4884-2311-9291

William L. Wallander (Texas Bar No. 20780750) 

Matthew D. Struble (Texas Bar No. 24102544) 

Kiran Vakamudi (Texas Bar No. 24106540) 

VINSON & ELKINS LLP 

2001 Ross Avenue, Suite 3900 

Dallas, TX 75201 

Tel: 214.220.7700 

Fax: 214.999.7787 

bwallander@velaw.com; mstruble@velaw.com; 

kvakamudi@velaw.com

David S. Meyer (pro hac vice pending) 

Lauren R. Kanzer (pro hac vice pending) 

VINSON & ELKINS LLP 

1114 Avenue of the Americas, 32nd Floor 

New York, NY 10036 

Tel: 212.237.0000 

Fax: 212.237.0100 

dmeyer@velaw.com; lkanzer@velaw.com 

PROPOSED ATTORNEYS FOR THE DEBTORS 

AND DEBTORS IN POSSESSION 

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

In re: 

KIDKRAFT, INC., et al., 

Debtors.1

§ 

§ 

§ 

§ 

§ 

§ 

Case No. 24-80045-11 

(Chapter 11) 

(Joint Administration Requested) 

(Emergency Hearing Requested) 

EMERGENCY MOTION 

FOR ENTRY OF INTERIM 

AND FINAL ORDERS PURSUANT 

TO 11 U.S.C. §§ 105, 361, 362, 363, 364, 

AND 507 AND FED. R. BANKR. P. 2002, 4001 AND 

 9014 (I) AUTHORIZING DEBTORS AND DEBTORS 

IN POSSESSION TO OBTAIN POSTPETITION SENIOR 

SECURED SUPERPRIORITY FINANCING, (II) AUTHORIZING 

THE DEBTORS TO USE CASH COLLATERAL, (III) GRANTING 

LIENS AND PROVIDING SUPERPRIORITY ADMINISTRATIVE 

EXPENSE STATUS, (IV) GRANTING ADEQUATE PROTECTION TO THE 

PREPETITION SECURED PARTIES, (V) MODIFYING THE AUTOMATIC STAY, 

(VI) SCHEDULING A FINAL HEARING, AND (VII) GRANTING RELATED RELIEF 

1

 The Debtors in these chapter 11 cases and the last four digits of their respective federal tax identification numbers 

or Canadian business numbers, as applicable, are: KidKraft, Inc. (3303), KidKraft Europe, LLC (3174), KidKraft 

Intermediate Holdings, LLC (8800), KidKraft International Holdings, Inc. (2933), KidKraft Partners, LLC (3268), 

KidKraft International IP Holdings, LLC (1841), Solowave Design Corp. (9294), Solowave Design Holdings 

Limited (0206), Solowave Design Inc. (3073), Solowave Design LP (7201), and Solowave International Inc. 

(4302). The location of the Debtors’ U.S. corporate headquarters and the Debtors’ service address is: 4630 Olin 

Road, Dallas, TX 75244.

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EMERGENCY RELIEF HAS BEEN REQUESTED. RELIEF IS REQUESTED 

NOT LATER THAN 9:30 A.M. (CENTRAL TIME) ON MAY 13, 2024. 

IF YOU OBJECT TO THE RELIEF REQUESTED OR YOU BELIEVE THAT 

EMERGENCY CONSIDERATION IS NOT WARRANTED, YOU MUST APPEAR 

AT THE HEARING IF ONE IS SET, OR FILE A WRITTEN RESPONSE PRIOR 

TO THE DATE THAT RELIEF IS REQUESTED IN THE PRECEDING 

PARAGRAPH. OTHERWISE, THE COURT MAY TREAT THE PLEADING AS 

UNOPPOSED AND GRANT THE RELIEF REQUESTED. 

A HEARING WILL BE CONDUCTED ON THIS MATTER ON MAY 13, 2024 AT 

9:30 A.M. (CENTRAL TIME) IN COURTROOM #2, FLOOR 14, UNITED STATES 

BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS, 1100 

COMMERCE STREET, DALLAS, TX 75242. 

PARTICIPATION AT THE HEARING WILL ONLY BE PERMITTED BY AN 

AUDIO AND VIDEO CONNECTION. 

AUDIO COMMUNICATION WILL BE BY USE OF THE COURT’S DIAL-IN 

FACILITY. YOU MAY ACCESS THE FACILITY AT 1-650-479-3207. VIDEO 

COMMUNICATION WILL BE BY USE OF THE CISCO WEBEX PLATFORM. 

CONNECT VIA THE CISCO WEBEX APPLICATION OR CLICK THE LINK ON 

JUDGE LARSON’S HOME PAGE. THE MEETING CODE IS 160 135 6015. 

CLICK THE SETTINGS ICON IN THE UPPER RIGHT CORNER AND ENTER 

YOUR NAME UNDER THE PERSONAL INFORMATION SETTING. 

HEARING APPEARANCES MUST BE MADE ELECTRONICALLY IN 

ADVANCE OF ELECTRONIC HEARINGS. TO MAKE YOUR APPEARANCE, 

CLICK THE “ELECTRONIC APPEARANCE” LINK ON JUDGE LARSON’S 

HOME PAGE. SELECT THE CASE NAME, COMPLETE THE REQUIRED 

FIELDS AND CLICK “SUBMIT” TO COMPLETE YOUR APPEARANCE. 

TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE: 

The above-captioned debtors and debtors in possession (collectively, the “Debtors”), file 

this Emergency Motion for Entry of Interim and Final Orders Pursuant to 11 U.S.C. §§ 105, 361, 

362, 363, 364, and 507 and Fed. R. Bankr. P. 2002, 4001, and 9014 (I) Authorizing Debtors and 

Debtors in Possession to Obtain Postpetition Senior Secured Superpriority Financing, 

(II) Authorizing the Debtors to Use Cash Collateral, (III) Granting Liens and Providing 

Superpriority Administrative Expense Status, (IV) Granting Adequate Protection to the Prepetition 

Secured Parties, (V) Modifying the Automatic Stay, (VI) Scheduling a Final Hearing, and 

(VII) Granting Related Relief (the “Motion”). The facts and circumstances supporting the relief 

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requested in this Motion are set forth in the Declaration of Ajay Bijoor, Managing Director of 

Robert W. Baird & Co., in Support of the Debtors’ Motion to Obtain Postpetition Financing 

(the “Bijoor Declaration”), the Declaration of Carl Moore, Managing Director of 

SierraConstellation Partners, LLP, in Support of the Debtors’ Motion to Obtain Postpetition 

Financing (the “Moore Declaration,” and together with the Bijoor Declaration, the “Financing 

Declarations”), and the Declaration of Geoffrey Walker in Support of Chapter 11 Petitions and 

First Day Pleadings (the “First Day Declaration”), each filed contemporaneously herewith.2 In 

support of this Motion, the Debtors state as follows: 

SUMMARY OF TERMS OF DIP FACILITY AND USE OF CASH COLLATERAL 

1. In accordance with Bankruptcy Rules 4001(b)–(d) and Procedures for Complex 

Cases in the Northern District of Texas Section D, the below chart summarizes the material 

provisions of the proposed Interim Order (as defined below) and the DIP Term Sheet, a copy of

which is attached as Exhibit A of the Interim Order (the “DIP Term Sheet”):

3

Bankruptcy Rule Summary of Material Term 

Borrower 

FED. R. BANKR. P. 

4001(c)(1)(B)

KidKraft, Inc. 

See DIP Term Sheet, Borrower. 

Guarantors

FED. R. BANKR. P. 

4001(c)(1)(B)

The Debtors 

See DIP Term Sheet, Schedule I.

DIP Lender 

FED. R. BANKR. P. 

4001(c)(1)(B)

1903 Partners, LLC 

See DIP Term Sheet, DIP Lender. 

DIP Agent 

FED. R. BANKR. P. 

4001(c)(1)(B)

GB Funding, LLC 

See DIP Term Sheet, DIP Agent. 

Maturity Date; 

Duration for Use of 

DIP Collateral 

The Maturity Date shall be the earliest of (i) 60 days after the Petition Date, (ii) 30 days 

following the entry of the Interim Order if the Bankruptcy Court has not entered the Final 

Order (as defined below); (iii) the date the Debtors’ receive notice of the acceleration of 

2

 Capitalized terms used but not otherwise defined in this Motion shall have the meanings set forth in the First Day 

Declaration or the DIP Term Sheet, as applicable. 

3

 The summaries contained in this Motion are qualified in their entirety by the provisions of the documents 

referenced. To the extent anything in this Motion is inconsistent with such documents, the terms of the applicable 

documents shall control. Capitalized terms used in this summary chart but not otherwise defined have the 

meanings ascribed to them in the DIP Term Sheet or the Interim Order, as applicable. 

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FED. R. BANKR. P. 

4001(b)(1)(B)(iii), 

4001(c)(1)(B)

any of the DIP Loans and the termination of the commitments to make the DIP Loans 

resulting from Event of Default; (iv) the effective date of the Plan; (v) the date a sale 

pursuant to section 363 of the Bankruptcy Code is consummated (exclusive of a Sale 

Toggle); and (vi) the dismissal or conversion of any of the Chapter 11 Cases or the CCAA 

Recognition Proceedings (or a motion by the Debtors for dismissal of either). 

See DIP Term Sheet, Maturity Date. 

DIP Commitment 

FED. R. BANKR. P. 

4001(c)(1)(B)

A superpriority senior-secured priming multi-draw term loan facility (i) not to exceed at 

any time outstanding aggregate commitments of $10.5 million, consisting of a $4.0 million 

DIP Commitment after entry of the Interim Order and an incremental $6.5 million DIP 

Commitment after entry of the Final Order plus (ii) the Roll-Up Amount. 

See Interim Order, Section 1.2. 

Roll-Up 

Complex Case 

Procedures 

 (D)(10)(c) 

Roll-up of the full amount of the Rescue Financing (as defined below) (exclusive of interest 

and fees), $23.3 million. The roll up shall be approved upon entry of the Interim Order and 

deemed to have been advanced on the date thereof. 

See Interim Order, Section 1.2. 

Conditions to 

Borrowing 

FED. R. BANKR. P. 

4001(c)(1)(B)

Usual and customary for financings of this type, including, among other things: 

 no Event of Default shall have occurred; 

 the applicable Chapter 11 Milestones shall have been satisfied; 

 all reasonable, documented fees and out-of-pocket expenses of the DIP Secured Parties 

relating to the DIP Facility have been paid; 

 Debtors have insurance with respect to the DIP Collateral; 

 no Material Adverse Change shall have occurred; 

 the non-Debtor guarantors under the Prepetition Loan Documents execute a 

reaffirmation and ratification agreement; and 

 entry of the Interim and Final Orders. 

See DIP Term Sheet, Conditions Precedent to Each Interim DIP Loan & Conditions 

Precedent to Each Final DIP Loan. 

Interest Rate 

FED. R. BANKR. P. 

4001(c)(1)(B)

Adjusted Term SOFR for an Interest Period (as defined in the Prepetition Credit 

Agreement) of one month plus 8.50%. 

See DIP Term Sheet, Interest Rate; Interim Order Section 1.3(a) 

Use of Cash 

Collateral 

FED. R. BANKR. P. 

4001(b)(1)(B)(iii); 

Complex Case 

Procedures (D)(12)

The Debtors are authorized to use Cash Collateral, subject to the Interim Order, the DIP 

Term Sheet, the DIP Documents, in accordance with the Approved Budget, a copy of the 

latest version of which is attached to the DIP Term Sheet as Exhibit A, and the liens and 

security interests granted to Prepetition Agent and Prepetition Lender (collectively, the 

“Prepetition Secured Parties”). 

See Interim Order, Section 2.6(a). 

Adequate 

Protection for Use 

of Cash Collateral

FED. R. BANKR. P. 

4001(b)(1)(B)(iv) 

4001(c)(1)(B)(ii)

As adequate protection for any diminution of the Prepetition Secured Parties’ interest in the 

Prepetition Collateral resulting from the use of Cash Collateral, the subordination of their 

existing liens to the DIP Liens, and the imposition of the Carve-Out, the Prepetition Secured 

Parties shall (i) receive replacement liens pursuant to sections 361, 363(e), and 364(d)(l) of 

the Bankruptcy Code, (ii) a superpriority administrative expense claim, and (iii) payment 

of all reasonable, documented out-of-pocket costs and expenses of the Prepetition Secured 

Parties, in each case subject to the Carve Out. 

See Interim Order, Section 2.6. 

Liens and Priority The DIP Liens on the DIP Collateral shall, in all cases, subject and subordinate to the CarveOut, have the priority set forth as follows: 

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FED. R. BANKR. P. 

4001(c)(1)(B); 

Complex Case 

Procedures 

(D)(10)(g)

(i) pursuant to section 364(c)(1) of the Bankruptcy Code, constitute an allowed 

superpriority administrative expense claim (the “DIP Superpriority Claim”) in the 

Chapter 11 Cases with priority over any and all administrative expenses; 

(ii) pursuant to sections 364(c)(2), secured by a perfected first priority lien on the DIP 

Collateral, to the extent that such DIP Collateral is not subject to valid, perfected, and 

non-avoidable liens as of the Petition Date (subject to the Permitted Liens); and 

(iii) pursuant to section 364(c)(3), secured by a perfected junior lien on DIP Collateral 

(as defined below), to the extent such DIP Collateral is subject to a Permitted Lien. 

See Interim Order, Sections 2.1 and 2.2. 

Prepayments 

FED. R. BANKR. P. 

4001(c)(1)(B)

Optional Prepayments: The Debtors may prepay the DIP Loans in whole or in part at any 

time without premium or penalty. All optional prepayments shall be applied to the DIP 

Loans in accordance with the Prepayment Waterfall. Any amounts prepaid may not be 

reborrowed. 

Mandatory Prepayments: The Debtors shall pay or prepay the DIP Loans and all other DIP 

Obligations (together with a cash reserve established for the benefit of the DIP Agent to 

cover asserted contingent and indemnity obligations) in accordance with the Prepayment 

Waterfall, upon receipt of proceeds of a sale of substantially all of the Debtors’ assets, sale 

of any assets outside of the ordinary course of business in excess of $10,000, and any 

extraordinary receipts. 

See DIP Term Sheet, Optional Prepayments & Mandatory Prepayments. 

Budget 

FED. R. BANKR. P. 

4001(c)(1)(B)

The “Approved Budget” shall consist of a weekly budget for the nine-week period 

commencing on the Petition Date and include, among other things, all projected cash 

receipts, sales, and cash disbursements. 

Commencing on the Monday of the first full calendar week after the Petition Date at 

5:00 p.m. (Central Time) and continuing on the two-week anniversary thereafter 

(or such other time as the Debtors may elect with the consent of the DIP Lender and the 

Purchaser), the weekly budget shall be updated. 

See DIP Term Sheet, Approved Budget; Approved Cash Flow Projection; and Variance 

Reports; Interim Order Section 1.8(a). 

Variance Covenant 

FED. R. BANKR. P. 

4001(c)(1)(B)

“Permitted Variances” include: (a) up to 15% of the aggregate for all cash disbursements 

(other than fees and expenses of counsel to the DIP Secured Parties and Professional 

Persons), (b) less than 20% of the aggregate for all cash receipts in the Approved Budget, 

and (c) up to 15% of all fees and expenses incurred on a per-Professional Person basis, in 

each case calculated weekly on a rolling four week basis commencing as of the Petition 

Date, with the first such testing to begin three weeks from the Petition Date, except that the 

Professional Fee Variance shall be calculated weekly and not on a rolling four week basis. 

See DIP Term Sheet, Approved Budget; Approved Cash Flow Projection; and Variance 

Reports; Interim Order Section 1.8(b). 

Events of Default

FED. R. BANKR. P. 

4001(c)(1)(B); 

Complex Case 

Procedures 

(D)(10)(d)

Events of Default include usual and customary events of default for financings of this type, 

including, but not limited to (i) after the first applicable testing date, the occurrence of any 

deviation from the Approved Budget that is greater than the Permitted Variances; (ii) failure 

of any of the Chapter 11 Milestones to be satisfied; (ii) the filing of any application by the 

Debtors for the approval of (or an order is entered by the Court approving) any claim arising 

under section 507(b) of the Bankruptcy Code; (iii) the actual amount of Allowed 

Administrative Expense Claims, Allowed Priority Tax Claims, and Other Priority Claims 

(each as defined in the Plan) exceeds or is expected to exceed the Administrative Expense 

Claim and Priority Tax Claim Backstop Amount; and (iv) failure to pay principal, interest 

or other DIP Obligations in full in cash when due. 

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See DIP Term Sheet, Events of Default. 

Indemnification 

FED. R. BANKR. P. 

4001(c)(1)(B)(ix)

The DIP Term Sheet contains indemnification provisions ordinary and customary for 

financings of this type. 

See DIP Term Sheet, Indemnity. 

Carve-Out 

FED. R. BANKR. P. 

4001(c)(1)(B)(i)

The interim order provides a “Carve-Out” of from liens, collateral, cash collateral, adequate 

protection claims, superpriority claims, and other claims for the payment of certain statutory 

fees, allowed professional fees of the Debtors, and allowed professional fees of an official 

committee of unsecured creditors, including a Post-Carve Out Trigger Notice Cap, subject 

to the terms of the Interim Order. 

The Funded Reserve Account shall be funded on the Friday of the first full calendar week 

following the Petition Date and on a weekly basis thereafter and be held by the Debtors in 

trust solely for the benefit of the Debtor Professionals subject to the terms of the Interim 

Order and the Approved Budget. 

See DIP Term Sheet, Carve-Out; Interim Order, Section 2.3. 

Fees, Expenses, 

and Additional 

Payments 

FED. R. BANKR. P. 

4001(c)(1)(B); 

Complex Case 

Procedures 

(D)(14)(c)

The Debtors shall pay the (A) DIP Lender (i) an origination fee of 2.00% of the DIP 

Commitment and (ii) an exit fee of 2.00% of the DIP Commitment that will be fully earned 

and non-refundable upon consummation of the Plan and (B) the DIP Agent, a weekly 

administrative fee of $7,500. 

The Debtors shall also pay all reasonable, documented out-of-pocket costs and expenses of 

the DIP Secured Parties relating to the DIP Facility, the Debtors’ Chapter 11 Cases. 

See DIP Term Sheet, DIP Fees & DIP Secured Parties’ Expenses. 

Section 506(c) 

Waiver 

FED. R. BANKR. P. 

4001(c)(1)(B)(x); 

Complex Case 

Procedures 

(D)(13)(b)

Effective upon entry of the Final Order, the Debtors shall waive, and shall not assert in the 

Chapter 11 Cases or any successor cases, any surcharge claim under sections 105(a) and/or 

506(c) of the Bankruptcy Code or otherwise for any costs and expenses incurred in 

connection with the preservation, protection or enhancement of, or realization by the 

Prepetition Lender or the DIP Lender, upon the Prepetition Collateral or DIP Collateral, 

respectively. 

See DIP Term Sheet, Events of Default; Interim Order, Section 4.3. 

Section 552(b) 

Waiver 

FED. R. BANKR. P. 

4001(c)(1)(B); 

Complex Case 

Procedures 

(D)(13)(c)

Effective upon entry of the Final Order, the DIP Secured Parties and the Prepetition Secured 

Parties shall be entitled to the rights and benefits of section 552(b) of the Bankruptcy Code, 

and the “equities of the case” exception under section 552(b) of the Bankruptcy Code shall 

not apply to any of the Prepetition Secured Parties, the DIP Secured Parties, the DIP 

Obligations, or the Prepetition Obligations. 

See DIP Term Sheet, Events of Default; Interim Order, Section 5.9. 

Marshaling 

FED. R. BANKR. P. 

4001(c)(1)(B); 

Complex Case 

Procedures 

(D)(13)(d)

Effective upon entry of the Final Order, the DIP Lender shall not be subject to the equitable 

doctrine of “marshaling” or any similar doctrine with respect to the DIP Collateral and all 

proceeds shall be received and applied pursuant to the Final Order and the DIP Loan 

Documents notwithstanding any other agreement or provision to the contrary. 

See DIP Term Sheet, Events of Default; Interim Order, Section 5.9. 

Liens on 

Avoidance 

Actions/Proceeds 

FED. R. BANKR. P. 

4001(c)(1)(B)(iii); 

Complex Case 

Procedures 

(D)(13)(a)

Subject to entry of Final Order, the DIP Lender shall have a lien on the proceeds of 

avoidance actions under chapter 5 of the Bankruptcy Code. 

See Interim Order, Section 2.1(a).

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Determination 

Regarding 

Prepetition Claims 

FED. R. BANKR. P. 

4001(c)(1)(B)(iii); 

Complex Case 

Procedures 

(D)(10)(e)

The Interim Order contains stipulations of fact by the Debtors, including related to the 

validity and enforceability of the DIP Secured Parties’ prepetition secured obligations. 

The stipulation are valid against third parties, unless (a) the third party files a complaint or 

motion seeking authority to commence litigation as a representative of the estate 

(a “Challenge”) before the earliest of (i) the objection deadline for the Plan, (ii) 60 calendar 

days from the date of appointment of the Committee by the U.S. Trustee, and (iii) 75 

calendar days from the Petition Date for all parties other than the Committee (if any) 

(the “Challenge Period”) challenging the Prepetition Obligations or Prepetition Liens and 

(b) such Challenge sets for the with specificity the basis for such challenge, and any 

challenges or claims not so specified prior to the expiration of the Challenge Period shall 

be deemed forever waived, released, and barred. 

See Interim Order, Section F(a)(ii). 

Effect of Debtors’ 

Stipulations on 

Third Parties 

FED. R. BANKR. P. 

4001(c)(1)(B)(iii), 

(viii)

The Debtors’ Stipulations are binding on each other party in interest unless (a) such party 

in interest with standing and requisite authority has timely commenced an adversary 

proceeding during the Challenge Period regarding the Prepetition Obligations or Prepetition 

Liens and (b) such Challenge sets for the with specificity the basis for such challenge. 

See Interim Order, Section 4.1. 

Milestones

FED. R. BANKR. P. 

4001(c)(1)(B)(vi); 

Complex Case 

Procedures 

(D)(10)(a)

Milestones relating to the DIP include, in relevant part, 

 No later than one day after the Petition Date, the Debtors shall have filed the Plan and 

Disclosure Statement.

 No later than two Business Days after the Petition Date, the Debtors shall have obtained 

entry of the Interim Order by the Bankruptcy Court, and no later than five Business 

Days thereafter, the Debtors shall have obtained entry by the CCAA Court of the 

Interim DIP Recognition Order.

 No later than 30 days after the Petition Date, the Debtors shall have obtained entry of 

the Final Order by the Bankruptcy Court, and no later than five Business Days 

thereafter, the Debtors shall have obtained entry by the CCAA Court of the Final DIP 

Recognition Order.

 No later than 45 days after the Petition Date, the Bankruptcy Court shall have entered 

the Confirmation Order and the final Sale Order, and no later than five Business Days 

thereafter, the CCAA Court shall have entered an order in the CCAA Recognition 

Proceedings recognizing and giving effect in Canada to the Confirmation Order and 

the Sale Order.

 No later than five Business Days after the later of entry of the Sale Order and the CCAA 

Sale Order, all conditions to Closing under the Purchase Agreement shall have been 

satisfied or waived and the Sale Transaction shall have been consummated. 

See DIP Term Sheet, Milestones. 

Waiver or 

Modification of the 

Automatic Stay

FED. R. BANKR. P. 

4001(c)(1)(B)(iv); 

Complex Case 

Procedures 

(D)(10)(d)

The Interim Order provides that the automatic stay under section 362 of the Bankruptcy 

Code is modified to: 

(A) implement the DIP financing arrangements, (B) to take any act to create, validate, 

evidence, attach or perfect any lien, security interest, right, or claim in the DIP Collateral, 

(C) to assess, charge, collect, advance, deduct, and receive payments with respect to the 

Prepetition Obligations or the DIP Obligations, as applicable. 

Upon the occurrence of an Event of Default: 

(A) declare a termination, reduction, or restriction on the ability of the Debtors to use Cash 

Collateral, (B) take any other action and exercise all other rights and remedies provided by 

the Interim Order, the DIP Documents, or applicable law other than those rights and 

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remedies subject to the expiration of the Remedies Notice Period, and (C) charge interest 

at the default rate under the DIP Documents. 

See Interim Order, Section 3.4. 

Releases, Waivers, 

or Limitation on 

any Claim or 

Cause of Action 

FED. R. BANKR. P. 

4001(c)(1)(B)(viii); 

Complex Case 

Procedures 

(D)(10)(f)

Each Debtor, on behalf of itself and its successors and assigns and other “Releasors” 

(as defined in the Interim Order) release each of the Prepetition Agent and Prepetition 

Lender other “Prepetition Releasees” (as defined in the Interim Order) and the DIP Lender, 

DIP Agent, and other “DIP Releasees” (as defined in the Interim Order) from all claims and 

causes of action against any Prepetition Releasees or DIP Releasees as of the date of the 

Interim Order, in respect of the Prepetition Obligations, the Prepetition Loan Documents, 

the DIP Obligations, the RSA, the Plan, the Backyard Sale, the DIP Documents, and any 

DIP Loans or other financial accommodations made by DIP Agent and/or DIP Lender, as 

applicable. 

See Interim Order Sections F(a)(vii) & 4.5. 

2. After exploring their options with the assistance of their independent investment 

banker, the Debtors have concluded that the DIP Facility is the best and only viable postpetition 

financing alternative available to them. The DIP Agent and DIP Lender (collectively, the “DIP 

Secured Parties”) would not have agreed to provide such financing without the terms and 

provisions summarized above and set forth below. The Debtors and the DIP Secured Parties have 

endeavored to structure the DIP Facility and its approval in accordance with the applicable 

provisions of the Bankruptcy Rules and the Procedures for Complex Cases in the Northern District 

of Texas. It is the Debtors’ firm conviction that without the DIP Facility, the Debtors’ businesses 

will not be able to operate, resulting in the loss of value, jobs, and the ability to consummate the 

Sale Transaction for the benefit of their estates and stakeholders. In light of the foregoing, and as 

further set forth in the Motion and supporting declarations, the Debtors respectfully submit that 

the terms of the DIP Facility are appropriate under the facts and circumstances of these Chapter 

11 Cases. 

PRELIMINARY STATEMENT 

3. As discussed in greater detail in the Financing Declarations and the First Day 

Declaration and the other pleadings, these chapter 11 cases (the “Chapter 11 Cases”) will 

effectuate the sale of substantially all of the Debtors’ assets to Backyard Products, LLC 

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(“Backyard”). Prior to the Petition Date, the Debtors and their advisors engaged in multiple 

marketing processes which resulted in the Sale Transaction with Backyard. After these multiple 

market tests, the Debtors believe that the proposed Sale Transaction with Backyard provides the 

best—and only currently available—opportunity to maximize the value of the Debtors’ estates. 

4. On April 25, 2024, in order to implement the Sale Transaction while simultaneously 

maintaining the value of their estates, the Debtors entered into a Restructuring Support Agreement 

(the “RSA”) with certain of their key stakeholders. Those stakeholders included Backyard and the 

Prepetition Lender who has also agreed to provide the Debtors with the proposed postpetition 

financing described in this Motion. The RSA sets forth the commitments of the parties to 

implement the proposed Sale Transaction through the Plan, including DIP Facility (as defined 

below) in accordance with the DIP Term Sheet. 

5. The DIP Facility is essential for the Debtors to consummate the Sale Transaction. 

As described in the Moore Declaration, the Debtors will utilize the DIP Facility to pay their 

employees, produce inventory, and make other ordinary course payments in order to preserve their 

value for the Sale Transaction with Backyard. Accordingly, the Debtors respectfully request the 

Court approve the proposed DIP Facility, which will provide the Debtors with a total of $10.5 in 

new money financing, approximately $4.0 million of which the Debtors are requesting on an 

interim basis. As described further in this Motion, in exchange for this essential liquidity, the 

Debtors have agreed to certain reasonable protections for the DIP Secured Parties, including liens 

on collateral, payment of interest and fees on amounts borrowed, and a limited “roll up” of 

approximately $23.3 million of prepetition financing (the “Rescue Financing”) which provided 

the Debtors with a liquidity runway to file these Chapter 11 Cases and maximize the value of their 

estates. 

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6. As set forth in greater detail below and in the Financing Declarations, the DIP 

Facility is the product of arm’s-length negotiations and is in the best interests of the Debtors and 

their Estates. The terms of the DIP Facility comply with section 364 of the Bankruptcy Code, and 

entry into the DIP Facility and performance of all of the Debtors’ obligations is reasonable and 

appropriate exercise of the Debtors’ business judgment under the circumstances. Accordingly, the 

Debtors respectfully request that the Court authorize the Debtors’ entry into the DIP Facility, and 

grant other relief as requested in this Motion. 

JURISDICTION AND VENUE 

7. The United States Bankruptcy Court for the Northern District of Texas 

(the “Court”) has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. This matter is a core 

proceeding pursuant to 28 U.S.C. § 157(b)(2)(A). The Debtors confirm their consent, pursuant to 

rule 7008 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), to the entry of 

a final order by the Court in connection with this Motion to the extent that it is later determined 

that the Court, absent consent of the parties, cannot enter final orders or judgments in connection 

herewith consistent with Article III of the United States Constitution. 

8. Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. 

9. The statutory bases for the relief requested herein are sections 105, 361, 362, 363, 

364, 503, and 507 of title 11 of the United States Code (the “Bankruptcy Code”), Bankruptcy 

Rules 2002, 4001, 6003, and 6004, rules 9007-1 and 9013-1 of the Local Bankruptcy Rules of the 

United States Bankruptcy Court for the Northern District of Texas (the “N.D. Tex. L.B.R.”), and 

the General Order Regarding Procedures for Complex Chapter 11 Cases (the “Complex Case 

Procedures”). 

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EMERGENCY CONSIDERATION 

10. In accordance with the N.D. Tex. L.B.R. and Complex Case Procedures, the 

Debtors request emergency consideration of this Motion. The liquidity provided under the DIP 

Facility is necessary for the Debtors’ transition into chapter 11, which is critical to the viability of 

their operations and the success of these Chapter 11 Cases. As discussed in detail below and in 

the First Day Declaration, any delay in granting the relief requested could hinder the ultimate 

success of the Debtors’ chapter 11 cases and cause immediate and irreparable harm. As such, the 

Debtors believe that emergency consideration is necessary and request that this Motion be heard 

at the Debtors’ first day hearings. 

BACKGROUND 

11. KidKraft, Inc. (together with its Debtor and non-Debtor affiliates, the “Company”) 

is a Dallas-based privately held company that is a leader in branded, sustainable, wood-based 

active and imaginative play products, with operations in the U.S., Canada, Europe, and Asia. The 

Company works with global supply partners to source materials and build its products, which 

include dollhouses, play sets, playhouses, swing sets, and more. It distributes its products through 

partnerships with major global retailers and through direct-to-customer sales, with more than 3,000 

points of distribution in over 90 countries. The Company, like many in its industry, has 

experienced significant headwinds in recent years that have strained liquidity and operations. 

Unable to satisfy its funded debt obligations and certain other obligations to vendors and other 

parties, the Company and its advisors undertook extensive marketing and sale processes that have 

culminated in these Chapter 11 Cases, through which the Company aims to implement a sale to a 

strategic buyer pursuant to a prepackaged chapter 11 plan (or, in the alternative, pursuant to 

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consummation of a stand-alone sale pursuant to section 363 of the Bankruptcy Code) to, among 

other things, preserve jobs and continue the KidKraft brand as a going concern. 

12. On the date hereof (the “Petition Date”), the Debtors each filed a voluntary petition 

for relief under chapter 11 of the Bankruptcy Code. The Debtors are operating their businesses 

and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of 

the Bankruptcy Code. As of the date hereof, no request for the appointment of a trustee or 

examiner has been made and no official committee of unsecured creditors (a “Committee”) has 

been appointed in these Chapter 11 Cases. 

13. Additional information regarding the Debtors and these Chapter 11 Cases, 

including the Debtors’ business operations, capital structure, financial condition, and the reasons 

for and objectives of these Chapter 11 Cases, is set forth in the First Day Declaration filed 

contemporaneously herewith and incorporated herein by reference. 

DEBTORS’ PREPETITION CAPITAL STRUCTURE 

A. Prepetition Credit Agreement. 

14. As described in the First Day Declaration, the Debtors’ funded debt arises from the 

Prepetition Credit Agreement, which was amended (the “Fifth Amendment”) in connection with 

the Debt Sale to the Prepetition Secured Parties. The Fifth Amendment increased the available 

priority revolving commitments under the Prepetition Credit Agreement to $26.8 million, and 

extended the maturity of the term loans under the Prepetition Credit Agreement from June 30, 

2023, to June 30, 2024, giving the Company crucial liquidity and runway to pursue the marketing 

process that ultimately yielded the proposed transaction with Backyard. The Prepetition Credit 

Agreement was further amended on May 9, 2024, to increase the total available priority revolving 

commitments to $31.5 million. 

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15. As of the Petition Date, the Debtors’ aggregate principal outstanding funded debt 

obligations under the Prepetition Credit Agreement totaled approximately $144.9 million, 

comprised of (i) $81.7 million under the Prepetition First Lien Term Facility and (ii) $63.2 million 

under the Prepetition First Lien Revolving Facility. In addition, the Debtors owe accrued and 

unpaid interest under both the Prepetition First Lien Term Facility and the Prepetition First Lien 

Revolving Facility. The remainder of the Debtors’ prepetition capital structure is summarized in 

the table below. 

Facility Maturity Total Approx. Amount 

Outstanding 

Revolving Credit Facility June 2024 $63.2 million4

Term Loan Credit Facility June 2024 $81.7 million 

Total Secured Debt $144.9 million 

Subordinated Sponsor Debt January 2025 $5.0 million 

Total Effective Debt $149.9 million 

DEBTORS’ LIQUIDITY NEEDS AND THE PROPOSED DIP FACILITY 

16. As detailed in the Moore Declaration, the Debtors require access to liquidity to 

ensure that they are able to continue their normal business operations during these Chapter 11 

Cases and to preserve the value of their Estates. All of the Debtors’ cash on hand as of the Petition 

Date and any proceeds of the Prepetition Collateral are subject to the liens of the Prepetition 

Lender. Pursuant to the RSA, the Prepetition Lender has agreed to provide the DIP Facility on the 

terms set forth in the Interim Order and in accordance with the Approved Budget. 

17. The proceeds from the proposed DIP Facility will be used for, among other things, 

making payments integral to the Debtors’ business operations, paying administrative expenses 

associated with these Chapter 11 Cases, and satisfying working capital needs in the ordinary course 

4

 The Revolving Credit Facility includes approximately $31.5 million of priority revolving commitments. 

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of business. Moreover, the liquidity to be provided under the DIP Facility, combined with access 

to existing Cash Collateral, will enable the Debtors to (i) fund their operations during the course 

of these Chapter 11 Cases including chapter 11 administrative costs, (ii) ensure that value is 

preserved during the course of the Debtors’ Chapter 11 Cases, and (iii) consummate the Sale 

Transaction and confirm the Plan to maximize value for the Debtors’ Estates. 

18. Given that substantially all of the Debtors’ unrestricted cash is Cash Collateral, the 

Debtors need access to such Cash Collateral and the proceeds of the DIP Facility to operate their 

businesses in the ordinary course during these Chapter 11 Cases. Authority to use Cash Collateral 

and enter into the DIP Facility will provide the Debtors with necessary funds to operate their 

business and continue paying their postpetition obligations as they come due during these Chapter 

11 Cases. 

THE ROLL UP OF A PORTION 

OF THE RESCUE FINANCING IS REASONABLE. 

19. The DIP Facility seeks to “roll up” approximately $23.3 million of the Rescue 

Financing upon entry of the Interim Order. The proposed Roll-Up Amount is limited to the new 

capital that the Prepetition Secured Parties provided the Debtors after the Debt Sale closed on 

January 31, 2024. Importantly, this liquidity provided a runway for the Debtors to commence the 

2024 Sale Process, which in turn led to Backyard’s offer and the proposed Sale Transaction and 

has allowed the Debtors to maintain their operations and preserve the value of their estates leading 

up to these Chapter 11 Cases. The roll up is a material component of the structure of the DIP 

Facility and was required by the DIP Lenders as a condition to their commitment to provide 

postpetition financing and their consent to the Debtors’ use of Cash Collateral. Additionally, the 

proposed roll up is reasonable in light of the ratio of new money provided by the DIP Lender to 

the Roll-Up Amount. The Debtors believe that given the limited size of the Roll-Up Amount in 

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comparison to the substantial benefits the Debtors will receive from the liquidity under the DIP 

Facility and the substantial benefits provided by the Rescue Financing, agreeing to the roll up in 

the Interim Order is a reasonable exercise of their business judgment. 

THE DIP FACILITY WAS NEGOTIATED IN GOOD FAITH AND AT ARMS’ LENGTH 

20. As further described in the Bijoor Declaration, the terms of the DIP Facility are the 

product of extensive good faith, arm’s-length negotiations between the Debtors and the DIP 

Secured Parties, each of which was represented by qualified counsel. Beginning in March 2024, 

the Debtors, with the assistance of the Advisors, actively negotiated the terms and provisions of 

the DIP Facility. The result of these negotiations was memorialized in the RSA and the DIP Term 

Sheet. Based on the DIP financing marketing process conducted by the Debtors and Baird and the 

extensive arm’s-length negotiations between the Debtors and the DIP Lender, the DIP Facility 

represents the best financing option available to the Debtors. The terms of the DIP Facility are 

reasonable under the circumstances and are consistent with market terms for such financings 

provided to companies in circumstances similar to the Debtors. 

RELIEF REQUESTED 

21. By this Motion, the Debtors seek entry of an interim order substantially in the form 

attached as Exhibit A (the “Interim Order”), and subsequently entry of a final order which shall

be substantially in the same form as the Interim Order and modified to become a final order as 

contemplated in the Interim Order (the “Final Order”) and scheduling a final hearing (the “Final 

Hearing”) to consider entry of the Final Order. 

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BASIS FOR RELIEF 

A. Obtaining the DIP Facility, Including the Roll-Up Amount, is a Sound Exercise of Business 

Judgment. 

22. After thorough marketing of their assets by independent financial advisors, the 

Debtors have concluded that the Sale Transaction is the best opportunity for the Debtors to 

maximize the value of their estates. Further, after market testing and seeking financing alternatives 

via their independent financial advisors, the DIP Facility is the only financing option available to 

the Debtors under the circumstances of these Chapter 11 Cases. The Court should authorize the 

Debtors, as an exercise of their sound business judgment, to (i) enter into the DIP Documents, 

(ii) obtain access to the DIP Facility, and (iii) use advances of credit under the DIP Facility and 

Cash Collateral in accordance with the DIP Orders and the Approved Budget. 

23. If an agreement to obtain secured credit complies with the provisions of, and 

policies underlying, the Bankruptcy Code, courts give debtors considerable deference in acting in 

accordance with their sound business judgment in obtaining such credit. See, e.g., In re Estrada, 

2016 WL 745536, at *3 (Bankr. S.D. Tex. Feb. 24, 2016) (“In determining whether to approve a 

motion to obtain credit, courts generally permit debtors in possession to exercise their basic 

business judgment consistent with their fiduciary duties.”); In re Republic Airways Holdings Inc., 

No. 16-10429 (SHL), 2016 WL 2616717, at *11 (Bankr. S.D.N.Y. May 4, 2016) (“In determining 

whether to authorize post-petition financing, bankruptcy courts will generally defer to the debtor’s 

business judgment.”); In re Los Angeles Dodgers LLC, 457 B.R. 308, 313 (Bankr. D. Del. 2011) 

(“Debtors correctly posit that courts will almost always defer to the business judgment of a debtor 

in the selection of a lender.”); In re Ames Dep’t Stores, Inc., 115 B.R. 34, 40 (Bankr. S.D.N.Y. 

1990) (“[C]ases consistently reflect that the court’s discretion under section 364 is to be utilized 

on grounds that permit reasonable business judgment to be exercised so long as the financing 

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agreement does not contain terms that leverage the bankruptcy process and powers or its purpose 

is not so much to benefit the estate as it is to benefit a party-in-interest.”). 

24. Bankruptcy courts generally will not second guess a debtor’s business decisions 

when those decisions involve a minimum level of care in arriving at the decision on an informed 

basis, in good faith, and in the honest belief that the action was taken in the best interests of the 

debtor. See In re Los Angeles Dodgers LLC, 457 B.R. at 313. To determine whether the business 

judgment test is met, “the court ‘is required to examine whether a reasonable business person 

would make a similar decision under similar circumstances.’” In re Dura Auto. Sys. Inc., No. 06-

11202 (KJC), 2007 WL 7728109, at *97 (Bankr. D. Del. Aug. 15, 2007) (citations omitted); 

In re Montgomery Ward Holding Corp., 242 B.R. 147, 153 (D. Del. 1999) (noting that courts 

require only that the debtors “show that a sound business purpose justifies such actions”) (citations 

omitted). 

25. Under the circumstances, the Debtors’ decision to enter into the DIP Facility is a 

sound exercise of their business judgment following a careful evaluation of the alternatives. First, 

without access to the DIP Facility, the Debtors will be unable to pay ongoing operating expenses 

necessary to sustain their operations, which in turn would jeopardize the Sale Transaction. Second, 

the Debtors negotiated the DIP Term Sheet and the other DIP Documents with the DIP Secured 

Parties in good faith, at arm’s length, and with the assistance of the Advisors, and the Debtors 

submit that the terms of the DIP Facility represent the most favorable terms on which such 

financing can be obtained. Third, the Debtors submit that the terms of the DIP Facility are 

reflective of market terms for financings of this type. Accordingly, the Court should authorize the 

Debtors’ entry into the DIP Documents as a reasonable exercise of the Debtors’ business judgment. 

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B. The Court Should Authorize the Liens and Superpriority Claims Under Sections 364(c) 

and 364(d) of the Bankruptcy Code. 

26. The Debtors propose to obtain financing under the DIP Facility by providing the 

DIP Secured Parties with security interests and liens as set forth in the DIP Documents pursuant 

to sections 364(c) and 364(d) of the Bankruptcy Code. Specifically, the Debtors are requesting 

providing the DIP Secured Parties with (i) first priority liens on any unencumbered assets pursuant 

to section 364(c) of the Bankruptcy Code and (ii) first priority, senior priming liens (“Priming 

Liens”) on all encumbered assets with priority over all other claims (subject and subordinate in 

each case only to the Carve-Out and Permitted Liens). 

(a) The Court Should Authorize the Granting of Superpriority Administrative Claims and 

Liens on Unencumbered Property. 

27. The Debtors meet the requirements for relief under section 364(c) of the 

Bankruptcy Code, which provides: 

If the trustee is unable to obtain unsecured credit allowable under section 503(b)(1) 

of this title as an administrative expense, the court, after notice and a hearing, may 

authorize the obtaining of credit or the incurring of debt: 

(1) with priority over any or all administrative expenses of the kind 

specified in section 503(b) or 507(b) of this title; 

(2) secured by a lien on property of the estate that is not otherwise 

subject to a lien; or 

(3) secured by a junior lien on property of the estate that is subject to a 

lien. 

11 U.S.C. § 364(c). 

28. To satisfy the requirements of section 364(c) of the Bankruptcy Code, courts 

consider whether (i) the debtor made a reasonable effort, but failed, to obtain unsecured credit 

under sections 364(a) and 364(b) of the Bankruptcy Code; (ii) the credit transaction benefits the 

debtor as necessary to preserve estate assets; and (iii) the terms of the credit transaction are fair, 

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reasonable, and adequate, given the circumstances of the debtor and proposed lender. 

See In re Republic Airways Holdings Inc., 2016 WL 2616717, at *11; In re Los Angeles Dodgers 

LLC, 457 B.R. at 312–13; In re Ames Dep’t Stores, Inc., 115 B.R. at 40; In re Aqua Assoc., 

123 B.R. 192, 195–99 (Bankr. E.D. Pa. 1991). However, section 364 of the Bankruptcy Code 

“imposes no duty to seek credit from every possible lender before concluding that such credit is 

unavailable.” In re Snowshoe Co., 789 F.2d 1085, 1088 (4th Cir. 1986). A debtor need only 

demonstrate “by a good faith effort that credit was not available without” the protections afforded 

to potential lenders by sections 364(c) of the Bankruptcy Code. Id.; see also In re Plabell Rubber 

Prods., Inc., 137 B.R. 897, 900 (Bankr. N.D. Ohio 1992); In re Ames Dep’t Stores, 

115 B.R. at 37–39 (debtor must show that it made reasonable efforts to seek other sources of 

financing under section 364(a) and (b) of the Bankruptcy Code). 

29. The Debtors submit they have satisfied the requirements of section 364(c) of the 

Bankruptcy Code and should thus be authorized to grant liens on unencumbered property and 

superpriority claims to the DIP Lender on account of the DIP Facility. 

30. As set forth above and in the Financing Declarations, prior to the Petition Date, the 

Debtors and their advisors contacted other parties to seek proposals for third-party postpetition 

financing. No potential lenders were willing to provide financing on an unsecured or junior lien 

basis. Accordingly, the Debtors submit that the requirement of section 364 of the Bankruptcy 

Code is satisfied because alternative credit on more favorable terms is unavailable to the Debtors. 

31. The DIP Facility is necessary to preserve the value of the Debtors’ Estates. The 

Debtors require immediate access to the DIP Facility and use of Cash Collateral to continue 

operations and preserve the going-concern value of their Estates in order to consummate the Sale 

Transaction with Backyard. The proceeds of the DIP Facility will allow the Debtors to address 

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fluctuations in their cash flows, which affects their ability to pay trade creditors and satisfy other 

obligations that arise in the ordinary course of business. Absent the new money provided under 

the DIP Facility, these fluctuations may result in the inability to pay key vendors, which would 

adversely impact the Debtors’ operations. 

32. Finally, the terms of the DIP Facility are justified under the circumstances. The 

DIP Facility represents the only source of postpetition financing available to the Debtors and is 

designed to provide the Debtors with sufficient liquidity to administer these Chapter 11 Cases and 

facilitate the Sale Transaction. Given the Debtors’ circumstances, the Debtors submit that the 

terms of the DIP Facility, as set forth in the DIP Term Sheet, are fair, reasonable, and adequate. 

For all of the foregoing reasons, the Debtors submit that they have satisfied the requirements of 

section 364(c) of the Bankruptcy Code and that the Court should, therefore, authorize the Debtors 

to provide the DIP Lender with (i) superpriority administrative expense status for the DIP 

Obligations as provided for in section 364(c)(1) of the Bankruptcy Code and (ii) liens on the 

Debtors’ unencumbered property pursuant to section 364(c)(2) of the Bankruptcy Code. 

(b) The Court Should Authorize the Debtors to Grant Priming Liens. 

33. In addition to authorizing financing under section 364(c) of the Bankruptcy Code, 

courts may also authorize a debtor to obtain postpetition credit secured by a lien that is senior or 

equal in priority to existing liens on encumbered property if the debtor cannot otherwise obtain 

such credit and the interests of existing lien holders are adequately protected. 

See 11 U.S.C. § 364(d)(1). Specifically, section 364(d)(1) of the Bankruptcy Code provides: 

The court, after notice and a hearing, may authorize the obtaining of credit or the 

incurring of debt secured by a senior or equal lien on property of the estate that is 

subject to a lien only if: 

(A) the trustee is unable to obtain such credit otherwise; and 

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(B) there is adequate protection of the interest of the holder of the lien on 

the property of the estate on which such senior or equal lien is proposed to 

be granted. 

11 U.S.C. § 364(d)(1). 

34. “Section 364(d) ‘does not require that debtors seek alternative financing from every 

possible lender. However, the debtor must make an effort to obtain credit without priming a senior 

lien.’” In re Republic Airways Holdings Inc., 2016 WL 2616717, at *11. Consent by secured 

creditors to priming obviates the need to show adequate protection. See Anchor Savs. Bank FSB 

v. Sky Valley, Inc., 99 B.R. 117, 122 (N.D. Ga. 1989) (“[B]y tacitly consenting to the superpriority 

lien, those [undersecured] creditors relieved the debtor of having to demonstrate that they were 

adequately protected.”). What constitutes adequate protection is decided on a case-by-case basis. 

See In re Swedeland Dev. Group, Inc., 16 F.3d 552, 564 (3d Cir. 1994) (“[A] determination of 

whether there is adequate protection is made on a case-by-case basis.”); In re N.J. Affordable 

Homes Corp., No. 05-60442 (DHS), 2006 WL 2128624, at *14 (Bankr. D.N.J. June 29, 2006) 

(“The term ‘adequate protection’ is intended to be a flexible concept.”); In re Columbia Gas Sys., 

Inc., Nos. 91-803, 91-804, 1992 WL 79323, at *2 (Bankr. D. Del. Feb. 18, 1992) (emphasizing 

that “the varying analyses and results contained in the . . . slew of cases demonstrate that what 

interest is entitled to adequate protection and what constitutes adequate protection must be decided 

on a case-by-case basis”). Accordingly, the Debtors may incur “priming” liens under the DIP 

Facility if they are unable to obtain unsecured or junior secured credit and either (i) the existing 

secured creditors have consented or (ii) such existing secured creditors are adequately protected. 

35. The Debtors seek authority to grant liens to the DIP Lender on a priming basis 

(subject and subordinate to the Carve-Out). The Debtors submit that the grant of Priming Liens 

contemplated by the DIP Facility is appropriate because the proposed priming is consensual, and 

the Debtors are providing adequate protection to those secured creditors whose liens are being 

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primed. The DIP Lender is the Prepetition Lender—the primary prepetition secured creditor of 

the DIP Loan Parties—and has consented to the priming features of the DIP Facility. Indeed, the 

Prepetition Lender has actively participated in negotiating the terms of the proposed financing 

and/or Cash Collateral usage and agreed to the form of the Interim Order. Furthermore, the 

Debtors propose to provide adequate protection to the Prepetition Lender in the form of 

superpriority claims and replacement liens as set forth in the Interim Order. Accordingly, the 

Debtors submit that they have satisfied the requirements for granting Priming Liens to the DIP 

Lender pursuant to section 364(d)(1) of the Bankruptcy Code, and they request that the Court 

authorize them to do so. 

C. The Court Should Approve the Proposed Adequate Protection. 

36. In addition to advances under the DIP Facility, the Debtors require use of Cash 

Collateral for working capital to preserve their business operations and to administer these Chapter 

11 Cases. Section 363(c) of the Bankruptcy Code governs a debtor’s use of a secured creditor’s 

cash collateral. Section 363(c) provides, in pertinent part, that: 

The trustee may not use, sell, or lease cash collateral . . . unless— 

(A) each entity that has an interest in such cash collateral consents; or 

(B) the court, after notice and a hearing, authorizes such use, sale, or lease 

in accordance with the provisions of this section. 

11 U.S.C. § 363(c)(2). Furthermore, section 363(e) provides that “on request of an entity that has 

an interest in property . . . proposed to be used, sold or leased, by the trustee, the court, with or 

without a hearing, shall prohibit or condition such use, sale, or lease as is necessary to provide 

adequate protection of such interest.” 11 U.S.C. § 363(e). 

37. Section 362(d)(1) of the Bankruptcy Code provides for adequate protection of 

interests in property due to the imposition of the automatic stay. See In re Cont’l Airlines, 91 F.3d 

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553, 556 (3d Cir. 1996) (en banc). Courts determine what constitutes sufficient adequate 

protection on a case-by-case basis. Swedeland Dev. Grp., 16 F.3d at 564. 

38. As highlighted above, the Debtors propose to provide the Prepetition Secured 

Parties with adequate protection in various forms, to protect them from any diminution in value of 

the Prepetition Collateral resulting from the use of the Cash Collateral and the imposition of the 

automatic stay. Specifically, the Debtors propose to provide the Prepetition Secured Parties with 

Replacement Liens junior and subordinate only the Carve-Out, Permitted Liens, and the DIP Liens, 

a superpriority administrative expense claim, and the Adequate Protection Payments in exchange 

for access to the Prepetition Secured Parties’ Cash Collateral. Further, as additional adequate 

protection, the Debtors have agreed to a waiver of claims arising under section 506(c) of the 

Bankruptcy Code and a waiver of marshaling of assets with respect to the DIP Collateral and 

Prepetition Collateral. 

39. Cash Collateral will provide the Debtors with liquidity vital to sustain their 

operations and these Chapter 11 Cases. Accordingly, the Debtors’ proposed forms of adequate 

protection are not only necessary to protect against any diminution in value but are fair, reasonable, 

and appropriate under the circumstances of these Chapter 11 Cases to ensure that the Debtors are 

able to continue using the Cash Collateral, subject to the terms and limitations set forth in the 

Interim Order and the DIP Documents, for the benefit of all parties in interest and their Estates. 

D. The Roll-Up of the Prepetition Credit Agreement is Appropriate. 

40. An integral component of the DIP Facility is the roll up of the Rescue Financing, 

which includes up to $23.3 million of principal accrued under the Prepetition Credit Agreement 

and shall be approved upon entry of the Interim Order concurrent with the Debtors’ entry into the 

DIP Facility and which shall reduce the amounts due and owing on a dollar-for-dollar basis. The 

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negotiation of the roll up was a critical component of the overall DIP Facility and was necessary 

to achieve a consensual restructuring rather than a freefall bankruptcy. 

41. The DIP Secured Parties required approval of the roll up upon entry of the Interim 

Order as a condition for funding the DIP Facility. The DIP Facility—including the proposed roll 

up—represents the only financing option available to address the Debtors’ liquidity needs under 

these circumstances. Accordingly, the proposed roll up is reasonable, appropriate, and reflective 

of the current market for debtor-in-possession financings under these circumstances. 

42. This Court and courts in other jurisdictions have approved similar financing 

facilities that include the roll up of prepetition debt. See, e.g., In re Ebix, Inc., No. 23-80004 

(SWE) (Bankr. N.D. Tex. Dec. 17, 20230) (approving a roll up loan with a ratio of 0.5:1 of new 

money to rolled up money); In re Sunland Medical Foundation, No. 23-80000 (MVL) (Bankr N.D. 

Tex. Nov. 1, 2022) (approving a roll up loan with a ratio of 0.7:1 of new money to rolled up 

money); In re AiBUY Opco, LLC, No. 22-31737 (SGJ) (approving a roll up loan with a ratio of 

13.6:1 of new money to rolled up money); In re Corsicana Bedding, No. 22-90016 (ELM) 

(Bankr. N.D. Tex. June 25, 2022) (approving a roll up loan with a ratio of 5:1 of new money to 

rolled up money). 

E. The Court Should Authorize the Debtors to Use Cash Collateral. 

43. The Debtors should further be authorized to use Cash Collateral pursuant to 

section 363(c)(2) of the Bankruptcy Code, which provides, in relevant part, that a debtor: 

[M]ay not use, sell, or lease cash collateral . . . unless: 

(A) each entity that has an interest in such cash collateral consents; or 

(B) the court, after notice and a hearing, authorizes such use, sale, or lease 

in accordance with the provisions of this section. 

11 U.S.C. § 363(c)(2). 

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44. Section 363(e) of the Bankruptcy Code further provides that “on request of an entity 

that has an interest in property . . . to be used, sold, or leased by the trustee, the court . . . shall 

prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such 

interest.” 11 U.S.C. § 362(e). 

45. The Prepetition Secured Parties have consented to the Debtors’ use of Cash 

Collateral in exchange for the provision of adequate protection described above and provided for 

in the Interim Order. While section 361 of the Bankruptcy Code provides examples of forms of 

adequate protection, such as granting replacement liens and administrative claims, courts decide 

what constitutes adequate protection on a case-by-case basis. See Swedeland Dev. Grp., 16 F.3d 

at 564 (“[A] determination of whether there is adequate protection is made on a case-by-case 

basis.”). 

46. As described herein and in the Moore Declaration, access to Cash Collateral on an 

interim basis is essential to the continued operation of the Debtors’ business and orderly entry into 

the Chapter 11 Cases, and the adequate protection offered here in exchange for the use of Cash 

Collateral is customary and appropriate under the circumstances. Use of Cash Collateral is in the 

best interest of the Debtors’ Estates and, accordingly, the Court should authorize the Debtors to 

use Cash Collateral pursuant to section 363(c) of the Bankruptcy Code. 

F. The Court Should Authorize the Debtors to Pay the Fees Under the DIP Documents. 

47. The DIP Secured Parties have committed substantial capital to ensure successful 

execution of the DIP Facility and these Chapter 11 Cases. The Debtors have further agreed to pay 

certain fees of the DIP Lender in exchange for their agreement to provide the financing under the 

DIP Facility. The terms of the financing, which includes the corresponding fees, is the only 

financing available to the Debtors under the circumstances of these cases. The consideration being 

provided to the DIP Secured Parties in exchange for such commitment appropriately compensates 

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the DIP Secured Parties for their costs and commitment, was the subject of arm’s-length 

negotiation between the Debtors and the DIP Secured Parties and is necessary to obtain the DIP 

Facility, which will enable the Debtors’ continued operations and consummation of the Sale 

Transaction. The Debtors submit that under these circumstances, authorization to pay such fees is 

warranted. 

G. The DIP Secured Parties Should Be Deemed a Good Faith Lender Under Section 364(e) 

of the Bankruptcy Code. 

48. Section 364(e) of the Bankruptcy Code protects a good faith lender’s right to collect 

on loans extended to a debtor, and its right in any lien securing those loans, even if the authority 

of the debtor to obtain such loans or grant such liens is later reversed or modified on appeal. 

Section 364(e) provides that: 

The reversal or modification on appeal of an authorization under this section [364 

of the Bankruptcy Code] to obtain credit or incur debt, or of a grant under this 

section of a priority or a lien, does not affect the validity of any debt so incurred, or 

any priority or lien so granted, to an entity that extended such credit in good faith, 

whether or not such entity knew of the pendency of the appeal, unless such 

authorization and the incurring of such debt, or the granting of such priority or lien, 

were stayed pending appeal. 

11 U.S.C. § 364(e). 

49. The terms of the DIP Documents are the result of good faith, arm’s-length 

negotiation and the Debtors’ reasonable and informed determination that the DIP Lender has 

offered the most favorable postpetition financing terms under the circumstances, which are the 

only available terms pursuant to which the Debtors could obtain necessary postpetition financing. 

The terms of the DIP Documents are reasonable under the circumstances, and the proceeds of the 

DIP Facility will be used only for purposes that are permissible under the Bankruptcy Code and in 

accordance with the DIP Orders and the DIP Documents (including the Approved Budget). 

Accordingly, the Court should find that the DIP Lender is a “good faith” lender within the meaning 

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of section 364(e) of the Bankruptcy Code and are entitled to all the protections afforded by that 

section. 

H. The Automatic Stay Should Be Modified on a Limited Basis and the Procedure for Stay 

Relief Comports with the Complex Case Procedures. 

50. The proposed Interim Order provides that the automatic stay provisions of 

section 362 of the Bankruptcy Code will be modified to the extent necessary to implement and 

effectuate the terms and provisions of the DIP Documents and the Interim Order including to 

(i) permit the Debtors to grant the security interests, liens, and superpriority claims described 

herein and to perform such acts as may be required to assure the perfection and priority of such 

security interests and liens, and (ii) permit the DIP Secured Parties to exercise rights and remedies 

under certain circumstances. 

51. The proposed Interim Order provides that, upon the occurrence and during the 

continuance of an Event of Default under the DIP Term Sheet or any of the DIP Documents; any 

other breach, default, or other violation by the Debtors of the terms and provisions of the Interim 

Order and DIP Term Sheet after the delivery of a Carve-Out Trigger Notice, the automatic stay 

shall terminate solely to the extent necessary for the DIP Agent to exercise all rights and remedies 

in accordance with the Interim Order. Notably, the Interim Order provides that the DIP Agent 

must wait for a period of five Business Days after the date a Default Notice is delivered before 

exercising remedies (the “Remedies Notice Period”). During the Remedies Notice Period, the 

Debtors or other parties in interest may file a motion seeking an emergency hearing before the 

Court (a “Stay Relief Hearing”) and DIP Secured Parties consent to an emergency hearing that 

occurs within the Remedies Notice Period. The Interim Order authorizes the DIP Agent to 

(i) terminate the DIP Commitments, (ii) accelerate the DIP Loans, (iii) send blocking notices or 

activation notices pursuant to the terms of any deposit account control agreement, and (iv) repay 

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any amounts owing in respect of the DIP Obligations. Stay modifications of this kind are ordinary 

and standard features of debtor-in-possession financing arrangements and, in the Debtors’ business 

judgment, are reasonable and fair under the circumstances of these Chapter 11 Cases and should 

be approved. See, e.g., In re Sunland Medical Foundation, Case No. 23-80000 (MVL) 

(Bankr. N.D. Tex. Sep. 28, 2023) (modifying automatic stay as necessary to effectuate the terms 

of the order); In re Tuesday Morning Corporation, Case No. 23-90001 (ELM) (Bankr. N.D. Tex. 

Apr. 6, 2023) (same); In re Corsicana Bedding, LLC, Case No. 22-90016 (ELM) 

(Bankr. N.D. Tex. July 27, 2022) (same); In re Northwest Senior Housing Corporation, Case No. 

22-30659 (MVL) (Bankr. N.D. Tex. June 23, 2022) (same); In re Christian Care Centers, Inc., 

Case No. 22-80000 (SGJ) (Bankr. N.D. Tex. June 23, 2022) (same). 

I. Failure to Obtain Immediate Interim Access to the DIP Facility and Cash Collateral Would 

Cause Immediate and Irreparable Harm. 

52. Bankruptcy Rules 4001(b) and 4001(c) provide that a final hearing on a motion to 

obtain credit pursuant to section 364 of the Bankruptcy Code may not be commenced earlier than 

14 days after the service of such motion. Upon request, however, the Court may conduct a 

preliminary, expedited hearing on the motion and authorize the obtaining of credit and use of cash 

collateral to the extent necessary to avoid immediate and irreparable harm to a debtor’s estate 

pending a final hearing. Section 363(c)(3) of the Bankruptcy Code authorizes the court to conduct 

a preliminary hearing and to authorize the use of cash collateral “if there is a reasonable likelihood 

that the [debtor] will prevail at the final hearing under [section 363(e) of the Bankruptcy Code].” 

11 U.S.C. § 363(c)(3). Furthermore, the Complex Case Procedures provide that “a hearing on a 

Financing Motion . . . will routinely be conducted as a first-day hearing to consider emergency 

relief for interim use of cash collateral and/or interim debtor-in-possession financing.” Complex 

Case Procedures, D.11. 

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53. The Debtors respectfully request that the Court hold and conduct a hearing to 

consider entry of the Interim Order authorizing the Debtors, from entry of the Interim Order until 

the Final Hearing, to withdraw and borrow funds under the DIP Facility and use Cash Collateral. 

The Debtors will suffer immediate and irreparable harm if the Interim Order approving the DIP 

Facility is not entered sooner than 14 days after service of the Motion, if the Debtors are not 

permitted to access the financing under the DIP Facility in the aggregate principal amount of $4.0 

million during the Interim Period, and if the repayment of the Rescue Financing is not approved 

upon entry of the Interim Order. The Debtors require access to the DIP Facility prior to the final 

hearing on the Motion and entry of the Final Order approving the DIP Facility in order to continue 

operating, to pay their administrative expenses, and to implement the relief requested in the 

Debtors’ other “first-day” motions. This relief is necessary for the Debtors to preserve and 

maximize value and, therefore, to avoid immediate and irreparable harm and prejudice to the 

Debtors’ Estates and all parties in interest. 

REQUEST FOR IMMEDIATE RELIEF 

54. Bankruptcy Rule 6003 empowers a court to grant relief within the first 21 days after 

the Petition Date “to the extent that relief is necessary to avoid immediate and irreparable harm.” 

For the reasons discussed herein and in the First Day Declaration, authorizing the Debtors to enter 

into the DIP Documents, obtain the DIP Loans, and grant the protections to the DIP Lender and 

the Prepetition Lender as set forth in the Interim Order, as well as granting the other relief requested 

herein, is critical to enabling the Debtors to effectively transition to operating as chapter 11 debtors. 

Failure to receive such authorization and other relief during the first 21 days of these Chapter 11 

Cases would significantly impact the Debtors’ ability to swiftly and efficiently consummate a Sale 

Transaction and/or obtain confirmation of the Plan. As such, the relief requested is necessary in 

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order for the Debtors to maximize the value of their estates for the benefit of all stakeholders. 

Accordingly, the Debtors submit that they have satisfied the “immediate and irreparable harm” 

standard of Bankruptcy Rule 6003 to support granting the relief requested herein. 

WAIVER OF BANKRUPTCY RULES 6004(a) AND 6004(h) 

55. To implement the foregoing successfully, the Debtors seek a waiver of the notice 

requirements under Bankruptcy Rule 6004(a) and the 14-day stay of an order authorizing the use, 

sale, or lease of property under Bankruptcy Rule 6004(h). 

RESERVATION OF RIGHTS 

56. For the avoidance of doubt, nothing in this Motion is intended to be, nor should it 

be construed as (i) an implication or admission as to the validity or priority of any claim or lien 

against the Debtors, (ii) an impairment or waiver of the Debtors’ or any other party in interest’s 

rights to contest or dispute any such claim or lien, (iii) a promise or requirement to pay any claim, 

(iv) an implication or admission that any particular claim is of a type specified or defined in the 

Motion or any proposed order, or (v) a waiver of the Debtors’ or any other party in interest’s rights 

under the Bankruptcy Code or any other applicable law. 

NOTICE 

57. Notice of this Motion has been provided by delivery to: (i) the Office of the United 

States Trustee for the Northern District of Texas; (ii) the holders of the 30 largest unsecured claims 

against the Debtors (on a consolidated basis); (iii) the administrative agent under the Debtors’ 

prepetition secured credit agreement; (iv) Katten Muchin Rosenman LLP, as counsel to the 

administrative agent under the Debtors’ prepetition secured credit agreement; (v) counsel to the 

buyer under the Debtors’ prepetition asset purchase agreement, King & Spalding LLP, 

1185 Avenue of the Americas, 34th Floor, New York, NY 10036, Attn: Roger Schwartz and Miguel 

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Cadavid; (vi) those persons who have formally appeared in these Chapter 11 Cases and requested 

service pursuant to Bankruptcy Rule 2002; (vii) the Internal Revenue Service; (viii) all other 

applicable government agencies to the extent required by the Bankruptcy Rules or the N.D. Tex. 

L.B.R; and (ix) the DIP Agent and DIP Lender. In light of the nature of the relief requested in this 

Motion, the Debtors submit that no further notice is necessary. 

NO PRIOR REQUEST 

58. No prior motion for the relief requested herein has been made to this Court or any 

other court. 

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PRAYER 

The Debtors respectfully request that the Court enter the Interim Order, in the form attached 

hereto as Exhibit A, and grant them such other and further relief to which the Debtors may be

justly entitled. 

Dated: May 10, 2024 

Dallas, Texas /s/ William L. Wallander 

VINSON & ELKINS LLP 

William L. Wallander (Texas Bar No. 20780750) 

Matthew D. Struble (Texas Bar No. 24102544) 

Kiran Vakamudi (Texas Bar No. 24106540) 

2001 Ross Avenue, Suite 3900 

Dallas, TX 75201 

Tel: 214.220.7700 

Fax: 214.999.7787 

bwallander@velaw.com; mstruble@velaw.com; 

kvakamudi@velaw.com 

- and - 

David S. Meyer (pro hac vice pending) 

Lauren R. Kanzer (pro hac vice pending) 

1114 Avenue of the Americas, 32nd Floor 

New York, NY 10036 

Tel: 212.237.0000 

Fax: 212.237.0100 

dmeyer@velaw.com; lkanzer@velaw.com 

PROPOSED ATTORNEYS FOR THE 

DEBTORS AND DEBTORS IN POSSESSION 

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CERTIFICATE OF SERVICE 

I certify that on May 10, 2024, I caused a copy of the foregoing document to be served by 

the Electronic Case Filing System for the United States Bankruptcy Court for the Northern District 

of Texas. 

 /s/ Matthew D. Struble 

One of Counsel 

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 Proposed Interim Order

EXHIBIT A

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4889-9030-5723 

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

In re: 

KIDKRAFT, INC., et al., 

Debtors.1

§ 

§ 

§ 

§ 

§ 

§ 

Case No. 24-80045-11 

(Chapter 11) 

(Joint Administration Requested) 

Re: Docket No. 

INTERIM ORDER 

PURSUANT TO 11 U.S.C. §§ 105, 361, 362, 

363, 364, AND 507 AND FED. R. BANKR. P. 2002, 4001 

AND 9014 (I) AUTHORIZING DEBTORS AND DEBTORS 

IN POSSESSION TO OBTAIN POSTPETITION SENIOR 

SECURED SUPERPRIORITY FINANCING, (II) AUTHORIZING 

THE DEBTORS TO USE CASH COLLATERAL, (III) GRANTING 

LIENS AND PROVIDING SUPERPRIORITY ADMINISTRATIVE 

EXPENSE STATUS, (IV) GRANTING ADEQUATE PROTECTION TO THE 

PREPETITION SECURED PARTIES, (V) MODIFYING THE AUTOMATIC STAY, 

(VI) SCHEDULING A FINAL HEARING, AND (VII) GRANTING RELATED RELIEF 

1

 The Debtors in these chapter 11 cases and the last four digits of their respective federal tax identification numbers 

or Canadian business numbers, as applicable, are: KidKraft, Inc. (3303), KidKraft Europe, LLC (3174), KidKraft 

Intermediate Holdings, LLC (8800), KidKraft International Holdings, Inc. (2933), KidKraft Partners, LLC (3268), 

KidKraft International IP Holdings, LLC (1841), Solowave Design Corp. (9294), Solowave Design Holdings 

Limited (0206), Solowave Design Inc. (3073), Solowave Design LP (7201), and Solowave International Inc. 

(4302). The location of the Debtors’ U.S. corporate headquarters and the Debtors’ service address is: 4630 Olin 

Road, Dallas, TX 75244. 

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Upon the motion (the “Motion”) of the above-captioned debtors and debtors-in-possession 

(collectively, the “Debtors”) pursuant to §§ 105, 361, 362, 363, 364(c)(1), 364(c)(2), 364(c)(3), 

and 364(d) of title 11 of the United States Code (the “Bankruptcy Code”), and Rules 2002, 4001, 

and 9014 of the Federal Rules of Bankruptcy Procedure (as amended, the “Bankruptcy Rules”), 

and the General Order Regarding Procedures for Complex Cases (the “Complex Case 

Procedures”) made applicable by Rules 4001-1 and 9013-1 of the Local Bankruptcy Rules 

(the “N.D. Tex. L.B.R.”) for the United States Bankruptcy Court for the Northern District of Texas 

(the “Court”) inter alia seeking, among other things: 

(1) authorization for KidKraft, Inc. (“KidKraft” or “Borrower”) to obtain, and for 

KidKraft Intermediate Holdings, LLC (“HoldCo”, and together with the other Guarantors listed in 

Schedule 1 of the DIP Term Sheet, the “Guarantors”) to guarantee, unconditionally, on a joint 

and several basis, a senior secured super-priority multi-draw debtor-in-possession term loan credit 

facility (the “DIP Facility”) on the terms and conditions set forth in the Priming Superpriority 

Debtor-In-Possession Financing Term Sheet, dated as of April 25, 2024, attached hereto as 

Exhibit A (as amended, supplemented or otherwise modified from time to time in accordance with 

the terms and conditions set forth herein and including the references to the Prepetition Credit 

Agreement (as defined below) specified therein, the “DIP Term Sheet”),2 by and among the 

Borrower, the Guarantors, GB Funding, LLC, as DIP Agent (“DIP Agent”), and 1903 Partners, 

LLC, as DIP Lender (“DIP Lender,” and, together with the DIP Agent, the “DIP Secured 

Parties”), and the other DIP Documents (as defined below) consisting of: (i) $4.0 million of new 

money loans (the “Interim DIP Commitment”) to be provided following entry of the Interim Order 

2

 Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Motion or the 

DIP Term Sheet, as applicable. 

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by DIP Lender, (ii) $6.5 million of new money loans (“Final DIP Commitment”) to be provided 

following entry of the Final Order by DIP Lender; (iii) $23.3 million of Prepetition Obligations, 

which will be deemed to have been advanced and shall convert into DIP Loans on a dollar-fordollar cashless basis upon entry of the Interim Order (the “Roll-Up Amount”, and together with 

the Interim DIP Commitment and Final DIP Commitment, the “DIP Commitment”), and in 

accordance with this order (the “Interim Order”), secured by perfected senior priority security 

interests in and liens on the DIP Collateral (as defined below) pursuant to §§ 364(c)(2), 364(c)(3), 

and 364(d) of the Bankruptcy Code (subject to the Carve-Out and the Permitted Liens (each as 

defined below)); 

(2) authorization for Borrower and Guarantors to remit all collections, asset proceeds 

and payments to the DIP Secured Parties for application, or deemed application, first to the 

repayment of all DIP Obligations (as defined below) in accordance with the DIP Term Sheet and 

the other DIP Documents until such obligations are fully repaid, and then to the Prepetition Secured 

Parties for application until all Prepetition Obligations (as defined below) are fully repaid; 

(3) authorization for the Debtors to grant superpriority administrative claim status, 

pursuant to § 364(c)(1) of the Bankruptcy Code, to DIP Agent, for the benefit of itself and DIP 

Lender, in respect of all DIP Obligations (subject to the Carve-Out); 

(4) as set forth below, subject to Section 4.1 of this Interim Order, approval of certain 

stipulations by the Debtors as set forth in this Interim Order in connection with the Prepetition 

Credit Agreement; 

(5) authorizing and directing the Debtors to pay the principal, interest, fees, expenses 

and other amounts payable under the DIP Documents as such become due, including, without 

limitation, continuing commitment fees, closing fees, audit fees, appraisal fees, liquidator fees, 

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structuring fees, administrative agent’s fees, the reasonable and documented fees and 

disbursements of DIP Agent’s and DIP Lender’s respective attorneys, advisors, accountants and 

other consultants, all to the extent provided in, and in accordance with, the applicable DIP 

Documents; 

(6) as set forth below, authorization to use Cash Collateral and all other Prepetition 

Collateral and to provide adequate protection to Prepetition Agent and Prepetition Lender (each in 

their respective capacities under the Prepetition Loan Documents (as defined below)), to the extent 

set forth herein; 

(7) effective only upon entry of a Final Order (as defined below), the waiver of the 

Debtors’ right to assert claims to surcharge against the DIP Collateral pursuant to § 506(c) of the 

Bankruptcy Code; 

(8) the modification of the automatic stay imposed by section 362 of the Bankruptcy 

Code to the extent necessary to implement and effectuate the terms and provisions of this Interim 

Order to the extent hereinafter set forth; 

(9) the setting of a final hearing on the Motion (“Final Hearing”) to consider entry of 

a final order (the “Final Order”) authorizing, among other things, the borrowing under the DIP 

Documents on a final basis, as set forth in the Motion and the DIP Term Sheet filed with the Court, 

including the granting to DIP Agent and DIP Lender the senior security interests and liens 

described above and super-priority administrative expense claims (subject to the Carve-Out); and 

(10) related relief. 

The initial hearing on the Motion having been held by the Court on May 13, 2024 

(the “Interim Hearing”), and upon the record made by the Debtors at the Interim Hearing, 

including the Motion, the Declaration of Geoffrey Walker in Support of Chapter 11 Petitions and 

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First Day Pleadings, the Declaration of Ajay Bijoor, Managing Director of Robert W. 

Baird & Co. Incorporated, in Support of (I) the Debtors’ Motion to Obtain Postpetition Debtor in 

Possession Financing and (II) the Sale Process, the Declaration of Carl Moore, Manager of 

SierraConstellation Partners, LLC in Support of the Debtors’ Motion to Obtain Postpetition 

Debtor in Possession Financing, and the filings and pleadings in the above-captioned chapter 11 

cases (the “Chapter 11 Cases”), the Court having found that the relief requested in the Motion is 

in the best interests of Debtors, their estates, their creditors and other parties in interest, and 

represents a sound exercise of the Debtors’ business judgment and is essential for the continued 

operation of the Debtors’ businesses; it appearing to the Court that granting the interim relief 

requested in the Motion is necessary to avoid immediate and irreparable harm to the Debtors and 

their estates pending the Final Hearing; notice of the Motion, the relief requested therein, and the 

Interim Hearing (the “Notice”) was appropriate under the circumstances; the Notice having been 

served by the Debtors in accordance with Bankruptcy Rules 4001 and 9014 and the Local Rules 

on (i) the administrative agent under the Prepetition Credit Agreement (the “Prepetition Agent”), 

(ii) Katten Muchin Rosenman LLP, as counsel to the Prepetition Agent, (iii) the Office of the U.S. 

Trustee for the Northern District of Texas (the “U.S. Trustee”), (iv) King & Spalding LLP, as 

counsel to the buyer under the Debtors’ prepetition asset purchase agreement (the “APA”), 

(v) the holders of the thirty (30) largest unsecured claims, on a consolidated basis, against the 

Estates (the “30 Largest Unsecured Creditors”), (vi) the Internal Revenue Service and applicable 

state taxing authorities; (vii) any party that has asserted or may assert a lien in the Debtors’ assets, 

(viii) the office of attorneys general for the states in which the Debtors operate; (ix) the United 

States Attorney’s Office for the Northern District of Texas, (x) all parties who have filed a notice 

of appearance and request for service of papers pursuant to Bankruptcy Rule 2002, (xi) the United 

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States Securities and Exchange Commission, (xii) all other applicable government agencies to the 

extent required by the Bankruptcy Rules or the N.D. Tex. L.B.R, and (xiii) the DIP Lender 

(collectively, the “Notice Parties”); and the opportunity for a hearing on the Motion was 

appropriate and no other notice need be provided; and after due deliberation sufficient cause 

appearing therefor; 

THE COURT HEREBY MAKES THE FOLLOWING FINDINGS OF FACT AND 

CONCLUSIONS OF LAW3: 

A. Petition. On May 10, 2024 (the “Petition Date”), each Debtor filed a voluntary 

petition (each, a “Petition”) under chapter 11 of the Bankruptcy Code. The Debtors continue to 

operate their businesses and manage their properties as debtors-in-possession pursuant to 

§§ 1107(a) and 1108 of the Bankruptcy Code. 

B. Disposition. The Motion is hereby granted in accordance with the terms of this 

Interim Order. Any objections to the Motion with respect to the entry of the Interim Order that 

have not been withdrawn, waived, resolved, or settled are hereby denied and overruled. 

C. Jurisdiction and Venue. The Court has jurisdiction over the matters raised in the 

Motion pursuant to 28 U.S.C. §§ 1334. The Motion is a “core” proceeding as defined in 28 U.S.C. 

§ 157(b), and the Court may enter a final order consistent with Article III of the United States 

Constitution. Venue of this proceeding and the Motion in this district is proper pursuant to 

28 U.S.C. §§ 1408 and 1409. 

3

 The findings and conclusions set forth herein constitute the Court’s findings of fact and conclusions of law 

pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. To 

the extent that any of the following findings of fact constitute conclusions of law, they are adopted as such. To 

the extent any of the following conclusions of law constitute findings of fact, they are adopted as such. 

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D. Committee Formation. As of the date hereof, the U.S. Trustee has not yet appointed 

an official committee of unsecured creditors in these Chapter 11 Cases pursuant to section 1102 

of the Bankruptcy Code (a “Committee”). The statutory and legal predicates for the relief sought 

herein include sections 105, 361, 362, 363, 364 and 507 of the Bankruptcy Code and Bankruptcy 

Rules 2002, 4001, 9013 and 9014 and the applicable provisions of the Local Rules. 

E. Notice. Proper, timely, adequate, and sufficient notice of the Motion has been 

provided in accordance with the Bankruptcy Code, the Bankruptcy Rules, and the Local Rules, 

and no other or further notice of the Motion with respect to the relief requested at the Interim 

Hearing or the entry of this Interim Order shall be required. 

F. Debtors’ Acknowledgments, Stipulations, and Agreements. After consultation 

with their attorneys and financial advisors, and without prejudice to the rights of any Committee 

appointed in these Chapter 11 Cases or other parties-in-interest as and, subject to Section 4.1 of 

this Interim Order, the Debtors, on their behalf and on behalf of their estates, admit, stipulate, 

acknowledge and agree that: 

(a) Prepetition Stipulations 

(i) Prepetition Loan Documents. Prior to the commencement of the 

Chapter 11 Cases, Prepetition Agent and Prepetition Lender made loans, advances and provided 

other financial accommodations to Borrower and KidKraft Netherlands B.V., a private company 

with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under 

the laws of The Netherlands (the “Dutch Borrower”), jointly and severally with respect to the 

Priority Revolving Loans (as defined in the Prepetition Credit Agreement), Guarantors and certain 

of their non-Debtor affiliates (the Dutch Borrower, together with the other non-Debtor affiliates 

party to the Prepetition Credit Agreement, “Non-Debtor Loan Parties”), pursuant to the terms and 

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conditions set forth in (1) that certain Amended and Restated First Lien Credit Agreement dated 

as of April 3, 2020 (as amended, supplemented, or otherwise modified prior to the Petition Date, 

the “Prepetition Credit Agreement”); (2) that certain Amended and Restated First Lien Security 

Agreement as of dated April 3, 2020 by and among Borrower, the Guarantors, and the Non-Debtor 

Loan Parties (the Non-Debtor Loan Parties, together with the Borrower and the Guarantors, the 

“Grantors”) and Prepetition Agent, as Secured Party (as amended, supplemented, or otherwise 

modified prior to the Petition Date, including the Security Agreement Supplement, dated January 

30, 2024, the “Prepetition Security Agreement”); and (3) all other agreements, documents and 

instruments executed and/or delivered with, to, or in favor of Prepetition Agent or Prepetition 

Lender in connection with the Prepetition Credit Agreement or the Prepetition Security 

Agreement, including, without limitation, all security agreements, notes, guarantees, mortgages, 

Uniform Commercial Code financing statements and all other related agreements, documents and 

instruments executed and/or delivered in connection therewith or related thereto (all of the 

foregoing, together with the Prepetition Credit Agreement and the Prepetition Security Agreement, 

as all of the same have heretofore been amended, supplemented, modified, extended, renewed, 

restated and/or replaced at any time prior to the Petition Date, collectively, the “Prepetition Loan 

Documents”). 

(ii) Prepetition Obligations. As of the Petition Date, the Borrower, Guarantors 

and Non-Debtor Loan Parties were indebted, jointly and severally, to Prepetition Agent and 

Prepetition Lender under the Prepetition Loan Documents in respect of outstanding Loans 

(as defined in the Prepetition Credit Agreement) in an aggregate principal amount of not less than 

$144.9 million, plus all other Obligations (as defined in the Prepetition Credit Agreement), plus 

interest accrued and accruing thereon, together with all costs, fees, expenses (including attorneys’ 

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fees and legal expenses) and other charges accrued, accruing or chargeable with respect thereto 

(collectively, the “Prepetition Obligations”). The Prepetition Obligations constitute allowed, 

legal, valid, binding, enforceable and non-avoidable obligations of Borrower, Guarantors, and the 

Non-Debtor Loan Parties and are not subject to any offset, defense, counterclaim, avoidance, 

recharacterization or subordination pursuant to the Bankruptcy Code or any other applicable law, 

and the Debtors do not possess, shall not assert, hereby forever release, and are forever barred from 

bringing any claim, cause of action, counterclaim, setoff or defense of any kind, nature or 

description, in any such case, arising out of, connected with, or relating to any and all acts, 

omissions or events occurring prior to the entry of this Interim Order, which would in any way 

affect the validity, enforceability and non-avoidability of any of the Prepetition Obligations or 

liens and security interest securing the same described in clause (F)(a)(iii) below, including, 

without limitation, avoidance, disallowance, disgorgement, recharacterization, or subordination 

(equitable or otherwise) pursuant to the Bankruptcy Code or applicable non- bankruptcy law. The 

Debtors and their estates (a) have no claims, objections, challenges, causes of action, and/or choses 

in action, including without limitation, avoidance claims under Chapter 5 of the Bankruptcy Code 

or applicable state law equivalents or actions for recovery or disgorgement, against Prepetition 

Agent or Prepetition Lender or any of their respective affiliates, agents, attorneys, advisors, 

professionals, officers, directors and employees arising out of, based upon or related to the 

Prepetition Loan Documents or Prepetition Obligations; and (b) have waived, discharged, and 

released any right to challenge any of the Prepetition Obligations, including the priority of the 

Prepetition Obligations, and the validity, extent, and priority of the liens securing the Prepetition 

Obligations. 

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(iii) Prepetition Collateral. As of the Petition Date, the Prepetition Obligations 

were fully secured pursuant to the Prepetition Loan Documents by valid, perfected, enforceable 

and non-avoidable first-priority security interests and liens (except, in the case of perfection, for 

(A) Excluded Accounts and (B) commercial tort claims, letter of credit rights, certificate of title 

vehicles, and other assets, in each case of this clause (B), to the extent expressly excluded from 

the requirement to perfect liens thereon pursuant to the Prepetition Loan Documents) 

(the “Prepetition Liens”) granted by Borrower, Guarantors, and the Non-Debtor Loan Parties for 

fair consideration and reasonably equivalent value to DIP Agent, for the benefit of itself and DIP 

Lender under the Prepetition Loan Documents, in and upon all of the of the Debtors’ and 

Non-Debtor Loan Parties’ assets and property other than Excluded Assets, Excluded Receivables, 

and Consumer Goods (as each such term is defined in the Prepetition Credit Agreement) 

(collectively, the “Prepetition Collateral”), including all cash of the Debtors, wherever located, 

and all cash equivalents, including any cash in deposit accounts of the Debtors (other than 

Excluded Accounts), in each case, whether as Prepetition Collateral or which represents income, 

proceeds, products, rents or profits of non-cash Prepetition Collateral (collectively, the “Cash 

Collateral”), subject only to the liens permitted under Section 7.01 of the Prepetition Credit 

Agreement to the extent that such security interests, liens or encumbrances are (A) valid, perfected 

and non-avoidable security interests, liens or encumbrances securing valid, binding and 

unavoidable debt permitted under the Prepetition Loan Documents, and (B) senior to, have not 

been, and are not subject to being subordinated to the Prepetition Liens or otherwise avoided, and, 

in each instance, only for so long as and to the extent that such encumbrances are and remain senior 

and outstanding (hereinafter referred to as the “Prepetition Permitted Liens”). The Debtors do 

not possess and will not assert any claim, counterclaim, setoff or defense of any kind, nature or 

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description, whether arising at law or in equity, including any recharacterization, subordination, 

avoidance or other claim arising under or pursuant to section 105 or chapter 5 (including, without 

limitation, sections 510, 544, 547, 548, 549 or 550) of the Bankruptcy Code or under any other 

similar provisions of applicable state or federal law, that would in any way affect the validity, 

enforceability and non-avoidability of any of Prepetition Agent’s and Prepetition Lender’s liens, 

claims or security interests in the Prepetition Collateral. 

(iv) Default by the Debtors. The Debtors acknowledge and stipulate that one or 

more Events of Default (as defined in the Prepetition Credit Agreement) have occurred and are 

continuing as of the date hereof. 

(v) Proof of Claim. The acknowledgment by the Debtors of the Prepetition 

Obligations and the liens, rights, priorities and protections granted to or in favor of Prepetition 

Agent and Prepetition Lender in respect of the Prepetition Collateral as set forth herein and in the 

Prepetition Loan Documents shall be deemed a timely filed proof of claim on behalf of Prepetition 

Agent and Prepetition Lender in these Chapter 11 Cases. 

(vi) Indemnity. The DIP Agent, DIP Lender, and Prepetition Secured Parties 

have acted in good faith, without negligence or violation of public policy or law, in respect of all 

actions taken by them in connection with or related in any way to negotiating, implementing, or 

obtaining the requisite approvals of the DIP Facility and the use of Cash Collateral, including in 

respect of granting DIP Liens, any challenges or objections to the DIP Facility or the use of Cash 

Collateral, and all documents related to any and all transactions contemplated by the foregoing. 

Accordingly, each of the Prepetition Secured Parties and the DIP Secured Parties shall be and 

hereby are indemnified and held harmless by the Debtors in respect of any claim or liability 

incurred in respect thereof of in any way related thereto, provided that no such parties will be 

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indemnified for any cost, expense, or liability to the extent determined in a final, non-appealable 

judgment of a court of competent jurisdiction to have resulted primarily from such parties’ bad 

faith, gross negligence, fraud, or willful misconduct. No exception or defense exists in contract, 

law, or equity to the Debtors’ obligation under this paragraph to indemnify and/or hold harmless 

each of the Prepetition Secured Parties and the DIP Secured Parties. 

(vii) Release. Each Debtor, on behalf of itself and its successors and assigns, 

and their respective agents, officers, directors, employees, attorneys, professionals, predecessors, 

successors, and assigns (collectively, the “Releasors”), hereby forever, unconditionally, 

permanently, and irrevocably release, discharge, and acquit each of the Prepetition Agent and 

Prepetition Lender and each of their respective successors and assigns, and their present and former 

shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, 

employees and other representatives (collectively, the “Prepetition Releasees”) of and from any 

and all claims, demands, liabilities, damages, expenses, responsibilities, disputes, remedies, causes 

of action, indebtedness and obligations, of every kind, nature and description, whether arising in 

law or otherwise, and whether known or unknown, matured, or contingent that any of the Releasors 

had, have or hereafter can or may have against any Prepetition Releasees as of the date hereof, in 

respect of events that occurred on or prior to the date hereof with respect to the Debtors, the 

Prepetition Obligations, the Prepetition Loan Documents, the DIP Obligations, the RSA, the Plan, 

the Backyard Sale, the DIP Documents and any DIP Loans or other financial accommodations 

made by DIP Agent and/or DIP Lender to the Debtors pursuant to the Prepetition Loan Documents 

or the DIP Documents including, without limitation, (a) any so-called “lender liability” or 

equitable subordination claims or defenses, (b) any and all “claims” (as defined in the Bankruptcy 

Code) and causes of action arising under the Bankruptcy Code, and (c) any and all offsets, 

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defenses, claims, counterclaims, set off rights, objections, challenges, causes of action, and/or 

choses in action of any kind or nature whatsoever, whether arising at law or in equity, including 

any recharacterization, recoupment, subordination, avoidance, or other claim or cause of action 

arising under or pursuant to section 105 or chapter 5 of the Bankruptcy Code or under any other 

similar provisions of applicable state, federal, or foreign law, including, without limitation, any 

right to assert any disgorgement or recovery, in each case, with respect to the extent, amount, 

validity, enforceability, priority, security, and perfection of any of the Prepetition Obligations, the 

Prepetition Loan Documents, or the Prepetition Liens. 

(viii) Non-Debtor Loan Parties. The Dutch Borrower and the Borrower are 

jointly and severally liable with respect to the Priority Revolving Loans (as defined in the 

Prepetition Credit Agreement) and each of the other Non-Debtor Loan Parties and the Debtors are 

jointly and severally liable with respect to the Prepetition Obligations. 

G. Findings Regarding the DIP Financing. 

(i) DIP Financing. The Debtors have requested from the DIP Secured Parties, 

and the DIP Secured Parties are willing, to extend certain loans, advances and other financial 

accommodations on the terms and conditions set forth in this Interim Order, the DIP Term Sheet 

and the other DIP Documents, respectively. 

(ii) Need for DIP Financing. The Debtors do not have sufficient available 

sources of working capital, including Cash Collateral, to operate their businesses in the ordinary 

course of business without the financing requested in the Motion. The Debtors’ ability to pay their 

vendors, suppliers, and employees, and to otherwise fund their operations is essential to the 

preservation and maintenance of the going concern value of each Debtor and consummation of the 

Backyard Sale and the Plan. Accordingly, the Debtors have an immediate need to enter into the 

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DIP Facility in order to, among other things, permit the orderly continuation of the operation of 

their businesses, minimize the disruption of their business operations, and preserve and maximize 

the value of the assets of the Debtors’ bankruptcy estates (as defined under § 541 of the Bankruptcy 

Code, the “Estates”) in order to maximize the value of the Estates. 

(iii) No Credit Available on More Favorable Terms. The Debtors are unable to 

procure financing in the form of unsecured credit allowable as an administrative expense under 

§§ 364(a), 364(b), or 503(b)(1) of the Bankruptcy Code or in exchange for the grant of a 

superpriority administrative expense, junior liens on encumbered property of the Estates, or liens 

on property of the Estates not subject to a lien pursuant to § 364(c)(1), 364(c)(2) or 364(c)(3) 

of the Bankruptcy Code. The Debtors have been unable to procure the necessary financing on 

terms more favorable, taken as a whole, than the DIP Facility. In light of the foregoing, and 

considering all alternatives, the Debtors have reasonably and properly concluded, in the exercise 

of their sound business judgment, the DIP Facility represents the best financing available to the 

Debtors at this time, and are in the best interests of the Debtors, their respective Estates, and all of 

their stakeholders. 

(iv) Initial Budget. The Debtors have prepared and delivered to DIP Agent and 

DIP Lender an initial nine-week budget (the “Initial Budget” and each subsequent approved 

budget pursuant to section 1.8 hereof, an “Approved Budget”) reflecting the Debtors’ anticipated 

cash receipts and anticipated disbursements for each calendar week for the covered periods, 

a summary of which is attached to the DIP Term Sheet. The Initial Budget was prepared by the

Debtors, with the assistance of their professional advisors and management, and the Debtors 

represent that the Initial Budget is achievable in accordance with the terms of the DIP Documents 

and this Interim Order. DIP Agent and DIP Lender are relying upon the Debtors’ compliance with 

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the Initial Budget in accordance with this Interim Order in determining to enter into the DIP 

Facility. 

(v) Business Judgment and Good Faith Pursuant to § 364(e). The terms of the 

DIP Documents and this Interim Order are fair, just and reasonable under the circumstances, 

ordinary and appropriate for secured financing to debtors-in-possession, reflect the Debtors’ 

exercise of their prudent business judgment consistent with their fiduciary duties, and supported 

by reasonably equivalent value and fair consideration. The terms and conditions of the DIP 

Documents and this Interim Order have been negotiated in good faith and at arms’ length by and 

among the Debtors and DIP Agent, with all parties being represented by competent counsel. Any 

credit extended under the terms of this Interim Order shall be deemed to have been extended in 

“good faith” by DIP Agent and DIP Lender, as that term is used in section 364(e) of the Bankruptcy 

Code and the DIP Obligations, the DIP Liens, and the DIP Superpriority Claim are entitled to the 

full protection of section 364(e) of the Bankruptcy Code in the event that this Interim Order or any 

provision hereof is vacated, reversed, or modified on appeal or otherwise. 

(vi) Credit Bid Rights. To the fullest extent permitted by section 363(k) of the 

Bankruptcy Code, in connection with any sale or other disposition of the DIP Collateral or 

Prepetition Collateral (as applicable) including any sales occurring under or pursuant to section 

363 of the Bankruptcy Code, a plan of reorganization or plan of liquidation under section 1129 of 

the Bankruptcy Code, or a sale or disposition by a chapter 7 trustee for any of the Debtors under 

section 725 of the Bankruptcy Code (any of the foregoing sales or dispositions, a “Sale”), 

(a) DIP Agent (on behalf of their respective DIP Secured Parties) shall have the right to credit bid, 

in accordance with the DIP Documents, up to the full amount of the DIP Obligations, 

(b) the Prepetition Agent (on behalf of and at the written direction of the Prepetition Secured 

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Parties) shall have the right to credit bid, in accordance with the Prepetition Loan Documents, up 

to the full amount of the Prepetition Obligations, (c) DIP Agent and Prepetition Agent shall have 

the absolute right (at the direction of their respective Secured Parties) to assign, transfer, sell or 

otherwise dispose of its rights to credit bid in connection with the assignment, transfer, sale, or 

disposition of the corresponding DIP Obligations, except as may be set forth in the DIP 

Documents, and Prepetition Obligations, respectively, and (d) each of the Debtors hereby 

acknowledge and agree that they shall not object, or support any objection, to or limit, or support 

any limitation on, any other such DIP Secured Parties’ or Prepetition Secured Parties’ rights to 

credit bid, as applicable, up to the full amount of the DIP Obligations and Prepetition Obligations, 

respectively. 

(vii) Sections 506(c) and 552(b) Waivers. As a material inducement to 

(a) the DIP Secured Parties’ agreement to provide the DIP Facility and the Prepetition Secured 

Parties’ consent to the use of Cash Collateral in accordance with the Approved Budget, (b) the DIP 

Secured Parties’ agreement to subordinate the DIP Liens and the DIP Superpriority Claim to the 

Carve-Out, and (c) the Prepetition Secured Parties’ agreement to subordinate the Prepetition Liens, 

Prepetition Replacement Lien and the Prepetition Adequate Protection Superpriority Claim to the 

Carve-Out, the DIP Liens, and the DIP Superpriority Claim, subject to entry of the Final Order 

(retroactive to the Petition Date), each of the DIP Secured Parties and the Prepetition Secured 

Parties are entitled to receive (1) a waiver of any equities of the case exceptions or claim sunder 

section 552(b) of the Bankruptcy Code and a waiver of unjust enrichment and similar equitable 

relief as set forth below, and (2) a waiver of the provisions of section 506(c) of the Bankruptcy 

Code. 

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(viii) Good Cause. The relief requested in the Motion is necessary, essential and 

appropriate, and is in the best interest of and will benefit the Debtors, their creditors and their 

Estates, as its implementation will, among other things, provide the Debtors with the necessary 

liquidity to (1) minimize disruption to the Debtors’ businesses and ongoing operations in 

anticipation of the consummation of the Backyard Sale and Plan, (2) preserve and maximize the 

value of the Estates for the benefit of all the Debtors’ creditors, and (3) avoid immediate and 

irreparable harm to the Debtors, their creditors, their businesses, their employees, and their assets. 

(ix) Adequate Protection. The Prepetition Secured Parties are entitled, pursuant 

to sections 361, 362, 363, and 364 of the Bankruptcy Code, to receive adequate protection to the 

extent of any Diminution in Value of their respective interests in the Prepetition Collateral 

(including Cash Collateral), to the extent set forth in the Interim Order. 

(x) Immediate Entry. Sufficient cause exists for immediate entry of this Interim 

Order pursuant to Bankruptcy Rule 4001(c)(2). No party appearing in the Chapter 11 Cases has 

filed or made an objection to the relief sought in the Motion or the entry of this Interim Order, or 

any objections that were made (to the extent such objections have not been withdrawn, waived, 

resolved, or settled) are hereby overruled. Based upon the foregoing, and after due consideration 

and good cause appearing therefor. 

IT IS HEREBY ORDERED THAT: 

Section 1. Authorization and Conditions to Financing. 

1.1 Motion Granted. The Motion is granted in accordance with Bankruptcy 

Rule 4001(c)(2) to the extent provided in this Interim Order. Except as otherwise expressly 

provided in this Interim Order, any objection to the entry of this Interim Order that has not been 

withdrawn, waived, resolved or settled, is hereby denied and overruled on the merits. 

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1.2 Authorization to Borrow, Guaranty, and Use Loan Proceeds. Borrower is 

hereby authorized and empowered to immediately borrow and obtain DIP Loans and to incur 

indebtedness and other Obligations (as defined in the DIP Term Sheet) (collectively referred to as 

the “DIP Obligations”), and the Guarantors are hereby authorized to guarantee such DIP 

Obligations, all pursuant to the terms and conditions of this Interim Order, the DIP Term Sheet, 

and the other DIP Documents, during the period commencing on the date of entry of this Interim 

Order through and including the entry of the Final Order, up to an aggregate amount equal to the 

Interim DIP Commitment plus the Roll-Up Amount. Subject to the terms and conditions contained 

in this Interim Order and the DIP Documents, the Debtors shall use the proceeds of the DIP Loans 

and other credit and financial accommodations provided by DIP Agent and DIP Lender under the 

DIP Term Sheet and the other DIP Documents solely for payment of expenses set forth in the 

Approved Budget and all interest, costs, fees, amounts, and other obligations owing to the DIP 

Secured Parties in accordance with the terms and conditions of the DIP Documents and this Interim 

Order. 

1.3 Financing Documents 

(a) Authorization. The Debtors are hereby authorized to enter into, 

execute, deliver, perform, and comply with all of the terms, conditions and covenants of the DIP 

Term Sheet and the other DIP Documents. Upon execution and delivery of the DIP Term Sheet 

and the other DIP Documents, such agreements and documents shall constitute valid and binding 

obligations of the Debtors, enforceable against each Debtor party thereto in accordance with the 

terms of such agreements, documents and this Interim Order. No obligation, payment, transfer or 

grant of security arising under the DIP Term Sheet, the other DIP Documents or this Interim Order 

shall be stayed, restrained, voidable, or recoverable under the Bankruptcy Code or under any 

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applicable law (including, without limitation, under § 502(d) of the Bankruptcy Code), or be 

subject to any defense, reduction, setoff, recoupment or counterclaim. The Debtors are hereby 

authorized and directed to pay, in accordance with this Interim Order, the principal, interest, fees, 

expenses and other amounts described in the DIP Documents as such become due and without 

need to obtain further Court approval, including, without limitation, monitoring fees, agency fees, 

alternate transaction fees, closing fees, unused facility fees, continuing commitment fees, backstop 

fees, exit fees, servicing fees, yield maintenance premiums, audit fees, appraisal fees, liquidator 

fees, structuring fees, administrative agent’s fees, the reasonable and documented fees and 

disbursements of the DIP Secured Parties’ attorneys, advisors, accountants, and other consultants, 

whether or not such fees arose before or after the Petition Date, and whether or not the transactions 

contemplated hereby are consummated, to implement all applicable reserves and to take any other 

actions that may be necessary or appropriate, all to the extent provided in this Interim Order or the 

DIP Documents. Upon execution and delivery, the DIP Term Sheet and other DIP Documents 

shall represent valid and binding obligations of the Debtors, enforceable against each of the 

Debtors and their Estates in accordance with their terms. 

(b) Approval; Evidence of Borrowing Arrangements. All terms, 

conditions and covenants set forth in the DIP Documents (including, without limitation, the DIP 

Term Sheet) are approved to the extent necessary to implement the terms and provisions of this 

Interim Order. All such terms, conditions and covenants shall be sufficient and conclusive 

evidence of (a) the borrowing arrangements by and among the Debtors, DIP Agent and DIP 

Lender, and (b) each Debtor’s assumption and adoption of all of the terms, conditions, and 

covenants of the DIP Term Sheet and the other DIP Documents for all purposes, including, without 

limitation, to the extent applicable, the payment of all DIP Obligations arising thereunder, 

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including, without limitation, all principal, interest, fees and other expenses, including, without 

limitation, all of DIP Agent’s and DIP Lender’s consultant fees, professional fees, attorney fees 

and legal expenses, as more fully set forth in the DIP Documents. 

(c) Amendment. Subject to the terms and conditions of the DIP Term 

Sheet and the other DIP Documents, Debtors and DIP Agent may amend, modify, supplement or 

waive any provision of the DIP Documents (a “DIP Amendment”) without further approval or 

order of the Court, so long as (a) such DIP Amendment is not materially burdensome on the 

Debtors or their Estates, and is undertaken in good faith by DIP Agent, DIP Lender and the 

Debtors; (b) the Debtors provide prior written notice of the DIP Amendment (the “DIP 

Amendment Notice”) to the U.S. Trustee and counsel to any Committee, or in the event no such 

Committee is appointed at the time of such DIP Amendment, the 30 Largest Unsecured Creditors, 

and (c) the Debtors file the DIP Amendment Notice with the Court; provided, however, that neither 

consent of the parities notified pursuant to section (b) hereof nor approval of the Court will be 

necessary to effectuate any such amendment, modification or supplement. Any material DIP 

Amendment to the DIP Documents must be approved by the Court to be effective. 

1.4 Payment of Prepetition Debt. The Debtors are authorized to repay all 

Prepetition Obligations in accordance with the DIP Term Sheet, the other DIP Documents and this 

Interim Order, including, without limitation, Sections 1.5 and 1.6 of this Interim Order. 

1.5 Payments and Application of Payments & DIP Collateral Proceeds; RollUp. The Debtors are authorized and directed to make all payments and transfers of Estate property 

to DIP Agent as provided for, permitted and/or required under the DIP Term Sheet and the other 

DIP Documents, which payments and transfers shall not be avoidable or recoverable from DIP 

Agent or DIP Lender under §§ 547, 548, 550, 553 or any other section of the Bankruptcy Code, or 

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by reason of any other claim, charge, assessment, or other liability, whether by application of the 

Bankruptcy Code, other law or otherwise. All proceeds of the DIP Collateral (as defined herein) 

received by DIP Agent or DIP Lender, and any other amounts or payments received by DIP Agent 

or DIP Lender in respect of the DIP Obligations, may be applied or deemed to be applied by DIP 

Agent, in its discretion, first, to the indefeasible repayment of the DIP Obligations, and then to the 

indefeasible repayment in full of the Prepetition Obligations, all in accordance with the DIP Term 

Sheet, the other DIP Documents and this Interim Order. Without limiting the generality of the 

foregoing, the Debtors are authorized without further order of the Court to pay or reimburse DIP 

Agent and DIP Lender for future costs and expenses, including, without limitation, all professional 

fees, consultant fees and legal fees and expenses paid or incurred by DIP Agent or DIP Lender in 

connection with the financing transactions as provided in this Interim Order and the DIP 

Documents, all of which shall be and are included as part of the principal amount of the DIP 

Obligations and secured by the DIP Collateral. 

1.6 Continuation of Prepetition Procedures. Except to the extent expressly set 

forth in the DIP Documents, all prepetition practices and procedures for the payment and collection 

of proceeds of the Prepetition Collateral (as defined herein), the turnover of cash, the delivery of 

property to Prepetition Agent and Prepetition Lender, and any blocked depository bank account 

arrangements, are hereby approved and shall continue without interruption after the 

commencement of the Chapter 11 Cases. 

1.7 Indemnification. The Debtors are authorized to indemnify and hold 

harmless each of the Prepetition Secured Parties and DIP Secured Parties, each of their respective 

successors, assigns, affiliates, parents, subsidiaries, partners, controlling persons, representatives, 

agents, attorneys, advisors, financial advisors, consultants, professionals, officers, directors, 

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members, managers, shareholders and employees, past, present, and future, and their respective 

heirs, predecessors, successors and assigns in accordance with, and subject to the terms of, the DIP 

Documents, which indemnification is hereby authorized and approved. 

1.8 Approved Budget; Permitted Variances; Debtor Professional Reports. 

(a) The Debtors shall use Cash Collateral and the proceeds of the DIP Facility 

solely in accordance with the Approved Budget and the DIP Documents. Commencing on the 

Monday of the first full calendar week after the Petition Date at 5:00 p.m. (Central Time) and 

continuing on the two (2)-week anniversary thereafter (or such other times as the Debtors may 

elect with the consent of DIP Lender and Backyard Products, LLP (the “Purchaser”), the Debtors 

shall deliver to DIP Agent an updated budget with the form and level of detail set forth in the Initial 

Budget, and shall include, weekly basis cash revenues, receipts, expenses, professional fees and 

other disbursements (including, without limitation, any payments with respect to real property 

leases), net cash flows, inventory receipts and other items on a line item basis (including all 

necessary and required expenses that the Debtors expect to incur and anticipated uses of proceeds 

of draws under the DIP Facilities). If such budget is in form and substance satisfactory to DIP 

Agent in its sole discretion and consented to by the Purchaser (such consent not to be unreasonably 

withheld, conditioned, or delayed, other than line items of the budget pertaining to the 

Reimbursement Amounts (as defined in the APA) or which impact the Purchase Price (as defined 

in the APA), for which such consent shall be in the discretion of the Purchaser), it shall constitute 

the “Approved Budget” for purposes of this Interim Order. Any amendments, supplements or 

modifications to the Approved Budget shall be subject to the prior written approval of DIP Lender 

in its sole discretion and the prior written consent of the Purchaser (such consent not to be 

unreasonably withheld, conditioned, or delayed, other than line items of the budget pertaining to 

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the Reimbursement Amounts or which impact the Purchase Price, for which such consent shall be 

in the discretion of the Purchaser), prior to the implementation thereof. Notwithstanding anything 

to the contrary herein, Purchaser shall not have any consent rights with respect to the Approved 

Budget following any breach by Purchaser of the APA or termination of the APA. 

(b) Commencing on the Wednesday of the first full calendar week after the 

Petition Date at 5:00 p.m. (Central Time), and on a weekly basis thereafter (or at such other times 

as the Debtors may elect with the consent of DIP Lender) the Debtors shall deliver to DIP Lender 

a variance report in form and substance reasonably acceptable to DIP Lender (an “Approved 

Variance Report”) showing comparisons of actual results for each line item against such line item 

in the Approved Budget. Thereafter, the Debtors shall deliver to DIP Lender, an Approved 

Variance Report on a weekly basis for (a) the preceding week, and (b) the trailing four (4) week 

period (or, if fewer than four (4) weeks have lapsed since the Petition Date, then for the trailing 

one, two or three week period, as applicable). Any amendments, supplements or modifications to 

an Approved Variance Report shall be subject to the prior written approval of DIP Lender in its 

sole discretion. 

(c) Each Approved Variance Report shall indicate whether there are any 

adverse variances that exceed any of the Permitted Variances. “Permitted Variances” shall mean 

variances: (a) up to 15% of the aggregate for all cash disbursements line-items in the Approved 

Budget (other than fees and expenses of counsel to the DIP Secured Parties and Professional 

Persons), (b) less than 20% of the aggregate for all cash receipts in the Approved Budget, and (c) 

up to 15% of all fees and expenses incurred on a per-Professional Person basis (the “Professional 

Fee Variance”), in each case calculated weekly on a rolling four (4) week basis commencing as of 

the Petition Date, with the first such testing of (a) and (b) to begin three (3) weeks from the Petition 

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Date, and the Professional Fee Variance testing set forth in (c) shall be performed weekly beginning 

the week following the Petition Date and not on a rolling four (4) week basis. 

(d) If any Professional Person exceeds the Professional Fee Variance, such 

Professional Person will make a representative available to meet and confer with DIP Lender as 

soon as practicable and no later than two (2) Business Days after delivery of such Approved 

Variance Report, to discuss a good faith modification to the Approved Budget (the “Meet and 

Confer”). If DIP Lender and such Professional Person cannot mutually agree on a modification 

following the Meet and Confer, DIP Lender may, in its sole discretion, declare an Event of Default, 

consistent with the provisions herein.

(e) Commencing on the Monday of the first full calendar week after the Petition 

Date and continuing weekly thereafter, each Debtor Professional shall submit a report of the prior 

week’s accrued fees and expenses to the DIP Agent (the “Debtor Professional Report”). The DIP 

Agent shall review the Debtor Professional Reports, may test the accrued fees and expenses in the 

Debtor Professional Report against the Professional Fee Variance, and must submit a written 

objection (if any) to the applicable Debtor Professional no later than two (2) Business Days 

following delivery of the Debtor Professional Report (the “Review Period”). If the DIP Agent 

does not submit a written objection at the close of the Review Period, the Debtors shall fund the 

full amount of accrued fees and expenses in such Debtor Professional Report into the Professional 

Carve Out Reserve Account. If the DIP Agent submits a written objection to the Debtor 

Professional Report prior to the end of the Review Period, the DIP Agent and the applicable Debtor 

Professional shall conduct a Meet and Confer within two (2) Business Days. At the conclusion of 

the Meet and Confer, if the DIP Agent elects to declare an Event of Default, the Debtors shall only 

fund an amount not to exceed 150% of such Debtor Professional’s budgeted amount as set forth 

in the Approved Budget for the period covered by such Debtor Professional Report. For the 

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avoidance of doubt, any Event of Default or other action taken by the DIP Agent shall not impact 

any amounts previously funded in the Funded Reserve Account in compliance with the procedures 

herein. For the avoidance of doubt, the DIP Agent’s request for a Meet and Confer shall not 

(in and of itself absent an Event of Default declaration) impact any terms of the DIP Documents, 

including any subsequent reporting and testing as set forth herein, nor the DIP Secured Parties’ 

obligations to loan and the Debtors’ obligations to fund the Funded Reserve Account in accordance 

with the DIP Documents after a Meet and Confer is requested. 

Section 2. DIP Liens; Superpriority Administrative Claim Status. 

2.1 DIP Liens. 

(a) Granting of DIP Liens. To secure the prompt payment and 

performance of any and all DIP Obligations of the Debtors to DIP Agent and DIP Lender of 

whatever kind, nature or description, absolute or contingent, now existing or hereafter arising, DIP 

Agent, for the benefit of itself and DIP Lender, shall have and is hereby granted, effective as of 

the Petition Date, valid and perfected first-priority security interests and liens, superior to all other 

liens, claims or security interests that any creditor of any of the Estates may have (subject only to 

the Carve-Out and the Permitted Liens), in and upon all assets and property (whether tangible, 

intangible, real, personal or mixed), wherever located, whether now owned or owing to, or 

hereafter acquired by, or arising in favor of each Debtor and its respective chapter 11 estate, and 

any and all proceeds therefrom, including, without limiting the generality of the foregoing, all 

cash, Cash Collateral, accounts, accounts receivable, inventory, property, plant and equipment, 

real estate, leaseholds, equity interests, intellectual property, and upon entry of the Final Order, the 

proceeds of any avoidance actions under chapter 5 of the Bankruptcy Code (all of the foregoing 

collectively, the “DIP Collateral”). The DIP Collateral shall also include any rents, issues, 

products, proceeds, and profits generated by any item of DIP Collateral, without the necessity of 

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any further action of any kind or nature by DIP Agent to claim or perfect such rents, issues, 

products, or proceeds. 

(b) Priority of DIP Liens. The liens and security interests of DIP Agent 

and DIP Lender granted under the DIP Documents and this Interim Order on the DIP Collateral 

securing all DIP Obligations shall be first and senior in priority to all other interests and liens of 

every kind, nature and description, whether created consensually, by an order of the Court or 

otherwise, including, without limitation, liens or interests granted in favor of third parties in 

conjunction with §§ 363, 364 or any other section of the Bankruptcy Code or other applicable law; 

provided, however, that DIP Agent’s and DIP Lender’s liens on and security interests in the DIP 

Collateral shall be subject only to (a) such priming liens or interests imposed by applicable 

non-bankruptcy law that are in existence as of the Petition Date, and are otherwise unavoidable 

(collectively, “Permitted Liens”) and (b) the Carve-Out. The right of a seller of goods to reclaim 

any goods whether under section 546(c) of the Bankruptcy Code or otherwise shall not be a 

Permitted Lien or Prepetition Lien; rather, any such alleged claim arising or asserted as a right of 

reclamation shall have the same rights and priority with respect to the DIP Liens, Prepetition Liens 

and Prepetition Payment Liens, as such claims had with respect to the Prepetition Liens. 

(c) Right of Repayment. The right of DIP Agent and DIP Lender to 

repayment in accordance with the DIP Documents and this Interim Order from the sale or other 

disposition of the DIP Collateral, or any proceeds thereof, shall be first and senior in priority to all 

other rights of repayment of every kind, nature, and description (other than the Carve-Out). 

(d) Perfection of DIP Liens and Prepetition Replacement Lien. This 

Interim Order shall be sufficient and conclusive evidence of the priority, perfection and validity of 

all liens and security interests granted herein, including the DIP Liens and the Prepetition 

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Replacement Lien, which shall be effective as of the Petition Date, without any further act and 

without regard to any other federal, state or local requirements or law requiring notice, filing, 

registration, recording or possession of the DIP Collateral, or other act to validate or perfect such 

security interest or lien, including without limitation control agreements with any deposit bank or 

with any other financial institution(s) holding a depository account or other account consisting of 

or containing Collateral (a “Perfection Act”). Notwithstanding the foregoing, if DIP Agent or 

Prepetition Agent, as applicable, shall, in its sole discretion, elect for any reason to file, record or 

otherwise effectuate any Perfection Act, then such DIP Agent or Prepetition Agent is authorized 

to perform such act, and the Debtors and Guarantors are authorized to perform such act to the 

extent necessary or required by the DIP Documents, which act or acts shall be deemed to have 

been accomplished as of the date and time of entry of this Interim Order notwithstanding the date 

and time actually accomplished, and in such event, the subject filing or recording office is 

authorized to accept, file or record any document in regard to such act in accordance with 

applicable law. DIP Agent or Prepetition Agent, as applicable, may choose to file, record or 

present a certified copy of this Interim Order in the same manner as a Perfection Act, which shall 

be tantamount to a Perfection Act, and, in such event, the subject filing or recording office is 

authorized to accept, file or record such certified copy of this Interim Order in accordance with 

applicable law. Should DIP Agent or Prepetition Agent, as applicable, so choose and attempt to 

file, record or perform a Perfection Act, no defect or failure in connection with such attempt shall 

in any way limit, waive or alter the validity, enforceability, attachment, or perfection of the DIP 

liens and security interests granted herein by virtue of the entry of this Interim Order. 

(e) Nullifying Prepetition Restrictions to DIP Financing. 

Notwithstanding anything contained in any prepetition agreement, contract, lease, document, note 

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or instrument to which any Debtor is a party or under which any Debtor is obligated, except as 

otherwise permitted under the DIP Documents, any provision that restricts, limits or impairs in 

any way any Debtor from granting DIP Agent security interests in or liens upon any of the Debtors’ 

assets or properties (including, among other things, any anti-lien granting or anti-assignment 

clauses in any leases or other contractual arrangements to which any Debtor is a party) under the 

DIP Documents or this Interim Order, as applicable, or otherwise entering into and complying 

with all of the terms, conditions and provisions hereof or of the DIP Documents, shall not 

(a) be effective and/or enforceable against any of the Debtors, DIP Agent or DIP Lender, as 

applicable, or (b) adversely affect the validity, priority or enforceability of the liens, security 

interests, claims, rights, priorities and/or protections granted to DIP Agent and DIP Lender 

pursuant to this Interim Order or the DIP Documents, in each case, to the maximum extent 

permitted under the Bankruptcy Code and other applicable law. 

(f) To the extent that any applicable non-bankruptcy law otherwise 

would restrict the granting, scope, enforceability, attachment, or perfection of any liens and 

security interests granted and created by this Interim Order (including the DIP Liens and the 

Prepetition Replacement Liens) or otherwise would impose filing or registration requirements with 

respect to such liens and security interests, such law is hereby pre-empted to the maximum extent 

permitted by the Bankruptcy Code, applicable federal or foreign law, and the judicial power and 

authority of the Court. By virtue of the terms of this Interim Order, to the extent that any DIP 

Agent or Prepetition Agent, as applicable, has filed Uniform Commercial Code financing 

statements, mortgages, deeds of trust, or other security or perfection documents under the names 

of any of the Debtors (including all Guarantors), such filings shall be deemed to properly perfect 

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its liens and security interests granted and confirmed by this Interim Order without further action 

by the applicable DIP Agent or Prepetition Agent, as applicable. 

(g) Except with respect to the Carve-Out, certain Permitted Liens, the 

DIP Liens, the DIP Superpriority Claims, the Prepetition Replacement Liens, and the Prepetition 

Adequate Protection Superpriority Claims (i) shall not be made subject to or pari passu with 

(A) any lien, security interest, or claim heretofore or hereinafter granted in any of these Chapter 

11 Cases or any case under chapter 7 of the Bankruptcy Code upon the conversion of any of these 

Chapter 11 Cases against the Debtors (such converted cases, “Successor Cases”), their respective 

Estates, any trustee, or any other estate representative appointed or elected in these Chapter 11 

Cases or any Successor Cases and/or upon the dismissal of any of these Chapter 11 Cases or any 

Successor Cases; (B) any lien that is avoided and preserved for the benefit of the Debtors and their 

respective Estates under section 551 of the Bankruptcy Code or otherwise; and 

(C) any intercompany or affiliate lien or claim; and (ii) shall not be subject to sections 510, 549, 

550, or 551 of the Bankruptcy Code. 

2.2 Superpriority Administrative Expense Claims. For all DIP Obligations now 

existing or hereafter arising pursuant to this Interim Order or the DIP Documents, DIP Agent, for 

the benefit of itself and DIP Lender, is granted an allowed superpriority administrative claim 

pursuant to § 364(c)(1) of the Bankruptcy Code, having priority in right of payment over any and 

all other obligations, liabilities and indebtedness of the Debtors (other than the Carve-Out), 

whether now in existence or hereafter incurred by the Debtors, and over any and all administrative 

expenses or priority claims of the kind specified in, or ordered pursuant to, inter alia, §§ 105, 326, 

328, 330, 331, 503(b), 506(c), 507(a), 507(b), 364(c)(1), 546(c), 726, 1113 or 1114 of the 

Bankruptcy Code (other than the Carve-Out), whether or not such expenses or claims may become 

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secured by a judgment lien or other non-consensual lien, levy or attachment, which allowed 

superpriority administrative claim shall be payable from and have recourse to all prepetition and 

post-petition property of the Debtors and all proceeds thereof (the “DIP Superpriority Claim”). 

2.3 Carve-Out. 

(a) Carve-Out. As used in this Interim Order, the “Carve-Out” means the sum 

of (i) all fees required to be paid to the Clerk of the Court and to the Office of the United States 

Trustee under section 1930(a) of title 28 of the United States Code plus interest at the statutory 

rate; (ii) all reasonable fees and expenses up to $50,000 incurred by a trustee under section 

726(b) of the Bankruptcy Code; (iii) to the extent allowed or permitted to be paid at any time, 

whether by interim order, procedural order, or otherwise, all accrued and unpaid fees, 

disbursements, costs, and expenses (the “Allowed Professional Fees”) incurred by persons or 

firms retained by the Debtors pursuant to section 327, 328, or 363 of the Bankruptcy Code 

(the “Debtor Professionals”) and by any Creditors’ Committee pursuant to section 328 or 1103 of 

the Bankruptcy Code (the “Committee Professionals” and, together with the Debtors’ 

Professionals, “Professional Persons”) at any time before or on the first business day following 

delivery by DIP Agent to the Debtors of a Carve-Out Trigger Notice (as defined below), but shall 

not include any restructuring, sale, transaction or other “success” fee except for such fee earned 

by Robert W. Baird & Co. Inc. in its capacity as investment banker to the Debtors during such 

time; and (iv) Allowed Professional Fees of Professional Persons in an aggregate amount not to 

exceed $150,000 incurred after the first business day following delivery by DIP Agent of the 

Carve-Out Trigger Notice, to the extent allowed at any time, whether by interim order, procedural 

order, or otherwise (this section (iv) the “Post-Carve-Out Trigger Notice Cap”); and (v) an amount 

up to the amount secured by and necessary to fund the Canadian Priority Charges (as defined in 

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the DIP Term Sheet) for the beneficiaries thereof (without duplication) in the CCAA Recognition 

Proceedings. For purposes of the foregoing, “Carve-Out Trigger Notice” shall mean a written 

notice delivered by email (or other electronic means) by DIP Agent to the Debtors and the 

Committee (if any), which notice may be delivered in the sole discretion of DIP Agent following 

the occurrence of an Event of Default, and shall describe the Event of Default, state that the DIP 

Facility is terminated and that the Post-Carve-Out Trigger Notice Cap has been invoked. 

(b) Pre-Carve-Out Trigger Notice Funding. Commencing on the Friday of the 

first full calendar week following the Petition Date and on a weekly basis thereafter, the DIP 

Secured Parties shall loan and the Debtors shall fund, using borrowings from the DIP Facility, 

Cash Collateral, or cash on hand, a segregated account (the “Funded Reserve Account”) held by 

the Debtors in trust and solely for the benefit of the Debtor Professionals in an amount equal to the 

amount of applicable Professional Fees set forth in the Approved Budget, subject to the objection 

procedures described in Section 1.8(d) hereof and the Prepetition Secured Parties’ and DIP 

Secured Parties’ reversionary interest in any unused amounts. The Debtors shall pay only Allowed 

Professional Fees from the Funded Reserve Account, and all payments of Allowed Professional 

Fees incurred prior to the Carve-Out Termination Date shall be paid first from such Funded 

Reserve Account, provided that this shall not be a limitation on payment of Allowed Professional 

Fees from sources other than the Funded Reserve Account in the event the Funded Reserve 

Account does not have sufficient funds or has not be funded as provided above. 

(c) Post-Carve-Out Trigger Notice Funding. On the day on which a Carve-Out 

Trigger Notice is given by the DIP Agent to counsel for the Debtors and the Committee 

(the “Carve-Out Termination Date”), the Carve-Out Trigger Notice shall be deemed a draw 

request and notice of borrowing hereunder and also a demand to the Debtors to utilize all cash on 

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hand as of such date and any available cash thereafter held by any Debtor to fund (A) the Funded 

Reserve Account in an amount equal to the sum of (x) the amounts set forth in paragraphs 

(a)(i)-(iii) above, plus (y) the total amount of unpaid Allowed Professional Fees set forth in the 

“Professional Fees (Escrow Account Funding)” line item of the Approved Budget for any time 

before or on the first business day following the Carve-Out Termination Date, to the extent not 

already funded in accordance with Section 2.3(b) hereof, whether such fees have become Allowed 

Professional Fees prior to the Carve-Out Termination Date, plus (z) the amount set forth in 

paragraph (a)(v) above to an account designated by the Information Officer in the CCAA 

Recognition Proceedings for the beneficiaries of the Canadian Priority Charges (the “Canadian 

Priority Reserve Account”); and (B) a segregated escrow account held by the Debtors in trust for 

the benefit of Professional Persons in an amount equal to the Post-Carve-Out Trigger Notice Cap 

(the “Post-Carve-Out Trigger Notice Reserve Account” and, together with the Funded Reserve 

Account and the Canadian Priority Reserve Account, the “Carve-Out Reserve Accounts”). 

Prepetition Agent’s, Prepetition Lender’s, DIP Agent’s, and DIP Lender’s, in each case to the 

fullest extent applicable, claims, liens and security interests in any property of the Debtors, 

including, without limitation, the Prepetition Collateral, the DIP Collateral, Cash Collateral, the 

Prepetition Adequate Protection Superpriority Claim (as defined below), the DIP Superpriority 

Claim, any other adequate protection or superpriority claim, and any junior pre- or post-petition 

lien, interest or claim in favor of any other party, shall be subordinate to the Allowed Professional 

Fee Claims of the Professional Persons and other beneficiaries thereof as to all funds in the 

Carve-Out Reserve Accounts. 

(d) No Direct Obligation To Pay Allowed Professional Fees. None of the DIP 

Secured Parties or Prepetition Secured Parties shall be responsible for the payment or 

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reimbursement of any fees or disbursements of any Professional Person incurred in connection 

with the Chapter 11 Cases or any Successor Cases under any chapter of the Bankruptcy Code 

provided that the Carve-Out Reserve Accounts shall have been fully funded from cash on hand, 

Cash Collateral, or proceeds of the DIP Facility. Nothing in this Interim Order shall be construed 

to obligate any of the DIP Secured Parties or Prepetition Secured Parties, in any way, to pay 

compensation to, or to reimburse expenses of, any Professional Person or to guarantee that the 

Debtors have sufficient funds to pay such compensation or reimbursement, provided that the 

Carve-Out Reserve Accounts shall have been fully funded, and provided that this shall not be a 

limitation on payment of Allowed Professional Fees from sources other than the Carve-Out 

Reserve Accounts in the event the Carve-Out Reserve Accounts does not have sufficient funds or 

has not be funded as provided above. Notwithstanding anything herein, nothing shall require the 

DIP Secured Parties or Prepetition Secured Parties to provide any funding in excess of the DIP 

Commitment. 

(e) Payment of Allowed Professional Fees Prior to the Carve-Out Termination 

Date. Any payment or reimbursement made prior to the occurrence of the Carve-Out Termination 

Date in respect of any Allowed Professional Fees shall not reduce the Carve-Out; provided that, 

upon the full funding of the Carve-Out Reserve Accounts following the Carve-Out Termination 

Date, the Debtors’ authorization to use Cash Collateral to fund the Carve-Out Reserve Accounts 

shall cease, and the liens and claims of the DIP Agent and DIP Lender shall cease being 

subordinated to the Carve-Out, each with respect to and to the extent of the amounts so funded. 

(f) Payment of Carve-Out on or After the Carve-Out Termination Date. Any 

payment or reimbursement made on or after the occurrence of the Carve-Out Termination Date in 

respect of any Allowed Professional Fees shall permanently reduce the Carve-Out on a 

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dollar-for-dollar basis. Any funding of the Carve-Out shall be added to, and made a part of, the 

DIP Obligations secured by the DIP Collateral and shall be otherwise entitled to the protections 

granted under this Interim Order, the DIP Documents, the Bankruptcy Code, and applicable law. 

2.4 Payment of Carve-Out. 

Payment from the Carve-Out Reserve Accounts, whether by or on behalf of 

DIP Agent or DIP Lender, shall not and shall not be deemed to reduce the DIP Obligations, and 

shall not be deemed to subordinate any of any of DIP Agent’s or DIP Lender’s liens and security 

interests in the Prepetition Collateral, any other DIP Collateral, the Prepetition Adequate 

Protection Superpriority Claim, or the DIP Superpriority Claim to any junior pre- or post-petition 

lien, interest or claim in favor of any other party other than the Carve-Out for Professional Persons. 

2.5 Excluded Professional Fees. 

(a) Notwithstanding anything to the contrary in this Interim Order, no 

DIP Collateral (or proceeds thereof) nor any DIP Loans or any other credit or financial 

accommodations provided under or in connection with the DIP Documents shall be used to pay 

any Allowed Professional Fees or any other fees or expenses incurred by any Professional Person 

in connection with any of the following: 

(i) an assertion or joinder in any claim, counter-claim, action, 

proceeding, application, motion, objection, defense or other contested matter seeking any 

order, judgment, determination or similar relief: (A) challenging the legality, validity, 

priority, perfection, or enforceability of (I) the Prepetition Obligations or any Prepetition 

Secured Parties’ liens on and security interests in the Prepetition Collateral or (II) the DIP 

Obligations or any DIP Secured Parties’ liens on and security interests in the DIP 

Collateral; (B) invalidating, setting aside, avoiding, recharacterizing or subordinating, in 

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whole or in part, (I) the Prepetition Obligations or any Prepetition Secured Parties’ liens 

on and security interests in the Prepetition Collateral or (II) the DIP Obligations or any DIP 

Secured Parties’ liens on and security interests in the DIP Collateral; or (C) preventing, 

hindering or delaying DIP Agent’s or DIP Lender’s assertion or enforcement of any lien, 

claim, right or security interest or realization upon any DIP Collateral in accordance with 

the terms and conditions of the DIP Term Sheet, the DIP Documents, and this Interim 

Order other than reasonable and documented fees in connection with a good faith challenge 

of an asserted Event of Default and related Carve-Out Trigger Notice; 

(ii) a request made to this Court to use Cash Collateral (as such term is 

defined in section 363 of the Bankruptcy Code) without the prior written consent of DIP 

Agent and Prepetition Agent; 

(iii) a request made to this Court for authorization to obtain debtor-inpossession financing or other financial accommodations pursuant to section 364(c) or 

section 364(d) of the Bankruptcy Code or otherwise incur Indebtedness (as defined in the 

Prepetition Credit Agreement) without the prior written consent of DIP Agent (except to 

the extent permitted under the DIP Documents); 

(iv) the commencement or prosecution of any action or proceeding of 

any claims, causes of action or defenses against any DIP Secured Party or Prepetition 

Secured Party or any of their respective officers, directors, employees, agents, attorneys, 

affiliates, successors or assigns, including, without limitation, any attempt to recover or 

avoid any claim or interest or disgorge any payments under chapter 5 of the Bankruptcy 

Code or any applicable state law equivalents; 

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(v) the cost of a Committee’s investigation into any claims against any 

Prepetition Secured Parties arising under or in connection with the Prepetition Loan 

Documents in excess of $25,000 (the “Committee Investigation Budget”); provided that 

no portion of the Committee Investigation Budget may be used to seek formal discovery 

or commence any challenge, objection, or prosecute any such Challenge, claims or causes 

of actions; or 

(vi) any act which has or could directly, materially and adversely modify 

or compromise the rights and remedies of any of the DIP Secured Parties or Prepetition 

Secured Parties under this Interim Order, or which directly results in the occurrence of an 

Event of Default under this Interim Order or any DIP Documents. 

2.6 Limited Use of Cash Collateral; Adequate Protection. 

(a) Authorization to Use Cash Collateral. Subject to the terms and 

conditions of this Interim Order, the DIP Term Sheet, the DIP Documents, and in accordance with 

the Approved Budget, Borrower shall be and are hereby authorized to use Cash Collateral for the 

period commencing on the date of this Interim Order and terminating on the Carve-Out 

Termination Date, subject to the liens and security interests granted to Prepetition Agent and 

Prepetition Lender; provided that during the Remedies Notice Period (as defined herein) the 

Debtors may use Cash Collateral solely for the following amounts and expenses: (i) to fund the 

Carve-Out Reserve Accounts in accordance with paragraph 2.3 above; and (ii) to pay expenses 

critical to the administration of the Estates, as agreed by DIP Agent in its sole discretion. Nothing 

in this Interim Order shall authorize the disposition of any assets of the Debtors or their Estates 

outside the ordinary course of business, or any Debtor’s use of Cash Collateral or other proceeds 

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resulting therefrom, except as expressly permitted in this Interim Order, the DIP Documents and 

in accordance with the Approved Budget. 

(b) Prepetition Replacement Lien. As adequate protection for the 

diminution in value of their interests in the Prepetition Collateral (including Cash Collateral) on 

account of the Borrower’s use of such Prepetition Collateral (including Cash Collateral), the 

imposition of the automatic stay and the subordination to the Carve-Out on a dollar-for dollar basis 

(collectively, the “Diminution in Value”), Prepetition Agent, for the benefit of itself and 

Prepetition Lender, is hereby granted pursuant to §§ 361 and 363 of the Bankruptcy Code, and 

solely to the extent of the Diminution in Value, valid, binding, enforceable and perfected 

replacement liens upon and security interests in all DIP Collateral (the “Prepetition Replacement 

Lien”). The Prepetition Replacement Lien shall be junior and subordinate only to 

(A) the Carve-Out, (B) the Permitted Liens, and (C) the DIP Liens on the DIP Collateral to secure 

the DIP Obligations, and shall otherwise be senior to all other security interests in, liens on, or 

claims against any of the DIP Collateral. 

(c) Prepetition Adequate Protection Superpriority Claim. As 

adequate protection for the Diminution in Value, Prepetition Agent, for the benefit of itself and 

Prepetition Lender, is hereby granted, solely to the extent of the Diminution in Value, an allowed 

superpriority administrative expense claim pursuant to sections 503(b), 507(a), and 507(b) of the 

Bankruptcy Code in each of the Chapter 11 Cases and any successor bankruptcy cases 

(the “Prepetition Adequate Protection Superpriority Claim”). The Prepetition Adequate 

Protection Superpriority Claim shall be junior only to (A) the Carve-Out, and (B) the DIP 

Superpriority Claim, and shall otherwise have priority over all administrative expense claims and 

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unsecured claims against the Debtors and their Estates now existing or hereafter arising, of any 

kind or nature whatsoever. 

(d) Adequate Protection Payments and Protections. Upon entry of this 

Interim Order, as further adequate protection (the “Adequate Protection Payments”) for the 

Diminution in Value, the Debtors are authorized and directed to provide adequate protection to the 

Prepetition Secured Parties in the form of payment in cash (regardless of the Approved Budget, 

and regardless of any Diminution in Value) for (i) the reasonable, documented fees, expenses, and 

disbursements (including without limitation, the reasonable and documented fees, expenses, and 

disbursements of counsel and third-party consultants and other vendors, including without 

limitation, financial advisors and auditors) incurred by Prepetition Secured Parties arising prior to 

the Petition Date, and (ii) the reasonable, documented fees, expenses, and disbursements 

(including without limitation, the fees, expenses, and disbursements of counsel and third-party 

consultants and other vendors, including without limitation, financial advisors and auditors) 

incurred by Prepetition Secured Parties arising subsequent to the Petition Date. 

Section 3. Default; Rights and Remedies; Relief from Stay. 

3.1 Events of Default. The occurrence of any of the following events shall 

constitute an “Event of Default” under this Interim Order: (a) any Debtor’s failure to perform, in 

any respect, any of their obligations under this Interim Order; or (b) an “Event of Default” under 

the DIP Term Sheet or any of the other DIP Documents. 

3.2 Rights and Remedies upon Event of Default. Upon the occurrence of an 

Event of Default, (a) the Debtors shall be bound by all restrictions, prohibitions and other terms as 

provided in this Interim Order, the DIP Term Sheet and the other DIP Documents, and (b) DIP 

Agent shall be entitled to take any act or exercise any right or remedy (subject to Section 3.4 

below) as provided in this Interim Order or the DIP Term Sheet or any of the other DIP Documents, 

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as applicable, including, without limitation, declaring all DIP Obligations immediately due and 

payable, accelerating the DIP Obligations, ceasing to extend DIP Loans, setting off any DIP 

Obligations with DIP Collateral or proceeds in DIP Agent’s or DIP Lender’s possession, and 

enforcing any and all rights with respect to the DIP Collateral. DIP Agent and DIP Lender shall 

have no obligation to lend or advance any additional funds to or on behalf of the Debtors, or 

provide any other financial accommodations to the Debtors, immediately upon or after the 

occurrence of an Event of Default or upon the occurrence of any act, event, or condition that, with 

the giving of notice or the passage of time, or both, would constitute an Event of Default. 

3.3 Expiration of Loan Commitment. Upon the expiration, termination, or 

maturity of Borrower’s authority to borrow or otherwise obtain other credit accommodations from 

DIP Agent and DIP Lender pursuant to the terms of this Interim Order and the DIP Documents 

(except if such authority shall be extended with the prior written consent of DIP Agent, which 

consent shall not be implied or construed from any action, inaction or acquiescence by DIP Agent 

or DIP Lender), unless an Event of Default set forth in Section 3.1 above occurs sooner and the 

automatic stay has been lifted or modified pursuant to Section 3.4 of this Interim Order, all of the 

DIP Obligations shall immediately become due and payable and DIP Agent and DIP Lender shall 

have no obligation whatsoever to make or extend any loans, advances, provide any financial or 

credit accommodations to the Debtors or permit the use of Cash Collateral. 

3.4 Modification of Automatic Stay; Remedies Notice Period. 

(a) The automatic stay provisions of section 362 of the Bankruptcy 

Code and any other restriction imposed by an order of the Court or applicable law are hereby 

modified without further notice, application or order of the Court to the extent necessary to permit 

DIP Agent and DIP Lender to perform any act authorized or permitted under or by virtue of this 

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Interim Order or the DIP Documents, as applicable, including, without limitation, 

(I) (A) to implement the DIP financing arrangements authorized by this Interim Order and pursuant 

to the terms of the DIP Documents, (B) to take any act to create, validate, evidence, attach or 

perfect any lien, security interest, right or claim in the DIP Collateral, (C) to assess, charge, collect, 

advance, deduct and receive payments with respect to the Prepetition Obligations or the DIP 

Obligations, as applicable, including, without limitation, all interests, fees, costs and expenses 

permitted under the DIP Documents (subject to Section 5.12 of this Interim Order) and apply such 

payments to the Prepetition Obligations or DIP Obligations pursuant to the DIP Documents and/or 

this Interim Order, as applicable, and (II) upon an Event of Default, (A) declare a termination, 

reduction or restriction on the ability of the Debtors to use Cash Collateral, (B) to take any other 

action and exercise all other rights and remedies provided to it by this Interim Order, the DIP 

Documents or applicable law other than those rights and remedies subject to the expiration of the 

Remedies Notice Period, and (C) charge interest at the default rate under the DIP Documents. 

(b) In addition, and without limiting anything in Section 3.4(a) hereof, 

upon the delivery of a Carve-Out Trigger Notice and the expiration of the five (5) business day 

period thereafter (the “Remedies Notice Period”), DIP Agent, acting on behalf of itself and DIP 

Lender, without further notice, application or order of the Court, shall be entitled to take any action 

and exercise all rights and remedies provided to it by this Interim Order, the DIP Documents or 

applicable law that DIP Agent may deem appropriate in its sole discretion to proceed against and 

realize upon the DIP Collateral or any other assets or properties of the Estates upon which DIP 

Agent, for the benefit of itself and DIP Lender, has been or may hereafter be granted liens or 

security interests to obtain the full and indefeasible repayment of all DIP Obligations. 

Notwithstanding anything to the contrary, any action that DIP Agent is otherwise permitted to take 

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pursuant to this Interim Order to (i) terminate the DIP Commitments, (ii) accelerate the DIP Loans, 

(iii) send blocking notices or activation notices pursuant to the terms of any deposit account control 

agreement, and (iv) repay any amounts owing in respect of the DIP Obligations (including, without 

limitation, fees, indemnities and expense reimbursements), in each case, shall not require any 

advance notice to the Debtors. During the Remedies Notice Period, the Debtors, the Committee 

(if appointed), and/or any party in interest shall be entitled to seek an emergency hearing, and DIP 

Agent and DIP Lender shall consent to such emergency hearing so long as it occurs within the 

Remedies Notice Period; provided, that, (A) the sole issue the Debtors may bring before the Court 

at any such emergency hearing is whether an Event of Default has occurred, and (B) if such 

emergency hearing cannot be scheduled prior to the expiration of the Remedies Notice Period 

solely as a result of the Court’s unavailability, the Remedies Notice Period shall be automatically 

extended to the date that is one (1) business day after the first date the Court is available. 

Section 4. Representations; Covenants; and Waivers. 

4.1 Reservation of Third-Party Challenge Rights. Notwithstanding anything in 

this Interim Order, the stipulations, releases, agreements, and admissions contained in this Interim 

Order, including, without limitation, paragraph F hereof (collectively, the “Debtors’ 

Stipulations”), shall be binding in all circumstances on the Debtors, their respective Estates and 

any successor (including, without limitation, any estate representative or a chapter 7 or chapter 11 

trustee appointed or elected for any of the Debtors with respect thereto) provided that, the Debtors’ 

Stipulations shall be binding on each other party in interest, including, without limitation, the 

Committee (if any), unless (a) any such party in interest with standing and authority, including the 

Committee (if any) has timely filed a complaint or motion seeking authority to commence 

litigation as a representative of the estate (a “Challenge”) before the earliest of (i) the objection 

deadline for the Plan, (ii) sixty (60) calendar days from the date of appointment of the Committee 

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by the U.S. Trustee, and (iii) seventy-five (75) calendar days from the Petition Date for all parties 

other than the Committee (if any) (the “Challenge Period”) challenging the amount, validity, 

perfection, enforceability, priority, or extent of the Prepetition Obligations or Prepetition Liens, or 

otherwise asserting or prosecuting any action for preferences, fraudulent transfers or conveyances, 

other avoidance power claims or any other claims, counterclaims, or causes of action, objections, 

contests, or defenses with respect to the Prepetition Obligations or Prepetition Liens and (b) such 

Challenge sets for the with specificity the basis for such challenge, and any challenges or claims 

not so specified prior to the expiration of the Challenge Period shall be deemed forever waived, 

released, and barred. For the avoidance of doubt, a party’s commencement of a timely Challenge 

shall preserve the Challenge Period only with respect to such party. Nothing in this Interim Order 

vests or confers on any Person (as defined in the Bankruptcy Code), including the Committee 

(if any), standing or authority to pursue any Challenge or cause of action belonging to the Debtors 

or their respective Estates, including, without limitation, claims and defenses with respect to the 

Prepetition Credit Agreements or the Prepetition Liens on the Prepetition Collateral. If any 

Challenge is timely commenced, the Debtors’ Stipulations shall nonetheless remain binding and 

conclusive (as provided in this paragraph) on the Debtors, the Committee (if any), and any other 

person or entity, except as to any specific findings and admissions that were expressly and 

successfully challenged in such Challenge as set forth in a final, non-appealable order of a court 

of competent jurisdiction. If no such Challenge is timely and properly filed, or if a Challenge is 

timely and properly filed but denied, (i) the Prepetition Obligations shall be deemed allowed in 

full, shall not be subject to any setoff, recoupment, counterclaim, deduction or claim of any kind, 

and shall not be subject to any further objection or challenge by any party at any time, and the 

Prepetition Liens on and security interest in the Prepetition Collateral shall be deemed legal, valid, 

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perfected, enforceable, and non-avoidable for all purposes and of first and senior priority, subject 

to only the Carve-Out and Permitted Liens, and (ii) Prepetition Agent and Prepetition Lender, and 

each of their respective participants, agents, officers, directors, employees, attorneys, 

professionals, successors, and assigns (each in their respective capacities as such) shall be deemed 

released and discharged from any and all claims and causes of action related to or arising out of 

the Prepetition Loan Documents, and shall not be subject to any further objection or challenge 

relating thereto or arising therefrom by any party at any time. Nothing contained in this Section 

4.1(a) shall or shall be deemed or construed to impair, prejudice or waive any rights, claims or 

protections afforded to DIP Agent or DIP Lender in connection with the DIP Documents, and any 

other post-petition financial and credit accommodations provided by DIP Agent and DIP Lender 

to the Debtors in reliance on section 364(e) of the Bankruptcy Code and in accordance with the 

terms and provisions of this Interim Order and the DIP Documents. 

4.2 Debtors’ Waivers. Prior to the indefeasible repayment in full in cash of all 

Prepetition Obligations and all DIP Obligations (“Repayment in Full”), any request by the Debtors 

of this Court without the prior consent of the DIP Agent with respect to the following shall also 

constitute an Event of Default: (a) to use Cash Collateral under section 363 of the Bankruptcy 

Code other than as provided in this Interim Order, (b) to obtain post-petition loans or other 

financial accommodations pursuant to section 364(c) or 364(d) of the Bankruptcy Code, other than 

as provided in this Interim Order or as may be otherwise expressly permitted pursuant to the DIP 

Documents, (c) to challenge the application of any payments authorized by this Interim Order as 

pursuant to section 506(b) of the Bankruptcy Code, or to assert that the value of the Prepetition 

Collateral is less than the Prepetition Obligations, (d) to propose, support or have a plan of 

reorganization or liquidation that is inconsistent with the Plan, Backyard Sale or RSA, or 

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(e) to seek relief under the Bankruptcy Code, including without limitation, under section 105 of 

the Bankruptcy Code, to the extent any such relief would in any way restrict or impair the rights 

and remedies of DIP Agent or DIP Lender as provided in this Interim Order and the DIP 

Documents or DIP Agent’s or DIP Lender’s exercise of such rights or remedies; provided, 

however, that DIP Agent may otherwise consent in writing, but no such consent shall be implied 

from any other action, inaction, or acquiescence by any DIP Secured Party. 

4.3 Section 506(c) Claims. Subject to entry of the Final Order, no costs or 

expenses of administration which have or may be incurred in the Chapter 11 Cases shall be charged 

against DIP Agent or DIP Lender, their respective claims, or the DIP Collateral pursuant to §§ 105 

or 506(c) of the Bankruptcy Code or otherwise without the prior written consent of DIP Agent, 

and no such consent shall be implied from any other action, inaction or acquiescence by DIP Agent 

or DIP Lender. 

4.4 DIP Collateral Rights. Until the occurrence of Repayment in Full: 

(a) no other party shall foreclose or otherwise seek to enforce any junior 

lien or claim in DIP Collateral and 

(b) upon and after the delivery of a Carve-Out Trigger Notice and the 

expiration of the Remedies Notice Period, if requested by the DIP Agent in connection with 

such exercise of rights and remedies, the Debtors shall cooperate with the DIP Agent to, among 

other things, (i) make reasonable efforts to collect accounts receivable, without setoff by any 

account debtor, (ii) provide at all reasonable times access to the Debtors’ premises to 

representatives or agents of the DIP Agent (including any collateral liquidator or consultant), 

(iii) provide the DIP Agent and their representatives or agents, at all reasonable times access 

to the Debtors’ books and records and any information or documents requested by the DIP 

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Agent or their respective representatives, (iv) perform all other obligations set forth in the DIP 

Documents, and (v) take reasonable steps to safeguard and protect the DIP Collateral.

4.5 Release of DIP Secured Parties. Each of the Releasors hereby forever, 

unconditionally, permanently, and irrevocably release, discharge, and acquit each of the DIP 

Secured Parties and their respective successors and assigns, and their present and former 

shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, 

employees and other representatives (collectively, the “DIP Releasees”) of and from any and all 

claims, demands, liabilities, damages, expenses, responsibilities, disputes, remedies, causes of 

action, indebtedness and obligations, of every kind, nature and description, whether arising in law 

or otherwise, and whether known or unknown, matured, or contingent that any of the Releasors 

had, have or hereafter can or may have against any DIP Releasees as of the date hereof, in respect 

of events that occurred on or prior to the date hereof with respect to the Debtors, the Prepetition 

Obligations, the Prepetition Loan Documents, the DIP Obligations, the RSA, the Plan, the 

Backyard Sale, the DIP Documents and any DIP Loans or other financial accommodations made 

by DIP Agent and/or DIP Lender to the Debtors pursuant to the Prepetition Loan Documents or 

the DIP Documents including, without limitation, any so-called “lender liability” claims or 

defenses, (a) any so-called “lender liability” or equitable subordination claims or defenses, 

(b) any and all “claims” (as defined in the Bankruptcy Code) and causes of action arising under 

the Bankruptcy Code, and (c) any and all offsets, defenses, claims, counterclaims, set off rights, 

objections, challenges, causes of action, and/or choses in action of any kind or nature whatsoever, 

whether arising at law or in equity, including any recharacterization, recoupment, subordination, 

avoidance, or other claim or cause of action arising under or pursuant to section 105 or chapter 5 

of the Bankruptcy Code or under any other similar provisions of applicable state, federal, or foreign 

law, including, without limitation, any right to assert any disgorgement or recovery, in each case, 

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with respect to the extent, amount, validity, enforceability, priority, security, and perfection of any 

of the DIP Obligations, the DIP Documents, or the DIP Liens. 

Section 5. Other Rights and DIP Obligations. 

5.1 No Modification or Stay of This Interim Order. The DIP Agent and DIP 

Lender have acted in good faith in connection with the DIP Facility and with this Interim Order, 

and their reliance on this Interim Order is in good faith, and the DIP Agent and DIP Lender are 

hereby entitled to the protections of section 364(e) of the Bankruptcy Code. Notwithstanding 

(a) any stay, modification, amendment, supplement, vacating, revocation or reversal of this Interim 

Order, the DIP Documents or any term hereunder or thereunder, (b) the failure to obtain a Final 

Order pursuant to Bankruptcy Rule 4001(c)(2), or (c) the dismissal or conversion of one or more 

of the Chapter 11 Cases (each, a “Subject Event”), (x) the acts taken by each of DIP Agent and 

DIP Lender in accordance with this Interim Order, and (y) the DIP Obligations incurred or arising 

prior to DIP Agent’s actual receipt of written notice from the Debtors expressly describing the 

occurrence of such Subject Event shall, in each instance, be governed in all respects by the original 

provisions of this Interim Order, and the acts taken by DIP Agent and DIP Lender in accordance 

with this Interim Order, and the liens granted to DIP Agent and DIP Lender in the DIP Collateral, 

and all other rights, remedies, privileges, and benefits in favor of DIP Agent and DIP Lender 

pursuant to this Interim Order and the DIP Documents shall remain valid and in full force and 

effect pursuant to section 364(e) of the Bankruptcy Code. For purposes of this Interim Order, the 

term “appeal”, as used in section 364(e) of the Bankruptcy Code, shall be construed to mean any 

proceeding for reconsideration, amending, rehearing, or re-evaluating this Interim Order by the 

Court or any other tribunal. 

5.2 Power to Waive Rights; Duties to Third Parties. DIP Agent and Prepetition 

Agent, as applicable, shall have the right to waive any of the terms, rights and remedies provided 

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or acknowledged in this Interim Order that are in favor of the DIP Secured Parties and Prepetition 

Secured Parties, respectively (the “Lender Rights”), and shall have no obligation or duty to any 

other party with respect to the exercise or enforcement, or failure to exercise or enforce, any Lender 

Right(s). Any waiver by DIP Agent or Prepetition Agent of any Lender Rights shall not be or 

constitute a continuing waiver unless expressly provided therein. Any delay in or failure to 

exercise or enforce any Lender Right shall neither constitute a waiver of such Lender Right, subject 

any of the DIP Secured Parties or Prepetition Secured Parties to any liability to any other party, 

nor cause or enable any party other than the Debtors to rely upon or in any way seek to assert as a 

defense to any obligation owed by the Debtors to any of the DIP Secured Parties or Prepetition 

Secured Parties. 

5.3 Disposition of DIP Collateral. The Debtors shall not sell, transfer, lease, 

encumber or otherwise dispose of any portion of the DIP Collateral outside the ordinary course of 

business, other than pursuant to the terms of the DIP Term Sheet, this Interim Order, and the 

Approved Budget, without the prior written consent of DIP Agent (and no such consent shall be 

implied, from any other action, inaction or acquiescence by DIP Agent or DIP Lender) and, in 

each case, an order of the Court. 

5.4 Inventory. The Debtors shall not, without the consent of DIP Agent, 

(a) enter into any agreement to return any inventory to any of their creditors for application against 

any prepetition indebtedness under any applicable provision of section 546 of the Bankruptcy 

Code, or (b) consent to any creditor taking any setoff against any of its prepetition indebtedness 

based upon any such return pursuant to section 553(b)(1) of the Bankruptcy Code or otherwise. 

5.5 Reservation of Rights. The terms, conditions and provisions of this Interim 

Order are in addition to and without prejudice to the rights of each DIP Secured Party and 

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Prepetition Secured Party to pursue any and all rights and remedies under the Bankruptcy Code, 

the DIP Documents, the Prepetition Loan Documents, or any other applicable agreement or law, 

including, without limitation, rights to seek adequate protection and/or additional or different 

adequate protection, to seek relief from the automatic stay, to seek an injunction, to oppose any 

request for use of cash collateral or granting of any interest in the DIP Collateral or Prepetition 

Collateral, as applicable, or priority in favor of any other party, to object to any sale of assets, and 

to object to applications for allowance and/or payment of compensation of Professional Persons 

or other parties seeking compensation or reimbursement from the Estates and to pursue any and 

all rights and remedies against any Non-Debtor Loan Party. 

5.6 Binding Effect. 

(a) The provisions of this Interim Order and the DIP Documents, the 

DIP Obligations, the Prepetition Adequate Protection Superpriority Claim, the DIP Superpriority 

Claim and any and all rights, remedies, privileges and benefits in favor of each of DIP Agent and 

DIP Lender provided or acknowledged in this Interim Order, and any actions taken pursuant 

thereto, shall be effective immediately upon entry of this Interim Order notwithstanding 

Bankruptcy Rules 4001(a)(3), 6004(h) and 7062, shall continue in full force and effect, and shall 

survive entry of any such other order converting one or more of the Chapter 11 Cases to any other 

chapter under the Bankruptcy Code, or dismissing one or more of the Chapter 11 Cases. 

(b) Any order dismissing one or more of the Chapter 11 Cases under 

section 1112 or otherwise shall be deemed to provide (in accordance with §§ 105 and 349 of the 

Bankruptcy Code) that (a) the DIP Superpriority Claim and DIP Agent’s and DIP Lender’s liens 

on and security interests in the DIP Collateral and all other claims, liens, adequate protections and 

other rights granted pursuant to the terms of this Interim Order shall continue in full force and 

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effect notwithstanding such dismissal until Repayment in Full, and (b) the Court shall retain 

jurisdiction, notwithstanding such dismissal, for the purposes of enforcing all such claims, liens, 

protections and rights. 

(c) In the event the Court modifies any of the provisions of this Interim 

Order or the DIP Documents following a Final Hearing, such modifications shall not affect the 

rights or priorities of DIP Agent and DIP Lender pursuant to this Interim Order with respect to the 

DIP Collateral or any portion of the DIP Obligations which arises or is incurred or is advanced 

prior to such modifications, and this Interim Order shall otherwise remain in full force and effect 

to such extent. 

(d) This Interim Order shall be binding upon the Debtors, all parties in 

interest in the Chapter 11 Cases and their respective successors and assigns, including any trustee 

or other fiduciary appointed in the Chapter 11 Cases or any subsequently converted bankruptcy 

case(s) of any Debtor. This Interim Order shall also inure to the benefit of the Debtors, DIP Agent, 

DIP Lender, and each of their respective successors and assigns. 

5.7 Restrictions on Cash Collateral Use; Additional Financing; Plan Treatment. 

(a) All post-petition advances and other financial accommodations 

under the DIP Term Sheet and the other DIP Documents are made in reliance on this Interim Order 

and there shall not at any time be entered in the Chapter 11 Cases, or in any Successor Case, any 

order (other than the Final Order) which authorizes the use of Cash Collateral, or the sale, lease, 

or other disposition of property of any Estate in which DIP Agent or DIP Lender have a lien or 

security interest, except as expressly permitted hereunder or in the DIP Documents, or authorizes 

under section 364 of the Bankruptcy Code the obtaining of credit or the incurring of indebtedness 

secured by a lien or security interest which is equal or senior to a lien or security interest in property 

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in which DIP Agent or DIP Lender hold a lien or security interest, or which is entitled to priority 

administrative claim status which is equal or superior to that granted to DIP Agent and DIP Lender 

herein; unless, in each instance (x) Agent shall have given its express prior written consent with 

respect thereto, no such consent being implied from any other action, inaction or acquiescence by 

DIP Agent or DIP Lender, or (y) such other order requires Repayment in Full. The security 

interests and liens granted to or for the benefit of DIP Agent and DIP Lender hereunder and the 

rights of DIP Agent and DIP Lender pursuant to this Interim Order and the DIP Documents with 

respect to the DIP Obligations and the DIP Collateral are cumulative. 

(b) All DIP Obligations and Prepetition Obligations shall receive 

treatment under the Plan as set forth in the RSA, Plan Term Sheet, and DIP Term Sheet. 

5.8 No Owner/Operator Liability. In determining to make any loan under the 

DIP Documents (including the negotiation thereof) and authorizing the use of Cash Collateral, 

none of the DIP Secured Parties or the Prepetition Secured Parties shall be deemed to (i) be in 

control of the operations of the Debtors or to be acting as a “controlling person,” “responsible 

person,” or “owner or operator” with respect to the operation or management of the Debtors 

(as such terms, or any similar terms, are used in the Internal Revenue Code, the United States 

Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 

et seq., as amended, or any similar federal or state statute) or (ii) owe any fiduciary duty to any of 

the Debtors. Furthermore, nothing in this Interim Order shall in any way be construed or 

interpreted to impose or allow the imposition upon any of the DIP Secured Parties or the 

Prepetition Secured Parties of any liability for any claims arising from the prepetition or 

postpetition activities of any of the Debtors and their respective affiliates (as defined in section 

101(2) of the Bankruptcy Code). 

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5.9 Marshalling; 552(b) Waiver. Subject to entry of the Final Order, (a) none 

of the DIP Secured Parties or the Prepetition Secured Parties shall be subject to the equitable 

doctrine of “marshaling” or any similar doctrine with respect to the DIP Collateral or the 

Prepetition Collateral, as applicable, and all proceeds of DIP Collateral shall be received and 

applied in accordance with the DIP Documents and the Prepetition Credit Agreements as 

applicable, (b) the DIP Secured Parties and the Prepetition Secured Parties are and shall each be 

entitled to all of the rights and benefits of section 552(b) of the Bankruptcy Code, and 

(c) the “equities of the case” exception under section 552(b) shall not apply to any of the 

Prepetition Secured Parties, DIP Secured Parties, DIP Obligations, or Prepetition Obligations. 

5.10 Right of Setoff. To the extent any funds were on deposit with Prepetition 

Agent as of the Petition Date, including, without limitation, all funds deposited in, or credited to, 

an account of any Debtor with Prepetition Agent or Prepetition Lender immediately prior to the 

filing of the Chapter 11 Cases (regardless of whether, as of the Petition Date, such funds had been 

collected or made available for withdrawal by any such Debtor), such funds (the “Deposited 

Funds”) are subject to rights of setoff. By virtue of such setoff rights, the Deposited Funds are 

subject to a lien in favor of Prepetition Agent and/or Prepetition Lender, as applicable, pursuant to 

§§ 506(a) and 553 of the Bankruptcy Code. 

5.11 Right to Credit Bid. 

(a) To the fullest extent permitted by section 363(k) of the Bankruptcy 

Code, in connection with any sale or other disposition of the DIP Collateral or Prepetition 

Collateral (as applicable) including any Sale: (a) DIP Agent (on behalf of DIP Lender) shall have 

the right to credit bid on a dollar-for-dollar basis, in accordance with the DIP Documents, up to 

the full amount of the DIP Obligations, (b) subject to the challenge rights set forth in Section 4.1 

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hereof, Prepetition Agent (on behalf of the Prepetition Lender) shall have the right to credit bid, in 

accordance with the Prepetition Loan Documents, up to the full amount of the Prepetition Secured 

Obligations, (c) each of the DIP Agent and Prepetition Agent shall have the absolute right (at the 

direction of their respective secured parties) to assign, transfer, sell or otherwise dispose of its 

rights to credit bid in connection with the assignment, transfer, sale, or disposition of the 

corresponding DIP Obligations, except as may be set forth in the DIP Documents, and (d) each of 

the Debtors, the Prepetition Secured Parties, and DIP Secured Parties acknowledge and agree that 

they shall not object, or support any objection, to or limit, or support any limitation on, any other 

such DIP Secured Parties’ or Prepetition Secured Parties’ rights to credit bid, up to the full amount 

of their respective DIP Obligations and/or Prepetition Obligations. 

5.12 Payment and Review of Lender Professional Fees and Expenses. Each 

Debtor shall pay all reasonable and documented professional fees and other expenses of the 

Prepetition Secured Parties and the DIP Secured Parties, whether incurred before or after the 

Petition Date; provided, that the Debtors shall pay all such reasonable and documented fees and 

expenses within ten (10) business days of delivery of a statement or invoice for such fees and 

expenses (it being understood that such statements or invoices may be in summary form and shall 

not be required to be maintained in accordance with the U.S. Trustee Guidelines, nor shall any 

such counsel or other professional be required to file any interim or final fee applications with the 

Court or otherwise seek the Court’s approval of any such payments) to the Debtors and the 

Committee (if appointed), unless, within such seven (7) business day period, the Debtors or the 

Committee (if appointed) serve a written objection upon the requesting party, in which case, the 

Debtors shall immediately pay such amounts that are not the subject of any objection and pay the 

withheld amount as subsequently agreed by the parties or ordered by the Court to be paid. 

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5.13 Access to DIP Collateral. Notwithstanding anything contained herein to the 

contrary and without limiting any other rights or remedies of DIP Agent and DIP Lender contained 

in this Interim Order, the DIP Documents, or otherwise available at law or in equity, and subject 

to the terms of the DIP Term Sheet, upon reasonable prior written notice to the landlord of any 

leased premises that an Event of Default has occurred and is continuing, DIP Agent may, subject 

to the applicable notice provisions, if any, in this Interim Order and any separate applicable 

agreement by and between such landlord and DIP Agent, enter upon any leased premises of the 

Debtors or any other party for the purpose of exercising any remedy with respect to DIP Collateral 

located thereon and shall be entitled to all of the Debtors’ rights and privileges as lessee under 

such lease without interference from the landlords thereunder, provided that DIP Agent shall be 

obligated only to pay rent of the Debtors that first accrues after the written notice referenced above 

and that is payable during the period of such occupancy by DIP Agent, calculated on a daily per 

diem basis. Nothing herein shall require DIP Agent to assume any lease as a condition to the rights 

afforded in this paragraph. For the avoidance of doubt, subject to (and without waiver of) the rights 

of DIP Agent under applicable nonbankruptcy law, DIP Agent can only enter upon a leased 

premises after an Event of Default in accordance with (i) a separate agreement with the landlord 

at the applicable leased premises, or (ii) upon entry of an order of the Court obtained by motion of 

DIP Agent on such notice to the landlord as shall be required by the Court. 

5.14 Indefeasible Payment. All payments made to or for the benefit of any of the 

DIP Secured Parties or Prepetition Secured Parties after the Petition Date shall be indefeasible and 

shall not be subject to disgorgement, counterclaim, set-off, subordination, recharacterization, defense, 

disallowance, recovery or avoidance by any party for any reason except as may occur pursuant to 

application of Section 4.1 of this Interim Order. 

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5.15 Term; Termination. Notwithstanding any provision of this Interim Order to 

the contrary, the term of the financing arrangements among the Debtors, DIP Agent and DIP 

Lender authorized by this Interim Order may be terminated pursuant to the terms of the DIP Term 

Sheet. 

5.16 Limited Effect. In the event of a conflict between the terms and provisions 

of any of the DIP Documents and this Interim Order, the terms and provisions of this Interim Order 

shall govern. 

5.17 Objections Overruled. All objections to the entry of this Interim Order are 

(to the extent not withdrawn, waived, or settled) hereby overruled. 

5.18 Retention of Jurisdiction. The Court retains jurisdiction and power with 

respect to all matters arising from or related to the implementation or interpretation of this Interim 

Order, the DIP Term Sheet, and the other DIP Documents. 

Section 6. Final Hearing and Objection Deadline. 

The Final Hearing on the Motion pursuant to Bankruptcy Rule 4001(c)(2) is scheduled for 

[_], 2024 before the Court. The Debtors shall promptly mail copies of this Interim Order to the 

Noticed Parties, and to any other party that has filed a request for notices with the Court and to 

any Committee (if appointed) and such Committee’s counsel, if same shall have filed a request for 

notice. Such notice is deemed good and sufficient and that no further notice need be given. Any 

party in interest objecting to the relief sought at the Final Hearing shall serve and file written 

objections, which objections shall be served upon (i) proposed attorneys to the Debtors, (i) Vinson 

& Elkins LLP, 2001 Ross Avenue, Suite 3900, Dallas, TX 75201, Attn: Matthew D. Struble, and 

1114 Avenue of the Americas, 32nd Floor, New York, New York 10036, Attn: Lauren R. Kanzer; 

(ii) counsel to the DIP Secured Parties and Prepetition Secured Parties, Katten Muchin Rosenman 

LLP, 50 Rockefeller Plaza, New York, NY 10020, Attn: Cindi M Giglio and Lucy F. Kweskin; 

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(iii) counsel to the Committee (if appointed); and (iv) the Office of the United States Trustee for 

the Northern District of Texas, 1100 Commerce Street, Room 976, Dallas, Texas 75242, 

Attn: Meredyth Kippes and shall be filed with the Clerk of the United States Bankruptcy Court 

for the Northern District of Texas, in each case, to allow actual receipt of the foregoing no later 

than ten (10) days prior to the Final Hearing. 

# # # End of Order # # # 

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4889-9030-5723 

Order submitted by: 

VINSON & ELKINS LLP 

William L. Wallander (Texas Bar No. 20780750) 

Matthew D. Struble (Texas Bar No. 24102544) 

Kiran Vakamudi (Texas Bar No. 24106540) 

2001 Ross Avenue, Suite 3900 

Dallas, TX 75201 

Tel: 214.220.7700 

Fax: 214.999.7787 

bwallander@velaw.com 

mstruble@velaw.com 

kvakamudi@velaw.com 

- and – 

David S. Meyer (pro hac vice pending) 

Lauren R. Kanzer (pro hac vice pending) 

1114 Avenue of the Americas, 32nd Floor 

New York, NY 10036 

Tel: 212.237.0000 

Fax: 212.237.0100 

dmeyer@velaw.com; 

lkanzer@velaw.com 

PROPOSED ATTORNEYS FOR 

THE DEBTORS AND DEBTORS IN POSSESSION

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EXHIBIT A 

DIP Term Sheet

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KIDKRAFT, INC. 

Priming Superpriority Debtor-In-Possession Financing 

Term Sheet 

Dated as of April 25, 2024 

This Priming Superpriority Debtor-in-Possession Financing Term Sheet (including all schedules, 

annexes and exhibits hereto, this “Term Sheet”) describes the principal terms and conditions of a 

proposed DIP Facility to be provided by the DIP Lender to the Borrower in connection with cases 

(collectively, the “Chapter 11 Cases”) to be filed by the Debtors in the United States Bankruptcy 

Court for the Northern District of Texas (the “Bankruptcy Court”) pursuant to chapter 11 of title 

11 of the United States Code (as amended, the “Bankruptcy Code”) on or around May 6, 2024 

(the date of filing, the “Petition Date”) and proceedings to be commenced pursuant to Part IV of 

the Companies’ Creditors Arrangement Act (Canada) (“CCAA” and the related recognition 

proceedings, the “CCAA Recognition Proceedings”) in the Ontario Superior Court of Justice 

(Commercial List) (the “CCAA Court”). 

The parties contemplate the sale of the Debtors’ assets to Backyard Products, LLC or its designee 

(the “Backyard Sale”) pursuant to that certain Asset Purchase Agreement (the “APA”) dated as 

of the date hereof between KidKraft, Inc., and certain of its affiliates and Backyard Products, LLC 

(the “Purchaser”) and an orderly wind down pursuant to a chapter 11 plan (the “Plan”) to be 

consummated in the Chapter 11 Cases pursuant to that certain Restructuring Support Agreement 

to which this Term Sheet is attached (the “RSA”) and the Plan Term Sheet attached thereto 

(the “Plan Term Sheet”). 

This Term Sheet is being provided on a confidential basis and it, along with its contents and 

existence, may not be distributed, disclosed or discussed with any other party. This Term Sheet is 

not an offer for the purchase, sale or subscription or invitation of any offer to buy, sell or to 

subscribe for any securities. The terms and conditions set forth in this Term Sheet do not constitute 

or create an agreement, obligation or commitment of any kind by or on behalf of any party, unless 

and until executed by each of the undersigned parties hereto. 

BORROWER: KidKraft, Inc. (“KidKraft” or “Borrower”) 

GUARANTORS: The affiliates of KidKraft listed on Schedule 1 hereto (such 

affiliates and KidKraft, Inc., each a “Debtor” and 

collectively, the “Debtors”), as may be modified with the 

consent of the DIP Agent and any additional guarantor. 

DIP LENDER: 1903 Partners, LLC (the “DIP Lender”) 

DIP AGENT: GB Funding, LLC (the “DIP Agent”, and together with the 

DIP Lender, the “DIP Secured Parties”) 

DIP COMMITMENT: The DIP Lender agrees to make senior secured superpriority 

priming debtor-in-possession loans (each, a “DIP Loan” and 

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4883-5905-5795 

in the aggregate, the “DIP Loans”) to Borrower from time to 

time pursuant to a multi-draw debtor-in-possession term loan 

facility (the “DIP Facility”) in an aggregate amount (i) not to 

exceed at any time outstanding aggregate commitments of 

$10.5 million (the “DIP Commitment”) consisting of a $4.0 

million DIP Commitment as of the Interim Closing Date 

(the “Interim Commitment”) and an incremental $6.5 

million DIP Commitment as of the Final Closing Date 

(the “Final Commitment”) plus (ii) the Roll-Up Amount. 

PURCHASE PRICE 

CALCULATION: 

Every Wednesday beginning the first full calendar week 

following the Petition Date, the Debtors shall deliver an 

updated calculation of the “Purchase Price at close” in 

accordance with Exhibit B of the APA as though the 

Backyard Sale was closing on such date (each such 

calculation, a “Purchase Price Calculation”) to the DIP 

Agent and the Purchaser. If the aggregate “Purchase Price at 

close” in any such Purchase Price Calculation is 20% or more 

below the Example Purchase Price Calculation set forth in the 

Exhibit B of the APA, it shall be deemed a “Negative 

Purchase Variance.” 

ROLL UP: Upon entry of the Interim Order, $23.3 million of the 

Prepetition Obligations shall be “rolled up” and converted 

into DIP Loans on a dollar-for-dollar cashless basis (the 

“Roll-Up Amount”). 

CASH COLLATERAL: “Cash Collateral” consists of: (i) cash collateral (as such term is 

defined in section 363(a) of the Bankruptcy Code, including, 

without limitation, any accounts receivable and general 

intangible and any other cash or right that would be included in 

such definition of “cash collateral” within the meaning of 

section 363(a) of the Bankruptcy Code) including, without 

limitation, all cash or cash equivalents and other amounts, 

including the cash in any deposit or securities accounts, 

wherever located; (ii) any cash or cash equivalents received as 

proceeds of Prepetition Collateral or DIP Collateral; and (iii) all 

other cash or cash equivalents of the Debtors. 

Subject to the terms of the DIP Documents, the Prepetition 

Secured Parties (as defined below) shall consent to the Debtors’ 

use of Cash Collateral during the Chapter 11 Cases and CCAA 

Recognition Proceedings to fund (i) working capital, 

(ii) general corporate purposes, (iii) restructuring costs and 

expenses, and (iv) any other fees required under the DIP 

Documents and the other definitive documentation during the 

pendency of the Chapter 11 Cases and CCAA Recognition 

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Proceedings, in each case, subject to the Approved Budget (as 

defined below), including the Permitted Variances. 

To the extent any amounts required to be funded under this 

Term Sheet, the DIP Documents, the RSA, the Plan, or the 

APA or any other document or order (including the 

Administrative Expense Claim,Priority Tax Claim, and Other 

Priority Claim Backstop Amount, Post-Sale Reserve, and 

Foreign Sale Reserve) are not actually expended, such 

amounts shall be deemed Cash Collateral and distributed to 

the DIP Agent or Prepetition Agent, as applicable.

CLOSING DATES: “Interim Closing Date” means the date on which the 

“Conditions Precedent to Each Interim DIP Loan” (including, 

without limitation, entry of the Interim Order) are satisfied or 

waived in accordance with this Term Sheet. 

“Final Closing Date” means the date on which the 

“Conditions Precedent to Each Final DIP Loan” as set forth 

below (including, without limitation, entry of the Final Order) 

shall have been satisfied or waived in accordance with this 

Term Sheet. 

DIP LOAN 

DOCUMENTATION: 

At the option of the DIP Lender in its sole discretion, Debtors 

shall execute definitive financing documentation with respect 

to the DIP Loans, including, without limitation, all guaranties 

thereof, satisfactory in form and substance to each of the DIP 

Lender and Debtors (and together with this Term Sheet and 

other documents governing the DIP Facility, the “DIP 

Documents”). The provisions of the DIP Documents shall, 

upon execution, supersede the provisions of this Term Sheet. 

The provisions of the DIP Documents shall be substantially 

the same as the Prepetition Loan Documents with such 

changes as are necessary to reflect the terms of this Term 

Sheet, the DIP Orders and the Canadian DIP Recognition 

Orders (once entered). 

“Canadian DIP Recognition Orders” shall mean, as 

applicable, an order (after hearing on notice to all parties 

having or asserting a lien on all or any portion of the DIP 

Collateral situated in Canada), recognizing and giving effect 

in Canada to: (i) the Interim Order (the “Interim DIP 

Recognition Order,” and together with the Interim Order, the 

“Interim Orders”), and (ii) the Final Order (the “Final DIP 

Recognition Order” and together with the Final Order, the 

“Final Orders”). 

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In addition to the provisions set forth herein, the DIP Orders 

and the Canadian DIP Recognition Orders shall contain 

additional customary protections for the DIP Lenders. Each 

of the parties’ rights and obligations hereunder shall be 

subject to entry of the DIP Orders and the Canadian DIP 

Recognition Orders. 

ACKNOWLEDGMENT; 

RATIFICATION: 

Each Debtor hereby acknowledges, confirms, and agrees that: 

(i) as of the Petition Date, the Debtors are jointly and 

severally indebted under and in connection with that certain 

Amended and Restated First Lien Credit Agreement dated as 

of April 3, 2020, among KidKraft and KidKraft Netherlands 

B.V. as borrowers, KidKraft Intermediate Holdings, LLC 

(“Holdings”), the subsidiaries of Holdings that are guarantors 

thereto (collectively, with Holdings, the “Guarantors”) GB 

Funding, LLC in its capacity as administrative agent and 

collateral agent (the “Prepetition Agent”), and 1903 

Partners, LLC in its capacity as Lender (the “Prepetition 

Secured Lender”, and together with the Prepetition Agent, 

the “Prepetition Secured Parties”) (as may be amended, 

supplemented or otherwise modified from time to time, the 

“Prepetition Credit Agreement”, and together with all 

related security agreements, collateral agreements, pledge 

agreements, control agreements, guarantees, the “Prepetition 

Loan Documents”) in the aggregate principal amount of not 

less than $144.9 million (together with any other amounts 

outstanding under the Prepetition Credit Agreement, 

including interest costs, expenses, indemnification 

obligations, and fees (including attorneys’ fees and legal 

expenses) (collectively, the “Prepetition Obligations”));

(ii) the Prepetition Obligations constitute the legal, valid and 

binding obligations of each Debtor enforceable against it in 

accordance with the terms thereof, and each Debtor has no 

valid defense, offset or counterclaim to the enforcement of 

such obligations; 

(iii) the Prepetition Obligations are secured by valid, 

enforceable and perfected (except, in the case of perfection, 

for (A) Excluded Accounts and (B) commercial tort claims, 

letter of credit rights, certificate of title vehicles, and other 

assets, in each case of this clause (B), to the extent expressly 

excluded from the requirement to perfect liens thereon 

pursuant to the Prepetition Loan Documents) first priority and 

senior security interests in and liens (subject in priority only 

to those “Liens” permitted under Section 7.01 of the 

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Prepetition Credit Agreement (the “Prepetition Permitted 

Liens”) and the DIP Liens) upon all of the Debtors’ assets 

and property other than Excluded Assets, Excluded 

Receivables and Consumer Goods (as each such term is 

defined in the Prepetition Credit Agreement) (collectively, the 

“Prepetition Collateral”), including Cash Collateral; 

(iv) each of the Prepetition Loan Documents to which it is a 

party was duly executed and delivered by such Debtor, and 

each is in full force and effect as of the date hereof; 

(v) the Prepetition Secured Parties are and shall be entitled to 

all of the rights, remedies and benefits provided for in the 

Prepetition Loan Documents and the DIP Orders; and 

(vi) all of the terms and conditions of the Prepetition Loan 

Documents, as amended and supplemented pursuant hereto 

and pursuant to the DIP Orders and the Canadian DIP 

Recognition Orders, are ratified, restated, assumed, adopted 

and affirmed, and each Debtor agrees (a) to be fully bound, as 

debtor and debtor-in-possession, by the terms of the 

Prepetition Loan Documents to which such Debtor is a party, 

(b) to pay all of the Prepetition Obligations in accordance 

with the terms of such Prepetition Loan Documents and in 

accordance with the DIP Orders, and (c) each of the 

Prepetition Loan Documents are hereby incorporated herein 

by reference and hereby are and shall be deemed adopted and 

assumed in full by each Debtor, each as Debtor and debtor-inpossession, and considered as agreements between such 

Debtor, on the one hand, and the Prepetition Secured Parties 

on the other hand. 

The Interim Order and Final Order shall include typical 

acknowledgments regarding the validity and priority of the 

Prepetition Secured Parties and Prepetition Obligations. 

CHALLENGE PERIOD: The “ACKNOWLEDGMENT; RATIFICATION” section of 

this Term Sheet and portion of the “RELEASES” sections of 

this Term Sheet pertaining to the Prepetition Obligations, 

Prepetition Loan Documents, and Prepetition Secured Parties 

shall be subject to a typical “challenge period” (the 

“Challenge Period”) to be set forth in the Interim Order and 

Final Order, which Challenge Period shall expire prior to the 

date that the Plan is confirmed by the Bankruptcy Court. 

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CARVE-OUT: “Carve-Out” shall mean the sum of: 

(i) all fees required to be paid to the Clerk of the Court and to 

the U.S. Trustee under section 1930(a) of title 28 of the 

United States Code plus interest at the statutory rate; 

(ii) all reasonable fees and expenses up to $50,000 incurred 

by a trustee under section 726(b) of the Bankruptcy Code; 

(iii) to the extent allowed at any time, whether by interim 

order, procedural order, or otherwise all unpaid fees, costs, 

disbursements and expenses (the “Allowed Professional 

Fees”) incurred or earned by persons or firms retained by the 

Debtors pursuant to sections 327, 328, or 363 of the 

Bankruptcy Code (the “Debtor Professionals”) and the 

Committee (if any) pursuant to sections 328 or 1103 of the 

Bankruptcy Code (the “Committee Professionals,” and, 

together with the Debtor Professionals, the “Professional 

Persons”) at any time on or before the first business day 

following delivery by the DIP Lender to the Debtors of a 

Carve-Out Trigger Notice (as defined in the Interim Order 

and Final Order), but shall not include any restructuring, sale, 

transaction or other “success” fee except for such fee earned 

by Robert W. Baird & Co. Inc. in its capacity as investment 

banker to the Debtors during such time; 

(a) Commencing on the Friday of the first full calendar 

week following the Petition Date and on a weekly basis 

thereafter, the DIP Secured Parties shall loan and the 

Debtors shall fund, using borrowings from the DIP 

Facility or cash on hand, a segregated account (the 

“Funded Reserve Account”) held by the Debtors in trust 

for the benefit of the Debtor Professionals in an amount 

equal to the amount of applicable Professional Fees set 

forth in the Approved Budget, subject to the objection 

procedures herein in the “Debtor Professional Budget and 

Reporting” section. 

(iv) Allowed Professional Fees of the Professional Persons in 

an aggregate amount not to exceed $150,000 accrued after the 

first business day following delivery by the DIP Agent of a 

Carve-Out Trigger Notice, to the extent allowed at any time, 

whether by interim order, procedural order, final order, or 

otherwise; and 

(v) an amount up to the amount secured by and necessary to 

fund the Administration Charge (as defined below) for the 

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beneficiaries thereof (without duplication) in the CCAA 

Recognition Proceedings. 

USE OF PROCEEDS: Proceeds of the DIP Loans (and Cash Collateral) will be used 

solely in accordance with the Approved Budget (as defined 

below) for (a) working capital and general corporate purposes 

of the Debtors, (b) restructuring costs and expenses, (c) costs 

and expenses related to the DIP Facility, (d) payment of 

interest on the DIP Loans, and (e) other costs to ensure 

consummation of the Plan. 

Neither proceeds of the DIP Loans nor any Cash Collateral 

shall be used (i) to permit the Borrower, the Guarantors or 

any other party-in-interest or any of their representatives to 

challenge or otherwise contest or institute any proceeding to 

determine (x) the validity, perfection or priority of security 

interests in favor of any of the DIP Secured Parties or the 

Prepetition Secured Parties, or (y) the enforceability of the 

obligations of the Debtors under the DIP Documents or the 

Prepetition Loan Documents, (ii) to investigate, commence, 

prosecute or defend any claim, motion, proceeding or cause 

of action against any of the DIP Secured Parties or the 

Prepetition Secured Parties, each in such capacity, and their 

respective agents, attorneys, advisors or representatives. 

APPROVED BUDGET; 

APPROVED CASH FLOW 

PROJECTION; AND 

VARIANCE REPORTS: 

By no later than two (2) Business Days before the Petition 

Date, Debtors shall deliver to the DIP Lender a weekly 

budget for the 9-week period commencing on the Petition 

Date, and such weekly budget shall be approved by the DIP 

Lender and the Purchaser (such consent, which shall not be 

unreasonably withheld, conditioned, or delayed, other than 

line items of the budget pertaining to the Reimbursement 

Amounts (as defined in the APA) or which impact the 

Purchase Price (as defined in the APA), for which such 

consent shall be in the discretion of the Purchaser) and shall 

set forth, among other things, all projected cash receipts, 

sales, and cash disbursements, a copy of which is attached as 

Exhibit A hereto (the “Approved Budget”). 

Commencing on the Monday of the first full calendar week 

after the Petition Date at 5:00 p.m. (Central Time) and 

continuing on the two (2)-week anniversary thereafter (or 

such other time as the Debtors may elect with the consent of 

the DIP Lender), the weekly budget shall be updated, and if 

such updated budget is in form and substance satisfactory to 

the DIP Lender and the Purchaser (such consent, which shall 

not be unreasonably withheld, conditioned, or delayed, other 

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than line items of the budget pertaining to the Reimbursement 

Amounts or which impact the Purchase Price, for which such 

consent shall be in the discretion of the Purchaser), it shall 

become the “Approved Budget” for purposes of this Term 

Sheet and the DIP Orders. Commencing on the Wednesday 

of the first full calendar week after the Petition Date at 5:00 

p.m. (Central Time), and on a weekly basis thereafter (or at 

such other times as the Debtors may elect with the consent of 

the DIP Lender) the Debtors shall deliver to the DIP Lender a 

variance report in form and substance reasonably acceptable 

to the DIP Lender (an “Approved Variance Report”) 

showing comparisons of actual results for each line item 

against such line item in the Approved Budget. Thereafter, 

Debtors shall deliver to the DIP Lender, an Approved 

Variance Report on a weekly basis for (a) the preceding 

week, and (b) the trailing four (4) week period (or, if fewer 

than four (4) weeks have lapsed since the Petition Date, then 

for the trailing one, two or three week period, as applicable). 

Each Approved Variance Report shall indicate whether there 

are any adverse variances that exceed any of the Permitted 

Variances. 

“Permitted Variances” shall mean variances: (a) up to 15% 

of the aggregate for all cash disbursements (other than fees 

and expenses of counsel to the DIP Secured Parties and 

Professional Persons) line-items in the Approved Budget, 

(b) less than 20% of the aggregate for all cash receipts in the 

Approved Budget, and (c) up to 15% of all fees and expenses 

incurred on a per-Professional Person basis (the 

“Professional Fee Variance”) in each case calculated weekly 

on a rolling four (4) week basis commencing as of the 

Petition Date, with the first such testing to begin three (3) 

weeks from the Petition Date, except that the Professional Fee 

Variance shall be calculated weekly and not on a rolling four 

(4) week basis. Any amendments, supplements or 

modifications to the Approved Budget or an Approved 

Variance Report shall be subject to the prior written approval 

of the DIP Lender in its sole discretion prior to the 

implementation thereof. 

Other than as set forth below in the “Debtor Professional 

Budgeting and Reporting” section of this term sheet, if any 

Professional Person exceeds the Professional Fee Variance, 

such Professional Person will, if requested by the DIP Lender 

within two (2) Business Days of receipt of such adverse 

variance report, make a representative available to meet and 

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confer with the DIP Lender as soon as practicable and no later 

than two (2) Business Days after delivery of such Approved 

Variance Report, to discuss a good faith modification to the 

Approved Budget (the “Meet and Confer”). If the DIP 

Lender and such Professional Person cannot mutually agree 

on a modification following the Meet and Confer, the DIP 

Lender may, in its sole discretion, declare an Event of 

Default, consistent with the provisions herein. 

To the extent the amount of actual fees and expenses of any 

Professional Person is less than the amount set forth in the 

Approved Budget on a weekly basis, such amount for such 

Professional Person may be rolled forward to increase the 

amount available to the applicable Professional Person in any 

subsequent week. 

DEBTOR 

PROFESSIONAL 

BUDGETING AND 

REPORTING 

Notwithstanding anything to the contrary herein, the 

following requirements shall apply to each Debtor 

Professional. 

(i) Commencing on the Monday of the first full calendar week 

after the Petition Date and continuing weekly thereafter, each 

Debtor Professional shall submit a report of the prior week’s 

accrued fees and expenses to the DIP Agent (the “Debtor 

Professional Report”). 

(ii) The DIP Agent shall review the Debtor Professional 

Reports, may test the accrued fees and expenses in the Debtor 

Professional Report against the Professional Fee Variance, 

and must submit a written objection (if any) to the applicable 

Debtor Professional no later than two (2) Business Days 

following delivery of the Debtor Professional Report 

(the “Review Period”). 

(a) If the DIP Agent does not submit a written objection at 

the close of the Review Period, the Debtors shall fund the 

full amount of accrued fees and expenses in such Debtor 

Professional Report into the Funded Reserve Account. 

(b) If the DIP Agent submits a written objection to the 

Debtor Professional Report prior to the end of the Review 

Period, the DIP Agent and the applicable Debtor 

Professional shall conduct a Meet and Confer within two 

(2) Business Days. 

(c) At the conclusion of the Meet and Confer, if the DIP 

Agent elects to declare an Event of Default, the Debtors 

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shall only fund an amount not to exceed 150% of such 

Debtor Professional’s budgeted amount as set forth in the 

Approved Budget for the period covered by such Debtor 

Professional Report. For the avoidance of doubt, any 

Event of Default or other action taken by the DIP Agent 

shall not impact any amounts previously funded in the 

Funded Reserve Account in compliance with the 

procedures herein. 

For the avoidance of doubt, the DIP Agent’s request for a 

Meet and Confer shall not (in and of itself absent an Event of 

Default declaration) impact any terms of the DIP 

Documentation, including any subsequent reporting and 

testing as set forth herein, nor the DIP Secured Parties’ 

obligations to loan and the Debtors’ obligations to fund the 

Funded Reserve Account in accordance with the DIP Term 

Sheet after a Meet and Confer is requested.

ADMINISTRATIVE 

EXPENSE CLAIM, 

PRIORITY TAX CLAIM, 

AND OTHER PRIORITY 

CLAIM BACKSTOP 

AMOUNT: 

The amount, to be agreed upon by the Debtors and both the 

DIP Lender and Backyard Products, LLC, each in its sole 

discretion, and funded by cash on hand of the Debtors and the 

proceeds of the DIP Facility prior to the Confirmation Date, 

sufficient to satisfy the agreed upon estimated amount of the 

Allowed Administrative Expense Claims, Allowed Priority 

Tax Claims, and Allowed Other Priority Claims excluding 

Allowed Professional Fee Claims; provided, that in no event 

will the DIP Lender’s obligation to provide such funding 

exceed the Administrative Expense Claim, Priority Tax 

Claim, and Other Priority Claim Backstop Amount (as 

defined and set forth in the Plan). 

FIRST PRIORITY 

SECURITY INTEREST: 

All DIP Loans and other liabilities and obligations of Debtors 

to the DIP Secured Parties under or in connection with this 

Term Sheet, the DIP Documents, and the DIP Orders 

(collectively, the “DIP Obligations”) shall be: 

(i) pursuant to section 364(c)(1) of the Bankruptcy Code, 

constitute an allowed superpriority administrative expense 

claim (the “DIP Superpriority Claim”) in the Chapter 11 

Cases of the Debtors with priority over any and all 

administrative expenses, whether heretofore or hereafter 

incurred, of the kind specified in sections 503(b) or 507(a) of 

the Bankruptcy Code but shall be subject to the Carve-Out 

and, shall be payable from the proceeds of DIP Collateral; 

(ii) pursuant to sections 364(c)(2), secured by a perfected first 

priority lien on the DIP Collateral, to the extent that such DIP 

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Collateral is not subject to valid, perfected, and non-avoidable 

liens as of the Petition Date (but in all cases subject to the 

Carve-Out); 

(iii) pursuant to section 364(c)(3), secured by a perfected 

junior lien on DIP Collateral (as defined below), to the extent 

such DIP Collateral is subject to a Permitted Lien; 

(iv) pursuant to section 364(d) of the Bankruptcy Code, 

secured by the DIP Liens, which shall constitute a perfected, 

senior secured superpriority priming security interest and lien 

on the DIP Collateral (but in all cases subject to the CarveOut); and 

(v) pursuant to the Canadian DIP Recognition Orders, secured 

by a super-priority CCAA Court-ordered charge upon DIP 

Collateral which is property of a Debtor formed under the 

laws of Canada (the “Canadian Debtors”) or DIP Collateral 

situated in Canada (all such collateral, the “Canadian 

Collateral”). 

For clarity, all existing liens, including the liens granted in 

connection with the Prepetition Loan Documents shall be 

primed and made subject to and subordinate to the DIP Liens. 

The DIP Liens shall not be pari passu with or subordinated to 

any other liens or security interests (whether currently 

existing or hereafter created), except (i) the Carve-Out, (ii) 

such liens or interests expressly agreed upon in writing by the 

DIP Agent in its sole discretion, (iii) with respect to the 

Canadian Collateral, (A) the super-priority administration 

charge to be established by the CCAA Court on the Canadian 

Collateral in the Supplemental Order (Foreign Main 

Proceeding) as security for the professional fees and 

disbursements of Canadian counsel to the Debtors, the 

information officer appointed by the CCAA Court in the 

CCAA Recognition Proceedings (the “Information Officer”) 

and legal counsel to the Information Officer incurred in 

respect of the CCAA Recognition Proceedings in an amount 

not to exceed C$750,000 (the “Administration Charge”), 

and (B) the super-priority charge to be established by the 

CCAA Court on the Canadian Collateral in the Supplemental 

Order (Foreign Main Proceeding), securing an indemnity by 

KidKraft and the Canadian Debtors in favor of their directors 

and officers against certain Canadian obligations or liabilities 

that they may incur as directors and officers of KidKraft and 

the Canadian Debtors on or after the commencement of the 

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CCAA Recognition Proceedings in an amount not to exceed 

C$100,000 (the “Directors’ Charge, and together with the 

Administration Charge, the “Canadian Priority Charges”) 

or (iv) such priming liens or interests imposed by applicable 

non-bankruptcy law and disclosed to the DIP Agent prior to 

the entry of the Interim Order, are in existence as of the 

Petition Date, and otherwise unavoidable (collectively, the 

“Permitted Liens”). For the avoidance of doubt, the 

Permitted Liens shall not include any liens which are junior in 

priority to the liens held by the Prepetition Secured Parties.

GRANT OF SECURITY 

INTEREST: 

As collateral security for the prompt performance, 

observance, and payment in full of the DIP Obligations, each 

Debtor, as debtor and debtor-in-possession, hereby grants, 

pledges, and assigns to the DIP Agent, for the benefit of the 

DIP Lender, continuing security interests in and liens upon, 

and rights of setoff against, all of the DIP Collateral (the 

“DIP Liens”). 

As collateral security for the prompt performance, 

observance, and payment in full of the Adequate Protection 

Superpriority Claim (as defined below), each Debtor, as 

debtor and debtor-in-possession, hereby grants, pledges, and 

assigns to Prepetition Agent, for the benefit of the Prepetition 

Secured Lender, continuing security interests in and liens 

upon, and rights of setoff against, all of the DIP Collateral 

(the “Replacement Lien”). 

ADEQUATE 

PROTECTION: 

As adequate protection for any diminution of the Prepetition 

Secured Parties’ interest in the Prepetition Collateral resulting 

from the use of Cash Collateral, the subordination of their 

existing liens to the DIP Liens, and the imposition of the 

Carve-Out, the Prepetition Secured Parties shall receive: 

(i) pursuant to sections 361, 363(e), and 364(d)(l) of the 

Bankruptcy Code, the Replacement Lien, which shall be 

subject and subordinated only to the Carve-Out, the DIP 

Liens, and the Permitted Liens; 

(ii) an administrative expense claim, junior and subordinate 

only to the Carve-Out and the DIP Superpriority Claim with 

priority over any and all other administrative expenses (the 

“Adequate Protection Superpriority Claim”); and 

(iii) payment of all reasonable, documented out-of-pocket 

costs and expenses of the Prepetition Secured Parties relating 

to the DIP Facility, the Debtors’ Chapter 11 Cases, and the 

CCAA Recognition Proceedings (including, without 

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limitation, prepetition and post-petition reasonable and 

documented fees and disbursements of counsel and advisors).

Such adequate protection shall in all cases be subject to the 

Carve-Out and shall be entitled to the full protections of 

Section 507(b) of the Bankruptcy Code and shall be payable 

from Avoidance Actions upon entry of the Interim Order. 

The Prepetition Secured Parties reserve all rights with respect 

to additional adequate protection, including adequate 

protection payments substantially equal to interest on the 

Prepetition Obligations. 

DIP COLLATERAL: “DIP Collateral” means, collectively, all assets and property 

(whether tangible, intangible, real, personal or mixed), 

wherever located, whether now owned or owing to, or 

hereafter acquired by, or arising in favor of each Debtor and 

its respective chapter 11 estate, and any and all proceeds 

therefrom, including, without limiting the generality of the 

foregoing, all cash, Cash Collateral, accounts, accounts 

receivable, inventory, property, plant and equipment, real 

estate, leaseholds, equity interests, intellectual property, and 

upon entry of the Final Order, avoidance actions under 

chapter 5 of the Bankruptcy Code and proceeds thereof 

(collectively, the “Avoidance Actions”). 

For the avoidance of doubt, any amounts paid by Purchaser to 

the Debtors in the event of a breach or termination of the 

APA shall be Cash Collateral. 

The DIP Collateral shall also include any rents, issues, 

products, proceeds, and profits generated by any item of DIP 

Collateral, without the necessity of any further action of any 

kind or nature by the DIP Agent in order to claim or perfect 

such rents, issues, products, or proceeds. 

The Debtors shall take all action that may be reasonably 

necessary or desirable or that the DIP Agent may reasonably 

request, to at all times maintain the validity, perfection, 

enforceability and priority of the security interest and liens of 

the DIP Agent in the DIP Collateral, or to enable the DIP 

Agent to protect, exercise or enforce its rights hereunder, 

under the DIP Orders, the Canadian DIP Recognition Orders 

and in the DIP Collateral. 

DIP FEES: The Debtors shall pay the (A) DIP Lender (i) an origination 

fee of 2.00% of the DIP Commitment, which shall be fully 

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earned and non-refundable on the Interim Closing Date, and 

shall be paid from the proceeds of the initial funding of DIP 

Loans, and (ii) an exit fee of 2.00% of the DIP Commitment, 

which shall be fully earned and non-refundable upon 

consummation of the Plan and (B) the DIP Agent, a weekly 

administrative fee of $7,500. 

INTEREST RATE: The interest rate on the DIP Loans shall be a rate per annum 

equal to Adjusted Term SOFR for an Interest Period (as such 

terms are defined in the Prepetition Credit Agreement) of one 

month plus 8.50%. Interest shall be paid at the end of each 

Interest Period in cash, using Cash Collateral or proceeds of 

the DIP Loans. On the last day of each Interest Period the 

interest rate on the outstanding DIP Loans will be 

automatically deemed continued at Adjusted Term SOFR for 

an Interest Period of one month determined as of such date.

Interest shall be paid monthly on the DIP Loans in cash, using 

Cash Collateral or proceeds of the DIP Loans. 

DEFAULT RATE: At all times following the occurrence and during the 

continuance of an Event of Default, principal, interest and 

other amounts due on the DIP Loans shall bear interest at a 

rate equal to the “Interest Rate” section above plus 3.00%. 

MATURITY DATE: The DIP Loans (together with all other DIP Obligations) shall 

mature and be due and payable on the earliest to occur of the 

following (such date, the “Maturity Date”): 

(i) the date that is sixty (60) days after the Petition Date (the 

“Outside Date”), which may be extended in the sole 

discretion of the DIP Lender; 

(ii) the date which is thirty (30) days following the entry of 

the Interim Order if the Bankruptcy Court has not entered the 

Final Order on or prior to such date; 

(iii) the date of the Debtors’ receipt of notice of the 

acceleration of any of the DIP Loans and the termination of 

the commitments to make the DIP Loans resulting from the 

occurrence of an Event of Default (including, without 

limitation, the failure to meet any Chapter 11 Milestone set 

forth in the RSA (collectively, the “Chapter 11 

Milestones”)); 

(iv) the effective date of the Plan; 

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(v)a sale of all or substantially all of the Debtors’ assets is 

consummated under Section 363 of the Bankruptcy Code 

(which for the avoidance of doubt shall include the Backyard 

Sale after the occurrence of the Sale Toggle (as defined in the 

Plan Term Sheet)); and 

(vi) the filing of a motion by the Debtors seeking dismissal or 

termination of any or all of the Chapter 11 Cases or the 

CCAA Recognition Proceedings, the dismissal or termination 

of any or all of the Chapter 11 Cases or the CCAA 

Recognition Proceedings, the filing of a motion by the 

Debtors seeking to convert any or all of the Chapter 11 Cases 

to a case under chapter 7 of the Bankruptcy Code, the 

conversion of any or all of the Chapter 11 Cases to a case 

under chapter 7 of the Bankruptcy Code or entry of an order 

appointing a trustee under chapter 11 of the Bankruptcy Code, 

a responsible officer or examiner with enlarged powers 

relating to the operation of the Debtors’ business (powers 

beyond those set forth in section 1106(a)(3) and (4) of the 

Bankruptcy Code) under section 1106 of the Bankruptcy 

Code, the making of an assignment in bankruptcy by or entry 

by any Canadian court of a bankruptcy order in respect of any 

of the Debtors under the Bankruptcy and Insolvency Act 

(Canada) (“BIA”), or the entry of an order of any Canadian 

court appointing a receiver under the BIA over any DIP 

Collateral, in each case without the prior written consent of 

the DIP Agent. 

OPTIONAL 

PREPAYMENTS: 

The Debtors may prepay the DIP Loans in whole or in part at 

any time without premium or penalty. All optional 

prepayments shall be applied to the DIP Loans in accordance 

with the Prepayment Waterfall set forth below. Any amounts 

so prepaid may not be reborrowed. 

MANDATORY 

PREPAYMENTS; 

APPLICATION OF 

PREPAYMENTS: 

The Debtors shall pay or prepay the DIP Loans and all other 

DIP Obligations (together with a cash reserve established for 

the benefit of the DIP Agent to cover asserted contingent and 

indemnity obligations) in accordance with the Prepayment 

Waterfall, in each case after funding the Carve-Out, reserving 

proceeds sufficient to pay accrued and unpaid expenses to the 

extent set forth in the Approved Budget, and reserving for 

amount secured by and necessary to fund the Canadian 

Priority Charges (without duplication), upon receipt of any of 

the following (each, a “Mandatory Prepayment Event”): 

(i) net proceeds of any sale or disposition of all or 

substantially all of Debtors’ assets pursuant to section 363 of 

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the Bankruptcy Code simultaneous with the consummation 

thereof, other than the Backyard Sale. 

(ii) net proceeds of any other sale or other disposition by any 

Debtor of any assets, in a single transaction or series of 

related transactions, having a value in excess of $10,000 

(except for the sale of goods or services in the ordinary course 

of business, sales contemplated by the Approved Budget, and 

certain other sales to be agreed on); and 

(iii) 100% of the net proceeds of extraordinary receipts 

(including tax refunds, indemnity payments, pension 

reversions, acquisition purchase price adjustments and 

insurance proceeds not included as proceeds of asset 

dispositions) by any Debtor, excluding any tax refunds 

contemplated to be received by any of the Debtors as set forth 

in the Approved Budget. 

Any amounts so paid or prepaid may not be reborrowed. No 

reinvestment of the proceeds of any extraordinary receipts, 

asset sales or other proceeds described above shall be 

permitted without the prior written consent of the DIP Lender. 

All payments or prepayments and proceeds of DIP Collateral 

received by the Debtors outside the ordinary course of 

business (other than the Backyard Sale) will be applied in the 

following order of priority (the “Prepayment Waterfall” 

(unless otherwise determined by the DIP Lender in its sole 

discretion)), in each case after funding the Carve-Out, 

reserving proceeds sufficient to pay accrued and unpaid 

expenses to the extent set forth in the Approved Budget, and 

reserving for amount secured by and necessary to fund the 

Canadian Priority Charges (without duplication): 

(i) first, to pay all reasonable documented out-of-pocket 

expenses of the DIP Secured Parties (including, without 

limitation, reasonable and documented out-of-pocket fees and 

expenses of counsel and external advisors); 

(ii) second, to pay an amount equal to all accrued and unpaid 

interest (including, without limitation, any interest that 

accrued and was “paid in kind”) owing to the DIP Secured 

Parties; 

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(iii) third, to repay any principal amounts outstanding in 

respect of the DIP Loans (including any amounts, other 

interest, that have been added to the principal balance); and 

(iv) fourth, all other amounts owing to the DIP Secured 

Parties. 

Proceeds from the Backyard Sale shall be distributed in 

accordance with the Plan. 

INDEFEASIBLE 

PAYMENT: 

All payments made to or for the benefit of any of the DIP 

Secured Parties or Prepetition Secured Parties after the 

Petition Date shall be indefeasible and shall not be subject to 

disgorgement, counterclaim, set-off, subordination, 

recharacterization, defense, disallowance, recovery or 

avoidance by any party for any reason. 

CONDITIONS 

PRECEDENT TO EACH 

INTERIM DIP LOAN: 

The obligations of the DIP Lender to make any Interim DIP 

Loans will be subject to satisfaction, or written waiver, by the 

DIP Lender in its sole and absolute discretion, of each of the 

following conditions precedent in connection with each draw 

request: 

(i) DIP Agent shall have received a request in writing in form 

approved by DIP Agent, in each case signed by Borrower, not 

later than 5:00 p.m. New York time (or such later time as DIP 

Agent may consent to in its discretion) three (3) business days 

prior to the date of the proposed borrowing of such Interim 

DIP Loan; 

(ii) Debtors shall have timely delivered to the DIP Lender the 

Approved Budget or any update thereto required to be 

delivered in accordance with this Term Sheet; 

(iii) Debtors shall have delivered to the DIP Agent a Closing 

Certificate, duly executed by the chief executive officer, 

president, or chief financial officer of the Borrower and 

appropriately completed, by which such officer shall certify 

to the DIP Agent all of the conditions precedent to the Interim 

DIP Loans have been satisfied (at any time delivered, a 

“Closing Certificate”); 

(iv) the Debtor shall have delivered all Purchase Price 

Calculations as required hereunder, and there shall have been 

no Negative Purchase Variances; 

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(v) Debtors shall be in compliance with and satisfied the 

applicable Chapter 11 Milestones; 

(vi) the interim order has been entered by the Bankruptcy 

Court (after a hearing on notice to all parties having or 

asserting a lien on all or any portion of the DIP Collateral) 

and shall not have been reversed, modified, amended, stayed 

or vacated, or in the case of any modification or amendment, 

in a manner without the consent of the DIP Lender (the 

“Interim Order”), and the Debtors shall be in compliance in 

all respects with the Interim Order; 

(vii) the DIP Lender shall be satisfied that the DIP Liens 

have been properly perfected and shall constitute first-priority 

liens (subject only to Permitted Liens); 

(viii) all reasonable, documented fees and out-of-pocket 

expenses of the DIP Secured Parties relating to the DIP 

Facility (including, without limitation, the reasonable, 

documented fees and out-of-pocket expenses of their counsel 

and external advisors) shall have been paid in full to the 

extent invoiced at least two (2) business days prior; 

(ix) Debtors shall have insurance (including, without 

limitation, commercial general liability and property 

insurance) with respect to the DIP Collateral in such amounts 

and scope as is customary for companies similarly-situated to 

the Debtors and otherwise reasonably acceptable to the DIP 

Agent, and the DIP Agent shall have received additional 

insured and loss payee endorsements, as applicable, with 

respect thereto, in form and substance reasonably acceptable 

to the DIP Agent; 

(x) the DIP Agent shall have received the results of a recent 

lien, tax, and judgment search in each relevant jurisdiction 

with respect to Debtors, and such search shall reveal no liens 

on any of the assets of Debtors other than Permitted Liens and 

Permitted Prepetition Liens; 

(xi) no Event of Default shall have occurred and be 

continuing on the Interim Closing Date, or after giving effect 

to the Interim DIP Loan; 

(xii) all representations and warranties of the Debtors 

hereunder shall be true and correct in all material respects; 

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(xiii) subject to Bankruptcy Court approval, (i) each Debtor 

shall have the corporate power and authority to make, deliver 

and perform its obligations under this Term Sheet and the 

Interim Order, and (ii) no consent or authorization of, or filing 

with, any person (including, without limitation, any 

governmental authority) shall be required in connection with 

the execution, delivery or performance by each Debtor, or for 

the validity or enforceability in accordance with its terms 

against such Debtor, of this Term Sheet and the Interim 

Order, except for consents, authorizations and filings which 

shall have been obtained or made and are in full force and 

effect, relating to the CCAA Recognition Proceedings, or, the 

failure to obtain or perform, could not reasonably be expected 

to cause a Material Adverse Change; 

(xiv) no Material Adverse Change shall have occurred; 

(xv) each of the non-Debtor borrower and the non-Debtor 

guarantors under the Prepetition Loan Documents shall have 

executed a reaffirmation and ratification agreement ratifying 

and confirming its obligations under each of the Prepetition 

Loan Documents to which it is a party and each grant of a 

security interest contained therein, which agreement shall be 

in form and substance acceptable to the Prepetition Secured 

Parties; 

(xvi) DIP Agent shall have received, such certificates of 

good standing (to the extent such concept exists) from the 

applicable secretary of state (or equivalent) of the state (or 

other jurisdiction) of organization of each Debtor, certificates 

of resolutions or other corporate or limited liability company 

action, incumbency certificates and/or other certificates of 

responsible officers of each Debtor as the DIP Agent may 

reasonably require evidencing the identity, authority and 

capacity of each responsible officer thereof authorized to act 

as a responsible officer in connection with this DIP Term 

Sheet and the other DIP Documents to which such Debtor is a 

party or is to be a party on the Interim Closing Date and 

certifying the organization documents of each Debtor; and 

(xvii) the DIP Secured Parties shall have received such other 

information and/or deliverables as they may reasonably 

require or request consistent with the Prepetition Loan 

Documents. 

“Material Adverse Change” means a material adverse effect 

on and/or material adverse developments arising after the 

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Petition Date with respect to (i) the business operations, 

properties, assets, or financial conditions of the Debtors and 

their subsidiaries taken as a whole; (ii) the validity, perfection 

or priority of the DIP Liens granted by the Borrower and the 

Guarantors in favor of the DIP Secured Parties, (iii) the rights, 

remedies and benefits available to, or conferred upon, the DIP 

Secured Parties, taken as a whole; provided that the filing and 

administration of the Chapter 11 Cases and the CCAA 

Recognition Proceedings and related events shall not 

constitute a Material Adverse Change, or (iv) the Backyard 

Sale; provided that the filing and administration of the 

Chapter 11 Cases and the CCAA Recognition Proceedings 

and related events shall not constitute a Material Adverse 

Change. 

CONDITIONS 

PRECEDENT TO EACH 

FINAL DIP LOAN: 

The obligations of the DIP Lender to make any Final DIP 

Loans shall be subject to satisfaction or waiver of each of the 

following conditions: 

(i) all representations and warranties of the Debtors hereunder 

being true and correct in all material respects; 

(ii) no Event of Default shall exist or would immediately 

result from such proposed Final DIP Loan or from the 

application of the proceeds therefrom; 

(iii) all reasonable, documented fees and out-of-pocket 

expenses, including reasonable, documented and out-ofpocket attorney’s fees of the DIP Secured Parties, shall have 

been paid in full; 

(iv) the applicable Chapter 11 Milestones shall have been 

satisfied; 

(v) a final order approving the DIP Facility shall have been 

entered, which final order shall not have been reversed, 

modified, amended, stayed or vacated or in the case of any 

modification or amendment, in a manner without the consent 

of the DIP Lender (the “Final Order,” and together with the 

Interim Order, the “DIP Orders”) and the Debtors shall be in 

compliance in all respects with the Final Order; 

(vi) no Material Adverse Change shall have occurred; 

(vii) the Debtors shall have delivered to the DIP Agent a 

Closing Certificate certifying all of the conditions precedent 

to such Final DIP Loan have been satisfied; 

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(viii) DIP Agent shall have received a request in writing in 

form approved by DIP Agent, in each case signed by 

Borrower, not later than 5:00 p.m. New York time (or such 

later time as DIP Agent may consent to in its discretion) three 

(3) business days prior to the date of the proposed borrowing 

of such Final DIP Loan; 

(ix) DIP Agent shall have received with respect to the week 

in which such Final DIP Loan is to be made, an Approved 

Budget for such week, including an Approved Variance 

Report; 

(x) the Debtor shall have delivered all Purchase Price 

Calculations as required hereunder, and there shall have been 

no Negative Purchase Variances; and 

(xi) the DIP Secured Parties shall have received such other 

information and/or deliverables as they may reasonably 

require or request consistent with the Prepetition Loan 

Documents. 

Any modifications of the Final Orders shall require the prior 

written consent of the DIP Secured Parties. 

REPRESENTATIONS 

AND WARRANTIES: 

The representations and warranties set forth in Sections 5.01 

through 5.04, 5.06 through 5.10, 5.12, 5.13, 5.15, 5.17, and 

5.18 of the Prepetition Credit Agreement are incorporated 

herein by reference and shall be deemed made by the Debtors 

for the benefit of the DIP Secured Parties in respect of the 

DIP Facility and DIP Obligations, mutatis mutandis, as if 

fully set forth herein, on the Interim Closing Date, on the 

Final Closing Date and on the date of each credit extension 

hereunder. Each Debtor further represents that the proceeds 

of each advance hereunder shall be used solely in accordance 

with the “Use of Proceeds” section of this Term Sheet. 

AFFIRMATIVE 

COVENANTS: 

From and after the Closing Date, each Debtor shall: 

(i) comply with the affirmative covenants set forth in Sections 

6.04 through 6.08, 6.11 and 6.12 of the Prepetition Credit 

Agreement which are incorporated herein by reference for the 

benefit of the DIP Secured Parties in respect of the DIP 

Facility and DIP Obligations, mutatis mutandis, as if fully set 

forth herein; 

(ii) timely deliver, or cause to be timely delivered, to the DIP 

Lender the Approved Budget and Approved Variance 

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Reports, and all other financial reports, budgets, forecasts, 

and legal and financial documentation requested by the DIP 

Lender (or their respective legal advisors), all in accordance 

with the provisions set forth herein; 

(iii) deliver, or continue to deliver, to the DIP Lender all 

financial and other information required to be delivered by 

any Debtor under Sections 6.01, 6.02, and 6.03 of the 

Prepetition Credit Agreement which are incorporated herein 

by reference for the benefit of the DIP Secured Parties in 

respect of the DIP Facility and DIP Obligations, mutatis 

mutandis, as if fully set forth herein; 

(iv) (a) keep proper books, records and accounts in 

accordance with GAAP in which full, true and correct entries 

shall be made of all dealings and transactions in relation to 

their business and activities and consistent with Section 6.09 

of the Prepetition Credit Agreement, (b) cooperate, consult 

with, and provide to the DIP Secured Parties all such 

information as required or as reasonably requested by the DIP 

Secured Parties, (c) permit, upon three (3) business days’ 

notice, representatives of the DIP Secured Parties to visit and 

inspect any of their respective properties, to examine and 

make abstracts or copies from any of their respective books 

and records, to conduct a collateral audit and analysis of their 

respective inventory and accounts, to tour the Debtors’ 

business premises and other properties, and to discuss, and 

provide advice with respect to, their respective affairs, 

finances, properties, business operations and accounts with 

their respective officers, employees and independent public 

accountants as often as may reasonably be desired, and (d) 

permit representatives of the DIP Secured Parties to consult 

with and advise the Debtors’ management on matters 

concerning the general status of the Debtors’ business, 

financial condition and operations; 

(v) comply with the Approved Budget (subject to the 

Permitted Variances) and with provisions of this Term Sheet, 

DIP Orders and the Canadian DIP Recognition Orders (as 

applicable); 

(vi) except to the extent (a) contemplated by the Approved 

Budget, (b) the failure to do so could not reasonably be 

expected to cause a Material Adverse Change, or (c) 

otherwise consented to by the DIP Lender in writing, 

continue, and cause to be continued, the business of the 

Debtors, maintain, and cause to be maintained, the Debtors’ 

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existence and material relationships, rights and privileges, and 

comply with all material contractual obligations; 

(vii) take, or cause to be taken, all appropriate action, to do or 

cause to be done all things necessary, proper or advisable, to 

pursue and consummate the Plan in accordance with the 

Chapter 11 Milestones, and provide the DIP Lender with 

copies of any bids (including, without limitation, any 

information, financial or otherwise, submitted in connection 

with any bids) upon receipt by the Debtors; 

(viii) do or cause to be done all things reasonably necessary, 

proper or advisable under applicable law, and to execute and 

deliver such documents and other papers, as may be 

reasonably requested by the DIP Secured Parties to carry out 

the provisions of this Term Sheet, the Interim Order, the Final 

Order or the Canadian DIP Recognition Orders; 

(ix) take, or cause to be taken, all appropriate action to remain 

the sole owner of the DIP Collateral, free of liens other than 

Permitted Liens and Permitted Prepetition Liens; 

(x) take, or cause to be taken, all appropriate action to comply 

with all material applicable laws with respect to the DIP 

Collateral; 

(xi) pay when due all U.S. Trustee fees; 

(xii) provide all notices received from the Purchaser under the 

APA, and exercise or refrain from exercising, as applicable, 

such rights, in each case, in accordance with the written 

instructions (emails suffice) of the DIP Agent, and otherwise 

allow the DIP Agent to participate and audit any of the 

Debtors’ rights under the APA; 

(xiii) the Debtors shall not release or otherwise terminate, or 

cause to be released or otherwise terminated, any security 

interest granted by the Debtors’ non-debtor affiliates under the 

Prepetition Loan Documents before a substitute, valid right of 

pledge or similar charge has been created, consented to and 

perfected by such affiliate in favor of the Prepetition Secured 

Parties (which substitute shall include a right, pledge or charge 

against any proceeds of the asset on which the security interest 

has been released or terminated); and 

(xiv) promptly provide such additional information 

concerning the Debtors, the Plan, or the DIP Collateral as the 

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DIP Secured Parties may reasonably request and access to 

Debtors’ officers, directors, and advisors to discuss such 

information at reasonable times during normal business hours 

(and such officers, directors, and advisors shall be directed to 

discuss such information with the DIP Secured Parties). 

NEGATIVE COVENANTS: Unless otherwise provided in the Approved Budget, this Term 

Sheet or as part of the Plan, no Debtor shall, without the 

express, prior written consent of the DIP Agent, do, or cause 

to be done, any of the following: 

(i) create, incur, assume or suffer to exist any lien (other than 

a Prepetition Permitted Lien) upon any of its property, assets, 

income or profits, whether now owned or hereafter acquired, 

except valid, perfected and unavoidable liens existing as of 

the Petition Date which, other than Permitted Liens, are junior 

to the liens securing the DIP Facility, and shall not cause, or 

permit to be caused, any direct or indirect subsidiary of 

Borrower that is not a Debtor to, create, incur, assume or 

suffer to exist any such liens; 

(ii) convey, sell, lease, assign, transfer or otherwise dispose of 

(including through a transaction of merger or consolidation) 

any of its property, business or assets, whether now owned or 

hereafter acquired, out of the ordinary course of business; 

(iii) incur or make any expenditure, investment or other 

payment, or any Restricted Payment (as defined in the 

Prepetition Credit Agreement), other than in accordance with 

the Approved Budget, subject to the Permitted Variances; 

(iv) create, or acquire any ownership interest in, any 

subsidiaries (whether direct or indirect) other than those 

existing on the Petition Date; 

(v) create, incur assume or suffer to exist any indebtedness 

other than (A) indebtedness of the Debtors under this Term 

Sheet, (B) indebtedness contemplated by the Approved 

Budget and (D) indebtedness permitted under Section 7.03(l), 

(o), (v) or (z) of the Prepetition Credit Agreement; 

(vi) enter into any transaction of any kind with any Affiliate 

of Borrower without the DIP Agent’s prior written consent or 

as otherwise permitted by the order of the Bankruptcy Court 

governing the Debtors’ authorization to continue using its 

cash management system; or 

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(vi) consummate any amendment, restatement, supplement or 

other modification to or waiver of any of its organization 

documents. 

EVENTS OF DEFAULT: Each of the following shall constitute an “Event of Default”: 

(i) after the first applicable testing date, the occurrence of any 

deviation from the Approved Budget that is greater than the 

Permitted Variances; provided, that, the DIP Lender may only 

declare an Event of Default arising from any deviation from 

the Professional Fee Variance if the DIP Lender and such 

Professional Person cannot mutually agree to a good faith 

modification during the Meet and Confer; 

(ii) the use of Cash Collateral for any purpose other than as 

permitted in the DIP Documents, DIP Orders, the Canadian 

DIP Recognition Orders or Approved Budget; 

(iii) any modification by the Debtors of the DIP Secured 

Parties’ rights under the DIP Documents, DIP Orders or the 

Canadian DIP Recognition Orders; 

(iv) failure of any of the Chapter 11 Milestones to be 

satisfied; 

(v) failure by any Debtor to be in compliance in all material 

respects with the sections of the Term Sheet entitled 

“Affirmative Covenants” (and five (5) business days shall 

have elapsed since the DIP Lender shall have given notice to 

the Debtors of such failure) and “Negative Covenants” or 

failure to otherwise be in compliance in all material respects 

with any other provision of this Term Sheet, the DIP Orders 

and the Canadian DIP Recognition Orders; 

(vi) failure of any representation or warranty to be true and 

correct in all material respects when made; 

(vii) the filing of any application by the Debtors for the 

approval of (or an order is entered by the Court approving) 

any claim arising under Section 507(b) of the Bankruptcy 

Code or any other provision of the Bankruptcy Code or any 

security, mortgage, collateral interest or other lien in any of 

the Chapter 11 Cases or CCAA Recognition Proceedings 

which is pari passu with or senior to the DIP Superpriority 

Claims or the DIP Liens, excluding liens arising under the 

DIP Orders or the Canadian DIP Recognition Orders, or 

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pursuant to any other financing agreement made with the 

prior written consent of the DIP Agent; 

(viii) the filing of any application by the Debtors for the 

approval of (or an order is entered by the Court authorizing) 

compensation or other amounts under any employee or 

executive incentive or retention plans (or any similar sort of 

retention or incentive program) without the prior written 

consent of the DIP Secured Parties in their sole discretion; 

(ix) any request made by the Debtors for, or the reversal, 

modification, amendment, stay, reconsideration or vacatur of 

the DIP Orders, as entered by the Bankruptcy Court or the 

Canadian DIP Recognition Orders, as entered by the CCAA 

Court, as applicable, without the prior written consent of the 

DIP Secured Parties; 

(x) the commencement of any action by the Debtors or other 

authorized person (other than an action permitted by the DIP 

Orders or the Canadian DIP Recognition Orders) against any 

of the DIP Secured Parties or its agents and employees, to 

subordinate or avoid any liens made in connection with the 

DIP Orders or the Canadian DIP Recognition Orders; 

(xi) (1) the assertion by the Debtors in any pleading filed in 

any court that any material provision of the DIP Orders, the 

Canadian DIP Recognition Orders or this Term Sheet is not 

valid and binding for any reason, or (2) any material 

provision of the DIP Orders, the Canadian DIP Recognition 

Orders or this Term Sheet shall for any reason, or any other 

order of this Court approving the Debtors’ use of Cash 

Collateral (as defined in the DIP Orders), cease to be valid 

and binding (without the prior written consent of the DIP 

Secured Parties); 

(xii) the filing with the Bankruptcy Court of a plan of 

reorganization or liquidation in any of the Chapter 11 Cases 

other than the Plan; 

(xiii) the appointment or entry of an order in any of the 

Chapter 11 Cases of a trustee, receiver, examiner, or 

responsible officer with enlarged powers relating to the 

operation of the business of any Debtor (powers beyond those 

set forth in sections 1106(a)(3) and (a)(4) of the Bankruptcy 

Code), unless such appointment or order has not been 

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reversed, stayed, or vacated within thirty (30) days after the 

entry of such order; 

(xiv) the granting of relief from the automatic stay by the 

Bankruptcy Court or of the stay ordered by the CCAA Court 

to any other creditor or party in interest in the Chapter 11 

Cases with respect to any portion of the DIP Collateral 

exceeding $100,000 in value in the aggregate; 

(xv) failure to pay principal, interest or other DIP Obligations 

in full in cash when due, including without limitation, on the 

Maturity Date; 

(xvi) the allowance of any claim or claims under section 

506(c)or 552(b) of the Bankruptcy Code against or with 

respect to any DIP Collateral; 

(xvii) withdrawal or material modification by the Debtors of 

any motion in connection with the Backyard Sale, without the 

consent of the DIP Secured Parties; 

(xviii) the Debtors seek to consummate an Alternative 

Transaction (as defined in the APA) without the prior written 

consent of the DIP Secured Parties; 

(xix) the Plan is not confirmed or is changed without the DIP 

Secured Parties’ consent, or the Plan Sponsor breaches (or is 

anticipated to breach) its obligations under the Plan; 

(xx) the occurrence of any Material Adverse Change; 

(xxi) any termination of the RSA or the APA; 

(xxii) the actual amount of Allowed Administrative Expense 

Claims, Allowed Priority Tax Claims, and Allowed Other 

Priority Claims (each as defined in the Plan) exceeds or is 

expected to exceed the Administrative Expense Claim, 

Priority Tax Claim, and Other Priority Claim Backstop 

Amount; 

(xxiii) the occurrence of any Negative Purchase Variance 

under any Purchase Price Calculation; 

(xxiv) such other events of default to be included in the DIP 

Orders as reasonably specified by the DIP Secured Parties 

with the reasonable consent of the Debtors; and 

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(xxv) the conversion of any Chapter 11 Case to a Chapter 7 

case(s), or any Debtor shall file a motion or other pleading 

seeking the conversion of any Chapter 11 Case to chapter 7 of 

the Bankruptcy Code or the making of an assignment 

bankruptcy by or entry by any Canadian court of a bankruptcy 

order in respect of any of the Debtors under the BIA, or the 

entry of an order of any Canadian court appointing a receiver 

under the BIA over any DIP Collateral, in each case, without 

the prior written consent of DIP Agent. 

REMEDIES UPON EVENT 

OF DEFAULT: 

Upon the occurrence and during the continuance of any Event 

of Default and delivery of a Carve-Out Trigger Notice (as 

defined in the Interim DIP Order or the Final DIP Order, as 

applicable) and delivery by the DIP Agent of five (5) business 

days’ notice to the Debtors (the “Notice Period”), during 

which time the Debtors may seek an emergency hearing 

before the Bankruptcy Court, the DIP Secured Parties may 

not exercise rights or remedies; provided, that, if a hearing 

cannot be scheduled prior to the expiration of the Notice 

Period solely as a result of the Bankruptcy Court’s 

unavailability, the Notice Period shall be automatically 

extended to the date that is one (1) business day after the first 

date that the Bankruptcy Court is available. 

After the expiration of the Notice Period, the DIP Secured 

Parties may (except as otherwise ordered by the Bankruptcy 

Court or the CCAA Court): 

(i) declare all DIP Obligations (including principal of and 

accrued interest on any outstanding DIP Loans) to be 

immediately due and payable; 

(ii) terminate the DIP Facility and/or any further commitment 

to lend to Borrower; and 

(iii) exercise rights and remedies pursuant to the terms of the 

DIP Documents, the DIP Orders, the Canadian DIP 

Recognition Orders or applicable law, and if requested by the 

DIP Agent in connection with such exercise of rights and 

remedies, the Debtors shall cooperate with the DIP Agent to, 

among other things, (A) make reasonable efforts to collect 

accounts receivable, without setoff by any account debtor, (B) 

provide at all reasonable times access to the Debtors’ 

premises to representatives or agents of the DIP Agent 

(including any collateral liquidator or consultant), (B) provide 

the DIP Agent and their representatives or agents, at all 

reasonable times access to the Debtors’ books and records 

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and any information or documents requested by the DIP 

Agent or their respective representatives, (C) perform all 

other obligations set forth in the DIP Documents, and (D) 

take reasonable steps to safeguard and protect the DIP 

Collateral, and 

(iv) the Debtors shall not otherwise interfere with or actively 

encourage others to interfere with the DIP Agent’s 

enforcement of rights including, without limitation, the right 

to (W) take any actions reasonably calculated to preserve or 

safeguard the DIP Collateral or to prepare the DIP Collateral 

for sale; (X) foreclose or otherwise enforce the DIP Liens on 

any or all of the DIP Collateral; (Y) immediately set off any 

and all amounts held as Cash Collateral (including, without 

limitation, in any Cash Collateral account held for the benefit 

of the DIP Agent and DIP Lenders); and/or (Z) exercise any 

other default-related rights and remedies under the under the 

DIP Facility Documents, this Interim Order the DIP Orders, 

the Canadian DIP Recognition Orders or applicable law. 

DIP SECURED PARTIES’ 

EXPENSES: 

All reasonable, documented out-of-pocket costs and expenses 

of the DIP Secured Parties relating to the DIP Facility, the 

Debtors’ Chapter 11 Cases, and the CCAA Recognition 

Proceedings (including, without limitation, prepetition and 

post-petition reasonable and documented fees and 

disbursements of counsel and advisors) shall be payable by 

Borrower promptly upon written demand (together with 

summary backup documentation supporting such 

reimbursement request) and without the requirement for 

Bankruptcy Court or CCAA Court approval. 

A copy of summary invoices for the U.S. advisors to the DIP 

Secured Parties and Prepetition Secured Parties shall be 

provided by the Debtors to the Office of the U.S. Trustee, and 

counsel for any statutory committee, subject to customary 

review periods. 

RELEASES: The Interim Order and Final Order shall provide customary 

releases for each of the DIP Secured Parties and the 

Prepetition Secured Parties and each of their respective each 

of their respective former, current or future officers, 

employees, directors, agents, representatives, owners, 

members, partners, financial advisors, legal advisors, 

shareholders, managers, consultants, accountants, attorneys, 

affiliates and successors and predecessors in interest (in their 

respective capacities as such) (collectively, the “Released 

Parties”) with respect to all claims and liabilities arising from 

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4883-5905-5795 

the DIP Facility, the DIP Liens, the DIP Superpriority Claims, 

the DIP Documents and the Prepetition Secured Parties with 

respect to the Prepetition Obligations and the Prepetition 

Loan Documents; provided that, with respect to the 

Prepetition Secured Parties, such releases shall be subject to 

the Challenge Period. 

INDEMNITY: Each Debtor shall indemnify, pay and hold harmless the DIP 

Secured Parties (and each of their directors, officers, 

members, employees and agents) against any loss, liability, 

cost, or expense incurred in respect of the financing 

contemplated hereby or the use or the proposed use of 

proceeds thereof (except to the extent resulting from the gross 

negligence, or willful misconduct, bad faith, or a material 

breach of DIP Documents of the indemnified party, as 

determined by a final, nonappealable judgment of a court of 

competent jurisdiction). 

CREDIT BID: The DIP Agent shall have the right to credit bid the 

outstanding DIP Obligations on a dollar-for-dollar basis in 

any sale of DIP Collateral, subject to the requirement that the 

DIP Agent fund all Allowed Administrative Expenses, up to 

the Administrative Expense Claim, Priority Tax Claim, and 

Other Priority Claim Backstop Amount and the Carve-Out, 

and the amount secured by and necessary to fund the 

Canadian Priority Charges (without duplication). 

DIP ORDERS GOVERN: To the extent of any conflict or inconsistency between this 

Term Sheet and the DIP Orders, the DIP Orders shall govern. 

AMENDMENT AND 

WAIVER: 

No provision of this Term Sheet or the DIP Orders may be 

amended other than by an instrument in writing signed by the 

DIP Secured Parties and Debtors, provided, however on the 

Petition Date, the Parties agree to update the amounts set 

forth in (i) of the “Acknowledgment; Ratification” section 

herein and the “Roll-Up” section herein. 

GOVERNING LAW AND 

JURISDICTION: 

The laws of the State of New York (except as governed by 

mandatory provisions of the Bankruptcy Code or the CCAA) 

shall govern this Term Sheet. 

The parties to this Term Sheet shall submit to the exclusive 

jurisdiction of the Bankruptcy Court and shall waive any right 

to trial by jury. Notwithstanding the foregoing, the CCAA 

Court shall have exclusive jurisdiction of the CCAA 

Recognition Proceedings.

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4883-5905-5795 

NOTICES: All notices required to be provided hereunder shall be 

delivered to: 

(i) if to Debtors to: 

KidKraft, Inc. 

Attention: Geoffrey Walker 

Email: Geoff.W@kidkraft.com 

with a copy (which shall not constitute notice) to: 

Vinson & Elkins LLP 

Attention: David Meyer; William Wallander; Lauren Kanzer 

Email: dmeyer@velaw.com; bwallander@velaw.com; 

lkanzer@velaw.com 

(ii) if to Prepetition Secured Parties or DIP Secured Parties to: 

GB Funding, LLC 

Attention: David Braun and Kyle Shonak 

Email: dbraun@gordonbrothers.com; 

kshonak@gordonbrothers.com 

with a copy (which shall not constitute notice) to: 

Katten Muchin Rosenman LLP 

Attention: Steven Reisman; Cindi Giglio 

Email: sreisman@katten.com; cgiglio@katten.com 

COUNTERPARTS AND 

ELECTRONIC 

TRANSMISSION: 

This Term Sheet may be executed in any number of 

counterparts and by different parties hereto on separate 

counterparts, each of which when so executed and delivered, 

shall be deemed an original, and all of which, when taken 

together, shall constitute one and the same instrument. 

Delivery of an executed counterpart of a signature page to this 

Term Sheet by facsimile, “PDF” or other electronic 

transmission shall be effective as delivery of a manually 

executed counterpart of this Term Sheet. 

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4883-5905-5795 

Schedule 1 

1. KidKraft, Inc. 

2. KidKraft Intermediate Holdings, LLC

3. KidKraft International Holdings, Inc. 

4. KidKraft Europe, LLC 

5. KidKraft International IP Holdings, LLC 

6. KidKraft Partners, LLC 

7. Solowave Design Corp.

8. Solowave Design Inc.

9. Solowave Design LP

10. Solowave Design Holdings Limited

11. Solowave International Inc.

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4883-5905-5795 

Exhibit A 

Approved Budget 

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KidKraft, Inc. DIP Budget (9 Weeks)

DIP Week>> 1 2 3 4 5 6 7 8 9

Week End>> 5/10/2024 5/17/2024 5/24/2024 5/31/2024 6/7/2024 6/14/2024 6/21/2024 6/28/2024 7/5/2024 Exit Total

Total Inflows 2,000,000 2,097,889 1,796,228 1,079,983 1,810,476 2,048,180 2,120,225 2,160,181 2,565,020 - 17,678,181

Operating Cash Flow:

Factory Payments 1,089,533 1,041,389 733,769 594,427 1,796,758 1,806,739 1,737,717 762,125 694,866 - 10,257,323

Cost of Sales (Shipping, Testing, etc.) 301,795 314,211 444,969 195,409 203,911 161,007 387,578 188,353 214,588 - 2,411,821

Employee Costs 295,450 39,254 291,039 39,254 291,039 39,254 291,039 39,254 291,039 99,254 1,715,874

Operating Expenses 518,985 377,348 266,077 410,319 797,084 535,720 217,965 378,859 545,151 50,000 4,097,506

Intercompany (from)/to China 342,000 660,000 - - - 225,000 570,000 - - 128,226 1,925,226

Total Operational Outflows 2,547,763 2,432,202 1,735,853 1,239,408 3,088,792 2,767,720 3,204,299 1,368,591 1,745,643 277,479 20,407,750

Restructuring Fees:

Professional Fees - BK Restructuring 30,000 626,545 574,878 408,212 424,878 408,212 633,212 429,878 526,545 1,225,000 5,287,361

Professional Fees - Trustee Fees (est.) - - - - - - - - - 250,000 250,000

Other 27,250 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 - 87,250

Total Restructuring Outflows 57,250 634,045 582,378 415,712 432,378 415,712 640,712 437,378 534,045 1,475,000 5,624,611

Other Obligations

Other Employee Obligations - - - - - - - - 58,905 - 58,905

Priority Tax Claims - - - 300,700 - - - - 175,000 275,000 750,700

Severance 93,257 - - - - - - - 57,848 - 151,105

Post Sale Reserve - - - - - - - - - 643,000 643,000

Pre-Petition Vendor Payments - CV/503b9/Shippers - 525,000 - 425,000 - - - - - - 950,000

Utility Deposit - 20,000 - - - - - - - - 20,000

Total Incremental Outflows 93,257 545,000 - 725,700 - - - - 291,753 918,000 2,573,710

Net Cash Flow (698,270) (1,513,359) (522,004) (1,300,837) (1,710,695) (1,135,251) (1,724,786) 354,211 (6,421) (2,670,479) (10,927,891)

Cash Requirement

Beginning Book Balance 2,129,070 1,430,800 2,129,070 2,129,070 2,129,070 2,129,070 2,129,070 2,129,070 2,129,070 2,129,070 2,129,070

Net Cash Flow (698,270) (1,513,359) (522,004) (1,300,837) (1,710,695) (1,135,251) (1,724,786) 354,211 (6,421) (2,670,479) (10,927,891)

DIP Financing - 2,211,629 522,004 1,300,837 1,710,695 1,135,251 1,724,786 (354,211) 6,421 541,409 8,798,821

Ending Cash 1,430,800 2,129,070 2,129,070 2,129,070 2,129,070 2,129,070 2,129,070 2,129,070 2,129,070 - -

DIP Financing

Interest/Origination Fee/Exit Fee - 210,000 - - - - - - 841,994 - 1,051,994

DIP Financing - 2,211,629 522,004 1,300,837 1,710,695 1,135,251 1,724,786 (354,211) 6,421 541,409 8,798,821

Ending Balance - 2,421,629 522,004 1,300,837 1,710,695 1,135,251 1,724,786 (354,211) 848,416 541,409 9,850,815

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