Case Doc 57 Filed 10/29/13 Entered 10/29/13 16:30:00 Desc Main Document Page 1 of 25 UNITED STATES BANKRUPTCY COURT DISTRICT OF VERMONT

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1 Desc Main Document Page 1 of 25 UNITED STATES BANKRUPTCY COURT DISTRICT OF VERMONT IN RE: ) ) PLASTIC TECHNOLOGIES OF VERMONT, INC. ) Case No cab PLASTIC TECHNOLOGIES OF MARYLAND, INC. ) Chapter 11 case PLASTIC TECHNOLOGIES OF NEW YORK, LLC. ) Jointly Administered ) Debtor in Possession. ) FINAL ORDER AUTHORIZING USE OF CASH COLLATERAL, AUTHORIZING POST-PETITION BORROWING AND GRANTING ADEQUATE PROTECTION Upon the motion (the "Motion") dated October 21, 2013 of Plastic Technologies of Vermont, Inc., Plastic Technologies of Maryland, Inc., and Plastic Technologies of New York, LLC (collectively, Debtors ), pursuant to, inter alia, sections 105, 361, 362(a), 363(c) and 364 of Title 11 of the United States Code, 11 U.S.C. 101, et seq. (as amended, the "Bankruptcy Code") and Rules 2002, 4001 and 9014 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), seeking authorization for the Debtor to use Cash Collateral (as defined in the Bankruptcy Code) in which Centrix Bank ( Centrix ) has a perfected first priority lien interest, such Motion have come before the Court for emergency hearing on first day motions on October 22, 2013, and subsequently on October 25, 2013, and for final hearing on November 19, 2013, the Debtors present through their attorneys Obuchowski & Emens-Butler, PC; Centrix Bank, through their attorneys, Nixon & Peabody, LLP; Internal Revenue Service, present through Melissa Ranaldo, Assistant United States Attorney; Business Finance Agency of New Hampshire, Inc., by and through its attorneys, Primmer Piper Eggleston & Cramer PC; Consolidated Container Corporation, through its attorneys John J. Kennelly, Esq., Pratt, Vreeland, Kennelly, Martin &

2 Desc Main Document Page 2 of 25 White and Jason Watson, Esq., Alston & Bird; and the Office of United States Trustee, through trial attorney, Kevin Purcell, Esq.; The Court having heard the arguments of Counsel, and having considered the Motion on notice and upon a stipulation agreed between the Debtor and Centrix in accordance with Rule (c) and of the Vermont Local Bankruptcy Rules (the Local Rules ); and it appearing to the Court that the relief requested by the Motion is in the best interests of the Debtors and their creditors and is essential for the continued operation of the Debtors business, and no objections having been filed and final hearing having been held on November 19, 2013; and after due deliberation and consideration and good and sufficient cause appearing therefor; IT IS HEREBY FOUND, DETERMINED, ORDERED AND ADJUDGED that: 1. Jurisdiction. This Court has core jurisdiction over these proceedings and the parties and property affected hereby pursuant to 28 U.S.C. 157(b) and Consideration On Limited Notice and Scheduling of a Hearing and Further Notice. Pursuant to Rule (c) and Local Rule the Motion was considered initially on limited notice at the request of the Debtors and Centrix, and such consideration was appropriate in the circumstances of these cases so as to avoid immediate and irreparable harm to the Debtors estate. 1 A final hearing with regard to the Debtors further use of Cash Collateral was held, on notice, on November 19, 2013, at 10:00 am at the United States Bankruptcy Court, US Post Office and Courthouse, 151 West Street, Room 202, Rutland, VT and Vermont Interactive Television sites, pursuant to the Debtors motion for authorization for use of cash collateral, and 1 The use and reference of immediate and irreparable harm to the Debtors Estate is agreed by the parties to be solely for the purposes of the Debtors need for use of cash collateral and debtor in possession financing, and as to other issues, specifically the Debtors Motion for Sale, as such term as presently used and hereafter is not conceded for such other issues or to have res judicata effect for other issues other than cash collateral and debtor in possession financing. 2

3 Desc Main Document Page 3 of 25 granting of adequate protection liens filed with this Court on October 21, 2013, no objection having been filed, and cause shown for the relief requested. 3. Background. (a) Petition Date. On October 21, 2013 (the "Petition Date"), the Debtors filed voluntary petitions for relief with this Court under Chapter 11 of the Bankruptcy Code (the "Chapter 11 Cases" or the Cases ). The Debtors are continuing in possession of its property, and operating and managing its business, as debtor-in-possession, pursuant to sections 1107 and 1108 of the Bankruptcy Code. (b) Need to Use Cash Collateral and Debtor in Possession Financing. The Debtors had an immediate need to use Cash Collateral and Debtor in Possession financing. The Debtors do not have sufficient available sources of unencumbered working capital to operate its business in the ordinary course of business. As of the Petition Date, the Debtors have requested permission to utilize cash collateral and Debtor in Possession financing, and an interim hearing with regard to the use of cash collateral and debtor in possession financing was held on October 22, 2013 and October 25, Prior to entry of an order approving the final use of cash collateral, however, the Debtors required the limited use of Cash Collateral and Debtor in Possession financing in order to continue operating its business in the ordinary course and so as to avoid serious and irreparable harm to the Debtor and its estate, which harm would occur if the Debtor were unable to use Cash Collateral and obtain the financing as requested in the Motion, which temporary and interim use were approved by prior Order of this Court. (c) DIP Facility. Debtors are unable to obtain sufficient financing from sources other than DIP Lender on terms more favorable than the DIP Facility described in this Order and pursuant to the DIP Facility Documents. Debtors have been unable to obtain unsecured credit 3

4 Desc Main Document Page 4 of 25 solely under section 503(b)(1) of the Bankruptcy Code as an administrative expense. New credit is unavailable to Debtors without (a) providing the DIP Lender (i) the DIP Facility Superpriority Claims and (ii) the DIP Facility Liens as provided herein and in the DIP Facility Documents, and providing for the Adequate Protection of the Prepetition Secured Parties interests in the Prepetition Collateral on the terms and conditions as set forth herein. (d) Business Judgment, Good Faith and Arm s Length. Based upon the record presented by Debtors to this Court: (i) the terms of the DIP Facility and use of Cash Collateral described in this Order are the best available under the circumstances, reflect the Debtors exercise of prudent business judgment consistent with their fiduciary duty, and are supported by reasonably equivalent value and fair consideration; and (ii) the DIP Facility and use of Cash Collateral described in this Order have been negotiated in good faith and at arm s length among Debtors and the DIP Lender, and any loans, use of Cash Collateral or other financial accommodations set forth in this Order shall be deemed to have been extended, issued, made, or consented to, as the case may be, in good faith within the meaning of section 364(e) of the Bankruptcy Code. (e) Willingness to Provide Financing. The DIP Lender has indicated a willingness to provide financing to the Debtors and/or permit the use of Cash Collateral by the Debtors (or to otherwise refrain from objecting to such financing or use of Cash Collateral) subject to (i) the entry of this Order, (ii) the terms and conditions of the DIP Facility Documents, and (iii) findings by the Court that such post-petition financing and use of Cash Collateral is essential to the Debtors estate, that the terms of such financing and use of Cash Collateral were negotiated in good faith and at arm s length, and that the DIP Facility Liens, the DIP Facility Superpriority Claims, and the other protections granted pursuant to this Order and the DIP Facility Documents 4

5 Desc Main Document Page 5 of 25 will not be affected by any subsequent reversal, modification, vacatur, or amendment of this Order or any other order, as provided in section 364(e) of the Bankruptcy Code. The DIP Lender has acted in good faith in, as applicable, negotiating, consenting to and agreeing to provide the post-petition financing arrangements and/or use of Cash Collateral (or otherwise not opposing such financing or use of Cash Collateral) contemplated by this Order and the other DIP Facility Documents, and the reliance of the DIP Lender on the assurances referred to above is in good faith. (f) Limitations to Consent. None of the Prepetition Secured Parties have opposed the terms and conditions of this Order, including the priming under section 364(d) of the Bankruptcy Code as provided for herein. The consent of the Prepetition Secured Parties is expressly limited to (i) the Debtors use of Cash Collateral solely on the terms and conditions set forth in this Order (ii) the post-petition financing being provided by the Working Capital DIP Agent and Working Capital DIP Lender as contemplated by this Order and the Working Capital DIP Facility Documents and (iii) the post-petition financing being provided by the Interchange DIP Lender as contemplated by this Order and the Interchange DIP Facility Documents. The Adequate Protection granted in this Order constitutes adequate protection necessary of the Prepetition Secured Parties interests in the Prepetition Collateral, including Cash Collateral, with respect to the Debtors use of Cash Collateral, the Post-petition Indebtedness (as defined below) and the priming of the Prepetition Liens as authorized herein. This Order is in lieu of all further hearings on the issue of Adequate Protection with respect to the Prepetition Secured Parties; provided, however, that nothing in this Order, including, without limitation, any of the provisions herein with respect to Adequate Protection, shall constitute, or be deemed to constitute, a finding that the 5

6 Desc Main Document Page 6 of 25 interests of any Prepetition Secured Party are or will be adequately protected with respect to any non-consensual use of Cash Collateral or priming of the Prepetition Liens. (g) Request for Continuing Order. In order to avoid immediate and irreparable harm to the Debtors estate 2 that will occur if this Order is not approved, the Debtors have requested that Centrix permit the use of Cash Collateral for such operating purposes set forth in the attached Schedule B (the Budget through December 20, 2013 ). (h) Limited Consent and Objections to such Use. Centrix and the Internal Revenue Service ( IRS ) have consented to the use of Cash Collateral, but only to the extent such Cash Collateral is used in strict accordance with the terms and conditions of this Order, including but not limited to the operating purposes and dollar amounts set forth in the Budget. The IRS and Office of US Trustee objected to such use pending the provision of additional information, in addition to other concerns, and subsequent clarification of the lien of the Internal Revenue Service and the subordination of such lien. The IRS asserts a superior interest in Inventory and Raw Materials, including the products and proceeds thereof, as a result of its tax lien, and further asserts the subordination does not cover inventory or raw materials, or the products and proceeds thereof. Centrix Bank does not agree with the IRS on the scope and priority of the IRS s lien or the legal effect of the subordination agreement and has reserved all of Centix s rights to litigate all of its rights to a conclusion. No language in this Order shall be construed to waive either Centrix or the IRS rights or to determine or have res judicata effect with respect to the priority of either Centrix or the IRS in any cash collateral or in any pre or post-petition assets. 2 See Footnote 1. 6

7 Desc Main Document Page 7 of 25 (h) Good Cause for Entry of the Order. Good cause has been shown for the entry of this Interim Order. Among other things, entry of this Order will minimize disruption of the Debtor s business and operations and permit it to meet payroll and other operating expenses, obtain needed supplies and retain customer and supplier confidence by demonstrating an ability to maintain normal operations. In accordance with Local Rule the permission to use Cash Collateral hereunder has been limited to the amount necessary to avoid immediate and irreparable harm to the Debtors estate 3 pending final hearing on notice. (i) The Prepetition Financing. Pursuant to the Prepetition Loan Agreement and related documents (the Prepetition Loan Documents ), the Debtors acknowledge and agree that the Debtors granted to Centrix certain liens and security interests in a variety of forms of collateral, including, without limitation, collateral that constitutes Cash Collateral as defined in section 363 of the Bankruptcy Code (with all such collateral being referred to herein as the Prepetition Collateral and the liens thereon being referred to as the Prepetition Liens ). The Prepetition Loan Documents are more particularly described on the attached Schedule A, together with the amounts due on each of the Prepetition Obligations. The Debtors acknowledge and agrees that they are obligated to Centrix pursuant to the Prepetition Loan Documents as of the Petition Date, in the amounts described on the attached Schedule A (the Prepetition Obligations ). (j) Basis for Adequate Protection. Centrix and the IRS are entitled to receive adequate protection pursuant to sections 361, 362, 363 of the Bankruptcy Code, to the extent any amounts under the Prepetition Loan Documents and/or the IRS s tax lien, remain outstanding, for any diminution in the value of the Prepetition Collateral resulting from the Debtors use, sale or lease 3 See Footnote 1. 7

8 Desc Main Document Page 8 of 25 of such Prepetition Collateral, including Cash Collateral, during the Chapter 11 Cases. The parties represented at the hearing that adequate protection is necessary to avoid diminution of the estate and the Bank s and IRS s Collateral, however, the Bank has not requested an adequate protection payment but a post-petition lien against post-petition assets to the same nature, scope and validity as existed pre-petition. The IRS has requested an adequate protection payment of $12, monthly and a post-petition lien against post-petition assets to the same nature, scope and validity as existed pre-petition. The Debtors shall at all times maintain inventory and raw material levels at the same levels that existed as of the Petition-Date. 4. Authorization for Limited Use of Cash Collateral. The Debtors are authorized to use Cash Collateral solely for the period (the "Specified Period") from the Petition Date through and including November 19, 2013, where after hearings on October 21 and October 25, 2013, the parties agreed to further use of cash collateral and debtor in possession financing under an Interim Bridge Order. The right of the Debtors to use Cash Collateral shall terminate upon the earliest to occur of: (a) expiration of the Specified Period, (b) failure of the Debtors to comply with any of the terms or conditions of this Order, (c) the dismissal or conversion of this case to a case under Chapter 7 of the Bankruptcy Code, or the appointment of a trustee under Chapter 11 of the Bankruptcy Code 4, or (d) a final order authorizing the use of Cash Collateral substantially in accordance with the terms of this Order or otherwise acceptable to Centrix and the IRS in their sole discretion is not entered within 45 days from the Petition Date. Except as otherwise expressly provided herein, Cash Collateral may be used during the Specified Period solely up to the amounts, at the times and for the line items identified in the cash collateral budget (the Budget ) attached hereto; provided that, in addition to the restrictions of the Budget, during the 8

9 Desc Main Document Page 9 of 25 Specified Period, the Debtor shall not use Cash Collateral in an amount exceeding an aggregate total of $.00, and Debtor in Possession financing not to exceed $301, Authorization to Borrow and Use Cash Collateral. Debtors may use Cash Collateral and obtain post-petition financing from the DIP Lender as provided in this Order. The DIP Facility will be governed by the Prepetition Senior Loan Documents, as supplemented or modified by this Order and the DIP Facility Documents, including as follows: (a) The DIP Facility. (i) The post-petition credit in the total amount of $301,000 shall be advanced to the Debtors pursuant to the Prepetition Demand Promissory Note dated August 29, 2012 in the amount of $2,000,000 in favor of the Bank listed as loan number on Schedule A attached hereto (the DIP Facility Note ). All of the Debtors obligations arising under the DIP Facility, including, without limitation, all principal, interest, attorneys fees and other expenses are identified as the DIP Facility Indebtedness. The DIP Facility Note and all other documents related to or executed in connection with the DIP Facility, as may be amended, restated, supplemented or otherwise modified from time to time, including, without limitation, the Prepetition Senior Loan Documents, shall be identified collectively as the DIP Facility Documents. (ii) Subject to the terms and conditions of the DIP Facility Documents and this Order, Debtors are authorized to request advances under the DIP Facility, and the DIP Lender is authorized to make advances under the DIP Facility, notwithstanding (A) that the obligations continued from the preceding page 4 Termination on appointment of a Chapter 11 Trustee shall not occur sooner than seven (7) days after appointment. 5 Based upon the Debtors projections and budget attached as Exhibit B. 9

10 Desc Main Document Page 10 of 25 under the Prepetition Credit Agreement may not be satisfied at the time of any such advances due to defaults existing as of the date of entry of this Order under the Prepetition Senior Loan Documents of which DIP Lender has been notified in writing. (iv) Debtors may immediately request advances under the DIP Facility, provided that the principal amount of each such requested advance and all other post-petition advances outstanding as of the date of such request, are consistent with the Budget, as modified from time to time with the prior consent of the DIP Lender. (v) Debtors is authorized to use amounts borrowed under the DIP Facility to fund payment of expenses as and when budgeted, measured weekly for total budgeted disbursements (with an adverse variance of up to 5%) in the Budget. (b) General (i) All cash and cash equivalents (including any Cash Collateral) which are now in or hereafter come into Debtors possession shall be paid to the DIP Lender for pro rata application to the DIP Facility Indebtedness. After irrevocable payment in full of the DIP Facility Indebtedness, all remaining amounts will be applied to the outstanding amount of the Prepetition Senior Lender Indebtedness in accordance with the Prepetition Senior Loan Documents. 6. DIP Facility Superpriority Claims. For all of the DIP Facility Indebtedness, the DIP Lender is granted, pursuant to section 364(c)(1) of the Bankruptcy Code, the allowed DIP Facility Superpriority Claims, which claims shall be payable from and have recourse to, in addition to the Collateral, any unencumbered prepetition or post-petition property of the Debtors whether now existing or hereafter acquired. The DIP Facility Superpriority Claims shall be deemed legal, valid, binding, enforceable, and perfected claims, not subject to subordination, 10

11 Desc Main Document Page 11 of 25 impairment or avoidance other than as specifically provided for herein, for all purposes in the Case and any successor case. 7. Automatic Stay. Without further order from this Court, the automatic stay provisions of section 362 of the Bankruptcy Code are hereby vacated and modified to the extent necessary to permit the DIP Lender, upon the occurrence of a Termination Event, to exercise all rights and remedies provided for in the DIP Facility Documents; provided, however, that prior to the exercise of any enforcement or liquidation remedies against the Collateral, the party exercising such rights or remedies shall be required to give three (3) business days prior written notice to the Debtors, counsel to the Debtors, counsel to the committee (if appointed), and the U.S. Trustee; provided, however, that such notice shall not be required prior to the exercise of any right or remedy to (i) freeze monies or balances in the Debtors accounts, (ii) set off monies or balances of the Debtors in accounts maintained by the DIP Lender; (iii) charge default rates of interest, (iv) terminate commitments and cease funding under the DIP Facility Documents, or (v) revoke consent to the use of Cash Collateral. Notwithstanding the occurrence of a Termination Event, all of the rights, remedies, benefits, and protections provided to the DIP Lender under the DIP Facility Documents and this Order shall survive the Termination Date. The Debtors and/or the committee (if appointed) shall have the initial burden of proof at any hearing on any request by the Debtors and/or the committee to re-impose or continue the automatic stay with respect to the DIP Lender; provided, however, that the only issue to be determined at such hearing shall be whether a Termination Event has occurred, and if a Termination Event is determined to have occurred, the automatic stay will not be re-imposed or continue with respect to the DIP Lender. This Court shall retain exclusive jurisdiction to hear and resolve any disputes and enter any orders 11

12 Desc Main Document Page 12 of 25 required by the provisions of this paragraph and relating to the application, re-imposition or continuance of the automatic stay with respect to the DIP Lender. 8. Survival. Except as otherwise provided in this Order, the provisions of this Order and any actions taken pursuant hereto shall survive the Termination Date and the entry of any order (a) confirming any plan under Chapter 11 of the Bankruptcy Code in the Case (and, to the extent not satisfied in full in cash, the Post-petition Indebtedness shall not be discharged by the entry of any such order, or pursuant to section 1141(d)(4) of the Bankruptcy Code, the Debtors having hereby waived such discharge); (b) approving any sale under section 363 of the Bankruptcy Code, (c) converting the Case to a Chapter 7 case unless permitted under the DIP Facility Documents, or (d) dismissing the Case unless permitted under the DIP Facility Documents; and, notwithstanding the entry of any such order, the terms and provisions of this Order shall continue in full force and effect, and the DIP Facility Superpriority Claims, DIP Facility Liens, and Adequate Protection granted pursuant to this Order and/or the DIP Facility Documents shall continue in full force and effect and shall maintain their priority as provided by this Order and the DIP Facility Documents to the maximum extent permitted by law until all of the Post-petition Indebtedness is indefeasibly paid in full in cash. 9. Adequate Protection Payments. To provide adequate protection for the secured claim of the Internal Revenue Service during the term of this agreement, the Debtors will do the following: a. The Internal Revenue Service shall be granted a rollover replacement lien, as additionally described in paragraph 10, below, effective as of the Filing Date, on all post-petition inventory, accounts, equipment (including vehicles), cash, and cash equivalents, contracts rights, general intangibles and all other post- 12

13 Desc Main Document Page 13 of 25 petition personal property of the Debtors, including proceeds and products thereof, to the same extent and priority, if any, as existed as of the date of filing. This lien and security agreement shall be in addition to the liens that the Internal Revenue Service had in the assets and property of the Debtor as of the Petition Date, however such lien shall not apply to any carve out from Centrix for the benefit of the Estate, or Chapter 5 claims and causes. b. The post-petition lien granted to the Internal Revenue Service will be shared with other secured creditors as they are identified. The priority of each secured creditor in the post-petition property will be based on the priority each secured creditor held in property of the Debtor as of the petition-date. Such priority shall be determined by agreement of the secured creditors and/or by order or judgment of the Court. The federal tax liens continue to attach to the newly arising assets and protect the secured federal tax claim to the same extent and priority as existed as of the filing date. The Debtors shall at all times maintain inventory and raw material levels at the same levels that existed as of the Petition-Date. c. The Debtors represent that as of the Petition Date, all of the assets of Plastic Technologies of Vermont, Inc. were subject to the federal tax liens. d. The Debtors shall not use cash collateral during the pendency of this agreement for any purpose which is not authorized by the Bankruptcy Code or by an order 13

14 Desc Main Document Page 14 of 25 of the Court. The parties to this Stipulation agree that the Bankruptcy Code will allow the Debtor to pay normal post-petition expenses incurred in the ordinary course of business. e. The Internal Revenue Service, by and through its agents or representatives, shall have access to and the right to inspect the Debtors assets and properties during normal business hours, with at least 24 hours advance notice being given and with a right of the Debtor to propose an alternative, if required for business reasons. f. Upon reasonable notice, the Debtor will permit the Internal Revenue Service to inspect, review and copy any financial records of the Debtor. These records will be made available at the Debtor s place of business. g. The Debtors will make a minimum monthly payment on the secured prepetition tax debt of $12, Payments will be made on the 1 st day of each month and shall continue each month thereafter until confirmation, dismissal or conversion to Chapter 7. Payments to the Internal Revenue Service shall be sent to IRS Insolvency - 2nd Floor, Niagara Center, 130 South Elmwood Avenue, Buffalo, New York 14202, Attn: Jianping Huang. Payments shall be applied by the Internal Revenue Service as the Service, in its sole discretion, determines to be in its best interests and as allowed by law. 14

15 Desc Main Document Page 15 of 25 h. Nothing in this Order shall constitute an admission by the Internal Revenue Service that the protection provided to it shall not at some time become inadequate to fully and properly protect the creditor s interests and at any time the Internal Revenue Service may apply to the court for additional adequate protection. Further, nothing in this Stipulation shall bind the Internal Revenue Service or constitute an agreement by it to the treatment of its claims under any plan of reorganization. i. The Debtors shall file all prospective tax returns on the due date of the return with the appropriate IRS office and submit a copy to the IRS office within three working days of the submission. j. The Debtors shall pay each federal tax deposit as it accrues (when payroll is made) through a federal depository as required by law and submit a proof of payment to the IRS office within three working days of the deposit. k. There shall not be entered in the Debtors Chapter 11 cases any order under Section 363 authorizing the use, sale or lease of cash collateral, or the sale of any other collateral, without notice to the United States. 10. Adequate Protection Liens. As adequate protection to Centrix and the IRS for any diminution in the value of the Prepetition Collateral, including as a result of the Debtors use of Cash Collateral for the Specified Period, which includes the further extension of the Line of 15

16 Desc Main Document Page 16 of 25 Credit in an amount not to exceed $301,000.00, effective immediately upon the execution of this Order, the Debtors hereby grant to Centrix and the IRS, a continuing, valid, binding, enforceable and automatically-perfected first priority postpetition replacement lien security interest, mortgage and other liens (collectively, the "Replacement Lien") senior to all other liens against the Debtors estates on all property of the Debtors estates that was encumbered by the Prepetition Liens immediately prior to the Petition Date, subject to valid, perfected and otherwise unavoidable liens existing as of the Petition Date, senior to the Prepetition Liens (the Permitted Prior Liens ) but specifically excluding for purposes of this Order the proceeds of any claims or actions under sections 544, 547 or 548 of the Bankruptcy Code (the "Excluded Avoidance Actions"). The property described herein together with the Prepetition Collateral is collectively referred to herein as the "Collateral". To avoid any doubt, to secure all of the Debtors obligations to Centrix and the IRS, Centrix and the IRS are hereby granted a first priority roll-over replacement lien and security interest in and upon all of the Debtors post-petition assets effective as of the Filing Date to the same extent, scope and priority as its Prepetition Lien. Lastly, in the event the Replacement Lien proves to be deficient or inadequate then Centrix and the IRS shall have a claim under Section 507(b) for the amount of said deficiency Automatic Perfection. The Replacement Liens granted to Centrix and the IRS pursuant to this Order shall be fully perfected by operation of law upon execution of this Order by the Court such that no additional steps need be taken by the Centrix or the IRS to perfect said security interests, liens and priority. Centrix and the IRS are not required to file financing statements, mortgages, notices of lien or similar instruments in any jurisdiction or effect any other action to attach or perfect the Replacement Liens granted under this Order. 16

17 Desc Main Document Page 17 of Continued Insurance & Cash Management. Until the obligations of the Prepetition Loan Documents have been indefeasibly paid in full in cash, and notwithstanding the expiration of the Specified Period or any earlier termination of the Debtor s authorization to use Cash Collateral hereunder, the Debtors shall: (a) insure the Collateral in the amounts and for the risks, and by the entities, as required under the Prepetition Loan Agreement, and (b) maintain the cash management system in effect as approved by the Court. 13. No Waiver of Prepetition Rights. Except as expressly provided for herein or by the Bankruptcy Code, nothing contained herein shall (a) constitute consent by Centrix to the use of Cash Collateral other than as provided herein, or (b) obligate Centrix to permit the use of Cash Collateral other than as provided herein or to advance funds to the Debtor for any reason, including, without limitation, for the payment of expenses of administration under the Bankruptcy Code. 14. Limitation of Cash Collateral. From and after the date of this Temporary Bridge Order and pending the entry of any subsequent orders, Cash Collateral shall not, directly or indirectly, be used to pay administrative expenses of the Debtor and its estate, except for those expenses that are expressly set forth in the Budget or otherwise approved by the Court. 15. Debtor s Restrictions. The Debtor is enjoined and prohibited from, at any time during this chapter 11 case, granting mortgages, security interest or liens in the Collateral or any portion thereof, to any other parties pursuant to Section 364(d) of the Bankruptcy Code or otherwise, which mortgages, security interest or liens are senior to or on a parody with the security interests or liens of Centrix. Centrix is authorized under Section 364 of the Bankruptcy Code, to extend its Line of Credit to the Debtors in the amount not to exceed $301, during the period of this Cash Collateral Order. 17

18 Desc Main Document Page 18 of Security Documents. The Debtor shall execute and deliver to Centrix and IRS all such agreements, financing statements, instruments and other documents as Centrix and the IRS may reasonably request to evidence, confirm, validate or perfect the liens and security interests granted herein. 17. Waiver of Claims. The Debtor waives and releases any and all claims known or unknown, against Centrix existing as of the date hereof, but such waiver is not intended to bind any party besides the Debtors, specifically excluding including any subsequent Trustee in Chapter 7 or Chapter 11 from the binding effect of such waiver. The Debtors acknowledge that it will not subject Centrix to the equitable doctrines of marshaling or subordination or any other similar doctrine with respect to any of the Collateral. 18. Valid and Binding Agreements. The Debtors acknowledges and agrees that, as of the Petition Date, the Prepetition Loan Documents are valid and binding agreements enforceable against the Debtors in accordance with their terms, and that the Prepetition Liens grant to Centrix valid, enforceable, properly perfected, first priority security interests in the Prepetition Collateral except as limited by paragraph 3(h) above. 19. Termination of Cash Collateral Usage. The Debtors' authorization to use Cash Collateral shall terminate upon the expiration of the Specified Period. Except as expressly provided herein, termination of the Debtor s authorization to use Cash Collateral hereunder shall not impair the continuing effectiveness and enforceability of all other provisions hereof. 20. Survival of Provisions. The terms and provisions of this Cash Collateral Order with respect to the Replacement Liens shall survive the entry of any order confirming a plan of reorganization, dismissing, or converting the Case into a case under Chapter 7 of the Bankruptcy Code, and the Replacement Liens shall continue in the Case and in any such successor case, and 18

19 Desc Main Document Page 19 of 25 shall maintain its priority as provided herein, until the Claim has been indefeasibly paid in full in cash, notwithstanding the expiration of the Specified Period or any earlier termination of the Debtor s authorization to use Cash Collateral. The creation, scope, perfection and priority of the Replacement Liens shall not be altered or impaired by any plan of reorganization which may hereafter be confirmed or by any further order which may hereafter be entered in the Case, without the express written consent of the Centrix and the IRS. 21. Good Faith Reliance. Centrix and the IRS have acted in good faith in connection with this Cash Collateral Order, and are entitled to the full protection of Section 364(e) of the Bankruptcy Code. If any provision of this Order is hereafter modified, vacated or stayed by subsequent order of this or any other Court for any reason, such modification, vacatur, or stay shall not affect the validity, perfection, priority, or enforceability of the Replacement Lien granted by the Debtors herein. 22. Certain Rights Preserved. Centrix s or the IRS s failure to seek relief or otherwise exercise remedies under the Prepetition Loan Documents or the Order shall not constitute a waiver of any of its rights hereunder, thereunder, or otherwise. 23. Nunc Pro Tunc Effect of this Interim Order. This Order shall constitute findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052 and shall take effect and be fully enforceable nunc pro tunc to the Petition Date immediately upon execution hereof. 24. Binding Effect. The provisions of this Interim Bridge Order shall be binding upon and shall inure to the benefit of Centrix, the IRS and their successors and assigns, and the Debtors and its successors and assigns, including any trustee or other fiduciary hereafter appointed in this bankruptcy case, whether in chapter 11, chapter 7, or otherwise, as a legal representative of the Debtor or its estate. 19

20 Desc Main Document Page 20 of Payment in Full. The Debtors shall provide for a sale and/or file a plan of reorganization and disclosure statement that provide, among other things, for the payment in full of any and all amounts then due to Centrix and the IRS. 26. Party-In-Interest Status. Centrix and the IRS shall be deemed to be a party-ininterest for all purposes in this chapter 11 case with the right and opportunity to appear and be heard on all matters arising in the bankruptcy case including, without limitation: (a) employment and payment of professionals by the Debtor s estate; (b) the sale of any estate property; (c) any plan of reorganization proposed in the case; and (d) any proposed conversion or dismissal of the case. 27. Access to Debtors Estate. Without limiting the rights of access and information afforded Centrix under the Loan Documents, the Debtors shall provide representatives, agents and/or employees of Centrix access to the Debtor's premises and its records and shall otherwise cooperate, consult with, and provide to such persons all such non-privileged information and information not subject to a binding confidentiality agreement, as they may reasonably request. The Debtors also shall provide to Centrix, at the time filed or provided, all statements, schedules, or financial reports which the Debtors file in the Bankruptcy Case or provides to the United States Trustee, in accordance with applicable Bankruptcy Rules, local bankruptcy rules, or guidelines of the United States Trustee. Centrix shall be authorized to conduct audits of its collateral, and the Debtors shall provide Centrix's auditor's with reasonable cooperation to enable Centrix to properly complete the audit. 28. Debtors Financials. The Debtors shall provide and deliver to Centrix and the Office of US Trustee, and any other party so requesting: (a) weekly Financial and Collateral Reports; (b) a weekly report comparing actual income and expenses to budgeted income and 20

21 Desc Main Document Page 21 of 25 expenses for the preceding period and cumulative from the Petition Date. The Debtor shall also timely file all operating reports in accordance with U.S. Trustee guidelines and promptly provide copies of those report(s) to Centrix. 29. Service of Final Order. The Debtors shall serve a copy of this Final Order on all persons entitled to service of the same. 30. Retention of Jurisdiction. The Court has and will retain jurisdiction to enforce this Order according to its terms. 31. Preservation of rights. In the event of any sale of the Debtors business, to the extent not previously paid, the Debtors and Centrix Bank agree that the secured claims will be paid from the proceeds of such sale, in accordance with the scope and priorities of its liens and security interests on the assets sold, as per the Sale Order. This Agreed Order is without prejudice to the rights of any other creditors or the Office of the United States Trustee to object to or dispute the perfection of any liens or the relative scope and priorities of any liens and security interests in the assets of the Debtors. Any Creditors Committee shall have until January 31, 2014 to object to the nature, extent, scope or validity of the liens. Dated:, 2013 HON. COLLEEN A. BROWN UNITED STATES BANKRUPTCY JUDGE 21

22 Desc Main Document Page 22 of 25 AGREED TO AND ACCEPTED BY Raymond J. Obuchowski OBUCHOWSKI & EMENS-BUTLER, PC P.O. Box 60, Bethel, Vermont By: /s/ Raymond J. Obuchowski Raymond J. Obuchowski ATTORNEYS FOR THE DEBTORS AND DEBTORS IN POSSESSION Daniel W. Sklar, Esq. NIXON & PEABODY, LLP 900 Elm Street, Manchester, NH By: /s/ Daniel W.. Sklar Daniel W. Sklar ATTORNEYS FOR CENTRIX BANK TRISTRAM J. COFFIN United States Attorney By: Melissa A.D. Ranaldo, Esq. Assistant U.S. Attorney P.O. Box 570, Burlington, VT (802) By: /s/ Melissa A.D. Ranaldo Melissa A.D. Ranaldo ATTORNEYS FOR THE INTERNAL REVENUE SERVICE Office of the United States Trustee United States Department of Justice Kevin Purcell, Esq. Trial Attorney 74 Chapel Street, Suite 200, Albany, NY By: /s/ Kevin Purcell Kevin Purcell ATTORNEY FOR THE OFFICE OF US TRUSTEE 22

23 Desc Main Document Page 23 of 25 SCHEDULE A PRE-PETITION LOAN DOCUMENTS AND AMOUNTS DUE ON PREPETITION OBLIGATIONS 1. On November 16, 2012, the Borrower executed and delivered to the Bank a Note (Loan No ) in the original principal amount of Five Hundred Thousand Dollars ($500,000.00) As of the Petition Date, the amounts due under Line of Credit Note are as follows: Principal: $ 418, Interest: $ Total: $ 418, On August 29, 2012, the Borrower executed and delivered to the Bank a Note in the original principal amount of Two Million Dollars ($2,000,000) ( Loan No ). As of the Petition Date, the amounts due under the Term Loan 1 Note are as follows: Principal: $ 1,739, Interest: $ 5, Total: $ 1,745, On August 29, 2012, the Borrower executed and delivered to the Bank a Note in the original principal amount of Two Million Dollars ($2,000,000) ( Loan No ). As of the Petition Date, the amounts due under the Term Loan 1 Note are as follows: Principal: $ 1,211, Interest: $ 3, Total: $ 1,215, On August 29, 2012 and November 16, 2012, the Borrower executed and delivered to the Bank a Commercial Security Agreement (the Line of Credit Note Security Agreement ). Pursuant to the terms of the Line of Credit Security Agreement, the Borrower granted the Bank a security interest in its assets defined as Collateral (the Line of Credit Note Collateral ) in the doc

24 Desc Main Document Page 24 of 25 Line of Credit Note Security Agreement as security for its obligations to the Bank pursuant to the Line of Credit Note and other Term notes 5. The Bank s security interest in the Collateral pledged by the Security Agreements was perfected by the filing of Uniform Commercial Code Financing Statement No , filed with the Vermont Secretary of State on September 4, 2012; and Financing Statement No filed with the Maryland Secretary of State on September 4,

25 SCHEDULE B - BUDGET Case Doc 57 Filed 10/29/13 Entered 10/29/13 16:30:00 Desc Main Document Page 25 of 25 Shelburne Plastics 13 Week Cash Flow Projection 2013 Week Oct 1 Nov 8 Nov 15 Nov 22 Nov 29 Nov 6 Dec 13 Dec 20 Dec 27 Dec 3 Jan Beginning Balance (70,000) (162,000) (200,000) (160,000) (289,000) (260,000) (301,000) (246,000) (216,000) (256,000) Cash Receipts 305, , , , , , , , , , ,000 Cash Available 305, , ,000 95, ,000 6,000 50,000 9,000 74, ,000 64,000 Cash Disbursements Resin 140, , , , , , , , , , ,000 Other materials Interstate 15, Walle 20, Hudson Encon Atlas All Star Payroll 78,400 18,900 78,400 18,900 78,400 18,900 78,400 18,900 18,900 78,400 18,900 Payroll Taxes 33,600 8,100 33,600 8,100 33,600 8,100 33,600 8,100 8,100 33,600 8,100 Staffing Diamond 16,000 16,000 16,000 16,000 16,000 16,000 16,000 16,000 16,000 16,000 16,000 TPI 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 Weststaff 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Insurance Cigna 30,000 30,000 30,000 Unum 5,000 5,000 (see note 3) Workers Comp 43,000 19,000 19,000 (see note 4) General 26,000 9,000 9,000 Rent MD 18,000 NH 18,000 18,000 18,000 NY VT Utilities 11,000 70,000 11,000 60,000 11,000 Freight D Day 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 GMH 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000 MD 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 NY 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 Trailer Rentals 26,000 26,000 26,000 Attorney Fees Taxes (see note 1) 4,000 11,000 4,000 8,000 4,000 4,000 11,000 8,000 4,000 4,000 11,000 Misc (see note 2) 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Total Disbursements 375, , , , , , , , , , ,000 Ending Balance (70,000) (162,000) (200,000) (160,000) (289,000) (260,000) (301,000) (246,000) (216,000) (256,000) (228,000) Note 1 Note 2 Note 3 Note 4 Taxes include IRS Subordination (7k/ mo), state unemployment and withholding taxes. Miscellaneous includes equipment repairs, travel, 3expense reports, etc. Workmans Comp 43k one time deposit. General 17k one time deposit. Week Oct 1 Nov 8 Nov 15 Nov 22 Nov 29 Nov 6 Dec 13 Dec 20 Dec 27 Dec 3 Jan Resin Deliveries VT NH Green MD , , , , , , , , , , ,000 Other Material Interstate Walle Hudson Encon Atlas All Star