Bankruptcy No. BK-S-00-10533-LBR (AgriBioTech, Inc.) Jointly Administered With: No. BK-S-OO-10534-LBR (AgriBioTech Canada) No. BK-S-OO-10535-LBR (Las Vegas Fertilizer Co. No. BK-S-OO-10536-LBR (Garden West Distributors, Inc.) No. BK-S-OO-10537-LBR (Geo W. Hill Co., Inc.)United States Bankruptcy Court, D. Nevada
November 13, 2000
WILLIAM P. WEINTRAUB, ESQ., JEFFREY N. POMERANTZ, ESQ., MALHAR S. PAGAY, ESQ., PACHULSKI, STANG, ZIEHL, YOUNG JONES, P.C., San Francisco, CA.
JAMES PATRICK SHEA, ESQ., CANDACE C. CARLYON, ESQ., SHEA
CARLYON, LTD Las Vegas, NV., Attorneys for Debtors and Debtors-in-Possession.
INTERIM ORDER GRANTING DEBTORS’ EMERGENCY MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING DEBTORS TO USE CASH COLLATERAL AND GRANTING REPLACEMENT LIENS AND RELATED RELIEF
LINDA RIEGLE, United States Bankruptcy Judge
On November 8, 2000 at 1:30 p.m., this Court held a hearing on the motion of AgriBioTech, Inc., a Nevada corporation (“ABT”), AgriBioTech Canada, Inc., a Canada corporation (“ABT Canada”), Las Vegas Fertilizer Co., Inc., a Nevada corporation (“LVF”), Garden West Distributors, Inc., a Arizona corporation (“Garden West”) and Geo. W. Hill Co., Inc., a Kentucky corporation (“Hill”) (collectively the “Debtors”) for entry of interim and final orders authorizing Debtors to use cash collateral and granting replacement liens (the “Motion”).
David Bertenthal, Esq. appeared on behalf of the Debtors. Vernon Teofan appeared on behalf of the Bank Group. Deborah Williamson appeared on behalf of the Committee. Other appearances were as noted in the record. Based on the arguments made in the Motion, the pleadings and documents on file in this case, and the arguments made by counsel at the hearing, and it appearing that notice has been proper under the circumstances and the nature of the relief requested, and that no other notice need be given; and sufficient cause appearing therefor,
IT IS THEREFORE ORDERED ADJUDGED AND DECREED AS FOLLOWS:
1. The Motion is approved on an interim basis as provided herein.
2. The Debtors are authorized to use Cash Collateral (as that term is defined in Paragraph 3 below) for the month of November, 2000, in accordance with the budget (the “Budget”)[1] attached hereto as Exhibit “A”; provided, however, that Debtors’ actual expenditures may exceed a line item amount set forth in the Budget so long as the Debtors’ aggregate expenditures do not exceed the total amount of Cash Collateral authorized to be used pursuant to the Budget, and so long as no new line-items are added to the Budget and provided further that the Budget for November, 2000, shall be reduced by amounts expended from November 1, 2000 through November 8, 2000.
3. For purposes of this Order, “Cash Collateral” shall mean cash, negotiable instruments, documents of title, securities, deposit accounts, or other cash equivalents, whenever acquired, in which the Debtors and Bank of America, NA., as agent for the Debtors’ lenders (the “Bank Group”), have an interest, including the proceeds, products, offspring, rents, or profits of property subject to a security interest in favor of the Bank Group, whether existing before or after the commencement of these cases.
4. The Debtors agree to and shall deposit all Cash Collateral into the cash collateral account (the “Account”) currently maintained at Bank of America, NA. The Debtors may only make disbursements from the Account as provided in the Budget, or as hereafter authorized in writing by the Bank Group, or as provided for in any order of the Court entered after notice to the Bank Group and an opportunity for hearing.
5. As adequate protection to compensate the Bank Group for the Debtors’ use of Cash Collateral, the Bank Group is hereby granted a first and prior replacement lien upon all property of these estates, whether the Pre-Petition Collateral or the Post-Petition Collateral, whether now owned or existing or hereafter created or acquired by any of the Debtors, wherever located, but only for the amount of Cash Collateral used and only to the extent that such usage of Cash Collateral results in a diminution of value of the interest of the Bank Group in the Pre-Petition Collateral and the Post-Petition Collateral; subject only to: (i) preexisting, perfected, indefeasible, and unavoidable liens and security interests of the Bank Group and other secured creditors existing on or as of the Petition Date (including liens that relate back under law) to the extent that such security interests and liens are equal or superior to the Bank Group’s security interests and liens; (ii) the rights of the “Professionals” (as that term is defined in the Amended and Restated Carve-Out Agreement) under the Amended and Restated Carve-Out Agreement; (iii) the rights of the Professionals covered under the Knudsen Order; (iv) to any timely challenge to the amount, validity, or enforceability (but not the priority) of the Pre-Petition Indebtedness or the validity, perfection, or enforceability of the liens and security interests of the Bank Group in the Pre-Petition Collateral securing the Pre-Petition Indebtedness.
6. Subject to items (i) through (iv) at the end of the first sentence of Paragraph 5, above, in the event that the adequate protection granted to the Bank Group under this Order proves to be inadequate, pursuant to Bankruptcy Code section 507(b), the Bank Group is also granted a claim for the amount of any diminution in the value of their Pre-Petition or Post-Petition Collateral caused by the Debtors’ use of Cash Collateral, which claim shall have priority over all administrative expenses incurred in this case of any kind, including such administrative expenses of the kinds specified in, or allowable under, Bankruptcy Code sections 105, 326, 330, 331, 503(b), 506(c), 507(a) or 726. Except as provided in items (i) through (iii) at the end of the first sentence of Paragraph 5, above, no costs or expenses of administration which have been or may be incurred in these proceedings, any conversion of these proceedings pursuant to section 1112 of the Bankruptcy Code, or in any other proceeding related hereto, and no priority claims are, or will be, prior to or on a parity with the claim of Bank Group against the Debtors.
7. Subject to the rights set forth in item (iv) at the end of the first sentence of Paragraph 5, above, this Order shall be sufficient and conclusive evidence of the granting, creation, validity, perfection and priority of the Bank Group’s replacement liens upon the Post-Petition Collateral and Pre-Petition Collateral without the necessity of filing or recording any financing statements, mortgages, deeds of trust, notices or other documents which may otherwise be required under the law of any jurisdiction or the taking of any other action to validate or perfect the replacement liens granted to the Bank Group under this Order, or to entitle the Bank Group to the section 507(b) priority granted herein. If, however, Bank Group, the Agent, or the Administrative Agent shall, in their sole discretion, elect for any reason to file or record any such financing statement, mortgages, deeds of trust, notices or other documents with respect to such replacement liens, the Debtors shall execute the same upon request and the filing or recording thereof shall be deemed to have been made at the time and on the date of the commencement of this Chapter 11 case and shall not constitute a violation of the automatic stay. The Bank Group, the Agent or the Administrative Agent may, also in their discretion, file a certified copy of this Order in any jurisdiction in which any of the Debtors have real or personal property, and in such event, the subject filing or recording officer is authorized and directed to file or record such certified copy of this Order.
8. On a daily basis, the Debtors shall provide to Bank Group an accounting which includes the following: (a) the balance of the Account; (b) all withdrawals from the Account, and each of the payments funded with those withdrawals; and (c) all deposits in the Account. In addition, the Debtors shall promptly provide to the Bank Group all other financial information requested by the Bank Group or their attorneys or other representatives, including all such information which was required to be provided by Debtors to the Bank Group under the Pre-Petition and Post-Petition Loan Documents. Notwithstanding the expiration or termination of this Order, the requirement of the Debtors to provide the Bank Group all other financial information requested by the Bank Group or their attorneys or other representatives, including all such information which was required to be provided by Debtors to the Bank Group under the Pre-Petition and Post-Petition Loan Documents, will continue so long as the Debtors remain as debtors-in-possession in these cases.
9. Notwithstanding any provision of the Final DIP Financing Order, nothing herein shall prevent the Debtors or the Committee from seeking to use Cash Collateral on or after the expiration of the Budget, or any extension thereof, or the Bank Group from objecting to such use of Cash Collateral. Nothing in this Order will be deemed or construed as an admission or waiver by the Bank Group as to adequate protection, or any other issue in the Bankruptcy Cases; nor shall this Order constitute consent by the Bank Group to the use of their Cash Collateral other than for the limited purpose and during the limited period expressly provided herein.
10. Each of the Debtors is authorized to perform all acts, and execute and comply with the terms of such other documents, instruments and agreements which the Bank Group, the Agent or the Administrative Agent may reasonably require consistent with the terms of this Order.
11. The provisions of this Order shall be binding upon and inure to the benefit of the Bank Group, the Agent, the Administrative Agent, and the Debtors and their respective successors and assigns, including but not limited to any trustee appointed as a representative of any of the Debtors’ estates.
12. Subject to the rights of the Committee as set forth in item (iv) at the end of the first sentence in Paragraph 5, above, no subsequent stay, modification, termination, failure to extend the term of or vacation of this Order shall affect, limit or modify the validity, enforceability or perfection of any security interest, mortgage, lien or priority granted to the Bank Group in connection herewith.
13. In relation to advances and collections under the DIP Loan Agreement and!or collections or deposits of Cash Collateral in the Account:
(a) Bank of America as Agent is authorized to receive and Debtors are authorized and directed to remit or cause to be remitted to the Account maintained under the Final DIP Financing Order (or to such other lockbox account which Bank of America may designate) all Cash Collateral, including the proceeds of accounts receivable, Disposition Proceeds (as defined in the DIP Loan Agreement), and other payments made to or monies received by Debtors, now in any of the Debtors’ possession or hereafter coming into any of the Debtors’ possession or becoming due and payable to any of the Debtors, and Bank of America as Agent is authorized to conditionally apply such Cash Collateral and the proceeds thereof as set forth in the DIP Loan Agreement and Final DIP Financing Order or this Order. Except as otherwise provided in the DIP Loan Agreement, proceeds and payments received by Bank of America as Agent with respect to the Pre-Petition Collateral shall be applied, first, to Pre-Petition Indebtedness (including without limitation all accrued and to the extent allowed by applicable law, accruing interest and expenses), and then, after full repayment of the Pre-Petition Indebtedness, to the Post-Petition Indebtedness. Proceeds or payments received by the Bank of America as Agent with respect to the Post-Petition Collateral shall he applied to the Post-Petition Indebtedness (including without limitation all accrued interest and to the extent allowed by applicable law, accruing interest and expenses); provided, however, that the application of Cash Collateral in the Account for payment of fees and expenses shall be subject to the provisions of ¶ 9 of the Final DIP Financing Order. If the source of any such proceeds or payments is not clearly identified or identifiable (by consent of Debtors, Bank Group, and the Committee, or otherwise) as attributable to Post-Petition Collateral, such proceeds or payments shall be deemed conditionally to be proceeds of Pre-Petition Collateral, subject to further order of the Bankruptcy Court. Until the Pre-Petition and Post-Petition Indebtedness is unconditionally, indefeasibly and finally paid in full, the Bank Group, the Agent and the Administrative Agent shall have all the rights, remedies and protections provided for and granted to them in and by the DIP Financing Agreement, the Final DIP Financing Order, this Order and any other Orders entered herein. In the event the Pre and Post-Petition Indebtedness is unconditionally, indefeasibly and finally paid in full, Bank of America as Agent shall no longer receive remittance of Cash Collateral and such Cash Collateral shall be deposited into the Account with no further application thereof (other than use thereof pursuant to the Budget) pending further Order of the Court.
(b) Such Cash Collateral and proceeds shall be received and conditionally applied by Bank of America as Agent subject to all indefeasible and unavoidable liens and security interests of other secured parties perfected or deemed perfected on or as of the Petition Date which are senior to the liens and security interests of Bank Group.
(c) In the event that the Bank Group and the Committee acknowledge in writing or the Bankruptcy Court by final order finds that a claim, lien, or security interest in such Cash Collateral and proceeds (or the collateral from which such Cash Collateral and proceeds was derived) is unavoidable, indefeasible, and superior to the liens and security interests of Bank Group, Bank Group shall promptly pay over to the holder of such senior claim, lien, or security interest the lesser of: (a) the amount of the holder’s superior claim; or (b) the amount of the Cash Collateral or proceeds received by the Bank Group subject to such superior claim, lien, or security interest.
(d) In the event the Bank Group is required to disgorge and pay over to a senior secured party or any other person any amount of money which was received and applied to the reduction of the indebtedness and obligations of the Debtors to the Bank Group, such indebtedness and obligations shall be reinstated in such amount, shall bear interest as provided in the DIP Financing Agreement and shall have the same rights and priority as if it had never been paid.
14. Nothing in this Order shall change or modify any party’s rights under previous orders or stipulations entered in these cases.
15. The Bank Group has consented to the Debtors’ interim use of cash collateral as provided in this Order. The entry of this Order is without prejudice to the rights of the Debtors’ to seek all relief requested in the Motion at the Final Hearing, thereon, including the use of Cash Collateral for the payment of any expenses, including Professional Fees, not specifically provided for by the relief granted in this Order, whether incurred prior to or after the Final Hearing. The entry of this Order is also without prejudice to any objection the Bank Group may have to the relief requested in the Motion, provided, however, that the Bank Group has consented to the use of Cash Collateral as provided herein.
Nothing contained herein shall limit or preclude the Bank Group, the Committee, the Growers or the Debtors from asserting any arguments they may now or later assert in connection with the relief requested in the Motion.
16. This Final Hearing on the Debtors’ Motion which shall take place at November 29, 2000 at 1:30 p.m. Objections to the final relief requested in the Motion must be filed with the Court and served on counsel to the Debtors so that they are received by Debtors’ counsel no later than November 20, 2000.