not obliged, however, to say that under no conceivable circumstances could cross-collateralization be authorized." The court did not ultimately resolve the issue of whether cross-collateralization is permissible. The court overturned the financing order on the grounds that such an order may not be decided on an exparte motion and that the nonparticipating creditors should have been given notice and an opportunity to be heard.

Recent DIP Roll-Up Cases In re Lyondell Chemical Company Background The proposed Dl P was to be provided by an affiliate of the Debtors' primary shareholder (the "Insider"), along with a certain limited number of prepetition senior secured lenders (the "Participating Lenders"). Objections 1. The Insider's participation in the DIP should have only been permitted if DIP financing was undersubscribed by the senior secured lenders and the Debtors had neglected to approach many of those lenders with respect to the proposed financing. 2. Priming is an "extraordinary remedy" that should only be invoked "cautiously." In a circumstance in which the DIP financing will prime the senior secured claims of all senior secured lenders, equity demanded that all senior secured lenders have an equal opportunity to participate on a pro rata basis.

Recent DIP Roll-Up Cases In re Lyondell Chemical Company 3. To the extent a roll-up would be appropriate (i) it should be offered on a pro rata basis and (ii) it should be limited to an amount that would have been adequate to generate sufficient interest in the financing. Outcome: The parties reached a settlement in which the Insider agreed to step down as a DIP lender and objecting creditors were given the option to participate in the deal. - Subsequent challenge by Bank of New York: Judge held that the DIP order did not waive marshalling rights, and therefore adequate protection afforded the secured noteholders under the DIP orders was sufficient.

Recent DIP Roll-Up Cases In re Lyondell Chemical Company Priorities, Liens and Adequate Protection A. Superpriorit )Y administrative expense status for all DIP obligations ( 364M1 1. Claims of the roll-up portion are junior to the revolver and new money DIP portions. B. Liens 1. First priority liens on all unencumbered property of the debtors (5 364(~)(2)). 2. First priority priming liens (5 364(d)(1)). a. Such liens prime the debtors' prepetition notes, senior lenders and bridge lenders. 3. Junior liens (5 364 (c)(3)). a. Captures all other collateral that is otherwise subject to an enforceable prepetition lien. 4. Relative priority. a. Roll-up liens are junior both to the new money and revolver DIP liens.

Recent DIP Roll-Up Cases In re Lyondell Chemical Company C. Adequate Protection 1. Applies to the prepetition noteholders, senior lenders and bridge lenders: a. Adequate protection liens. 1. Such liens generally rank in the same relative priority as they did under the prepetition documents. b. Claims pursuant to section 507(b) of the Bankruptcy Code. c. Fees and expenses of the respective agents and trustees, as well as certain counsel and financial advisor fees. d. Financial monitoringheporting expenses. e. Payment to the senior lenders of all accrued but unpaid interest and other fees at the non-default rate.

Recent DIP Roll-Up Cases In re Aleris International, Inc. DIP Financing 1. "New Money Term Facility": Up to an aggregate principal amount of $448,327,940.24 plus 40,445,414.15. P 2. "Roll-Up Term Facility": U to an Aggregate principal amount of $540,000,000 of the Prepetition Term Faci ity. a. Each participating prepetition term lender may roll-up a principal amount of its prepetition loans up to the amount of its commitment under the New Money Term Facili (the "Dollar for Dollar Roll Up"), plus 5% of its prepetition loans other than the Dol?' ar for Dollar Roll Up. b. Each prepetition lender that executed the second amendment to the Prepetition Term Facility but does not commit to the New Money Term Facility may roll-up 5% of its prepetition term loans. 3. "ABL Facility": Up to an a gregate principal amount of $575 million. $385 million of the Prepetition ABL faci 9 ity deemed funded by the ABL Facility. The Debtors are also authorized to use a portion of the New Money Term Facility to repay at least $45 million of the Prepetition ABL facility. All letters of credit under the Prepetition ABL facility continue and are deemed to be letters of credit issued under the ABL Facility. Objections 1. The roll-up feature of the DIP facility is improper because there is no binding precedent authorizing roll-ups similar to the one sought by the Debtors.

Recent DIP Roll-Up Cases In re Aleris International, lnc. 1. The DIP facilities improperly benefit the prepetition ABL lenders and the backstop lenders at the expense of prepetition term lenders because (i) the Debtors seek to use the proceeds of the New Money Term Facility to cure the over-advance position of the prepetition ABL lenders and (ii) the ability of the backstop lenders to roll-up prepetition loans acquired after January 30, 2009 disproportionately benefits them over other prepetition term loan lenders. 2. The proposed DIP subordinates secured liens in violation of the intercreditor agreement. Final DIP Hearing Result 1. Execution and entry into the second amendment effectively foreclosed the objecting prepetition lenders right to object to the DIP and the sufficiency of the adequate protection provided. 2. There is no change in the priority liens in relation to the liens securing the other prepetition secured obligations, so no violation of the intercreditor agreement. Adversary Proceeding One of the prepetition creditors filed an adversary complaint against Deutsche Bank, alleging, inter aha, breach of the intercreditor agreement. Deutsche Bank filed a motion to dismiss.

Recent DIP Roll-Up Cases In re Pacific Ethanol Holding Co. Background Pacific Ethanol is the largest West Coast-based marketer and producer of ethanol. The company filed for bankruptcy protection due to, among other things, high corn prices and low prices of ethanol that affected its bottom line. * DIP lenders proposed to extend up to $20 million of credit to Pacific Ethanol of which a $7 million revolver will be available immediately. $30 million of the DIP lenders' prepetition loans will be rolled-up at a ratio of 1.5:l (calculated at a ratio of one and one-half dollars of prepetition loans rolled-up for every dollar of new money provided). $1 0.5 million of the roll-up amount will be rolled-up upon the initial funding of the revolver. Proposed DIP Facility $50 million total, composed of: $20 million of new loans; and $30 million roll-up of existing loans.

Recent DIP Roll-Up Cases In re Pacific Ethanol Holding Co. Objections 1. Pacific Ethanol cannot show that an influx of $20 million in new money is necessary to continue its operations or that such financing will enable it to generate revenue or increase collateral value sufficient to justify a $20 million priming DIP or a $50 million first lien position. 2. Pacific Ethanol did not satisfy its burden of showing that the interim DIP is necessary to avoid irreparable harm pending a final hearing. 3. The DIP failed to meet the standard for post-petition financing. Pacific Ethanol failed to show that the DIP financing is fair, reasonable and adequate under the circumstances and thus has not carried its burden under section 364 of the Bankruptcy Code. i. Pacific Ethanol failed to establish that the senior liens are adequately protected by showing that the debtor cannot receive credit otherwise and that there is adequate protection of the prepetition lenders' interest.. 11. The roll-up feature of the DIP facility is improper.

Recent DIP Roll-Up Cases In re Pacific Ethanol Holding Co. Outcome Court entered an interim order approving DIP facility. The Court's stated reasons include: - The use of the Debtor's cash collateral alone would be insufficient to allow the Debtor to carry on as a going concern; and - The Debtor was unable to obtain alternative financing on better terms than were offered by the DIP facility.

Recent DIP Roll-Up Cases (Single Lender Case) In re Tempe Land Company LLC Background Tempe Land Company, LLC ("Tempe") was a residential condominium developer. Tempe filed for bankruptcy protection after its construction lender failed to fully fund Tempe's development activities while Tempe was in the middle of its development project. The proposed DIP lender, EFO Finance Group, LLC, ("EFO") proposed to lend over $7.9 million at a 14% interest rate (including a 4% origination fee). The DIP would be a priming loan with priority over prepetition debt. Proposed DIP Facility $7.978 million in new loans to be applied as follows: $2 million towards completion of the project; $1.7 million to lender fees, expenses and reserves; $2.95 million for repayment of other loans; and $607 thousand reserved for contingencies and reorganization expenses.

Recent DIP Roll-Up Cases (Single Lender Case) In re Tempe Land Company L LC Objections No objections filed Outcome Court denied the motion approving the DIP financing. The Court concluded that the DIP was not proper due to the following: - The funding of the proposed DIP loan would result in a diminution in the value of the existing lienholders' interest in the collateral; and - The funding of the proposed DIP loan would not enhance the value of the Debtor by an amount that is greater than the amount of the DIP loan.

Credit and lntercreditor Agreement Considerations Overview DIP financing involving roll-ups may cause the Debtor to breach common contract provisions in pre-petition credit agreements. lntercreditor agreement provisons may also hinder the ability of a second lien creditor to object to roll-ups. Such provisions include: First Lien Credit Agreements - Pro Rata Payment Provisions - Pro Rata Sharing Provisions First Lien - Second Lien lntercreditor Agreement Issues: - First Lien Debt Caps; - Advance consent to priming; and - Cash Collateral

Credit Agreement Considerations Pro Rata Payment Provisions in First Lien Credit Agreements Credit Agreements usually contain "pro-rata payment" provisions requiring payments to be made to the lenders on a pro-rata basis, and so called "sharing" provisions requiring lenders to share any amounts received in the excess of their pro rata share with the other lenders. A "pro-rata" payment provision may arguably be violated if not all first-lien lenders participate in DIP Financing where prepetition debt is being rolled up. In addition, such a provision may be capable of being amended only with 100% lender consent (which is the case for most "pro rata payment" provisions).

Credit Agreement Example Provisions Pro Rata Payment Provisions SECTION 2.1 7* Pro Ra fa Treatment. Except as provided below in this Section 2.17 with respect to Swingline Loans and as required under Section 2.15, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment of the Commitment Fees, each reduction of the Term Loan Commitments or the Revolving Credit Commitments and each conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans).

Credit Agreement Example Provisions Pro Rata Sharing Provisions (Example 1) 12.5. Ratable Sharing. If any Lender shall obtain any payment or reduction of any Obligation, whether through setoff or otherwise, in excess of its share of such Obligation, determined on a Pro Rata basis or in accordance with Section 5.6.1, as applicable, such Lender shall forthwith purchase from Agent, Issuing Bank and the other Lenders such participations in the affected Obligation as are necessary to cause the purchasing Lender to share the excess payment or reduction on a Pro Rata basis or in accordance with Section 5.6.1, as applicable. If any of such payment or reduction is thereafter recovered from the purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

Credit Agreement Example Provisions Pro Rata Sharing Provisions (Example 2) SECTION 2.13. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set off, or otherwise) on account of the Loans owing to it (other than pursuant to Section 2.09, 2.12, 8.0 1 (b), 8.04(d) or 8.07) in excess of its ratable share of payments on account of the Loans, such Lender shall forthwith notify the Administrative Agent of such fact and purchase from the other Lenders such participations in the Loans owing to them as shan be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender by delivering payment pursuant to this Section 2.13 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set off) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation.

Credit Agreement Example Provisions Pro Rata Sharing Provisions (Example 3) SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of Title I I of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans or UC Disbursement as a result of which the un aid principal portion of its Loans and participations in UC Disbursements shal l' be proportionate1 less than the unpaid principal portion of the Loans and partici ations in UC Dis ursements of any other P d Lender, it shall be deemed simultaneous y to have purchased from such other Lender at face value, and shall promptly a to such other Lender the purchase price for, a participation in the Loans and U &! xposure of such other Lender, so that the ag regate unpaid rincipal amount of the Loans and UC Exposure and participations in P oans and UC E xposure held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Loans and UC Exposure then outstandin as the principal amount of its Loans and UC Exposure prior to such exercise o 3 banker's lien, setoff or counterclaim or other event was to the principal amount of all Loans and UC Exposure outstanding prior to such exercise of banker's lien, setoff or counterclaim or other event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.18 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest.

Credit Agreement Example Provisions Amendment Provisions (Example 1 ) "Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by Holdings, the Borrower and the Required Lenders; provided, however, that no such agreement shall... amend or modify the pro rata requirements of Section 2.17... without the prior written consent of each Lender..."

Credit Agreement Example Provisions Amendment Provisions (Example 2) "(a) No amendment or waiver of any provision of this Agreement or any Notes, nor consent to any departure by any Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrowers and the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (0 no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (D) waive the application of Section 2.13 or otherwise change Section 2.04, Section 2.08, Section 2.1 1 or Section 2.13 in a manner that would alter the pro rata 66 sharing of any payment or reduction in the Commitments required thereby...

Intercreditor Agreement Considerations First Lien - Second Lien Intercreditor Agreement Issues First Lien Debt Caps - a cap on the amount of first-lien lender debt that will enjoy the benefit of a senior lien. - Often includes DIP financings and provides that the aggregate of the prepetition financing and the DIP financing does not exceed the negotiated dollar cap. - If DIP financing is not included, may complicate the first-lien lender's efforts to roll-up the prepetition indebtedness owed to it in a DIP financing arrangement

Intercreditor Agreement Considerations First Lien - Second Lien lntercreditor Agreement Issues Continued Advance consent to priming - - Without consent of the second-lien lender to priming of its liens in connection with the first-lien lender's provision of Dl P financing, the Bankruptcy Court may decline to approve or may delay in giving approval for the DIP financing absent the provision of adequate protection of the second-lien lender's liens. - In intercreditor situations where a second lien lender's consent is given in advance to DIP financing, a second lien lender will argue that the priming lien should be senior not only to the prepetition liens of the second-lien lender but also to the prepetition liens of the first-lien lenders so as not to dilute the priority of the position of the second lien lender.

Intercreditor Agreement Considerations First Lien - Second Lien lntercreditor Agreement Issues Continued Cash Collateral - - The first lien lender will normally push for intercreditor provisions by which the second-lien lender will be deemed to have consented to the borrower's use of cash collateral in any bankruptcy case to the extent of any consent given by the first-lien lender.

Intercreditor Agreement Example Provisions First Lien Cap; Cash Collateral; DIP Financing (Example 1) Section 6.1 Use of Cash Collateral and Financing Issues. Until the Discharge of First Lien Obligations has occurred, if the Borrower or any other Grantor shall be subject to any lnsolvency Proceeding and the First Lien Agent shall desire to permit the use of "Cash Collateral" (as such term is defined in Section 363(a) of the Bankruptcy Code), on which the First Lien Agent or any other creditor has a Lien or to permit the Borrower or any other Grantor under Section 363 or Section 364 of the Bankruptcy Code or any similar Bankruptcy Law (each, a "DIP Financing", then, so long as the maximum principal amount of Indebtedness that may be outstanding from time to time in connection with such DIP Financing, together with the principal amount of First Lien Obligations outstanding at such time (after giving effect to the application of the proceeds of any DIP Financing to refinance all or any portion of the First Lien Obligations) shall not exceed the First Lien Cap [ lus $ I, then the Second Lien Agent, on behalf of itself and the &cond Lien Claimholders,

lntercreditor Agreement Example Provisions First Lien Cap; Cash Collateral; DIP Financing (Example 1, cont'd) (A) agrees that it will raise no objection to, or otherwise contest or interfere with, such use of cash collateral or DIP Financing on the grounds of adequate protection or otherwise nor support any other Person objecting to, or otherwise contest or interfere with, such sale, use, or lease of cash collateral or DIP Financing and will not request any form of adequate protection or any other relief in connection therewith (except as agreed by the First Lien Agent or to the extent expressly permitted by Section 6.4) and

Intercreditor Agreement Example Provisions First Lien Cap; Cash Collateral; DIP Financing (Example 1 cont'd) to the extent the Liens securing the First Lien Obligations are subordinated to or pari passu with such DIP Financing, the Second Lien Agent will subordinate its Liens in the Collateral to (x) the Liens securing such DIP Financing (and all Obligations relating thereto), (y) any adequate protection Liens provided to the First Lien Claimholders...;

lntercreditor Agreement Example Provisions First Lien Cap; Cash Collateral; DIP Financing (Example 2) 6.1 Finance and Sale Issues. Until the Discharge of First Lien Obligations has occurred, if the Borrower or any other Loan Party shall be subject to any lnsolvency or Liquidation Proceeding and the First Lien Collateral Agent shall desire to permit the use of "Cash Collateral" (as such term is defined in Section 363(a) of the Bankruptcy Code), on which the First Lien Collateral Agent or any other creditor has a Lien or to permit the Borrower or any other Loan Party to obtain financing, whether from the First Lien Secured Parties or any other Person under Section 364 of the Bankruptcy Code or any similar Bankruptcy Law ("DIP Financing"), then the Second Lien Collateral Agent, on behalf of itself and the Second Lien Secured Parties, agrees that it will raise no objection to, or otherwise contest or interfere with, such Cash Collateral use or DIP Financing other than as set forth below.

lntercreditor Agreement Example Provisions First Lien Cap; Cash Collateral; DIP Financing (Example 2 cont'd) To the extent the Liens securing the First Lien Obligations are subordinated to or pari passu with any DIP Financing which meets the requirement above, the Second Lien Collateral Agent will not request adequate protection or any other relief in connection therewith (except as expressly agreed by the First Lien Collateral Agent or to the extent permitted by Section 6.3) and will subordinate its Liens in the Collateral to (x) the Liens securing such DIP Financing (and all Obligations relating thereto), (y) any adequate protection Liens provided to the First Lien Claimholders and (I) any "carve-out" for professional fees and fees payable under 28 U.S.C. 5 1930(a)(7) agreed to by the First Lien Collateral Agent.

lntercreditor Agreement Example Provisions First Lien Cap; Cash Collateral; DIP Financing (Example 2 cont'd) Notwithstanding the foregoing provisions of this Section 6.1, the foregoing provisions of this Section 6.1 shall not prevent any Second Lien Secured Party (or the Second Lien Collateral Agent on their behalf) from: (ii) objecting to any DIP Financing (including requiring "adequate protection") if the aggregate principal amount of the DIP Financing together with the aggregate amount of all letter of credit accommodations thereunder plus the aggregate outstanding amount of the First Lien Obligations outstanding under the First Lien Credit Agreement exceeds the First Lien Cap Amount;

lntercreditor Agreement Example Provisions First Lien Cap; Cash Collateral; DIP Financing (Example 2 cont'd) and (v) objecting to any DIP Financing or use of Cash Collateral (including requesting "adequate protection") if (A) such financing or Cash Collateral is not subject to the terms of this Agreement, (B) the Second Lien Collateral Agent, on behalf of the Second Lien Secured Parties, does not retain a Lien on the Collateral (including the proceeds thereof arising after the commencement of such lnsolvency or Liquidation Proceeding) with the same priority as existed prior to such commencement of such lnsolvency or Liquidation Proceeding subject to any Lien granted in connection with such DIP Financing or use of Cash Collateral or (C) the Second Lien Collateral Agent, on behalf of the Second Lien Secured Parties, does not receive a replacement Lien on post-petition assets to the same extent granted to the First Lien Secured Parties with the same priority as existed prior to the commencement of the lnsolvency or Liquidation Proceeding.

Intercreditor Agreement Example Provisions First Lien Cap; Cash Collateral; DIP Financing (Example 3) 6.1 Finance and Sale Issues. Until the Discharge of First Lien Obligations has occurred, if the Borrower or any other Grantor shall be subject to any lnsolvency or Liquidation Proceeding and the First Lien Collateral Agent shall desire to permit the use of "cash collateral" (as such term is defined in Section 363(a) of the Bankruptcy Code) other than proceeds of the Second Lien Priority Assets ("Cash collateral'^, on which the First Lien Collateral Agent or any other creditor has a Lien or to permit the Borrower or any other Grantor to obtain financing, whether from the First Lien Claimholders or any other Person under Section 364 of the Bankruptcy Code or any similar Bankruptcy Law ("DIP Financing"), then the Second Lien Collateral Agent, on behalf of itself and the Second Lien Claimholders, agrees that

lntercreditor Agreement Example Provisions First Lien Cap; Cash Collateral; DIP Financing (Example 3 cont'd) it will raise no objection to such Cash Collateral use or DIP Financing and to the extent the Liens securing the First Lien Obligations are subordinated to or pari passu with such DIP Financing, the Second Lien Collateral Agent will subordinate its Liens in the Collateral to the Liens securing such DIP Financing (and all Obligations relating thereto) and will not request adequate protection or any other relief in connection therewith (except, as expressly agreed by the First Lien Collateral Agent or to the extent permitted by Section 6.3);

lntercreditor Agreement Example Provisions First Lien Cap; Cash Collateral; DIP Financing (Example 3) provided, that, (i) the aggregate principal amount of the DIP Financing plus the aggregate outstanding principal amount of First Lien Obligations plus the aggregate face amount of any letters of credit and similar instruments issued and not reimbursed under the First Lien Credit Agreement does not exceed the First Lien Cap plus $5,000,000, (4 the DIP Financing does not compel the Borrower to seek confirmation of a specific plan of reorganization for which all or substantially all of the material terms are set forth in the DIP Financing documentation or a related document (iii) the DIP Financing documentation or Cash Collateral order does not expressly require the liquidation of the Collateral prior to a default under the DIP Financing documentation or Cash Collateral order.

Thank you. Elizabeth M. Bohn Jorden Burt LLP 777 Brickell Avenue Suite 500 Miami, FL 331 31 eb @ jordenusa.com (305) 347-6879 Shannon Lowry Nagle O'Melveny & Myers LLP Times Square Tower 7 Times Square New York, NY 10036 snagle @ omrn.com (21 2) 408-2452