Case KG Doc 5 Filed 10/20/14 Page 1 of 13

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1 Case KG Doc 5 Filed 10/20/14 Page 1 of 13 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ) Chapter 11 UI~TURA (LA) INC., et al., l Debtors. ) Case No (_) ) (Joint Administration Requested) MOTION OF THE DEBTORS FOR AN ORDER UNDER SECTION :i66 OF THE BANKRUPTCY CODE (A) PROHIBITING UTILITY PROVIDERS FROM ALTERING, REFUSING QR DISCONTINUING SERVICE, (B) DEEMING UTILITIES ADEQUATELY ASSURED OF FUTUIZ~ PERFORMANCE, AND (C) ESTAI~LISHING PROCEDURES FOR DETERMINING ADEpUATE ASSURANCE OF PAYMENT The above-captioned debtors and debtors in possession (the "Debtors") in these Chapter 11 Cases, hereby move this Court for entry pf an order (a) prohibiting. the Utility Providers (defined below) from altering, refusing or discontinuing service; (b) deeming the Utility Providers adequately assured of future performance; and (c) establishing procedures for determining additional adequate assurance of future payment (the "Motion"). In support of this Motion, the Debtors respectfully state as follows: Jurisdiction The United States Bankruptcy ~aurt for the District of Delaware (the "Court") has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334 and the Afnended Standing ONder of Reference from the United States District Court for the District of Delaware, dated February 29, This matter is a core ~rpceeding within the meaning of 28 ~ The Debtors in these cases, along with the last four digits of each Debtor's federal tax identification numbers are: Ultura (LA) lnc. (9624) and Ultura (Oceanside) Inc. (6429). The mailing address for each of the Debtors is: 3605 Long Beach Blvd., Suite 201, Long Beach, CA DOCS LA: /001

2 Case KG Doc 5 Filed 10/20/14 Page 2 of 13 U.S.C. 157(b)(2) and the Court may enter a final order consistent with Article III of the United States Constitution. Venue is proper before this Court pursuant to 28 U.S.C and The statutory predicates for the relief requested herein are sections 105(a) and 366 of title 11 of the United States Code (the "Bankruptcy Code"), Back~rouncl A. General 3. On the date hereof (the "Petition Date"), the Debtors commenced these chapter 11 cases (the "Chapter 11 Cases") by filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code. 4. The Debtors have continued in the possession of their property and have continued to operate and manage their businesses as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 5. No official committee has been appointed by the Office of the United States Trustee. 6. The factual background relating to the Debtors' commencement of these Chapter 11 Cases is set forth in detail in the DeclaNation of GNant Lynn in Support of First I~ay Motions (the"lyon Declaration") filed contemporaneously with this Motion and incorporated herein by reference. Relief Requested 7. In the normal course of business, the Debtors have relationships with various utility companies and other providers (each a "Utility Provider" and, collectively, the ROCS L.A: /001 2

3 Case KG Doc 5 Filed 10/20/14 Page 3 of 13 "Utility Providers") for the provision of telephone, cellular phone, gas, electricity, water, trash and other related services (the "Utility Services"). The Utility Providers include, without limitation, the entities set forth on Exhibit A hereto.2 The Debtors estimate that their average monthly pastpetition payments to the Utility Providers will aggregate approximately $37, Because uninterrupted Utility Services are critical to the Debtors' ongoing operations, the Debtors, by this Motion and pursuant to sections 105(a) and 366 of the Bankruptcy Code, seek the entry of an order: (a) prohibiting the Utility Providers from altering, refusing or discontinuing services; (b) deeming Utility Providers adequately assured of future performance; and (c) establishing procedures for determining additional adequate assurance of future payment. 9. In order to provide adequate assurance of payment for future services to the Utility Providers (subject to the terms of the orders authorizing use of cash collateral and/or postpetition financing, the "Financing Order"), the Debtors propose to make a deposit (a "Utility Deposit") equal to 50% of the Debtors' estimated cost of their monthly utility consumption for each Utility Provider in a segregated reserve (the "Utility Deposit Reserve") to be held in the client trust fund account of the Debtors' proposed bankruptcy counsel. The Debtors estimate that the Utility Deposits, in the aggregate, will total $18,550. The Debtors propose to make Utility Deposits in the Utility Deposit Reserve for each of the Utility Providers specified on The listing of any entity on Exhibit A hereto is not an admission that such entity is a utility within the meaning of section 366 of the Bankruptcy Lode. The Debtors reserve the right to assert at any time that any entity listed on exhibit A is not entitled to adequate assurance pursuant to Bankruptcy Code section 366. The Debtors further reserve the right to terminate the services of any Utility Provider at any time and to seek an immediate refund of any Utility Deposit (defined herein) without giving effect to any right of setoff or claim asse3 ted by a Utility Provider against the llebtors. DOCS LA /001

4 Case KG Doc 5 Filed 10/20/14 Page 4 of 13 Exhibit A hereto within ten days after the entry of an interim order granting this Motion, pending further order of the Court, for the purpose of providing each. Utility Provider with adequate assurance of payment for its postpetition services to the Debtors. 10. In addition, the Debtors seek to establish reasonable procedures (the "Procedures") by which a Utility Provider may request additional adequate assurance of future payment, in the event that such Utility Provider believes that its Utility Deposit does not provide it with satisfactory adequate assurance. Such Procedures, in particular, would provide that: a. If a Utility Provider is not satisfied with the assurance of future payment provided by the Debtors pursuant to the proposed Utility Deposit, the Utility Provider must serve a written request (the "Re uest") upon the Debtors setting forth the locations) for which Utility Services are provided, the account numbers) for such location(s), the outstanding balance for each account, a summary of the Debtors' average utility usage over the past twelve months, and an explanation of why the Utility Deposit is inadequate assurance of payment; b. The Request must be actually received by the Debtors and Debtors' counsel, Shirley S. Cho, Esquire, Pachulski Stang Ziehl &Jones LLP, Santa Monica Blvd., 13`'' Floor, Los Angeles, CA 90067; Without further order of the Court (subject to the terms of the Financing Order and consent of the prepetition and postpetition Lender, the "Lender"), the Debtors may enter into agreements granting additional adequate assurance to a Utility Provider serving a timely Request, if the Debtors, in their discretion, determine that the Request is reasonable; d. If the Debtors believe that a Request is unreasonable, then the Debtors shall, within thirty days after the Request Deadline, file a motion pursuant to section 366(c)(2) of the Bankruptcy Code (a "Determination Motion"), seeking a determination from the Court that the Utility Deposit, plus any additional consideration offered by the Debtors, constitutes adequate assurance oi' payment. Pending notice and a hearing on the Determination Motion, the Utility Provider that is the subject of the unresolved Request may DOGS LA: /001 ~

5 Case KG Doc 5 Filed 10/20/14 Page 5 of 13 not alter, refuse, or discontinue services to the Debtors nor recover or setoff against a prepetition deposit; and e. Any Utility Provider that fails to make a timely Request shall be deemed to be satisfied that the Utility Deposit provided to it constitutes adequate assurance of payment. 11. If the Debtors supplement the list in Exhibit A hereto subsequent to the filing of this Motion, the Debtors will serve a copy of this Motion and the signed order granting the Motion (the "Order") on any Utility Provider that is added to the list by such a supplement (the "Supplemental Service"). In addition, the Debtors will also provide a Utility Deposit in the amount of 50% of the estimated cost of monthly utility consumption fot~ the added Utility Provider, subject to the Financing Order. Concurrently with the Supplemental Service, the Debtors will file with the Court a supplement to Exhibit A adding the name of the Utility Provider so served. The added Utility Provider shall have thirty days from the date of the Supplemental Service to make a Request. 12. The Debtors further request that the Order provide that the Debtors may terminate the services of any Utility Provider by providing written notice (a "Termination Notice") to the Utility Provider. Upon receipt of a Termination Notice by a Utility Provider, pursuant to the relief requested by the Debtors herein, the Debtors may withdraw an amount equal to the iltility Provider's Utility Deposit from the Utility Deposit Reserve, without giving effect to any rights of setoff or any claims the Utility Provider may assert against the Debtors. The Debtors believe that the immediate withdrawal of a Utility Deposit relating to a Utility Provider whose services are terminated is fair and appropriate under the circumstances because ROCS LA /001

6 Case KG Doc 5 Filed 10/20/14 Page 6 of 13 the Utility Provider would no longer require adequate assurance of future payment by the Debtors. Basis For Relief 13. Congress enacted section 366 of the Bankruptcy Code to protect a debtor from utility service cutoffs upon a bankruptcy filing and to provide utility companies with adequate assurance that the debtor will pay for postpetition services. See H.R. Rep No , at 350 (1978) repninted in 1978 U.S.C.C.A.N. 5963, Accordingly, section 366 protects a debtor by enjoining utilities from altering, refusing or discontinuing services solely nn account of unpaid prepetition amounts for a period of thirty days after the bankruptcy tiling. Section 366 also protects utility providers by permitting them to alter, refuse or discontinue service after twenty (20) days if the debtors have not furnished "adequate assurance" of payment. 14. Section 366(c), which was enacted as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the"2005 Act"), significantly modified the existing statutory framework. It has two primary purposes. First, it permits a utility to alter, refuse, or discontinue utility service if a debtor has not provided "satisfactory" adequate assurance within twenty (20) days of its bankruptcy filing, subject to the court's ability to modify the amount of adequate assurance. 11 U.S.C. 366(c)(2) and (c)(3)(a). Second, it restricts the factors that a court can consider when determining whether an adequate asstu~ance payment is, in fact, adequate. Specifically, courts may no longer consider (i) the absence of a security deposit before the debtor's petition date, (ii) the debtor's history of timely payments, or (iii) the availability of an administrative expense priority when determining the amount of a deposit. 11 DOCS I.A /001 6

7 Case KG Doc 5 Filed 10/20/14 Page 7 of 13 U.S.C. 366(c)(3)(B). Notwithstanding these changes, it does not appear that Congress intended to -- or did -- abrogate the bankruptcy court's right to determine the amount of adequate assurance necessary or change the fundamental requirement that assurance of payment must simply be "adequate." 15. While section 366(c) does limit the factors a court can consider when determining whethex a debtor has provided adequate assurance of payment, it does not limit the court's ability to determine the amount of payment necessary, if any, to provide such adequate assurance. Instead, section 366(c) gives courts the same discretion in determining the amount of payment necessary for adequate assurance as they previously had under section 366(b). CompaNe 11 U.S.C. 366(b) (pre-2005 Act) ("On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance") with 11 U.S.C. 366(c)(3)(A) (2005 Act) ("On request of a party in interest and after notice and a hearing, the court may order modification of the amount of an assurance payment under paragraph (2)");see also Richard Levin & Alesia Ranney-Marinelli, The Cheeping Repeal of Chapter 11; The Significant Business Provisions of the Bankruptcy Abuse PNotection and ConsumeN Protection Act of 2005, 79 Aivt. BANtcR. L.J. 603, (2005)(stating that courts would likely continue to determine the amount and form of adequate protection after the implementation of the 2005 Act). It is well established that section 366(b) permits a court to find that no adequate assurance payment at all is necessary to provide a utility with adequate assurance of payment. See In re Adelphia Bus. Solutions, 280 B.R. 63, 80 (Bankr. S.D.N.Y. 2002) (citing Virginia Elec. and PoweN Co. v. UOCS LA: /001 7

8 Case KG Doc 5 Filed 10/20/14 Page 8 of 13 Caldor, Inc., 117 F.3d 646, 650 (2d Cir. 1997)). This may be particularly true in cases where debtors have made prepetition deposits or prepayments for services that utilities will ultimately render postpetition. 11 U.S.C. 366(c)(1)(A)(v) (recognizing a prepayment for postpetition services as adequate assurance). Accordingly, courts continue to have discretion to determine the amount and form of adequate assurance payments. 16. Additionally, section 366(c), like section 366(b), simply requires that a utility's assurance of payment be "adequate." Courts have long recognized that adequate assurance of performance does not constitute an absolute guarantee of a debtor's ability to pay. In re New Rochelle Tel. CoNp., 397 B.R. 633, 639 (Bankr. E.DN.Y. 2008) ("Adequate assurance, however, is not a guarantee of payment; rather, it is intended to guard against the utility assuming an unreasonable risk ofnon-payment."); In re Steinebach v. Tucson Elec. Power Co. (In Ne Steinbach), 303 B.R. 634, 641 (Bankr. D. Ariz. 2004) ("Adequate assurance of payment is not, however, absolute assurance...[a]il 366(b) requires is that a utility receive only such assurance of payment as is necessary to protect its interests given the facts of the debtor's financial circumstiances"); Adelphia, 280 B.R. 63 at 80 (accord.). Courts also have recognized that in determining the amount of adequate assurance, bankruptcy courts should "`focus upon the need of the utility for assurance, and...require that the debtor supply nn more than that, since the debtor almost perforce has a conflicting need to conserve scarce financial resources. "' Vzrginia Elec. &Power Co., 117 F.3d at 650 (quoting In re Penn Jersey CoNp., 72 B.R. 981, 985 (Bankr. E.D. Pa 1987) (emphasis by Second Circuit)); In Ne New Rochelle Tel. Corp., 397 B.R. at 639 (accord). ROCS LA278906, /001 g

9 Case KG Doc 5 Filed 10/20/14 Page 9 of The essence of the Court's inquiry in determining whether a given assurance of payment is in fact "adequate" is an examination of the totality of the circumstances in making an informed judgment as to whether utilities will be subject to an unreasonable risk of nonpayment. Adelphia, 280 B.R. at 82-83; S. Cal. Edison Co. v, Crystal Cathedral Ministries (In re CNystcrl Cathedral MinistNies), 454 B.R. 124, (C.D. Cal. 2011). 18. Here, the Debtors propose to make Utility Deposits iti order to provide adequate assurance to the Utility Providers. Under the circumstances of these Chapter 11 Cases, the Debtors believe that the proposed Utility Deposits constitute adequate assurance of payment under section 366(c) of the Bankruptcy Code. Moreover, the Debtors propose to protect the Utility Providers further by establishing the Procedures provided for herein, whereby any Utility Provider can request additional adequate assurance in the event that it believes there are facts and circumstances with respect to its providing postpetition services to the Debtors that would merit greater protection. 19. The Debtors cannot continue to operate without continued Utility Services. If any of the Utility Providers alter, refuse or discontinue service, even for a brief period, the Debtors' business operations would be severely disrupted. In contrast, the Utility Providers will not be prejudiced by the continuation of their services and will be paid all postpetition utility charges. Therefore, it is critical that Utility Services continue uninterrupted. 20. Additionally, this Court has the authority to grant the relief requested herein pursuant to section 105(a) of the Bankruptcy Code, which provides that the Court "may issue any order, process or judgment that is necessary or appropriate to carry out the provisions DOCS LA: /001 9

10 Case KG Doc 5 Filed 10/20/14 Page 10 of 13 of this title." 11 U.S.C. 105(a). "The basic purpose of section 105 is to assure the bankruptcy courts [sic] power to take whatever action is appropriate or necessary in aid of the exercise of their jurisdiction." Collies on Bankruptcy (16th ed. 2013). Because the proposed Procedures protect the Debtors without materially prejudicing the Utility Providers, they carry out section 366 in a manner fully consistent therewith and are an appropriate exercise of this Court's authority under section 105(a) of the Bankruptcy Code. 21. This Court has granted relief similar to that requested herein after the enactment of the 2005 Act. See, e.g., In re Ablest; Inc,, Case No (KJC)(Bnlcr. D. Del. Apr. 21, 2014) (deeming utilities adequately assured of payment where the debtors established a segregated account containing the aggregate estimated cost for two weeks of utility service); In re Rotech Healthcare, Inc., Case No (PJW)(Bankr. D. Del. May 7, 2013 (same)); In ~e Batton Technology Corp., Case No (KG)(Bankr. D. Del. Nov. 6, 2012) (same); In Ne Appleseed's Intermediate Holdings LLC, Case No (KG)(Bankr. D. Del. Feb. 17, 2011) (same); In ~e Local Insight Media Holdings, Inc., Case No (KG)(Bankr. D. Del. Dec. 10, 2010) (same); In re U.S. ConcNete, Inc., Case No, (PJW)(Bankr. D. Del. May 21, 2010) (same).3 Moreover, the rights of the Utility Providers would not be prejudiced if the Court grants this Motion because the Utility Providers are permitted to come before the Court and seek relief according to the Procedures established herein. Waiver of Bankruptcy Rules 6003 and Pursuant to Rule 6003(b) of the Federal Rules of Bankruptcy Procedure, 3 Because of the voluminous nature of the orders cited. herein, they are not attached to this Motion. Copies of these orders, however, are available upon request. llocs LA /001 1 ~

11 Case KG Doc 5 Filed 10/20/14 Page 11 of 13 "a motion to pay all or part of a claim that arose before the filing of the petition" shall not be granted by the Court within 21 days of the Petition Date "[e]xcept to the extent that relief is necessary to avoid immediate and irreparable harm...," Fed. R. Bankr. P. 6003(b). Because the Utilities may attempt to terminate the Debtors' postpetition utility services within the period set forth in section 366(c)(2) of the Bankruptcy Code, and for the reasons set forth in the Lyon Declaration, the Debtors submit that the requirements of Rule 6003 have been met and that the relief requested in this Motion is necessary to avoid immediate and irreparable harm to the Debtors and their estates. 23. Further, to implement the foregoing successfully, the Debtors seek a waiver of the notice requirements under Bankruptcy Rule 6004(a) and the fourteen (14) day stay of an order authorizing the use, sale, or lease of property under Bankruptcy Rule 6004(h), to the extent these rules are applicable. Reservation of Rights 24. Nothing contained herein is intended or should be construed as an admission as to the validity of any claim against the Debtors, a waiver of the Debtors' rights to dispute any claim, applicability of any law, or an approval or assumption of any agreement, contract, or lease under section 365 of the Bankruptcy Code. The Debtors expressly reserve their rights to contest any invoice or claim with respect to the Utility Providers in accordance with applicable bankruptcy and non-bankruptcy law. ROCS LA /

12 Case KG Doc 5 Filed 10/20/14 Page 12 of 13 Notice 25. Notice of this Motion has been given to the following parties or, in lieu thereof, to their counsel: (i) the Office of the United States Trustee; and (ii) the Debtors' secured lender, UAC Finance, Inc. Because the Motion is seeking "first day" relief, within two business days after the hearing on the Motion, the Debtors will serve copies of the Motion and any order entered respecting the Motion as required by Delaware Local Bankruptcy Rule (m). The Debtors submit that, in light of the nature of the relief requested, no other or further notice need be given. No Prior Request 26. No prior motion for the relief requested herein has been made to this or any other Court. Pursuant to Local Bankruptcy Rule (~, the Debtors consent to the entry of a final judgment or order with respect to the Motion if it is determined that this Court would lack Article III jurisdiction to enter such final order or judgment absent the consent of the parties. DOCS LA;278906, /001 I Z

13 Case KG Doc 5 Filed 10/20/14 Page 13 of 13 WHEREFORE, the Debtors respectfully request that this Court enter an interim and final order, substantially in the form attached hereto, granting the relief requested herein and such other and further relief as this Court deems appropriate. PACHULSKI STANG ZI~HL &JONES LLP ~~' ~ e frey N. Pomerantz (CA Bar No ) ebra I. CJrassgr~en (CA Bar No ) James E. O'Neill (Bar No. 4042) Jeffrey W. Dulberg (CA Bar No ) 919 North Market Street, 17t~' Floor P.O. Box 8705 Wilmington, DE (Courier 19801) Telephone: (302) Facsimile: (302) jpomerantz@pszj law. com dgrassgreen@pszj law.com joneill@pszjlaw.com j dulberg@pszj law.com [Proposed] Counsel to Debtors and Debtors in Possession vocs La:a~s~o~.a s~~~4ioo~ 13

14 Case KG Doc 5-1 Filed 10/20/14 Page 1 of 2 EXHIBIT A (Utility Providers) DOCS LA: /001

15 Case KG Doc 5-1 Filed 10/20/14 Page 2 of 2 UTILITY PRQVIDER ~ ADDRESS AtCOUM1iT NUMBERS} TYPE QF DEBTOR FACIIiTY PROTECT SERVICE MONTHLY AVERAGE($) Cox Business PO Box and Phones Ultura (Oceanside) $1, Dept. # Inc. Oaks, PA San Diego Gas & PO Box Gas & Ultura (Oceanside) $24, Electric Santa Ana, CA Electric Inc AT&T PO Box T1 Line Ultura (Oceanside) $ Carol Stream, IL Inc Waste Management PO Box and Waste Ultura (Oceanside) $1, of North County Phoenix AZ $5Q Inc. City of Oceanside PO Box Water Ultura (Oceanside) $10, Los Angeles, CA Inc Total Projected Monthly Average $37, DOCS I_,A: /001

16 Case KG Doc 5-2 Filed 10/20/14 Page 1 of 6 EXHIBIT B (Proposed Interim Order) UOCS LA /001

17 Case KG Doc 5-2 Filed 10/20/14 Page 2 of 6 IN THE UNITED STATES BANKRUPTCY COURT FQR THE DISTRICT OF DELAWARE In re: ) Chapter 11 ULTURA (LA) INC., et al., l Debtors. ) Case No O ) (Joint Administration Requested) INTERIM ORDER UNDER SECTION X66 OF THE BANKRUPTCY CODE (A) PROHIBITING UTILITY PROVIDERS FRQ11Z ALTERING, REFUSING OR DISCONTINUING SERVICE, (B) DEEMING UTILITIES ADEQUATELY ASSURED OF FUTURE PERFORMANCE, AND (C) ESTABLISHING PROCEDURES FOR DETERMINING ADEQUATE ASSURANCE OF PAYMENT This matter came before the Court on the Motion of the Debtors for an ONcler Under Section 366 of the Bankruptcy Code (a) PNohibiting Utility Providers From Altering, Refusing or Discontinuing Service, (b) Deemzng Utilities Adequately Assured of Future PeNformance, and (c) Establishing Procedures fon Determining Adequate Assurance of Payment (the"motion").2 The Motion was filed by the above-captioned debtors and debtors in possession (the"debtors") and it shall be promptly served by the Debtors' counsel, together with a copy of this Interim Order, no later than three (3) business days after entry of this Interim Order by way of postage prepaid, first class regular mail upon each Utility Provider set forth on Exhibit A hereto and other interested parties. The Court finds that the relief requested in the Motion is in the best interest of the Debtors, their estates and creditors and other parties in interest and that, in light of the record of the hearing on the Motion, the proposed Utility Deposits and the 1 The Debtors in these cases, along with the last four digits of each Debtor's federal. tax identification numbers are: Ultura (LA) Inc. (9624) and Ultura (Oceanside) Inc. (6429). The mailing address for each of the Debtors is: 3605 Long Beach Blvd., Suite 201, Long Beach, CA Capitalized terms not otherwise defined herein shall having the meanings ascribed to them in the Motion. DOGS LA /001

18 Case KG Doc 5-2 Filed 10/20/14 Page 3 of 6 Procedures provided for by the Motion constitute adequate assurance of payment to the Utility Providers for their postpetition services. After due deliberation thereon and sufficient cause appearing therefore; and due and adequate notice of the Motion having been given under the circumstances; and the requirements of Rule 6003 of the Federal Rules of Bankruptcy Procedure having been satisfied; it is HEREBY ORDERED THAT: The Motion is GRANTED, as stated herein, on an interim basis pending a final hearing thereon, which is hereby scheduled for.m. on, 2014, with any objection to be filed and served so as to be received on or before _.M. on Within ten (10) days after the date of entry of this Order, the Debtors shall set aside the Utility Deposits into a segregated reserve (the "Utility Deposit Reserve"), which amounts shall be held in the client trust fund account of the Debtors' proposed bankruptcy counsel. 3. Within ten (10) days after the date of entry of this Order, the Debtors will furnish adequate assurance of payment for postpetition utility services by making a deposit equal to 50% of the Debtors' estimated cost of postpetition monthly utility consumption (a "Utility Deposit") for each Utility Provider into the Utility Deposit Reserve, subject to the terms and conditions of the Financing Order. 4. Except in accordance with the procedures set forth below, absent further order of the Court, each Utility Provider is prohibited from (a) altering, refusing or discontinuing service to, or discriminating against the Debtors solely on the basis of the commencement of I)OCS LA t4/001 2

19 Case KG Doc 5-2 Filed 10/20/14 Page 4 of 6 these Chapter 11 Cases or on account of any unpaid invoice for services provided before the Petition Date, and (b) requiring the payment of any additional deposit or other secu~ ity in connection with the Utility Providers' continued provision of utility services, including the furnishing of telephone, gas, electricity, water, and trash services, or any other utility service of like kind to the Debtors. 5. If a Utility Provider is not satisfied with the assurance of future payment provided by the Debtors in the Motion, then the Utility Provider must serve a written request (the "Request") upon the Debtors setting forth the locations) for which Utility Services are provided, the account numbers) for such location(s), the outstanding balance for each account, a summary of the Debtors' average utility usage over the past twelve months, and an explanation of why the Utility Deposit is inadequate assurance of payment. 6. The Request must be actually received by the Debtors and Debtoz s' counsel, Shirley Cho, Esquire, Pachulski Stang Ziehl &Jones LLP, Santa Monica Blvd., 13t" Floor, Los Angeles, CA Without further order of the Court (subject to t11e terms of the Financing Order and the consent of the Lender), the Debtors may enter into agreements granting additional adequate assurance to a Utility Provider serving a timely Request, if the Debtors, in their discretion, determine that the Request is reasonable. If the Debtors believe that a Request is unreasonable, within thirty (30) days after the Request Deadline the Debtors shall file a motion pursuant to section 366(c)(2) of the Bankruptcy Code (a"determination Motion"), seeking a determinatio~i from the Court that DOCS LA: /001

20 Case KG Doc 5-2 Filed 10/20/14 Page 5 of 6 the Utility Deposit paid to the objecting Utility Provider, plus any additional consideration offered by the Debtors, constitutes adequate assurance of payment. Pending notice and a hearing on the Determination Motion, the Utility Provider that is the subject of the unresolved Request may not alter, refuse, or discontinue services to the Debtors, nor exercise any set off against the Utility Deposit. 9. Any Utility Provider that fails to make a timely Request shall be deemed to be satisfied that the Utility Deposit constitutes adequate assurance of payment. 10. The Debtors may supplement the list of Utility Providers on exhibit A to the Motion. If the Debtors supplement the list subsequent to the filing of the Motion, the Debtors will serve a copy of the Motion and this Order on any Utility Provider that is added to the list by such a supplement (the "Supplemental Service"). In addition, the Debtors will provide a Utility Deposit in the amount of 50% of tihe estimated cost of monthly utility consumption for the added Utility Provider, subject to the terms and conditions of the financing Order. Any subsequently added Utility Provider set forth on a supplement to Exhibit A to the Motion will fall within the scope of this Order from the date of the filling of the supplemental Exhibit A. Such an added Utility Provider shall have thirty (30) days from the date of the Supplemental Service to make a Request. If such Request is made, the Debtors and the ijtility Provider making the Request shall be bound by the Procedures set forth herein, as applicable. 11. The Debtors may terminate the services of any Utility Provider by providing written notice (a"termination Notice") to the Utility Provider. Upon receipt of a Termination Notice by a Utility Provider, the Debtors may withdraw an amount equal to the ROCS LA: /001 4

21 Case KG Doc 5-2 Filed 10/20/14 Page 6 of 6 Utility Provider's Utility Deposit from the Utility Deposit Reserve, without giving effect to any rights of setoff or any claims the Utility Provider may assert against the Debtot~s. The Debtors' rights to oppose any such setoff ox claims of the Utility Providers are reserved. 12. Nothing in this order shall be deemed to vacate or modify any other restrictions on the termination of service by a Utility Provider as provided by sections 362 and 365 of the Bankruptcy Code or other applicable law. Nothing herein or in the Motion shall constitute postpetition assumption or adoption of any agreement pursuant to section 365 of the Bankruptcy Code, nor shall anything herein be deemed a waiver by the Debtors or any other party of any rights with respect to the assumption or rejection of an executory contract. Dated:, 2014 United States Bankruptcy Judge DOGS LA /001 5

22 Case KG Doc 5-3 Filed 10/20/14 Page 1 of 3 EXHIBIT C (Proposed Final Order) DOGS I,A /001

23 Case KG Doc 5-3 Filed 10/20/14 Page 2 of 3 IN TI3E UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ) Chapter 11 ULTIJRA (LA) INC., et al., l Debtors. ) Case No (_) ) (Joint Administration Requested) FINAL O12DER (A) PROIIISITING UTILITY PROVIllERS FROM ALTERING, REFUSING OR DISCONTINUING SERVICE, (B) neeiyiing UTILITIES AD~QUATEI.Y ASSUItEll OI+' FUTURE PERFORMANCT, AND (C) ESTABLIS~3ING PROCEDURES FUR DET~RIIZINING ADEQUATE ASSURANCE OF PAYMENT This matter came before the Court on the Motion of the DebtoNs for an ONder Under Section 366 of the Bankruptcy Cade (a) PNohibiting Utility PNovideNs FNom Altering, Refusing o~ Discontinuing Service, (b) Deeming Utilities Adequately Assured of Future PerfoNmance, ~znd (c) Establishing PNocedures for Determining Adequate AssuNance of ~'ayment (the"motion") filed by the above-captioned debtors and debtors in possession (the "Debtors") On,the Court entered an order gt anting the Motion on an interim basis (the "Interim Order") and scheduled a final hearing on the Motion for at.m. (the "Final Hearing"). A copy of the Interim Order is annexed hereto as Exhibit A. The Court finds that the relief requested in the Motion is in the best interest of the Debtors, their estates and creditors and other parties in interest and that, in light of the record of the hearing on the Motion, the Utility Deposits and the Procedures provided for by the Motion constitute adequate assurance of 1 The Debtors in these cases, along with the last four digits of each Debtor's federal tax identification numbers are: Ultura (LA) Inc. (9624) and Ultura (Oceanside) Inc. (6429). The mailing address for each of the Debtors is: 3605 Long Beach Blvd., Suite 201, Long Beach, CA DOCS LA /001

24 Case KG Doc 5-3 Filed 10/20/14 Page 3 of 3 payment of the Utility Providers for their postpetition services. After due deliberation thereon and sufficient cause appearing therefor it is HEREBY ORDERED THAT: The Motion is GRANTED on a final basis, as provided herein. 2. The procedures set forth in the Interim Order are hereby approved on a final basis. 3. Nothing in this order shall be deemed to vacate or modify any other restrictions on the termination of service by a Utility Provider as provided by sections 362 and 365 of the Bankruptcy Code or other applicable law. Nothing herein or in the Motion shall constitute postpetition assumption or adoption of any agreement pursuant to section 365 of the Bankruptcy Code, nor shall anything herein be deemed a waiver by the Debtors or any other party of any rights with respect to the assumption or rejection of ari executot~y contract. Dated:, 2014 United States Bankruptcy Judge DOCS LA /001 2