Stoli Group (USA), LLC (“Stoli USA”) and Kentucky Owl, LLC (“KO”), as debtors and 

debtors in possession (collectively, the “Debtors”) in the above-captioned chapter 11 cases (the 

“Chapter 11 Cases”) file this their Debtors’ Emergency Motion for Entry of Interim and Final 

Orders (I) Authorizing the Debtors to Use Cash Collateral; (II) Granting Adequate Protection; 

1 The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtor’s federal identification 

number, are Stoli Group (USA), LLC (5602) and Kentucky Owl, LLC (3826). The Debtors’ address is 135 East 57th 

Street, 9th Floor, New York City, New York.

Holland N. O’Neil (TX 14864700)

Stephen A. Jones (TX 24101270)

Mary Rofaeil (TX 24119467)

Zachary C. Zahn (TX 24137675)

FOLEY & LARDNER LLP

2021 McKinney Avenue, Suite 1600

Dallas, TX 75201

Telephone: (214) 999-3000

Facsimile: (214) 999-4667

honeil@foley.com

sajones@foley.com

mary.rofaeil@foley.com

zzahn@foley.com

PROPOSED COUNSEL TO DEBTORS

AND DEBTORS IN POSSESSION

Ann Marie Uetz (pro hac vice forthcoming)

FOLEY & LARDNER LLP

500 Woodward Avenue, Suite 2700

Detroit, MI 48226-3489

Telephone: (313) 234-7100

Facsimile: (313) 234-2800

auetz@foley.com 

Michael J. Small (pro hac vice forthcoming)

FOLEY & LARDNER LLP

321 North Clark Street, Suite 3000

Chicago, IL 60654-4762

Telephone: (312) 832-4500

Facsimile: (312) 832-4700

msmall@foley.com 

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

In re: 

Stoli Group (USA), LLC, et al.,

1

Debtors. 

§

§ 

§ 

§ 

§ 

§ 

§ 

Chapter 11 

Case No.: 24-80146-swe-11 

(Joint Administration Requested) 

DEBTORS’ EMERGENCY MOTION FOR ENTRY OF INTERIM AND

FINAL ORDERS (I) AUTHORIZING THE DEBTORS TO USE CASH

COLLATERAL; (II) GRANTING ADEQUATE PROTECTION; (III)

MODIFYING THE AUTOMATIC STAY; (IV) SCHEDULING A FINAL

HEARING; AND (V) GRANTING RELATED RELIEF

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(III) Modifying the Automatic Stay; (IV) Scheduling a Final Hearing; and (V) Granting Related 

Relief (the “Motion”). In support of the Motion, the Debtors respectfully state as follows: 

I.

BANKRUPTCY RULE 4001 SUMMARY2

1. In accordance with Rule 4001 of the Federal Rules of Bankruptcy Procedure (the 

“Bankruptcy Rules”), the following table summarizes the material terms of the proposed 

interim order (the “Interim Order”) attached hereto as Exhibit A:

SUMMARY OF MATERIAL TERMS

Name of

Entity with

Interest in

the Cash

Collateral

Fifth Third Bank, National Association (Lender)

Interim

Order ¶ 

E.

Purposes

for the Use

of the Cash

Collateral

Cash Collateral shall be used to fund working capital, operating 

expenses, capital expenditures, fixed charges, payroll, and all other 

general corporate purposes arising in the Debtors’ ordinary course of 

business only as shown on the Budget, as well as allowed 

administrative costs, including, but limited to, professional fees and 

expenses.

Interim

Order ¶ 5.

Duration of

Use of Cash

Collateral

Unless extended by the entry of a further order of the Court, the 

interim authorization granted to the Debtors to use Cash Collateral 

under the Interim Order shall terminate upon the earlier of (i) two (2) 

business days following the date of the Final Hearing, or any later date 

the Lender agrees upon in writing; (ii) the date on which a Final Order 

is entered; (iii) the date upon which a chapter 11 or chapter 7 trustee, 

or examiner with authority to operate or possess any Debtor’s assets, 

is appointed in any of the Chapter 11 Cases; (iv) the date upon which 

any of the Chapter 11 Cases are dismissed or converted; (v) the date 

upon which the Debtors file a motion seeking to use Cash Collateral 

without Lender’s consent or to incur postpetition debt on a basis 

secured by interests in the Prepetition Collateral that are senior or pari 

passu with the interests of Lender in the Prepetition Collateral (or the 

initial loan proceeds of which would not be used to indefeasibly repay 

the Prepetition Indebtedness in full); and (vi) the occurrence of an 

uncured Event of Default (defined below) by any of the Debtors under 

this Interim Order. 

Interim

Order ¶ 7. 

2 Capitalized terms used but not defined herein shall have the meaning ascribed to such terms below or in the

Interim Order.

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3 

SUMMARY OF MATERIAL TERMS

Debtors’

Stipulations

Subject to the entry of the Final Order, the Debtors stipulate that (i) 

the Debtors are parties to the Prepetition Loan Documents, 

(hereinafter defined), including (a) the Stoli Credit Agreement

(hereinafter defined), by and between Debtor Stoli USA, and any and 

all other documents, agreements, or instruments executed in 

connection with the Stoli Credit Agreement, and (b) the KO Credit 

Agreement (hereinafter defined), by and between Debtor KO, and any 

and all other documents, agreements, or instruments executed in 

connection with the KO Credit Agreement, and any and all other 

documents, agreements, or instruments executed in connection with 

the KO Credit Agreement; (ii) computed as of November 27, 2024, 

the Debtors are separately liable to the Lender in the outstanding 

principal amount of $78,374,334.30 (together with all interest, fees,

costs, and charges accrued or accruing prior to, on, or after the 

Petition Date, if applicable, collectively, the “Prepetition 

Indebtedness”), all of which is due and owing under the Prepetition 

Loan Documents, comprised of (i) $41,033,893.58 owed by Debtor

Stoli and (ii) $37,340,440.72 owed by Debtor KO; (iii) as security for

repayment of the Prepetition Indebtedness, respectively, the Lender 

holds valid, senior, perfected, and enforceable liens (the “Prepetition 

Liens”) in all of the collateral described in the various Prepetition 

Loan Documents, (collectively, the “Prepetition Collateral”); (iv) (a) 

all of the amounts owing to the Lender pursuant to the Prepetition

Loan Documents are due and owing, and are legally binding and 

enforceable obligations of each of the Debtors, respectively; (b) the 

interests and liens of the Lender in, to, and against all of the 

Prepetition Collateral, respectively are valid, enforceable and properly 

perfected, and are not subject to avoidance, marshalling, or other 

challenge under any state or federal law; and (d) there are no existing 

claims or causes of action of the Debtors, whether liquidated or 

unliquidated, direct or indirect, and whether arising under state or 

federal law (including the Bankruptcy Code) against the Lender, 

arising from the relationship between the Debtors, on one hand, and 

the Lender, on the other hand; and (v) the Lender’s Prepetition 

Collateral includes cash proceeds and other cash equivalents, and all 

cash and cash equivalent proceeds of the Prepetition Collateral,

constituting cash collateral of the Debtors within the meaning of 11 

U.S.C. § 363(a) (the “Cash Collateral”).

Interim

Order ¶ 

E.

Adequate

Protection

The following adequate protection (“Adequate Protection”) is 

provided to the Lender as adequate protection of the Lenders’ asserted 

pre-Petition Date security interests in the Prepetition Collateral:

Replacement Liens. Notwithstanding anything in section 552 of the

Bankruptcy Code to the contrary, the Interim Order provides that 

Lender is granted, from and after the Petition Date, replacement liens 

Interim

Order ¶ 9. 

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4 

SUMMARY OF MATERIAL TERMS

and security interests in all of the Debtors’ assets, including, without 

limitation, all accounts and inventory acquired by the Debtors after the 

Petition Date, specifically including all cash proceeds arising from 

such accounts and inventory acquired by the Debtors after the Petition 

Date (but excluding any causes of action under chapter 5 of the 

Bankruptcy Code) (the “Adequate Protection Collateral” and, 

together with the Prepetition Collateral, collectively, the 

“Collateral”), in the same nature, extent, priority, and validity that 

such liens existed on the Petition Date (the “Replacement Liens”). 

The Replacement Liens shall secure the Lender to the extent

necessary to adequately protect the Lender from any diminution in 

value of its interests in property of the Debtors’ estates as a result of 

the entry of the Interim Order and the use of Cash Collateral 

authorized thereby, and shall have the same validity, priority, and 

enforceability as Lenders’ liens on the Debtors’ assets on the Petition 

Date; provided, however, the Replacement Liens shall be junior in 

priority and in payment to the Carve Out (defined below) upon entry 

of the Final Order. The Replacement Liens are granted effective as of 

the Petition Date, without the necessity of the execution by the 

Debtors of any security agreement, pledge agreement, financing 

statement, or any other documents, or the necessity of any kind of 

financing statement or other filing by the Lender. 

Super-Priority Claims. To the extent the Replacement Liens granted 

to the Lender in the Interim Order do not provide the Lender with 

adequate protection of its interests in the Cash Collateral, the Lender 

shall have superpriority administrative expense claims in each of the 

Bankruptcy Cases under Bankruptcy Code § 507(b) with priority over 

every other administrative claim of any kind (the “Super-Priority 

Claims”). Subject only to the Carve Out upon entry of the Final 

Order, the Super-Priority Claims of the Lender shall have priority over 

all other administrative expenses incurred in the Chapter 11 Cases of 

any kind, including such administrative expenses of the kinds 

specified in, or allowable under, sections 365(d)(3), 506(c), 507(a) or 

507(b) of the Bankruptcy Code. Other than the Carve Out, no costs or 

expenses of administration which have been or may be incurred in the 

Chapter 11 Cases, any conversion of the Chapter 11 Cases 

proceedings pursuant to section 1112 of the Bankruptcy Code, or in 

any other proceeding related hereto, and no priority claims are, or will 

be, prior to or on parity with the Super-Priority Claims of the Lender.

Carve Out Subject to the entry of the Final Order, “Carve Out” means, the sum 

of (i) all fees and expenses required to be paid to the Clerk of the 

Bankruptcy Court and the U.S. Trustee pursuant to 28 U.S.C. § 

1930(a) plus interest at the statutory rate (without regard to the notice 

set forth in (iii) below) (collectively, the “Statutory Fees”); (ii) all 

Interim

Order ¶ 

10. 

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SUMMARY OF MATERIAL TERMS

reasonable fees and expenses up to $50,000.00 incurred by a trustee 

under section 726(b) of the Bankruptcy Code (without regard to the 

notice set forth in (iii) below); and (iii) to the extent allowed at any 

time, whether by interim order, procedural order, or otherwise, all 

unpaid fees and expenses accrued or incurred by persons or firms 

retained by the Debtors pursuant to section 327, 328, or 363 of the 

Bankruptcy Code (the foregoing, collectively, “Professional Fees”) 

before or on the first business day following delivery by the Lender of 

a written notice delivered by email (or other electronic means) to the 

Debtors, their lead restructuring counsel, and the U.S. Trustee, which 

notice may be delivered following the occurrence and during the 

continuation of an Event of Default stating that the Post-Carve-Out 

Trigger Notice Cap (as defined below) has been invoked (the “CarveOut Trigger Notice”); and (iv) Professional Fees in an aggregate 

amount not to exceed $300,00.00 incurred after the first business day 

following delivery by the Lender of the Carve-Out Trigger Notice, to 

the extent allowed at any time, whether by interim order, procedural 

order, or otherwise (the amounts set forth in clause (iv) being the

“Post-Carve-Out Trigger Notice Cap”); provided that, nothing shall 

be construed to impair the ability of any party to object to the fees, 

expenses, reimbursement or compensation described in clauses (i), 

(ii), (iii) or (iv) above, on any grounds.

Events of

Default

a. If the Debtors’ actual operating disbursements under the Budget 

exceed the amounts set forth in the Budget by more than the 

Budget Variance without the prior written consent of the Lender 

or prior authority from the Court;

b. If the Debtors pay obligations not shown on the Budget without 

the prior written consent of the Lender or further authority from 

the Court; and

c. If the Debtors breach any other term, provision, or requirement of 

the Interim Order.

Interim

Order ¶ 

12.

Remedies Upon the occurrence of an Event of Default, the Lender may give 

written notice thereof to lead bankruptcy counsel to the Debtors, 

counsel for any official committee (a “Committee”) appointed in the 

Chapter 11 Cases (if any), and counsel for the U.S. Trustee (the 

“Default Notice”).

With respect to an Event of Default as to which a Default Notice has 

been delivered by the Lender in accordance with the Interim Order, 

the Debtors, the Committee (if any), and the U.S. Trustee shall have 

three (3) business days from the date of the Default Notice (the 

“Remedy Notice Period”) to either cure the Event of Default or 

obtain an order of the Court on notice to the Lender (a) enjoining or 

restraining the Lender from taking action or exercising rights and 

Interim

Order ¶ 

13.

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SUMMARY OF MATERIAL TERMS

remedies based upon the Event of Default specified in the Default 

Notice (a “Restraint on Remedies”), or (b) challenging whether an 

Event of Default in the Default Notice has occurred or is continuing

without cure. During the Remedy Notice Period, the Lender shall 

refrain from exercising its rights and remedies.

Challenge

Period

Notwithstanding any other provisions of the Interim Order, any 

interested party in these cases other than the Debtors, including, 

without limitation, the Committee (if any), shall have until the earlier 

of the date that is 75 calendar days from the Petition Date or 60 

calendar days after a Committee is formed (such period, the 

“Challenge Period”), to commence an adversary proceeding against 

the Lender for the purpose (collectively, a “Challenge Action”) of 

challenging the validity, extent, priority, perfection, enforceability and 

non-avoidability of the Lender’s Prepetition Liens against the 

Prepetition Collateral. All parties in interest, including, without 

limitation, the Committee (if any), that fail to commence a Challenge 

Action prior to the expiration of the Challenge Period shall be barred 

forever from commencing a Challenge Action and shall be bound by 

the Stipulations and terms set forth in the Interim Order.

Interim

Order 14. 

Binding

Effect

The provisions of the Interim Order shall be binding upon and inure to 

the benefit of the Debtors, the Lender, and any Committee appointed 

in this case, and their respective successors and assigns, including any 

trustee hereafter appointed in these Bankruptcy Cases. 

Interim

Order ¶ 

15. 

II.

JURISDICTION AND VENUE

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

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

core proceeding within the meaning of 28 U.S.C. § 157(b). The Debtors confirm their consent, 

pursuant to Rule 7008 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), 

to the entry of a final order by the Court. 

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

4. The bases for the relief requested herein are sections 105, 361, 362, and 363 of 

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

Bankruptcy Rules 2002, 4001, 6003, 6004, and 9014. 

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III.

BACKGROUND

A. The Chapter 11 Cases

5. On November 27, 2024, (the “Petition Date”), the Debtors filed voluntary 

petitions for relief under chapter 11 of Title 11 of the United States Code (the “Bankruptcy 

Code”), thereby initiating the Chapter 11 Cases and creating their respective bankruptcy estates 

(the “Estates”). The Debtors remain in possession of their property and are managing their 

businesses as debtors-in-possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy 

Code. The Court has not appointed a trustee, and no official committee has been established. 

6. Information on the Debtors, their businesses, and a summary of the relief 

requested in this Motion can be found in the Declaration of Chris Caldwell in Support of First 

Day Motions (the “First Day Declaration”), filed concurrently herewith and incorporated herein 

by reference.

B. The Prepetition Loan Documents

7. Prior to the Petition Date, each of the Debtors entered into and obtained separate 

senior secured revolving credit facilities from Fifth Third Bank, National Association, a national 

banking association (the “Lender”).

8. Debtor Stoli USA is a borrower under that certain Credit Agreement dated 

October 28, 2022, by and between Debtor Stoli USA and the Lender (the “Stoli Credit 

Agreement”), and, together with related loan documents, agreements, or instruments executed in 

connection with the Stoli Credit Agreement, and as amended, restated, modified, or 

supplemented, the “Stoli Loan Documents”). Via the Stoli Credit Agreement, Debtor Stoli USA 

was provided a revolving credit facility in an aggregate amount of $50,000,000 (the “Stoli 

Revolver”).

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9. Debtor KO is a borrower under that certain Amended and Restated Credit 

Agreement dated as of February 3, 2023, by and between Debtor KO and the Lender (the “KO 

Credit Agreement”), and, together with related loan documents, agreements, or instruments 

executed in connection with the Stoli Credit Agreement, and as amended, restated, modified, or 

supplemented, the “KO Loan Documents,” and collectively with the Stoli Loan Documents, the 

“Prepetition Loan Documents”). Via the KO Credit Agreement, Debtor KO was provided a 

revolving credit facility in an aggregate amount of $40,000,000 (the “KO Revolver,” 

collectively with the Stoli Revolver, the “Revolver Commitment”). 

10. The amounts owed under the Prepetition Loan Documents are secured by a firstpriority lien on substantially all of the Debtors’ assets, respectively. Moreover, the Lender 

alleges that the Debtors’ collective obligations under the Prepetition Loan Documents are further 

secured via cross-collateralization and that the Debtors are purportedly guarantors of each other’s 

obligations under the Prepetition Loan Documents pursuant to (a) that certain Joinder Agreement 

dated February 15, 2023, by and between Debtor Stoli USA and the Lender (the “Stoli Joinder”) 

and (b) that certain Joinder Agreement dated February 15, 2023, by and between Debtor KO and 

the Lender (the “KO Joinder,” and collectively with the Stoli Joinder, the “Joinder 

Agreements”). 

11. Beginning on July 17, 2024, and subsequently on August 7, 2024, September 26, 

2024, and October 21, 2024, the Lender served each of the Debtors with notices of default and 

reservation of rights letters, alleging and asserting ongoing defaults under the Stoli Loan 

Documents and KO Loan Documents, respectively (collectively, the “Notices of Default”). 

Following the Lender’s serving the Debtors with the Notices of Default, the Debtors and the 

Lender engaged in extensive negotiations and discussions, both directly and through counsel.

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12. Additionally, on October 29, 2024, the Lender sent a total of ten (10) letters (the 

“KO Vendor Letters”) to various trade vendors, suppliers, and storage providers utilized by KO 

(collectively, the “KO Vendors”), among other things, (a) informing the KO Vendors that KO 

was in default under the KO Loan Documents and that the Lender did not consent to any of KO’s 

inventory currently held by the KO Vendors being sold, removed, transported, or otherwise 

disposed of by KO or anyone else without the Lender’s prior written consent; and (b) demanding 

that the KO Vendors not acknowledge, facilitate, or undertake any further sales, removal,

transportation or other disposition of any KO inventory held by the KO Vendors without the 

Lender’s prior written consent. 

13. Thereafter, on November 13, 2024, the Lender served each of the Debtors with 

notices of default, acceleration, demand for repayment, and reservation of rights letters, alleging 

and asserting additional ongoing defaults and demanding repayment of all amounts owed by 

each of the Debtors, respectively, under the Stoli Loan Documents and KO Loan Documents

(collectively, the “Acceleration Notices”). 

14. The Debtors continued to engage in negotiations and discussions with the Lender, 

both directly and through counsel. The Debtors (1) retained Riveron Consulting, LLC 

(“Riveron”) as the Debtors’ restructuring and financial advisor and (2) appointed Steven Wybo 

of Riveron as the Debtors’ Chief Restructuring Officer (“CRO”). The Debtors continued their 

negotiations and discussions with the Lender following Riveron’s engagement and the CRO’s 

appointment. However, the Debtors and the Lender were unable to reach a mutually agreeable 

resolution that would allow the Debtors to sustain their operations and provide the Debtors with 

sufficient time to secure financing from an alternative lender.

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

obligations under the Prepetition Loan Documents total approximately $78,374,334.30 (together 

with all interest, fees, costs, and charges accrued or accruing prior to, on, or after the Petition 

Date, if applicable, collectively, the “Prepetition Indebtedness”), all of which is due and owing 

under the Prepetition Loan Documents, comprised of (i) $41,033,893.58 under the Stoli Revolver 

and (ii) $37,340,440.72 under the KO Revolver.

16. The Debtors admit, acknowledge, and do not dispute that, as security for 

repayment of the Prepetition Indebtedness, the Lender holds valid, senior, perfected, and 

enforceable liens (the “Prepetition Liens”) in all of the collateral described in the various 

Prepetition Loan Documents, (collectively, the “Prepetition Collateral”). The Prepetition 

Collateral includes cash proceeds and other cash equivalents, and all cash and cash equivalent 

proceeds of the Prepetition Collateral, constituting cash collateral of the Debtors within the 

meaning of section 363(a) of the Bankruptcy Code (the “Cash Collateral”).

17. The Debtors admit, acknowledge, and do not dispute that the Prepetition Loan 

Documents are legally binding and enforceable obligations of each of the Debtors. The 

Prepetition Liens in, to, and against all of the Prepetition Collateral are valid, enforceable, and 

properly perfected and are not subject to avoidance under any state and federal law. The Debtors 

do not have any existing claims or causes of action against the Lender arising from the 

relationship between the Debtors and the Lender with respect to the Prepetition Loan 

Documents, the Prepetition Indebtedness, the Prepetition Liens, or the Prepetition Collateral.

C. The Subordinate Loan Documents

18. Debtor KO is also a borrower under that certain Loan Agreement, dated 

November 29, 2017, by and between Debtor KO and S.P.I. Worldwide Trade Limited, as 

successor to SPI Group S.a`r.l. (the “Subordinate Lender”), as from time to time amended, 

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11 

supplemented, restated, or otherwise modified (the “Subordinate Loan Documents”), providing 

for a delayed draw term loan of up to $25,000,000 (the “Subordinate Loan”). The Subordinate 

Loan is unsecured, bears interest at a rate of 3% per annum, and all amounts borrowed under the 

Subordinate Loan mature on December 31, 2027. As of the Petition Date, the Debtors owe 

$6,151,299.00 under the Subordinate Loan Documents. 

19. Debtor KO, the Lender, and the Subordinate Lender entered into that certain 

Amended and Restated Subordination Agreement on February 3, 2024 (the “Subordination 

Agreement”), thereby subordinating the Subordinate Loan to the amounts owed by Debtor KO 

under the KO Loan Documents. 

IV.

RELIEF REQUESTED

20. Pursuant to sections 105, 361, 362, and 363 of the Bankruptcy Code and 

Bankruptcy Rules 2002, 4001, 6003, 6004, and 9014, the Debtors request the following: 

a. authorization for the Debtors to (i) use Cash Collateral and all other 

Prepetition Collateral in accordance with the terms of the Interim Order 

and material compliance with the cash disbursements and receipts budget 

annexed thereto (as such budget may be modified from time to time with 

the prior written consent of the Lender, which consent shall not be 

unreasonably withheld, the “Budget”), and (ii) provide adequate 

protection to the Lender under the Prepetition Loan Documents; 

b. that this Court hold an interim hearing on the Motion to consider the relief 

requested in this Motion and entry of the proposed Interim Order; 

c. that this Court schedule a final hearing (the “Final Hearing”) to consider 

entry of a final order (the “Final Order”) granting the relief requested in 

this Motion on a final basis; 

d. modification of the automatic stay imposed by section 362 of the 

Bankruptcy Code to the extent necessary to implement and effectuate the 

terms and provisions of the Interim Order and the Final Order; 

e. waiver of any applicable stay with respect to the effectiveness and 

enforceability of the Interim Order or the Final Order (including, without 

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12 

limitation, a waiver pursuant to Bankruptcy Rule 6004 and a waiver of the 

applicability of Bankruptcy Rule 4001(a)(3)); and 

f. that the Court grant such further and other relief as is just and proper. 

V.

BASIS FOR RELIEF

A. Emergency Relief

21. The Debtors bring this Motion on an emergency basis given the immediate and 

irreparable harm that the Debtors will potentially suffer if they are denied the ability to use Cash 

Collateral, which is necessary to sustain ongoing business operations and to preserve the value of 

their assets for the benefit of the Debtors’ Estates, and to implement the Debtors’ restructuring 

objectives. Absent the continued use of Cash Collateral, the Debtors would likely have to cease 

their ongoing operations to the material detriment of their employees, creditors, stakeholders, 

and other parties in interest. Therefore, the Debtors need to ensure the availability of such 

working capital now. 

B. Adequate Protection and Cash Collateral 

22. Pursuant to Bankruptcy Code § 363(c)(2), a debtor-in-possession may not use 

cash collateral without the consent of the Lender or court approval. See 11 U.S.C. § 363(c)(2). 

Bankruptcy Code § 363(e) provides that, upon request of an entity that has an interest in property 

to be used by the debtor, the court shall prohibit or condition such use as is necessary to provide 

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

23. The Bankruptcy Code does not expressly define “adequate protection” or 

proscribe a particular form that it must take. See In re Las Torres Dev., L.L.C., 413 B.R. 687, 

696–97 (Bankr. S.D. Tex. 2009) (noting that the Bankruptcy Code “contains no specific, 

definitive definition of adequate protection”) (citing In re First S. Sav. Ass’n, 820 F.2d 700, 710 

(5th Cir. 1987)). Generally, courts decide what constitutes adequate protection on a case-by-case 

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basis. See In re First S. Sav. Ass’n, 820 F.2d at 710 (noting, with respect to adequate protection, 

that “‘[i]ts application is left to the vagaries of each case’”) (quoting In re Becker Indus., 58 B.R. 

725, 736 (Bankr. S.D.N.Y. 1986)); Resolution Tr. Corp. v. Swedeland Dev. Group, Inc. (In re 

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

there is adequate protection is made on a case by case basis.”) (citing In re O’Connor, 808 F.2d 

1393, 1397 (10th Cir. 1987)); In re Mosello, 195 B.R. 277, 289 (Bankr. S.D.N.Y. 1996) (“The

determination of adequate protection is a fact specific inquiry.”). The focus of the adequate

protection requirement is to protect a “secured creditor from diminution in the value of its 

interest during the Chapter 11 reorganization.” In re 495 Central Park Avenue Corp., 136 B.R. 

626, 631 (Bankr. S.D.N.Y. 1992); see also In re Hubbard Power & Light, 202 B.R. 680, 685 

(Bankr. E.D.N.Y. 1996) (“The goal of adequate protection . . . is to safeguard the secured 

creditor from diminution in the value of its interests”); In re Beker, 58 B.R. 725, 736 (Bankr. 

S.D.N.Y. 1986) (the focus of adequate protection “is protection of the secure creditor from 

diminution in the value of its collateral during the reorganization process”).

C. The Debtors’ Proposed Adequate Protection for the Use of Cash Collateral

24. The Lender asserts liens on the Cash Collateral of the Debtors. As adequate 

protection for such Debtors’ use of the Cash Collateral, the Debtors are proposing to provide the 

Lender with adequate protection via replacement liens and superpriority administrative claims 

for any diminution of value. Specifically, the Debtors will give the Lender valid and 

automatically perfected (without necessity of the execution of additional mortgages, security 

agreements, pledge agreements, financing statements, or other documents) replacement liens and 

security interests in all of the Debtors’ assets, including, without limitation, all accounts and 

inventory acquired by the Debtors after the Petition Date, specifically including all cash proceeds 

arising from such accounts and inventory acquired by the Debtors after the Petition Date (but 

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excluding any causes of action under chapter 5 of the Bankruptcy Code) (the “Adequate 

Protection Collateral” and, together with the Prepetition Collateral, collectively, the 

“Collateral”), in the same nature, extent, priority, and validity that such liens existed on the 

Petition Date (the “Replacement Liens”). The Replacement Liens will secure the Lender to the 

extent necessary to adequately protect the Lender from any diminution in value of its interests in 

the property of the Debtors’ Estates as a result of the use of Cash Collateral. Upon entry of the 

Final Order, the Replacement Liens, however, will be junior in priority and payment to the Carve 

Out (as defined below).

25. To the extent the Replacement Liens granted to the Lender do not provide the 

Lender with adequate protection of its interests in the Cash Collateral, the Lender will have a 

super-priority administrative expense claim under Bankruptcy Code § 507(b) with priority over 

every other administrative claim of any kind (the “Super-Priority Claims”). Subject only to the 

Carve Out (as defined below) upon entry of the Final Order, the Super-Priority Claims of the 

Lender will have priority over all other administrative expenses incurred in this case of any kind, 

including such administrative expenses of the kinds specified in or allowable under sections 

365(d)(3), 506(c), 507(a) or 507(b) of the Bankruptcy Code.

26. The proposed Adequate Protection, outlined above and as set forth in the 

proposed Interim Order, is sufficient to secure the Debtors’ projected use of Cash Collateral 

because the projected diminution in value, if any, from the use of Cash Collateral is less than the 

value of the Adequate Protection proposed to the Lender. Moreover, the use of Cash Collateral is 

itself a form of Adequate Protection by preserving or even increasing the value of the Debtors’ 

overall going concern value by operating during the restructuring process. See, e.g., In re 495 

Cent. Park Ave. Corp., 136 B.R. at 631 (noting that, in determining whether protection is 

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“adequate,” courts consider “whether the value of the debtor’s property will increase as a result 

of the” use of collateral or provision of financing) (citing Bank of New England v. BWL, Inc., 

121 B.R. 413, 418 (D. ME. 1990)).

D. The Use of Cash Collateral is Necessary to Preserve the Assets of the Estates

27. The Debtors require immediate access to liquidity to ensure that they are able to

continue operating during these Chapter 11 Cases and to preserve the value of their Estates for 

the benefit of all parties-in-interest. Substantially all of the Debtors’ total cash on hand as of the

Petition Date is subject to the liens of the Lender and thus constitutes Cash Collateral.

28. The Debtors continue to incur expenses associated with the management of the

Debtors’ ongoing operations, the collection of receivables, and the administration of the Debtors’ 

Estates during the course of these Chapter 11 Cases. It is essential that the Debtors continue to 

fund their ongoing operating expenses, payroll obligations, insurance expenses, and other 

obligations. The Debtors’ ability to use Cash Collateral will allow the continuation of the 

Debtors’ existing operations and lending relationships.

29. Immediate access to Cash Collateral will restore the confidence of their vendors,

customers, employees, and other stakeholders at this critical stage of their restructuring.

Accordingly, the use of Cash Collateral in accordance with the terms of the Interim Order is 

essential to the Debtors’ ability to minimize disruptions and avoid irreparable harm to their

business.

E. The Carve Out is Appropriate

30. For purposes hereof and only upon entry of the Final Order, the “Carve Out” 

means, the sum of (i) all fees and expenses required to be paid to the Clerk of the Bankruptcy 

Court and the U.S. Trustee pursuant to 28 U.S.C. § 1930(a) plus interest at the statutory rate 

(without regard to the notice set forth in (iii) below) (collectively, the “Statutory Fees”); (ii) all 

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reasonable fees and expenses up to $50,000.00 incurred by a trustee under section 726(b) of the 

Bankruptcy Code (without regard to the notice set forth in (iii) below); and (iii) to the extent 

allowed at any time, whether by interim order, procedural order, or otherwise, all unpaid fees and 

expenses accrued or incurred by persons or firms retained by the Debtors pursuant to section 

327, 328, or 363 of the Bankruptcy Code (the foregoing, collectively, “Professional Fees”) 

before or on the first business day following delivery by the Lender of a written notice delivered 

by email (or other electronic means) to the Debtors, their lead restructuring counsel, and the U.S. 

Trustee, which notice may be delivered following the occurrence and during the continuation of 

an Event of Default under the Interim Order stating that the Post-Carve-Out Trigger Notice Cap 

(as defined below) has been invoked (the “Carve-Out Trigger Notice”); and (iv) Professional 

Fees in an aggregate amount not to exceed $300,000.00 incurred after the first business day 

following delivery by the Lender of the Carve-Out Trigger Notice, to the extent allowed at any 

time, whether by interim order, procedural order, or otherwise (the amounts set forth in this 

clause (iv) being the “Post-Carve-Out Trigger Notice Cap”); provided that, nothing in the 

interim shall be construed to impair the ability of any party to object to the fees, expenses, 

reimbursement or compensation described in clauses (i), (ii), (iii) or (iv) above, on any grounds.

31. On the day on which a Carve-Out Trigger Notice is given by the Lender as set 

forth herein (the “Termination Declaration Date”), the Carve-Out Trigger Notice shall 

constitute a demand to the Debtors to utilize all cash on hand (including Cash Collateral) as of 

such date and any available cash thereafter held by any Debtors to fund a reserve in an amount 

equal to the then accrued and unpaid amounts of the Professional Fees. Notwithstanding 

anything to the contrary herein, the Carve Out shall be senior to all liens and claims securing 

Prepetition Indebtedness, including the Replacement Liens and the Super-Priority Claims.

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32. The Carve Out is similar to other provisions of this type, which have been found 

to be reasonable and necessary to ensure that the Debtors’ Estates and any statutory committee 

can retain assistance from counsel. See In re Ames Dep’t Stores Inc., 115 B.R. 34, 38 (Bankr. 

S.D.N.Y. 1990) (“Indeed, it has been the uniform practice of this Court . . . to insist on a carve 

out . . . in a reasonable amount designed to provide for payment of the fees of debtor’s and the 

committees’ counsel and possible trustee’s counsel in order to preserve the adversary system.”).

33. Without the Carve Out, the Debtors’ Estates and other parties-in-interest may be 

deprived of possible rights and powers because all of the Debtors’ assets would be subject to 

prior security interests. See In re Ames Dep’t Stores Inc., 115 B.R. at 38 (observing that courts 

insist on carve outs for professionals representing parties in interest because “[a]bsent such 

protection, the collective rights and expectations of all parties-in-interest are sorely prejudiced”). 

The Carve Out also protects against the possibility of administrative insolvency by ensuring that 

assets remain available for the payment of statutory and professional fees. Accordingly, the 

Court should approve the Carve Out.

F. The Automatic Stay Should be Modified to a Limited Extent

34. The relief requested herein contemplates a modification of the automatic stay to 

permit the Debtors and the Lender to perform the transactions and actions contemplated or 

permitted by the Interim Order.

35. The stay relief provisions are a reasonable exercise of the Debtors’ business 

judgment, are appropriate under the present circumstances, and, accordingly, should be 

approved.

G. Interim Relief is Warranted

36. Pursuant to Bankruptcy Rule 4001(b)(2), a final hearing on a motion to use cash

collateral may not be commenced before 14 days after service of the applicable motion. Fed. R.

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Bankr. P. 4001. This Court may, however, conduct a preliminary hearing before the expiration of

that fourteen-day period and likewise authorize the use of Cash Collateral, if necessary, to the

extent necessary to avoid immediate and irreparable harm to a debtor’s estate. Id.

37. The Debtors and their Estates will suffer immediate and irreparable harm if the

interim relief requested herein authorizing the Debtors to use the Cash Collateral is not granted

promptly. The Debtors believe that the commencement of the Chapter 11 Cases has already and

will continue to significantly increase the demands on their cash as a result of, among other 

things, the costs of administering the Chapter 11 Cases and addressing key constituents’ 

concerns regarding the Debtors’ financial health and ability to continue operations in light of the 

Chapter 11 Cases. The Debtors have an immediate need for access to liquidity to, among other 

things, permit the orderly continuation of the operation of their business, and to satisfy other 

working capital and operation needs, all of which are required to preserve and maintain the

Debtors’ going concern value for the benefit of all parties in interest.

38. The alternative, in this case, is “to force the debtor to close down their operations 

and thus doom any effort at reorganization which will hopefully extract the maximum value of 

the assets involved to the benefit of all classes of creditors and other constituencies involved in 

this case.” In re Dynaco Corp., 162 B.R. 389, 396 (Bankr. D.N.H. 1993) (alteration in original). 

This result would be at fundamental odds to the rehabilitative purposes of chapter 11, therefore, 

approval of this Motion is warranted. Id. at 394 (noting that “it is apparent that the Congress 

intended business under reorganization to proceed in as normal a fashion as possible”) (quoting 

In re Prime, Inc., 15 B.R. 216, 219 (Bankr. W.D. Mo. 1981)).

39. In examining requests under Bankruptcy Rule 4001, courts apply the same 

business judgment standard applicable to other business decisions. See In re Simasko Production 

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Co., 47 B.R. 444, 449 (D. Colo. 1985); In re Ames Dept. Stores, Inc., 115 B.R. 34, 39–40 

(Bankr. S.D. N.Y. 1990). The Debtors submit that, for the reasons set forth herein, the immediate 

use of Cash Collateral, on an interim basis, as requested in this Motion, is necessary to avert 

immediate and irreparable harm to the Debtors’ businesses and their Estates. After the 14-day 

period, however, the request for use of cash collateral is not limited to those amounts necessary 

to prevent harm to the Debtors’ business.

40. The Debtors request that the Court conduct an emergency preliminary hearing on 

the Motion and authorize the Debtors, from and after the entry of the Interim Order until a Final 

Hearing on the relief requested herein, to use Cash Collateral, as necessary. Such authorization 

will ensure that the Debtors maintain ongoing operations and avoid immediate and irreparable 

harm and prejudice to their Estates and all parties in interest pending the Final Hearing.

41. Accordingly, for all of the reasons set forth above, prompt entry of the Interim 

Order is necessary to avert immediate and irreparable harm to the Debtors’ Estates and is 

consistent with, and warranted under, Bankruptcy Rules 4001(b)(2) and (c)(2).

H. Request for a Final Hearing

42. As noted above, pursuant to Bankruptcy Rules 4001(b)(2), the Debtors 

respectfully request that the Court set a date for the Final Hearing at the earliest date and time of 

the Court’s convenience that will ensure adequate notice and due process to all parties-in-interest 

to these Chapter 11 Cases.

43. The Debtors respectfully request that they be authorized to serve a copy of the 

signed Interim Order, which fixes the time and date for the filing of objections, if any, by firstclass mail on the Notice Parties (as defined below) and to any other party that has filed a request 

for notices with this Court and to any official committee, or the legal counsel of any official 

committee, if the same shall have filed a request for notice. The Debtors respectfully request that 

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the Court consider such notice of the Final Hearing to be sufficient notice under Bankruptcy 

Rule 4001. 

VI.

BANKRUPTCY RULE 6003 HAS BEEN SATISFIED

44. Bankruptcy Rule 6003 provides that, to the extent relief is necessary to avoid 

immediate and irreparable harm, a bankruptcy court may issue an order granting “a motion to 

use, sell, lease, or otherwise incur an obligation regarding property of the estate, including a 

motion to pay all or part of a claim that arose before the filing of the petition” before twenty-one 

days after filing of the petition. Here, the Debtors believe an immediate and orderly transition 

into chapter 11 is critical to the viability of their business operations. Any delay in granting the 

relief requested could hinder the Debtors’ business operations and cause irreparable harm to the 

Debtors’ Estates, thus threatening the Debtors’ ability to reorganize successfully. Accordingly, 

the Debtors have satisfied the requirements of Bankruptcy Rule 6003. 

VII.

REQUESTS FOR BANKRUPTCY RULES 4001 AND 6004 WAIVERS

45. The Debtors request a waiver of the notice requirements under Bankruptcy Rule 

6004(a) and any stay of the order granting the relief requested herein pursuant to Bankruptcy 

Rules 4001(a)(3) and 6004(h). As explained above and in the First Day Declaration, the relief 

requested herein is necessary to avoid immediate and irreparable harm to the Debtors. 

Accordingly, ample cause exists to justify the waiver of the notice requirements under 

Bankruptcy Rule 6004(a) and the 14-day stay imposed by Bankruptcy Rules 4001(a)(3) and 

6004(h), to the extent such stay applies. 

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VIII.

NOTICE

46. No trustee, examiner, or statutory creditors’ committee has been appointed in 

these Chapter 11 Cases. This Motion has been provided to (i) the Office of the United States 

Trustee for the Northern District of Texas; (ii) the Debtors’ secured lender and counsel to the 

Debtors’ secured lender; (iii) the holders of the 30 largest unsecured claims against the Debtors 

(on a consolidated basis); (iv) the Internal Revenue Service; and (vi) all parties in interest who 

have formally appeared and requested notice. The Debtors respectfully submit that no further 

notice of this Motion is required. 

47. The pleadings in these Chapter 11 Cases and supporting papers are available on 

the Debtors’ website at https://cases.stretto.com/Stoli or on the Bankruptcy Court’s website at 

https://ecf.txnb.uscourts.gov/. You can request any pleading you need from (i) the proposed 

noticing agent at: Stretto, 410 Exchange, Suite 100, Irvine, CA 92602, 855-469-2598 (toll-free), 

(TeamStoli@stretto.com) or (ii) proposed counsel for the Debtors at: Foley & Lardner LLP, c/o 

Stephen A. Jones, 2021 McKinney Avenue, Suite 1600, Dallas, Texas 75201 

(sajones@foley.com).. 

WHEREFORE, based on the foregoing, the Debtors respectfully request that the Court (i) 

grant the Motion and (ii) grant such other relief as the Court deems appropriate under the 

circumstances.

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DATED: November 29, 2024 Respectfully submitted by: 

/s/ Holland N. O’Neil

Holland N. O’Neil (TX 14864700) 

Stephen A. Jones (TX 24101270) 

Mary Rofaeil (TX 24119467) 

Zachary C. Zahn (TX 24137675) 

FOLEY & LARDNER LLP

2021 McKinney Avenue, Suite 1600 

Dallas, TX 75201 

Telephone: (214) 999-3000 

Facsimile: (214) 999-4667 

honeil@foley.com 

sajones@foley.com 

mary.rofaeil@foley.com 

zzahn@foley.com 

-andAnn Marie Uetz (pro hac vice forthcoming) 

FOLEY & LARDNER LLP

500 Woodward Avenue, Suite 2700 

Detroit, MI 48226-3489 

Telephone: (313) 234-7100 

Facsimile: (313) 234-2800 

auetz@foley.com 

-andMichael J. Small (pro hac vice forthcoming)

FOLEY & LARDNER LLP

321 North Clark Street, Suite 3000 

Chicago, IL 60654-4762 

Telephone: (312) 832-4500 

Facsimile: (312) 832-4700 

msmall@foley.com

PROPOSED COUNSEL TO DEBTORS

AND DEBTORS IN POSSESSION

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CERTIFICATE OF SERVICE

I hereby certify that on November 29, 2024, a true and correct copy of the foregoing 

document was served electronically by the Court’s PACER system. 

/s/ Stephen A. Jones 

Stephen A. Jones 

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