Opinion
Case No. 04-13819, Jointly Administered.
September 13, 2004.
Brian P. Leitch, Esq., Daniel M. Lewis, Esq., Michael J. Canning, Esq., ARNOLD POR TER LLP, Denver, CO and Washington, DC and New York, NY, Lawrence E. Rifken, Esq. (VSB No. 29037), Douglas M. Foley, Esq. (VSB No. 34364), McGUIREWOODS LLP, McLean, Virginia, Counsel to the Debtors and Debtors-in-Possession.
Robert Coulter, Esq., Assistant United States Attorney, Civil Division, U.S. Department of Justice and Andrea Horowitz Handel, Brendan Collins, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, D.C., Steven J. Reisman, Daniel R. Lenihan, CURTIS, MALLET-PREVOST, COLT MOSLE LLP, New York, New York, Attorneys for the ATSB as Government Guarantor of the Tranche A Loans.
David S. Walls, David L. Eades, Stephen E. Gruendel, MOORE VAN ALLEN, PLLC, Charlotte, N.C., and SWIDLER BERLIN FRIEDMAN, LLP, Monique D. Almy, Steven Tave, The Washington Harbour, Washington, DC, Attorneys for the Collateral Agent, the Agent, and Bank of America as a Tranche B Lender.
Upon the Debtors' Motion for Bridge, Interim and Final Orders (1) Authorizing the Debtors to Use Cash Collateral; (2) Providing Adequate Protection; (3) Scheduling a Final Hearing; (4) Approving Form and Manner of Notice; and (5) Granting Related Relief (the "Motion"), wherein the Debtors moved this Court for, among other things, the entry of an interim order authorizing the Debtors' use of Cash Collateral on an interim basis (the "Interim Relief"), and after notice and a hearing on the Interim Relief, the Court finds, subject to the terms and conditions hereof, that (i) the Interim Relief requested in the Motion is in the best interests of the Debtors, their estates and their creditors; (ii) the Interim Relief requested in the Motion is necessary to provide the Debtors with sufficient cash to continue operations and to preserve the going concern value of their businesses; (iii) proper and adequate notice of the Motion and the hearing on the Interim Relief has been given, and no other or further notice is necessary with respect to the Interim Relief; and (iv) upon the record herein, after due deliberation thereon, good and sufficient cause exists for the granting of the Interim Relief as set forth herein. Therefore,
Unless otherwise defined herein, all capitalized terms shall have the meaning ascribed to them in the Motion.
THE COURT HERE BY FINDS AND CONCLUDES THAT:
Background
A. On September 12, 2004 (the "Petition Date"), the Debtors commenced these chapter 11 cases (the "Cases") by filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code in this Court.
B. The Debtors have continued in the management and operation of their businesses as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. No trustee or examiner has been appointed in these Cases, and no official committee of unsecured creditors has been form ed as of the date hereof.
C. This Court has jurisdiction, pursuant to 28 U.S.C. §§ 157(b) and 1334, over these Cases, and over the persons and property affected hereby. Consideration of the Motion constitutes a core proceeding as defined in 28 U.S.C. § 157(b)(2). The statutory predicates for the relief sought herein are sections 105, 361, 363 and 507 of the Bankruptcy Code and Rule 4001 (b) and (d) of the Federal Rules of Bankruptcy Procedure. Venue of the Cases in this Court is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
D. On September 12, 2004, this Court entered a Bridge Order granting the Debtors interim relief by allowing the Debtors the use of Cash Collateral, subject to the conditions and limitations set forth in such Bridge Order, during the period from the date of such Bridge Order through the entry or denial of an interim order authorizing the Debtors' continued use of Cash Collateral (the "Bridge Cash Collateral Period"). The Debtors have utilized Cash Collateral during the Bridge Cash Collateral Period in compliance with the conditions and limitations of the Bridge Order.
ATSB Loan and Cash Collateral
E. On March 31, 2003, the Debtors emerged from their prior bankruptcy cases before this Court (jointly administered as case no. 02-83984-SSM) in accordance with the "Findings of Fact, Conclusions of Law, and Order under 11 U.S.C. §§ 1129(a) and (b) Fed.R.Bankr.P. 3020 Confirming the First Amended Joint Plan of Reorganization of US Airways Group, Inc. and its Affiliated Debtors and Debtors-in-Possession, as Modified" entered by this Court on March 18, 2003 (as subsequently modified and in effect, the "Confirmation Order").
F. Upon the Debtors' emergence from the prior bankruptcy cases, US Airways, Inc. ("USAI") obtained a One Billion Dollar ($1,000,000,000) loan from various lenders (the "ATSB Loan"), $900 million of which is guaranteed by the Air Transportation Stabilization Board (the "ATSB") in accordance with the Air Transportation Safety and Stabilization Act. The ATSB Loan includes a Nine Hundred Million Dollar ($900,000,000) Tranche A loan (the "Tranche A Loan"), the portion of the ATSB Loan that is guaranteed by the ATSB, and a One Hundred Million Dollar ($100,000,000) Tranche B loan (the "Tranche B Loan").
G. The initial Lenders were Kitty Hawk Funding Corporation, which funded the entire Tranche A Loan as Primary Tranche A Lender (together with its assigns, the "Tranche A Lender"); Bank of America, N.A. ("Bank of America"), which funded $25 million of the Tranche B Loan, and the Retirement Systems of Alabama Holdings LLC ("RSA"), which funded the remaining $75 million of the Tranche B Loan (together, the "Tranche B Lenders"). Kitty Hawk Funding Corporation subsequently assigned its position and rights as Tranche A Lender to the YC SUSI Trust.
H. The ATSB Loan is evidenced by that certain Loan Agreement dated as of March 31, 2003 (as amended, the "Loan Agreement") among USAI, US Airways Group, Inc. and the Subsidiary Guarantors from time to time party thereto (the "Guarantors"), the Tranche A Lender and Tranche B Lenders (collectively, the "Lenders"), Phoenix American Financial Services, Inc., as Loan Administrator (the "Loan Administrator"), Bank of America, N.A., as Agent for the Lenders (in such capacity, the "Agent"), as Agent for the Tranche A Lender (in such capacity, the "Tranche A Agent"), and as Collateral Agent (in such capacity, the "Collateral Agent" and, together with the Agent and the Tranche A Agent, the "Agents") and the ATSB. The Lenders, the Agents and the ATSB are collectively referred to hereinafter as the "ATSB Lender Parties".
I. As authorized by the Air Transportation Safety and Stabilization Act, the ATSB guaranteed the Tranche A Loan ($900 million) pursuant to a Guarantee Agreement entered into among the Agent, the Lenders and the ATSB on March 31, 2003 (the "Guarantee").
J. The ATSB Loan was and is secured, pursuant to the terms of a number of collateral agreements (the "Collateral Agreements") entered into by one or more of the Debtors, by a wide range of assets owned by such Debtors. This collateral includes, among other things, as more specifically identified in the various Collateral Agreements, certain aircraft and engines, equipment and parts, flight simulators, airport takeoff and landing slots, real property, inventory, accounts receivable, bank accounts and other cash assets, and investment properties and proceeds thereof (collectively, the "Pre-Petition Collateral").
K. Pursuant to section 552(b) of the Bankruptcy Code, the Pre-Petition Collateral includes, without limitation, all proceeds, products and profits of the Pre-Petition Collateral, whether existing before or after the commencement of the Cases.
L The Confirmation Order provides that the liens on the Pre-Petition Collateral securing the ATSB Loan constitute legal, valid and duly perfected first priority liens and security interests, not subject to avoidance and junior and subordinate only to certain liens and security interests permitted under the Loan Agreement. The ATSB Lender Parties assert, and the Debtors acknowledge and agree, that the Collateral Agreements create valid, binding, enforceable (other than in respect of the stay of enforcement arising from section 362 of the Bankruptcy Code) and perfected liens in the Pre-Petition Collateral and Cash Collateral pursuant to the terms of the Confirmation Order and the Collateral Agreements, and are not subject to avoidance or subordination pursuant to the Bankruptcy Code or applicable non-bankruptcy law.
M. The debtors and the ATSB Lender Parties agree that after application of certain payments that have been made by USAI on account of the ATSB Loan, the current outstanding principal balance of the ATSB Loan is $717,567,888 (together with all interest, fees, charges and expenses accrued or to accrue, and which are payable in accordance with the Loan Agreement, the "ATSB Loan Obligations"). Of this principal amount, $645,811,098.76 is outstanding in respect of Tranche A Loan and $71,756,788.75 is outstanding in respect of the Tranche B Loan.
N. The ATSB Lender Parties assert, and the Debtors acknowledge and agree, that (i) the ATSB Loan constitutes a legal, valid and binding obligation of the Debtors, enforceable in accordance with its terms (other than in respect of the stay of enforcement arising from section 362 of the Bankruptcy Code), (ii) no offsets, defenses or counterclaims exist to the currently outstanding ATSB Loan Obligations, and (iii) no portion of the currently outstanding ATSB Loan Obligations is subject to avoidance or subordination pursuant to the Bankruptcy Code or applicable non-bankruptcy law.
O. The ATSB Lender Parties assert, and the Debtors acknowledge and agree, that the Debtors currently have Unrestricted Cash (as defined in the Loan Agreement), composed of cash and cash equivalents, with a value in excess of $745 million in which the ATSB Lender Parties hold, by and through the Collateral Agent, a valid, perfected first priority security interest. The ATSB Lender Parties and the Debtors agree that such Unrestricted Cash therefore constitutes "cash collateral" under section 363 of the Bankruptcy Code (the "Cash Collateral"). Such Cash Collateral comprises substantially all of the unrestricted cash and cash equivalents available to support the Debtors' continued operations.
P. An immediate need exists for the Debtors to have continued access to the Cash Collateral in order to continue their operations, meet their payroll and other necessary, ordinary course business expenditures, acquire goods and services, and administer and preserve the value of their estates, and maintain adequate access to cash in amounts customary and necessary for companies of this size in this industry to maintain customer and vendor confidence. The ability of the Debtors to finance their operations by way of working capital requires their access to their cash resources, the absence of which would immediately and irreparably harm the Debtors, their estates, and their creditors. The Debtors require these cash resources to operate their businesses, to preserve the confidences of vendors, suppliers and customers, and to preserve the going concern value of their businesses.
Q. The Interim Relief requested in the Motion is, subject to the terms and conditions hereof, necessary, essential, and appropriate for the continued operation of the Debtors' businesses and the preservation of their estates and of going concern values.
R. It is in the best interest of Debtors' estates to grant the Debtors immediate access to Cash Collateral, subject to the terms and conditions hereof.
S. The ATSB Lender Parties assert, and the Debtors acknowledge and agree that, the ATSB Lender Parties also possess valid, perfected, and enforceable security interests in substantial collateral other than the Cash Collateral. The Debtors acknowledge that the aggregate value of all the Pre-Petition Collateral (including the Cash Collateral) pledged to the ATSB Lender Parties as security for the ATSB Loan Obligations is, as of the Petition Date, more than the outstanding balance of the ATSB Loan Obligations. As a result, the ATSB Lender Parties are entitled to receive payment of post-petition interest, fees and expenses (all as provided for under the terms of the Loan Agreement) in accordance with section 506(b) of the Bankruptcy Code.
T. The Debtors have requested that the ATSB Lender Parties consent to the Debtors' use of the Cash Collateral and the other Pre-Petition Collateral pursuant to the terms and conditions of this Interim Order during the Interim Cash Collateral Period (as defined below). The Debtors acknowledge and stipulate that the ATSB Lender Parties are entitled to adequate protection pursuant to sections 361 and 363(e) of the Bankruptcy Code with respect to the Pre-Petition Collateral, including without limitation to compensate such ATSB Lender Parties for any loss or diminution in value resulting from the use of the Cash Collateral, the use, sale or lease of the Pre-Petition Collateral and the imposition of the automatic stay during the Interim Cash Collateral Period.
U. Subject to the entry of and continued effectiveness of this Interim Order, the ATSB Lender Parties have consented, and directed the Collateral Agent not to object, to the Debtors' use of the Pre-Petition Collateral, including the Cash Collateral, during the Interim Cash Collateral Period.
V. Prior notice of the hearing (the "Interim Hearing") and for the entry of the Interim Order and the Interim Relief requested in the Motion, was given by telecopy, electronic mail, overnight delivery service, hand delivery or regular mail, to (i) the office of the United States Trustee for the Eastern District of Virginia, (ii) the Agent, Collateral Agent and Bank of America as a Tranche B Lender and counsel, (iii) the Tranche A Lender and Tranche A Agent and counsel, (iv) the RSA and counsel; (v) the ATSB and counsel; (vi) the United States Department of Justice; (vii) the Loan Administrator and counsel; (viii) the Debtors' thirty (30) largest general unsecured creditors (to the extent practicable), and (ix) all unions representing employees of the Debtors (the "Initial Notice Parties").
W. The Debtors have requested immediate entry of an Order of this Court approving the Interim Relief (the "Interim Order") pursuant to Bankruptcy Rule 4001(b)(2), and the undersigned ATSB Lender Parties have consented to such relief. Good and sufficient cause has been shown for the entry of this Interim Order. Among other things, the entry of this Interim Order is in the best interests of the Debtors, their creditors and their estates because it will enable the Debtors to (i) continue the orderly operation of their businesses and avoid an immediate shutdown of operations; (ii) meet their obligations for payroll, necessary ordinary course expenditures, and other operating expenses; (iii) pay necessary fees and professional expenses under the Bankruptcy Code and make payments authorized under other Orders entered by this Court; (iv) obtain needed goods and services; (v) retain customer, supplier and employer confidence by demonstrating that they have the financial ability to maintain normal operations; and (vi) maintain adequate cash resources customary and necessary for companies of this size and in the industries in which they operate to maintain customer confidence, thereby avoiding immediate and irreparable harm to the Debtors' estates.
NOW, based upon the Motion of the Debtors and the record before this Court with respect to the Motion made by the Debtors at the Interim Hearing, and good cause appearing therefor,
IT IS ORDERED, ADJUDGED AND DECREED that:
(1) The Motion is GRANTED with respect to Interim Relief.
Period of Interim Relief
(2) Notwithstanding any provision of the Bankruptcy Code or the Bankruptcy Rules to the contrary, this Interim Order shall take effect immediately upon signature and shall remain in effect until the earlier of (i) the close of business on October 15, 2004, or (ii) the entry or denial of a final order (the "Final Order") authorizing the Debtors' continued use of Cash Collateral (such period being referred to as the "Interim Cash Collateral Period").
Good Faith
(3) The Debtors, the ATSB Lender Parties, and their respective agents and employees have acted in good faith in negotiating, consenting, and agreeing to the Debtors' use of Cash Collateral as contemplated and provided by this Interim Order. The negotiation of the terms and provisions of this Interim Order have been conducted at arms' length, and the Debtors believe such terms and provisions are fair and reasonable under the circumstances and reflect the Debtors' exercise of reasonable business judgment consistent with the Debtors' fiduciary duties.
(4) Nothing in this Interim Order shall in any way be construed or interpreted to impose or allow the imposition upon the ATSB Lender Parties or their respective agents and employees any liability for any claims arising from the prepetition or postpetition activities of the Debtors or any of their affiliates in the operation of their businesses, or in connection with their restructuring efforts.
(5) If any of the provisions of this Interim Order are hereafter modified, vacated or stayed by an Order of this Court or another court, such stay, modification or vacation shall not affect the validity and enforceability of any lien, security interest or priority authorized for the benefit of any of the ATSB Lender Parties hereunder that is granted or attaches prior to the effective date of such stay, modification or vacation, and any use of the Cash Collateral by the Debtors pursuant to this Interim Order prior to the effective date of such modification, stay or vacation shall be governed in all respects by the original provisions of this Interim Order.
(6) This Interim Order is without prejudice (i) to the rights of the ATSB Lender Parties to seek a modification of this Interim Order, including a request for additional adequate protection or the termination of the Debtors' right to use Cash Collateral, after notice and hearing, including a hearing noticed on an emergency basis; and (ii) to the rights of the Debtors to seek modification or extension of the Interim Order, including an increased use of Cash Collateral, after notice and hearing, including a hearing noticed on an emergency basis.
Authorized Use of Cash Collateral
(7) The Debtors are hereby authorized to use Cash Collateral during the Interim Cash Collateral Period, subject to the conditions and limitations set forth below.
(8) The Debtors may use Cash Collateral during the Interim Cash Collateral Period to pay the ordinary and reasonable expenses of operating their businesses, including, without limitation, payroll and benefit expenses, aircraft and engine debt and lease payments, purchase of fuel and supplies, government security and inspection fees, advertising, utility services, payroll taxes, insurance, supplies and equipment (excluding the purchase or other acquisition of aircraft), vendor and supplier services, and other expenditures as are necessary for operating their businesses. The Debtors may also utilize Cash Collateral during the Interim Cash Collateral Period to make payments authorized under other Orders entered by this Court, including for payment of professional and other administrative expenses; provided, however, that notwithstanding anything herein to the contrary, no such Cash Collateral may be used by the Debtors to pay any professional fees or expenses of any party in interest to object to, contest in any manner or otherwise challenge, the validity, perfection or enforceability of the ATSB Loan, the Collateral Agreements, or any liens or security interests securing the ATSB Loan (or to undertake any formal discovery proceedings in anticipation thereof). The foregoing shall not be interpreted to prevent the Debtors from paying the reasonable professional fees or expenses of any Official Committee in connection with the investigation of the liens and security interests of the ATSB Lender Parties prior to the commencement of any adversary proceeding challenging such liens and security interests.
Adequate Protection for ATSB Lender Parties For Debtors' Use of Cash Collateral
(9) In each case as adequate protection for, and to the extent of the diminution in value of, the ATSB Lender Parties' interests in the Pre-Petition Collateral resulting from the Debtors' use of Cash Collateral and the other Pre-Petition Collateral and the imposition of the automatic stay pursuant to section 362 of the Bankruptcy Code during the Interim Cash Collateral Period:
(a) The Debtors shall pay, for the benefit of the ATSB Lender Parties, all current interest, fees (including without limitation all fees as described in section 2.8 of the Loan Agreement) and charges (including without limitation all charges as described in section 11.3 of the Loan Agreement) accruing under the Loan Agreement, which become due or accrue during the Interim Cash Collateral Period; provided that any such unpaid interest and all fees and charges as described in section 2.8 of the Loan Agreement that came due and were payable under the Loan Agreement prior to the Petition Date shall be paid within five (5) business days after the entry of this Interim Order. All such payments of interest accruing or paid during the Interim Cash Collateral Period shall be calculated at the default rate under the Loan Agreement. All payments of interest, fees and charges accruing during the Interim Cash Collateral Period shall be due and payable as and when required under the Loan Agreement.
(b) The Debtors hereby grant, assign and pledge to the Collateral Agent, for the ratable benefit of the ATSB Lender Parties, valid, perfected and enforceable liens and security interests (the "Replacement Liens") in (i) all property owned by any of the Debtors as of the Petition Date in which the Collateral Agent does not hold a valid, enforceable and perfected lien or security interest and the proceeds therefrom, and (ii) all property which becomes part of the Debtors' estates on or after the Petition Date and the proceeds therefrom (collectively (i) and (ii) together being the "Replacement Collateral"), which property shall include, without limitation, (A) any accounts receivable acquired by the Debtors on or after the Petition Date, and (B) any cash or cash equivalents acquired by the Debtors on or after the Petition Date, which cash or cash equivalents shall be deemed Cash Collateral and subject to the protections of section 363 of the Bankruptcy Code; provided, however, that such Replacement Liens shall not extend or apply to any interest of the Debtors (i) in any aircraft or engine, including all parts, substitutions, renewals and replacements of, improvements, accessions and accumulations incident to each such aircraft or engine, to the extent such aircraft or engine constitutes equipment of the type described in section 1110(a)(3) of the Bankruptcy Code (a "Section 1110 Asset"), or (ii) any other encumbered asset with respect to which the granting of any such Replacement Lien would cause a default of any financing, lease or similar agreement governing a Section 1110 Asset or a default under any other agreement which would result in a default under any financing, lease or similar agreement directly or indirectly governing a Section 1110 Asset. (c) The Replacement Liens granted hereunder shall be valid, perfected, and enforceable against the Replacement Collateral without further filing or recording of any document or instrument or the taking of any further actions. The Replacement Liens granted hereunder shall be subject and subordinate in priority to those liens, security interests and other encumbrances, existing as of the Petition Date, or which attach to the Replacement Collateral, which are valid, perfected, enforceable and unavoidable and which are otherwise senior to the liens in favor of the ATSB Lender Parties. The Replacement Liens shall be valid and enforceable against any trustee appointed in any of the Cases, or in any prior or subsequent proceeding affecting the Debtors, including any conversion of any of the Cases to a liquidation under chapter 7 of the Bankruptcy Code.
For the avoidance of doubt, notwithstanding any other term or provision of this Interim Order, the Replacement Collateral shall not include any assets which are governed by Trust Agreements, as such term is defined in the Loan Agreement.
(d) In the event that, as a result of the Debtors' use of Cash Collateral as granted herein, or the imposition of the stay pursuant to section 362 of the Bankruptcy Code, during the Interim Cash Collateral Period, and, if notwithstanding the Replacement Liens granted herein, the collateral (including the Pre-Petition Collateral, Replacement Collateral, and Cash Collateral) proves insufficient to repay the ATSB Loan Obligations in full, the ATSB Lender Parties (as their respective interests appear) shall have an administrative expense claim under section 507(b) of the Bankruptcy Code with priority over all other administrative expense claims (the "Super-Priority Claim"), limited in amount to the aggregate diminution in value of the ATSB Lender Parties' interests in the Pre-Petition Collateral after the Petition Date, senior to all other priority or superpriority claims in these bankruptcy cases.
(e) During the Interim Cash Collateral Period, the Debtors shall pay monthly, promptly upon submission of invoices and related documentation, all reasonable fees, charges, expenses and other amounts incurred or accrued by any of the ATSB Lender Parties (in their capacities as ATSB Lender Parties), or the ATSB Loan Administrator (in such capacity), as the case may be, in connection with the Cases or the Loan Agreement, including without limitation, (i) the reasonable attorneys' fees and expenses of Moore Van Allen PLLC, as counsel to the Agent, the Collateral Agent, Bank of America as Tranche B Lender and the LC Issuing Bank, (ii) the reasonable attorneys' fees and expenses of Mayer Brown, Rowe and Maw LLP, as counsel to the Tranche A Lender and Tranche A Agent, (iii) the reasonable attorneys' fees and expenses of counsel to RSA as a Tranche B Lender incurred in such capacity; (iv) the reasonable attorneys' fees and expenses of Curtis, Mallet-Prevost, Colt Mosle LLP, as counsel to the ATSB; (v) the reasonable attorneys' fees and expenses of counsel to the ATSB Loan Administrator; and (vi) the reasonable fees and expenses of Lazard Freres Co. LLC, the financial advisor retained at the direction of certain of the ATSB Lender Parties (the "Financial Advisor"). The Debtors' obligations to make such payments shall include, in each instance, any of such fees, charges, expenses and other amounts which were incurred or accrued but unpaid as of the date hereof.
(f) The Debtors shall not be entitled to any section 506(c) payment or priority for the costs or expenses of the administration of any of these Cases, arising during the Interim Cash Collateral Period, against any of the Pre-Petition Collateral or Replacement Collateral except to the extent the Debtors have incurred reasonable necessary costs and expenses that have provided a direct, demonstrable, net benefit to such collateral and the ATSB Lender Parties; provided that any such claim shall be chargeable against and payable from only tangible personal property of the Debtors (excluding, for the avoidance of doubt, Cash Collateral); and provided further that any such claim shall arise only in connection with the preservation of or disposition of such collateral.
(10) During the Interim Cash Collateral Period, as additional adequate protection of the ATSB Lender Parties, the Debtors shall provide the ATSB Lender Parties the following information:
(a) On a weekly basis, a 13-week cash forecast (the "Budget") including reports, in form, detail and substance reasonably satisfactory to the ATSB Lender Parties, which show the sources and uses of cash from the prior week, and material variances associated therewith, with such Budget and reports to be provided, for the week that ends on Friday, by 12:00 p.m. on the following Wednesday;
(b) On a daily basis, reports in form, detail and substance reasonably satisfactory stating the aggregate amount of Unrestricted Cash (as defined in the Loan Agreement);
(c) Copies of (i) all non-privileged documents provided to any official committee (an "Official Committee") that is appointed in these Cases, (ii) any and all audits prepared by the Debtors' accountants, and (iii) subject to the Debtors' reasonable best efforts, copies of final versions of all non-privileged consultants' reports, appraisals, business plans, and similar documents as they become available to the Debtors;
(d) As and when required under the terms of the Loan Agreement, all of the financial information, operational information (including slot utilization reports) and related reports, documents and analysis required under the terms of the Loan Agreement.
(11) The Debtors shall, during the Interim Cash Collateral Period, maintain Unrestricted Cash (as defined in the Loan Agreement) in amounts, measured as of the close of business Friday of each week, not less than the weekly minimums of Unrestricted Cash as set forth below:
Week Ended 9/17/04 $600,000,000 Week Ended 9/24/04 $600,000,000 Week Ended 10/1/04 $550,000,000 Week Ended 10/8/04 $575,000,000 Week Ended 10/15/04 $585,000,000
(12) Upon reasonable telephonic notice by any of the ATSB Lender Parties, the Loan Administrator, or the Financial Advisor, the Debtors shall permit such party and any of its agents, advisors, auditors and employees full and reasonable access to the Debtors' books, records and place of business to verify the existence, condition and location of property in which said creditor holds a security interest. The Debtors shall also provide the ATSB Lender Parties, the Loan Administrator, and the Financial Advisor, and any of their agents, advisors, auditors and employees, with reasonable access during normal business hours to all documentation, places of business, officers, consultants and employees of the Debtors, all without material disruption to the operation of the business of any of the Debtors. The Debtors shall provide to the ATSB Lender Parties, the Loan Administrator, and the Financial Advisor, with reasonable promptness, such financial information concerning the Debtors' cash flow projections, business plan, and other aspects of operations as such parties may reasonably request from time to time.
(13) Upon entry of this Interim Order, (i) the ATSB Loan Obligations shall constitute allowed secured claims of the ATSB Lender Parties against USAI and each of the Guarantors that is a Debtor in these Cases, and (ii) the liens and security interests of the Collateral Agent, for the benefit of the ATSB Lender Parties, shall be determined to be valid, perfected, enforceable and not subject to avoidance. Notwithstanding the foregoing, such determination of the validity, perfection, enforceability and unavoidability of such liens, security interests and claims is without prejudice to the rights of any authorized party (other than the Debtors) to investigate and challenge any such liens, security interests and/or claims of the ATSB Loan Parties; provided that any such challenge shall be made by commencement of an adversary proceeding pursuant to Federal Rule of Bankruptcy Procedure 7001 (an "Adversary Proceeding") no later than 60 days after the entry of this Interim Order or be forever barred. Despite the initiation of any such challenge to any such liens, security interests or secured claims, such liens, security interests and secured claims shall be presumed to be valid and entitled to the benefit of this Interim Order pending the entry of a final non-appealable judgment and order in favor of the authorized party with respect to such challenge. If no such Adversary Proceeding is properly and timely filed by such date, (i) the ATSB Loan Obligations shall not be subject to any other or further challenge, counterclaim, offset, subordination or avoidance by any party in interest, including without limitation any subsequently appointed trustee, and (ii) the liens and security interests of the Collateral Agent, for the benefit of the ATSB Lender Parties and the ATSB Loan Administrator, as the case may be, shall not be subject to any other or further challenge and shall be determined to have been, as of the Petition Date, valid, binding, perfected, enforceable and unavoidable.
(14) None of the ATSB Lender Parties shall take any action during the Interim Cash Collateral Period to seize or take control over any of the Cash Collateral or the Debtors' other property, nor shall they impose freezes of assets or seek to exercise any alleged right of setoff or recoupment, or exercise any other right or remedy against the Pre-Petition Collateral, the Replacement Collateral or the Debtors' other property during the Interim Cash Collateral Period; provided that each of the ATSB Lender Parties reserve their rights to do any of the foregoing, after receiving authority of the Court to the extent necessary, upon a breach or violation by the Debtors of any of the terms or conditions of this Interim Order; and provided, further, that Bank of America may impose customary administrative holds on any commercial bank accounts and other commercial transactions, including without limitation ACH transfers, credit card processing, and other similar transactions, pending the entry of first day orders of the Court governing such matters. Notwithstanding the above, nothing in this paragraph 14 shall impair the rights of any federal agency or entity other than the ATSB in this regard.
Termination of Debtors' Ability to Use Cash Collateral
(15) The Debtors' ability to use Cash Collateral during the Interim Cash Collateral Period will terminate immediately upon the occurrence of any event described in clauses (a), (d), (e), (f), (g), (j) or (k)(1) below or, if any event described in any other clause below shall occur, four business days after any ATSB Lender Party shall deliver written notice to the Debtors that an event of default has occurred:
(a) the expiration of the Interim Order as provided in Paragraph (2), other than due to the entry of the Final Order or any other order of the Court approving the Debtors' use of Cash Collateral, without the prior written consent of the ATSB Lender Parties;
(b) the Debtors fail to comply in any material respect with any of the terms or conditions of this Interim Order;
(c) the Debtors seek any modification or extension of this Interim Order, without providing the ATSB Lender Parties a minimum of two (2) business day prior written notice of the hearing on such modification or extension;
(d) the aggregate amount of Unrestricted Cash is less than the applicable amounts required by Paragraph 11 of this Interim Order, measured as of the close of business on Friday of each week during the Interim Cash Collateral Period unless the Debtors certify to the ATSB Lender Parties in writing before 8:00 p.m. (New York time) on the next calendar day (Saturday) that the aggregate amount of Unrestricted Cash is not less than the applicable minimum required by Paragraph 11 of this Interim Order measured as of such Friday;
(e) the Debtors enter into any asset purchase agreement, without the prior written consent of the ATSB Lender Parties, for the sale, lease or transfer of the Pre-Petition Collateral, Cash Collateral, Replacement Collateral, or other property of the Debtors, in an amount greater than $20,000,000, individually or in the aggregate;
(f) an application is filed by the Debtors for the approval of any claim arising under section 507(b) of the Bankruptcy Code or any lien in any of the Cases which is pari passu with or senior to the Super-Priority Claim or Replacement Liens, excluding, in all cases, any Super-Priority Claim, Replacement Liens or other liens arising under this Interim Order or the Final Order, or pursuant to any other financing agreement made with the prior written consent of the ATSB Lender Parties;
(g) the commencement of any action by the Debtors against any of the ATSB Lender Parties, or their respective agents and employees, to subordinate or avoid any liens made in connection with the ATSB Loan;
(h) any Order shall be entered granting relief from the stay arising under section 362 of the Bankruptcy Code to the holder or holders of any security interest, lien or right of setoff to permit foreclosure (or the granting of a deed in lieu of foreclosure or similar instrument), possession, set-off or any similar remedy with respect to any assets of the Debtors that have a value in excess of $50,000,000 in the aggregate;
(i) (1) any of the Cases shall be dismissed or converted to a case under chapter 7 of the Bankruptcy Code, or the Debtors shall file a motion, or other pleading, seeking dismissal of any of any of the Cases under section 1112 of the Bankruptcy Code, or otherwise; or (2) a trustee under chapter 11 of the Bankruptcy Code, a responsible officer or an examiner with enlarged powers relating to the operation of the Debtors' business (powers beyond those set forth in section 1106(a)(3) and (4) of the Bankruptcy Code) under section 1106 of the Bankruptcy Code shall be appointed or elected in any of the Cases;
(j) the Debtors fail to pay timely to the Agent, on behalf of the ATSB Lender Parties, current cash payments during the Interim Cash Collateral Period for all interest and all fees and related charges due to the ATSB Lender Parties under section 2.8 of the Loan Agreement;
(k) (1) the Debtors shall assert in any pleading filed in any court that any material provision of this Interim Order is not valid and binding for any reason, or (2) any material provision of this Interim Order shall for any reason, other than the entry of the Final Order, or any other order of this Court approving the Debtors' use of Cash Collateral, without the prior written consent of the ATSB Lender Parties, cease to be valid and binding; and
(l) the Debtors shall fail in any material respect to comply with section 5.4(a) (Maintenance of Properties), section 5.4(b) (Insurance), or section 5.16(Slot Utilization) of the Loan Agreement, or the Debtors shall fail in any material respect to comply with any provisions in the Collateral Agreements governing the maintenance of the Debtors' properties, insurance or the maintenance and protection of slots.
(16) Notwithstanding any other term or provision hereof, for so long as the Guarantee shall remain in effect, (a) remedies exercisable by the Lenders, the Agent or the Collateral Agent under the Loan Agreement or any Collateral Agreement, and (b) any written notice delivered pursuant to Paragraph 15 hereof, shall be exercised or made solely upon the written instruction, or with the written consent, of the ATSB. For so long as the Guarantee shall remain in effect, wherever any term or provision of this Interim Order provides for the consent or approval of the ATSB Lender Parties, such consent shall require at a minimum the consent of the ATSB. The ATSB authorizes the Agents and the Lenders to consent to and execute this Interim Order.
(17) The provisions of this Interim Order shall be binding upon and inure to the benefit of the Debtors, the ATSB Lender Parties, any Official Committee, and any trustee subsequently appointed for the estates of any of the Debtors, whether in the chapter 11 cases or in the event of any conversion of any chapter 11 case to a liquidation administered under chapter 7 of the Bankruptcy Code. Such binding effect is an integral part of the Interim Order. The terms of this Interim Order supercede the terms of the Bridge Order.
(18) This Interim Order shall constitute findings of fact and conclusions of law and shall take effect and be fully enforceable immediately upon execution hereof.
NOTICE OF FINAL HEARING
(19) Following entry of this Interim Order, the Debtors shall immediately provide notice of the Motion, and a copy of this Interim Order and notice of the Final Hearing, by mail to each of the Initial Notice Parties and, without duplication, to (i) parties who have filed a request for service prior to such date, (ii) counsel to any Official Committee appointed in these cases, and (iii) the United States Department of Justice. Such notice shall constitute good and sufficient notice of the Final Hearing. The notice of approval of this Interim Order shall state that any party in interest objecting to the use of Cash Collateral or the terms of the Final Order shall file written objections with the United States Bankruptcy Court Clerk for the Eastern District of Virginia, Alexandria Division, no later than October 12, 2004, which objections shall be served so that same are received by not later than 4:00 p.m. (prevailing Eastern time) on such date by electronic mail service to usairwaysservice@aporter.com andusairwaysservice@mcguirewoods.com.
(20) The Final Hearing to consider the Motion and Final Order shall be held on October 14, 2004 at 9:30 a.m., at the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria Division, 200 S. Washington St., Alexandria, Virginia 22314, before the Honorable Stephen S. Mitchell, United States Bankruptcy Judge.
SO ORDERED.