Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 1 of 12

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1 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 1 of 12 Stephen M. Pezanosky State Bar No HAYNES AND BOONE, LLP 301 Commerce Street, Suite 2600 Fort Worth, TX Telephone: Facsimile: stephen.pezanosky@haynesboone.com Matthew T. Ferris State Bar No Jarom J. Yates State Bar No HAYNES AND BOONE, LLP 2323 Victory Avenue, Suite 700 Dallas, TX Telephone: Facsimile: matt.ferris@haynesboone.com jarom.yates@haynesboone.com PROPOSED ATTORNEYS FOR DEBTORS IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION In re: SAS HEALTHCARE, INC., et al., 1 Debtors. Chapter 11 Case No MXM-11 (Joint Administration Requested) DEBTORS EMERGENCY MOTION FOR INTERIM AND FINAL ORDERS (I) AUTHORIZING DEBTORS TO USE CASH COLLATERAL, (II) GRANTING ADEQUATE PROTECTION AND (III) SCHEDULING A FINAL HEARING PURSUANT TO BANKRUPTCY RULE 4001(B) SAS Healthcare, Inc., et al. ( SAS ), debtors-in-possession in the above-referenced chapter 11 cases (collectively, the Debtors ), file this Debtors Motion for Interim and Final Orders (I) Authorizing Debtors to Use Cash Collateral, (II) Granting Adequate Protection to Prepetition Secured Parties, and (III) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001(B) (the Motion ) requesting that the Court enter an order pursuant to 11 U.S.C. 105, 361, and 363 of Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code ), and Rules 2002 and 4001 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) authorizing the use of cash collateral ( Cash Collateral, as that term is defined in the 1 The Debtors in these Chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: SAS Healthcare, Inc. (3809); Sundance Behavioral Health Care, Inc. (3195); RCR Healthcare, LLC (5788); and RCR Healthcare Dallas, LLC (5558). The location of the Debtors service address is 2707 Airport Freeway, Suite 206, Fort Worth, TX v.2

2 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 2 of 12 Bankruptcy Code) of the Debtors and granting related relief and in support thereof, respectfully represents as follows: Jurisdiction and Venue 1. This Court has jurisdiction over this Motion pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper pursuant to 28 U.S.C and Background A. Chapter 11 Cases 2. On January 31, 2019 (the Petition Date ), the Debtors filed their voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the Bankruptcy Code ) commencing the above captioned cases (the Chapter 11 Cases ). The Debtors continue to manage and operate the remaining aspects of their business as debtors-in-possession pursuant to Bankruptcy Code 1107 and Concurrently with the filing of this Motion, the Debtors have requested procedural consolidation and joint administration of the Chapter 11 Cases. 3. An official committee of unsecured creditors has yet to be appointed in these Chapter 11 Cases. Further, no trustee or examiner has been requested or appointed in these Chapter 11 Cases. 4. A more detailed description of the Debtors and their business, the facts and circumstances leading up to the filing of the Debtors Chapter 11 Cases, and the facts supporting the Motion are set forth in greater detail in the Statement of Background Information and Declaration of Brian F. Gleason, the Debtors Financial Advisor, in Support of the Debtors Chapter 11 Petitions and First Day Motions (the First Day Declaration ), which was filed on February 1, 2019, and is incorporated by reference in this Motion v.2 2

3 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 3 of 12 B. The Debtors Business and Operations 5. The Debtors own, and prior to December 21, 2018, operated, the following three mental health treatment facilities: a. Sundance Hospital located in Arlington, Texas (the Arlington Facility ), a 116 bed in-patient psychiatric hospital, along with certain out-patient mental health treatment facilities; b. Sundance Hospital Dallas, located in Garland, Texas (the Dallas Facility ), a 116 bed in-patient psychiatric hospital, along with certain out-patient mental health treatment facilities; and c. Sundance Center of Fort Worth, in Fort Worth, Texas (the Fort Worth Facility, and together with the Arlington Facility and the Dallas Facility, the Treatment Facilities ), an out-patient mental health treatment facility. 6. Prior to December 2018, in the Treatment Facilities the Debtors provided both inpatient and out-patient mental health care to children, adolescents and adults struggling with substance abuse and addiction, mental health disorders, and/or behavioral and psychological disorders. As described in more detail in the First Day Declaration, in December 2018, the Debtors ceased operating the Treatment Facilities. C. The Debtors Secured Debt, and Assets 7. As of January 30, 2019, the Debtors combined secured debt obligations, 2 including accrued interest, totaled approximately $18,533,443. As described in greater detail below, the Debtors significant funded debt obligations include: A secured term loan (the Ciera Term Loan ) with Ciera Bank in the original principal amount of $8,250,000. The borrower under the Ciera Term Loan is RCR Dallas. SAS is a guarantor of RCR Dallas obligations under the Ciera Term Loan. The Ciera Term Loan and the Ciera Revolver (defined below) are cross-collateralized. Approximately $8,266,874 in unpaid principal and accrued interest remains outstanding under the Ciera Term Loan. The Ciera Term Loan is secured by the real property comprising the Dallas Facility and a blanket lien on all of the assets of SAS and RCR Dallas. 2 The Debtors reserves all rights with respect to any debt obligation listed herein, including with respect to amount and validity as well as with respect to whether such debt obligation constitutes a secured debt obligation v.2 3

4 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 4 of 12 A secured revolving line of credit (the Ciera Revolver ) with Ciera Bank with a $500,000 credit limit. The borrower under the Ciera Revolver is SAS. RCR Dallas is a guarantor of RCR Dallas obligations under the Ciera Revolver. The Ciera Revolver and the Ciera Term Loan are cross-collateralized. The Ciera Revolver is fully drawn and the current principal balance plus accrued interest is approximately $503,656. The Ciera Revolver is secured by the real property comprising the Dallas Facility and a blanket lien on the assets of SAS and RCR Dallas. A secured term loan (the Southside Term Loan ) with Southside Bank, as successor in interest to OmniAmerican Bank, in the original principal amount of $4,366, The borrowers under the Southside Term Loan are SAS and RCR. SBHC is a guarantor of the borrowers obligations under the Southside Term Loan. The Southside Term Loan and the Southside Construction Loan (defined below) are cross-collateralized. Approximately $3,044,761 in unpaid principal and accrued interest remains outstanding under the Southside Term Loan. The Southside Term Loan is primarily secured by the real and personal property comprising the Arlington Facility. A secured construction loan (the Southside Construction Loan ) with Southside Bank, as successor in interest to OmniAmerican Bank, in the original principal amount of $5,576,763. The borrowers under the Southside Construction Loan are SAS and RCR. SBHC is a guarantor of the borrowers obligations under the Southside Construction Loan. The Southside Construction Loan and the Southside Term Loan are cross-collateralized.. Approximately $4,371,289 in unpaid principal and accrued interest remains outstanding under the Southside Construction Loan. The Southside Construction Loan is primarily secured by the real and personal property comprising the Arlington Facility. A secured loan (the Southside 2015 Loan ) with Southside Bank in the original principal amount of $850,000. Approximately $621,863 in unpaid principal and accrued interest remains outstanding under the Southside 2015 Loan. The Southside 2015 Loan is primarily secured by the real and personal property comprising the Fort Worth Facility. A second lien secured note (the Bridge Financing ) with REP Perimeter Holdings, LLC, in the original principal amount of $400,000. All of the Debtors are borrowers under the Bridge Financing. The entire balance of the original principal amount, plus accrued interest, remains outstanding under the Bridge Financing. The Bridge Financing is secured by a second lien in all of the Debtors previously encumbered property and a first lien in any of the Debtors remaining unencumbered property. A subordinated secured note (the Owners Note ) with the Debtors owners, in the original principal amount of $1,325,000. The borrowers under the Owner v.2 4

5 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 5 of 12 Note are RCR and RCR Dallas. The entire balance of the original principal amount, plus accrued interest, remains outstanding under the Owner Note. The Owner Note is secured by a junior lien in all of the assets of the Debtors. 8. The Debtors primary assets consist of their accounts receivable, inventory, furniture, equipment, and the real property associated with the Treatment Facilities. While the Debtors continue to collect unpaid accounts receivable, the Debtors are no longer generating new accounts receivable. D. The Debtors Cash Management System 9. Through the Cash Management Motion, the Debtors are requesting approval of a cash management system in which a newly established account (the DIP Account ) will replace the Debtors pre-bankruptcy operating accounts and will operate as the Debtors primary operating account. Under the proposed Cash Management System (as defined in the Cash Management Motion), the Debtors Historical Accounts (as defined in the Cash Management Motion) will primarily serve as either collection accounts or will not be used. The Debtors will periodically transfer the collections and other payments received by the Historical Accounts to the DIP Account Because the Debtors are no longer operating the Treatment Facilities, the primary collections received by the Debtors are collections of outstanding accounts receivable. 3 Capitalized terms in this footnote not otherwise defined in the Motion shall have the meaning ascribed to them in the Cash Management Motion. The Debtors anticipate that most of the Debtors uncollected accounts receivable will be collected through the SAS Operating Account. Because the SAS Operating Account is a Chase account, the Debtors will be able to periodically transfer funds from the SAS Operating Account to the DIP Account electronically. However, the Sundance Operating Account and the Credit Card Deposit Account are Wells Fargo accounts and the Debtors do not have the ability to electronically transfer funds from those accounts to the DIP Account and therefore transfers from those accounts to the DIP Account will likely need to be made through manual check deposits. The Debtors therefore plan to monitor collections to the Sundance Operating Account and the Credit Card Deposit Account and make either weekly or bi-monthly check deposits of the funds in those accounts to the DIP Account v.2 5

6 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 6 of 12 E. The Debtors Marketing Process, the Perimeter Bridge Financing, and the Proposed DIP Financing 11. On December 21, 2018, for the reasons more fully described in the First Day Declaration, the Debtors ceased operating the Treatment Facilities. Prior to ceasing the operation of the Treatment Facilities, the Debtors retained Raymond James as their investment banker to run a marketing and sale process. After shuttering the Treatment Facilities on December 21, 2018, the Debtors determined that they would need to retain a small core of employees to aid the Debtors in their collection efforts, general administrative tasks, and sale preparation. With the Treatment Facilities Shuttered, most of the Debtors remaining employees were dismissed. After the Treatment Facilities were closed, the Debtors negotiated and entered into an LOI for the sale of substantially all of their assets to REP Perimeter Holdings, LLC ( Perimeter ) through a marketing and sale process conducted pursuant to Bankruptcy Code In the days between Christmas and the New Year, the Debtors retained Phoenix Management Services ( Phoenix ) as their financial advisors. Shortly after the New Year, Phoenix completed its initial review of the Debtors finances and concluded that despite holding over $4 million in gross accounts receivable, collections were coming in at a rate well below historical trends. The slow-down in collections exacerbated the Debtors already strained liquidity position, particularly considering the Debtors need to continue paying their remaining critical employees, utilities, restructuring professionals, and other general expenses as it prepared for a sale and a bankruptcy filing. 13. To address the Debtors critical cash shortfall, the Debtors, with the aid of their professionals, held discussions with the Debtors existing secured lenders in an attempt to secure additional pre-petition loans as well as debtor-in-possession financing to finance the Debtors v.2 6

7 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 7 of 12 anticipated 363 marketing and sale process. The Debtors also engaged with Perimeter about the possibility of providing pre-petition and post-petition financing. 14. Ultimately the Debtors were able to reach agreements with Perimeter whereby Perimeter agreed that (a) Perimeter would provide the Bridge Financing, which was funded on January 22, 2019, and is secured by second liens on substantially all of the Debtors assets and (b) an affiliate of Perimeter DIP financing to finance the Debtors Chapter 11 Cases, including a marketing and sale process in which Perimeter or its affiliate would agree to serve as the stalking horse bidder. 15. Through a separate motion filed contemporaneously with the Motion, the Debtors are seeking authorization to enter into the DIP financing. The Debtors plan to file a motion seeking approval of marketing and sale procedures in the coming days. F. The Debtors Proposed Use of Cash Collateral 16. The Debtors propose to use the Cash Collateral of their alleged secured creditors Ciera, Perimeter, in its capacity as a pre-petition lender, and the holders of the Owners Note (each a Secured Party and, collectively, the Secured Parties ), to manage the Debtors remaining business operations, maintain the Debtors assets, and to fund other expenses during the Chapter 11 Cases utilizing their Cash Management System. Because the Debtors are no longer operating the Treatment Facilities, the Debtors anticipate that the primary source of Cash Collateral during the Chapter 11 Cases will be collections of outstanding accounts receivable. Relief Requested 17. By this Motion, pursuant to Bankruptcy Code 105, 361, and 363, and Bankruptcy Rules 2002, 4001, and 6004, the Debtors seek, among other things, the following: a. authorization for the Debtors to use Cash Collateral and the granting of adequate protection to the Secured Parties for, among other things, such use of Cash v.2 7

8 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 8 of 12 Collateral and all use and diminution in value of the Prepetition Collateral (as defined in the Interim Order); and b. pursuant to Bankruptcy Rule 4001, that an interim hearing (the Interim Hearing ) on the Motion be held before this Court to consider entry of the proposed Interim Order attached hereto as Exhibit A ; and c. that this Court schedule a final hearing (the Final Hearing ) to consider entry of a Final Order authorizing the use of Cash Collateral. A. Emergency Relief Basis for Relief Requested 18. The Debtors bring this Motion on an emergency basis given the immediate and irreparable harm that the Debtors will potentially suffer if they are denied the ability to use Cash Collateral, which is necessary to sustain ongoing business operations, through the operation of the Cash Management System, to preserve the value of their assets for the benefit of the Debtors estates, and to implement the Debtors restructuring objectives. 19. Absent the continued use of Cash Collateral, the Debtors would likely have to cease their ongoing wind-down operations to the material detriment of their creditors, stakeholders and other parties in interest. Therefore, the Debtors need to ensure the availability of such working capital now. B. Adequate Protection and Cash Collateral 20. Pursuant to Bankruptcy Code 363(c)(2, a debtor-in-possession may not use cash collateral without the consent of the secured party or court approval. See 11 U.S.C. 363(c)(2). Bankruptcy Code 363(e) provides that, upon request of an entity that has an interest in property to be used by the debtor, the court shall prohibit or condition such use as is necessary to provide adequate protection of such interest. See 11 U.S.C. 363(e). 21. What constitutes adequate protection must be decided on a case-by-case basis. See In re O Connor, 808 F.2d 1393, 1396 (10th Cir. 1987); In re Martin, 761 F.2d 472 (8th Cir v.2 8

9 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 9 of ); In re Mosello, 195 B.R. 277, 289 (Bankr. S.D. N.Y. 1996); In re Realty Southwest Assocs., 140 B.R. 360 (Bankr. S.D. N.Y. 1992); In re Beker Indus. Corp., 58 B.R. 725 (Bankr. S.D. N.Y. 1986). The focus of the requirement is to protect a secured creditor from diminution in the value of its interest in the particular collateral during the period of use. See In re 495 Central Park Avenue Corp., 136 B.R. 626, 631 (Bankr. S.D. N.Y. 1992); In re Beker, 58 B.R. at 736; In re Hubbard Power & Light, 202 B.R. 680 (Bankr. E.D. N.Y. 1996). 22. The Secured Parties each assert liens on the Cash Collateral of the Debtors. As adequate protection for such Debtors use of the Cash Collateral, the Debtors are proposing to provide the foregoing lenders with valid and automatically perfected (without necessity of the execution of additional mortgages, security agreements, pledge agreements, financing statements, or other documents) replacement liens and security interests in all accounts, including accounts receivable, acquired by the Debtors, as applicable, specifically including all cash proceeds arising from such accounts and accounts receivable acquired by the Debtors after the Petition Date, in the same nature, extent, priority, and validity that such liens, if any, existed on the Petition Date ( Adequate Protection ) to the extent of any diminution in value of such lenders pre-petition Date security interests in the Debtors pre-petition Date property, if any. 23. Here, the proposed Adequate Protection, outlined hereinabove and set forth in the Proposed Order, is sufficient to secure the Debtors projected use of Cash Collateral because the projected diminution in value, if any, from the use of Cash Collateral is less than the value of the Adequate Protection proposed to the Secured Parties. In fact, the use of Cash Collateral is itself a form of Adequate Protection by preserving the value of the Debtors operations and assets during the marketing and sale process proposed by the Debtors v.2 9

10 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 10 of 12 C. The Use of Cash Collateral is Necessary to Preserve Assets of the Estates 24. While the Debtors operations have largely ceased, the Debtors continue to incur expenses associated with the management of the Debtors ongoing remaining operations, the collection of receivables, the protection and maintenance of the Debtors real property, and the administration of the Debtors marketing and sale process during the course of these Chapter 11 Cases. It is essential that the Debtors continue to fund their ongoing payroll obligations, insurance expense, and other obligations. This Motion is intended as a backstop to the separate debtor-in-possession financing motion that will be or has been filed by Debtors. This Motion will allow the continuation of the Debtors existing operations and lending relationships. D. Interim Approval Should Be Granted 25. Pursuant to Bankruptcy Rule 4001(b)(2), a final hearing on a motion to use cash collateral may not be commenced before 14 days after service of the applicable motion. Fed. R. Bankr. P This Court may, however, conduct a preliminary hearing before the expiration of that fourteen-day period and likewise authorize the use of Cash Collateral, if necessary, to the extent necessary to avoid immediate and irreparable harm to a debtor s estate. 26. In examining requests under this Bankruptcy Rule, courts apply the same business-judgment standard as is applicable to other business decisions. See In re Ames Dept. Stores, Inc., 115 B.R. 34, 38 (Bankr. S.D. N.Y. 1990). The Debtors submit that, for the reasons set forth herein, the immediate use of Cash Collateral, on an interim basis, as requested in this Motion is necessary to avert immediate and irreparable harm to the Debtors businesses and their estates. 27. The Debtors request that the Court conduct an emergency preliminary hearing on the Motion and authorize the Debtors, from and after the entry of the Interim Order until a Final Hearing on the relief requested herein, to use Cash Collateral, as necessary. Such authorization v.2 10

11 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 11 of 12 will ensure that the Debtors maintain ongoing operations and avoid immediate and irreparable harm and prejudice to their estates and all parties in interest pending the Final Hearing. E. Request for Final Hearing 28. As noted above, pursuant to Bankruptcy Rules 4001(b)(2), the Debtors respectfully request that the Court set a date for the Final Hearing at the earliest date and time of the Court s convenience that will ensure adequate notice and due process to all parties-in-interest to these Chapter 11 Cases. 29. The Debtors respectfully request that they be authorized to serve a copy of the signed Interim Order, which fixes the time and date for the filing of objections, if any, by firstclass mail on the Notice Parties (as defined below) and to any other party that has filed a request for notices with this Court and to any official committee, or the legal counsel of any official committee, if the same shall have filed a request for notice. The Debtors respectfully request that the Court consider such notice of the Final Hearing to be sufficient notice under Bankruptcy Rule Conference with Lender 30. Counsel for the Debtors have conferred with counsel for each of the Secured Parties on the relief requested herein. Perimeter and the holders of the Owners Note do not object to the Debtors use of Cash Collateral, but at the time of this filing have not approved the form of this Interim Order. At the time of filing, Ciera had not confirmed whether it agrees to the proposed treatment under the terms of the Cash Collateral Order. Notice 31. Notice of this Motion has been provided to: (i) the Office of the United States Trustee; (ii) the Debtors secured creditors; (iii) any party whose interests are directly affected by this specific pleading; (iv) those persons who have formally appeared and requested notice and v.2 11

12 Case mxm11 Doc 13 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 12 of 12 service in these proceedings pursuant to Bankruptcy Rules 2002 and 3017; (v) counsel for the proposed DIP Lender; (vi) counsel for any official committees appointed by this Court; (vii) the consolidated 20 largest unsecured creditors of the Debtors; and (viii) all governmental agencies having a regulatory or statutory interest in these cases. No other or further notice need be provided. WHEREFORE the Debtors respectfully request that the Court (i) grant the Motion and (ii) grant such other and further relief as is just and proper. RESPECTFULLY SUBMITTED this 1st day of February, HAYNES AND BOONE, LLP By: /s/ Matthew T. Ferris Stephen M. Pezanosky State Bar No HAYNES AND BOONE, LLP 301 Commerce Street, Suite 2600 Fort Worth, TX Telephone: Facsimile: stephen.pezanosky@haynesboone.com and Matthew T. Ferris State Bar No Jarom J. Yates State Bar No Victory Avenue, Suite 700 Dallas, TX Telephone: Facsimile: matt.ferris@haynesboone.com jarom.yates@haynesboone.com PROPOSED ATTORNEYS FOR DEBTORS v.2 12

13 Case mxm11 Doc 13-1 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 1 of 8 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION In re: SAS HEALTHCARE, INC., et. al., 1 Debtors. Chapter 11 Case No.: MXM-11 (Joint Administration Requested) INTERIM ORDER (I) AUTHORIZING DEBTORS TO USE CASH COLLATERAL, (II) GRANTING ADEQUATE PROTECTION, AND (III) SCHEDULING A FINAL HEARING PURSUANT TO BANKRUPTCY RULE 4001(b) On February 5, 2019, the Court conducted an interim hearing (the Interim Hearing ) to consider Debtors Emergency Motion for Interim and Final Orders (I) Authorizing Debtors to Use Cash Collateral, (II) Granting Adequate Protection, and (III) Scheduling a Final Hearing 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: SAS Healthcare, Inc. (3809) ( SAS ); Sundance Behavioral Health Care, Inc. (3195) ( SBHC ); RCR Healthcare, LLC (5788) ( RCR ); and RCR Healthcare Dallas, LLC (5558) ( RCR Dallas ). The location of the Debtors service address is 2707 Airport Freeway, Suite 206, Fort Worth, TX v.3

14 Case mxm11 Doc 13-1 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 2 of 8 Pursuant to Bankruptcy Rule 4001(b) [Docket No. ] (the Motion ) 2 filed by the abovecaptioned debtors (collectively, the Debtors ) pursuant to sections 105, 361, 362, 363, 507 and 552 of title 11 of the United States Code, 11 U.S.C. 101, et seq. (as amended, the Bankruptcy Code ), Rules 2002, 4001 and 9014 of the Federal Rules of Bankruptcy Procedure (as amended, the Bankruptcy Rules ), and the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the Northern District of Texas (the Local Bankruptcy Rules ), requesting, among other things: a. entry of this interim order (this Interim Order ) authorizing, on an interim basis, the Debtors use of Cash Collateral and the granting of adequate protection to the Secured Parties for, among other things, such use of Cash Collateral and any diminution in value of the each of the Secured Parties respective asserted pre-petition liens and security interests; b. that this Court schedule a final hearing (the Final Hearing ) to consider entry of an order (the Final Order ) authorizing and approving the Debtors use of Cash Collateral on a final basis; and c. waiver of any applicable stay with respect to the effectiveness and enforceability of this Interim Order (including a waiver pursuant to Bankruptcy Rule 6004(h)). The Court, having held the Interim Hearing, finds that: (i) it has jurisdiction over the matters raised in the Motion pursuant to 28 U.S.C. 157 and 1334; (ii) this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); (iii) the relief requested in the Motion is in the best interests of the Debtors, their estates, and their creditors; (iv) proper and adequate notice of the Motion has been given and no other or further notice of the interim relief granted in this Interim Order is 2 Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Motion v.3

15 Case mxm11 Doc 13-1 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 3 of 8 necessary; and (v) upon the record herein, and after due deliberation thereon, good and sufficient cause exists for the granting of the relief as set forth herein. Therefore, IT IS HEREBY FOUND, DETERMINED, ORDERED AND ADJUDGED, that: 1. On January 31, 2019 (the Petition Date ), the Debtors each filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. 2. The Debtors are in possession of their property and continue to operate and manage the remaining aspects of their business as debtors-in-possession pursuant to 1107(a) and 1108 of the Bankruptcy Code. 3. The Motion. The Motion is hereby granted on an interim basis as set forth herein. Any objections to the entry of this Interim Order, to the extent not already withdrawn or resolved, are hereby overruled on the merits. 4. Committee Formation. A statutory committee of unsecured creditors (if appointed, the Committee ) has not been appointed in the Chapter 11 Cases. 5. Notice. On February 1, 2019, the Debtors served copies of the Motion and notice of the Interim Hearing (collectively, the Notice ) in accordance with Bankruptcy Rule 4001 to all creditors and parties in interest entitled to such notice, including: (i) the Office of the U.S. Trustee for this District; (ii) those parties listed as holding the twenty (20) largest unsecured claims against the Debtors estates on a consolidated basis; (iii) each of the Secured Parties and their respective counsel; (iv) any other secured parties of record or parties that, to the Debtors knowledge, may assert a security interest in property of the Debtors estates; (v) the Internal Revenue Service; and (vi) any party that has requested notice in the Chapter 11 Cases pursuant to Bankruptcy Rule Under the circumstances, such Notice of the Interim Hearing and the relief requested in the Motion is due, proper, and sufficient notice and complies with Bankruptcy v.3

16 Case mxm11 Doc 13-1 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 4 of 8 Rules 2002, 4001, and 9014 and the Local Rules, and no other or further notice of the Interim Hearing or the interim relief granted in this Interim Order is necessary or required, except as set forth herein with respect to the Final Hearing. 6. The adequate protection granted to the Secured Parties herein has been proposed in good faith. 7. The Debtors require the use of Cash Collateral to fund the Debtors post-petition liquidity needs. The expenses proposed to be paid by the Debtors are reasonable and necessary to prevent immediate and irreparable injury, loss, or damage to the Debtors estates. The Court concludes that entry of this Interim Order is necessary, essential, and appropriate for the management and preservation of the Debtors assets and property and is in the best interests of the Debtors, their estates, their creditors, and other parties in interest. 8. The Secured Parties have consented to the Debtors use of Cash Collateral under the terms set forth in this Interim Order. ACCORDINGLY, IT IS HEREBY ORDERED THAT: 9. Use of Cash Collateral. The Debtors are authorized to use the Cash Collateral of the Secured Parties to fund working capital, operating expenses, fixed charges, payroll, and all other general corporate purposes arising in the ordinary course of their businesses, and to pay the costs and expenses related to the administration of their bankruptcy cases, including reasonable professional fees and certain other expenses, in each case in accordance with the DIP Financing budget. 10. Adequate Protection. As adequate protection for the Debtors use of Cash Collateral, to the extent (i) that the liens and security interests asserted by each of the Secured Parties in the Debtors pre-petition Date property interests are perfected, valid, and not avoidable as of the Petition Date, and (ii) of any diminution in value of such Secured Parties pre-petition v.3

17 Case mxm11 Doc 13-1 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 5 of 8 Date liens and security interests, each of the Secured Parties is hereby granted: a. From and after the Petition Date, valid and automatically perfected (without necessity of the execution of additional mortgages, security agreements, pledge agreements, financing statements, or other documents) replacement liens and security interests in all accounts, including accounts receivable, acquired by the Debtors, as applicable, specifically including all cash proceeds arising from such accounts and accounts received acquired by the Debtors, after the Petition Date, in the same nature, extent, priority, and validity that any such liens asserted by the Secured Parties existed on the Petition Date (collectively, the Adequate Protection Collateral ). b. As of the date of this Interim Order, said replacement liens and security interests granted the Secured Parties shall be valid, perfected, enforceable and effective against the Debtors, their successors and assigns, including any trustee or receiver in these Chapter 11 Cases or any superseding chapter 7 case, without any further action by the Debtors, and without the execution, delivery, filing or recordation of any promissory notes, financing statements, security agreements or other documents. Notwithstanding the foregoing, this Interim Order shall be deemed a security agreement and may be filed as a financing statement and the Debtors shall execute and deliver such notes, security agreements, assignments, financing statements and other documents that the Secured Parties shall reasonably request to further evidence the liens and security interests granted hereby. c. The replacement liens and security interests granted to the Secured Parties herein shall have the same priority as each Secured Party s pre- Petition Date liens and security interest in such property. d. Each of the Secured Parties shall have all the rights and remedies of a secured creditor in connection with the liens and security interests granted by this Interim Order in all Adequate Protection Collateral, except to the extent that such rights and remedies may be affected by the Bankruptcy Code, and otherwise. 11. Events of Default. The following shall constitute events of default under this Interim Order (each, an Event of Default ): a. If any representation made by the Debtors after the commencement of these Chapter 11 Cases in any report or financial statement delivered to the Secured Parties proves to have been false or misleading in any material respect as of the time when made or given (including by omission of material information necessary to make such representation, warranty or statement not misleading); v.3

18 Case mxm11 Doc 13-1 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 6 of 8 b. The Debtors fail to provide any reports or accounting information when due or access to its books and records within a reasonable time after such access is requested; c. If a trustee or examiner, with authority to affect the operation of the businesses of the Debtors is appointed in these Chapter 11 Cases without the consent of the Secured Parties; or d. If the Chapter 11 Cases of the Debtors are dismissed or converted to cases under chapter 7 of the Bankruptcy Code. 12. Remedies Upon Default. The Secured Parties shall be entitled to a hearing on five (5) business-days notice (subject to the Court's availability) regarding the existence and continuation of an Event of Default to argue that such an Event of Default exists and constitutes cause within the meaning of Section 362(d)(1) of the Bankruptcy Code. Nothing herein shall prohibit the Secured Parties from seeking other relief on shorter notice to the Debtors. At such hearing, the Secured Parties shall be entitled to seek any of the following relief with respect to the Debtors: a. the immediate termination of the use of the Cash Collateral by the Debtors; b. the lifting of the automatic stay under 11 U.S.C. 362 permitting the Secured Parties to take possession of all or any part of their respective collateral; c. the entry of an order prohibiting or limiting the further use of the Cash Collateral by the Debtors; d. the appointment of a trustee or examiner in these Chapter 11 Cases or the entry of an order converting any of these Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code; and e. such further or other relief as provided in the Bankruptcy Code, this Interim Order or applicable non-bankruptcy law. 13. Term. Unless otherwise ordered by the Court or extended by written agreement between the Debtors and the Secured Parties, the Debtors right to use Cash Collateral granted hereunder shall commence on the date hereof and expire at a time to be agreed upon by the v.3

19 Case mxm11 Doc 13-1 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 7 of 8 Debtors and the Secured Parties. Notwithstanding such expiration or other termination, or modification hereof, the Secured Parties shall be entitled to the liens, priorities and other rights provided herein to the extent that the Debtors have used the Secured Parties Cash Collateral following the date hereof. 14. Restrictions on Use of Cash Collateral. Notwithstanding anything to the contrary contained herein, no Cash Collateral may be used, directly or indirectly, by any of the Debtors or any other person or entity to (a) object, contest, or raise any defense to the validity, perfection, priority, extent, or enforceability of the Secured Parties asserted pre-petition Date liens and security interests, or (b) seek to modify any of the rights granted to the Secured Parties hereunder or, with respect to Perimeter, under any order approving the DIP Financing. 15. No Surcharge. No costs or expenses of administration which have been or may be incurred in the Chapter 11 Cases shall be recovered from the Secured Parties or charged against the Secured Parties prepetition collateral or Adequate Protection Collateral pursuant to sections 105 or 506(c) of the Bankruptcy Code or otherwise. 16. Notice and Hearing; Reservation of Rights to Object. The Final Hearing to consider entry of the Final Order is scheduled for [, 2019] at [ ]:[_]0 [_].m. Objections, if any, to the entry of the Final Order shall be filed and served on or before 5:00 p.m. Central Time on [, 2019]. This Interim Order shall be binding upon, and inure to the benefit of the Secured Parties, the Debtors, a Committee, if one is appointed, and their respective successors and assigns including, without limitation, any trustee appointed in these Chapter 11 Cases or any superseding chapter 7 case. 17. The findings of fact and conclusions of law of this Court pursuant to this Interim Order shall be deemed effective upon the entry of this Interim Order. To the extent that such v.3

20 Case mxm11 Doc 13-1 Filed 02/01/19 Entered 02/01/19 20:21:25 Page 8 of 8 findings may constitute conclusions, and vice versa, they hereby are deemed such. Court. Submitted by: 18. This Interim Order is immediately valid and fully effective upon its entry by the HAYNES AND BOONE, LLP Stephen M. Pezanosky State Bar No Commerce Street, Suite 2600 Fort Worth, TX Telephone: Facsimile: stephen.pezanosky@haynesboone.com and Matthew T. Ferris State Bar No Jarom J. Yates State Bar No Victory Avenue, Suite 700 Dallas, TX Telephone: Facsimile: matt.ferris@haynesboone.com jarom.yates@haynesboone.com PROPOSED ATTORNEYS FOR DEBTORS ### End of Order ### v.3