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Local Bankr.R.4001-3

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Local Bankr. R. 4001-3 Use of Cash Collateral and Debtor in Possession Financing.

In order to facilitate the expeditious hearing and review of motions seeking authority to use cash collateral and seeking approval of debtor in possession financing, a checklist for each motion pursuant to 11 U.S.C. § 363 and 11 U.S.C. § 364 shall be completed and attached to the motion  and shall clearly and concisely disclose the following:

(a)      Contents of Motion. The following provisions, to the extent applicable, are added to the enumerated lists of material provisions set forth in FRBP 4001(b)(1)(B), (c)(1) and (d)(1)(B):

(1)      pricing and economic terms, including letter of credit fees, commitment fees, any other fees, and the treatment of costs and expenses to the lender, any agent for the lender, and their respective professionals;

(2)      any effect on existing liens of the granting of collateral or adequate protection provided to the lender and any priority or super priority provisions;

(3)      any carve-outs, or subordinations, from liens or super priorities;

(4)      any cross-collateralization provision that elevates pre-petition debt to administrative expense (or higher) status or that secures pre-petition debt with liens on post-petition assets (which liens the creditor would not otherwise have by virtue of the pre-petition security agreement or applicable law);

(5)      any provision that applies the proceeds of post-petition financing to pay, in whole or in part, pre-petition debt or which otherwise has the effect of converting pre-petition debt to post-petition debt (i.e., any "roll-up" provision);

(6)      any provisions that would affect the Court’s power to consider the equities of the case under 11 U.S.C. § 552(b)(1);

(7)      any terms that provide that the use of cash collateral or the availability of credit will cease on (i) the filing of a challenge to the lender’s pre-petition lien or the lender’s pre-petition claim based on the lender’s pre-petition claim; (ii) entry of an order granting relief from the automatic stay other than an order granting relief from the stay with respect to material assets; (iii) the grant of a change of venue with respect to the case or any adversary proceeding; (iv) management changes or the departure, from the Debtor, of any identified employees; (v) the expiration of a specified time for filing a plan; or (vi) the making of a motion by a party in interest seeking any relief (as distinct from an order granting such relief);

(8)      any provision establishing a deadline for, or otherwise requiring, the sale of property of the estate or filing or confirming a plan;

(9)      in jointly administered cases, terms that govern the joint liability of Debtors including any provision described in subdivision (e) of this rule; and

(10)     any provision for the funding of non-debtor affiliates with cash collateral or proceeds of the loan, as applicable, and the approximate amount of such funding.

(b)     Disclosure of Efforts to Obtain Financing and Good Faith. A motion for authority to obtain credit pursuant to 11 U.S.C. § 364 shall describe in general terms the efforts of the trustee or debtor in possession to obtain financing, the basis upon which the debtor in possession or trustee determined that the proposed financing is on the best terms available, and material facts bearing on the issue of whether the extension of credit is being extended in good faith.

(c)      Inadequacy of Notice After Event of Default.

(1)      If the proposed order contains a provision that modifies or terminates the automatic stay or permits the lender to enforce remedies after an event of default, either the proposed order shall require at least seven (7) days' notice to the trustee or debtor in possession, the United States Trustee and each committee appointed under 11 U.S.C. §§ 1102 or 1114 (or the largest creditors if no committee has been appointed under 11 U.S.C. § 1102), before the modification or termination of the automatic stay or the enforcement of the lender's remedies, or the motion shall explain why such notice provision is not contained in the proposed order.

(2)      If the proposed order contains a provision that terminates the use of cash collateral, either the proposed order shall require at least five (5) days' notice before the use of cash collateral ceases (provided that the use of cash collateral conforms to any budget in effect) or the motion shall explain why such notice provision is not contained in the proposed order.

(d)      Joint Obligations. In jointly-administered cases, if one or more Debtors will be liable for the repayment of indebtedness for funds advanced, used or transferred to or for the benefit of another Debtor, the motion and the proposed order shall describe, with specificity, any provisions of the agreement or proposed order that would affect the nature and priority, if any, of any inter-debtor claims that would result if a Debtor were to repay debt incurred by or for the benefit of another Debtor.

(e)      Investigation Period Relating to Waivers and Concessions as to Prepetition Debt. If a motion seeks entry of an order in which the Debtor stipulates, acknowledges or otherwise admits to the validity, enforceability, priority, or amount of a claim that arose before the commencement of the case, or of any lien securing the claim, either the proposed order shall include a provision that permits a committee appointed under 11 U.S.C. § 1102 and other parties in interest to undertake an investigation of the facts relating thereto, and proceedings relating to such determination, or the motion shall explain why the proposed order does not contain such a provision. The minimum time period for such committee or other party in interest to commence, or to file a motion to obtain authority to commence, any related proceedings as representative of the estate shall ordinarily be sixty (60) days from the date of entry of the order authorizing the use of cash collateral or the obtaining of credit, or such other period of time as the Court orders for cause shown prior to the expiration of such period.

(f)      Content of Interim Orders. A motion that seeks entry of an emergency or interim order before a final hearing under FRBP 4001(b)(2) or (c)(2) shall describe the amount and purpose of funds sought to be used or borrowed on an emergency or interim basis and shall set forth facts to support a finding that immediate or irreparable harm will be caused to the estate if immediate relief is not granted before the final hearing.

(g)      Provisions of the Proposed Order.

(1)     Findings of Fact.

(A)      A proposed emergency or interim order shall include a finding that immediate and irreparable loss or damage will be caused to the estate if immediate financing or authorization of use of cash collateral is not obtained and should state with respect to notice only that the hearing was held pursuant to FRBP 4001(b)(2) or (c)(2), that notice was given to certain parties in the manner described, and that the notice was, in the Debtor's belief, the best available under the circumstances.

(B)      A proposed order may include factual findings as to notice and the adequacy thereof.

(C)      To the extent that a proposed order incorporates by reference to, or refers to a specific section of, a pre-petition or post-petition loan agreement or other document, the proposed order shall also include a statement of such section's import.

(2)     Cross-Collateralization and Rollups. Unless otherwise determined by the Court, a proposed order approving cross-collateralization or a rollup shall include language that reserves the right of the Court to unwind, in whole or in part, after notice and hearing, the post-petition protection provided to the pre-petition lender or the pay down of the pre-petition debt, whichever is applicable, in the event that there is a timely and successful challenge to the validity, enforceability, extent, perfection, or priority of the pre-petition lender's claims or liens, or a determination that the pre-petition debt was undersecured as of the petition date, and the cross-collateralization or rollup unduly advantaged the lender.

(3)     Waivers, Consents, or Amendments with Respect to the Loan Agreement. A proposed order may permit the parties to enter into waivers or consents with respect to the loan agreement or amendments thereof without the need for further Court approval provided that (i) the agreement as so modified is not materially different from that approved, (ii) notice of all amendments is filed with the Court, and (iii) notice of all amendments (other than those that are ministerial or technical and do not adversely affect the Debtor) are provided in advance to counsel for any committee appointed under 11 U.S.C. §§ 1102 or 1114, all parties requesting notice, and the United States Trustee.

(4)     Conclusions of Law. A proposed order may provide that the Debtor is authorized to enter into the loan or other agreement, but it shall not state that the Court has examined and approved the loan or other agreement, unless specifically authorized by the Court.

(5)     Order to Control. The proposed order shall state that to the extent that a loan or other credit agreement differs from the order, the Court Order shall control.

(6)     Statutory Provisions Affected. The proposed order shall specify those provisions of the Bankruptcy Code, Bankruptcy Rules, and Local Rules relied upon as authority for granting relief, and shall identify those sections that are, to the extent permitted by law, being limited or abridged.

(7)     Conclusions of Law Regarding Notice. A proposed order may contain conclusions of law with respect to the adequacy of notice under 11 U.S.C. §§ 363 and 364 and FRBP 4001.