Opinion
Case No. 08-18178-TJC, Case No. 08-18184-TJC.
December 15, 2008
Richard B. Rosenblatt, Linder M. Dorney, Esq., Law Offices of Richard B. Rosenblatt PC, Rockville MD, Counsel for the Debtor.
Maria Ellena Chavez-Ruark, Tydings Rosenberg LLP, Baltimore, MD, Counsel for the Official Committee of Unsecured Creditors.
Thomas D. Renda, Patricia A. Borenstein, MILES STOCKBRIDGE, P.C., Baltimore, Maryland, Counsel for Chevy Chase Bank, F.S.B..
Champion Billiard Supply, Inc. and Champion Billiards Bar Stools, Inc. (collectively, the "Debtor"), Chevy Chase Bank, F.S.B. ("Chevy Chase"), and the Official Committee of Unsecured Creditors (the "Committee"), by and through their undersigned counsel, have negotiated the limited use of Chevy Chase's cash collateral in good faith and have requested the entry of this Order (the "Cash Collateral Order") pursuant to the Debtor's Motion for Authority to Use Cash Collateral (the "Motion").
FACTUAL BACKGROUND
1. The Debtor commenced two cases (individually, a "Case" and collectively, the "Cases") by filing a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") on June 20, 2008 (the "Petition Date"). Since the Petition Date, the Debtor continues in the management and possession of its business and property as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
2. Each Debtor is a corporation organized and existing under the laws of the Maryland. The Debtor's corporate offices are located at 106700 Hanna Street, Beltsville, Maryland 20705. The Debtor owns a chain of retail stores which sell entertainment equipment and furniture such as pool tables, theatre seats, and patio furniture.
3. On July 11 2008 the Court entered the Stipulation and Agreed Order Authorizing Debtor's interim and Final Limited Use of Cash Collateral and Providing Adequate Protection of Interest of Chevy Chase Bank F.S.B. in Cash Collateral (the First "Stipulation"),. The First Stipulation expired on October 22, 2008.
4. The Debtor has requested use of Chevy Chase's Cash Collateral (as defined herein) in order to operate the Debtor's business, and Chevy Chase has agreed to provide limited use of the Cash Collateral subject to the terms and conditions of this Order.
THE LOAN DOCUMENTS AND CHEVY CHASE'S CLAIM
5. Chevy Chase asserts and the Debtor agrees that the Debtor is indebted to Chevy Chase (the "Indebtedness"), and Chevy Chase is a perfected secured creditor of the Debtor pursuant to certain loan documents (collectively, as may have been amended, modified, altered and/or restated from time to time, the "Loan Documents") with a lien on substantially all assets of the Debtor, including the Debtor's inventory, equipment, accounts receivable, and all proceeds thereof and all other personal property of the Debtor as set forth in the Loan Documents (collectively, the "Pre-Petition Collateral").
BINDING AGREEMENT
6. Chevy Chase and the Debtor assert that the agreements and arrangements authorized in this Order have been negotiated at arms-length, are fair and equitable under the circumstances, and are enforceable pursuant to their terms. Chevy Chase and the Debtor assert that they have acted in good faith (including, without limitation, as that term is used in Section 363 of the Bankruptcy Code and otherwise) in the negotiation and preparation of this Cash Collateral Order, have been represented by counsel, and intend to be and are bound by the terms of this Cash Collateral Order.
CASH COLLATERAL
7. Chevy Chase asserts, and the Debtor agrees, that all rents, royalties, income, proceeds, profits, and revenues of the Pre-Petition Collateral that are in the Debtor's (or persons in privity with the Debtor and/or the Debtor) possession, custody or control, and all other "cash collateral" within the meaning of Section 363(a) of the Bankruptcy Code (collectively, the "Cash Collateral") are the Cash Collateral of Chevy Chase. Chevy Chase asserts, and the Debtor agrees, that Chevy Chase has first perfected liens upon and security interests in the Cash Collateral pursuant to the applicable provisions of the Loan Documents, Sections 363(a) and 552(b) of the Bankruptcy Code, the First Stipulation, and this Cash Collateral Order.
8. Chevy Chase does not consent to the Debtor's use of Cash Collateral except in strict accordance with the terms and conditions contained in this Cash Collateral Order, including the attached Budget, as defined herein.
9. The Debtor has requested that Chevy Chase permit the use of Cash Collateral in order to provide funds to be used solely for such purposes set forth in the Budget in order to avoid immediate and irreparable harm to the Debtor's estate which will occur if this Cash Collateral Order is not approved. Without the use of Cash Collateral, the Debtor asserts that it will be unable to retain or pay employees, to maintain the value of the estate's assets, to provide financial information, or to perform any of the tasks which the Debtor believes are necessary to maximize the value of the estate.
10. Good, adequate, and sufficient cause has been shown to justify the granting of the relief requested herein. The Debtor asserts that the use of Cash Collateral is necessary to preserve the estate, and will avoid immediate and irreparable harm to the Debtor, its estate and assets, prior to the expiration of the period specified herein.
IT IS THEREFORE ORDERED:
USE OF CASH COLLATERAL
11. The Debtor is hereby authorized on a limited basis to use Cash Collateral only as provided in strict accordance with the terms and conditions provided in this Cash Collateral Order, provided, however, that with respect to bonuses and commissions, the Debtor shall not pay any bonus or commission both in terms of rate of pay and gross amount) to any individual which is materially higher than that paid during the immediately prior fiscal year.
12. The Debtor may use Cash Collateral on an interim basis only to pay for the specified purposes and for no more than the specified amounts set forth in the budget attached hereto as Exhibit A (the "Budget"), until such time as this Stipulation has been approved by the Court and has become final by virtue of the expiration of the time to object, or resolution of any objections that have been filed (the "Interim Period"), and subject to the other terms and conditions of this Cash Collateral Order. To the extent this Cash Collateral Order becomes a Final Cash Collateral Order (as defined in the last paragraph of this Order), the Debtor may use Cash Collateral only to pay for the specified purposes and for no more than the specified amounts set forth in the Budget for the period through January 31, 2009, subject to the terms and conditions of this Cash Collateral Order. In the event that the Debtor's actual expenditures for any specified purpose in the Budget is less or more than fifteen (15%) of the amount set forth in the Budget, the difference between the actual expenditure and the amount set forth in the Budget may not be used by the Debtor for any other purpose without Chevy Chase's prior written consent, except that such amounts may be paid over to Chevy Chase in accordance with the terms of this Order.
13. In addition to the permitted expenditures in the Budget, Chevy Chase consents to the payment of all amounts due to the Office of the U.S. Trustee under 28 U.S.C. § 1930(a)(6), to the extent this Cash Collateral Order becomes a Final Cash Collateral Order. Except for the payment of such fees and payment of items listed on the Budget, the Debtor shall not use Cash Collateral for any other purpose.
14. The Debtor shall open and designate on or more debtor-in-possession account(s) (the "Account"), into which all deposits of Cash Collateral shall be made. The Debtor shall segregate and account to Chevy Chase for all Cash Collateral which it possesses. All of the Cash Collateral collected by the Debtor or its agents shall be immediately deposited into the Debtor's Account. If the Debtor receives funds which the Debtor contends are not Chevy Chase's Cash Collateral, the Debtor shall immediately inform Chevy Chase in writing of the amount and source of such Funds and the separate account into which such funds have been deposited. The Debtor is strictly prohibited from using the Cash Collateral except as provided herein. The Debtor shall account to Chevy Chase for the receipt and use of Cash Collateral received by the Debtor prior to the entry of this Cash Collateral Order.
ADEQUATE PROTECTION
15. As adequate protection of Chevy Chase's interest in the Pre-Petition Collateral and the Cash Collateral during the Interim Period and thereafter, if this Cash Collateral Order becomes a Final Cash Collateral Order, the Debtor shall make adequate protection payments to Chevy Chase as set forth in the Budget and this Cash Collateral Order. Payment to Chevy Chase shall continue to be made on the 1st day of month during the term hereof, for so long as this Cash Collateral Order is in effect (the "Adequate Protection Payments"). Chevy Chase will apply the Adequate Protection Payments to the Indebtedness in accordance with the Loan Documents, or as may be otherwise directed by the Court.
16. As further adequate protection of Chevy Chase's interest in the Pre-Petition Collateral and Cash Collateral, the Debtor hereby grants Chevy Chase, effective as of the Petition Date, replacement and additional liens upon and security interests in all of the properties and assets of the Debtor and the Debtor including, but not limited to, the Pre-Petition Collateral, collateral acquired by the Debtor postpetition, and the collateral described in the Loan Documents and this Cash Collateral Order (the "Collateral"), but the replacement lien shall not extend to the proceeds of any avoidance actions prosecuted by the Debtor or the Committee pursuant to Article Five of the Bankruptcy Code. Such replacement liens are granted to the same extent, validity and priority of Chevy Chase's liens upon the Pre-Petition Collateral as of the Petition Date. The replacement liens and the additional liens are only granted to the extent that the use of Cash Collateral diminishes Chevy Chase's secured claim as of the Petition Date. The additional liens shall be subject to perfected, priority liens upon such additional collateral in favor of other parties in interest, to the extent such liens were entitled to priority over the liens of Chevy Chase prior to the commencement of the Case.
17. As further adequate protection of Chevy Chase's interest in the Pre-Petititon Collateral and Cash Collateral, Chevy Chase shall be afforded super-priority administrative claim status pursuant to Section 503(b)(1) of the Bankruptcy Code, to the extent that the use of Cash Collateral diminishes Chevy Chase's secured claim herein as of the Petition Date.
18. Chevy Chase and the Debtor are hereby authorized to perform all acts, take any action, and execute and comply with the terms of such other documents, instruments, and agreements as Chevy Chase may require as evidence of and for the protection of the Collateral and Cash Collateral, or which may be otherwise deemed reasonably necessary by Chevy Chase to effectuate the terms and conditions of this Cash Collateral Order, including, without limitation, the filing of any financing statements, amendments, or other notices evidencing perfection of Chevy Chase's security interest in any collateral.
19. All of the terms and provisions of this Cash Collateral Order, including but not limited to the security interests and liens created and perfected hereby, shall be binding upon the Debtor, and any subsequently appointed trustee either under Chapter 7 or Chapter 11 under the Bankruptcy Code.
20. In the event of a Default, as set forth below, (and only as event (a) set forth in paragraph 22 below, after Chevy Chase has given ten (10) days notice of the occurrence of such event to the Debtor (and its counsel), the Committee (if formed), and the Office of the U.S. Trustee and such Event has not been cured or remedied) the Debtor's authority to use Cash Collateral shall immediately cease, and the Debtor shall not use Cash Collateral without further order of the Court.
REPORTING REQUIREMENTS
21. Each Friday during the term hereof, the Debtor agrees to deliver to Chevy Chase and the Committee copies of: (i) weekly revenue and expense reports reasonably available to the Debtor in electronic form and (ii) details of all banking transactions for the prior week, reasonably available to the Debtor in electronic form.
EVENTS OF DEFAULT
22. The occurrence of any of the following shall constitute an event of default under this Cash Collateral Order: (a) any violation or breach of any of the terms of this Cash Collateral Order, including the failure of the Debtor to use the Cash Collateral in strict compliance with this Cash Collateral Order, (b) the maturity, termination, expiration, or non-renewal of this Cash Collateral Order as provided for herein, (c) conversion of the Case to a case under Chapter 7 of the Bankruptcy Code, (d) the dismissal of the Case, (e) the discontinuation of the Debtor's business or the issuance of an order for the Debtor to discontinue its business, except as provided in the order entered on November 19, 2008 authorizing the Debtor to conduct a going-out-of-business sale or (f) the payment of any prepetition unsecured trade debt, credit card debt, or other debt (any of the foregoing events of default being referred to in this Cash Collateral Order, individually, as an "Event of Default" and, collectively, as "Events of Defaults"). Upon an Event of Default, Chevy Chase may file a notice with the Court declaring such Event of Default ("Default Notice") and shall send a copy of such notice by electronic mail to counsel for the Debtor and counsel for the Committee.
23. Upon the occurrence of any Event of Default and the filing of the Default Notice by Chevy Chase (provided, however, that a Default Notice is not required with respect to an Event of Default under (b), (c) or (d) in the preceding paragraph) and at all times thereafter, and without (i) further act or action by Chevy Chase or this Court, (ii) further notice or hearing, (iii) further order of this Court, or (iv) further order of any court exercising jurisdiction of this case, the Debtor's authority to use Cash Collateral and any and all obligations of Chevy Chase under this Cash Collateral Order shall automatically terminate.
OTHER
24. The terms and provisions of this Cash Collateral Order as well as the priorities in payment, liens, and security interests granted pursuant to this Cash Collateral Order and the Loan Documents shall continue, and such priorities in payment, liens and security interests shall maintain their priority until all Indebtedness is indefeasibly satisfied in full. The provisions of this Cash Collateral Order shall inure to the benefit of the Debtor, Chevy Chase, and their respective successors and assigns.
25. Chevy Chase and the Debtor agree that no approval, agreement, or consent requested of Chevy Chase by the Debtor pursuant to the terms of this Cash Collateral Order or otherwise shall be inferred from any action, inaction or acquiescence of Chevy Chase other than a writing acceptable to Chevy Chase which is signed by Chevy Chase and expressly shows such approval, agreement, or consent, without limitation. Chevy Chase and the Debtor agree that this Cash Collateral Order shall not be interpreted to waive any right or rights of Chevy Chase under the Loan Documents. Chevy Chase and the Debtor agree that this Cash Collateral Order is not intended to cause and shall not cause a novation of the Loan Documents or related loan documents or any of the Indebtedness, nor shall it extinguish, affect or impair the obligations of the Debtor or any guarantors under the Loan Documents or related loan documents, including any guaranties, under or with respect to the Indebtedness. Chevy Chase and the Debtor agree that this Cash Collateral Order shall not release, terminate or limit the priority of any security interests and liens held by Chevy Chase in any assets of the Debtor, or any guarantors. Chevy Chase and the Debtor agree that nothing contained in this Cash Collateral Order is intended to or shall discharge, diminish or extinguish any of or all of the Indebtedness. Chevy Chase and the Debtor agree that nothing contained in this Cash Collateral Order, including without limitation, Chevy Chase's acceptance of the Adequate Protection Payments, shall decelerate the Indebtedness or waive, release or modify in any manner the obligations of any guarantors to Chevy Chase. The Debtor specifically acknowledges and agree that Chevy Chase has not agreed, committed or represented to the Debtor or any other person that the Interim Period will be extended.
26. Chevy Chase and the Debtor agree that nothing herein shall be deemed or construed to waive, limit or modify the rights of Chevy Chase or the Debtor to seek additional relief in this Case in accordance with any provision of the Bankruptcy Code or applicable law.
27. Chevy Chase and the Debtor agree that any notice, objection, report or other document required to be given hereunder shall be deemed given: (i) when sent by facsimile, (ii) upon dispatch by overnight mail, (iii) when sent by electronic mail, or (iv) upon deposit in the United States mail, postage pre-paid, and addressed as follows:
(a) if to Chevy Chase: Claude Sanders Chevy Chase Bank, F.S.B. Commercial Banking Division 7501 Wisconsin Avenue, 12th Floor Bethesda, MD 20814 Phone: (240) 497-7771 Fax: (240) 497-7718 Email: jrsanders@chevychasebank.net
with a copy to: Thomas D. Renda, Esquire Patricia A. Borenstein, Esquire Miles Stockbridge P.C. 10 Light Street Baltimore, Maryland 21202 Phone: (410) 385-3418 Facsimile: (410) 385-3702 Email: trenda@ @milesstockbridge.com
(b) If to the Committee: Maria Ellena Chavez-Ruark Tydings Rosenberg LLP 100 East Pratt St., 26th Floor Baltimore, MD 21202 Phone: (410) 752-9739 Facsimile: (410) 727-5460
(c) if to the Debtor: Mr. Douglas Kelly, President Champion Billiard Supply, Inc. Champion Billiards and Barstools, Inc. 10700 Hanna Street Beltsville, MD 20705
with a copy to: Linda M. Dorney, Esq. Law Offices of Richard B. Rosenblatt PC 30 Courthouse Square, Suite 302 Rockville MD 20850
28. Chevy Chase's consent and Debtor's authority to use Cash Collateral and this Cash Collateral Order shall be effective nunc pro tunc as of October 23, 2008 upon entry of this Cash Collateral Order to and including the earlier of: (i) the occurrence of an Event of Default or (ii) the expiration of the Interim Period, at which time all of the Debtor's authority to use Cash Collateral shall terminate, unless otherwise stipulated to by Chevy Chase and the Debtor in accordance with the terms of this Cash Collateral Order, or otherwise ordered by this Court. To the extent this Cash Collateral Order becomes a Final Cash Collateral Order, the Debtor's authority to use Cash Collateral will be extended beyond the Interim Period to and including the earlier of: (i) the occurrence of an Event of Default; (ii) further Order of the Court, in connection with the Debtors liquidation sale authorized at the conclusion of the hearing held on approval of such sale on November 13, 2008 (the "GOB Sale"), or otherwise; or (iii) January 31, 2009, at which time all of the Debtor's authority to use Cash Collateral shall terminate, unless otherwise stipulated to by Chevy Chase and the Debtor in accordance with the terms of this Cash Collateral Order, or otherwise ordered by this Court.
29. Notwithstanding anything in this Cash Collateral Order, the Budget attached hereto as Exhibit A shall be deemed to be superseded by the budget attached hereto as Exhibit B, from and after the time the Debtors begin their GOB Sale (including budgeted expenditures made in advance of such GOB Sale).
30. Notice of this Cash Collateral Order has been served in accordance with Bankruptcy Rule 4001(d) on November 21, 2008. Objections to the Cash Collateral Order shall be filed and served upon the Debtor's counsel within fifteen (15) days after such service (the "Objection Deadline"). If, and only to the extent that, an objection to this Cash Collateral Order is filed on or before the Objection Deadline, the Court may conduct a final hearing on the use of cash collateral in the United States Bankruptcy Court for the District of Maryland (the "Hearing"), with other hearings on matters currently on the Court's calendar in this Case, at a time and place to be scheduled by the Court. Absent a timely objection filed on or before the Objection Deadline, this Cash Collateral shall become a final order of this Court (the "Final Cash Collateral Order") without the Hearing, further notice, or order of this Court.
SO ORDERED.
Notice Recipients
Recipients of Notice of Electronic Filing: Recipients submitted to the BNC (Bankruptcy Noticing Center):
District/Off: 0416-0 User: vharper Date Created: 12/15/2008 Case: 08-18178 Form ID: pdfparty Total: 6 aty Alan M. Grochal agrochal@tydingslaw.com aty Linda M. Dorney ldorney@rosenblattlaw.com aty Maria Ellena Chavez-Ruark mruark@tydingslaw.com aty Richard B. Rosenblatt rrosenblatt@rosenblattlaw.com aty Thomas D. Renda trenda@milesstockbridge.com TOTAL: 5 db Champion Billiard Supply, Inc. 11333 Maryland Avenue Beltsville, MD 20705 TOTAL: 1