Case No. Bky 05-30073.United States Bankruptcy Court, D. Minnesota.
November 8, 2005
ORDER AUTHORIZING CONTINUED USE OF CASH COLLATERAL
GREGORY KISHEL, Bankruptcy Judge
The motion of A.P.I. Inc. (“API” or “Debtor”) for an order authorizing continued use of cash collateral (the “Motion”) came before the undersigned on November 7, 2005.
Based on the arguments of counsel, all the files, records and proceedings herein, the Court being advised in the premises, and the Court’s findings of fact and conclusions of law, if any, having been stated orally and recorded in open court following the close of evidence,
THE COURT FINDS THAT:
A. API has complied with the notice requirements of the Rules of Bankruptcy Procedure and the Local Rules.
B. Massachusetts Mutual Life Insurance Company, C.M. Life Insurance Company, Pacific Life Insurance Company, United of Omaha Life Insurance Company, Companion Life Insurance Company, Thrivent Financial for Lutherans, Nationwide Life Insurance Company of America (collectively, the “Senior Noteholders”), LaSalle Bank National Association (“LaSalle”), Wells Fargo Bank, National Association (together with LaSalle, the “Banks”) and API have reached an agreement regarding the use of the Senior Noteholders’ and the Banks’ cash collateral and the granting of adequate protection.
C. API has stipulated and represented to the Court that: (1) the guaranty agreement (the “Credit Agreement Guaranty”) dated as of February 4, 2004 executed by API in connection
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with the credit agreement (along with the other documents executed pursuant thereto or in connection therewith, the “Credit Agreement”) dated as of February 4, 2004 executed by API Group, Inc. (“Group”), LaSalle, as agent for the Banks (in that capacity, the “Agent”), and the Banks, evidences and governs the prepetition relationship between API and the Banks; (2) the guaranty agreement (the “Note Purchase Agreement Guaranty”) dated as of October 1, 2000 executed by API, in connection with the note purchase agreement (along with the other documents executed pursuant thereto or in connection therewith, the “Note Purchase Agreement”) dated as of October 1, 2000 executed by Group and the Senior Noteholders, evidences and governs the prepetition relationship between API and the Senior Noteholders; (3) as of January 6, 2005, (the “Petition Date”), pursuant to the Credit Agreement Guaranty, in the event that there are any defaults under the Credit Agreement or Credit Agreement Guaranty, API will be liable to the Banks in respect of prepetition debt and, subject to the right of the asbestos committee (the “Committee”) to object as set forth in paragraph 7 of this Order, such prepetition debt shall be an allowed claim in an amount not less than $9,000,000.00 plus interest, fees and expenses; (4) as of the Petition Date, pursuant to the Note Purchase Agreement Guaranty, in the event that there are any defaults under the Note Purchase Agreement or Note Purchase Agreement Guaranty, API will be liable to the Senior Noteholders in respect of prepetition debt and, subject to the right of the Committee to object as set forth in paragraph 7 of this Order, such prepetition debt shall be an allowed claim in an amount not less than $50,000,000.00, plus interest, fees and expenses; (5) the Credit Agreement Guaranty and Note Purchase Agreement Guaranty constitute the legal, valid and binding obligation of API, enforceable in accordance with the terms of the Credit Agreement Guaranty and the Note Purchase Agreement Guaranty; (6) no offsets, defenses or counterclaims to the Credit Agreement Guaranty or Note Purchase Agreement Guaranty exist, and no portion of the Credit Agreement
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Guaranty or Note Purchase Agreement Guaranty is subject to avoidance or subordination pursuant to the Bankruptcy Code or applicable nonbankruptcy law; (7) the prepetition liens of the Banks and the Senior Noteholders in substantially all of API’s real and personal property (the “Prepetition Liens”), among other things, secure payment of all of API’s obligations with respect to the Credit Agreement Guaranty and Note Purchase Agreement Guaranty; and (8) the Prepetition Liens are, subject only to Permitted Liens (as defined below), valid, binding, enforceable and properly perfected first priority liens, which are not subject to any claims, counterclaims, defenses, setoff, recoupment or deduction, and which are otherwise unavoidable and not subject to avoidance or subordination pursuant to any provisions of the Bankruptcy Code or applicable nonbankruptcy law.
IT IS HEREBY ORDERED:
1. The Debtor is authorized to use cash, including cash collateral, subject to the liens of the Senior Noteholders and the Banks in accordance with the projections attached to the Motion, within a maximum variance of ten percent (10%) unless the Banks or Senior Noteholders shall consent in writing to a greater variance, on the terms and conditions set forth in this Order.
2. In addition to the existing rights and interests of the Senior Noteholders and the Banks in cash collateral and for the purpose of attempting to provide adequate protection for the interests of the Senior Noteholders and the Banks in their prepetition collateral, including any diminution in value which results from the Debtor’s use of cash collateral hereunder, the Senior Noteholders and the Banks are hereby granted, as security to the extent of the Debtor’s actual use of cash collateral and any diminution of the value of the Senior Noteholders’ and the Banks’ interest in their prepetition collateral, a valid perfected and enforceable security interest (the “Replacement Liens”) in and upon all of the assets of the Debtor, both tangible and intangible,
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real and personal, including without limitation, accounts, inventory, machinery and equipment, real property, chattel paper, intellectual property, licenses, deposit accounts, money, negotiable collateral, securities, and general intangibles (but not including claims or causes of action arising under Sections 544, 547, 548 and 553 of the Bankruptcy Code), and all improvements, additions and extensions thereto, all replacement thereof, all books and records with respect thereto and all products and proceeds of the foregoing, specifically including any proceeds of the foregoing deposited into accounts opened by the Debtor after the Petition Date and the accounts themselves. The Replacement Liens shall be subject to valid, properly perfected and enforceable liens existing on the Petition Date.
3. API shall also provide non-monetary adequate protection by: (a) maintaining insurance coverage for the Senior Noteholders’ and the Banks’ Collateral (as defined in the Motion); (b) providing to the Senior Noteholders and the Banks such financial or operating reports as were provided to the Senior Noteholders and the Banks pre-petition and copies of reports filed with the Office of the U.S. Trustee, and additional financial or operating reports as reasonably required by the Senior Noteholders and the Banks; and (c) consulting with the Senior Noteholders and the Banks regarding the status of the case.
4. Nothing herein shall be construed as the Senior Noteholders’ or the Banks’ consent to § 506(c) claims against the Senior Noteholders, the Banks or their Collateral.
5. This Order is effective as of the date of its entry. No modification of this Order shall deprive the Senior Noteholders or the Banks of adequate protection of their interest in API’s property to the extent that such protection is required by the Bankruptcy Code and other applicable law.
6. Subject to paragraph 7 herein, (1) the Prepetition Liens shall be subject only to the Permitted Liens; (2) the Credit Agreement Guaranty and Note Purchase Agreement Guaranty
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executed by API, in connection with the Credit Agreement and Note Purchase Agreement respectively constitute the legal, valid and binding obligations of API; (3) no offsets, defenses or counterclaims to the Credit Agreement Guaranty or Note Purchase Agreement Guaranty exist, and no portion of the Credit Agreement Guaranty or Note Purchase Agreement Guaranty is subject to avoidance or subordination pursuant to the Bankruptcy Code or applicable nonbankruptcy law; (4) as of the Petition Date, pursuant to the Credit Agreement Guaranty, in the event that there are any defaults under the Credit Agreement or Credit Agreement Guaranty, API will be liable to the Banks in respect of prepetition debt and, subject to the right of the Committee to object as set forth in paragraph 7 of this Order, such prepetition debt shall be an allowed claim in an amount not less than $9,000,000.00, plus interest, fees and expenses; (5) as of the Petition Date, pursuant to the Note Purchase Agreement Guaranty, in the event that there is a default under the Note Purchase Agreement or Note Purchase Agreement Guaranty, API will be liable to the Senior Noteholders in respect of prepetition debt and, subject to the right of the Committee to object as set forth in paragraph 7 of this Order, such prepetition debt shall be an allowed claim in an amount not less than $50,000,000.00, plus interest, fees and expenses. Subject to paragraph 7, API has waived and released any and all claims and causes of action it may assert against the Banks or the Senior Noteholders, including any right to challenge API’s obligations under the Credit Agreement Guaranty or Note Purchase Agreement Guaranty. For purposes of this Order, “Permitted Liens” shall mean: (a) valid third-party liens existing as of the Petition Date that are not subject to avoidance, or subordinated or junior by agreement with Agent prior to the Petition Date or otherwise subordinated under § 510, and (b) the claim of the United States Trustee for the payment of fees under 28 U.S.C. § 1930(a).
7. Effective upon entry of this Order, the stipulations and findings contained in paragraph C of this Order and the provisions of paragraph 6 of this Order shall be binding on all
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parties in interest in the cases and their respective successors and assigns, including any trustee, subject only to the right of the Committee to file and serve an appropriate pleading objecting to or contesting such stipulations, findings or provisions on or before the earlier of (i) termination of the Debtor’s right to use Cash Collateral under the terms of this Order or (ii) December 27, 2005 or such later date as agreed to in writing by the Debtor, the Banks, and the Senior Noteholders, which date shall not be later than March 27, 2006.
8. The occurrence of any one or more of the following events shall constitute an “Event of Default” under this Order:
(a) The entry of an order converting this case to a case under Chapter 7 of the Bankruptcy Code or terminating the Debtor’s authority to conduct its business;
(b) An event of default under the terms of the Credit Agreement, Credit Agreement Guaranty, Note Purchase Agreement or Note Purchase Agreement Guaranty;
(c) The granting of a lien to any party on any of API’s assets that is senior or pari passu to any of the liens of the Banks or Senior Noteholders;
(d) Any modification or amendment of the Banks’ or Senior Noteholders’ rights under this Order;
(e) Upon the seventh (7th) business day following the delivery of written notice to the Debtor by the Banks or the Senior Noteholders of the Debtor’s failure to timely provide any of the reports or other information required under this order, unless the Debtor has cured such breach or default within such seven (7) business day period;
(f) The appointment of a trustee in this case;
(g) The dismissal of this case; or
(h) Upon the seventh (7th) business day following the delivery of written notice to the Debtor by the Banks or the Senior Noteholders of a challenge by any party to any of the liens of the Banks or Senior Noteholders, unless the Debtor has cured such breach or default within such seven (7) business day period.
9. Upon the occurrence of an Event of Default, the Debtor’s right to use Cash Collateral under the terms of this Order shall automatically terminate without the need for further Court involvement.
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10. The Debtor’s right to use Cash Collateral under the terms of this Order shall automatically terminate on the earlier of (i) the effective date of a plan of reorganization approved by the Court, or (ii) December 27, 2005 without the need for further Court involvement and the Banks and Senior Noteholders shall be relieved of any and all obligations, if any, owed API under this Order unless the Banks, Senior Noteholders and Debtor agree in writing to a further extension of this Order, as described below in paragraph 11 of this Order.
11. Upon the written consent of the Banks, the Senior Noteholders and the Debtor, and without the need for further Court involvement, the Debtor’s right to use Cash Collateral under the terms of this Order may be extended beyond December 27, 2005 for up to three additional thirty (30) day periods not to exceed more than ninety (90) days from December 27, 2005 (March 27, 2006) provided that prior to the expiration of any thirty-day extension, the Debtor obtains the written consent of the Banks and the Senior Noteholders to such extension.
12. To the extent the Replacement Liens are insufficient to adequately protect the Banks and Senior Noteholders, the Banks and Senior Noteholders are hereby allowed super-priority administrative expense claims pursuant to sections 507(b) and 503(b)(1)(A) of the Bankruptcy Code with priority over other costs of administration allowable under section 507(a)(1) of the Bankruptcy Code.
13. In the event that any or all of the provisions of this Order are hereafter modified, amended, vacated or stayed, such modification, amendment, vacation or stay shall not affect the validity or enforceability of any provisions of this Order prior to such time.
14. This Order shall not constitute a waiver by API, the Banks or the Senior Noteholders of any of their rights, claims, defenses and interests except as expressly provided herein.
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15. In the event API files a motion seeking any use of the Banks’ or Senior Noteholders’ cash collateral beyond December 27, 2005, API shall serve any such motion on counsel for the Banks and Senior Noteholders by facsimile or e-mail service at least 14 days prior to the hearing on any such motion.
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