4874-5626-7943

Jason S. Brookner (TX Bar No. 24033684)

Aaron M. Kaufman (TX Bar No. 24060067)

Lydia R. Webb (TX Bar No. 24083758)

GRAY REED

1601 Elm Street, Suite 4600

Dallas, TX 75201

Telephone: (214) 954-4135

Facsimile: (214) 953-1332

Email: jbrookner@grayreed.com

akaufman@grayreed.com

lwebb@grayreed.com

Proposed Counsel to the Debtors

and Debtors in Possession

DEBTORS’ EMERGENCY MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS 

(I) AUTHORIZING THE DEBTORS TO (A) OBTAIN POSTPETITION FINANCING 

AND (B) UTILIZE CASH COLLATERAL, (II) GRANTING LIENS 

AND SUPERPRIORITY ADMINISTRATIVE EXPENSE CLAIMS, (III) GRANTING 

ADEQUATE PROTECTION, (IV) MODIFYING THE AUTOMATIC STAY,

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

EMERGENCY RELIEF HAS BEEN REQUESTED. RELIEF IS REQUESTED NOT LATER 

THAN 9:00 A.M. ON FEBRUARY 29, 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 

1 The Debtors in these chapter 11 cases and the last four digits of each Debtors’ federal tax identification number are 

as follows: Cottonwood Financial Ltd. (1001); Cottonwood Financial Administrative Services, LLC (7228); 

Cottonwood Financial Texas, LLC (9059); Cottonwood Financial Idaho, LLC (5651); Cottonwood Financial 

Wisconsin, LLC (7075). The Debtors’ principal offices are located at 2100 W Walnut Hill Lane, Suite 300, Irving, 

TX 75038.

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

§

In re: § Chapter 11

§

COTTONWOOD FINANCIAL LTD., et al.,

1 §

§

Case No. 24-80035 (SWE)

§ (Joint Administration Requested)

Debtors. §

§

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COURT MAY TREAT THE PLEADING AS UNOPPOSED AND GRANT THE RELIEF 

REQUESTED.

A HEARING WILL BE CONDUCTED ON THIS MATTER ON FEBRUARY 29, 2024, AT 

9:00 A.M. IN EARLE CABELL FEDERAL BUILDING, 1100 COMMERCE STREET, 14TH 

FLOOR, COURTROOM 3, DALLAS, TEXAS, 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 THE USE OF THE CISCO WEBEX PLATFORM. CONNECT VIA THE CISCO 

WEBEX APPLICATION OR CLICK THE LINK ON JUDGE EVERETT’S HOME PAGE. 

THE MEETING CODE IS 476 420 189. CLICK THE SETTINGS ICON IN THE UPPER 

RIGHT CORNER AND ENTER YOUR NAME UNDER THE PERSONAL INFORMATION 

SETTING. 

HEARING APPEARANCES SHOULD BE MADE ELECTRONICALLY IN ADVANCE OF 

ELECTRONIC HEARINGS. TO MAKE YOUR APPEARANCE, CLICK THE 

“ELECTRONIC APPEARANCE” LINK ON JUDGE EVERETT’S HOME PAGE. SELECT 

THE CASE NAME, COMPLETE THE REQUIRED FIELDS AND CLICK “SUBMIT” TO 

COMPLETE YOUR APPEARANCE.

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

respectfully state as follows in support of this motion (this “Motion”): 

Introduction

1. The Debtors request authority to: (a) enter into a senior secured loan facility in an 

aggregate principal amount of up to $7.0 million (the “DIP Facility”) with the DIP Lender (defined 

below), with up to $2.0 million available on an interim basis; (b) to use cash collateral of the DIP 

Lender and to continue to use cash collateral of the Debtors’ Prepetition Secured Lender (defined 

below) under the terms of the Interim DIP Order (defined below); and (c) grant adequate protection 

to the Prepetition Secured Lender. 

2. The DIP Facility will provide the Debtors with sufficient liquidity to fund their

business operations and administrative expenses during the contemplated duration of these chapter 

11 cases. If approved, the Debtors will use the proceeds of the DIP Facility to, among other things, 

honor employee wages and benefits, procure goods and services, fund general and corporate 

operating needs and the administration of these chapter 11 cases, all in accordance with a budget 

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agreed to by the Debtors and the DIP Lender (the “Approved Budget”) attached as Exhibit 2 to the 

form of proposed interim order attached hereto as Exhibit A (the “Interim DIP Order”).

2

 

3. The Debtors and their estates would suffer immediate and irreparable harm if they 

were denied the financing needed to sustain on-going business operations during the critical first 

weeks of these cases. The DIP Facility ensures that the Debtors will have sufficient funding to 

continue to operate uninterrupted in these chapter 11 cases as they work towards a sale of their 

assets. Further, as set forth in the Declaration of Karen Nicolaou in support of this Motion, filed 

contemporaneously herewith (the “Nicolaou Declaration”), the terms of the DIP Facility are 

reasonable under the circumstances, and were the product of good faith, arm’s length negotiations.

4. The Debtors believe that approval of the DIP Facility will maximize the value of

the Debtors’ estates for the benefit of all stakeholders and is an exercise of sound business 

judgment. Accordingly, the Debtors respectfully request that the Court approve the relief requested 

herein and enter an interim order substantially in the form of the Interim DIP Order attached hereto 

and a final order (the “Final DIP Order,” and together with the Interim DIP Order, the “DIP 

Orders”).

Jurisdiction and Venue

5. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334, and this 

is a core matter pursuant to 28 U.S.C. § 157(b). 

6. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. 

7. The bases for the relief requested herein are sections 105, 361, 362, 363, 364, 503, 

and 507 of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the “Bankruptcy Code”), 

2 The forms of Interim DIP Order and DIP Term Sheet (defined below) remain under review and subject to potential 

additional revisions. Updated and final forms (as appropriate) will be filed on the docket in advance of the hearing 

on this matter.

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rules 2002, 4001, 6003, 6004, and 9014 of the Federal Rules of Bankruptcy Procedure 

(the “Bankruptcy Rules”), and Section D of the Procedures for Complex Cases in the Northern 

District of Texas (the “Complex Case Procedures”).

Background 

8. The Debtors operate one of the largest privately held retail consumer finance 

companies in the United States. Through its Cash Store® brand, the Debtors offer their customers 

an array of financial products and consumer-lending services, including single payment cash 

advances, installment cash advances and title loans. The Debtors utilize an innovative mix of 

financial technology (fintech) through its online customer portal and brick-and-mortar financial 

products and services through its 181 retail locations across Texas, Idaho and Wisconsin. 

9. On February 25, 2024 (the “Petition Date”), each Debtor filed a voluntary petition 

for relief under chapter 11 of the Bankruptcy Code. The Debtors are operating as debtors in 

possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Concurrently with the 

filing of this Motion, the Debtors have filed a motion requesting procedural consolidation and joint 

administration of these chapter 11 cases pursuant to Bankruptcy Rule 1015(b). No request for the 

appointment of a trustee or examiner has been made in these chapter 11 cases, and no committees 

have been appointed. 

10. A detailed description of the Debtors and their businesses, and the facts and 

circumstances supporting this Motion and the Debtors’ chapter 11 cases, are set forth in the 

Declaration of Karen Nicolaou, Chief Restructuring Officer, in Support of Chapter 11 Petitions 

and First Day Motions (the “First Day Declaration”), filed contemporaneously herewith and 

incorporated herein by reference.

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Relief Requested

11. By this motion, the Debtors seek entry of the Interim DIP Order, and subsequently, 

the Final DIP Order: 

a. Authorizing the Debtors to use cash collateral of their Prepetition Secured 

Lender, in accordance with the terms and conditions set forth in the Interim 

DIP Order and in accordance with the Approved Budget and authority for 

the Debtors to grant adequate protection to the Prepetition Secured Lender 

(as set forth in the DIP Term Sheet and the form of Interim DIP Order) with 

respect to any postpetition diminution in the value of their interests in their 

Prepetition Collateral (as defined below) arising from, among other things, 

the Debtors’ sale, use, or lease of the Prepetition Collateral and the priming 

of the prepetition liens held by the Prepetition Secured Lender by the DIP 

Liens (as defined below); 

b. Subject and subordinate to the Carve Out (as defined below), granting

replacement liens and other adequate protection to the Prepetition Secured 

Lender as described herein, which includes adequate protection payments 

of $175,000 on the 15th day of each month, reimbursement of reasonable 

postpetition professional fees and expenses, a superpriority claim for any 

diminution in value and a “last look” on Avoidance Proceeds (defined 

below); 

c. Authorizing the Debtors, as borrowers, to enter into a senior secured 

postpetition financing facility (the “DIP Facility”) consisting of a 

superpriority debtor in possession credit facility pursuant to the terms and 

conditions of that certain Secured Debtor in Possession Credit Facility Term 

Sheet (as amended or modified from time to time, the “DIP Term Sheet”) 

among the Debtors and Nehimba Holdings, LLC (the “DIP Lender”)

attached to the Interim DIP Order as Exhibit 1, and which shall consist of a 

superpriority multiple draw term loan facility with an aggregate principal 

amount of up to $7.0 million (net of original issue discount) from the DIP 

Lender as follows:

i. Interim Approval. From the date of the Interim DIP Order until the 

date a Final DIP Order is entered (the “Interim Period”), approval to 

draw DIP Loans in the maximum amount of $2.0 million, subject to 

compliance with the terms, conditions, and covenants described in 

the DIP Term Sheet, the Interim DIP Order, and the Approved 

Budget (defined below); and 

ii. Final Approval. Upon entry of the Final DIP Order, approval to 

draw DIP Loans in an amount up to $5.0 million, subject to 

compliance with the terms, conditions and covenants described in 

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the DIP Loan Documents (defined below), the Final DIP Order and 

the Approved Budget;

d. Authorizing the Debtors to execute and enter into the DIP Term Sheet and 

any other agreements, instruments, pledge agreements, guarantees, security 

agreements, intellectual property security agreements, control agreements, 

notes and other documents reasonably required by the DIP Lender 

(collectively, and together with the DIP Orders, the “DIP Loan Documents” 

and all obligations and indebtedness of any of the Debtors to the DIP Lender 

under the DIP Loan Documents (including, without limitation the DIP 

Loans), collectively, the “DIP Obligations”) and to perform their respective 

obligations thereunder and all such other and further acts as may be 

necessary, appropriate, or desirable in connection with the DIP Loan 

Documents, including, but not limited to, granting or perfecting liens or 

security interests by any of the Debtors in favor of and for the benefit of the 

DIP Lender on account of the DIP Facility; 

e. Authorization and direction for the Debtors to use the proceeds of the DIP 

Facility as expressly provided in the DIP Loan Documents and in 

accordance with the Approved Budget; 

f. Authorizing the Debtors to pay the principal, interest, fees, expenses and 

other amounts payable under the DIP Term Sheet and the DIP Loan 

Documents as such become earned, due and payable, including, but not 

limited to, the fees and costs of the DIP Lender’s professionals, advisors, 

and consultants (collectively, the “DIP Lender Reimbursements”);

g. Granting to the DIP Lender allowed superpriority claims, subject to the 

Carve Out (as defined below), pursuant to section 364(c)(1) of the 

Bankruptcy Code payable from and having recourse to all assets of the 

Debtors; 

h. Granting to the DIP Lender (i) liens on all unencumbered prepetition and 

postpetition property of the Debtors and their respective estates and the 

proceeds thereof pursuant to section 364(c)(2) of the Bankruptcy Code

including—subject to and effective upon entry of the Final DIP Order, and 

as a “last look” in the event the DIP Lender is not otherwise repaid in full—

any Avoidance Proceeds (as defined below) and (ii) priming liens pursuant 

to section 364(d) of the Bankruptcy Code on all prepetition and postpetition 

property of the Debtors’ estates and all proceeds thereof, in each case 

subject to the Carve Out; 

i. Subject to entry of the Final DIP Order approving such relief, waiving (a) 

any equitable doctrine of marshaling (b) the “equities of the case” exception 

under section 552(b) of the Bankruptcy Code and (c) the Debtors’ right to 

surcharge the DIP Collateral pursuant to section 506(c) of the Bankruptcy 

Code; 

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j. Stipulating the amount, validity, perfection, priority and enforceability of 

the Prepetition Secured Lender’s liens and claims, subject to a 45-day 

challenge period; 

k. Subject to entry of the Final DIP Order, releasing the DIP Lender and certain 

other related parties;

l. Authorizing the DIP Lender to terminate (a) all commitments to extend 

credit under the DIP Facility, and (b) to terminate the Debtors’ sale, use, or 

lease of Cash Collateral or the proceeds of the DIP Facility, each upon the 

occurrence and continuance of an Event of Default (as defined below); 

m. Modifying the automatic stay of Bankruptcy Code section 362 (the 

“Automatic Stay”) to the extent necessary to implement and effectuate the 

terms and provisions of the DIP Loan Documents, including the Interim DIP 

Order;

n. Approving a waiver of any applicable stay (including under Bankruptcy 

Rule 6004) with respect to the effectiveness of the Interim DIP Order; 

o. Scheduling an interim hearing (the “Interim Hearing”) on the Motion to be 

held before this Court to consider entry of the Interim DIP Order; 

p. Scheduling a final hearing (the “Final Hearing”) such that the Final Order 

is entered no later than 25 days after the Petition Date to consider final 

approval of the DIP Facility; and 

q. Granting such other and further relief as is just and proper. 

Concise Statement Pursuant to Bankruptcy Rule 4001(b) and

Section D of the Complex Case Procedures

I. Concise Statement regarding the DIP Facility. 

12. The below chart contains a summary of the material terms of the proposed DIP 

Loan, together with references to the applicable sections of the relevant source documents, as 

required by Bankruptcy Rules 4001(b)(1)(B) and 4001(c)(1)(B), and Section D.10 and D.13 of the 

Complex Case Procedures.3

3 Capitalized terms used in the following summary chart but not otherwise defined have the meanings ascribed to them 

in the DIP Term Sheet or the Interim DIP Order, as applicable.

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Bankruptcy Code Summary of Material Terms

Borrowers

Bankruptcy Rule 

4001(c)(1)(B)

Cottonwood Financial, Ltd. and affiliated Debtors

See DIP Term Sheet at 1. 

Guarantors

Bankruptcy Rule 

4001(c)(1)(B)

N/A

DIP Lender

Bankruptcy Rule 

4001(c)(1)(B)

Nehimba Holdings, LLC

See DIP Term Sheet at 1 

Prepetition Secured 

Lender

4001(c)(1)(B)

Third Coast Bank, SSB

See DIP Term Sheet at 1

Term

Bankruptcy Rule 

4001(b)(l)(B)(iii), 

4001(c)(1)(B)

All DIP Loans will be due and payable in full in cash on the earliest of (the “Maturity 

Date”): (i) July 31, 2024; (ii) the date of consummation of one or more Approved 

Transactions that, in the aggregate, constitutes a sale of all or substantially all of the 

Collateral; (iii) if the Final DIP Order has not been entered by the Bankruptcy Court on 

or before the applicable Milestone, the date of the applicable Milestone; (iv) the date of 

acceleration of the DIP Loans and the termination of the DIP Lender’s commitments 

under the DIP Facility pursuant to the terms of the DIP Credit Agreement; (v) the date the 

Bankruptcy Court orders the conversion of the chapter 11 case of any of the Debtors to a 

chapter 7 liquidation or the dismissal of the chapter 11 case of any Debtor; (vi) the date 

the Bankruptcy Court orders the appointment of chapter 11 trustee or examiner as to any 

Debtor; the filing of a proposed chapter 11 plan other than the Acceptable Plan; (vii) the 

filing of a proposed sale, bidding or marketing process or procedures for any of the 

Debtors’ assets other than the Acceptable Sale Process; (viii) the filing of a proposed sale, 

bidding or marketing process or procedures for any of the Debtors’ assets other than the 

Acceptable Sale Process; and (ix) the effective date of a chapter 11 plan of the Debtors.

The DIP Lender shall first apply proceeds of the DIP Collateral that is not the Prepetition 

Secured Lender’s Prepetition Secured Collateral to satisfy the repayment of the DIP 

Loans before applying proceeds of the DIP Collateral that is existing prepetition collateral 

of the Prepetition Secured Lender to satisfy the repayment of the DIP Loans; provided 

however, that in the event there is a sale of assets during the period of the Interim Order 

which are Prepetition Secured Collateral prior to a sale of assets which are not Prepetition 

Secured Collateral, the proceeds from the sale of the assets which are Prepetition Secured 

Collateral shall not be applied to the DIP Loan for a period of 45 calendar days following 

a closing of the sale.4

4 For clarity, the term “Prepetition Secured Lender Collateral” is defined on pages 1-2 of the Term Sheet as the 

following: The Prepetition Secured Lender has first-priority, fully-perfected liens on and security interest in and to 

all assets and property (real and personal, tangible and intangible), whether now owned by or owing to, or hereafter 

acquired by, or arising in favor Cottonwood Financial Ltd. Cottonwood Financial Texas, LLC and Cottonwood 

Financial Administrative Services, LLC, as further described and defined in the Prepetition Senior Loan Documents, 

which includes all (a) Accounts, (b) Accessions, (c) Assigned Contracts, (d) Chattel Paper, (e) Collateral Records, 

(f) Commercial Tort Claims, (g) Commodity Accounts, (h) Commodity Contracts, (i) Deposit Accounts, 

(j) Documents, (k) Equipment, (l) Financial Assets, (m) Fixtures, (n) General Intangibles, (o) Goods (including 

furniture), (p) Insurance, (q) Intellectual Property, (r) Instruments, (s) Inventory, (t) Investment Property, (u) Letters 

of Credit, (v) Letter-of-Credit Rights, (w) Licenses, (x) Money, (y) Payment Intangibles, (z) Permits, (aa) Pledged 

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Bankruptcy Code Summary of Material Terms

The Prepetition Secured Lender reserves all rights to assert and require additional time 

beyond 45 calendar days in connection with the Final DIP Order. For avoidance of doubt, 

the DIP Lender must consent to any material change between the Interim DIP Order and 

the Final DIP Order and is under no obligation to advance funds beyond the Interim 

Funding.

See DIP Term Sheet at 7-8; Interim DIP Order ¶¶ 12, 21. 

Commitment

Bankruptcy Rule 

4001(c)(1)(B)

A superpriority, multiple draw term loan facility (the “DIP Facility”) in an aggregate 

principal amount up to $7 million (net of the original issue discount) (the “Term Loan 

Commitments”), of which (i) $2 million (the “Interim Funding”) will be available upon 

entry of an interim order by the Bankruptcy Court, in a form acceptable to the DIP Lender 

in all respects, approving the terms and conditions of the DIP Facility (the “Interim DIP 

Order”) and (ii) the remaining $5 million will be available upon entry of a final order by 

the Bankruptcy Court, in a form acceptable to the DIP Lender in all respects, approving 

the DIP Facility on a final basis (the “Final DIP Order” and together with the Interim DIP 

Order the “DIP Orders”). All amounts at any time outstanding under the DIP Facility are 

referred to as the “DIP Loans.”

The DIP Loans shall, subject to the borrowing conditions set forth herein,in the loan 

agreement evidencing the DIP Facility (the “DIP Credit Agreement”) and in the 

applicable DIP Order, be made in draws following entry of the applicable DIP Order on 

the dates and not to exceed the amounts as set forth in the Initial Budget (as defined 

below) as approved by the DIP Lender and Prepetition Secured Lender (each net of the 

original issue discount) (each a “DIP Draw” and collectively, the “DIP Draws”), in an

aggregate amount not to exceed the remaining principal balance of the DIP Loans.

See DIP Term Sheet at 2.

Conditions of 

Borrowing 

Bankruptcy Rule 

4001(c)(1)(B)

The DIP Credit Agreement will contain usual and customary conditions precedent for 

transactions of this type and others that are determined to be appropriate by and which 

are reasonably acceptable to the DIP Lender (in its sole discretion), including, without 

limitation, the following, as a condition to any DIP Draw:

1. entry of the Interim DIP Order or Final DIP Order, as the case may be, in 

form and substance consistent with the terms and conditions set forth 

herein and otherwise satisfactory to the DIP Lender and the Prepetition 

Secured Lender in their sole discretion, which Interim DIP Order or Final

DIP Order, as the case may be, shall be in full force and effect, shall 

provide DIP Lender with lien priming all other liens, except as set forth 

herein with respect to the Cash Collateral Diminution in Value Claim, 

shall not have been reversed, vacated or stayed and shall not have been 

amended, modified, supplemented or otherwise modified without the prior 

written consent of the DIP Lender or Prepetition Secured Lender;

2. the DIP Lender and Prepetition Secured Lender shall have received a cash 

flow forecast setting forth all forecasted receipts and disbursements of the 

Debtors on a weekly basis for the period beginning as of the week of the 

Petition Date through 30 days thereafter, broken down by week, including 

Equity Interests, (ab) Securities, (ac) Securities Accounts, (ad) Security Entitlements, (ae) Software, (af) Supporting 

Obligations, (ag) Pledged Debt and (ah) Proceeds.

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Bankruptcy Code Summary of Material Terms

the anticipated weekly uses of the proceeds of the DIP Facility for such 

period, which forecast shall be reasonably acceptable to and approved by 

the DIP Lender and the Prepetition Secured Lender before filing (the 

“Initial Budget”);5

3. there shall be no default or Event of Default under the DIP Credit 

Agreement and each of the representations and warranties set forth in the 

DIP Credit Agreement shall be true and correct in all material respects;

4. the aggregate amount of actual receipts of the type included in the line 

item “Total Receipts” received by the Debtors from the Petition Date to 

the date of such DIP Draw shall not be less than 70% of the amount set 

forth under the line item “Total Receipts” in the then Approved Budget 

(as defined below);

5. the Debtors certify that, to the best of their knowledge, they are in full 

compliance with all applicable local, state, and federal regulations,

statutes, licensing, decrees, orders, and similar requirements;

6. the Debtors certify that, to the best of their knowledge, no regulator, 

governmental body, or agency has taken action or provided notice of 

potential or threatened action that could adversely impact the Debtors’ 

business or business prospects;

7. the Debtors certify that, to the best of their knowledge, there has been no

change of law, statute, regulation, order, decree, or guideline that could 

adversely impact the Debtors’ business or business prospects;

8. the Debtors certify that, to the best of their knowledge, there has been 

no change of TreeMac Funding Group LLC’s underwriting or business 

that could adversely impact the Debtors’ business or business prospects;

9. receipt by the DIP Lender and Prepetition Secured Lender of a schedule 

setting forth the identities of, and the aggregate amounts of cash to be paid 

from time to time in the chapter 11 cases to, any and allof the Debtors’ 

critical vendors above $10,000.00 in any single month or $25,000.00 in 

the aggregate for any such vendor and its affiliates, which schedule shall 

be acceptable to the DIP Lender and the Prepetition Secured Lender.6

It is understood and agreed that no legal opinions shall be a condition to the funding of 

any DIP Draw.

See DIP Term Sheet at 5-7. 

Interest Rates

Bankruptcy Rule 

4001(c)(1)(B)

At all times prior to the occurrence of an Event of Default (as defined below), interest on

the DIP Loans shall accrue at a rate per annum equal to eleven percent (11%) per annum 

(the “Interest Rate”). All interest shall be payable in cash upon the Maturity Date (as 

defined below), except in the Event of Default. 

5 For the avoidance of doubt, the Prepetition Secured Lender only consents to a 30-day budget at this time.

6 The Prepetition Secured Lender reserves all rights on critical vendor issues.

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Bankruptcy Code Summary of Material Terms

Upon the occurrence and during the continuation of an Event of Default, interest on the

DIP Loans shall accrue at fourteen percent (14%) per annum (the “Default Interest”),

which shall be payable in cash on demand.

All interest shall be computed on the basis of a 360-day year for the actual number of 

days occurring in the period for which such interest is payable.

Original Issue Discount: The DIP Loans shall be made with an original issue discount of 

three percent (3%) to (a) the Interim Funding upon entry of the Interim DIP Order; and 

(b) the remaining $5,000,000 upon entry of the Final DIP Order.

See DIP Term Sheet at 2-3. 

Use of DIP Financing 

Facility and Cash 

Collateral

Bankruptcy Rule

4001(b)(l)(B)(ii)

Proceeds of the DIP Loans will be used only for the following purposes, in each case, in 

accordance with and subject to the Approved Budget then in effect: (i) general corporate 

and working capital purposes; (ii) the payment of restructuring costs; (iii) the payment of 

Adequate Protection Payments and reasonable and documented pospetition 

professionals’ fees and expenses (as set forth herein) to the Prepetition Secured Lender;

and (iv) the payment of all reasonable and documented accrued and unpaid transaction 

costs, fees and expenses with respect to the DIP Facility, including reasonable and 

documented costs, fees and expenses of professional advisors to the DIP Lender.

Cash Collateral will only be used in accordance with and subject to the 30-day Initial 

Budget. For the avoidance of doubt, the Prepetition Secured Lender does not consent to 

any bonuses being paid during the 30-day Initial Budget; provided, however, that the 

Debtors may continue to make payments pursuant to their non insider employee incentive 

programs, as described more fully in Debtors’ Emergency Motion for Entry of an Order 

(I) Authorizing the Debtors to (A) Pay Prepetition Wages, Salaries, Other Compensation, 

and Reimbursable Expenses and (B) Continue Employee Benefits Programs, and (II) 

Granting Related Relief [Docket No. 13]. For the avoidance of doubt, the employee 

recipients are not executive-level employees.

No proceeds of the DIP Loan may be used to investigate, challenge, object to or contest 

the validity, priority, extent or enforceability of any amount due under, or claims granted 

under or in connection with the DIP Loan. No proceeds of the DIP Loan may be used to 

investigate, assert claims or causes of action against, or seek any relief against the DIP 

Lender, Trevor Lee Ahlberg, Trevor Lee Ahlberg 1997 Trust, or Bomani Business 

Lending, LLC; provided, however, that the official committee of unsecured creditors, if 

any, may use up to $20,000 to investigate any such claims or causes of action. 

No Cash Collateral may be used to investigate, challenge, object to or contest the validity, 

priority, extent or enforceability of any amount due under, or claims granted under or in

connection with the Prepetition Secured Loan. No Cash Collateral may be used to 

investigate, assert claims or causes of action against, or seek any relief against the 

Prepetition Secured Lender or its respective agents, affiliates, subsidiaries, directors, 

officers, representatives, attorneys, or advisors; provided, however, that the official 

committee of unsecured creditors, if any, may use up to $20,000 to investigate the 

validity, priority, enforceability or perfection of the Prepetition Secured Lender’s liens or 

claims. 

See DIP Term Sheet at 9-10; Interim DIP Order ¶¶ D(v), 6. 

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Adequate Protection

Bankruptcy Rules 

4001(b)(l)(B)(iv), 

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

The Prepetition Secured Lender will receive the following as adequate protection through 

the DIP Orders (the “Adequate Protection”):7

(i) as referenced above, cash payment of reasonable and documented post-petition 

professionals’ fees and expenses for one law firm serving as primary counsel to the 

Prepetition Secured Lender, and all other reasonable and documented out-of-pocket 

accrued and unpaid fees, costs, disbursements, and expenses of the Prepetition 

Secured Lender;

(ii) cash payments on the 15th day of each month in amount equal to $175,000 (the 

“Adequate Protection Payments”), with the first Adequate Protection Payment 

occurring on or before March 15, 2024; 

(iii) to the extent of any diminution of any of its Prepetition Secured Collateral or 

Adequate Protection Collateral (defined below), valid, perfected, unavoidable, 

replacement security interests in and liens (“Adequate Protection Liens”) in and on all

assets and property (real and personal, tangible and intangible), whether now owned 

by or owing to, or hereafter acquired by, or arising in favor of the Debtors and/or their 

bankruptcy estates, including any previous unencumbered assets (the “Adequate 

Protection Collateral”), subject only to and subordinate to the DIP superpriority claim, 

the DIP Liens, and the Carve-Out, except that the Adequate Protection Liens shall be 

senior to the DIP superpriority claim and the DIP Liens as to the assets of the Loan 

Debtors only in the amount of any Cash Collateral Diminution in Value Claim. The 

Adequate Protection Liens shall be in addition to all valid and enforceable liens and 

security interests existing in favor of the Prepetition Secured Lender and not in 

substitution therefor.

(v) Diminution Super-Priority Claim: 

• Cash Collateral Diminution: The Prepetition Secured Lender is granted a 

final, allowed superpriority administrative expense claim and lien (as 

provided above) under section 507(b) in each of the chapter 11 cases or in 

any case under chapter 7 of the Bankruptcy Code upon the conversion of any 

of the chapter 11 cases, or in any other proceedings superseding or related to 

any of the foregoing (collectively, the “Successor Cases”) to the extent of 

any diminution in value of the Prepetition Secured Lender’s interest in and 

liens on Cash Collateral from and after the Petition Date resulting from, 

among other things (a) subordination of the Prepetition Secured Lender’s 

interest in the Cash Collateral to the Carve-Out, (b) the sale, lease, 

disposition or use of Cash Collateral, (c) the priming of prepetition liens by 

the DIP Liens, (d) the imposition of the automatic stay pursuant to 

Bankruptcy Code section 362, and/or (e) for any other reason for which 

adequate protection may be granted under the Bankruptcy Code or case law 

(the “Cash Collateral Diminution in Value Claim”). Solely for the purpose 

of the Interim Order and the Interim DIP Loan of $2,000,000.00 the Cash 

Collateral Diminution in Value Claim is determined to be $500,000.00. The 

Prepetition Secured Lender reserves all rights to assert and require a larger 

7 Adequate Protection includes other rights and obligations herein, even if in a different section of the DIP Term Sheet. 

For the avoidance of doubt, all Adequate Protection Liens attach to Avoidance Action Proceeds; provided, however, 

the Prepetition Secured Lender shall only avail itself of Avoidance Action Proceeds on a “last look” basis and only if 

all other Prepetition Secured Collateral and Adequate Protection Collateral is inadequate to indefeasibly repay the 

Prepetition Secured Loan in full; and provided further that the Adequate Protection Liens shall not include proceeds 

of Avoidance Actions alleged against the Prepetition Secured Lender. 

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amount for the Cash Collateral Diminution in Value Claim in connection 

with the Final DIP Order and Final DIP Loan.8 Further, the Prepetition 

Secured Lender shall be entitled to file and assert a Cash Collateral 

Diminution in Value Claim for the period covered by the Interim DIP Order 

in an amount greater than $500,000.00, and if so determined by the Court, 

any excess amount over $500,000.00 shall be treated pursuant to the 

provisions of the Non-Cash Collateral Diminution below. The priority of 

Cash Collateral Diminution in Value Claim shall be as follows:

a. subordinate to the Carve Out as to all Debtors; 

b. subordinate to the DIP superpriority claim and the DIP Liens as to the 

Non-Loan Debtors;9 and

c. senior to the DIP superpriority claim and the DIP Liens as to the Loan 

Debtors.10

• Non-Cash Collateral Diminution: The Prepetition Secured Lender is granted 

an allowed superpriority administrative expense claim and lien (as provided 

above) under section 507(b) in each of the chapter 11 cases or in any case 

under chapter 7 of the Bankruptcy Code upon the conversion of any of the 

chapter 11 cases, or in any other proceedings superseding or related to any 

of the foregoing (collectively, the “Successor Cases”), subordinate to 

payment of the DIP superpriority claim, DIP Liens, and the Carve-Out, to 

the extent of any diminution in value of the Prepetition Secured Lender’s 

interest in and liens on non-Cash Collateral from and after the Petition Date 

resulting from, among other things (a) subordination of the Prepetition 

Secured Lender’s interest in the non-cash collateral to the Carve-Out, (b) the 

sale, lease, disposition or use of non-Cash Collateral, (c) the priming of 

prepetition liens by the DIP Liens, (d) the imposition of the automatic stay 

pursuant to Bankruptcy Code section 362, and/or (e) for any other reason for 

which adequate protection may be granted under the Bankruptcy Code or 

case law (the “Non-Cash Collateral Diminution in Value Claim”). 

(vi) The Cash Collateral Diminution in Value Claim and the Non-Cash Collateral 

Diminution in Value Claim shall have recourse to and be payable from all of the 

Adequate Protection Collateral. 

(vii) The Prepetition Secured Lender shall have the benefit of the Milestones, and 

financial reporting (each, as set forth herein), which shall continue to remain in effect 

with respect to the Prepetition Secured Lender following any termination of the DIP 

Facility.

The Adequate Protection Payments shall be free and clear of all liens and claims. 

The Adequate Protection Liens shall be in addition to all valid and enforceable liens and 

security interests existing in favor of the Prepetition Secured Lender and not in 

substitution thereof. 

Notwithstanding the foregoing, the Prepetition Secured Lender shall be entitled to seek 

8 For avoidance of doubt, the DIP Lender must consent to any increase of the Cash Collateral Diminution in Value 

Claim in the Final DIP Order, and is under no obligation to advance funds beyond the Interim Funding. 

9 The “Non-Loan Debtors” shall mean Cottonwood Financial Idaho, LLC and Cottonwood Financial Wisconsin, LLC.

10 The “Loan Debtors” shall mean Cottonwood Financial Ltd., Cottonwood Financial Administrative Services, LLC, 

and Cottonwood Financial Texas, LLC.

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different or additional forms of adequate protection for any reason, including due to any 

extension of Milestones or failure to satisfy them. 

The DIP Lender only consents to entry of the interim cash collateral order and interim 

adequate protection to the Prepetition Secured Lender as set forth herein and reserves all 

rights with respect to entry of any further adequate protection orders or relief to the 

Prepetition Secured Lender, including any final cash collateral or adequate protection 

order.

See DIP Term Sheet at 13-15; Interim Order ¶¶ 10. 

DIP Lender Liens 

and Superpriority 

Claims 

Bankruptcy Rule 

4001(c)(1)(B()

Subject only to the Carve Out and the Cash Collateral Diminution in Value Claim, the 

DIP Loans shall be secured by, and the Interim DIP Order and the Final DIP Order will 

both provide the DIP Lender with, automatically perfected first priority liens on and 

security interests in (the “DIP Liens”) all assets and property (real and personal), whether 

now owned by or owing to, or hereafter acquired by, or arising in favor of the Borrowers 

(together, the “Collateral”). The Final DIP Order will expand the DIP Collateral to include 

all proceeds of claims and causes of action under Chapter 5 of the Bankruptcy Code 

(“Avoidance Actions”); provided however the DIP Lender shall only avail itself of 

proceeds from Avoidance Actions on a “last look” basis, and only if all other DIP 

Collateral is inadequate to indefeasibly repay the DIP Loans in full; provided further that 

the DIP Collateral shall not include proceeds of any Avoidance Actions alleged against 

the DIP Lender or its affiliates or principals. 

All of the claims of the DIP Lender on account of the DIP Loans (the “DIP Claims”) shall 

be entitled to the benefits of section 364(c)(1) of the Bankruptcy Code, having a 

superpriority over any and all administrative expenses of the kind that are specified in, or 

contemplated by, sections 105, 326, 327, 328, 330, 331, 361, 362, 363, 364, 365, 503, 506, 

507(a), 507(b), 546, 552, 726, 1113, 1114 or any other provisions of the Bankruptcy Code, 

subject only to the Carve Out and the Cash Collateral Diminution in Value Claim. 

The DIP Claims will, at all times during the period that the DIP Loans remain outstanding, 

remain, in right of payment, senior in priority to all other claims or administrative 

expenses, subject only to the Carve Out and the Cash Collateral Diminution in Value 

Claim. 

See DIP Term Sheet at 3; Interim DIP Order ¶¶ 8, 9.

Repayment Features

Bankruptcy Rule 

4001(c)(1)(B)

All or any portion of the DIP Loans may be voluntarily repaid at any time, without 

premium or penalty. Once repaid, DIP Loans cannot be reborrowed

See Interim DIP Order ¶ 3. 

Budget

Bankruptcy Rule 4001 

(c)(1)(B)

Approved Budget. The “Budget” shall consist of a standard 13-week operating budget 

setting forth all forecasted receipts and disbursements on a weekly basis for such 13-week 

period beginning as of the week of the Petition Date, through the week ending 13 weeks 

thereafter, broken down by week, including the anticipated weekly uses of the proceeds 

of the DIP Facility for such period, which forecast shall be reasonably acceptable to and 

approved by the DIP Lender before filing. The Budget is attached to the Interim DIP 

Order as Exhibit 2. 

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Initial Budget. Cash Collateral may only be used in accordance with and subject to the 

30-day Initial Budget, as set forth above in “Use of DIP Financing Proceeds and Cash 

Collateral”.

See DIP Term Sheet at 6, 9, 11; Interim DIP Order ¶ 5.

Variance Covenant

Bankruptcy Rule 

4001I(l)(B)

The term “Permitted Variances” will mean (1) a permitted positive variance that would 

not cause the total cumulative operating disbursements of the Debtors for the then-current 

Approved Budget, including Allowed Professional Fees, to be greater than one-hundred 

ten percent (110%) of the then-current Approved Budget over the corresponding time 

period, unless the amount of such variance above one-hundred ten percent (110%) is less 

than or equal to the positive variance with respect to aggregate revenues and collections 

of the Debtors for the same period; and (2) a permitted negative variance that would not 

cause the total cumulative operating receipts of the Debtors for the then-current Approved 

Budget to be an amount less than seventy (70%) of the then-current Approved Budget 

over the corresponding time period.

See Interim DIP Order ¶ 25; see also DIP Term Sheet at 15 for financial and other 

reporting requirements. 

Events of Default

Bankruptcy Rule 

4001(c)(l)(B)

Usual and customary for financings of this type including, but not limited to, failure to 

obtain entry of the Interim DIP Order, as well as failure to achieve the Milestones. 

See DIP Term Sheet at 8-9; Interim DIP Order ¶ 23. 

Indemnification

Bankruptcy Rule 

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

The DIP Lender and Prepetition Secured Lender shall have no liability to any third party 

and shall not be deemed to be in control of the operations of Debtors, or to be acting as a 

“responsible person” or managing agent with respect to the operation or management of 

the Debtors. The Debtors shall indemnify and hold harmless the DIP Lender, and 

Prepetition Secured Lender, and their respective affiliates and officers, directors, 

employees, agents, and advisors to the extent set forth in the DIP Term Sheet; provided 

that any claim for indemnity under this paragraph must be brought before this Court for 

approval. For the avoidance of doubt, the DIP Lender and Prepetition Secured Lender 

shall not be indemnified for willful misconduct, gross negligence, or criminal acts. No 

indemnification shall be granted that violates applicable law in the Fifth Circuit.

Interim DIP Order ¶ 32.

Carve Out

Bankruptcy Rule 

4001(c)(1)(B)

The Interim Order provides a “Carve Out” of certain statutory fees, allowed professional 

fees of the Debtors, and say official committee of unsecured creditors appointed under 

section 1102 of the Bankruptcy Code appointed in the chapter 11 cases pursuant to section 

1103 of the Bankruptcy Code, including a Post-Carve Out Trigger Notice Cap, all as 

detailed in the DIP Term Sheet and the Interim Order. 

See DIP Term Sheet at 3-4; Interim DIP Order ¶ 11. 

Fees and Expenses

Bankruptcy Rule 

4001(c)(1)(B)

The Debtors shall pay all reasonable and documented out-of-pocket accrued and unpaid 

fees, costs, disbursements and expenses of (a) the DIP Lender (including, without 

limitation, the reasonable and documented fees, costs and expenses of its legal counsel 

(including, for the avoidance of doubt, the fees, costs and expenses of Wick Phillips Gould 

& Martin, LLP) and financial advisors and the (b) the Prepetition Secured Lender 

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(including, without limitation, the reasonable and documented fees, costs and expenses of

its legal counsel (including, for the avoidance of doubt, the fees, costs and expenses of

Jackson Walker LLP, and financial advisors). 

Payment of the DIP Lender and Prepetition Secured Lender reimbursements shall not be 

subject to allowance by the Court but shall be subject to the following process. At the 

same time such remittance advices are delivered to the Debtors, the professionals for the 

DIP Lender and Prepetition Secured Lender shall deliver a copy of their respective 

remittance advices to counsel for the other, any committee and the U.S. Trustee. The 

remittance advices for such fees and expenses shall not be required to comply with any 

U.S. Trustee guidelines related to the payment of fees and expenses of retained estate 

professionals, may be in summary form only, and shall not be subject to application or 

allowance by the Court. Any objections raised by the Debtors, the DIP Lender, the 

Prepetition Secured Lender, the Office of the U.S. Trustee or any committee with respect 

to such remittance advices within ten (10) calendar days of receipt thereof will be resolved 

by the Court (absent prior consensual resolution thereof). Pending such resolution, the 

undisputed portion of any such remittance advices shall be promptly paid by the Debtors. 

Except as otherwise ordered by the Court in the event an objection is timely filed, such 

fees and expenses shall not be subject to any setoff, defense, claim, counterclaim, or 

diminution of any type, kind, or nature whatsoever.

See DIP Term Sheet at 12-13; Interim DIP Order ¶¶ 28, 29. 

506(c) Waiver 

Bankruptcy Rule 

4001(c)(l)(B)(x)

The DIP Orders shall provide for customary prepetition secured lender protections, 

including, but not limited to, waivers regarding (a) section 506(c), (b) the “equities of the 

case” exception under 552(b) of the Bankruptcy Code, and (c) the equitable doctrine of 

marshaling with respect to Prepetition Secured Collateral and all adequate protection 

collateral. The Prepetition Secured Lender shall be entitled to all of the rights and benefits 

of section 552(b) of the Bankruptcy Code. 

See DIP Term Sheet at 16; Interim DIP Order ¶¶ D(vii), 12, 18. 

Section 552(b)

Bankruptcy Rule 

4001(c)(l)(B)

See above.

Liens on Avoidance 

Actions/Proceeds

Bankruptcy Rule 

4001(c)(1)(B)(xi)

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

avoidance actions under chapter 5 of the Bankruptcy Code; provided, however the DIP 

Lender shall only avail itself of proceeds from avoidance actions, on a “last look” basis, 

and only if all other Collateral is inadequate to indefeasibly repay the DIP Obligations in 

full and (B) as described above with respect to Adequate Protection granted to the 

Prepetition Secured Lender, the Prepetition Secured Lender shall have similar liens 

subject only to and subordinate to the DIP superpriority claim, the DIP Liens, and the 

Carve-Out, except that the Adequate Protection Liens shall be senior to the DIP 

superpriority claim and the DIP Liens as to the assets of the Loan Debtors only in the 

amount of any Cash Collateral Diminution in Value Claim. 

See DIP Term Sheet at 3, 13 n.4; Interim DIP Order ¶¶ 9, 10, 12 and n. 4. 

Stipulations to 

Prepetition Liens and 

Claims 

The DIP Orders shall contain stipulations as to, among other things, the amount, validity, 

enforceability of the loan documents and the secured liens, perfection and priority of the 

secured indebtedness under the Prepetition Secured Debt and/or liens granted in favor of 

the secured parties under the Prepetition Secured Debt, including with respect to any 

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Bankruptcy Rule 

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

actions taken by the Prepetition Secured Lender in respect of the foregoing prior to 

commencement of the Chapter 11 Cases, subject to a 45-day challenge period. The 

stipulations shall also provide (a) that the Prepetition Secured Debt constitutes allowed 

secured claims; (b) that no claims, challenges offsets, defenses, objections or causes of 

action exist against the Prepetition Secured Lender or its respective agents, affiliates, 

subsidiaries, directors, officers, representatives, attorneys, or advisors; and (c) for the 

acknowledgment and enforceability of the relevant subordination agreements. The 

Prepetition Secured Lender may, but shall not be required to, file a Proof of Claim.

The Final DIP Order shall provide the full and complete release of the of the DIP Lender, 

Trevor Lee Ahlberg, Trevor Lee Ahlberg 1997 Trust, and Bomani Business Lending, LLC 

to the fullest extent permitted by law, subject to a 45-day challenge period from entry of 

the Final DIP Order with respect to the Prepetition Secured Lender.

11

See DIP Term Sheet at 16; Interim DIP Order ¶¶ C, 32, 33. 

Milestones

Bankruptcy Rule 

4001(c)(1)(B)

1. 25 days after the Petition Date: (a) entry of the Final DIP Order; (b) entry of an order 

approving the Debtors’ rejection and surrender of certain leased premises on an 

interim basis; (c) conclusion of the surrender with respect to substantially all of the 

locations and assets subject to such rejections; (d) entry of an order approving the 

assumption of the Debtors’ principal agreements with TreeMac Funding Group LLC; 

(e) entry of an order approving an Acceptable Sale Process (as defined below).

2. 75 days after the Petition Date: entry of an order approving the sale(s) of substantially 

all of the Debtors’ assets pursuant to the Acceptable Sale Process

See DIP Term Sheet at 4-5; Interim Order ¶ 22. 

Challenge Period

Bankruptcy Rule 

4001(c)(l)(B)

45-day challenge period to investigate the Prepetition Secured Lender’s liens and claims.

45-day challenge period to investigate claims against the DIP Lender, Trevor Lee Ahlberg, 

Trevor Lee Ahlberg 1997 Trust, and Bomani Business Lending, LLC. 

See DIP Term Sheet at 16; Interim DIP Order ¶ 33. 

Waiver/Modification 

of the Automatic Stay

Bankruptcy Rule 

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

Upon (i) the occurrence and during the continuation of an Event of Default, and (ii) the 

expiration of a five (5) calendar day cure period (unless such Event of Default is not

curable, in which case no cure period shall apply) from the date of written notice of the 

Event of Default by the DIP Lender to the Debtors, counsel to the Prepetition Secured 

Lender, any committee, and the United States Trustee (with notice by email to counsel

being sufficient) (the “Remedies Notice Parties”) and with such notice of Event of Default 

to be filed on the docket of the Chapter 11 Cases, without such Event of Default having

been cured, the DIP Lender may (without further notice or grace period, unless required 

by applicable law) in its sole discretion, take any or all of the following actions: (a) declare 

obligations under the DIP Loan to be immediately due and payable; and (b) terminate the 

11 The Prepetition Secured Lender reserves all rights with respect to any releases contemplated or referenced in the 

DIP Term Sheet, the Interim DIP Order and/or any plan, which releases shall not become effective, if ever, until after 

entry of an order by the Bankruptcy Court. For the avoidance of doubt, no releases will be granted pursuant to the 

Interim DIP Order and all rights are expressly reserved.

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DIP Loan as to any future liability or obligations, including any obligation to make 

additional Advances, but without affecting any of the obligations of the Debtors under 

the DIP Loan, or the DIP Super-priority Claim. Prior to exercising any rights or remedies 

under the DIP Orders or the DIP Credit Agreement, the DIP Lender shall be required to 

file a motion with the Court using a CM/ECF emergency code seeking emergency relief 

from the automatic stay (the “Stay Relief Motion”) on at least three (3) business days’ 

written notice to the Remedies Notice Parties of the DIP Lender’s intent to exercise its 

rights and remedies (the “DIP Remedies Notice Period”). In the event the Bankruptcy 

Court determines during a hearing on the Stay Relief Motion that an Event of Default has 

occurred, the Bankruptcy Court may fashion an appropriate remedy, which may include 

the exercise of any and all rights available to the DIP Lender under the DIP Credit 

Agreement and the DIP Orders, as applicable

See DIP Term Sheet at 12; Interim Order ¶ 24. 

The Debtors’ Prepetition Secured Debt

13. On December 9, 2020, Cottonwood Financial Ltd. entered into that certain Loan 

Agreement (the “Loan Agreement”) with Third Coast Bank, SSB (“Third Coast”) in the aggregate 

principal amount of $25 million (the “Main Street Loan”).12 Ninety-five percent (95%) of the 

Main Street Loan ($23,750,000) is held by MS Facilities LLC, a special purpose vehicle 

established by the Federal Reserve Bank of Boston. The remaining five percent (5%) of the Main 

Street Loan ($1,250,000) is held by Third Coast (Third Coast, together with MS Facilities LLC, 

the “Prepetition Secured Lender”). Cottonwood Texas and CFAS are guarantors of the Main Street 

Loan. The obligations under the Main Street Loan are secured by first priority liens on 

substantially all of the assets of Cottonwood, Cottonwood Texas, and CFAS.13 As of the Petition 

Date, the aggregate amount outstanding under the Main Street Loan is approximately

$26,743,881.44 (the “Prepetition Secured Debt”). 

12 The Main Street Loan was issued under the Main Street Lending Program, established by the Federal Reserve to 

support lending to small and medium-sized businesses that were in sound financial condition before the onset of the 

COVID-19 pandemic.

13 The Prepetition Secured Lender does not have liens on the assets of Cottonwood Wisconsin or Cottonwood Idaho.

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14. Prior to the event of default discussed in the First Day Declaration, the maturity 

date under the Main Street Loan was December 9, 2025. Cottonwood failed to make the scheduled 

principal and interest payment due on December 9, 2023, and the Prepetition Secured Lender

subsequently accelerated the debt.

The DIP Facility

I. The Debtors’ Need for Access to Financing and Use of Cash. 

15. As described in the accompanying Nicolaou Declaration, the Debtors require 

immediate access to cash and financing under the DIP Facility to ensure they can continue 

operating during these chapter 11 cases and preserve the value of their estates for the benefit of all 

parties in interest. Without immediate postpetition financing and access to cash, the Debtors will 

be unable to continue paying wages to their employees, paying vendors, meeting working capital 

and business operating needs, preserving and maximizing the value of their estates, and 

administering these chapter 11 cases, all of which will cause immediate and irreparable harm to 

the value of the Debtors’ estates to the detriment of all stakeholders. Moreover, sufficient postpetition financing is necessary to send a strong market signal that these chapter 11 cases are wellfunded and that the Debtors will continue to operate without disruption while they are 

reorganizing. Otherwise, significant value deterioration may occur. Nicolaou Declaration ¶10. 

16. As set forth in the Approved Budget, to ensure such liquidity, the Debtors seek 

authorization to utilize cash and draw $2.0 million on an interim basis (minus the original issue 

discount of 3% on such interim advance), and an aggregate of up to $5.0 million in on a final basis 

upon entry of the Final DIP Order (minus the 3% original issue discount on such $5.0 million). 

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The Debtors believe the DIP Facility is essential to preserve and maximize the value of their 

estates, and responsibly administer these chapter 11 cases. 

A. Alternative Sources of Financing Are Not Available on Better Terms. 

17. The Debtors engaged Harney Partners (“Harney”) as their financial advisor in early 

December 2023 to provide financial advisory services, as well as to provide Ms. Nicolaou as the 

Debtors’ CRO, which services include exploring financing options to address the Debtors’ liquidity 

constraints. To that end, as described more fully in the Nicolaou Declaration, during the 

prepetition period, Harney identified 12 potential DIP lenders. Of those, 8 were eliminated from 

consideration almost immediately as the Debtors’ borrowing requirements were too small or an 

institutional decision was made not to extend credit to sub-prime lenders or high APR businesses. 

Two additional firms subsequently expressed a lack of interest due to concerns about the Debtors’ 

collateral and uncertainty of cash flows and certainty of exit. Nicolaou Declaration ¶ 15. 

Conversations continued with two private credit funds, one which has conducted extensive due 

diligence on the Debtors, and another that is a specialty fund focused on financing consumer 

lenders. The specialty fund ultimately declined to provide a DIP proposal based on high APR and 

lack of experience in providing DIP financing. While the remaining private credit fund continues 

to express interest in a potential transaction, it has not expressed definitive interest in providing a 

DIP. Id. 

18. As a result, Harney pivoted and began negotiating the terms of a potential DIP 

facility with the DIP Lender, which is an entity affiliated with the Debtors’ CEO and part owner, 

Trevor Ahlberg. 

19. As a consequence, and given time and liquidity constraints, and because the 

proposed DIP Lender was the only party who made an actionable proposal, id. ¶ 16, the Debtors 

determined that the DIP Facility was the best financing alternative available under the 

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circumstances because, among other things, it: (i) provides sufficient financing to meet the 

Debtors’ liquidity needs; and (ii) allows the Debtors to immediately work towards maximizing 

value and returns to creditors. 

20. Harney, along with the Debtors’ investment banker, Oppenheimer & Co., Inc., will 

continue to “shop the DIP” between the interim and final hearing to ensure that the Debtors’ 

postpetition financing will be on the most favorable terms available. Id. 

21. The Debtors would further demonstrate that the terms of the DIP Facility are fair, 

reasonable and appropriate under the circumstances and are in accordance with current market 

terms and further, that the DIP Facility is fair, reasonable, an exercise of sound business judgment, 

and necessary to avoid irreparable harm during the course of these Chapter 11 Cases. Nicolaou 

Declaration ¶¶ 17-18. Indeed, the overall “financing package” which includes the adequate 

protection to be granted to the Prepetition Secured Lender and the other elements of the interplay 

between the DIP Lender, the Debtors and the Prepetition Secured Lender were the subject of 

extensive negotiations. Further, as set forth in Nicolaou Declaration, the Milestones contained in 

the DIP Financing are reasonable and achievable and will assist in expending the Debtors’ 

emergence from chapter 11. Id. ¶ 19. 

Basis for Relief

I. The Debtors Should Be Authorized to Obtain Postpetition Financing.

A. Entry into the DIP Term Sheet and DIP Loan Documents Is an Exercise of the 

Debtors’ Sound Business Judgment.

22. The Court should authorize the Debtors to enter into the DIP Term Sheet and other 

DIP Loan Documents, obtain access to the DIP Facility, and continue using cash. Courts grant a 

debtor in possession considerable deference in acting in accordance with its business judgment in 

obtaining postpetition secured credit, so long as the agreement to obtain such credit does not run 

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afoul of the provisions of, and policies underlying, the Bankruptcy Code. See, e.g., In re N. Bay 

Gen. Hosp., Inc., No. 08-20368 (Bankr. S.D. Tex. July 11, 2008) (order approving postpetition 

financing on an interim basis as exercise of debtors’ business judgment); In re L.A. Dodgers 

LLC, 457 B.R. 308, 313 (Bankr. D. Del. 2011) (“[C]ourts will almost always defer to the business 

judgment of a debtor in the selection of the 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 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.”).

23. Specifically, to determine whether the business judgment standard is met, a court 

need only “examine whether a reasonable business person would make a similar decision under 

similar circumstances.” In re Exide Techs., 340 B.R. 222, 239 (Bankr. D. Del. 2006); see also In re 

Curlew Valley Assocs., 14 B.R. 506, 513–14 (Bankr. D. Utah 1981) (noting that courts should not 

second guess a debtor’s business decision when that decision involves “a business judgment made 

in good faith, upon a reasonable basis, and within the scope of the debtor’s authority under the 

[Bankruptcy] Code”).

24. Furthermore, in considering whether the terms of postpetition financing are fair and 

reasonable, courts consider the terms in light of the relative circumstances of both the debtor and 

the potential lender. See In re Farmland Indus., Inc., 294 B.R. 855, 886 (Bankr. W.D. Mo. 2003) 

(while many of the terms favored the DIP lenders, “taken in context, and considering the relative 

circumstances of the parties,” the court found them to be reasonable); see also Unsecured 

Creditors’ Comm. Mobil Oil Corp. v. First Nat’l Bank & Trust Co. (In re Elingsen McLean Oil 

Co., Inc.), 65 B.R. 358, 365 n.7 (W.D. Mich. 1986) (recognizing a debtor may have to enter into 

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“hard bargains” to acquire funds for its reorganization). The Court may also appropriately take 

into consideration non-economic benefits to the Debtors offered by a proposed postpetition facility. 

For example, in In re ION Media Networks, Inc., the bankruptcy court for the Southern District of 

New York held that:

Although all parties, including the Debtors and the Committee, are naturally 

motivated to obtain financing on the best possible terms, a business decision 

to obtain credit from a particular lender is almost never based purely on 

economic terms. Relevant features of the financing must be evaluated, 

including non economic elements such as the timing and certainty of 

closing, the impact on creditor constituencies and the likelihood of a 

successful reorganization. This is particularly true in a bankruptcy setting 

where cooperation and establishing alliances with creditor groups can be a 

vital part of building support for a restructuring that ultimately may lead to 

a confirmable reorganization plan. That which helps foster consensus may 

be preferable to a notionally better transaction that carries the risk of 

promoting unwanted conflict.

No. 09-13125, 2009 WL 2902568, at *4 (Bankr. S.D.N.Y. July 6, 2009) (emphasis added).

25. The Debtors’ determination to move forward with the DIP Facility is an exercise of 

their sound business judgment. The DIP Facility will allow the Debtors to: (a) fund capital 

expenditures that are essential to the Debtors’ continuation as a going concern; (b) provide the 

liquidity necessary to continue favorable trade terms with vendors and to reassure other 

stakeholders; (c) fund payroll obligations; (d) fund the administrative cost of these chapter 11 

cases; (e) fund the required adequate protection obligations and (f) provide a path to a valuemaximizing emergence from chapter 11. The Debtors negotiated the DIP Term Sheet with the DIP 

Lender and the Prepetition Secured Lender in good faith, at arm’s length, and with the assistance 

of their respective advisors, and the Debtors believe that they have obtained the best financing 

available under the circumstances. 

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B. The Debtors Should Be Authorized to Grant Liens and Superpriority Claims.

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

security interests and liens as set forth herein and in the DIP Term Sheet pursuant to sections 364(c) 

and (d) of the Bankruptcy Code. Specifically, the Debtors propose to provide to the DIP Lender

postpetition security interest in and liens on the DIP Collateral (as defined in the Interim Order) 

that are valid, perfected, allowed, enforceable, non-avoidable and not subject to challenge, dispute 

or subordination immediately upon entry of the Interim DIP Order.

27. The above-described liens on encumbered and unencumbered assets are common 

features of postpetition financing facilities, and as set forth in greater detail in the Nicolaou 

Declaration at ¶ 12-13, were a necessary feature here to provide security for the proposed 

financing. The statutory requirement for obtaining postpetition credit under section 364(c) is a 

finding, made after notice and hearing, that a debtor is “unable to obtain unsecured credit allowable 

under Section 503(b)(1) of [the Bankruptcy Code].” 11 U.S.C. § 364(c). See In re Crouse Grp., 

Inc., 71 B.R. 544, 549 (Bankr. E.D. Pa. 1987) (secured credit under section 364(c) of the 

Bankruptcy Code is authorized, after notice and hearing, upon showing that unsecured credit 

cannot be obtained). Courts have articulated a three-part test to determine whether a debtor is 

entitled to financing under section 364(c) of the Bankruptcy Code. Specifically, courts look to 

whether:

a. the debtor is unable to obtain unsecured credit under section 364(b) 

of the Bankruptcy Code, i.e., by allowing a lender only an 

administrative claim;

b. the credit transaction is necessary to preserve the assets of the estate; 

and

c. the terms of the transaction are fair, reasonable, and adequate, given 

the circumstances of the debtor-borrower and proposed lenders.

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See In re L.A. Dodgers LLC, 457 B.R. 308 (Bankr. D. Del. 2011); In re Ames Dep’t Stores, 115 

B.R. 34, 37–40 (Bankr. S.D.N.Y. 1990); see also In re St. Mary Hosp., 86 B.R. 393, 401–02 (Bankr. 

E.D. Pa. 1988); Crouse Grp., 71 B.R. at 549.

28. As described above and as set forth in the Nicolaou Declaration, no third-party 

lender was willing to provide postpetition DIP financing on an unsecured, pari passu, or juniorlien basis, other than the DIP Lender as set forth herein, in the DIP Term Sheet and in the form of 

Interim DIP Order. See Nicolaou Declaration ¶¶ 12-13, 18.

29. Absent the DIP Facility, which will provide assurances that the Debtors will have 

sufficient liquidity to administer these chapter 11 cases, the value of the Debtors’ estates would be 

significantly impaired to the detriment of all stakeholders. See Nicolaou Declaration ¶ 10. Without 

postpetition financing, the Debtors lack sufficient funds to operate their enterprise for anything 

other than a short-term basis, continue paying their debts as they come due, and cover the projected 

costs of these chapter 11 cases. See Nicolaou Declaration ¶¶ 10, 18. Given the Debtors’ 

circumstances, the Debtors believe that the terms of the DIP Facility, as set forth in the DIP Term 

Sheet, are reasonable as more fully set forth above and in the Nicolaou Declaration. For all these 

reasons, the Debtors submit that they have met the standard for obtaining postpetition financing.

30. In the event that a debtor is unable to obtain unsecured credit allowable as an 

administrative expense under section 503(b)(1) of the Bankruptcy Code, section 364(c) of the 

Bankruptcy Code provides that a court “may authorize the obtaining of credit or the incurring of 

debt (a) with priority over any or all administrative expenses of the kind specified in section 

503(b) or 507(b) of [the Bankruptcy Code]; (b) secured by a lien on property of the estate that is 

not otherwise subject to a lien; or (c) secured by a junior lien on property of the estate that is subject 

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to a lien.” As described above, the Debtors are unable to obtain unsecured credit. Therefore, 

approving a superpriority claim in favor of the DIP Lender is reasonable and appropriate.

31. Further, section 364(d) of the Bankruptcy Code provides that a debtor may obtain 

credit secured by a senior or equal lien on property of the estate already subject to a lien, after 

notice and a hearing, where the debtor is “unable to obtain such credit otherwise” and “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). The Debtors may 

incur “priming” liens under the DIP Facility if either (a) the prepetition lender has consented or 

(b) the prepetition lender’s interests in collateral are adequately protected. 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.”). 

32. Here, as set forth in the DIP Term Sheet, the Prepetition Secured Lender has agreed 

to priming, but only on the bases set forth therein, and only on the condition that the proposed 

adequate protection package is provided by the Debtors and approved by the Court. 

C. No Comparable Alternative to the DIP Facility Are Reasonably Available on 

More Favorable Overall Terms.

33. 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. 

In re Snowshoe Co., Inc., 789 F.2d 1085, 1088 (4th Cir. 1986); see also In re Plabell Rubber 

Prods., Inc., 137 B.R. 897, 900 (Bankr. N.D. Ohio 1992). Moreover, in circumstances where only 

a few lenders likely can or will extend the necessary credit to a debtor, “it would be unrealistic and 

unnecessary to require [the debtor] to conduct such an exhaustive search for financing.” In re Sky 

Valley, Inc., 100 B.R. 107, 113 (Bankr. N.D. Ga. 1988), aff’d sub nom. Anchor Sav. Bank FSB v. 

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Sky Valley, Inc., 99 B.R. 117, 120 n.4 (N.D. Ga. 1989); see also In re Snowshoe Co., 789 F.2d 

1085, 1088 (4th Cir. 1986) (demonstrating that credit was unavailable absent the senior lien by 

establishment of unsuccessful contact with other financial institutions in the geographic area); In 

re Stanley Hotel, Inc., 15 B.R. 660, 663 (D. Colo. 1981) (bankruptcy court’s finding that two 

national banks refused to grant unsecured loans was sufficient to support conclusion that 

section 364 requirement was met); 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)).

34. As noted above, the Debtors do not believe that a more favorable alternative DIP 

financing is reasonably available, making DIP Facility the most favorable to the Debtors under the 

circumstances. The DIP Facility provide the Debtors with the liquidity they need at the lowest 

cost available while simultaneously placing the Debtors on an optimal path for a successful 

restructuring. Therefore, the Debtors submit that the requirement of section 364 of the Bankruptcy 

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

II. The Debtors Should Be Authorized to Use Cash.

35. Section 363 of the Bankruptcy Code generally governs the use of estate property. 

Section 363(c)(2)(A) of the Bankruptcy Code permits a debtor in possession to use cash collateral

with the consent of the secured party. 

36. Section 363(e) of the Bankruptcy Code provides for adequate protection of interests 

in property when a debtor uses cash collateral. Further, 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 553, 556 (3d Cir. 1996) (en banc). 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 sufficient adequate 

protection on a case-by-case basis. See, e.g., In re First South Sav. Ass’n, 820 F.2d 700, 710 (5th 

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Cir. 1987) (explaining that adequate protection depends on the facts and circumstances of the case); 

In re Las Torres Dev., LLC, 413 B.R. 687, 697 (Bankr. S.D. Tex. 2009) (“[I]n determining whether 

a secured creditor’s interest is adequately protected, most courts engage in an analysis of the 

property’s ‘equity cushion’—the value of the property after deducting the claim of the creditor 

seeking relief from the automatic stay and all senior claims”) (internal quotes and citations 

omitted); see also In re Dynaco Corp., 162 B.R. 389, 394 (Bankr. D.N.H. 1993) (citing 2 Collier 

on Bankruptcy ¶ 361.01[1] at 361–66 (15th ed. 1993) (explaining that adequate protection can take 

many forms and “must be determined based upon equitable considerations arising from the 

particular facts of each proceeding”)). The concept of adequate protection is designed to shield a 

secured creditor from diminution in the value of its interest in collateral during the period of a 

debtor’s use. See In re Carbone Cos., 395 B.R. 631, 635 (Bankr. N.D. Ohio 2008) (“The test is 

whether the secured party’s interest is protected from diminution or decrease as a result of the 

proposed use of cash collateral.”); see also In re Cont’l Airlines, Inc., 154 B.R. 176, 180—81 

(Bankr. D. Del. 1993) (holding that adequate protection for use of collateral under section 363 of 

the Bankruptcy Code is limited to use-based decline in value).

A. Adequate Protection Provided to the Prepetition Secured Lender.

37. As described more fully above in the summary above, and as set forth more fully 

in the DIP Term Sheet and in the form of Interim DIP Order, the Debtors propose to provide the 

Prepetition Secured Lender with a variety of adequate protection (which also includes reporting 

obligations) as a condition to, and quid pro quo for, the use of cash collateral and the Prepetition 

Secured Lender’s agreement to be primed by the DIP Financing. 

38. The Debtors submit that this proposed adequate protection, which has been heavily 

negotiated and agreed to, is sufficient to protect the Prepetition Secured Lender from any potential

diminution in value to their collateral, including cash collateral. 

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III. The Debtors Should Be Authorized to Pay the Fees Required by the DIP Lender

Under the DIP Loan Documents.

39. Although there are no upfront or exit fees, there is a 3% original issue discount 

which is similar to an upfront fee. Under the DIP Loan Documents, the Debtors have also agreed, 

subject to Court approval, to pay certain the reasonable fees and expenses of the DIP Lender.

14 

Courts in this district and others have approved the payment of similar fees in large or complex 

chapter 11 cases. See, e.g., In re Eye Care Leaders Portfolio Holdings, LLC, No 24-80001 (MVL) 

(Bankr. N.D. Tex. Jan. --, 2024) (approving upfront fee of 3.75% of total commitment, plus a 

waivable back-end fee of $200,000); In re Ebix, Inc., No. 23-80004 (SWE) (Bankr. N.D. Tex. Dec. 

19, 2023) [Docket No. 64, ¶¶ 4(b), (c)] (approving upfront and exit fees of 3% and 2% of 

committed amount, respectively); In re Tuesday Morning, No. 23-90001 (ELM) (Bankr. N.D. Tex. 

Feb. 16, 2023) [Docket No. 112 ¶ 66]; In re Studio Movie Grill Holdings, LLC, No. 20-32633 

(SGJ) (Bankr. N.D. Tex. Oct. 27, 2020) [Docket No. 52, ¶ 65] (approving among other fees exit 

fees in the amount of 2.0 percent); In re Tuesday Morning Corp., No. 20-31476 (HDH) (Bankr. 

N.D. Tex. May 28, 2020) [Docket No. 35, ¶ 71] (approving an upfront fee of 2.0 percent to the 

DIP Facility); In re GGI Holdings, LLC, No. 20-31818 (HDH) (Bankr. N.D. Tex. May 7, 2020)

[Docket No. 63, ¶¶ 5(iv), 6(iii)].

40. It is understood and agreed by all parties, that these fees are an integral component 

of the overall terms of the DIP Facility and were required by the DIP Lender as consideration for 

the extension of postpetition financing. Accordingly, the Court should authorize the Debtors to 

pay the fees provided under the DIP Loan Documents in connection with entering into those 

agreements.

14 The Prepetition Secured Lender’s adequate protection package also includes the payment of fees and expenses, as 

set forth herein, in the DIP Term Sheet and in the Interim DIP Order.

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IV. The DIP Lender Should Be Deemed A Good-Faith Lender Under Section 364(e).

41. 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) of the Bankruptcy Code 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.

42. As explained herein, in the Nicolaou Declaration, and in the First Day Declaration, 

the DIP Loan Documents are the result of: (a) the Debtors’ reasonable and informed determination 

that the DIP Lender provided the best postpetition financing alternative available under the 

circumstances and (b) extended arm’s length, good-faith negotiations between the Debtors and the 

DIP Lender. The Debtors submit that the terms and conditions of the DIP Loan 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. Further, no consideration is being 

provided to any party to the DIP Loan Documents other than as described herein. Accordingly, 

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

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

section.

V. The Automatic Stay Should Be Modified on a Limited Basis.

43. The form of Interim DIP Order provides that the automatic stay provisions of 

section 362 of the Bankruptcy Code will be modified to allow the DIP Lender and the Prepetition 

Secured Lender to file any financing statements, security agreements, notices of liens, and other 

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similar instruments and documents in order to validate and perfect the liens and security interests 

granted to them under the Interim DIP Order. The proposed Interim DIP Order further provides 

that the automatic stay is modified as necessary to permit the Debtors to grant liens to the DIP 

Lender and the Prepetition Secured Lender, and to incur all liabilities and obligations set forth in 

the Interim DIP Order. Finally, the form of Interim DIP Order provides that, following the 

occurrence of an Event of Default and an appropriate opportunity for the Debtors to obtain relief 

from the Court, the automatic stay shall be vacated and modified to the extent necessary to permit 

the exercise of rights and remedies in accordance with the DIP Loan Documents, the Interim DIP 

Order, or applicable law.

44. 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. See, e.g., In re Tuesday Morning Corp., 

No. 20-31476 (HDH) (Bankr. N.D. Tex. July 10, 2020) (modifying automatic stay as necessary to 

effectuate the terms of the order); In re Taco Bueno Restaurants, Inc., No. 18-33678 (SGJ) (Bankr. 

N.D. Tex. Nov. 30, 2018) (same). These provisions are also consistent with the Complex Case 

Procedures.

VI. Failure to Obtain Immediate Interim Access to the DIP Facility and Use of Cash 

Would Cause Immediate and Irreparable Harm.

45. 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 or to use cash collateral pursuant to 

section 363 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.

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46. For the reasons noted above, the Debtors have an immediate postpetition need to 

use cash on hand, and access the liquidity provided by the DIP Facility. The Debtors cannot 

maintain the value of their estates during the pendency of these chapter 11 cases without access to 

cash. The Debtors will use cash, among other things, to fund the operation of their business, 

maintain business relationships with their vendors and suppliers, make payroll, and satisfy other 

essential working capital and operational needs, all of which are required to preserve and maintain 

the Debtors’ going concern value for the benefit of all parties in interest, and to fund the 

administration of these chapter 11 cases. In short, the Debtors’ ability to administer these chapter 

11 cases through the use of cash (to the extent it might be “cash collateral”) is vital to preserve and 

maximize the value of the Debtors’ estates.

47. The Debtors request that the Court hold and conduct a hearing to consider entry of 

the Interim DIP Order authorizing the Debtors, from and after entry of the Interim DIP Order until 

the Final Hearing, to receive initial funding under the DIP Facility. The Debtors require the initial 

funding under the DIP Facility prior to the Final Hearing and entry of the Final DIP Order to 

continue operating, in the normal course, pay their administrative expenses, and to otherwise 

implement the relief requested in the Debtors’ first day motions. This relief will enable the Debtors 

to preserve and maximize value and, therefore, avoid immediate and irreparable harm and 

prejudice to their estates and all parties in interest, pending the Final Hearing. 

Request for Final Hearing

48. Pursuant to Bankruptcy Rules 4001(b)(2) and 4001(c)(2), the Debtors request that 

the Court set a date for the Final Hearing that is as soon as practicable, and in no event later than 

25 days after the Petition Date, and fix the time and date prior to the Final Hearing for parties to 

file objections to this Motion. 

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Waiver of Bankruptcy Rule 6004(a) and 6004(h) 

49. 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). 

Notice

50. The Debtors will provide notice of this motion to the following parties or their 

counsel: (a) the U.S. Trustee for the Northern District of Texas; (b) the holders of the 30 largest 

unsecured claims against the Debtors (on a consolidated basis); (c) the DIP Lender; (d) the 

Prepetition Secured Lender; (e) the United States Attorney’s Office for the Northern District of 

Texas; (f) the Internal Revenue Service; (g) the state attorneys general for states in which the 

Debtors conduct business; and (h) any party that has requested notice pursuant to Bankruptcy Rule 

2002. In light of the nature of the relief requested, the Debtors submit that no other or further 

notice is needed.

WHEREFORE, the Debtors respectfully request that the Court enter an interim order, 

substantially in the form attached hereto as Exhibit A, granting the relief requested herein and 

such other relief as the Court deems appropriate under the circumstances.

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Respectfully submitted this 28th day of February, 2024. 

GRAY REED 

By: /s/ Lydia R. Webb

Jason S. Brookner 

Texas Bar No. 24033684

Aaron M. Kaufman

Texas Bar No. 24060067

Lydia R. Webb

Texas Bar No. 24083758

1601 Elm Street, Suite 4600

Dallas, Texas 75201

Telephone: (214) 954-4135

Facsimile: (214) 953-1332

Email: jbrookner@grayreed.com

akaufman@grayreed.com

lwebb@grayreed.com

Proposed Counsel to the Debtors

and Debtors in Possession

Certificate of Service

I certify that on February 28, 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/ Lydia R. Webb

Lydia R. Webb

 

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Exhibit A 

Proposed Interim DIP Order

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39313257v.2

4892-2687-9913

INTERIM ORDER (I) AUTHORIZING THE 

DEBTORS TO (A) OBTAIN POSTPETITION FINANCING 

AND (B) UTILIZE CASH COLLATERAL, (II) GRANTING LIENS AND

SUPERPRIORITY ADMINISTRATIVE EXPENSE CLAIMS, (III) GRANTING

ADEQUATE PROTECTION, (IV) MODIFYING THE AUTOMATIC STAY,

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

Upon the motion (the “Motion”)2 of the above-captioned debtors and debtors in possession 

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

364(e), 503 and 507 of title 11 of the United States Code (the “Bankruptcy Code”), rules 2002, 

1 The Debtors in these Chapter 11 Cases and the last four digits of each Debtors’ federal tax identification number are 

as follows: Cottonwood Financial Ltd. (1001); Cottonwood Financial Administrative Services, LLC (7228); 

Cottonwood Financial Texas, LLC (9059); Cottonwood Financial Idaho, LLC (5651); Cottonwood Financial 

Wisconsin, LLC (7075). The Debtors’ principal offices are located at 2100 W Walnut Hill Lane, Suite 300, Irving, TX 

75038.

2 Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Motion.

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

§

In re: § Chapter 11

§

COTTONWOOD FINANCIAL LTD., et al.,

1 §

§

Case No. 24-80035 (SWE)

§ (Jointly Administered)

Debtors. §

§

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2 

39313257v.2

4892-2687-9913

4001, 6003, 6004 and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy 

Rules”) and Section D of the Procedures for Complex Cases in the Northern District of Texas (the 

“Complex Case Procedures”) for entry of an interim order (this “Interim DIP Order”) and 

subsequently, a final order (the “Final DIP Order”, and together with the Interim DIP Order, the 

“DIP Orders”): 

A. Authorizing the Debtors to use the cash collateral (as defined Bankruptcy Code 

section 363(a), “Cash Collateral”) of their Prepetition Secured Lender (as defined 

below), in accordance with the terms and conditions set forth in the DIP Term Sheet 

(defined below), this Interim DIP Order and in accordance with the Approved 

Budget (defined below) and authority for the Debtors to grant adequate protection 

to the Prepetition Secured Lender with respect to any postpetition diminution in the 

value of its Prepetition Secured Lender Collateral (as defined below) arising from, 

among other things, the Debtors’ sale, use, or lease of the Prepetition Secured 

Lender Collateral and the priming of the prepetition liens held by the Prepetition 

Secured Lender by the DIP Liens (as defined below); 

B. Granting to the Prepetition Secured Lender, subject and subordinate to the Carve 

Out (as defined below) and the Cash Collateral Diminution in Value Claims (as 

defined below), the adequate protection described herein which include 

replacement liens to the Prepetition Secured Lender as adequate protection for any 

diminution in the value of the Prepetition Secured Lender Collateral; 

C. Authorizing the Debtors, as borrowers, to enter into a senior secured postpetition 

financing facility (the “DIP Facility”) consisting of a superpriority debtor in 

possession credit facility pursuant to the terms and conditions of that certain 

Secured Debtor-in-Possession Credit Facility Term Sheet (as amended or modified 

from time to time, the “DIP Term Sheet”) among the Debtors and Nehimba 

Holdings, LLC (the “DIP Lender”) attached to this Interim DIP Order as Exhibit 

1, and which shall consist of a superpriority priming line of credit and term loan 

facility in the aggregate principal amount of up to $7.0 million from the DIP Lender

as follows3: 

i. Interim Approval. From the date of the Interim DIP Order until the date a 

Final DIP Order is entered (the “Interim Period”), approval to draw DIP 

Loans not to exceed $2.0 million (minus a 3% original issue discount on 

such amount), subject to compliance with the terms, conditions, and 

covenants described in the DIP Term Sheet, the Interim DIP Order, and the 

Approved Budget; and 

3 All amounts at any time outstanding under the DIP Facility are referred to as the “DIP Loans.”

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ii. Final Approval. Subject to and upon entry of the Final DIP Order, approval 

to draw DIP Loans up to an additional principal amount not to exceed $5.0 

million (minus a 3% original issue discount on such amount), such that the 

total aggregate principal amount of all DIP Loans on a final basis does not 

exceed $7.0 million, subject to compliance with the terms, conditions and 

covenants described in the DIP Loan Documents (defined below), the Final 

DIP Order and the Approved Budget; 

D. Authorizing the Debtors to execute and enter into the DIP Term Sheet and any other 

agreements, instruments, pledge agreements, guarantees, security agreements, 

intellectual property security agreements, control agreements, notes and other 

documents reasonably required by the DIP Lender that are consistent with the DIP 

Term Sheet and subject to review and approval by the Prepetition Secured Lender 

(collectively, and together with the DIP Orders, the “DIP Loan Documents” and all 

obligations and indebtedness of any of the Debtors to the DIP Lender under the DIP 

Loan Documents collectively being the “DIP Obligations”) and to perform their 

respective obligations thereunder and all such other and further acts as may be 

necessary, appropriate, or desirable in connection with the DIP Loan Documents, 

including, but not limited to, granting or perfecting liens or security interests by any 

of the Debtors in favor of and for the benefit of the DIP Lender on account of the 

DIP Facility;

E. Authorization and direction for the Debtors to use the proceeds of the DIP Facility 

as expressly provided in the DIP Loan Documents and in accordance with the 

Approved Budget; 

F. Authorizing the Debtors to pay the principal, interest, fees, expenses and other 

amounts payable under the DIP Term Sheet and the DIP Loan Documents as such 

become earned, due and payable, including, but not limited to, the fees and costs of 

the DIP Lender’s professionals, advisors, and consultants (collectively, the “DIP 

Lender Reimbursements”), in addition to paying professional fees and other 

amounts to the Prepetition Secured Lender as part of the adequate protection to be 

granted to the Prepetition Secured Lender; 

G. Granting to the DIP Lender allowed superpriority claims, subject to the Carve Out

and the Cash Collateral Diminution in Value Claims, pursuant to section 364(c)(1) 

of the Bankruptcy Code payable from and having recourse to all assets of the 

Debtors; 

H. Granting to the DIP Lender (a) liens on all prepetition and postpetition property of 

the Debtors and their respective estates and the proceeds thereof pursuant to section 

364(c)(2) of the Bankruptcy Code including—subject to and effective upon entry 

of the Final DIP Order, and as a “last look” in the event the DIP Lender is not 

otherwise repaid in full—any Avoidance Action Proceeds (as defined below), (b) 

priming liens pursuant to section 364(d) of the Bankruptcy Code on all prepetition 

and postpetition property of the Debtors’ estates and all proceeds thereof, in each 

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case of (a) and (b), subject to the Carve Out and Cash Collateral Diminution in 

Value Claims and with the relative priorities set forth in this Interim DIP Order; 

I. Waiving (a) any equitable doctrine of marshaling, except as provided herein and 

(b) the Debtors’ right to surcharge the DIP Collateral and the Prepetition Secured 

Lender Collateral pursuant to section 506(c) of the Bankruptcy Code; 

J. Authorizing the DIP Lender to terminate (a) all commitments to extend credit under 

the DIP Facility, and (b) to terminate the Debtors’ sale, use, or lease of cash 

collateral or the proceeds of the DIP Facility, each upon the occurrence and 

continuance of an Event of Default (as defined below); 

K. Modifying the automatic stay of Bankruptcy Code section 362 (the “Automatic 

Stay”) to the extent necessary to implement and effectuate the terms and provisions 

of the DIP Loan Documents, including the Interim DIP Order; 

L. Approving a waiver of any applicable stay (including under Bankruptcy Rule 6004) 

with respect to the effectiveness of this Interim DIP Order; 

M. Scheduling an interim hearing (the “Interim Hearing”) on the Motion; 

N. Scheduling a final hearing (the “Final Hearing”) such that the Final DIP Order is 

entered no later than twenty five (25) calendar days after the Petition Date to 

consider final approval of the DIP Facility; and

O. Granting such other and further relief as is just and proper.

and this Court having considered the Motion, the exhibits attached thereto, the DIP Loan 

Documents, and the Declaration of Karen G. Nicolaou in support of the Motion (the “Nicolaou 

Declaration”), the evidence submitted, and the record made at the Interim Hearing held before this 

Court on February 29, 2024; and due, proper and sufficient notice of the Motion, having been 

given in accordance with Bankruptcy Rules 4001(b), (c), and (d) and 9014, and the local rules, 

procedures and orders of the Court; and the Interim Hearing to consider the relief requested in the 

Motion having been held and concluded; and all objections, if any, to the relief requested in the 

Motion having been withdrawn, resolved, or overruled by this Court; and it appearing to this Court 

that granting the interim relief requested is necessary to avoid immediate and irreparable harm to 

the Debtors and their estates (as defined under Bankruptcy Code section 541, the “Estates”), and 

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otherwise is fair and reasonable and in the best interests of the Debtors, their Estates, and their 

creditors and other constituents, and is essential for the continued operation of the Debtors’ 

business; and after due deliberation and consideration, and good and sufficient cause appearing 

therefor; 

THE COURT HEREBY MAKES THE FOLLOWING FINDINGS OF FACT AND 

CONCLUSIONS OF LAW: 

A. Petition Date. On February 25, 2024 (the “Petition Date”), each of the Debtors filed 

a voluntary petition for relief under chapter 11 of the Bankruptcy Code in this Court commencing 

these chapter 11 cases (these “Chapter 11 Cases”). On February 29, 2024, this Court entered an 

order approving the joint administration of these Chapter 11 Cases. The Debtors are continuing to 

operate their business and manage their affairs as debtors in possession pursuant to sections 

1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or official committee of 

unsecured creditors (“Committee”) has been appointed in these Chapter 11 Cases.

B. Jurisdiction and Venue. This Court has jurisdiction, pursuant to 28 U.S.C. §§ 

157(b) and 1334, over these Chapter 11 Cases, the Motion, the parties, and the Debtors’ property.

This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). Venue for these Chapter 11 Cases and 

proceedings on the Motion is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. The 

statutory bases for the relief sought herein are Bankruptcy Code sections 105, 361, 362, 363, 364, 

503, and 507, Bankruptcy Rules 2002, 4001, 6003, 6004, and 9014, and the Complex Case 

Procedures. 

C. Prepetition Secured Debt. Third Coast Bank, SSB, in its capacity as Lender (the 

“Prepetition Secured Lender”) and Debtor Cottonwood Financial Ltd., as borrower, are parties to 

that certain Loan Agreement, dated as of December 9, 2020 (as amended, restated, amended and 

restated, supplemented or otherwise modified, the “Prepetition Senior Secured Loan Agreement”), 

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providing for a loan in the aggregate principal amount of $25 million (the “Prepetition Secured

Lender Debt”), and related prepetition collateral and loan documents related thereto (collectively, 

the “Prepetition Secured Lender Loan Documents” and all Obligations (as defined in the 

Prepetition Secured Loan Documents) thereunder, the “Prepetition Secured Lender Loan”). As of 

the Petition Date, the outstanding aggregate principal and interest due under the Prepetition Senior 

Secured Loan Documents purports to be approximately $26,743,881.44, in addition to any and all 

interest (including default interest), fees, costs, expenses, charges and other obligations of Debtors 

to the Prepetition Secured Lender (the “Prepetition Secured Lender Claim”). 

i. The Prepetition Secured Lender Claim is secured by first-priority, fullyperfected liens on and security interest (the “Prepetition Secured Lender Liens”) in and to all assets 

and property (real and personal, tangible and intangible), whether now owned by or owing to, or 

hereafter acquired by, or arising in favor of Cottonwood Financial Ltd., Cottonwood Financial 

Administrative Services, LLC, and Cottonwood Financial Texas, LLC (together, the “Loan 

Debtors”), as further described and defined in the Prepetition Senior Loan Documents, which

includes all: (a) accounts, (b) accessions, (c) assigned contracts, (d) chattel paper, (e) collateral 

records, (f) commercial tort claims, (g) commodity accounts, (h) commodity contracts, (i) deposit 

accounts, (j) documents, (k) equipment, (l) financial assets, (m) fixtures, (n) general intangibles, 

(o) goods (including furniture), (p) insurance, (q) intellectual property, (r) instruments, (s) 

inventory, (t) investment property, (u) letters of credit, (v) letter-of-credit rights, (w) licenses (x) 

money, (y) payment intangibles, (z) permits, (aa) pledged equity interests, (ab) securities, (ac) 

securities accounts, (ad) security entitlements, (ae) software, (af) supporting obligations, (ag) 

pledged debt and (ah) proceeds (collectively, the “Prepetition Secured Lender Collateral”). The 

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assets of Cottonwood Financial Idaho, LLC and Cottonwood Financial Wisconsin, LLC (together, 

the “Non-Loan Debtors”) are not encumbered by the Prepetition Senior Secured Debt. 

ii. The Debtors and the Prepetition Secured Lender agree that (a) that the 

Prepetition Senior Secured Debt constitutes allowed secured claims; (b) that no claims, challenges 

offsets, defenses, objections or causes of action exist against the Prepetition Secured Lender or its 

respective agents, affiliates, subsidiaries directors, officers, representatives, attorneys, or advisors; 

and (c) for the acknowledgment and enforceability of the relevant subordination agreements. The 

Prepetition Secured Lender may, but shall not be required to, file a Proof of Claim. 

iii. Attached as Exhibit B to the Motion is a chart showing, among other things, 

the Debtors’ belief as to which Debtors have financing statements filed against them, and the scope 

of the collateral set forth in the applicable UCC-1 financing statement. 

iv. The Debtors seek to provide the Prepetition Secured Lender with 

replacement liens and other adequate protection on an interim basis. 

D. Findings Regarding DIP Facility and the Use of Cash Collateral. 

i. Request for Postpetition Financing and Use of Cash. The Debtors seek 

authority to enter into and perform under the DIP Loan Documents. The DIP Lender shall have no 

obligation to make loans or advances except pursuant to the terms and conditions set forth herein 

and in the other DIP Loan Documents and no obligation to waive any conditions required 

thereunder. The Debtors also seek authority to use cash on the terms described herein, and in 

accordance with the Approved Budget, which shall be subject to Permitted Variances (as defined 

below) to administer their Chapter 11 Cases and fund their operations. 

ii. Priming of the Prepetition Liens. The Debtors seek to prime the liens of the 

Prepetition Secured Lender as part of this Interim DIP Order.

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iii. Need for Postpetition Financing and Use of Cash. The Debtors do not have 

sufficient liquidity to operate their business in the ordinary course or to pursue either a sale or a 

stand-alone restructuring without the financing requested in the Motion. The Debtors’ ability to 

maintain business relationships with vendors, suppliers, and customers, to pay their employees, 

pay certain fees and expenses as set forth herein, and to otherwise fund their operations is essential 

to the Debtors’ continued viability as the Debtors seek to maximize and preserve the value of their 

respective Estates for the benefit of all stakeholders. The ability of the Debtors to obtain sufficient 

working capital and liquidity through the proposed DIP Facility with the DIP Lender and to use 

cash as set forth in this Interim DIP Order and the DIP Loan Documents is vital to the Debtors’ 

preservation and maintenance of going concern value. If the Debtors do not obtain authorization 

to borrow under the DIP Loan Documents, they, and their Estates, will suffer immediate and 

irreparable harm. Accordingly, the Debtors have an immediate need to obtain the DIP Loans and 

to use cash.

iv. No Credit Available on More Favorable Terms. As set forth in the Nicolaou 

Declaration and as demonstrated at the Interim Hearing, given their current financial condition, 

financing arrangements, and capital structure, the Debtors have been unable to procure the 

necessary financing from sources other than the DIP Lender on terms more favorable than those 

set forth in the DIP Term Sheet. The Debtors have been unable to reasonably obtain adequate 

unsecured credit allowable under Bankruptcy Code section 503(b)(1) as an administrative expense.

The Debtors have also been unable to obtain secured credit from other sources: (a) having priority 

over that of administrative expenses of the kind specified in Bankruptcy Code sections 503(b), 

507(a), and 507(b); (b) secured only by a lien on property of the Debtors and their Estates that is 

not otherwise subject to a lien; or (c) secured solely by a junior lien on property of the Debtors and 

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their Estates that is subject to a lien. Financing on a postpetition basis is not otherwise available 

without granting to the DIP Lender: (x) automatically perfected security interests in and liens on 

(each as provided herein) all of the Debtors’ existing and after- acquired assets with the priorities 

set forth herein; (y) superpriority claims and liens; and (z) the other protections to the extent set 

forth in this Interim DIP Order. After considering all reasonable alternatives, the Debtors have 

concluded, in the exercise of their sound and reasonable business judgment, that the DIP Facility, 

including, without limitation, the DIP Loans, represents the best financing available to them at this 

time.

v. Use of Proceeds of the DIP Facility. As a condition to entry into the DIP 

Loan Documents, the extensions of credit under the DIP Facility and the authorization to use cash, 

the Debtors have agreed, that proceeds of the DIP Facility and cash shall be used in accordance 

with the terms of this Interim DIP Order, the DIP Loan Documents, and the Approved Budget

(which shall be subject to Permitted Variances), solely to (i) provide working capital and for 

general corporate purposes of the Debtors during the Chapter 11 Cases; (ii) pay interest, fees, costs 

and expenses related to the DIP Facility; (iii) pay the fees, costs and expenses of the estate 

professionals retained in the Chapter 11 Cases as set forth in the Approved Budget and approved 

by the Bankruptcy Court; (iv) pay the DIP Lender Reimbursements and the Prepetition Secured 

Lender Reimbursements (as defined below); (v) make all permitted payments of costs of 

administration of the Chapter 11 Cases; (vi) the payment of Adequate Protection Payments (as 

defined below) to the Prepetition Secured Lender; and (vii) pay such prepetition expenses as are 

consented to by the DIP Lender and approved by the Bankruptcy Court (collectively, the 

“Permitted DIP and Cash Uses”). No proceeds of the DIP Loan may be used to investigate, 

challenge, object to or contest the validity, priority, extent or enforceability of any amount due 

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under, or claims granted under or in connection with the DIP Loan. No proceeds of the DIP Loan 

may be used to investigate, assert claims or causes of action against, or seek any relief against the 

DIP Lender, Trevor Lee Ahlberg, Trevor Lee Ahlberg 1997 Trust, or Bomani Business Lending, 

LLC; provided, however, that the official committee of unsecured creditors, if any, may use up to 

$20,000 to investigate any such claims or causes of action. 

vi. The DIP Facility Terms and Conditions are Fair and Reasonable. Based on 

the Motion, the Nicolaou Declaration, and the record presented to the Court at the Interim Hearing, 

the terms and conditions of the DIP Facility pursuant to the DIP Loan Documents (including the 

payment of fees and expenses contemplated thereunder) and the use of the DIP Collateral (defined 

below) and cash, pursuant to this Interim DIP Order are fair, reasonable, and the best available to 

the Debtors under the circumstances, reflect the Debtors’ exercise of prudent business judgment 

consistent with their fiduciary duties, are supported by reasonably equivalent value and 

consideration, and were entered into at arm’s-length, under no duress, and without undue 

influence, negligence, or violation of public policy or law. Use of cash and any credit to be 

extended as set forth in the DIP Loan Documents shall be deemed to have been so allowed, 

advanced, made, used, or extended in good faith, and for valid business purposes and uses, within 

the meaning of Bankruptcy Code section 364(e), and the DIP Lender is therefore entitled to the 

protections and benefits of Bankruptcy Code section 364(e) and this Interim DIP Order.

vii. Bankruptcy Code Sections 506(c) and Marshaling. Subject to entry of the 

Final DIP Order, the DIP Lender and the Prepetition Secured Lender are entitled to a waiver of (I) 

the provisions of Bankruptcy Code section 506(c), (II) the “equities of the case” exception under 

552(b) of the Bankruptcy Code, and (III) the equitable doctrine of “marshaling” or any similar 

doctrine, except as provided herein. 

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viii. Adequate Protection. The Debtors have agreed, pursuant to Bankruptcy 

Code sections 361, 362, 363, and 364, to provide the Prepetition Secured Lender with adequate 

protection against any diminution in value of their interests in the Prepetition Secured Lender 

Collateral, as set forth herein. 

ix. Good Faith Pursuant to Section 364(e). The terms and conditions of the DIP 

Loan Documents, this Interim DIP Order, and the provision of the DIP Facility were negotiated in 

good faith and at arm’s length among the Debtors and the DIP Lender with the assistance and 

counsel of their respective advisors. Credit to be extended under the DIP Facility shall be deemed 

to have been allowed, made, or extended in good faith by the DIP Lender within the meaning of 

section 364(e) of the Bankruptcy Code. 

x. Good and Sufficient Cause Shown. Good and sufficient cause has been 

shown for entry of this Interim DIP Order. The ability of the Debtors to obtain sufficient working 

capital and liquidity under the DIP Loan Documents is vital to the Debtors’ Estates and creditors. 

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 (a) minimize disruption to the 

business and ongoing operations, (b) preserve and maximize the value of the Debtors’ Estates for 

the benefit of all the Debtors’ stakeholders, and (c) maximize and stabilize the value of the 

Debtors’ assets and avoid immediate and irreparable harm to the Debtors, their creditors, their 

business, their employees, and their assets. The terms of the DIP Facility are fair and reasonable, 

reflect each Debtor’s exercise of its business judgment, and are supported by reasonably equivalent 

value and fair consideration. 

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xi. Final Hearing. At the Final Hearing, the Debtors will seek final approval of 

the proposed DIP Facility and use of cash pursuant to the Final DIP Order, which shall be in form 

and substance acceptable to the DIP Lender and Prepetition Secured Lender. Notice of the Final 

Hearing and Final DIP Order will be provided in accordance with this Interim DIP Order and no 

further notice, except as provided by this Interim DIP Order, shall be required. 

xii. Notice. Notice of the Interim Hearing and the emergency relief requested in 

the Motion has been provided by the Debtors, whether by facsimile, email, overnight courier, or 

hand delivery, to certain parties in interest, including: (a) the U.S. Trustee for the Northern District 

of Texas; (b) the holders of the 30 largest unsecured claims against the Debtors (on a consolidated 

basis); (c) the agent(s) to the Prepetition Secured Lender; (d) the United States Attorney’s Office 

for the Northern District of Texas; (e) the Internal Revenue Service; (f) the state attorneys general 

for states in which the Debtors conduct business; and (g) any party that has requested notice 

pursuant to Bankruptcy Rule 2002. Under the circumstances, the notice given by the Debtors of 

the Motion, the relief requested therein, and the Interim Hearing is appropriate notice thereof and 

complies with Bankruptcy Rules 4001(b) and (c) and the Complex Case Procedures, and no further 

notice of the relief granted herein is necessary or required.

Based upon the foregoing findings and conclusions, the Motion and the record before the 

Court with respect to the Motion, and good and sufficient cause appearing therefor, 

IT IS HEREBY ORDERED that:

1. Motion Approved. The Motion is granted solely on an interim basis in accordance 

with the terms of this Interim DIP Order. All objections to and reservations of rights with respect 

to the Motion and to the entry of this Interim DIP Order to the extent not withdrawn or resolved 

are hereby overruled on the merits in their entirety. 

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2. Interim Approval Only. The DIP Lender only consents to entry of this Interim DIP

Order and interim adequate protection to the Prepetition Secured Lender as set forth herein, and 

reserves all rights with respect to entry of any further adequate protection orders or relief to the 

Prepetition Secured Lender, including any final cash collateral or adequate protection order. The 

Prepetition Secured Lender only consents to entry of this Interim DIP Order as set forth herein and 

reserves all rights with respect to entry of any further DIP Orders or relief to the DIP Lender, 

including with respect to the entry of the Final DIP Order, if any. 

3. Authorization of the DIP Loans and the DIP Loan Documents. 

a. The DIP Facility is hereby approved solely on an interim basis. The Debtors 

are hereby authorized to execute, issue, deliver, enter into, and adopt, as the case may be, the DIP 

Loan Documents, subject to review and any objection by the Prepetition Secured Lender. Pending 

entry of the Final DIP Order, the Debtors are hereby authorized to borrow money pursuant to the 

DIP Loan Documents and request draws thereunder on an interim basis in an amount not to exceed 

$2.0 million (the “Interim DIP Commitment”) and in accordance with the terms of this Interim 

DIP Order, the DIP Loan Documents, and the Approved Budget (which shall be subject to 

Permitted Variances). Subject to and upon entry of the Final DIP Order, the Debtors may draw

such amounts as are necessary and agreed to by the DIP Lender subject to the conditions set forth 

in the Approved Budget and the DIP Orders; provided however, that the aggregate amount of all 

DIP Loans shall not exceed $7.0 million (the “Total DIP Commitment”).4

 

b. In furtherance of the foregoing and without further approval of this Court, 

each Debtor is authorized to perform all acts, to make, execute, and deliver all instruments and 

documents that may be necessary or required for performance by the Debtors under the DIP Loan 

4 The DIP Lender has reserved the right to reduce the Total DIP Commitment in the event the requested lien priming 

pursuant to section 364(d) of the Bankruptcy Code is not authorized as part of the Final DIP Order.

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Documents and the creation and perfection of the DIP Liens described in, provided for, and 

automatically perfected by this Interim DIP Order and the DIP Loan Documents. The Debtors are 

hereby authorized to pay, in accordance with this Interim DIP Order, the principal, interest, fees, 

expenses, DIP Lender Reimbursements and other amounts described in the DIP Loan Documents 

as such become due and without need to obtain further Court approval, as set forth herein.

c. The DIP Loan Documents, upon execution, shall be valid and binding 

obligations of the Debtors, enforceable against the Debtors and their Estates in accordance with 

their terms, and subject to the terms of this Interim DIP Order. The DIP Loan Documents and this 

Interim DIP Order constitute and evidence the validity and binding effect of the DIP Obligations 

of the Debtors, which DIP Obligations shall be enforceable, jointly and severally, against the 

Debtors, their Estates, and any successors thereto, including, without limitation, any trustee or 

other estate representative appointed in these Chapter 11 Cases or any case under chapter 7 of the 

Bankruptcy Code upon the conversion of any of the Chapter 11 Cases (each, a “Successor Case”).

No obligation, payment, transfer, or grant of a security or other interest to the DIP Lender under 

the DIP Loan Documents or this Interim DIP Order shall be stayed, restrained, avoidable, voidable, 

or recoverable under the Bankruptcy Code or any applicable law (including, without limitation, 

under Bankruptcy Code section 502(d)), or subject to any defense, reduction, setoff, recoupment, 

or counterclaim of any kind. 

d. From and after the Petition Date, the Debtors are authorized to use 

extensions of credit under the DIP Facility up to the Interim DIP Commitment for the purposes 

specifically set forth in this Interim DIP Order and the DIP Loan Documents, and in compliance 

with the Approved Budget. The Debtors are authorized, subject to the satisfaction of the conditions 

set forth in the DIP Loan Documents, to use proceeds of the DIP Collateral and the Prepetition 

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Secured Lender Collateral, subject to the Carve Out and Cash Collateral Diminution in Value 

Claims, and to draw upon the DIP Facility to (a) pay fees, costs, and expenses incurred in 

connection with the transactions contemplated by the DIP Loan Documents; (b) pay other 

administrative costs incurred in connection with the Chapter 11 Cases consistent with the 

Approved Budget, which shall be subject to Permitted Variances; (c) pay for other working capital 

and general corporate purposes of the Debtors consistent with the Approved Budget, which shall 

be subject to Permitted Variance, and other orders entered by the Court; and (d) fund the 

Professional Fee Reserve. All or any portion of the DIP Loans may be voluntarily repaid at any 

time without premium or penalty. Once repaid, DIP Loans may not be reborrowed 

4. Non-Material and Material or Adverse DIP Amendments. Subject to the terms and 

conditions of the DIP Loan Documents and the DIP Term Sheet, the Debtors and the DIP Lender

may supplement and otherwise make amendments or modifications DIP Loan Document that are 

non- material and non-adverse to the Debtors and the Prepetition Secured Lender. The DIP Lender

may waive any provision of the DIP Loan Documents, without further approval of the Court; 

provided, however, that the Debtors shall file a notice on the Court’s docket of any such 

amendment, modification, supplement or waiver, not more than three (3) business days after the 

effective date thereof. Any amendments, modifications, or supplements to any DIP Loan 

Documents, other than as set forth in the preceding sentence (collectively, “Material or Adverse 

DIP Amendments”), that are agreed to by the Debtors and the DIP Lender, as applicable, in 

accordance with the terms of the DIP Loan Documents, shall be filed on the Docket of these 

Chapter 11 Cases, with notice to (i) the Office of the United States Trustee, (ii) counsel for the 

Prepetition Secured Lender, and (ii) counsel for the Committee or, in the event no Committee is 

appointed or existing at the time, the Debtors’ consolidated list of thirty (30) largest unsecured 

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creditors. If no party in interest files an objection to the Material or Adverse DIP Amendment with 

the Court within five (5) business days from the date of such notice, the Debtors and the DIP 

Lender are authorized and empowered to execute, deliver, and implement, in accordance with the 

terms of the DIP Loan Documents, such Material or Adverse DIP Amendment, without further 

notice, hearing, or approval of this Court. Any Material or Adverse DIP Amendment subject to a 

timely and unresolved objection must be approved by the Court to be effective. 

5. Approved Budget. 

a. Compliance with Approved Budget. The Debtors, the Prepetition Secured 

Lender, and the DIP Lender have agreed to the 30-day “Approved Budget” setting forth all 

projected cash receipts and cash disbursements on a weekly basis, a copy of which is attached 

hereto as Exhibit 2. 

b. New Budgets. Subject to the entry of the Final DIP Order, if any, and an 

approved budget therewith, starting on the first Friday four weeks following the entry of this 

Interim DIP Order, and continuing every fourth calendar week until the DIP Termination Date 

(defined below), the Debtors shall deliver to counsel for the Prepetition Secured Lender and the 

DIP Lender an updated budget (the “Proposed Budget”) with respect to the Debtors for the current 

calendar week then ended and the immediately following consecutive 3 weeks (collectively, 4 

weeks), set forth on a weekly basis. Each Proposed Budget provided to the Prepetition Secured 

Lender and the DIP Lender shall be of no force and effect unless and until it is approved by the 

Prepetition Secured Lender and the DIP Lender, as described further below, and filed with the 

Court. Until such approval is given and filing made, the prior Approved Budget shall remain in 

effect. Upon written approval of the Prepetition Secured Lender and the DIP Lender, and the filing 

of a notice with the Court, the Proposed Budget shall become, as of the date of such approval and 

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filing, the Approved Budget, and shall prospectively replace any prior Approved Budget. If the 

Debtors, the Prepetition Secured Lender, and the DIP Lender are unable to agree on a Proposed 

Budget’s terms, the Debtors reserve the right to seek an expedited hearing with the Court to resolve 

such disagreement. In that event, the Prepetition Secured Lender and the DIP Lender shall not 

oppose the request for expedited consideration provided that any such hearing is held on not less 

than 48 hours’ notice to the Prepetition Secured Lender and the DIP Lender. In the event of any 

dispute regarding the terms of a Proposed Budget, the Debtors, the Prepetition Secured Lender, 

and the DIP Lender reserve any and all rights under the Bankruptcy Code or applicable law. 

c. Permitted Variance and Financial Reporting Requirements. As set forth 

further herein, the Debtors shall deliver the reports required by the DIP Loan Documents, including 

Variance Reports (as defined below).

6. Restrictions on Use of Cash Collateral. No Cash Collateral may be used to 

investigate, challenge, object to or contest the validity, priority, extent or enforceability of any 

amount due under, or claims granted under or in connection with the Prepetition Senior Secured 

Loan. No cash collateral may be used to investigate, assert claims or causes of action against, or 

seek any relief against the Senior Secured Lender or its respective agents, affiliates, subsidiaries, 

directors, officers, representatives, attorneys, or advisors; provided, however, that the official 

committee of unsecured creditors, if any, may use up to $20,000 to investigate the validity, priority, 

enforceability or perfection of the Prepetition Secured Lender’s liens or claims. Cash Collateral 

will only be used in accordance with and subject to the Approved Budget. For the avoidance of 

doubt, the Prepetition Secured Lender does not consent to any bonuses being paid during the first 

thirty (30) calendar days following the Petition Date; provided, however, that the Debtors may 

continue to make payments pursuant to their non insider employee incentive programs, as 

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described more fully in Debtors’ Emergency Motion for Entry of an Order (I) Authorizing the 

Debtors to (A) Pay Prepetition Wages, Salaries, Other Compensation, and Reimbursable Expenses 

and (B) Continue Employee Benefits Programs, and (II) Granting Related Relief [Docket No. 13]. 

For the avoidance of doubt, the employee recipients are not executive-level employees.

7. Termination of Rights to Use Cash Collateral. Unless extended further with the 

written consent of the Prepetition Secured Lender, the authority to use Cash Collateral under this 

Interim Order will automatically terminate upon the earlier of the following:

a. Thirty (30) calendar days from the Petition Date unless a Final DIP Order 

is entered with an Approved Budget;

b. The Debtors’ failure to make any payment to the Prepetition Secured Lender 

as and when due;

c. The appointment of a trustee in the Chapter 11 Cases or the appointment of 

a responsible officer or an examiner with expanded powers (powers beyond those set forth under 

sections 1106(a)(3) and (4) of the Bankruptcy Code) to operate, oversee or manage the financial 

affairs, the business, or reorganization of the Debtors under Bankruptcy Code section 1106(b);

d. The date that any Debtor ceases to operate its business (without the prior 

consent of the Prepetition Secured Lender);

e. The granting of relief from the Automatic Stay to any party that claims an 

interest in the Prepetition Secured Lender Collateral or replacement collateral other than the 

Prepetition Secured Lender;

f. The Court grants any party other than the Prepetition Secured Lender a lien 

or security interest equal to or senior to the liens and security interests held by the Prepetition 

Secured Lender, pursuant to the Prepetition Loan Documents or this Interim DIP Order;

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g. Any of the Debtors failing to comply with the terms of the Interim DIP 

Order or Final DIP Order;

h. The dismissal of any of the Debtors’ Chapter 11 Cases;

i. The conversion of any of the Debtors’ Chapter 11 Cases to chapter 7;

j. The termination of any of the Debtors’ exclusive rights to propose a chapter 

11 plan or the filing of any chapter 11 plan by any party other than the Debtors;

k. Debtors’ material breach of any affirmative or negative covenants contained 

in the DIP Term Sheet;

l. Debtors’ non-compliance with the Milestones (as defined below);

m. Debtors lose or suffer a materially adverse restriction in their ability to 

market and service third party loans;

n. The Bankruptcy Court enters an order modifying, reversing, revoking, 

staying, rescinding, or vacating this Interim DIP Order or the Final DIP Order or any portion 

thereof; and

o. The DIP Lender declares an Event of Default under the Interim DIP Order, 

the DIP Loan Agreements or, if entered, a Final DIP Order. 

Notwithstanding the foregoing, the Prepetition Secured Lender reserves all rights to seek 

dismissal or conversion of these chapter 11 cases, or any other actions or relief provided under the 

Bankruptcy Code.

8. Superpriority Claims of the DIP Lender. Subject and subordinate to the Carve Out

and the Cash Collateral Diminution in Value Claim only with regard to the Non-Loan Debtors, 

pursuant to Bankruptcy Code section 364(c)(1), all of the DIP Obligations shall be allowed claims 

against the Debtors, jointly and severally, with priority over any and all administrative expenses 

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(the “DIP Superpriority Claims”) and all other claims against the Debtors, now existing or 

hereafter arising, of any kind whatsoever, including, without limitation, all administrative expenses 

of the kind specified in Bankruptcy Code sections 503(b) and 507(b), and over any and all 

administrative expenses or other claims arising under Bankruptcy Code sections 105, 326, 328, 

330, 331, 503(b), 506(c) (subject to entry of the Final DIP Order), 507(a), 507(b), 726, 1113, or 

1114, whether or not such expenses or claims may become secured by a judgment lien or other 

non-consensual lien, levy, or attachment, which DIP Superpriority Claims shall be payable from 

and have recourse to all prepetition and postpetition property of the Debtors and their Estates and 

all proceeds thereof including, subject to the entry of the Final DIP Order and the “last look” 

provision in paragraph 8 herein, the proceeds of actions under Chapter 5 of the Bankruptcy Code. 

Other than the Carve Out as to all Debtors, and the Cash Collateral Diminution in Value Claims 

as to the Non-Loan Debtors, no claims (including, without limitation, any priority claims) are, or 

will be, senior to, prior to, or pari passu with the DIP Superpriority Claims or any of the DIP 

Obligations or with any of the other claims of the DIP Lender arising hereunder or under the DIP 

Loan Documents or otherwise in connection with the DIP Facility.

9. DIP Liens and DIP Collateral. As security for the DIP Obligations, effective and 

perfected automatically upon entry of this Interim DIP Order, pursuant to Bankruptcy Code 

sections 364(c)(1) and 364(c)(2), and without the necessity of the execution by the Debtors (or 

recordation or other filing or notice) of security agreements, control agreements, pledge 

agreements, financing statements, mortgages, schedules or other similar documents, or the 

possession or control by the DIP Lender of any property, the DIP Lender is hereby granted first 

priority security interests in and liens and mortgages upon all tangible and intangible prepetition 

and postpetition property in which any or each of the Debtors or their respective Estates have an 

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interest of any kind or nature, whether existing on or as of the Petition Date or thereafter acquired 

or created, wherever located, including, without limitation, the proceeds, products, and offspring 

of any of the foregoing, including proceeds of claims and causes of action arising under 

Bankruptcy Code sections 502(d), 544, 547, 548, 549, 550 and 553 and any other avoidance or 

similar action under the Bankruptcy Code or applicable nonbankruptcy law (such claims and 

causes of action being “Avoidance Actions” and all tangible and intangible prepetition and 

postpetition property in of the Debtors or their Estates being, collectively, the “DIP Collateral”), 

subject and subordinate only to the Carve Out and the Cash Collateral Diminution in Value Claims

(all such liens and security interests granted to the DIP Lender, pursuant to this Interim DIP Order 

and the DIP Loan Documents, the “DIP Liens”). For avoidance of doubt, pursuant to Bankruptcy 

Code section 364(c)(2), the DIP Liens include a valid, binding, continuing, enforceable, fully 

perfected first priority lien on, and security interest in, all property of the Debtors, wherever 

located, whether or not subject to a valid, perfected, non-avoidable and enforceable lien in 

existence on or as of the Petition Date or valid liens perfected (but not granted) after the Petition 

Date to the extent such postpetition perfection is permitted by Bankruptcy Code section 546(b), 

including, but not limited to: (i) any and all cash, accounts receivable, inventory, general 

intangibles, contracts, securities, chattel paper, owned real property, fixtures, machinery, 

equipment, vehicles, deposit accounts, patents, copyrights, trademarks, tradenames, rights under 

license agreements and other intellectual property; and (ii) the proceeds, products and offspring of 

all of the foregoing. Subject to entry of the Final DIP Order and the grant of a lien on proceeds of 

Avoidance Actions (“Avoidance Action Proceeds”), the DIP Lender shall only avail itself of 

Avoidance Action Proceeds on a “last look” basis, and only if all other DIP Collateral is inadequate 

to indefeasibly repay the DIP Obligations in full; provided further that the DIP Collateral shall not 

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include proceeds of any Avoidance Actions alleged against the DIP Lender or its affiliates or 

principals.

10. Adequate Protection for Use of Cash Collateral. Prepetition Secured Lender’s 

Prepetition Secured Lender Collateral will be authorized for use by the Debtors, and the Prepetition 

Secured Lender will receive as adequate protection through this Interim DIP Orders (the 

“Adequate Protection”):

a. Prepetition Secured Lender Reimbursements (as defined below);

b. The Prepetition Secured Lender shall receive monthly adequate protection 

payments, payable in cash, on the 15th day of each month of $175,000 (the “Adequate Protection 

Payments”), with the first occurring on or before March 15, 2024. Adequate Protection Payments 

shall be free and clear of all liens and claims.

c. To the extent of any of diminution in value of any of its Prepetition Secured 

Lender Collateral or Adequate Protection Collateral (defined below), the Prepetition Secured 

Lender is granted valid, perfected, unavoidable, replacement security interests in and liens and 

mortgages (“Adequate Protection Liens”), without the necessity of the execution by the Debtors 

(or recordation or other filing or notice) of security agreements, control agreements, pledge 

agreements, financing statements, mortgages, schedules or other similar documents, or the 

possession or control by the Prepetition Secured Lender of any property, upon all tangible and 

intangible prepetition and postpetition property in which any or each of the Debtors or their 

respective Estates have an interest of any kind or nature, including any previous unencumbered 

property, whether existing on or as of the Petition Date or thereafter acquired or created, wherever 

located, including, without limitation, the proceeds, products, and offspring of any of the 

foregoing, including proceeds of claims and causes of action arising under Bankruptcy Code 

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sections 502(d), 544, 547, 548, 549, 550 and 553 and any other avoidance or similar action under 

the Bankruptcy Code or applicable nonbankruptcy law (such claims and causes of action being 

“Avoidance Actions” and all tangible and intangible prepetition and postpetition property in of the 

Debtors or their Estates being, collectively, the “Adequate Protection Collateral”),

5 subject only 

to and subordinate to the DIP Superpriority Claim, the DIP Liens, and the Carve Out, except that 

the Adequate Protection Liens shall be senior to the DIP Superpriority Claim and the DIP Liens 

as to the assets of the Loan Debtors only in the amount of any Cash Collateral Diminution in Value 

Claim (as defined below). The Adequate Protection Liens shall be in addition to all valid and 

enforceable liens and security interests now existing in favor of the Prepetition Secured Lender 

and not in substitution therefor. The Prepetition Secured Lender reserves its rights and benefits 

under Bankruptcy Code section 552(b). 

Notwithstanding the foregoing, the Prepetition Secured Lender shall be entitled to seek 

different or additional forms of adequate protection for any reason, including due to any extension 

of Milestones or failure to satisfy them.

d. Superpriority Claim of the Prepetition Secured Lender - Cash Collateral

Diminution. The Prepetition Secured Lender is granted a final, allowed superpriority 

administrative expense claim secured by the Adequate Protection Liens with priority over any and 

all administrative expenses and all other claims against the Debtors, now existing or hereafter 

arising, of any kind whatsoever, including, without limitation, all administrative expenses of the 

kind specified in Bankruptcy Code sections 503(b) and 507(b), and over any and all administrative 

expenses or other claims arising under Bankruptcy Code sections 105, 326, 328, 330, 331, 503(b),

5

 The Prepetition Secured Lender shall only avail itself of proceeds from Avoidance Actions on a “last look” basis, 

and only if all other Prepetition Secured Collateral and Adequate Protection Collateral is inadequate to 

indefeasibly repay the Prepetition Secured Loan in full; provided further that the Adequate Protection Liens shall 

not include proceeds of any Avoidance Actions alleged against the Prepetition Secured Lender. 

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506(c) (subject to entry of any Final DIP Order), 507(a), 507(b), 726, 1113, or 1114 in each of the 

Chapter 11 Cases or in any Successor Case for any diminution in value of the Prepetition Secured 

Lender’s interest in and liens on Cash Collateral from and after the Petition Date resulting from, 

among other things (a) subordination of the Prepetition Secured Lender’s interest in the cash 

collateral to the Carve Out, (b) the sale, lease, disposition or use of cash collateral, (c) the priming 

of prepetition liens by the DIP Liens, (d) the imposition of the Automatic Stay, and/or (e) for any 

other reason for which adequate protection may be granted under the Bankruptcy Code or case law 

(the “Cash Collateral Diminution in Value Claim”). Solely for the purpose of this Interim DIP 

Order and the Interim DIP Commitment of $2.0 million, the Cash Collateral Diminution in Value 

Claim is $500,000. The Prepetition Secured Lender reserves all rights to assert and require a larger 

amount for the Cash Collateral Diminution in Value Claim in connection with any Final DIP Order 

and Total DIP Commitment. Further, the Prepetition Secured Lender shall be entitled to file and 

assert a Cash Collateral Diminution in Value Claim for the period covered by the Interim DIP 

Order in an amount greater than $500,000, and if so determined by the Court, any excess amount 

over $500,000 shall be treated pursuant to the provisions of the Non-Cash Collateral Diminution 

below. The priority of Cash Collateral Diminution in Value Claim secured by the Adequate 

Protection Liens shall be as follows: (a) subordinate to the Carve Out as to all Debtors; (b) 

subordinate to the DIP Superpriority Claim and the DIP Liens as to Non-Loan Debtors; and (c) 

senior to the DIP Superpriority Claim and the DIP Liens as to the Loan Debtors. The Cash 

Collateral Diminution in Value Claim shall have recourse to and be payable from all Adequate 

Protection Collateral.

e. Superpriority Claim of the Prepetition Secured Lender - Non-Cash 

Collateral Diminution. The Prepetition Secured Lender is granted an allowed superpriority 

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administrative expense claim secured by the Adequate Protection Liens with priority over any and 

all administrative expenses and all other claims against the Debtors, now existing or hereafter 

arising, of any kind whatsoever, including, without limitation, all administrative expenses of the 

kind specified in Bankruptcy Code sections 503(b) and 507(b), and over any and all administrative 

expenses or other claims arising under Bankruptcy Code sections 105, 326, 328, 330, 331, 503(b), 

506(c) (subject to entry of any Final DIP Order), 507(a), 507(b), 726, 1113, or 1114 in each of the 

Chapter 11 Cases or in any Successor Case, subordinate only to payment of the DIP Superpriority 

Claim, the DIP Liens and the Carve Out, for any diminution in value of the Prepetition Secured 

Lender’s interest in and liens on Prepetition Secured Lender Collateral that is not Cash Collateral 

from and after the Petition Date resulting from, among other things (a) subordination of the 

Prepetition Secured Lender’s interest in non-Cash Collateral to the Carve Out, (b) the sale, lease, 

disposition or use of non-Cash Collateral, (c) the priming of prepetition liens by the DIP Liens, (d) 

the imposition of the Automatic Stay, and/or (e) for any other reason for which adequate protection 

may be granted under the Bankruptcy Code or case law (the “Non-Cash Collateral Diminution in 

Value Claim”).

11. Carve Out. 

a. As used herein, the term “Carve Out” shall mean an amount equal to the 

sum of the following (A) : (i) all fees required to be paid to the Clerk of the Bankruptcy Court and 

to the Office of the United States Trustee under 28 U.S.C. § 1930(a) plus interest pursuant to 31 

U.S.C. § 3717 (without regard to the notice set forth in clause (ii) below); (ii) to the extent allowed 

by the Bankruptcy Court at any time, whether by interim order, final order, or otherwise, all 

accrued and unpaid fees, disbursements, costs and expenses incurred by persons or firms retained 

by the Debtors pursuant to sections 327, 328 or 363 of the Bankruptcy Code (the “Debtor 

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Professionals”) and all accrued unpaid fees, disbursements, costs and expenses incurred by the 

Committee (if any) pursuant to sections 328 and 1103 of the Bankruptcy Code (the “Committee 

Professionals,” together with the Debtor Professionals, the “Estate Professionals,” and such Estate 

Professional fees in each case in accordance with the Approved Budget, the “Allowed Professional 

Fees”) at any time before or on the first business day following delivery by the DIP Lender of a 

Carve Out Trigger Notice (as defined below), whether allowed by the Bankruptcy Court prior to 

or after delivery of a Carve Out Trigger Notice; and (iii) Allowed Professional Fees of Estate 

Professionals in an aggregate amount not to exceed $50,000 incurred after the first business day 

following delivery by the DIP Lender of a Carve Out Trigger Notice, to the extent allowed at any 

time, whether by interim order, final order, or otherwise (the amounts set forth in this clause (iii),

the “Post-Carve Out Trigger Notice Cap”); provided, however, nothing herein shall be construed 

to impair the ability of any party to object to any fees, expenses, reimbursement or compensation 

sought by any such professionals or any other person or entity. 

b. For purposes of the foregoing, “Carve Out Trigger Notice” shall mean a 

written notice (which may be delivered by e-mail (or other electronic means)) by the DIP Lender 

to the Debtors and their counsel, counsel to the Prepetition Secured Lender, the United States 

Trustee, and counsel to the Committee, and filed on the docket of the Chapter 11 Cases, which 

notice may be delivered following the occurrence of an Event of Default, stating that the PostCarve Out Trigger Notice Cap has been invoked. 

c. On a weekly basis—to the extent there is sufficient cash on hand prior to 

entry of the Final DIP Order, and then following entry of the Final DIP Order—the fees of the 

Debtors’ and Committee’s professionals provided for in the Approved Budget shall be funded into 

one of the Debtors’ accounts at Bank of Texas to be used solely to satisfy Allowed Professional 

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Fees in accordance with any applicable orders entered in the Chapter 11 Cases (the “Professional 

Fee Reserve”). The funds on deposit in the Professional Fee Reserve shall be available to satisfy 

the obligations owed to Estate Professionals, and the DIP Lender shall have a security interest on 

any residual amounts remaining in the Professional Fee Reserve after satisfaction in full of all 

Allowed Professional Fees. 

d. For the avoidance of doubt and notwithstanding anything to the contrary 

herein, the Carve Out shall be senior to all liens and claims securing the DIP Facility, and all other 

forms of adequate protection, liens, or claims securing the DIP Obligations. 

e. Notwithstanding the foregoing, the Carve Out shall not include, apply to, or 

be available for any fees or expenses incurred by any party in connection with (i) the initiation or 

prosecution of any claims, causes of action, adversary proceedings, or other litigation (A) against 

the DIP Lender or (B) challenging the amount, validity, perfection, priority, or enforceability of or 

asserting any defense, counterclaim, or offset to, the obligations and the liens and security interests 

granted under the DIP Loan Documents including, in each case, without limitation, for lender

liability or pursuant to any section of the Bankruptcy Code, applicable non-bankruptcy law or 

otherwise; (ii) attempts to modify any of the rights granted to the DIP Lender; (iii) attempts to 

prevent, hinder, or otherwise delay any of the DIP Lender’s assertion, enforcement, or realization 

upon any DIP Collateral in accordance with the DIP Loan Documents, this Interim DIP Order, and 

the Final DIP Order; (iv) paying any amount on account of any claims arising before the 

commencement of the Chapter 11 Cases unless such payments are provided for in the Approved 

Budget and approved by an order of this Court; (v) the prosecution or support any plan of 

liquidation or reorganization to which the DIP Lender has not consented; or (vi) any direct or 

indirect objection or opposition to, or any other effort to impede or compromise in any way, any 

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credit bid made by the DIP Lender to the extent such bid is not consistent with this Interim DIP 

Order.

12. Limitations on Charging Expenses Against Collateral; No Marshaling. Subject to 

and only upon entry of the Final DIP Order, (i) other than as set forth herein with relation to 

Avoidance Action Proceeds, 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 DIP Order and the DIP Loan Documents 

notwithstanding any other agreement or provision to the contrary and (ii) the Debtors (on behalf 

of themselves and their estates) shall waive, and shall not assert in the Chapter 11 Cases or any 

Successor Case, 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 DIP Lender, upon the DIP Collateral. Notwithstanding 

anything to the contrary in this Interim DIP Order, the DIP Lender shall first apply proceeds of the 

DIP Collateral that is not Prepetition Secured Lender Collateral to satisfy repayment of the DIP 

Loans before applying proceeds of the DIP Collateral that is Prepetition Secured Lender Collateral 

to satisfy repayment of the DIP Loans; provided however, that in the event there is a sale of assets 

during the period of this Interim DIP Order which assets are Prepetition Secured Lender Collateral 

prior to a sale of assets which assets are not Prepetition Secured Lender Collateral, the proceeds 

from the sale of the assets which are Prepetition Secured Lender Collateral shall not be applied to 

the DIP Loan for a period of 45 calendar days following the closing of the sale. 

13. Use of Prepetition Secured Lender Collateral and Cash. Subject to the terms and 

conditions of the DIP Loan Documents and this Interim DIP Order, and solely in accordance with 

the 30-day Approved Budget, which shall be subject to Permitted Variances, the Debtors are 

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hereby authorized to use the DIP Collateral and Prepetition Secured Lender Collateral, including 

cash, until the DIP Termination Date (as defined below) for working capital and general corporate 

purposes, including interest, fees, costs, and expenses related to these Chapter 11 Cases, the DIP 

Loan, and the DIP Loan Documents, including payment of any Adequate Protection obligations 

as set forth herein; provided, that nothing in this Interim DIP Order shall authorize, other than in 

the ordinary course of the Debtors’ business, the sale, transfer, lease, encumbrance, or other 

disposition of any assets of the Debtors or their Estates without the prior written consent of the 

DIP Lender and the Prepetition Secured Lender (and no such consent or direction shall be implied 

from any other action, inaction, or acquiescence by the DIP Lender, the Prepetition Secured Lender

or any order of this Court), except as permitted in the DIP Loan Documents and this Interim DIP

Order and approved by the Court to the extent required under applicable bankruptcy law.

14. Perfection of DIP Liens and Adequate Protection Liens. This Interim DIP Order 

shall be sufficient and conclusive evidence of the validity, perfection, and priority of all liens 

granted herein, including the DIP Liens and the Adequate Protection Liens, without the necessity 

of filing or recording financing statements, intellectual property filings, mortgages, notices of lien 

or similar instruments in any jurisdiction, taking possession of or control over, or the taking of any 

other action (including, for the avoidance of doubt, entering into any deposit account control 

agreement) to validate or perfect (in accordance with applicable non-bankruptcy law) the DIP 

Liens and the Adequate Protection Liens, or to entitle the DIP Lender or the Prepetition Secured 

Lender to the priorities granted herein. Notwithstanding the foregoing, the DIP Lender and the 

Prepetition Secured Lender each are hereby authorized, but not required, to file or record financing 

statements, intellectual property filings, mortgages, notices of lien or similar instruments in any 

jurisdiction, taking possession of or control over, or take any other action, as they may elect, in 

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order to validate and perfect the liens and security interests granted to them hereunder. Whether or 

not the DIP Lender or Prepetition Secured Lender chooses to file such financing statements, 

intellectual property filings, mortgages, notices of lien or similar instruments in any jurisdiction, 

take possession of or control over, or otherwise confirm perfection of the liens and security 

interests granted to it hereunder, such liens and security interests shall be deemed valid, perfected, 

allowed, enforceable, non-avoidable and not subject to challenge, dispute, or subordination 

immediately upon entry of this Interim DIP Order. A certified copy of this Interim DIP Order may, 

in the discretion of the DIP Lender or the Prepetition Secured Lender, as the case may be, be filed 

with any filing or recording office or with any registry of deeds or similar office, and accordingly, 

each officer is authorized to accept such certified copy of this Interim DIP Order for filing and 

recording.

15. Evidence of Liens. The Debtors shall execute and deliver promptly to the DIP 

Lender all such financing statements, mortgages, control agreements, notices, and other documents 

as the DIP Lender may reasonably request to evidence, confirm, validate, or perfect the DIP Liens.

16. Enforceability of DIP Obligations. Subject to entry of the Final DIP Order, if any 

or all of the provisions of this Interim DIP Order are hereafter reversed, modified, vacated, or 

stayed, such reversal, stay, modification, or vacatur shall not affect (a) the validity, priority, or 

enforceability of any DIP Liens and DIP Obligations incurred prior to the effective date of such 

reversal, stay, modification, or vacatur or (b) the validity, priority, or enforceability of the 

Adequate Protection Liens and Superpriority Claims of the Prepetition Secured Lender.

Notwithstanding any such reversal, stay, modification, or vacatur, any use of cash and any DIP 

Obligations incurred by the Debtors to the DIP Lender prior to the effective date of such reversal, 

stay, modification, or vacatur shall be governed in all respects by the original provisions of this 

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Interim DIP Order, and the DIP Lender shall be entitled to all of the rights, remedies, privileges, 

and benefits granted in Bankruptcy Code section 364(e), this Interim DIP Order, and the DIP Loan 

Documents.

17. Survival of Rights Granted Herein. Except as expressly otherwise provided in this 

Interim DIP Order or in the DIP Loan Documents (i) the Carve Out, the DIP Liens, the DIP 

Superpriority Claims, and all other rights and remedies of the DIP Lender granted by this Interim 

DIP Order and the DIP Loan Documents and (ii) all rights and remedies of the Prepetition Secured 

Lender, including all liens and claims granted by this Interim DIP Order, shall survive, and shall 

not be modified, impaired, or discharged by (a) the entry of an order converting any of the Chapter 

11 Cases to a case under chapter 7 of the Bankruptcy Code or dismissing any of the Chapter 11 

Cases, or (b) the entry of a confirmation order and, pursuant to Bankruptcy Code section 

1141(d)(4), the Debtors’ waiver of discharge as to any remaining DIP Obligations. The terms and 

provisions of this Interim DIP Order and the DIP Loan Documents shall continue in these Chapter 

11 Cases and in any Successor Case, and the DIP Liens, the DIP Obligations, the Carve Out, the 

DIP Superpriority Claims and the other administrative claims granted pursuant to this Interim DIP 

Order, and all other rights and remedies of the DIP Lender granted by this Interim DIP Order and 

the DIP Loan Documents shall continue in full force and effect until all DIP Obligations are 

indefeasibly paid in full in cash or receive other treatment as agreed to by the DIP Lender in its 

sole discretion.

18. After-Acquired Property. The Prepetition Secured Lender is entitled to all of the 

rights and benefits of section 552(b) of the Bankruptcy Code, and the “equities of the case” 

exception shall not apply to the Prepetition Secured Lender with respect to the proceeds, products, 

rents, offspring, issues or profits of any of the Prepetition Secured Lender Collateral or the 

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Adequate Protection Collateral, and no expenses of administration of the Chapter 11 Cases or any 

future proceeding that may result therefrom, including liquidation in bankruptcy or other 

proceedings under the Bankruptcy Code, may be charged against proceeds, products, rents, 

offspring, issues or profits from any of the Prepetition Secured Lender Collateral or Adequate 

Protection Collateral under section 552(b) of the Bankruptcy Code. The Debtors and their estates 

shall be deemed to have irrevocably waived, and to have agreed not to assert, any claim or right 

under section 552 of the Bankruptcy Code seeking to avoid the imposition of the Prepetition 

Secured Creditor Liens or the Adequate Protection Liens on any property acquired by any of the 

Debtors or any of their estates or seeking to surcharge any costs or expenses incurred in connection 

with the preservation, protection or enhancement of, or realization by, the Prepetition Secured 

Lender upon the Prepetition Secured Creditor Collateral or the Adequate Protection Collateral, as 

applicable.

19. Protection of the Rights of the DIP Lender. Unless the DIP Lender has provided its 

prior written consent, or all DIP Obligations have been indefeasibly paid in full in cash, there shall 

not be entered in any of these Chapter 11 Cases or any Successor Case any order (including any 

confirmation order) that authorizes any of the following: (a) the obtaining of credit or the incurring 

of indebtedness that is secured by a security, mortgage, or collateral interest or other lien on all or 

any portion of the DIP Collateral and/or that is entitled to administrative priority status, in each 

case that is superior to or pari passu with the DIP Liens, the DIP Obligations, and the DIP 

Superpriority Claims, except as expressly set forth in this Interim DIP Order; (b) the use of cash 

for any purpose other than as permitted in the Approved Budget, DIP Loan Documents, and this 

Interim DIP Order; (c) the return of goods pursuant to Bankruptcy Code section 546(h) (or other 

return of goods on account of any prepetition indebtedness) to any creditor of any Debtor or any 

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creditor’s taking any setoff against any of its prepetition indebtedness based upon any such return 

of goods pursuant to Bankruptcy Code section 553 or otherwise; or (d) any modification of any of 

the DIP Lender’s rights under this Interim DIP Order, the DIP Loan Documents with respect to 

any DIP Obligations. 

20. Proceeds of Subsequent Financing. If the Debtors, any trustee, any examiner with 

enlarged powers, any responsible officer, or any other estate representative subsequently appointed 

in the Chapter 11 Cases or any Successor Case, shall obtain credit or incur debt other than the 

credit or debt provided pursuant to the DIP Loan Documents at any time prior to the repayment in 

full of all DIP Obligations, including subsequent to the entry of a confirmation order with respect 

to the Debtors and the Debtors’ Estates, then all cash proceeds derived from such credit or debt 

shall immediately be turned over to the DIP Lender until indefeasible payment in full of the DIP 

Obligations in existence at such time in accordance with the DIP Loan Documents. 

21. Maturity Date. All DIP Obligations under this Interim DIP Order will be due and 

payable in full in cash unless otherwise agreed to by the DIP Lender in writing on the earliest of

the following (the “Maturity Date”): (i) July 31, 2024; (ii) the date of consummation of one or 

more Approved Transactions (as defined below) that, in the aggregate, constitutes a sale of all or 

substantially all of the DIP Collateral; (iii) if the Final DIP Order has not been entered by the 

Bankruptcy Court on or before the applicable Milestone, the date of the applicable Milestone; (iv) 

the date of acceleration of the DIP Loans and the termination of the DIP Lender’s commitments 

under the DIP Facility pursuant to the terms of the DIP Loan Documents; (v) the date the 

Bankruptcy Court orders the conversion of any of the Chapter 11 Cases to a chapter 7 liquidation 

or the dismissal of any of the Chapter 11 Cases; (vi) the date the Bankruptcy Court orders the 

appointment of chapter 11 trustee or examiner as to any Debtor; (vii) the filing of a proposed 

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chapter 11 plan not approved by the DIP Lender; (viii) the filing of a proposed sale, bidding or 

marketing process or procedures for any of the Debtors’ assets other than the Acceptable Sale 

Process (as defined below); and (ix) the effective date of a chapter 11 plan of the Debtors (any 

such date, the “DIP Termination Date”). Principal of, and accrued interest on, the DIP Loan and 

all other amounts owing to the DIP Lender under the DIP Facility shall be payable on the DIP 

Termination Date. 

22. Case Milestones. The Debtors, the DIP Lender, and the Prepetition Secured Lender

have agreed on the following milestones for these Chapter 11 Cases (the “Milestones” and each, a 

“Milestone”):

a. Twenty five (25) calendar days after the Petition Date: 

i. entry of the Final DIP Order; 

ii. entry of an order approving the Debtors’ rejection and surrender of 

certain leased premises on an interim basis; 

iii. conclusion of the surrender with respect to substantially all of the 

locations and assets subject to such rejections; 

iv. entry of an order approving the assumption of the Debtors’ principal 

agreements with TreeMac Funding Group LLC (“Treemac”); and 

v. entry of an order approving a sale and marketing process

(“Acceptable Sale Process”) that allows the Debtors to determine and seek 

Bankruptcy Court approval of a transaction (an “Approved Transaction”) to sell all 

or substantially all of the Debtors’ assets for consideration that provides for (i) the 

DIP Lender’s full rights to credit bid the DIP Loans (including as a stalking horse 

bidder); (ii) the repayment in full in cash of the DIP Loans and all senior secured 

loans at the closing of any sale; and (iii) is otherwise accept able to the DIP Lender 

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and Prepetition Secured Lender in its sole discretion. 

b. Seventy five (75) calendar days following the Petition Date: entry of an 

order approving the sale(s) of substantially all of the Debtors’ assets pursuant to the Acceptable 

Sale Process. 

23. Events of Default. Subject to any applicable cure or any notice period set forth 

below, if any, the Debtors’ right to use proceeds of the DIP Facility shall terminate without prior 

order of this Court or any further action by the DIP Lender, unless waived by the DIP Lender in 

writing and in accordance with the terms of the DIP Loan Documents, on the earliest to occur of 

(each, an “Event of Default”):

a. the Debtors’ failure to make any payment to the DIP Lender as and when 

due; 

b. if the Debtors request authority to obtain any financing not consented to by 

the DIP Lender and the proceeds of which are not used to immediately pay all DIP Loans in full; 

c. the filing by the Debtors (or with the Debtors’ consent) of any chapter 11 

plan or related disclosure statement that does not provide for payment in full of the DIP Loans and 

obligations, unless agreed to by DIP Lender; 

d. the appointment of a trustee in the Chapter 11 Cases or the appointment of 

a responsible officer or an examiner with expanded powers (powers beyond those set forth under 

sections 1106(a)(3) and (4) of the Bankruptcy Code) to operate, oversee or manage the financial 

affairs, the business, or reorganization of the Borrower under Bankruptcy Code Section 1106(b); 

e. the dismissal of any of the Debtors’ Chapter 11 Cases; 

f. the conversion of any of the Debtors’ Chapter 11 Cases to chapter 7; 

g. the termination of any of the Debtors’ exclusive rights to propose a chapter 

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11 plan or the filing of any chapter 11 plan by any party other than the Debtors; 

h. Debtors’ material breach of any affirmative or negative covenants contained 

in the DIP Term Sheet or any other DIP Loan Documents; 

i. Debtors’ non-compliance with the Milestones;

j. any material breach by Debtors of any of the terms of the Interim DIP Order 

or the Final DIP Order, as applicable;

k. the Debtors lose or suffer a materially adverse restriction in their ability to 

market and service third party loans; 

l. the Bankruptcy Court enters an order modifying, reversing, revoking, 

staying, rescinding, or vacating the Interim DIP Order, the Final DIP Order, the DIP Loan 

Documents or any portion thereof; 

m. any of the Debtors’ authority to use cash collateral is terminated or halted; 

or 

n. granting of relief from any stay of proceeding (including the Automatic 

Stay) so as to allow a third party to proceed against any asset of the Debtors in an amount in excess 

of $50,000 in the aggregate. 

24. Rights and Remedies Upon Event of Default. Upon (i) the occurrence and during 

the continuation of an Event of Default, and (ii) the expiration of a five (5) calendar day cure period 

(unless such Event of Default is not curable, in which case no cure period shall apply) from the 

date of written notice of the Event of Default by the DIP Lender to the Debtors, the Committee, 

the Prepetition Secured Lender, and the United States Trustee (with notice by email to counsel 

being sufficient) (the “Remedies Notice Parties”) without such Event of Default having been 

cured, the DIP Lender may (without further notice or grace period, unless required by applicable 

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law), in its sole discretion, take any or all of the following actions: (a) declare all obligations under 

the DIP Loan to be immediately due and payable; (b) terminate the DIP Loan as to any future 

liability or obligations, including any obligation to make additional advances, but without affecting 

any of the obligations of the Debtors under the DIP Loan, or the DIP Superpriority Claim. Prior to 

exercising any rights or remedies under the Interim DIP Order or Final DIP Order or the DIP Loan 

Documents, the DIP Lender shall be required to file a motion with the Court using a CM/ECF 

emergency code seeking emergency relief from the Automatic Stay (the “Stay Relief Motion”) on 

at least three (3) business days’ written notice to the Remedies Notice Parties of the DIP Lender’s 

intent to exercise its rights and remedies (the “DIP Remedies Notice Period”). In the event the 

Bankruptcy Court determines during a hearing on the Stay Relief Motion that an Event of Default 

has occurred, the Bankruptcy Court may fashion an appropriate remedy, which may include the 

exercise of any and all rights available to the DIP Lender under the DIP Loan Documents, the 

Interim DIP Order, or the Final DIP Order, as applicable. 

25. Financial Reporting. 

a. Permitted Variance. The term “Permitted Variances” will mean (1) a 

permitted positive variance that would not cause the total cumulative operating disbursements of 

the Debtors for the then-current Approved Budget, including Allowed Professional Fees, to be 

greater than one-hundred ten percent (110%) of the then-current Approved Budget over the 

corresponding time period, unless the amount of such variance above one-hundred ten percent 

(110%) is less than or equal to the positive variance with respect to aggregate revenues and 

collections of the Debtors for the same period; and (2) a permitted negative variance that would 

not cause the total cumulative operating receipts of the Debtors for the then-current Approved 

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Budget to be an amount less than seventy (70%) of the then-current Approved Budget over the 

corresponding time period. 

b. Reporting. On or before each Friday following the entry of this Interim DIP 

Order, the Debtors shall deliver to counsel for the DIP Lender and the Prepetition Secured Lender

a report showing actual results, including ending cash balances, (a) for the prior week compared 

to the same week in the then-current Approved Budget, and (b) for the cumulative weeks’ totals 

compared to the same cumulative weeks’ totals in the then-current Approved Budget, with 

reasonably detailed explanations for any variance on a line-by-line basis (“Financial Reporting 

Requirements”). On or before each Friday following the entry of this Interim DIP Order, the 

Debtors shall deliver to counsel to the DIP Lender and the Prepetition Secured Lender an updated 

schedule with the identities of, and the aggregate amounts of cash to be paid to any and all of the 

Debtors’ critical vendors, including an aggregate of all past, current and future payments above 

$10,000 in any single month or $25,000 in the aggregate for any such vendor and its affiliates and 

its variance, if any, from the Approved Budget (the “Weekly Critical Vendor Schedule”). 

Together, the Financial Reporting Requirements and the Weekly Critical Vendor Schedule are a

“Variance Report.” The Prepetition Secured Lender and its professional advisors and the DIP 

Lender and its professional advisors will have the right, at any time, to inspect, audit, examine, 

check, make copies of, or extract from the books, accounts, checks orders, invoices, bills of lading, 

correspondence, and other records of the Debtors, and the Debtors will make all of the same 

available to the DIP Lender and Prepetition Secured Lender and its representatives, for such 

purposes. The Debtors will provide the Prepetition Secured Lender and the DIP Lender with 

weekly portfolio loan listings as provided to TreeMac. 

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c. Meetings with DIP Lender. At the election of the DIP Lender, on each 

Monday (or, in the event that such day is not a business day then on the business day immediately 

following or on a day mutually agreed upon by the DIP Lender and the Borrower’s senior 

management and professionals) during the Chapter 11 Cases, the Debtors’ senior management and 

professionals shall host a telephonic meeting for the DIP Lender and its professionals at which the 

Debtors’ senior management and professionals shall provide an update to the DIP Lender (and 

make themselves available for questions) with respect to the financial and operating performance 

of the Debtors and their Estates, including, but not limited to, the Variance Report. The Prepetition 

Secured Lender and its professionals shall be invited and entitled to participate in such meetings. 

26. Interim DIP Order Controls. This Interim DIP Order shall constitute this Court’s 

findings of fact and conclusions of law based upon the record of these Chapter 11 Cases at the 

Interim Hearing and shall, upon its entry by this Court, take effect and be fully enforceable as of 

the Petition Date. In the event of any inconsistency between the terms and conditions of the DIP 

Loan Documents or this Interim DIP Order, the provisions of this Interim DIP Order shall govern 

and control. 

27. Binding Effect of Interim DIP Order. Immediately upon entry by the Court 

(notwithstanding any applicable law or rule to the contrary), the terms and provisions of this 

Interim DIP Order, including the liens granted herein shall, effective as of the Petition Date, 

become valid and binding upon and inure to the benefit of the Debtors, the DIP Lender, the 

Committee, the U.S. Trustee, and all other parties in interest and their respective successors and 

assigns, including any trustee or other fiduciary hereafter appointed in these Chapter 11 Cases, any 

Successor Case, or upon dismissal of the Chapter 11 Cases or any Successor Case.

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28. Costs, Fees, and Expenses of the DIP Lender. 

a. DIP Lender Reimbursements. Subject to the provisions set forth herein, the 

Debtors are authorized to pay, when due and payable, the DIP Lender Reimbursements, including, 

without limitation, (i) all reasonable and documented (in summary form) out-of-pocket fees, costs, 

disbursements and expenses of the DIP Lender (including, but limited in the case of counsel, to all 

reasonable and documented (in summary form) out-of-pocket fees, costs, disbursements and 

expenses of the DIP Lender’s counsel, and any successor counsel to each), in each case in 

connection with the negotiations, preparation, execution and delivery of the DIP Loan Documents 

and the funding of all DIP Loan under the DIP Facility, including, without limitation, all due 

diligence, transportation, computer, duplication, messenger, audit, insurance, appraisal, valuation 

and consultant costs and expenses, and all search, filing and recording fees, incurred or sustained 

by the DIP Lender and its counsel and professional advisors in connection with the DIP Facility, 

the DIP Loan Documents or the transactions contemplated thereby, the administration of the DIP 

Facility and any amendment or waiver of any provision of the DIP Loan Documents, and (ii) 

without duplication, all reasonable and documented (in summary form) out-of-pocket fees, costs, 

disbursements and expenses of the DIP Lender (including, but limited in the case of counsels, to 

all reasonable and documented (in summary form) out-of-pocket fees, costs, disbursements and 

expenses of outside counsels to the DIP Lender (and any successor counsel), and, to the extent 

necessary, one firm of local counsel engaged by the DIP Lender in each relevant jurisdiction, and 

any successor counsel to such primary counsel and local counsel, in each case in connection with 

(A) the enforcement of any rights and remedies under the DIP Loan Documents, (B) the Chapter 

11 Cases, including attendance at all hearings in respect of the Chapter 11 Cases; and (C) defending 

and prosecuting any actions or proceedings arising out of or relating to the DIP Obligations, the 

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Liens securing the DIP Obligations, or any transaction related to or arising in connection with the 

DIP Loan Documents or the other DIP Loan Documents. 

b. Process and Procedure. Payment of the DIP Lender Reimbursements shall 

not be subject to allowance by the Court but shall be subject to the following process. At the same 

time such remittance advices are delivered to the Debtors, the professionals for the DIP Lender 

shall deliver a copy of their respective remittance advices to counsel for the Committee and the 

U.S. Trustee on a monthly basis following entry of the Final DIP Order. The remittance advices

for such fees and expenses shall not be required to comply with any U.S. Trustee guidelines related 

to the payment of fees and expenses of retained estate professionals, may be in summary form 

only, and shall not be subject to application or allowance by the Court. Any objections raised by 

the Debtors, the Office of the U.S. Trustee or the Committee with respect to such remittance 

advices within five (5) calendar days of receipt thereof will be resolved by the Court (absent prior 

consensual resolution thereof). Pending such resolution, the undisputed portion of any such 

remittance advicesshall be promptly paid by the Debtors. Except as otherwise ordered by the Court 

in the event an objection is timely filed, such fees and expenses shall not be subject to any setoff, 

defense, claim, counterclaim, or diminution of any type, kind, or nature whatsoever. 

29. Costs, Fees, and Expenses of the Prepetition Secured Lender. 

a. Prepetition Secured Lender Reimbursements. Subject to the provisions set 

forth herein, the Debtors are authorized to pay, when due and payable, all reasonable and 

documented out-of-pocket accrued and unpaid fees, costs, disbursements and expenses of the 

Prepetition Secured Lender (the “Prepetition Secured Lender Reimbursements”), including, 

without limitation, all reasonable and documented (in summary form) fees, costs, disbursements 

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and expenses of Jackson Walker LLP, the legal counsel (and any successor counsel) for the 

Prepetition Secured Lender, and other financial advisors and consults. 

b. Process and Procedure. Payment of the Prepetition Secured Lender

Reimbursements shall not be subject to allowance by the Court but shall be subject to the following 

process. At the same time such remittance advices are delivered to the Debtors, the professionals 

for the Prepetition Secured Lender shall deliver a copy of their respective remittance advices to 

counsel for the Committee, the DIP Lender, and the U.S. Trustee on a monthly basis following 

entry of the Final DIP Order. The remittance advices for such fees and expenses shall not be 

required to comply with any U.S. Trustee guidelines related to the payment of fees and expenses 

of retained estate professionals, may be in summary form only, and shall not be subject to 

application or allowance by the Court. Any objections raised by the Debtors, DIP Lender, the 

Office of the U.S. Trustee or the Committee with respect to such remittance advices within five

(5) calendar days of receipt thereof will be resolved by the Court (absent prior consensual 

resolution thereof). Pending such resolution, the undisputed portion of any such remittance advices

shall be promptly paid by the Debtors. Except as otherwise ordered by the Court in the event an 

objection is timely filed, such fees and expenses shall not be subject to any setoff, defense, claim, 

counterclaim, or diminution of any type, kind, or nature whatsoever. 

30. Right to Credit Bid. Subject to Bankruptcy Code section 363(k) and the terms of 

the DIP Loan Documents and the Carve Out, the DIP Lender shall have the right to credit bid all 

or any portion of the DIP Obligations as part of any asset sale process, whether conducted pursuant 

to Bankruptcy Code sections 363 or 1129, or otherwise.

31. Right to Assign. The DIP Lender shall be permitted to assign DIP Loans with the 

consent of the Debtors (such consent not to be unreasonably withheld, delayed or conditioned); 

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provided that such consent of the Debtors shall not be required if such assignment is made to (i) 

an affiliate of the DIP Lender or (ii) during the continuation of an Event of Default.

32. Indemnification and Release. 

a. The DIP Lender and Prepetition Secured Lender shall have no liability to 

any third party and shall not be deemed to be in control of the operations of Debtors, or to be acting 

as a “responsible person” or managing agent with respect to the operation or management of the 

Debtors. The Debtors shall indemnify and hold harmless the DIP Lender, and Prepetition Secured 

Lender, and their respective affiliates and officers, directors, employees, agents, and advisors to 

the extent set forth in the DIP Term Sheet; provided that any claim for indemnity under this 

paragraph must be brought before this Court for approval. For the avoidance of doubt, the DIP 

Lender and Prepetition Secured Lender shall not be indemnified for willful misconduct, gross 

negligence, or criminal acts. No indemnification shall be granted that violates applicable law in 

the Fifth Circuit. 

b. The release, discharge, waivers, settlements, compromises, and agreements set 

forth in this subparagraph shall be deemed effective only upon entry of the Final DIP Order. 

Subject to the Challenge Period (as defined below), the Debtors forever and irrevocably (a) release, 

discharge, and acquit the DIP Lender, Trevor Lee Ahlberg, Trevor Lee Ahlberg 1997 Trust, and 

Bomani Business Lending, LLC (together, the “Released Parties”), and 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 predecessors in interest of and from any and all claims, demands, 

liabilities, responsibilities, disputes, remedies, causes of action, indebtedness, and obligations, of 

every type arising prior to the Petition Date, including, without limitation, any claims arising from 

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any actions relating to any aspect of the relationship between the Released Parties and the Debtors 

and their affiliates including any equitable subordination claims or defenses, with respect to or 

relating to the DIP Obligations, any and all claims and causes of action arising under the 

Bankruptcy Code, and any and all claims regarding the validity, priority, perfection or avoidability 

of the liens or secured claims of the DIP Lender; and (b) waive any and all defenses (including, 

without limitation, offsets and counterclaims of any nature or kind) as to the validity, perfection, 

priority, enforceability and non-avoidability of the DIP Obligations.

33. Effect of Debtors’ Stipulations. Subject to the entry of a Final DIP Order, each of 

the Debtors’ stipulations and each of the Debtors’ other admissions, agreements and releases 

contained in this Interim DIP Order shall be binding upon each of the Debtors, the DIP Lender, 

and the Prepetition Secured Lender under all circumstances and for all purposes. Each of the 

Debtors’ stipulations and each of the Debtors’ other admissions, agreements and releases contained 

in this Interim DIP Order shall be binding upon all other parties in interest, including, without 

limitation, any Committees appointed or formed in these Chapter 11 Cases and any other person 

or entity acting or seeking to act on behalf of the Debtors’ Estates, including any chapter 7 or 

chapter 11 trustee or examiner appointed or elected for any of the Debtors, in all circumstances 

and for all purposes unless: (a) such Committee or any other party in interest has filed by no later 

than a date that is the later of (i) in the case of a party in interest other than any Committee or the 

Prepetition Secured Lender, forty five (45) calendar days after entry of this Interim DIP Order; (ii) 

in the case of a Committee, the earlier of forty five (45) calendar days after the filing of notice of 

appointment of the Committee or the hearing to consider confirmation of a plan; (iii) in the case 

of the Prepetition Secured Lender, forty five (45) calendar days after entry of the Final DIP Order; 

(iv) with respect to any Challenge Proceeding (as defined below) against the Prepetition Secured 

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Lender or the DIP Lender, any such later date agreed to in writing by the Prepetition DIP Lender 

or the DIP Lender in their sole discretion; or (iv) any such later date ordered by the Court for cause 

shown after notice and an opportunity to be heard, provided that such order is sought before the 

expiration of any applicable period as set forth in clauses (i) through (iii) of this sentence (the 

“Challenge Period”), a motion or other pleading requesting, standing as to one or both of the 

Debtors, to file a contested matter, adversary proceeding or other action or “claim” (as defined in 

the Bankruptcy Code), (A) contesting, objecting or otherwise challenging the admissions, 

stipulations, findings or releases included in this Interim DIP Order, (B) contesting, objecting or 

otherwise challenging the amount, validity, perfection, enforceability, priority or extent of the 

Prepetition Senior Secured Loan, or (C) otherwise asserting or prosecuting any action for 

preferences, fraudulent transfers or conveyances, other avoidance power claims (whether pursuant 

to Chapter 5 of the Bankruptcy Code or otherwise) or any other claims arising from this Interim 

DIP Order (“Challenge Proceeding”). 

34. Good Faith Under Section 364(e). The DIP Lender has acted in good faith in 

connection with the DIP Loan Documents, including this Interim DIP Order, and is entitled to rely 

upon the protections granted herein and by section 364(e) of the Bankruptcy Code. 

35. Interim Compensation Procedures. The DIP Lender hereby consents to entry of an 

order, to be entered contemporaneously with, or after the entry of, this Interim DIP Order, in a 

form reasonably acceptable to the DIP Lender. 

36. Rights Preserved. Other than as expressly set forth in this Interim DIP Order, any 

other rights, claims, or privileges (whether legal, equitable, or otherwise) of the DIP Lender and 

the Prepetition Secured Lender are preserved. 

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37. No Waiver by Failure to Seek Relief. The failure or delay of the DIP Lender or the 

Prepetition Secured Lender to seek relief or otherwise exercise its respective rights and remedies 

under this Interim DIP Order, the DIP Loan Documents, Prepetition Senior Secured Loan 

Documents, or applicable law, as the case may be, shall not constitute a waiver of any of the rights 

hereunder, thereunder, or otherwise of the DIP Lender or the Prepetition Secured Lender.

38. No Third Party Rights. Except as explicitly provided for herein, this Interim DIP 

Order does not create any rights for the benefit of any third party, creditor, equity holder, or any 

direct, indirect, or incidental beneficiary.

39. Immediate Enforceability. This Interim DIP Order shall constitute findings of fact 

and conclusions of law pursuant to Bankruptcy Rule 7052 and shall take effect and be fully 

enforceable as of the Petition Date immediately upon execution hereof. Notwithstanding 

Bankruptcy Rules 4001(a)(3), 6004(h), 6006(d), 7062, or 9024 or any other Bankruptcy Rule, or 

Rule 62(a) of the Federal Rules of Civil Procedure, this Interim DIP Order shall be immediately 

effective and enforceable upon its entry and there shall be no stay of execution or effectiveness of 

this Interim DIP Order. Good cause has been shown for immediate entry of this Interim DIP Order 

pursuant to Bankruptcy Rules 4001(b)(2) and (c)(2).

40. Notices. All notices required or permitted under this Interim DIP Order shall be 

sent to the respective party and attorney at the address listed below, which notice shall be in writing 

and sent by certified mail, return receipt requested, hand delivery, email or by facsimile.

If notice is given to the Debtors, it shall be sent to:

Cottonwood Financial Ltd., et al.

c/o Gray Reed

1601 Elm Street, Suite 4600

Dallas, TX 75201

T: (214) 954-4135

F: (214) 953-1332

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4892-2687-9913

Attn: Jason S. Brookner

Aaron M. Kaufman

Lydia R. Webb

Email: jbrookner@grayreed.com

akaufman@grayreed.com

lwebb@grayreed.com

If notice is given to the Prepetition Secured Lender, it shall be sent to:

Third Coast Bank SSB

5000 Legacy Drive, Suite 120

Plano, TX 75024

Attn: JK Walker

Email: jkwalker@tcbssb.com

With a copy to:

Jackson Walker LLP

2323 Ross Avenue, Suite 600

Dallas, Texas 75201

T: (214) 953-6000

F: (214) 953-5822

Attn: Bruce Ruzinsky

Kenneth Stohner, Jr.

Machir Stull

Email: bruzinsky@jw.com

kstohner@jw.com

mstull@jw.com

If notice is given to the DIP Lender, it shall be sent to:

Nehimba Holdings, LLC 

c/o Wick Phillips Gould & Martin, LLP

3131 McKinney Avenue, Suite 500

Dallas, Texas 75204

T: (214) 692-6200

F: (214) 692-6255

Attn: Jason M. Rudd

Catherine A. Curtis, 

Email: jason.rudd@wickphillips.com

catherine.curtis@wickphillips.com

41. Retention of Jurisdiction. The Court retains jurisdiction to enforce this Interim DIP 

Order according to its terms to the fullest extent permitted by applicable law.

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42. Final Hearing. The Final Hearing to consider entry of the Final DIP Order is 

scheduled for [March 20], 2024 at 10:00 a.m. (CT) before the Honorable Scott W. Everett, United 

States Bankruptcy Judge, at the United States Bankruptcy Court for the Northern District of Texas, 

Dallas Division, Earle Cabell Federal Building, 1100 Commerce St., Courtroom 3, Dallas, TX 

75242-1496.

43. Notice of Final Hearing. Within three (3) business days of the date of the entry of 

this Interim DIP Order, the Debtors shall serve a copy of the Motion and this Interim DIP Order 

upon: (a) the U.S. Trustee; (b) the Internal Revenue Service; (c) the parties included on the 

Debtors’ consolidated list of thirty (30) largest unsecured creditors; (d) counsel to the DIP Lender; 

(e) counsel to the Prepetition Secured Lender; (f) financial institutions where the Debtors hold 

bank accounts; and (g) any party that has filed prior to such date a request for notices under 

Bankruptcy Rule 2002 with the Court.

44. Objection Deadline. Objections, if any, to the relief sought in the Motion and entry 

of the Final DIP Order shall be in writing, shall set forth with particularity the grounds for such 

objections or other statement of position, shall be filed with the Clerk of the Court, and personally 

served upon: (a) proposed counsel to the Debtors; (b) the U.S. Trustee; (c) proposed counsel to 

any Committee; and (d) counsel to the DIP Lender so that such objections are filed with the Court 

and received by said parties on or before 4:00 p.m. (CT) on [_______], 2024.

# # # END OF ORDER # # #

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Submitted by: 

Lydia R. Webb (TX Bar No. 24083758)

GRAY REED 

1601 Elm Street, Suite 4600

Dallas, Texas 75201

Telephone: (214) 954-4135

Facsimile: (214) 953-1332

Email: lwebb@grayreed.com

Proposed Counsel to the Debtors 

and Debtors in Possession

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Exhibit 1 

DIP Term Sheet

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DIP Loan Term Sheet | 1 39295850v.2 39295850v.2

COTTONWOOD FINANCIAL LTD. 

SECURED DEBTOR-IN-POSSESSION CREDIT 

FACILITY AND USE OF CASH 

COLLATERAL 

Summary of Proposed Material Terms and Conditions 

This Summary of Proposed Material Terms and Conditions (the “Term Sheet”), dated as of February 26, 

2024 sets forth (a) certain terms of the DIP Facility (as defined below), subject to the conditions set forth 

below, by the DIP Lender (as defined below) and (b) certain terms for the limited use of Cash Collateral (as 

defined section 363(a)). This Term Sheet does not attempt to describe all of the terms, conditions, and 

requirements that would pertain to the financing and use of Cash Collateral described herein, but rather is 

intended to be a summary outline of certain basic items, which shall be set forth in final documentation, 

which documentation shall be acceptable in all respects to the DIP Lender and the Prepetition Secured Lender 

in their sole discretion. This Term Sheet is qualified in all respects by the DIP Credit Agreement and the DIP 

Orders; and therefore, to the extent that any provision hereof conflicts with the terms of the DIP Credit 

Agreement and the DIP Orders, the DIP Credit Agreement and the DIP Orders shall control. 

Borrowers: Cottonwood Financial Ltd., Cottonwood Financial Administrative 

Services, LLC, Cottonwood Financial Texas, LLC, Cottonwood 

Financial Idaho, LLC, and Cottonwood Financial Wisconsin, LLC (the 

“Borrowers” or the “Debtors”) in the jointly administered cases under 

chapter 11 (the “Chapter 11 Cases”) of the United States Bankruptcy 

Code (the “Bankruptcy Code”) to be filed on or before February 25, 2024 

(the “Petition Date”). 

DIP Lender: Nehimba Holdings, LLC (the “DIP Lender”). 

Prepetition Secured Lender: Third Coast Bank, SSB (“Bank”), in its capacity as Lender

(the “Prepetition Secured Lender”) and Debtor Cottonwood Financial

Ltd., as borrower, are parties to that certain Loan Agreement, dated as of

December 9, 2020 (as amended, restated, amended and restated,

supplemented or otherwise modified, the “Prepetition Senior Secured 

Loan Agreement”), providing for a loan in the aggregate principal amount

of $25,000,000.00 (the “Prepetition Senior Secured Debt”), and related 

prepetition collateral and loan documents related thereto (collectively, the 

“Prepetition Senior Secured Loan Documents” and all Obligations (as 

defined in the Prepetition Credit Agreement) thereunder, the “Prepetition 

Senior Secured Loan”). Payment of the Prepetition Senior Secured Loan

is guaranteed by Cottonwood Financial Texas, LLC and Cottonwood

Financial Administrative Services, LLC. 

Prepetition Secured Lender 

Collateral: 

The Prepetition Secured Lender has first-priority, fully-perfected liens on 

and security interest in and to all assets and property (real and personal, 

tangible and intangible), whether now owned by or owing to, or hereafter

acquired by, or arising in favor Cottonwood Financial Ltd. Cottonwood

Financial Texas, LLC and Cottonwood Financial Administrative

Services, LLC, as further described and defined in the Prepetition Senior

Loan Documents, which includes all (a) Accounts, (b) Accessions, (c) 

Assigned Contracts, (d) Chattel Paper, (e) Collateral Records, 

(f) Commercial Tort Claims, (g) Commodity Accounts, (h) Commodity 

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Contracts, (i) Deposit Accounts, (j) Documents, (k) Equipment, 

(l) Financial Assets, (m) Fixtures, (n) General Intangibles, (o) Goods 

(including furniture), (p) Insurance, (q) Intellectual Property, 

(r) Instruments, (s) Inventory, (t) Investment Property, (u) Letters of

Credit, (v) Letter-of-Credit Rights, (w) Licenses, (x) Money, 

(y) Payment Intangibles, (z) Permits, (aa) Pledged Equity Interests, 

(ab) Securities, (ac) Securities Accounts, (ad) Security Entitlements, 

(ae) Software, (af) Supporting Obligations, (ag) Pledged Debt and

(ah) Proceeds (collectively, the “Prepetition Secured Collateral”). 

Type and Amount of the DIP 

Facility: 

A superpriority, multiple draw term loan facility (the “DIP Facility”) in 

an aggregate principal amount up to $7 million (net of the original issue 

discount) (the “Term Loan Commitments”), of which (i) $2 million (the 

“Interim Funding”) will be available upon entry of an interim order by 

the Bankruptcy Court, in a form acceptable to the DIP Lender and 

Prepetition Secured Lender in all respects, approving the terms and 

conditions of the DIP Facility and authorizing the use of Cash Collateral 

(the “Interim DIP Order”) and (ii) the remaining $5 million will be 

available upon entry of a final order by the Bankruptcy Court, in a form 

acceptable to the DIP Lender and Prepetition Secured Lender in all 

respects, approving the DIP Facility on a final basis and authorizing the 

use of Cash Collateral (the “Final DIP Order” and together with the 

Interim DIP Order, the “DIP Orders”). All amounts at any time 

outstanding under the DIP Facility are referred to as the “DIP Loans.” 

The Prepetition Secured Lender only consents to entry of the Interim 

DIP Order as set forth herein, and reserves all rights with respect to entry 

of any further DIP Orders, including the Final DIP Order, or relief to the 

DIP Lender. 

The DIP Loans shall, subject to the borrowing conditions set forth 

herein, in the loan agreement evidencing the DIP Facility (the “DIP 

Credit Agreement”) and in the applicable DIP Order, be made in draws 

following entry of the applicable DIP Order on the dates and not to 

exceed the amounts as set forth in the Initial Budget (as defined below) 

as approved by the DIP Lender and Prepetition Secured Lender (each 

net of the original issue discount) (each a “DIP Draw” and collectively, 

the “DIP Draws”), in an aggregate amount not to exceed the remaining 

principal balance of the DIP Loans. 

Interest Rate; Default Rate: At all times prior to the occurrence of an Event of Default (as defined 

below), interest on the DIP Loans shall accrue at a rate per annum equal 

to eleven percent (11%) per annum (the “Interest Rate”). All interest 

shall be payable in cash upon the Maturity Date (as defined below), 

except in the Event of Default. 

Upon the occurrence and during the continuation of an Event of Default, 

interest on the DIP Loans shall accrue at fourteen percent (14%) per 

annum (the “Default Interest”), which shall be payable in cash on 

demand. 

All interest shall be computed on the basis of a 360-day year for the 

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actual number of days occurring in the period for which such interest 

is payable. 

Original Issue Discount The DIP Loans shall be made with an original issue discount of three 

percent (3%) to (a) the Interim Funding upon entry of the Interim DIP 

Order; and (b) the remaining $5,000,000 upon entry of the Final DIP 

Order. 

Priority and Security under 

DIP Facility: 

Subject only to the Carve Out and the Cash Collateral Diminution in 

Value Claim (as defined below), the DIP Loans shall be secured by, and 

the Interim DIP Order and the Final DIP Order and will provide the DIP 

Lender automatically perfected first priority liens on and security 

interests in (the “DIP Liens”) all assets and property (real and personal), 

whether now owned by or owing to, or hereafter acquired by, or arising 

in favor of the Borrowers (together, the “DIP Collateral”). The Final DIP 

Order will expand the DIP Collateral to include all proceeds of claims 

and causes of action under Chapter 5 of the Bankruptcy Code 

(“Avoidance Actions”); provided however, the DIP Lender shall only 

avail itself of proceeds from Avoidance Actions on a “last look” basis, 

and only if all other DIP Collateral is inadequate to indefeasibly repay 

the DIP Loans in full; provided further that the DIP Collateral shall not 

include proceeds of any Avoidance Actions alleged against the DIP 

Lender or its affiliates or principals. 

Superpriority DIP Claims: All of the claims of the DIP Lender on account of the DIP Loans (the 

“DIP Claims”) shall be entitled to the benefits of section 364(c)(1) of the 

Bankruptcy Code, having a superpriority over any and all administrative 

expenses of the kind that are specified in, or contemplated by, sections 

105, 326, 327, 328, 330, 331, 361, 362, 363, 364, 365, 503, 506, 507(a), 

507(b), 546, 552, 726, 1113, 1114 or any other provisions of the 

Bankruptcy Code, subject only to the Carve Out and the Cash Collateral 

Diminution in Value Claim (as defined below). 

The DIP Claims will, at all times during the period that the DIP Loans 

remain outstanding, remain, in right of payment, senior in priority to all 

other claims or administrative expenses, subject only to the Carve Out 

and the Cash Collateral Diminution in Value Claim. 

Carve Out: “Carve Out” means an amount equal to the sum of the following (A) : 

(i) all fees required to be paid to the Clerk of the Bankruptcy Court and 

to the Office of the United States Trustee under 28 U.S.C. § 1930(a) plus 

interest pursuant to 31 U.S.C. § 3717 (without regard to the notice set 

forth in clause (ii) below); (ii) to the extent allowed by the Bankruptcy 

Court at any time, whether by interim order, final order, or otherwise, all 

accrued and unpaid fees, disbursements, costs and expenses incurred by 

persons or firms retained by the Debtors pursuant to sections 327, 328 

or 363 of the Bankruptcy Code (the “Debtor Professionals”) and all 

accrued unpaid fees, disbursements, costs and expenses incurred by the 

Committee (if any) pursuant to sections 328 and 1103 of the Bankruptcy 

Code (the “Committee Professionals,” together with the Debtor 

Professionals, the “Estate Professionals,” and such Estate Professional 

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fees in each case in accordance with the Budget, the “Allowed 

Professional Fees”) at any time before or on the first business day 

following delivery by the DIP Lender of a Carve Out Trigger Notice (as 

defined below), whether allowed by the Bankruptcy Court prior to or 

after delivery of a Carve Out Trigger Notice; and (iii) Allowed 

Professional Fees of Estate Professionals in an aggregate amount not to 

exceed $50,000 incurred after the first business day following delivery 

by the DIP Lender of a Carve Out Trigger Notice, to the extent allowed 

at any time, whether by interim order, final order, or otherwise (the 

amounts set forth in this clause (iii), the “Post-Carve Out Trigger Notice 

Cap”); provided, however, nothing herein shall be construed to impair 

the ability of any party to object to any fees, expenses, reimbursement 

or compensation sought by any such professionals or any other person 

or entity. For purposes of the foregoing, “Carve Out Trigger Notice” 

shall mean a written notice (which may be delivered by e-mail (or other 

electronic means)) by the DIP Lender to the Debtors and their counsel, 

counsel to the Prepetition Secured Lender, the United States Trustee, and 

lead counsel to any Committee appointed in the Chapter 11 Cases, and 

filed on the docket of the Chapter 11 Cases, which notice may be 

delivered following the occurrence of an Event of Default, stating that 

the Post-Carve Out Trigger Notice Cap has been invoked. 

 

On a weekly basis—to the extent there is sufficient cash on hand prior 

to entry of the Final DIP Order, and then following entry of the Final 

DIP Order—the fees of the Debtors’ and Committee’s professionals 

provided for in the Budget shall be funded into one of the Debtors’ 

existing DIP accounts, but segregated from all other funds, and used 

solely to satisfy Allowed Professional Fees in accordance with any 

applicable orders entered in the Chapter 11 Cases (the “Professional Fee 

Reserve”). The funds segregated for the Professional Fee Reserve shall 

be available to satisfy the obligations owed to Estate Professionals, and 

the DIP Lender shall have a security interest on any residual amounts 

remaining in the Professional Fee Reserve after satisfaction in full of all 

Allowed Professional Fees. 

For the avoidance of doubt and notwithstanding anything to the contrary 

herein, the Carve Out shall be senior to all liens and claims securing the 

DIP Facility, and all other forms of adequate protection, liens, or claims 

securing the DIP Loans. 

Chapter 11 Cases 

Milestones: 

The DIP Orders will include the following milestones (collectively, the 

“Milestones”) related to the Debtors’ Chapter 11 Cases with it being 

understood that, except as provided below, all orders must be reasonably 

acceptable to the DIP Lender and the Prepetition Secured Lender (other 

than the DIP Orders and the order approving an Acceptable Sale Process, 

which must be acceptable in their sole discretion): 

1. 25 days after the Petition Date: (a) entry of the Final DIP 

Order; (b) entry of an order approving the Debtors’ rejection 

and surrender of certain leased premises on an interim basis; 

(c) conclusion of the surrender with respect to substantially 

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all of the locations and assets subject to such rejections; (d) 

entry of an order approving the assumption of the Debtors’ 

principal agreements with TreeMac Funding Group LLC; (e) 

entry of an order approving an Acceptable Sale Process (as 

defined below). 

2. 75 days after the Petition Date: entry of an order approving 

the sale(s) of substantially all of the Debtors’ assets pursuant 

to the Acceptable Sale Process. 

Acceptable Sale and 

Marketing Process and Plan: 

A sales and marketing process (an “Acceptable Sale Process”) that 

allows the Debtors to determine and seek Bankruptcy Court approval of 

a transaction (an “Approved Transaction”) to sell all or substantially all 

of the Debtors’ assets for consideration that provides for (i) the DIP 

Lender’s full rights to credit bid the DIP Loans (including as a stalking 

horse bidder); (ii) the repayment in full in cash of the DIP Loans and all 

senior secured loans at the closing of any sale; and (iii) is otherwise 

acceptable to the DIP Lender and Prepetition Secured Lender in their 

sole discretion. 

A chapter 11 plan (an “Acceptable Plan”) that provides for, as applicable 

(i) the repayment in full in cash of the DIP Loans and all senior secured 

loans at the closing of any sale; (ii) is otherwise acceptable to the DIP 

Lender and Prepetition Secured Lender in their sole discretion; and (iii) 

the full and complete release and exculpation as of the effective date of 

the plan of the DIP Lender, Trevor Lee Ahlberg, Trevor Lee Ahlberg 

1997 Trust, and Bomani Business Lending, LLC to the fullest extent 

permitted by law. The Prepetition Secured Lender does not agree or 

consent to pursue a Plan process at this time.1

Conditions Precedent to DIP 

Draws: The DIP Credit Agreement will contain usual and customary conditions 

precedent for transactions of this type and others that are determined to 

be appropriate by and which are reasonably acceptable to the DIP 

Lender (in its sole discretion), including, without limitation, the 

following, as a condition to any DIP Draw: 

1

 The Secured Prepetition Lender reserves all rights with respect to any releases contemplated or referenced in this Term 

Sheet, the Interim DIP Order and/or any Plan, which releases shall not become effective, if ever, until after entry of an 

order by the Bankruptcy Court. For the avoidance of doubt, no releases are granted pursuant to the Interim DIP Order 

and all rights are expressly reserved. 

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1. entry of the Interim DIP Order or Final DIP Order, as the 

case may be, in form and substance consistent with the 

terms and conditions set forth herein and otherwise 

satisfactory to the DIP Lender and the Prepetition Secured 

Lender in their sole discretion, which Interim DIP Order or 

Final DIP Order, as the case may be, shall be in full force 

and effect, shall provide DIP Lender with lien priming all 

other liens, except as set forth herein with respect to the 

Cash Collateral Diminution in Value Claim, shall not have 

been reversed, vacated or stayed and shall not have been 

amended, modified, supplemented or otherwise modified 

without the prior written consent of the DIP Lender or 

Prepetition Secured Lender; 

2. the DIP Lender and Prepetition Secured Lender shall have 

received a cash flow forecast setting forth all forecasted 

receipts and disbursements of the Debtors on a weekly 

basis for the period beginning as of the week of the Petition 

Date through 30 days thereafter, broken down by week, 

including the anticipated weekly uses of the proceeds of the 

DIP Facility for such period, which forecast shall be 

reasonably acceptable to and approved by the DIP Lender 

and the Prepetition Secured Lender before filing (the 

“Initial Budget”);2

3. there shall be no default or Event of Default under the DIP 

Credit Agreement and each of the representations and 

warranties set forth in the DIP Credit Agreement shall be 

true and correct in all material respects; 

4. the aggregate amount of actual receipts of the type 

included in the line item “Total Receipts” received by the 

Debtors from the Petition Date to the date of such DIP 

Draw shall not be less than 70% of the amount set forth 

under the line item “Total Receipts” in the then Approved 

Budget (as defined below); 

5. the Debtors certify that, to the best of their knowledge, they 

are in full compliance with all applicable local, state, and 

federal regulations, statutes, licensing, decrees, orders, and 

similar requirements; 

6. the Debtors certify that, to the best of their knowledge, no 

regulator, governmental body, or agency has taken action 

or provided notice of potential or threatened action that 

could adversely impact the Debtors’ business or business 

prospects; 

7. the Debtors certify that, to the best of their knowledge, 

2

 For the avoidance of doubt, the Prepetition Secured Lender only consents to a 30-day budget at this time. 

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there has been no change of law, statute, regulation, order, 

decree, or guideline that could adversely impact the 

Debtors’ business or business prospects; 

8. the Debtors certify that, to the best of their knowledge, 

there has been no change of TreeMac Funding Group 

LLC’s underwriting or business that could adversely 

impact the Debtors’ business or business prospects; 

9. receipt by the DIP Lender and Prepetition Secured Lender 

of a schedule setting forth the identities of, and the 

aggregate amounts of cash to be paid from time to time in 

the chapter 11 cases to, any and all of the Debtors’ critical 

vendors above $10,000.00 in any single month or 

$25,000.00 in the aggregate for any such vendor and its 

affiliates, which schedule shall be acceptable to the DIP 

Lender and the Prepetition Secured Lender.3

10. It is understood and agreed that no legal opinions shall be a 

condition to the funding of any DIP Draw. 

Maturity: All DIP Loans will be due and payable in full in cash on the earliest of 

(the “Maturity Date”): (i) July 31, 2024; (ii) the date of consummation 

of one or more Approved Transactions that, in the aggregate, constitutes 

a sale of all or substantially all of the DIP Collateral; (iii) if the Final 

DIP Order has not been entered by the Bankruptcy Court on or before 

the applicable Milestone, the date of the applicable Milestone; (iv) the 

date of acceleration of the DIP Loans and the termination of the DIP 

Lender’s commitments under the DIP Facility pursuant to the terms of 

the DIP Credit Agreement; (v) the date the Bankruptcy Court orders the 

conversion of the chapter 11 case of any of the Debtors to a chapter 7 

liquidation or the dismissal of the chapter 11 case of any Debtor; (vi) the 

date the Bankruptcy Court orders the appointment of chapter 11 trustee 

or examiner as to any Debtor; the filing of a proposed chapter 11 plan 

other than the Acceptable Plan; (vii) the filing of a proposed sale, 

bidding or marketing process or procedures for any of the Debtors’ 

assets other than the Acceptable Sale Process; and (viii) the effective 

date of a chapter 11 plan of the Debtors. 

The DIP Lender shall first apply proceeds of the DIP Collateral that is 

not the Prepetition Secured Lender’s Prepetition Secured Collateral to 

satisfy the repayment of the DIP Loans before applying proceeds of the 

DIP Collateral that is existing prepetition collateral of the Prepetition 

Secured Lender to satisfy the repayment of the DIP Loans; provided 

however, that in the event there is a sale of assets during the period of 

the Interim Order which are Prepetition Secured Collateral prior to a sale 

of assets which are not Prepetition Secured Collateral, the proceeds from 

the sale of the assets which are Prepetition Secured Collateral shall not 

be applied to the DIP Loan for a period of 45 calendar days following a 

3

 The Prepetition Secured Lender reserves all rights on critical vendor issues. 

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closing of the sale. The Prepetition Secured Lender reserves all rights to 

assert and require additional time beyond 45 calendar days in connection 

with the Final DIP Order. For avoidance of doubt, the DIP Lender must 

consent to any material change between the Interim DIP Order and the 

Final DIP Order, and is under no obligation to advance funds beyond the 

Interim Funding. 

Events of Default The following and any other event of default included in any DIP Credit 

Agreement or the DIP Orders shall be events of default (collectively, 

“Events of Default” with each being an “Event of Default”): 

1. the Debtors’ failure to make any payment to the DIP Lender 

as and when due; 

2. if the Debtors request authority to obtain any financing not

consented to by the DIP Lender and the proceeds of which are 

not used to immediately pay all DIP Loans in full; 

3. the filing by the Debtors (or with the Debtors’ consent) of any 

chapter 11 plan or related disclosure statement that does not 

provide for payment in full of the DIP Loans and obligations, 

unless agreed to by DIP Lender; 

4. the appointment of a trustee in the Chapter 11 Cases or the 

appointment of a responsible officer or an examiner with 

expanded powers (powers beyond those set forth under 

sections 1106(a)(3) and (4) of the Bankruptcy Code) to 

operate, oversee or manage the financial affairs, the 

business, or reorganization of the Borrower under 

Bankruptcy Code Section 1106(b); 

5. the dismissal of any of the Debtors’ Chapter 11 Cases; 

6. the conversion of any of the Debtors’ Chapter 11 Cases to 

chapter 7; 

7. the termination of any of the Debtors’ exclusive rights to 

propose a chapter 11 plan or the filing of any chapter 11 plan 

by any party other than the Debtors; 

8. Debtors’ material breach of any affirmative or negative 

covenants contained in this Term Sheet or any other DIP 

Credit Agreement; 

9. Debtors’ non-compliance with the Milestones; 

10. any material breach by Debtors of any of the terms of the 

DIP Orders, as applicable; 

11. the Debtors lose or suffer a materially adverse restriction in 

their ability to market and service third party loans; 

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12. the Bankruptcy Court enters an order modifying, reversing, 

revoking, staying, rescinding, or vacating the DIP Orders, 

the DIP Credit Agreement or any portion thereof; 

13. any of the Debtors’ authority to use Cash Collateral is 

terminated or halted; or 

14. granting of relief from any stay of proceeding (including the 

automatic stay) so as to allow a third party to proceed against 

any asset of the Debtors in an amount in excess of 

$50,000 in the aggregate. 

Use of DIP Proceeds and 

Cash Collateral: 

Proceeds of the DIP Loans will be used only for the following purposes, 

in each case, in accordance with and subject to the Approved Budget (as 

defined below) then in effect: (i) general corporate and working capital 

purposes; (ii) the payment of restructuring costs; (iii) the payment of 

Adequate Protection Payments (as defined below) and reasonable 

and documented post-petition professionals’ fees and expenses (as 

discussed below) to the Prepetition Secured Lender; and (iv) the 

payment of all reasonable and documented accrued and unpaid 

transaction costs, fees and expenses with respect to the DIP Facility, 

including reasonable and documented costs, fees and expenses of 

professional advisors to the DIP Lender. 

Cash Collateral will only be used in accordance with and subject to the 

30-day Initial Budget. For the avoidance of doubt, the Prepetition 

Secured Lender does not consent to any bonuses being paid during the 

30-day Initial Budget; provided, however, that the Debtors may continue 

to make payments pursuant to their non insider employee incentive 

programs, as described more fully in Debtors’ Emergency Motion for 

Entry of an Order (I) Authorizing the Debtors to (A) Pay Prepetition 

Wages, Salaries, Other Compensation, and Reimbursable Expenses and 

(B) Continue Employee Benefits Programs, and (II) Granting Related 

Relief [Docket No. 13]. For the avoidance of doubt, the employee 

recipients are not executive-level employees. 

No proceeds of the DIP Loan may be used to investigate, challenge, 

object to or contest the validity, priority, extent or enforceability of any 

amount due under, or claims granted under or in connection with the DIP 

Loan. No proceeds of the DIP Loan may be used to investigate, assert 

claims or causes of action against, or seek any relief against the DIP 

Lender, Trevor Lee Ahlberg, Trevor Lee Ahlberg 1997 Trust, or Bomani 

Business Lending, LLC; provided, however, that the official committee 

of unsecured creditors, if any, may use up to $20,000 to investigate any 

such claims or causes of action. 

 No Cash Collateral may be used to investigate, challenge, object to or 

contest the validity, priority, extent or enforceability of any amount due 

under, or claims granted under or in connection with the Prepetition 

Secured Loan. No Cash Collateral may be used to investigate, assert 

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DIP Loan Term Sheet | 10 39295850v.2 39295850v.2

claims or causes of action against, or seek any relief against the 

Prepetition Secured Lender or its respective agents, affiliates, 

subsidiaries, directors, officers, representatives, attorneys, or advisors

provided, however, that the official committee of unsecured creditors, if 

any, may use up to $20,000 to investigate the validity, priority, 

enforceability or perfection of the Prepetition Secured Lender’s liens or 

claims. 

Termination of Rights to Use 

Cash Collateral 

Unless extended further with the written consent of the Prepetition 

Secured Lender, the authority to use Cash Collateral will automatically 

terminate upon the earlier of the following: 

• 30 days from the Petition Date. 

• The Debtors’ failure to make any payment to the Prepetition 

Secured Lender as and when due. 

• The appointment of a trustee in the Chapter 11 Cases or the 

appointment of a responsible officer or an examiner with 

expanded powers (powers beyond those set forth under sections 

1106(a)(3) and (4) of the Bankruptcy Code) to operate, oversee 

or manage the financial affairs, the business, or reorganization 

of the Borrower under Bankruptcy Code Section 1106(b). 

• The date that any Debtor ceases to operate its business (without 

the prior consent of the Prepetition Secured Lender). 

• The granting of relief from the automatic stay to any party that 

claims an interest in the Prepetition Secured Collateral or 

replacement collateral other than the Prepetition Secured 

Lender. 

• The Court grants any party other than the Prepetition Secured 

Lender a lien or security interest equal to or senior to the liens 

and security interests held by the Prepetition Secured Lender, 

pursuant to the Prepetition Loan Documents or this DIP Orders. 

• Any of the Debtors failing to comply with the terms of the DIP 

Orders. 

• The dismissal of any of the Debtors’ Chapter 11 Cases. 

• The conversion of any of the Debtors’ Chapter 11 Cases to 

chapter 7. 

• The termination of any of the Debtors’ exclusive rights to 

propose a chapter 11 plan or the filing of any chapter 11 plan by 

any party other than the Debtors. 

• Debtors’ material breach of any affirmative or negative 

covenants contained in this Term Sheet. 

• Debtors’ non-compliance with the Milestones. 

• The Debtors lose or suffer a materially adverse restriction in 

their ability to market and service third party loans. 

• The Bankruptcy Court enters an order modifying, reversing, 

revoking, staying, rescinding, or vacating the DIP Orders or any 

portion thereof. 

• The DIP Lender declares an Event of Default under the DIP 

Orders or the DIP Credit Agreement. 

Notwithstanding the foregoing, the Prepetition Secured Lender reserves 

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DIP Loan Term Sheet | 11 39295850v.2 39295850v.2

all rights to seek dismissal or conversion of these chapter 11 cases, or 

any other actions. 

Representations and 

Warranties: 

Usual and customary for transactions of this type and others determined 

to be reasonably appropriate by the DIP Lender and Prepetition Secured 

Lender, in each case, that are reasonably acceptable to the DIP Lender 

and Prepetition Secured Lender. 

Affirmative and Negative 

Covenants: 

Usual and customary for transactions of this type and others determined 

to be reasonably appropriate by the DIP Lender and Prepetition Secured 

Lender, in each case, that are reasonably acceptable to the DIP Lender 

and Prepetition Secured Lender, including, without limitation: 

1. delivery of budget updates to the Initial Budget, with 

variance reports (together with the Initial Budget, each, an 

“Approved Budget”) at least monthly plus as set forth in any 

cash collateral order to which any of the Debtors are subject; 

2. limitations on variances from the Approved Budget on 

disbursements and receipts, which limitations (including 

any permitted variances) and the line items of such 

Approved Budget tested in connection therewith, and the 

frequency and periods of such testing, shall be identical to 

such limitations and budget testing set forth in any cash 

collateral order to which any of the Debtors are subject; 

3. subject to exceptions to be agreed in the definitive 

documentation (which such exceptions shall be acceptable 

to the DIP Lender and the Senior Secured Lender) and other 

than the Carve Out and the Cash Collateral Diminution in 

Value Claim, the Debtors may not incur any indebtedness, 

grant any lien, dispose of any property, make any payment 

or distribution in respect of any prepetition claim or liability, 

including to any critical vendors or in respect of any critical 

vendor program, or permit any direct or indirect subsidiary 

to incur any indebtedness or grant any lien, or, in each case, 

enter into any agreement to do any of the foregoing, in each 

case without the prior written consent of the DIP Lender and 

the Prepetition Secured Lender; and 

4. prior to any DIP Draw or such later date as agreed to by the 

Debtors and the DIP Lender, the Debtors, the DIP Lender 

shall enter into the DIP Credit Agreement and related loan 

documents, in each case, in form and substance satisfactory 

to the DIP Lender and the Prepetition Secured Lender. 

 

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DIP Loan Term Sheet | 12 39295850v.2 39295850v.2

Remedies: Upon (i) the occurrence and during the continuation of an Event of Default, and 

(ii) the expiration of a five (5) calendar day cure period (unless such Event of 

Default is not curable, in which case no cure period shall apply) from the date of 

written notice of the Event of Default by the DIP Lender to the Debtors, counsel 

to the Prepetition Secured Lender, any committee, and the United States Trustee 

(with notice by email to counsel being sufficient) (the “Remedies Notice Parties”) 

and with such notice of Event of Default to be filed on the docket of the Chapter 

11 Cases, without such Event of Default having been cured, the DIP Lender may 

(without further notice or grace period, unless required by applicable law) in its 

sole discretion, take any or all of the following actions: (a) declare obligations 

under the DIP Loan to be immediately due and payable; and (b) terminate the 

DIP Loan as to any future liability or obligations, including any obligation to 

make additional Advances, but without affecting any of the obligations of the 

Debtors under the DIP Loan, or the DIP Super-priority Claim. Prior to exercising 

any rights or remedies under the DIP Orders or the DIP Credit Agreement, the 

DIP Lender shall be required to file a motion with the Court using a CM/ECF 

emergency code seeking emergency relief from the automatic stay (the “Stay 

Relief Motion”) on at least three (3) business days’ written notice to the 

Remedies Notice Parties of the DIP Lender’s intent to exercise its rights and 

remedies (the “DIP Remedies Notice Period”). In the event the Bankruptcy Court 

determines during a hearing on the Stay Relief Motion that an Event of Default 

has occurred, the Bankruptcy Court may fashion an appropriate remedy, which 

may include the exercise of any and all rights available to the DIP Lender under 

the DIP Credit Agreement and the DIP Orders, as applicable. 

Professional Fees: The Debtors shall pay all reasonable and documented out-of-pocket accrued and 

unpaid fees, costs, disbursements and expenses of (a) the DIP Lender (including, 

without limitation, the reasonable and documented fees, costs and expenses of its 

legal counsel (including, for the avoidance of doubt, the fees, costs and expenses 

of Wick Phillips Gould & Martin, LLP) and financial advisors) and (b) the 

Prepetition Secured Lender (including, without limitation, the reasonable and 

documented fees, costs and expenses of its legal counsel (including, for the 

avoidance of doubt, the fees, costs and expenses of Jackson Walker LLP, and 

financial advisors). 

Payment of the DIP Lender and Prepetition Secured Lender reimbursements 

shall not be subject to allowance by the Court but shall be subject to the following 

process. At the same time such remittance advices are delivered to the Debtors, 

the professionals for the DIP Lender and the Prepetition Secured Lender shall 

deliver a copy of their respective remittance advices to counsel to the DIP Lender 

and the Prepetition Secured Lender, each as applicable, counsel for any 

committee and the U.S. Trustee. The remittance advices for such fees and 

expenses shall not be required to comply with any U.S. Trustee guidelines related 

to the payment of fees and expenses of retained estate professionals, may be in 

summary form only, and shall not be subject to application or allowance by the 

Court. Any objections raised by the Debtors, the DIP Lender, the Prepetition 

Secured Lender, the Office of the U.S. Trustee, or any committee with respect to 

such remittance advices within ten (10) calendar days of receipt thereof will be 

resolved by the Court (absent prior consensual resolution thereof). Pending such 

resolution, the undisputed portion of any such remittance advices shall be 

promptly paid by the Debtors. Except as otherwise ordered by the Court in the 

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DIP Loan Term Sheet | 13 39295850v.2 39295850v.2

event an objection is timely filed, such fees and expenses shall not be subject to 

any setoff, defense, claim, counterclaim, or diminution of any type, kind, or 

nature whatsoever. 

Assignments: The DIP Lender shall be permitted to assign DIP Loans with the consent of the 

Borrowers (such consent not to be unreasonably withheld, delayed or 

conditioned); provided that such consent of the Borrowers shall not be required 

if such assignment is made to (i) an affiliate of the DIP Lender or (ii) during the 

continuation of an Event of Default. 

Adequate Protection for Use 

of Cash Collateral: 

The Prepetition Secured Lender will receive the following as adequate protection 

through the DIP Orders (the “Adequate Protection”):4

(i) as referenced above, cash payment of reasonable and documented postpetition professionals’ fees and expenses for one law firm serving as 

primary counsel to the Prepetition Secured Lender, and all other reasonable 

and documented out-of-pocket accrued and unpaid fees, costs,

disbursements, and expenses of the Prepetition Secured Lender; 

(ii) cash payments on the 15th day of each month in amount equal to

$175,000 (the “Adequate Protection Payments”), with the first Adequate 

Protection Payment occurring on or before March 15, 2024; 

(iii) to the extent of any diminution of any of its Prepetition Secured

Collateral or Adequate Protection Collateral (defined below), valid, 

perfected, unavoidable, replacement security interests in and liens

(“Adequate Protection Liens”) in and on all assets and property (real and

personal, tangible and intangible), whether now owned by or owing

to, or hereafter acquired by, or arising in favor of the Debtors and/or

their bankruptcy estates, including any previous unencumbered assets (the 

“Adequate Protection Collateral”), subject only to and subordinate to the

DIP superpriority claim, the DIP Liens, and the Carve-Out, except that the 

Adequate Protection Liens shall be senior to the DIP superpriority claim 

and the DIP Liens as to the assets of the Loan Debtors only in the 

amount of any Cash Collateral Diminution in Value Claim. The Adequate 

Protection Liens shall be in addition to all valid and enforceable liens and

security interests existing in favor of the Prepetition Secured Lender and

not in substitution therefor. 

(v) Diminution Super-Priority Claim: 

• Cash Collateral Diminution: The Prepetition Secured Lender is 

granted a final, allowed superpriority administrative expense claim

and lien (as provided above) under section 507(b) in each of the

chapter 11 cases or in any case under chapter 7 of the Bankruptcy

Code upon the conversion of any of the chapter 11 cases, or in any

4

 Adequate Protection includes other rights and obligations herein, even if in a different section of this term sheet. For the 

avoidance of doubt, all Adequate Protection Liens attach to Avoidance Actions proceeds; provided however, the 

Prepetition Secured Lender shall only avail itself of proceeds from Avoidance Actions on a “last look” basis, and only 

if all other Prepetition Secured Collateral and Adequate Protection Collateral is inadequate to indefeasibly repay the 

Prepetition Secured Loan in full; provided further that the Adequate Protection Liens shall not include proceeds of any 

Avoidance Actions alleged against the Prepetition Secured Lender. 

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DIP Loan Term Sheet | 14 39295850v.2 39295850v.2

other proceedings superseding or related to any of the foregoing

(collectively, the “Successor Cases”) to the extent of any 

diminution in value of the Prepetition Secured Lender’s

interest in and liens on Cash Collateral from and after the

Petition Date resulting from, among other things (a)

subordination of the Prepetition Secured Lender’s interest in

the Cash Collateral to the Carve-Out, (b) the sale, lease, 

disposition or use of Cash Collateral, (c) the priming of

prepetition liens by the DIP Liens, (d) the imposition of the

automatic stay pursuant to Bankruptcy Code section 362,

and/or (e) for any other reason for which adequate protection

may be granted under the Bankruptcy Code or case law (the 

“Cash Collateral Diminution in Value Claim”). Solely for the 

purpose of the Interim Order and the Interim DIP Loan of

$2,000,000.00 the Cash Collateral Diminution in Value Claim is

determined to be $500,000.00. The Prepetition Secured Lender

reserves all rights to assert and require a larger amount for the Cash

Collateral Diminution in Value Claim in connection with the Final

DIP Order and Final DIP Loan.5

 Further, the Prepetition Secured

Lender shall be entitled to file and assert a Cash Collateral

Diminution in Value Claim for the period covered by the Interim

DIP Order in an amount greater than $500,000.00, and if so

determined by the Court, any excess amount over $500,000.00 

shall be treated pursuant to the provisions of the Non-Cash 

Collateral Diminution below. The priority of Cash Collateral

Diminution in Value Claim shall be as follows: 

a. subordinate to the Carve Out as to all Debtors; 

b. subordinate to the DIP superpriority claim and the DIP Liens as to

the Non-Loan Debtors;6

 and 

c. senior to the DIP superpriority claim and the DIP Liens as to the

Loan Debtors.7

• Non-Cash Collateral Diminution: The Prepetition Secured Lender

is granted an allowed superpriority administrative expense claim

and lien (as provided above) under section 507(b) in each of the 

chapter 11 cases or in any case under chapter 7 of the Bankruptcy

Code upon the conversion of any of the chapter 11 cases, or in any

other proceedings superseding or related to any of the foregoing

(collectively, the “Successor Cases”), subordinate to payment of

the DIP superpriority claim, DIP Liens, and the Carve-Out, to the 

extent of any diminution in value of the Prepetition Secured

Lender’s interest in and liens on non-Cash Collateral from and after

the Petition Date resulting from, among other things (a)

5

 For avoidance of doubt, the DIP Lender must consent to any increase of the Cash Collateral Diminution in Value 

Claim in the Final DIP Order, and is under no obligation to advance funds beyond the Interim Funding. 6

 The “Non-Loan Debtors” shall mean Cottonwood Financial Idaho, LLC and Cottonwood Financial Wisconsin, LLC. 

7

 The “Loan Debtors” shall mean Cottonwood Financial Ltd., Cottonwood Financial Administrative Services, LLC, and 

Cottonwood Financial Texas, LLC. 

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DIP Loan Term Sheet | 15 39295850v.2 39295850v.2

subordination of the Prepetition Secured Lender’s interest in the 

non-cash collateral to the Carve-Out, (b) the sale, lease, disposition

or use of non-Cash Collateral, (c) the priming of prepetition liens

by the DIP Liens, (d) the imposition of the automatic stay pursuant

to Bankruptcy Code section 362, and/or (e) for any other reason for

which adequate protection may be granted under the Bankruptcy

Code or case law (the “Non-Cash Collateral Diminution in Value

Claim”). 

(vi) The Cash Collateral Diminution in Value Claim and the Non-Cash 

Collateral Diminution in Value Claim shall have recourse to and be

payable from all of the Adequate Protection Collateral. 

 (vii) The Prepetition Secured Lender shall have the benefit of the

Milestones, and financial reporting (each, as set forth herein), which shall

continue to remain in effect with respect to the Prepetition Secured Lender

following any termination of the DIP Facility. 

The Adequate Protection Payments shall be free and clear of all liens and claims. 

The Adequate Protection Liens shall be in addition to all valid and enforceable 

liens and security interests existing in favor of the Prepetition Secured Lender 

and not in substitution thereof. 

Notwithstanding the foregoing, the Prepetition Secured Lender shall be entitled 

to seek different or additional forms of adequate protection for any reason, 

including due to any extension of Milestones or failure to satisfy them. 

The DIP Lender only consents to entry of the interim cash collateral order and 

interim adequate protection to the Prepetition Secured Lender as set forth herein, 

and reserves all rights with respect to entry of any further adequate protection 

orders or relief to the Prepetition Secured Lender, including any final cash 

collateral or adequate protection order. 

Reporting to the Prepetition 

Secured Lender 

The Debtors will provide the Prepetition Secured Lender all financial reporting 

and other reports and notices owed to the DIP Lender under the DIP Facility. 

The Prepetition Secured Lender and its professional advisors and the DIP Lender 

and its professional advisors will have the right, at any time, to inspect, audit, 

examine, check, make copies of, or extract from the books, accounts, checks 

orders, invoices, bills of lading, correspondence, and other records of the 

Debtors, and the Debtors will make all of the same available to the Prepetition 

Secured Lender and its representatives, for such purposes. 

The Debtors will submit weekly reports to the Prepetition Secured Lender and 

the DIP Lender reflecting (a) all revenues collected in the prior week, (b) all 

disbursements made in the prior week, (c) balance in the Cash Collateral account, 

(d) accounts receivable aging and (e) comparison of amounts collected and paid 

in the prior week with the budgeted collections and expenses. 

The Debtors will provide the Prepetition Secured Lender and the DIP Lender 

with weekly portfolio loan listings as provided to TreeMac. 

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Waivers and Rights The DIP Orders shall provide for customary prepetition secured lender 

protections, including, but not limited to, waivers regarding (a) sections 506(c), 

(b) the “equities of the case” exception under 552(b) of the Bankruptcy Code, 

and (c) the equitable doctrine of marshaling with respect to Prepetition Secured 

Collateral and all adequate protection collateral. The Prepetition Secured Lender 

shall be entitled to all of the rights and benefits of section 552(b) of the 

Bankruptcy Code. 

Stipulations The DIP Orders shall contain stipulations as to, among other things, the amount, 

validity, enforceability of the loan documents and the secured liens, perfection 

and priority of the secured indebtedness under the Prepetition Senior Secured 

Debt and/or liens granted in favor of the secured parties under the Prepetition 

Senior Secured Debt, including with respect to any actions taken by the 

Prepetition Secured Lender in respect of the foregoing prior to commencement 

of the Chapter 11 Cases, subject to a 45-day challenge period. The stipulations 

shall also provide (a) that the Prepetition Secured Debt constitutes allowed 

secured claims; (b) that no claims, challenges offsets, defenses, objections or 

causes of action exist against the Prepetition Secured Lender or its respective 

agents, affiliates, subsidiaries, directors, officers, representatives, attorneys, or 

advisors; and (c) for the acknowledgment and enforceability of the relevant 

subordination agreements. The Prepetition Secured Lender may, but shall not be 

required to, file a Proof of Claim. 

The Final DIP Order shall provide the full and complete release of the of the DIP 

Lender, Trevor Lee Ahlberg, Trevor Lee Ahlberg 1997 Trust, and Bomani 

Business Lending, LLC to the fullest extent permitted by law, subject to a 45-

day challenge period from entry of the Final DIP Order with respect to the 

Prepetition Secured Lender.8

 

Perfection of Prepetition 

Secured Lender’s Liens 

under DIP Orders 

The DIP Orders shall be sufficient and conclusive evidence of the creation, 

validity, perfection, and priority of all liens granted herein, including the 

Adequate Protection Liens, without the necessity of filing or recording any 

financing statement, mortgage, notice, or other instrument or document which 

may otherwise be required under the law or regulation of any jurisdiction or the 

taking of any other action (including, for the avoidance of doubt, entering into 

any deposit account control agreement) to validate or perfect (in accordance with 

applicable non-bankruptcy law) the Adequate Protection Liens or to entitle the 

Prepetition Secured Lender to the priorities granted herein. Notwithstanding the 

foregoing, the Prepetition Secured Lender is authorized to file or record, in its 

sole discretion, as it may deem necessary or advisable, such financing statements, 

security agreements, mortgages, notices of liens, and other similar documents to 

8

 The Secured Prepetition Lender reserves all rights with respect to any releases contemplated or referenced in this Term 

Sheet, the Interim DIP Order and/or any Plan, which releases shall not become effective, if ever, until after entry of an 

order by the Bankruptcy Court. For the avoidance of doubt, no releases are granted pursuant to the Interim DIP Order 

and all rights are expressly reserved. 

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DIP Loan Term Sheet | 17 39295850v.2 39295850v.2

perfect its respective liens in accordance with applicable non-bankruptcy law, 

and all such financing statements, mortgages, notices, and other documents shall 

be deemed to have been filed, sent, or recorded as of the Petition Date; provided, 

however, that no such filing or recordation shall be necessary or required in order 

to create or perfect the Adequate Protection Liens. The Debtors shall execute and 

deliver upon reasonable request to the Prepetition Secured Lender, all such 

financing statements, mortgages, notices, and other documents as the Prepetition 

Secured Lender may reasonably request. The Prepetition Secured Lender may 

file a photocopy of the DIP Orders as a financing statement with any filing or 

recording office or with any registry of deeds or similar office, in addition to or 

in lieu of such financing statements, notices of lien, or similar instrument, and 

all applicable officials shall accept a photocopy of the DIP Orders for filing or 

recordation for such purpose. 

Reservation of Rights Nothing in this Term Sheet or the DIP Orders shall be deemed to waive, modify 

or otherwise impair the rights of the Prepetition Secured Lender, and the 

Prepetition Secured Lender shall expressly reserve all of its rights and remedies 

under the Prepetition Senior Secured Loan Documents and applicable law. 

Without limiting the foregoing, nothing in this Term Sheet or the DIP Orders 

shall have the effect of, or shall be construed as having the effect of amending or 

waiving any covenant, term or provision of the Prepetition Senior Secured Loan 

Documents, or any rights or remedies of the Prepetition Secured Lender 

thereunder, including (without limitation) any right to require strict compliance 

with such covenant, term or provision despite any consent or agreement 

contained in this Term Sheet or the DIP Orders. 

Not a Control Person The Prepetition Secured Lender shall have no liability to any third party and shall 

not be deemed to 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 term, or any similar 

terms, are used in the Internal Revenue Code, or any similar Federal or state 

statute), and Prepetition Secured Lender’s relationship with the Debtors shall not 

constitute or be deemed to constitute a joint venture or partnership of any kind 

with the Debtor. 

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39313257v.2

4892-2687-9913

Exhibit 2 

Approved Budget

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Cottonwood Financial

DIP Budget

1 2 3 4

$ in thousands PROJ PROJ PROJ PROJ Weeks 1-4

Week Ending: 16-Jun 1-Mar 8-Mar 15-Mar 22-Mar TOTAL

STARTING CORPORATE CASH 447 2,028 3,560 4,184 447

CUSTOMER LOAN CASH FLOW

Wisconsin

Fundings to Customers - WI (190) (204) (181) (203) (778)

Inflows from Customers - WI 558 378 438 363 1,737

Total WI Cash Flows 368 174 257 160 959

Fundings to Customers - ID (36) (38) (36) (37) (146)

Inflows from Customers - ID 91 74 77 61 302

Total ID Cash Flows 55 36 42 24 156

Net TreeMac Cash Flows (358) (220) (70) (3,703) (4,351)

Maintenance Fees & Net Collections - TX 1,671 1,335 1,314 1,189 5,509

Total TX Cash Flows 1,313 1,114 1,245 (2,514) 1,158

Net Customer Loan Cash Flow 1,735 1,324 1,544 (2,329) 2,273

OPERATING CASH FLOW

Payroll & Benefits (91) (1,239) - (1,189) (2,520)

Contract Labor - (88) (35) - (123)

Rent - - - - -

Advertising - - - (140) (140)

Information Technology (16) (95) (461) (49) (621)

Underwriting - (100) (100) (100) (300)

Other Store Level Expenses (15) (28) (53) (27) (123)

Ordinary Course Professionals - - - - -

Office Equipment & Supplies (5) (5) (5) (40) (55)

Collections - - - - -

Other Operating Expenses (15) (16) (65) (15) (111)

Referral Fees & Coupons (10) (10) (10) (10) (40)

Insurance (2) - (15) - (17)

TOTAL Operarting Expenses (154) (1,580) (744) (1,571) (4,049)

OPERATING CASH FLOW 1,581 (256) 799 (3,900) (1,775)

NON-OPERATING CASH FLOW

Adequate Protection - Prepetition Lender - - (175) - (175)

Critical Vendor Payments -

Utility Adequate Assurance Reserve (150) (150)

Debtor Counsel -

Debtor Financial Advisor -

Debtor Investment Banker (63) (63)

Claims/Noticing Agent -

Committee Professionals -

TOTAL Non-Operating Expenses - (213) (175) - (388)

TOTAL CASH FLOW 1,581 (468) 624 (3,900) (2,163)

DIP Advances / (Repayments 2,000 2,000

ENDING CASH 2,028 3,560 4,184 284 284

Starting TOTAL Cash 2,447 4,028 5,560 6,184 2,447

Store Level Cash (RESTRICTED) 2,000 2,000 2,000 2,000 2,000

Starting CORPORATE Cash 447 2,028 3,560 4,184 447

Net Customer Loan Portfolio Cash Flows 1,735 1,324 1,544 (2,329) 2,273

Operating Expenses (154) (1,580) (744) (1,571) (4,049)

Non-Operating Expenses - (213) (175) - (388)

CORPORATE Cash Before DIP Loan 2,028 1,560 4,184 284 (1,716)

DIP Advances / (Repayments - 2,000 - - 2,000

Ending CORPORATE Cash 2,028 3,560 4,184 284 284

Professional Fees

Accured Debtor Counsel (100) (100) (100) (100) (400)

Accured Debtor FA (50) (50) (50) (50) (200)

Accured Noticing/Claims Agent (30) (30) (30) (30) (120)

Accured Committee Professionals (15) (15) (15) (45)

Total Unpaid Professional Fees (180) (195) (195) (195) (765)

Aggregate Unpaid Professional Fees (180) (375) (570) (765) (765)

DIP Loan

Beginning Balance - - 2,000 2,000

Advances / Repayments - 2,000 - -

Ending Balance - 2,000 2,000 2,000

Case 24-80035-swe11 Doc 48 Filed 02/28/24 Entered 02/28/24 10:30:35 Desc Main

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