Document:

Ex 10-2 Real Alloy ABL DIP Term Sheet

		

			EXHIBIT 10.2

		

		
			DEBTOR-IN-POSSESSION FINANCING
TERM SHEET
		

		
			This Term Sheet is dated November 17, 2017, and is addressed to Real Alloy Holding, Inc. by Bank of America, N.A. ("BANA").  Unless otherwise defined herein, capitalized terms used herein and in the accompanying Annexes shall have the meanings set forth in the Existing Revolving Credit Agreement (as defined below).
		

		
			The terms set forth in this Term Sheet are being provided as part of a comprehensive proposal, each element of which is consideration for the other elements and an integral aspect of the proposed DIP Revolving Facility (as defined below).  
		

		
			 
		

		
			This Term Sheet provides an outline of a proposed split-lien, senior secured, super-priority revolving facility, and, does not purport to summarize all the terms, conditions, representations, warranties and other provisions with respect to the transactions referred to herein.  This Term Sheet is for discussion purposes only, and is non-binding, and is neither an expressed nor implied offer with regard to any financing, to arrange, provide or purchase any loans in connection with the transactions contemplated hereby or to arrange, provide or assist in arranging or providing the potential financing described herein.  Without limiting the generality of the foregoing, proposals contained herein shall be subject to, among other things, obtaining any necessary credit and court approvals.  Any agreement to provide the DIP Revolving Facility or any other financing arrangement will be subject to the execution and delivery of (i) definitive documentation satisfactory to the DIP Revolving Agent (as defined below) in its sole discretion and (ii) an order of the Bankruptcy Court (as defined below) satisfactory to the DIP Revolving Agent in its sole discretion.
		

		
			 
		

			
					
						 

					
					
						 

				
	
					
						Borrowers

					
					
						Real Alloy Holding, Inc., Real Alloy Recycling, Inc., Real Alloy Specialty Products, Inc., Real Alloy Specification, Inc., and EST Schaefer, LLC  (collectively, the "Company" or the "Borrowers" or the "Debtors"), each as a debtor and debtor-in-possession in cases for which joint administration will be requested (collectively, the "Cases") pending as of the filing date (the "Petition Date") under chapter 11 of the United States Bankruptcy Code (11 U.S.C. §§ 101, et seq., "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware ("Bankruptcy Court").

				
	
					
						Guarantors

					
					
						All guarantors under the Existing Revolving Facility and Real Alloy Canada Ltd. (collectively, the "Guarantors" and each a "Guarantor").  Such Guarantors, together with Borrower, are referred to herein as each a "Loan Party" and collectively, the "Loan Parties."  Such guarantees shall be joint and several.

				
	
					
						DIP Revolving Agent and DIP Revolving Lenders 

					
					
						BANA and such other Lenders acceptable to BANA (if any) would be the "DIP Revolving Lenders."  BANA would act as the agent for the DIP Revolving Lenders (in such capacity, the "DIP Revolving Agent"). 

				

		
			 
		

		
			
		

		
			

		 

		

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						Existing Revolving Facility

					
					
						The senior secured revolving loan facility under that certain Revolving Credit Agreement dated as of March 14, 2017, among the Borrowers, Existing Revolving Agent and Existing Revolving Lenders (the "Existing Revolving Credit Agreement") pursuant to which existing revolving loans and other obligations are outstanding thereunder as of the Petition Date, plus accruing postpetition interest, fees, costs and other charges payable thereunder (the "Existing Revolving Obligations").

				
	
					
						Existing Indenture

					
					
						The term notes ("Existing Notes") issued pursuant to the Indenture Documents.

				
	
					
						Existing Intercreditor Agreement

					
					
						The Intercreditor Agreement ("Existing Intercreditor Agreement") dated as of February 27, 2015, as amended, restated, supplemented or otherwise modified to date, among Wilmington Trust, N.A. ("Notes Collateral Trustee"), Existing Revolving Agent, and certain of the Loan Parties.

				
	
					
						DIP Revolving Facility

					
					
						The DIP Revolving Lenders will ratably provide Borrowers a super-priority, secured, debtor-in-possession revolving credit facility (the "DIP Revolving Facility") with a maximum credit amount ("Maximum Credit Amount") of $110,000,000.

					
						Advances under the DIP Revolving Facility ("DIP Revolving Loans") would be available up to a maximum amount outstanding at any one time equal to (i) the lesser of (A) the Maximum Credit Amount, and (B) the amount of the Postpetition Borrowing Base (as defined below), minus (ii)  an amount equal to (A) the aggregate amount of the Existing Revolving Obligations (it being understood that the Postpetition Borrowing Base will be reduced by the amount of outstanding Existing Revolving Obligations accruing after the Petition Date only to the extent such obligations have not been paid when due) plus (B) the aggregate principal amount of the outstanding DIP Revolving Loans (such sum, the "DIP Revolving Availability").  The Borrowers would only be permitted to request that the DIP Revolving Lenders make DIP Revolving Loans to the extent required to pay, when due, those expenses enumerated in the Approved Budget (as defined below) and as may otherwise be permitted or required by the Orders (as defined in Annex C). All cash consisting of proceeds of the categories of assets described in the definition of ABL Priority Collateral in the Existing Revolving Credit Agreement coming into the possession or control of the Debtors shall be applied to reduce the Existing Revolving Obligations (otherwise referred to a "Gradual Roll-up") until entry of the "Final Order" described in Annex C, at which time a DIP Revolving Facility advance shall be used to fully repay any remaining Existing Revolving Obligations. As between the Existing Revolving

				

		
			 
		

		
			
		

		

		 

		

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						Obligations and DIP Revolving Loans, applications shall be made first to the Existing Revolving Obligations until paid in full.

					
						The DIP Revolving Facility will be evidenced by a credit agreement (the "DIP Revolving Credit Agreement"), security documents, guarantees and other legal documentation (collectively, together with the DIP Revolving Credit Agreement, the "DIP Revolving Loan Documents") required by the DIP Revolving Agent and the DIP Revolving Lenders, which DIP Revolving Loan Documents shall be in form and substance consistent with this term sheet and otherwise substantially similar to the Existing Revolving Credit Agreement and documents under the Existing Revolving Facility.

				
	
					
						DIP Term Facility

					
					
						A new money, non-amortizing, term loan facility in an aggregate principal amount equal to $255,000,000, comprised of $65,000,000 of "new money" loans in respect of U.S. operations and up to $20,000,000 of "new money" loans in respect of European funding needs, plus up to $170,000,000 of loans representing a "roll-up" of a portion of the Existing Notes held by the DIP Term Lenders (as defined below), the interest on such "roll-up" portion being PIK interest (the "DIP Term Facility"), to be funded by term lenders ("DIP Term Lenders") and secured on a basis in accordance with the terms hereof. The agent for the DIP Term Lenders (in such capacity, the "DIP Term Agent") would be required to be reasonably acceptable to DIP Revolving Agent.  Up to $50,000,000 of the "new money" loans under the DIP Term Facility will be funded by the DIP Term Lenders to an account that may be accessed by the Borrowers for U.S. needs upon entry of, but subject to, the terms of the Interim Order (as defined in Annex C).

					
						No repayment of the Existing Indenture or the DIP Term Facility would be permitted with proceeds of the DIP Revolving Facility or DIP Revolving Collateral on which DIP Revolving Agent holds a lien senior to the DIP Term Facility or the Existing Indenture. 

					
						Promptly upon the closing of the DIP Term Facility, approximately $17-18 million of advances under the DIP Term Facility ("DIP Term Loans") will be advanced to Borrowers for immediate liquidity needs, and another $17-18 million of DIP Term Loans will pay down the Existing Revolving Facility to and, therefore, create availability under the DIP Revolving Facility.  Otherwise, except to the extent necessary to eliminate any Overadvance (as defined in the DIP Revolving Credit Agreement), no repayment of the Existing Revolving Obligations would be required to be made with any proceeds of the DIP Term Facility or (until the Existing Indenture and DIP Term Facility are paid in full) the "Notes Priority Collateral" (as defined in the Existing Intercreditor Agreement).

				

		
			 
		

		
			
		

		

		 

		

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						Closing Date

					
					
						On or before November 20, 2017, or such later date as may be mutually agreed upon by the Debtors, the DIP Term Agent and the DIP Revolving Agent (the "Closing Date").

				
	
					
						Maturity

					
					
						All DIP Revolving Obligations (as defined below) will be due and payable in full in cash on the earliest date to occur (the "Maturity Date") of (i) six (6) months from the Petition Date, (ii) the consummation of any sale of all or substantially all of the DIP Revolving Collateral of the Debtors pursuant to Section 363 of the Bankruptcy Code, (iii) if the Final Order has not been entered, the date that is thirty-five (35) calendar days after the Petition Date, (iv) the acceleration of the DIP Revolving Loans and the termination of the DIP Commitments upon the occurrence of an event referred to below under "Termination", and (v) the effective date of any Plan of any Loan Party, unless otherwise agreed by DIP Revolving Agent (any such date, the "DIP Revolving Termination Date").  Principal of, and accrued interest on, the DIP Revolving Loans and all other amounts owing to the DIP Revolving Agent and/or the DIP Revolving Lenders under the DIP Revolving Facility shall be payable on the DIP Revolving Termination Date.

				
	
					
						Postpetition  Borrowing Base

					
					
						Same as "U.S. Borrowing Base" and "Canadian Borrowing Base" under the Existing Revolving Credit Agreement but (i) determined taking into account all applicable (prepetition and postpetition) assets of Borrowers and Canadian Guarantors among the categories described in the definition of ABL Priority Collateral in the Existing Revolving Credit Agreement, and (ii) implementing a $7,500,000 availability block until a "Stalking Horse" (as defined in Annex D) is approved by the Bankruptcy Court in accordance with Annex D, and upon such approval of a Stalking Horse, implementing a $5,000,000 availability block; provided, that, reserves may also be established for accrued and accruing Carve-Outs, 503(b)(9) claims and other administrative expenses of, or prepetition claims against, the Debtors that are required to be paid from proceeds of the DIP Revolving Facility or the DIP Revolving Collateral.

				
	
					
						Letters of Credit and Bank Product Obligations

					
					
						Same as under Existing Revolving Credit Agreement.  All Existing Revolving Obligations consisting of contingent Existing Revolving Obligations (including Existing Revolving Obligations for Letters of Credit and Bank Product Obligations (each as defined in the Existing Revolving Credit Agreement)) would be deemed assumed by Borrower and reissued or otherwise incurred under the DIP Revolving Facility and, effective upon such deemed assumption and deemed reissuance and incurrence, such amount would be deemed refinanced for purposes of the Existing Intercreditor Agreement.

				

		
			 
		

		
			
		

		

		 

		

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						Optional Prepayment

					
					
						The DIP Revolving Facility may be prepaid (in accordance with the priorities herein) and the commitments under the DIP Revolving Facility may be terminated in whole at any time upon at least 3 business days’ prior written notice to DIP Revolving Agent; provided, however, if such prepayment is permanent and is accompanied by a termination of all commitments under the DIP Revolving Facility and repayment in full of the Existing Revolving Facility; provided,  further that such notice may be conditioned upon the occurrence or non-occurrence of any event specified therein (including the effectiveness of other credit facilities).

				
	
					
						Mandatory Prepayments

					
					
						Subject to the terms and conditions of the Existing Intercreditor Agreement and Orders, the DIP Revolving Facility will contain customary mandatory prepayment events for financings of this type (including immediate repayment of any over-formula amounts) substantially similar to the Existing Revolving Credit Agreement, including, without limitation, prepayments from proceeds of non-ordinary course dispositions of DIP Revolving Collateral.

					
						Mandatory prepayments will be applied, first, to the outstanding balance of the Existing Revolving Obligations in permanent reduction thereof, and, then, to the outstanding balance of the DIP Revolving Loans without a corresponding reduction of commitments under the DIP Revolving Facility.

				
	
					
						Use of Proceeds

					
					
						To (i) refinance the Existing Revolving Obligations upon entry of a Final Order, (ii) fund certain fees and expenses associated with the DIP Revolving Facility, and (iii) to pay for administrative expenses incurred by the Company during the Cases and set forth in the Approved Budget.

					
						Notwithstanding the foregoing, no portion or proceeds of the DIP Revolving Facility, DIP Term Facility, the Carve-Out (as defined below), the DIP Revolving Collateral (as defined below) or the assets securing the DIP Term Facility may be used in connection with the investigation (including discovery proceedings), initiation or prosecution of any claims, causes of action, adversary proceedings or other litigation against the Existing Revolving Agent, Existing Revolving Lenders, DIP Revolving Agent, DIP Revolving Lenders, except for $50,000 permitted for costs of a committee incurred investigating the Existing Revolving Agent, Existing Revolving Lenders, the Existing Revolving Obligations and the liens securing the same.

				
	
					
						Fees and Interest Rates

					
					
						As set forth on Annex A-I.

				
	
					
						Collateral

					
					
						Subject to the Carve-Out (as defined below), all obligations of the Debtors to the DIP Revolving Lenders and DIP Revolving Agent under

				

		
			 
		

		
			
		

		

		 

		

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						the DIP Revolving Facility, including, without limitation, all principal and accrued interest, premiums (if any), costs, fees and expenses or any other amounts due under the DIP Revolving Facility, as well as cash management services, hedges and other bank products provided by the DIP Revolving Lenders (collectively, the "DIP Revolving Obligations") shall be secured by the following (the "DIP Revolving Collateral"): 

					
						i.pursuant to section 364(c)(3) of the Bankruptcy Code, a junior perfected lien on, and security interest in, all present and after-acquired property of the Debtors, wherever located, that consist of the categories of assets described in the definition of North America ABL Priority Collateral in the Existing Intercreditor Agreement, junior only (except as otherwise set forth in the Orders) to the liens securing the Existing Revolving Obligations (the “Existing Revolving Liens”), replacement liens granted to secure the Existing Revolving Obligations, and to valid, perfected and enforceable and unavoidable liens existing as of the Petition Date in favor of any third party creditor, to the extent any such lien is senior to the Existing Revolving Liens (“Permitted Priority ABL Liens”); 

					
						ii.pursuant to section 364(c)(3) of the Bankruptcy Code, a junior perfected lien on, and security interest in, all present and after-acquired property of the Debtors, wherever located, that consist of the categories of assets described in the definition of Notes Priority Collateral in the Existing Intercreditor Agreement, junior only (except as otherwise set forth in the Orders) to the liens securing the DIP Term Facility, to liens securing the Existing Indenture and replacement liens granted to secure the Existing Indenture, (the “Existing Term Liens”), and to valid, perfected and enforceable and unavoidable liens existing as of the Petition Date in favor of any third party creditor, to the extent any such lien is senior to the Existing Term Liens (the “Permitted Priority Term Liens”) ; and

					
						iii.pursuant to section 364(c)(2) of the Bankruptcy Code, a first priority perfected lien on, and security interest in, all other property of the Debtors, wherever located (including, upon entry of the Final Order, proceeds of avoidance actions under chapter 5 of the Bankruptcy Code), not subject to a lien or security interest on the Petition Date, which lien to secure the DIP Revolving Obligations shall be pari passu with the lien of the DIP Term Agent on such assets.

				
	
					
						Superpriority DIP Claims

					
					
						All of the claims of the DIP Revolving Lenders on account of the DIP Revolving Obligations shall be entitled to the benefits of section 364(c)(1) of the  Bankruptcy Code, having a superpriority over any and

				

		
			 
		

		
			
		

		

		 

		

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						all administrative expenses of the kind that are specified in sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c), 726, 1114 or any other provisions of the Bankruptcy Code (the "Superpriority DIP Claims"), subject only to the Carve-Out.

					
						The Superpriority DIP Claims will, at all times during the period that the DIP Revolving Loans remain outstanding, remain senior in priority to all other claims or administrative expenses; provided that such Superpriority DIP Claims will, at all times during the period that the DIP Revolving Loans remain outstanding, rank pari passu with any superpriority administrative expense claims under Bankruptcy Code 364(c)(1) of the Bankruptcy Code of the DIP Term Lenders on account of the obligations under the DIP Term Facility.

				
	
					
						Bank Products; Cash Dominion

					
					
						Debtors will maintain their primary depository and treasury management relationships with Bank of America, N.A. or one of its affiliates or maintain or such other depository institutions; provided, that the Orders shall provide that account control agreements in favor of the Existing Revolving Agent shall be deemed also in favor of the DIP Revolving Agent. 

					
						Bank Products will otherwise be substantially the same as set forth in the Existing Revolving Credit Agreement.

					
						DIP Revolving Agent shall at all times have full cash dominion with respect to all Borrowers and Canadian Guarantors, other than with respect to any segregated account established specifically to hold advances under the DIP Term Facility until used by Borrowers.

				
	
					
						Carve-Out

					
					
						DIP Revolving Agent will not require specific reserves against availability on account of any carveouts for professionals in the Bankruptcy Case ("Carve-Out").  All Carve-Out amounts will be paid from proceeds DIP Term Facility and the Notes Priority Collateral.

				
	
					
						Investigation Rights

					
					
						The official committee of unsecured creditors appointed in the Cases (the "Committee") shall have a maximum of sixty (60) calendar days from the date of the Committee’s appointment, but in no event later than seventy-five (75) calendar days from the Petition Date (the "Committee Investigation Period") to investigate and commence an adversary proceeding or contested matter, as required by the applicable Federal Rules of Bankruptcy Procedure, and challenge (each, a "Challenge") the findings, the Debtors’ stipulations, or any other stipulations contained in the Orders, including, without limitation, any challenge to the validity, priority or enforceability of the liens securing the obligations under the Existing Revolving Loan Facility or the DIP Revolving Facility, or to assert any claim or cause of action against the Existing Revolving Agent, DIP Revolving Agent, or the Existing Revolving Lenders or DIP Revolving Lenders (the "ABL Released

				

		
			 
		

		
			
		

		

		 

		

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						Parties") arising under or in connection with the Existing Revolving Facility or the DIP Revolving Facility, as the case may be, whether in the nature of a setoff, counterclaim, or otherwise.  If the Chapter 11 Cases are converted to cases under chapter 7 of the Bankruptcy Code prior to the latest date by which the Committee Investigation Period would end pursuant to the immediately preceding sentence, then any chapter 7 trustee appointed in such converted cases shall have a maximum of sixty (60) days (the “Ch. 7 Investigation Period” and, together with the Committee Investigation Period, the “Investigation Period”) after the date that the Chapter 11 Cases are converted to bring any such Challenge.  The Investigation Period may only be extended: (a) with the prior written consent of counsel to the DIP Revolving Agent, as memorialized in an order of the Bankruptcy Court, or (b) pursuant to an order of the Bankruptcy Court upon a showing of good cause for such extension.  Except to the extent asserted in an adversary proceeding or contested matter filed during the Investigation Period, upon the expiration of such applicable Investigation Period (to the extent not otherwise waived or barred), (i) any and all Challenges or potential challenges shall be deemed to be forever waived and barred; (ii) all of the agreements, waivers, releases, affirmations, acknowledgements and stipulations contained in the Orders shall be irrevocably and forever binding on the Debtors, the Committee and all parties-in-interest and any and all successors-in-interest as to any of the foregoing, including any chapter 7 trustee, without further action by any party or the Bankruptcy Court; (iii) the Existing Revolving Obligations shall be deemed to be finally allowed and the Existing Revolving Liens shall be deemed to constitute valid, binding and enforceable encumbrances, and not subject to avoidance pursuant to the Bankruptcy Code or applicable non-bankruptcy law; and (iv) the Debtors shall be deemed to have released, waived and discharged the ABL Released Parties from any and all claims and causes of action arising out of, based upon or related to, in whole or in part, the Existing Revolving Facility or the DIP Revolving Facility.  Notwithstanding anything to the contrary herein: (x) if any Challenge is timely commenced, the stipulations contained in the Final Order shall nonetheless remain binding on all other parties-in-interest and preclusive except to the extent that such stipulations are expressly and successfully challenged in such Challenge; and (y) the ABL Released Parties reserve all of their rights to contest, on any grounds, any Challenge.

				
	
					
						Representations and Warranties

					
					
						The DIP Revolving Credit Agreement will contain customary representations and warranties substantially similar to those contained in the Existing Revolving Credit Agreement, with such modifications to be consistent with the provisions of this Term Sheet (which will be applicable to each Debtor and its subsidiaries) to be made as of (x) the date the Borrower and the Guarantors execute the DIP Revolving Loan Documents and (y) each date upon which Advances are made under the

				

		
			 
		

		
			
		

		

		 

		

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						DIP Revolving Facility, and in each case consistent with the representations and warranties provided by the Debtors to the DIP Term Lenders in respect of the DIP Term Facility but made applicable to the DIP Revolving Facility. 

				
	
					
						Affirmative, Negative and Financial Covenants 

					
					
						The DIP Revolving Credit Agreement will contain customary affirmative, negative and financial covenants substantially similar to those contained in the Existing Revolving Credit Agreement, with such modifications to reflect the provisions of this Term Sheet (which will be applicable to each Debtor and its subsidiaries) and to contain and be consistent with such covenants of the Debtors in favor of the DIP Term Lenders but made applicable to the DIP Revolving Facility, including, without limitation, the following:

				
	
					
						 

					
					
						Variance tests with respect to the Approved Budget (defined below) on the same terms as provided under the DIP Term Facility, with negative variance thresholds of 15-20% with respect to receipts and 12-20% with respect to disbursements.

					
						 

				
	
					
						 

					
					
						Without the prior written consent of the DIP Revolving Lenders, not make or permit to be made any change to the Orders or any other order of the Bankruptcy Court with respect to the DIP Revolving Facility. 

					
						 

				
	
					
						 

					
					
						Not permit the Debtors to seek authorization for, and not permit the existence of, (i) a claim for any administrative expense that is pari passu with or senior to the Superpriority DIP Claims, except for the Carve-Out, or (ii) any lien on any DIP Revolving Collateral having a priority equal or senior to the liens in favor of the DIP Revolving Agent (on behalf of the DIP Revolving Lenders) in respect of the DIP Revolving Obligations, except for the Carve-Out, the Permitted Priority ABL Liens, the Permitted Priority Term Liens, and the Existing Revolving Liens all on the basis set forth herein.

					
						 

				
	
					
						Financial Reporting Requirements

					
					
						The Borrower shall provide to the DIP Revolving Agent for the benefit of the DIP Revolving Lenders the following reporting deliveries (hereinafter the "Financial Reporting Requirements"), in each case substantially similar to the reporting deliveries and requirements agreed to between the Debtors and the DIP Term Lenders in respect of the DIP Term Financing but applicable to the DIP Revolving Lenders in respect of the DIP Revolving Credit Agreement, and in all cases certified by an officer of the Debtors: (i) a weekly Borrowing Base Certificate; (ii) monthly consolidated financial statements of the Debtors and their subsidiaries, within thirty (30) days of month end, certified by the Debtors’ chief financial officer; (iii) quarterly consolidated financial statements of the Debtors and their subsidiaries within forty-five (45) days of fiscal quarter end, certified by the Borrower’s chief financial

				

		
			 
		

		
			
		

		

		 

		

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						officer; (iv) annual audited consolidated financial statements of the Debtors and their subsidiaries within ninety (90) days of fiscal year end, certified with respect to such consolidated statements by independent certified public accountants acceptable to the DIP Revolving Agent which shall not be qualified in any material respect as to scope but may contain a qualification with respect to the Cases; (v) each month thereafter during the Cases, an updated 13-week cash flow forecast, in each case, in form and substance satisfactory to the DIP Revolving Agent at the direction of the DIP Revolving Lenders (the "Weekly Cash Flow Forecast") for the subsequent 13 week period consistent with the form of the Approved Budget; and (vi) beginning on the second Thursday following the Closing Date, and on each Thursday thereafter, a variance report (the "Variance Report") setting forth actual cash receipts, sales and disbursements of the Debtors for the prior week and setting forth all the variances, on a line-item and aggregate basis, from the amount set forth for such week as compared to the Approved Budget on a weekly, rolling 4-week, and cumulative basis (which shall be subject to the variances set forth in the DIP Revolving Loan Documents); The Borrower will promptly provide notice to the DIP Revolving Agent of any material adverse change.

					
						All deliveries required pursuant to this section shall be subject to the confidentiality provision in the DIP Revolving Credit Agreement.

				
	
					
						Other Reporting Requirements

					
					
						The DIP Revolving Credit Agreement will contain other reporting requirements substantially similar to those contained in the Existing Revolving Credit Agreement and under the DIP Term Facility (but made applicable to the DIP Revolving Facility), with such modifications to reflect the provisions of this Term Sheet, including, without limitation, with respect to litigation, contingent liabilities, ERISA or environmental events (collectively with the financial reporting information described above, the "Information").

				
	
					
						Chapter 11 Cases Milestones

					
					
						As set forth on Annex D.

				
	
					
						Approved Budget

					
					
						As used herein, "Approved Budget" means: a 13-week operating budget setting forth all forecasted receipts, sales and disbursements of the Debtors and their subsidiaries on a weekly basis for such 13-week period beginning as of the week of the Petition Date, broken down by week, including the anticipated weekly uses of the proceeds of the DIP Revolving Facility for such period, which shall include, among other things, available cash, cash flow, accrued but unpaid trade payables and ordinary course expenses, total expenses and capital expenditures, fees and expenses relating to the DIP Revolving Facility, fees and expenses related to the Cases, working capital and other general corporate needs and projected Availability during the term of the DIP Revolving Facility, which forecast shall be in form and substance satisfactory to

				

		
			 
		

		
			
		

		

		 

		

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						the DIP Revolving Agent, together with any Weekly Cash Flow Forecasts that are accepted by DIP Revolving Agent as an Approved Budget.

				
	
					
						Events of Default 

					
					
						The credit agreement governing the DIP Revolving Facility would include such events of default applicable to the Loan Parties and their respective subsidiaries substantially similar to those contained in the Existing Revolving Credit Agreement, and those events of default listed on Annex B (each, an “Event of Default”).  

				
	
					
						Termination

					
					
						Upon the occurrence and during the continuance of an event of default under the DIP Revolving Loan Documents, the DIP Revolving Agent may, and at the direction of the DIP Revolving Lenders shall, by written notice to the Borrower, its counsel, the U.S. Trustee and counsel for any statutory committee, terminate the DIP Revolving Facility, declare the obligations in respect thereof to be immediately due and payable and, subject to the immediately following paragraph, exercise all rights and remedies under the DIP Revolving Loan Documents and the Orders.

				
	
					
						Marshaling and Waiver of 506(c) Claims

					
					
						The Orders shall (i) provide that in no event shall the DIP Revolving Agent, the DIP Revolving Lenders, the Existing Revolving Agent, or the Existing Revolving Lenders be subject to the equitable doctrine of "marshaling" or any similar doctrine with respect to the DIP Revolving Collateral or the Working Capital Collateral (as defined in the Existing Intercreditor Agreement), as applicable, (ii) the Interim Order shall approve the waiver of all 506(c) claims on account of amounts covered by the Carve-Out, and (iii) the Final Order shall approve the waiver of all 506(c) claims and similar rights under 552(b).

				
	
					
						Adequate Protection

					
					
						As adequate protection for the use of the collateral securing the Existing Revolving Obligations, the Existing Revolving Agent and the Existing Revolving Lender shall receive, among other things, (i) current payment of all documented (in summary form) out-of-pocket fees, costs and expenses of the Existing Revolving Agent, including, without limitation, all fees, costs, disbursements and expenses of its outside counsel, Goldberg Kohn Ltd. (including,  without limitation, costs incurred in connection with its retention of a financial advisor), and one firm of local counsel engaged by the DIP Revolving Agent in connection with the Debtors’ Chapter 11 Cases and, without duplication, the Existing Revolving Lenders, (ii) replacement liens on the North America ABL Priority Collateral (as defined in the Existing Intercreditor Agreement), junior only to the Permitted Priority ABL Liens and the liens on such North America ABL Priority Collateral securing the Existing Revolving Obligations, (iii) liens on the Notes Priority Collateral, which shall be junior to the Carve-Out and the liens granted to the DIP Term Agent, the Existing Term Liens, liens securing the North America ABL Priority Obligations and any Permitted Priority Term Liens in such Notes Priority Collateral, (iv) superpriority

				

		
			 
		

		
			
		

		

		 

		

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						administrative expense claims with respect to the extent of any post-petition diminution in value of the Existing Revolving Lenders' interest in the ABL Priority Collateral (as defined in the Existing Intercreditor Agreement), which claims will be pari passu with any such claims of the DIP Term Lenders, (v) access to the Debtors' books and records and such financial reports as are provided to the DIP Revolving Agent, and (vi) the determination of liens and claims and release provided in the Investigation Rights section.

				
	
					
						Credit Bidding

					
					
						The Orders (as defined in Annex C) and the DIP Revolving Loan Documents (as defined below) shall provide that, in connection with any sale of any of the Debtors’ assets under section 363 of the Bankruptcy Code or under any plan or reorganization or liquidation (a "Plan"), subject to the later of entry of the Final Order or the conclusion of the Investigation Period (as defined below), (i) the Existing Revolving Agent shall have the right to credit bid up to and including the full amount of all Existing Revolving Obligations, as applicable, at the direction of the Lender (as defined in the Existing Revolving Credit Agreement) for the DIP Revolving Collateral (other than any Notes Priority Collateral in which the DIP Revolving Agent may hold a junior lien), and (ii) the DIP Revolving Agent shall have the right to credit bid any amounts outstanding under the DIP Revolving Facility at the direction of the DIP Revolving Lenders for the DIP Revolving Collateral (other than any Notes Priority Collateral on which the DIP Revolving Agent may hold a junior lien).  Any such credit bid may provide for the assignment of the right to purchase the acquired assets to a newly formed acquisition vehicle.

				
	
					
						Conditions Precedent to Closing

					
					
						As set forth on Annex C.

				
	
					
						Assignments & Participations

					
					
						Same terms and conditions as those in the Existing Revolving Credit Agreement, but without any approval or consent rights in favor of the Company after an Event of Default.

				
	
					
						Governing Law and Forum

					
					
						Same as Existing Revolving Credit Agreement.

				
	
					
						Counsel to Agent

					
					
						Goldberg Kohn Ltd. ("GK").

				
	
					
						Financial Advisor to Agent

					
					
						GK will continue to retain Conway MacKenzie, Inc. as financial advisor in connection with its capacity as counsel to the DIP Revolving Agent and Existing Revolving Agent.

				

		
			 
		

		
			 
		

		
			

		 

		

			A-12

		

 

		

		
			Annex A-I

Interest Rates and Fees
		

			
					
						 

					
					
						 

				
	
					
						Interest Rate Options:

					
					
						Borrower may elect that the loans bear interest at a rate per annum equal to:

				
	
					
						 

					
					
						(i) the Base Rate plus the Applicable Margin; or

				
	
					
						 

					
					
						(ii) the LIBOR Rate plus the Applicable Margin.

				
	
					
						 

					
					
						As used herein:

				
	
					
						 

					
					
						"Base Rate" has the meaning set forth in the Existing Revolving Credit Agreement.

				
	
					
						 

					
					
						"LIBOR Rate" has the meaning set forth in the Existing Revolving Credit Agreement.  The LIBOR Rate shall be available for interest periods consistent with the Existing Loan Agreement.

				
	
					
						 

					
					
						"Applicable Margin" means (i) 2.25% in the case of Base Rate Loans and (ii) 3.25% in the case of LIBOR Rate Loans.

				
	
					
						Interest Payment Dates:

					
					
						Same as Existing Revolving Credit Agreement.

				
	
					
						Letter of Credit Fees:

					
					
						Same as Existing Revolving Credit Agreement.

				
	
					
						Unused Line Fee:

					
					
						Same as Existing Revolving Credit Agreement.

				
	
					
						Default Rate:

					
					
						Same as Existing Revolving Credit Agreement.

				
	
					
						Rate and Fee Basis:

					
					
						All per annum rates shall be calculated on the basis of a year of 360 days and the actual number of days elapsed.

				
	
					
						Closing Fees:

					
					
						A fee in an amount equal to $1,100,000, payable ratably for the benefit of the DIP Revolving Lenders, earned and payable upon entry of the Interim Order. 

				
	
					
						Servicing Fee:

					
					
						None.

				
	
					
						Appraisal and Examination Fees:

					
					
						 Same as Existing Revolving Credit Agreement; provided that, the ongoing inventory and collateral audit will in all events be reimbursed, and field exams shall be conducted from time to time at Agent's election and at Borrower's expense.

				

		
			 
		

		
			 
		

		
			

		 

		

			A-I - 1

		

 

		

			 

		

		

		
			Annex B 
		

		
			 
		

		
			“Events of Default” for the DIP Revolving Facility would include, without limitation:
		

		
			 
		

		
			(a)   failure to make payments with respect to the DIP Revolving Facility when due;
		

		
			(b)   the Debtors filing a pleading seeking to modify or otherwise alter any of the Orders without the prior consent of the DIP Revolving Agent;  
		

		
			(c)   entry of an order without the prior consent of the DIP Revolving Agent modifying, reversing, staying, or otherwise altering any of the Orders; 
		

		
			(d)   dismissal of any of the Cases or conversion of any of the Cases to a case under chapter 7 of the Bankruptcy Code; 
		

		
			(e)   appointment of a chapter 11 trustee or examiner or other responsible person in any of the Cases without the consent of the DIP Revolving Agent; 
		

		
			(f)   any sale of all or substantially all assets pursuant to Section 363 of the Bankruptcy Code, unless (i) the proceeds of such sale are used to pay the DIP Revolving Facility and Existing Revolving Obligations in full in cash on a final and indefeasible basis with all commitments terminated and cash collateralization of all Letters of Credit and contingent obligations thereunder ("Paid in Full"), or (ii) such sale in consented to by the DIP Revolving Agent; 
		

		
			(g)   appointment of an examiner with enlarged powers relating to the operation of the business of the Loan Parties, which appointment shall not have been reversed, stayed or vacated within seven (7) calendar days;
		

		
			(h)   failure by the Debtors to satisfy covenants and milestones set forth on Annex D (the "Milestones");
		

		
			(i)   entry of an order granting any super-priority claim (except as contemplated herein) which is senior to or pari passu with the claims of the DIP Revolving Agent and the DIP Revolving Lenders  under the DIP Revolving Facility or the Existing Revolving Agent and the Existing Revolving Lenders under the Existing Revolving Facility;
		

		
			(j)   payment of or granting adequate protection with respect to pre-petition debt other than as approved by the DIP Revolving Agent or otherwise contemplated hereby; 
		

		
			(k)   any challenge to the validity of the liens in favor of or claims held by the Existing Revolving Agent or the Existing Revolving Lenders (excluding challenges by parties other than a Debtor that are not inconsistent with the terms and conditions of the then applicable Order); 
		

		
			(l)   the liens or super-priority claims granted with respect to the DIP Revolving Facility cease to be valid, perfected and enforceable in any respect; 
		

		
			(m) any of the Debtors uses cash collateral or proceeds of the DIP Revolving Facility for any item other than those set forth in, and in accordance with, the Approved Budget, except 
		

		
			
		

		
			

		 

		

			B-1

		

 

		

		
			with the prior consent of the DIP Revolving Agent;
		

		
			(n)   Permitted Variances under the Approved Budget are exceeded for any period of time;
		

		
			(o)  On or before the fourteenth (14) day after the Petition Date, the Debtors fail to engage and retain, pursuant to an order and terms reasonably acceptable to DIP Revolving Agent, a Chief Restructuring Officer, or such Chief Restructuring Officer ceases to serve in such capacity or is replaced, unless such replacement is reasonably acceptable to the DIP Revolving Agent;
		

		
			(p)   any uninsured judgments are entered with respect to any post-petition liabilities against any of the Debtors or any of their respective properties in a combined aggregate amount in excess of $1,000,000, unless stayed, vacated or satisfied for a period of twenty (20) calendar days after entry thereof;
		

		
			(q)   termination of the exclusive period for the Debtors to file a plan of reorganization in the Cases or the filing of a plan of reorganization other than the Plan, without the prior consent of the DIP Revolving Agent;
		

		
			(r)   any guarantor of the Existing Revolving Facility or the DIP Revolving Facility asserts any right of subrogation or contribution against any Debtor until all borrowings under the DIP Revolving Facility are paid in full and the commitments are terminated; 
		

		
			(s)   breaches of representations and warranties in any material respect; 
		

		
			(t)   no material adverse change has occurred since the Petition Date;
		

		
			(u)   noncompliance with any other covenants (subject to customary cure periods as may be agreed with respect to certain covenants);
		

		
			(v)   any event of default is continuing under the DIP Term Facility; and
		

		
			(w)  any violation by the Debtors of the terms of the Orders.
		

		
			 
		

		
			 
		

		
			

		 

		

			B-2

		

 

		

		
			Annex C
		

		
			The conditions precedent for the DIP Revolving Facility would include, without limitation:
		

		
			a)   All documented (in summary form) out-of-pocket fees, costs and expenses of (i) the DIP Revolving Agent and Existing Revolving Agent (including (and limited, in the case of counsel, to) all fees, costs, disbursements and expenses of the DIP Revolving Agent’s outside counsel, Goldberg Kohn Ltd. (including any financial advisor retained by Goldberg Kohn, Ltd. in connection with its representation of DIP Revolving Agent), and one firm of local counsel engaged by the DIP Agent in connection with the Debtors’ Chapter 11 Cases, and (ii) any other professional advisors retained by the DIP Revolving Agent or their counsel, on or before the Closing Date, shall have been paid in full in cash, to the extent invoiced to the Borrower no later than one (1) Business Day prior to the Closing Date; 
		

		
			b)   The DIP Revolving Agent shall have received the amount of the Closing Fee payable at Closing;
		

		
			c)   All material documentation relating to the DIP Revolving Facility and DIP Term Facility shall be in form and substance satisfactory to the DIP Revolving Agent and its counsel and executed by the Loan Parties;
		

		
			d)   DIP Revolving Agent shall have received and approved the Approved Budget;
		

		
			e)   DIP Revolving Agent shall have received a commitment (in form and substance reasonably acceptable to DIP Revolving Agent) concerning the agreement of the DIP Term Lenders to either allow the Stalking Horse (defined below) or similar prevailing bid to be consummated, if it is accepted by Borrowers at auction, or make a credit bid for the assets subject to the Stalking Horse bid, and cash proceeds thereof to be used to cause all obligations under the Existing Revolving Facility and the DIP Revolving Facility to be paid in full, in cash, on a final and indefeasible basis;
		

		
			f)   All first day and related orders (other than the Interim Order (as defined below)) entered by the Bankruptcy Court in the Cases shall be in form and substance reasonably satisfactory to the DIP Revolving Agent;
		

		
			g)   All motions and other documents filed with and submitted to the Bankruptcy Court in connection with the DIP Revolving Facility, and the approval thereof shall be in form and substance satisfactory to the DIP Revolving Agent;
		

		
			h)   There shall not exist any law, regulation, ruling, judgment, order, injunction or other restraint that, in the judgment of the DIP Revolving Agent at the direction of the DIP Revolving Lenders, prohibits, restricts or imposes a materially adverse condition upon the Borrower or the Guarantors, the DIP Revolving Facility or the exercise by the DIP Revolving Agent at the direction of the DIP Revolving Lenders of its rights as a secured party with respect to the DIP Revolving Collateral; 
		

		
			i)   Other than the Cases, or as stayed upon the commencement of the Cases, there shall exist no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that (i) except as disclosed, if 
		

		
			
		

		
			

		 

		

			C-1

		

 

		

		
			adversely determined, could reasonably be expected to result in a material adverse change or (ii) restrains, prevents or imposes or can reasonably be expected to impose materially adverse conditions upon the DIP Revolving Facility, the DIP Working Capital Collateral or the transactions contemplated thereby;   
		

		
			j)   Other than the Orders, (i) all governmental and third party consents and approvals necessary in connection with the DIP Revolving Facility shall have been obtained (without the imposition of any conditions that are not acceptable to the DIP Revolving Agent and the DIP Revolving Lenders in their reasonable discretion) and shall remain in effect, and (ii) no law or regulation shall be applicable, in the reasonable judgment of the DIP Revolving Agent and the DIP Revolving Lenders, that restrains, prevents or imposes materially adverse conditions upon the DIP Facility or the transactions contemplated hereby;
		

		
			k)   The DIP Revolving Agent, for the benefit of the DIP Revolving Lenders, shall have a valid and perfected lien on and security interest in the DIP Revolving Collateral on the basis and with the priority set forth herein and in the Orders; 
		

		
			l)   Upon request of the DIP Revolving Agent, the Borrower shall obtain endorsements naming the DIP Revolving Agent, on behalf of the DIP Revolving Lenders, as an additional insured or loss payee, as applicable, under all insurance policies to be maintained with respect to the properties of the Debtors and their subsidiaries forming part of the DIP Revolving Lenders' collateral, which endorsements shall provide for 30 days’ prior notice of cancellation of such policies to be delivered to the DIP Revolving Agent;  
		

		
			m) The Bankruptcy Court shall have entered an interim order (the "Interim Order") within three (3) calendar days following the Petition Date, in form and substance satisfactory to the DIP Revolving Agent and the DIP Revolving Lenders, which Interim Order shall include, without limitation, copies of the DIP Revolving Credit Agreement and the Approved Budget as exhibits thereto, entered on notice to such parties as may be reasonably satisfactory to the DIP Revolving Agent and the DIP Revolving Lenders, (i) authorizing and approving the DIP Revolving Facility and the Transactions contemplated thereby and hereby, including, without limitation, the granting of the super-priority status, security interests and liens, and the payment of all fees contemplated hereby; (ii) lifting or modifying the automatic stay to permit the Debtors to perform their obligations and the DIP Revolving Lenders to exercise their rights and remedies with respect to the DIP Revolving Facility, (iii) providing for the adequate protection in favor of the Existing Revolving Lenders described herein, (iv) providing for the Gradual Roll-up, and (v) reflecting such other terms and conditions that are satisfactory to the DIP Revolving Agent and the DIP Revolving Lenders in their sole discretion, which Interim Order shall be in full force and effect, shall not have been reversed, vacated or stayed and shall not have been amended, supplemented or otherwise modified without the prior written consent of the DIP Revolving Agent and the DIP Revolving Lenders; and
		

		
			n)   Pursuant to the Interim Order, the Bankruptcy Court shall have approved the DIP Term Facility; 
		

		
			
		

		
			

		 

		

			C-2

		

 

		

		
			o)   With respect to any borrowing under the DIP Revolving Facility after 35 days after the Closing Date, the Bankruptcy Court shall have entered a final order in form and substance satisfactory to the DIP Revolving Agent and the DIP Revolving Lenders (the "Final Order"; together with the Interim Order, the "Orders" and, each individually, an "Order") authorizing and approving the DIP Revolving Facility and the Transactions contemplated thereby and hereby, including, without limitation, the granting of the super-priority status, security interests and liens, and the payment of certain fees, which Final Order shall be in full force and effect, shall not have been reversed, vacated or stayed and shall not have been amended, supplemented or otherwise modified without the prior written consent of the DIP Revolving Agent and the DIP Revolving Lenders; 
		

		
			p)   Pursuant to the Final Order, the Bankruptcy Court shall have approved the DIP Term Facility; and
		

		
			q)   There shall have occurred no event which has resulted in or could reasonably be expected to result in a material adverse change.
		

		
			 
		

		
			

		 

		

			C-3

		

 

		

		
			Annex D
		

		
			Milestones
		

		
			1.   Obtain the Bankruptcy Court’s approval of (a) the Interim Order within three (3) days after the Petition Date, and (b) the Final Order within thirty-five (35) days after the Petition Date; 
		

		
			 
		

		
			2.   Within ten (10) days after the Petition Date, file a motion requesting the approval of procedures concerning a sale of substantially all of Borrowers' assets, in form and substance acceptable to DIP Revolving Agent;
		

		
			 
		

		
			3.   Within thirty-five (35) days after the Petition Date, obtain entry of an order (in form and substance acceptable to DIP Revolving Agent) approving procedures concerning a sale of substantially all of Borrowers' assets (a "Sale Procedures Order");
		

		
			 
		

		
			4.   Within seventy-five (75) days after the Petition Date, obtain entry of an order from the Bankruptcy Court (in form and substance acceptable to DIP Revolving Agent) approving a bid for substantially all of the assets of Borrowers (including without limitation all North America ABL Priority Collateral owed by Borrowers) that does not contain any financing, due diligence or other conditions or approvals that are not acceptable to DIP Revolving Agent, and provides for cash proceeds of the applicable purchase price to be used at closing to pay the Existing Revolving Facility and the DIP Revolving Facility in full (a "Stalking Horse");  provided, that such seventy-five (75) day deadline may be extended at the election of DIP Term Agent for up to twenty-five (25) days so long as no Event of Default under the DIP Revolving Facility has occurred; provided,  further, that the DIP Term Agent may agree to waive such milestone if the DIP Term Lenders make a bid for the assets of Borrowers that would otherwise constitute and meet the conditions of a Stalking Horse; 
		

		
			 
		

		
			5.   Within one hundred thirty (130) days after the Petition Date, conduct an auction in accordance with the Sale Procedures Order; and
		

		
			 
		

		
			6.   Within one hundred sixty (160) days after the Petition Date, consummate the Stalking Horse or such other offer accepted in accordance with the Sale Procedures Order and use cash proceeds at the closing thereof to cause all obligations under the Existing Revolving Facility and the DIP Revolving Facility to be paid in full, in cash, on a final and indefeasible basis. 
		

		
			 
		

		 

		

			D-1Ex 10-3 Real Alloy Notes DIP Term Sheet

		
			Exhibit 10.3
		

		
			 
		

		
			$85 MILLION SENIOR SECURED
		

		
			DEBTOR-IN-POSSESSION NOTES FACILITY
		

		
			SUMMARY OF TERMS AND CONDITIONS
		

		
			This Summary of Terms and Conditions (the “Term Sheet”) outlines certain terms of a proposed DIP Facility (as defined below).  This Term Sheet was prepared for discussion purposes only and does not constitute an offer, agreement, or commitment to enter into the DIP Facility, the Operative DIP Facility Documents (as defined below), or any other business transaction.  The terms and conditions of this proposed Term Sheet may be modified or supplemented by the DIP Noteholders in their sole discretion at any time and from time to time during the course of discussions as a result of changed market conditions or otherwise. This proposed Term Sheet is not exhaustive as to all of the terms and conditions that would govern the transactions described herein.
		

			
					
						 

					
					
						 

				
	
					
						Debtors

					
					
						Real Industry, Inc. (“RII”), Real Alloy Intermediate Holdings, LLC (“Intermediate Holding”), Real Alloy Holding, Inc. and certain of its direct and indirect subsidiaries (collectively, the “Debtors” and exclusive of RII, collectively, the “DIP Debtors”)) shall file jointly administered cases (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (as amended, the “Bankruptcy Code”), in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). 

				
	
					
						Issuer

					
					
						Real Alloy Holding, Inc. (the “Issuer”).

				
	
					
						Guarantors

					
					
						The DIP Facility will be guaranteed jointly and severally by all of the DIP Debtors, including all of the entities that are issuers of, or that guarantee, the Prepetition Notes (as defined below), including Intermediate Holding (the “Guarantors”).

				
	
					
						DIP Notes Trustee

					
						DIP Collateral Trustee

					
					
						Before the Bankruptcy Court hearing to consider approval of the DIP Facility on a final basis, the Required DIP Noteholders (as defined below) shall select a trustee for the DIP Facility (in such capacity, the “DIP Notes Trustee”) and a collateral trustee for the DIP Facility (in such capacity, the “DIP Collateral Trustee,” and together with the DIP Notes Trustee, the “DIP Trustees”).  For the avoidance of doubt, the same entity may serve as both DIP Notes Trustee and DIP Collateral Trustee.  Any references to the DIP Notes Trustee or DIP Collateral Trustee herein shall be disregarded to the extent the DIP Notes Trustee or DIP Collateral Trustee, as applicable, has not yet been appointed.   

				
	
					
						DIP Noteholders

					
					
						Investment funds and accounts managed by DDJ Capital Management, LLC (the “DDJ Noteholders”) and any other holders of DIP Notes (as defined below) purchased under the DIP Notes Purchase Agreement (as defined below) (collectively, the “DIP Noteholders”).

					
						“Required DIP Noteholders” shall mean (i) the DIP Noteholders holding a majority of the outstanding DIP Obligations, and (ii), for so

				

		
			 
		

		
			
		

		
			

		 

 

		

		
			 
		

			
					
						 

					
					
						long as the DDJ Noteholders hold any DIP Obligations, the DDJ Noteholders.

					
						Subject to the entry of the Interim DIP Order and the other conditions described herein, the DDJ Noteholders and certain other Holders of the Prepetition Notes (as defined below) who execute the DIP Notes Purchase Agreement prior to the initial closing under the DIP Facility and fund their share of the Interim Commitments (together with the DDJ Noteholders, the “Backstop DIP Noteholders”) shall commit to backstop the full amount of the DIP Facility on the terms set forth herein and the Operative DIP Facility Documents. Holders of the Prepetition Notes, other than the DIP Backstop Noteholders, shall be permitted to become DIP Noteholders pursuant to syndication procedures acceptable to the Required DIP Noteholders (“DIP Syndication Procedures”), with each holder of Prepetition Notes, other than the Backstop DIP Noteholders, entitled to a percentage of the Total Aggregate Commitments (as defined below) equal to the percentage of Prepetition Notes held by such holder measured against the aggregate principal amount of Prepetition Notes outstanding as of the Petition Date (as defined below), provided that such holders of Prepetition Notes consent to the DIP Facility and transactions contemplated herein.  The Backstop DIP Noteholders shall retain any commitments under the DIP Facility to which the other holders of the Prepetition Notes fail to subscribe in accordance with the protocol set forth above.  The DIP Debtors, at their expense, will retain an information agent acceptable to the Required DIP Noteholders and otherwise cooperate and provide assistance in connection with the administration and implementation of the DIP Syndication Procedures.  Unless the Required DIP Noteholders otherwise agree, the DIP Syndication Procedures shall be effectuated so that the eligible Prepetition Noteholders that elect to participate in the DIP Notes Facility will hold the same percentage of funded and unfunded commitments under Total Aggregate Commitment but without requiring any DIP Noteholder to directly transfer any portion of its DIP Notes to any Prepetition Noteholder.

				
	
					
						Control by Required DIP Noteholders

					
					
						The DIP Trustees shall take direction from and act in accordance with the instructions of the Required DIP Noteholders, who shall be authorized to amend or modify the terms of any Operative DIP Facility Documents (as defined below) and to consent to, and release any and all liens on the DIP Collateral (as defined below) in connection with, asset sales or other dispositions of DIP Collateral (including pursuant to section 363 of the Bankruptcy Code or pursuant to a chapter 11 plan), except for the following limitations, which shall require approval of all DIP Noteholders directly affected thereby:

					
						(A)   reduce the principal of, rate of interest on or any fees with respect to the New Money DIP Notes (as defined below) or forgive any principal, interest (other than any default portion thereof) or fees with respect to any New Money DIP Notes or payment of the foregoing in full, in cash, when due;

				

		
			 
		

		
			
		

		

		 

		

			2

		

 

	
					
						

					
						 

					
					
						(B)   postpone the date fixed for, or waive, any payment of principal or interest (provided that the Required DIP Noteholders shall be permitted to extend the Maturity Date (as defined below) and to control (or agree to forbear with respect to) any exercise of remedies in connection with any and all Events of Default (as defined below));

					
						 

					
						(C)   alter any applicable pro rata sharing or allocation of payments or proceeds of DIP Collateral provisions;

					
						 

					
						(D)   change the definition of the term Required DIP Noteholders;

					
						 

					
						(E)   convert the DIP Obligations into any exit financing facility for the DIP Debtors; or

					
						 

					
						(F)    consent to the assignment, delegation or other transfer by any of the Issuer or Guarantors of any of its rights and obligations under any Operative DIP Facility Documents or release the Issuer or Guarantors of their respective payment obligations under the Operative DIP Facility Documents.

					
						 

				
	
					
						Prepetition Notes Indenture

					
					
						That certain Indenture dated as of January 8, 2015 (as amended or otherwise modified from time to time, the “Prepetition Notes Indenture” and together with the other “Note Documents” (as defined in the Prepetition Notes Indenture, the “Prepetition Notes Documents”), among the Issuer (as defined therein), the Guarantors (as defined therein), Wilmington Trust, National Association, as trustee and collateral trustee (in such capacities, the “Prepetition Notes Trustee”), providing for the issuance of 10.000% senior secured notes due 2019 (the “Prepetition Notes” and the “Notes Obligations” (as defined in the Prepetition Notes Indenture) the “Prepetition Notes Obligations”).  Capitalized terms used, but not otherwise defined, herein shall have their respective meanings as set forth in the Prepetition Notes Indenture.  

				
	
					
						Prepetition ABL Agreement

					
					
						That certain Revolving Credit Agreement, dated as of March 14, 2017 (as amended or otherwise modified from time to time, the “Prepetition ABL Agreement,” and the Obligations as defined therein, the “Prepetition ABL Obligations”), among the Borrowers (as defined therein), the Borrower Representative (as defined therein), the other Credit Parties (as defined therein) party thereto, Bank of America, N.A., as administrative agent (the “Prepetition ABL Agent”), and the lenders party thereto (the “Prepetition ABL Lenders”).

				
	
					
						DIP ABL Facility

					
					
						The DIP Facility is conditioned upon certain of the DIP Debtors’ entry into a debtor-in-possession credit facility with the Prepetition ABL Agent and all or certain of the Prepetition ABL Lenders (or a similar facility asset based facility with alternative an agent (the “DIP ABL Agent”) and lenders secured by comparable collateral as the Prepetition ABL Obligations) (the “DIP ABL Facility”), which DIP

				

		
			 
		

		
			
		

		

		 

		

			3

		

 

	
					
						

					
						 

					
					
						 

				
	
					
						 

					
					
						ABL Facility may roll up the Prepetition ABL Obligations (such rolled up obligations, the “Roll Up DIP ABL Obligations,” and the other obligations under the DIP ABL Facility, the “New Money DIP ABL Obligations”) under which the DIP Debtors shall be permitted to draw as of the closing, subject to the borrowing base (calculated in the manner set forth in the Prepetition ABL Agreement, subject to a $7.5 million block, to be automatically reduced to $5 million upon court approval of a Stalking Horse Bid that provides for payment in full of the DIP ABL Facility and Prepetition ABL Obligations and is otherwise on terms and conditions reasonably acceptable to the DIP ABL Agent and the Prepetition ABL Agent).

				
	
					
						Intercreditor Agreement

					
					
						The Prepetition Notes Trustee, the Prepetition ABL Agent, the Issuer, and Intermediate Holding are party to that certain Intercreditor Agreement, dated as of February 27, 2015 (as amended or modified from time to time, including pursuant to the Interim DIP Order, the “Intercreditor Agreement”).

				
	
					
						DIP Facility

					
					
						A senior secured debtor-in-possession notes facility (the “DIP Facility” including the Debtor DIP Notes Facility and the Discretionary Foreign Subsidiary DIP Notes Facility) with a maximum principal availability of $85,000,000 (the “Total Aggregate Commitment” and the notes thereunder, the “New Money DIP Notes”) comprised of (A) $65,000,000 of New Money DIP Notes, the proceeds of which shall be used exclusively to fund the operations of the DIP Debtors (the “Debtor DIP Notes Facility”), and (B) an amount determined by the Required DIP Noteholders in their sole discretion, of up to $20,000,000 of New Money DIP Notes to be used exclusively to fund the operations of the DIP Debtors’ non-Debtor foreign subsidiaries (the “Discretionary Foreign Subsidiary DIP Notes Facility”) to be made available as follows: (a) up to $50,000,000 million (the “Interim Commitments”), (i) $40 million of which shall be made available as part of the Debtor DIP Notes Facility not later than one business day following the entry of the Interim DIP Order (as defined below), with $5,000,000 of such amount deposited in the Proceeds Account (as defined below) and (ii) $10 million of which shall be part of the of the Discretionary Foreign Subsidiary DIP Notes Facility and funded only if and when and in such amounts at the Required DIP Noteholders may determine from time to time, and (b) the remainder of the Total Aggregate Commitment (the “Final Commitments”) made available in delayed draws, each in an amount of no less than $5,000,000 and increments over such amount of $1,000,000, commencing one business day following the entry of the Final DIP Order (as defined below), in each case, subject to (y) delivery to the DIP Collateral Trustee and the DIP Noteholders of written notice of the DIP Debtors’ borrowing request at least three (3) business days prior to the requested date of borrowing and (z) the other terms and conditions described herein and in the Operative DIP

				

		
			 
		

		
			
		

		

		 

		

			4

		

 

	
					
						

					
						 

					
					
						Facility Documents (as defined below) and in accordance with the Budget (as defined below).

					
						The proceeds of all New Money DIP Notes (with the exception of $35,000,000 funded under the Interim Commitments as part of the Debtor DIP Notes Facility, which shall be transferred directly to the DIP Debtors) made by the DIP Noteholders to the DIP Debtors under the DIP Facility shall be deposited in a segregated account under the control of the DIP Collateral Trustee (the “Proceeds Account”), subject to withdrawals in minimum increments of $500,000, with the consent of the Required DIP Noteholders, by the DIP Debtors (x) on delivery to the DIP Collateral Trustee and the Required DIP Noteholders two business days prior to the proposed withdrawal date of (i) a schedule setting forth the disbursements to be funded from the funds to be withdrawn, which disbursements shall be due or become due during the seven (7) calendar days following such withdrawal and (ii) an officer’s certificate specifying the amount of the withdrawal, and certifying that (A) the funds to be withdrawn shall be used only to disbursements permitted pursuant to the Budget, subject to permitted variances, (B) the DIP ABL Facility is fully drawn as of the date of the withdrawal request, (C) no Default or Event of Default (each as defined below) has occurred and is continuing at the time of such withdrawal, and (D) the representations and warranties in the Operative DIP Facility Documents shall be true and correct in all material respects (or in the case of representations and warranties with a “materiality” qualifier, true and correct in all respects) except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties shall have been correct in all material respects of such earlier date.  Upon consummation of any Sale (as defined below), all amounts in the Proceeds Account shall be distributed ratably to the DIP Noteholders and/or holders of the Prepetition Notes, as the case may be, for application (subject to the Carve-Out): first to the New Money DIP Obligations (as defined below), second to the Roll Up Obligations (as defined below), and third to the Prepetition Notes Obligations.  The term “New Money DIP Obligations” shall mean all New Money DIP Notes and all interest, costs, expenses, and  other charges in respect thereof, and for avoidance of doubt, “New Money DIP Obligations” shall exclude the Roll-Up Obligations.

					
						The New Money DIP Notes will be issued under and in accordance with the terms of a debtor-in-possession notes purchase agreement (the “DIP Notes Purchase Agreement”) and the other definitive documentation with respect to the New Money DIP Obligations (in each case, in form and substance acceptable to the DIP Trustees and Required DIP Noteholders and, collectively with the DIP Notes Purchase Agreement and the related security and other documents, the “New Money DIP Facility Documents”).  

				
	
					
						Roll Up Obligations

					
					
						Subject to the entry of the Final DIP Order (as defined below), there shall also be a deemed roll-up of all Notes Obligations owed under, and as defined in, the Prepetition Notes Indenture (all such rolled-up

				

		
			
		

		
			

		 

		

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						Notes Obligations, the “Roll-Up Obligations,” and together with the New Money DIP Obligations, the “DIP Obligations”) and held by the DIP Noteholders (or affiliates thereof), in an amount equal to two times (2.0x) their respective share of the Total Aggregate Commitment under the DIP Facility.  For avoidance of doubt, the aggregate principal amount of the Roll-Up Obligations shall be $170 million.

					
						As provided in the “Security and Priority” section of this Term Sheet, the New Money DIP Obligations (and the liens securing them) shall be senior to the Roll-Up Obligations (and the liens and superpriority administrative claims securing or otherwise supporting them) in all respects.

					
						To effectuate the rollup of the Roll-Up Obligations, the Prepetition Notes Indenture shall be amended and new notes (the “Roll-Up Notes” and together with the New Money DIP Notes, the “DIP Notes”) will be issued under a supplemental indenture pursuant to the Prepetition Notes Indenture (the “Roll-Up Notes Supplemental Indenture” and collectively with all amendments (including amendments to the Prepetition Notes Documents) and the related security and other documents related thereto and necessary or expedient to effectuate the rollup of the Roll-Up Obligations, the “Roll-Up DIP Facility Documents”) in exchange for the Prepetition Notes Obligations that constitute Roll-Up Obligations.  The Roll-Up DIP Facility Documents shall provide that the terms and conditions of the Roll-Up Notes are substantially similar to the Prepetition Notes, except: (i) as concerns priority as described in the “Security and Priority” section of this Term Sheet, (ii) the Maturity Date of the Roll-Up Notes shall be the same as the New Money DIP Notes, and (iii) the Roll-Up Notes Supplemental Indenture shall include cross-defaults for any defaults under the New Money DIP Facility Documents.  The Roll-Up Notes Supplemental Indenture shall be filed with the Bankruptcy Court not less than three (3) days prior to the hearing to approve the DIP Facility on a final basis.

					
						As used herein, the “Operative DIP Facility Documents” means the New Money DIP Facility Documents, the Roll-Up DIP Facility Documents, and the related security and other documents (in each case, in form and substance acceptable to the DIP Trustees and Required DIP Noteholders).

					
						Other than being offered the priorities, benefits, and protections as set forth in the DIP Orders (as defined below) and the other Roll-Up DIP Facility Documents, the roll-up of the “Notes Obligations” (as defined in the Prepetition Notes Indenture, the “Prepetition Notes Obligations”) into the Roll-Up Obligations shall not constitute a novation or a refinancing of the Prepetition Notes Obligations, all Prepetition Notes Obligations shall remain outstanding under, and subject to, the Prepetition Notes Documents (as amended by the Roll-Up DIP Facility Documents), and the Roll-Up Notes shall remain entitled to vote under the Prepetition Notes Indenture, and the Prepetition Notes and Roll-Up Notes held by the DIP Noteholders 

				

		
			 
		

		
			
		

		
			

		 

		

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						shall be voted by such parties consistent with the direction of the Required DIP Noteholders.  

				
	
					
						Interest Rate

					
					
						New Money DIP Notes: 11.5%.  From and after the occurrence and during the continuance of an Event of Default, additional interest shall accrue at a rate of 2%.  Interest on the New Money DIP Loans shall be paid monthly.

					
						Roll-Up DIP Notes: same as Prepetition Notes; provided that interest accruing on the Roll-Up Notes shall be payable upon the Termination Date.

				
	
					
						Fees

					
					
						Each DIP Noteholder shall receive a closing fee (the “Closing Fee”) in the amount of 1.5% of its commitments with respect to New Money DIP Obligations under the DIP Facility.

					
						In exchange for the commitment by the Backstop DIP Noteholders to fund and backstop the DIP Facility as well as such other DIP Noteholders who execute the DIP Notes Purchase Agreement prior to the initial closing under the DIP Facility and fund their share of the Interim Commitments, such DIP Noteholders shall be entitled to a backstop fee of 3.5% (the “Backstop Fee”) of the Total Aggregate Commitment.

					
						Each Closing Fee and each Backstop Fee shall be paid in connection with each purchase of DIP Notes by netting such Closing Fee or Backstop Fee from the amount funded by the applicable DIP Noteholder. 

				
	
					
						Purpose

					
					
						The borrowings under the DIP Facility will be used in accordance with the Budget (as defined below) (a) to pay costs of administration of the Chapter 11 Cases, (b) to make payments pursuant to any interim or final order entered by the Bankruptcy Court pursuant to any “first day” motions and any related orders (the “First Day Orders”), provided, that the form and substance of such First Day Orders shall be reasonably acceptable to the DIP Collateral Trustee and Required DIP Noteholders, (c) to make payments required under the Operative DIP Facility Documents (as defined below), and (d) to fund working capital needs of the DIP Debtors; provided, that (x) while any DIP Obligations are outstanding, intercompany advances to any person or entity other than the Issuer or Guarantors shall be prohibited, except (i) to RII as expressly set forth in the Budget (as defined below) for purposes of funding the DIP Debtors’ share of certain shared services or (ii) with the express written consent of the Required DIP Noteholders (including any discretionary advances under the Discretionary Foreign Subsidiary DIP Notes Facility), and (y) in no event will proceeds of the DIP Facility be used to repay the Prepetition ABL Obligations or any obligations under the DIP ABL Facility (other than proceeds of New Money DIP Notes issued pursuant to that portion of the Interim Commitments (as defined below) relating to the Debtor DIP Notes Facility).  

				

		
			 
		

		
			
		

		

		 

		

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						Maturity Date and Termination Date

					
					
						The maturity date (the “Maturity Date”) shall be the earlier to occur of (a) the date that is six (6) months after the commencement of the Chapter 11 Cases, subject to extension with the consent of the DIP Debtors, the DIP Trustees, and the Required DIP Noteholders, and (b) the consummation of the Sale (as defined below). The termination date (the “Termination Date”) shall be the date of the Required DIP Lenders’ or DIP Notes Trustee’s written notice to the Issuer of the occurrence of the Termination Date, which may be delivered at any time after the occurrence and during the continuance of an Event of Default under the DIP Facility in accordance with the Operative DIP Facility Documents.  Upon the occurrence and during the continuance of the Termination Date, the ability to make withdrawals from the Proceeds Account and the consensual use of Cash Collateral (as defined below), exclusive of funds in the Proceeds Account, shall terminate five (5) days thereafter, and the funds in the Proceeds Account shall then be remitted to the DIP Collateral Trustee or the DIP Notes Trustee upon demand by the DIP Collateral Trustee, the DIP Notes Trustee, or the Required DIP Noteholders for application to the DIP Obligations in accordance with the “Application of Payments” section of this Term Sheet until paid in full and then to the Prepetition Notes Obligations in accordance with the provisions of the Prepetition Notes Documents.

				
	
					
						Voluntary Prepayments/Redemptions

					
					
						The Issuer may prepay and redeem, at any time without premium or penalty, New Money DIP Notes; provided, that each such partial redemption shall be in a minimum amount to be agreed to by the DIP Notes Trustee.  Any amount redeemed may not be reborrowed or repurchased.

				

		
			 
		

			
					
						Mandatory Prepayments/Redemptions

					
					
						The Operative DIP Facility Documents will contain customary mandatory prepayments/redemptions for financings of this type, including, without limitation, 100% of the net cash proceeds from asset sales or series of related asset sales (including casualty and condemnation events), 100% of net cash proceeds from the issuance of post-petition indebtedness or equity, and 100% of extraordinary receipts, in each case with respect to the foregoing subject to customary carve-outs and exceptions to be agreed.  Any amount repaid/prepaid/redeemed may not be reborrowed.  Any such mandatory prepayments/redemptions shall be applied to the DIP Obligations in accordance with the “Application of Payments” section of this Term Sheet.

				

		
			 
		

			
					
						Application of Payments

					
					
						Subject to the Carve-Out (as defined below) and the Intercreditor Agreement, all proceeds resulting from any transaction not in the ordinary course of the DIP Debtors’ businesses (including, without limitation, the Sale (as defined below), or any other disposition or liquidation of assets or Collateral), and all proceeds of any voluntary prepayment/redemptions or mandatory prepayment/redemptions and any other payment on account of the DIP Super-Priority Claim (as defined below) or any DIP Lien on any DIP Collateral (as each term is defined below), shall be applied to the DIP Obligations until paid

				

		
			 
		

		
			
		

		
			

		 

		

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						in full and then to the Prepetition Notes Obligations in accordance with the provisions of the Prepetition Notes Documents; provided that, for the avoidance of doubt, the foregoing shall be subject to the priority of the DIP Obligations (and the liens securing them) relative to the New Money ABL Obligations and the Roll Up DIP ABL Obligations as set forth in the DIP Order then in effect.

				
	
					
						Security and Priority

					
					
						Subject to the Carve-Out, the DIP Obligations and obligations under the DIP ABL Facility (a) will be entitled to super-priority claim status pursuant to section 364(c)(1) of the Bankruptcy Code (the “DIP Super-Priority Claim”), which shall be (i)  pari passu as between each other, (ii) senior to all other administrative expense claims, including any administrative expense claims provided as adequate protection to any party, and (b) will be secured by liens on all assets of the DIP Debtors (the “DIP Collateral”) having the following priorities:

					
						(A)as to DIP Collateral that does not constitute North America ABL Priority Collateral or Notes Priority Collateral (each as defined in the Intercreditor Agreement), including, subject to the entry of the Final Order, proceeds of the DIP Debtors’ claims and causes of action under sections 502(d), 544, 545, 547, 548, 550 and 553 of the Bankruptcy Code and any other avoidance or similar action under the Bankruptcy Code or similar state or municipal law and the proceeds of each of the foregoing (collectively, the “Avoidance Actions,” which for avoidance of doubt, excludes DIP Debtors’ claims and causes of action under section 549 of the Bankruptcy Code or similar state or municipal law and the proceeds of each of the foregoing), whether received by judgment, settlement, or otherwise—first, on a pari passu basis, the liens securing the DIP Notes and the DIP ABL Facility (with the relative priorities of the liens securing the New Money DIP Notes and the Roll Up DIP Notes as otherwise set forth herein); second, the adequate protection liens securing the Prepetition Notes Obligations; and third, the adequate protection liens securing the Prepetition ABL Obligations;

					
						(B)as to the DIP ABL Priority Collateral1—first, any Liens that are (1) in existence on the Petition Date (as defined below), (2) either perfected as of the

				

		
			 
		

		

		
			1 “DIP ABL Priority Collateral” shall have the meaning given to the term “North America ABL Priority Collateral” under the Intercreditor Agreement, as such term is amended pursuant to the following sentence.  Clause (viii) of the term “North America ABL Priority Collateral” set forth in the Intercreditor Agreement is hereby amended and restated as the following:  “(viii) all proceeds and products of any or all of the foregoing in whatever form received, but excluding any property that is directly acquired prior to the termination of the commitments under the DIP ABL Facility and acceleration of the DIP ABL Obligations or the DIP Notes Purchase Agreement and the acceleration of the DIP Notes Obligations with cash proceeds of any North America ABL Priority Collateral and does not otherwise constitute North America ABL Priority Collateral upon its acquisition; provided that capitalized terms used in this clause (viii) but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the interim order approving debtor-in-possession financing from certain of the Claimholders entered in the chapter 11 cases of Holdings, the Company, and the Grantors.”
		

		
			 
		

		
			
		

		
			

		 

		

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						Petition Date or perfected subsequent to the Petition Date solely to the extent permitted by section 546(b) of the Bankruptcy Code, and (3) permitted under the Prepetition Notes Documents and the Prepetition ABL Documents and senior in priority to the Liens in favor of Prepetition Notes Secured Parties and the Prepetition ABL Secured Parties after giving effect to any intercreditor or subordination agreement (the “Prepetition Prior Liens”); second, the liens securing the DIP ABL Obligations; third, any liens securing the Prepetition ABL Obligations, including adequate protection liens; fourth, the liens securing the New Money DIP Notes; fifth, the liens securing the Roll Up DIP Notes; and sixth, any liens securing the Prepetition Notes Obligations, including adequate protection liens; and

					
						(C)as to all DIP Notes Priority Collateral2—first, any Prepetition Prior Liens; second, the liens securing the New Money DIP Notes; third, the liens securing the Roll Up DIP Notes; fourth, any liens securing the Prepetition Notes Obligations, including adequate protection liens; fifth, the liens securing the DIP ABL Obligations; and sixth, any liens securing  the Prepetition ABL Obligations, including adequate protection liens.

					
						For the avoidance of doubt, DIP Collateral shall include, without limitation: (1) all cash, cash equivalents, deposit accounts, securities accounts, accounts, other receivables, chattel paper, contract rights, inventory (wherever located), instruments, documents, securities (whether or not marketable) and investment property (including, without limitation, all of the issued and outstanding capital stock and each of the Issuer’s and the Guarantors’ domestic subsidiaries and 66.6% of the voting stock of such entities’ foreign subsidiaries), furniture, fixtures, equipment, franchise rights, trade names, trademarks, servicemarks, copyrights, patents, intellectual property, general intangibles, rights to the payment of money (including, without limitation, tax refunds and any other extraordinary payments), supporting obligations, guarantees, letter of credit rights, commercial tort claims, causes of action and all substitutions, books and records related to the foregoing, accessions and proceeds of the foregoing, wherever located, including insurance or other proceeds; (2) all owned real property interests and all proceeds of leased real property; (3) subject to the entry of a final order, the proceeds of any avoidance actions brought pursuant to sections 502(4), 544, 545,

				

		
			 
		

		

		
			2 “DIP Notes Priority Collateral” shall have the meaning given to the term “Notes Priority Collateral” under the Intercreditor Agreement, as such term is amended pursuant to the following sentence.  Clause (xi) of the term “Notes Priority Collateral” set forth in the Intercreditor Agreement is hereby amended and restated as the following:  “(xi) all proceeds and products of any or all of the foregoing in whatever form received, but excluding any property that is directly acquired prior to the termination of the commitments under the DIP ABL Facility and acceleration of the DIP ABL Obligations or the DIP Notes Purchase Agreement and the acceleration of the DIP Notes Obligations with cash proceeds of any Notes Priority Collateral and does not otherwise constitute Notes Priority Collateral upon its acquisition; provided that capitalized terms used in this clause (xi) but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the interim order approving debtor-in-possession financing from certain of the Claimholders entered in the chapter 11 cases of Holdings, the Company, and the Grantors.”
		

		
			 
		

		
			
		

		
			

		 

		

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						547, 548, 549 (except as set forth in clause (4) below), 551, 553(b), 732(2) or 742(2) of the Bankruptcy Code; (4) the proceeds of any avoidance actions brought pursuant to section 549 of the Bankruptcy Code to recover any post-petition transfer of DIP Collateral or post-petition transfer of proceeds of DIP Notes; and (5) subject to the entry of a final order, the DIP Debtors’ rights under section 506(c) of the Bankruptcy Code and the proceeds thereof.  For the avoidance of doubt, DIP Collateral shall include all the foregoing rights, property, claims and interests, without regard as to whether such rights, property, claims and interests came into the DIP Debtors’ estates, or otherwise arose, after the Petition Date; provided that the DIP Collateral shall not include 33.4% of the voting stock of the foreign subsidiaries of any of the Issuer or any Guarantors; provided further that the liens securing the DIP ABL Facility or the Prepetition ABL Obligations shall not attach to the Proceeds Account.

					
						Subject to the entry of the Final DIP Order (as defined below), the adequate protection liens and claims in respect of the Prepetition Notes Obligations shall not be subject to any rights, claims, charges, or liens arising under section 506(c).  All DIP Obligations shall not be subject to the equitable doctrine of marshaling.  None of the New Money DIP Obligations (and subject to the entry of the Final DIP Order, the Prepetition Notes Obligations) shall be subject to the “equities of the case” exception under section 552 of the Bankruptcy Code.

					
						All DIP Protections will survive any conversion of any of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code or the dismissal of any of the Chapter 11 Cases.

					
						All DIP Liens authorized and granted pursuant to the DIP Orders entered by the Bankruptcy Court shall be deemed effective and perfected as of the Petition Date, and no further filing, notice, or act under applicable law or otherwise will be required to effect such perfection.  The Issuer and the debtor Guarantors and the DIP Collateral Trustee may make any filings, deliver any notices, make recordations, perform any searches, or take any other acts as may be necessary under state law or other applicable law in order to enforce the security, perfection, or priority of the DIP Liens as described herein.

				
	
					
						Carve-Out:

					
					
						After the delivery of a notice by the Required DIP Noteholders, the DIP Collateral Trustee, or the DIP Notes Trustee to the Issuer that an Event of Default has occurred and is continuing (a “Carve-Out Trigger Notice”), the DIP Notes Obligations shall be subordinated to: (a) the payment of allowed and unpaid professional fees and disbursements incurred by the DIP Debtors and any statutory committees appointed in the Chapter 11 Cases pursuant to section 327 and 1103 of the Bankruptcy Code in an aggregate amount not in excess of $2,000,000 (the “Carve-Out Amount”), (b) all unpaid professional fees and disbursements incurred prior to the delivery of

				

		
			 
		

		
			
		

		

		 

		

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						the Carve-Out Trigger Notice to the extent allowed by the Bankruptcy Court at any time, (c) the payment of fees pursuant to 28 U.S.C. § 1930 for allowed administrative expenses, and (d) in the event the Chapter 11 Cases are converted to chapter 7 cases, there shall be a separate Carve-Out of $50,000 in the aggregate that may be used for the reasonable fees and expenses of a chapter 7 trustee (clauses (a), (b), (c) and (d) together, the “Carve-Out”); provided that the terms “Carve-Out” and “Carve-Out Amount” shall not include any success fee, financing fee, restructuring fee, transaction fee or similar fee payable to any of the DIP Debtors’ professionals or committee’s professionals.  Notwithstanding the foregoing, so long as no Carve-Out Trigger Notice has been issued by the DIP Notes Trustee or the Required DIP Noteholders, the DIP Debtors shall be permitted to pay compensation and reimbursement of expenses allowed and payable under sections 330 and 331 of the Bankruptcy Code but solely to the extent the same are provided for on a cumulative basis as estimated professional fees and disbursements in the Budget, as the same may be due and payable and otherwise allowed and payable by order of the Bankruptcy Court, and the payment of the same shall not reduce the Carve-Out Amount.  The Carve-Out shall not be deemed increased if actual fees are higher in fact than the estimates provided in the Budget.

					
						No portion of the Carve-Out Amount, the proceeds of any DIP Notes, the funds in the Proceeds Account, or any collateral that constitutes “cash collateral” as such term is defined in section 363(a) of the Bankruptcy Code securing the Prepetition Notes Obligations (“Cash Collateral”) may be used to (or support any other party to) litigate, object to, contest or challenge in any manner or raise any defenses to the debt or collateral position of the DIP Noteholders, the DIP Trustees, the Prepetition Notes Trustee, or the holders of the Prepetition Notes, whether by challenging the validity, extent, amount, perfection, priority, or enforceability of the indebtedness under the DIP Facility, the Prepetition Notes Documents, or any related documents, or the validity, extent, perfection, priority, or enforceability of any mortgage, security interest, or lien with respect thereto or any other rights or interests or replacement liens with respect thereto or any other rights or interests of the DIP Trustees, the DIP Noteholders, the Prepetition Notes Trustee, or the holders of the Prepetition Notes, or by seeking to subordinate or recharacterize the DIP Facility (or amounts outstanding thereunder) or the Prepetition Notes Documents (or amounts outstanding thereunder), or to disallow or avoid any claim, mortgage, security interest, lien, or replacement lien or by asserting any claims or causes of action, including, without limitation, any actions under chapter 5 of the Bankruptcy Code, against the DIP Trustees, the DIP Noteholders, the Prepetition Notes Trustee, or the holders of the Prepetition Notes, or any of their respective officers, directors, agents, or employees.

					
						In addition, none of the Carve-Out Amount, proceeds of DIP Notes, nor any Cash Collateral shall be used in connection with (i)

				

		
			 
		

		
			
		

		
			

		 

		

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						preventing, hindering, or delaying enforcement or realization upon the DIP Collateral by the DIP Noteholders or the DIP Trustees or the exercise of rights by the DIP Trustees once an Event of Default has occurred and is continuing, (ii) using or seeking to use Cash Collateral or selling or otherwise disposing of the DIP Collateral other than as provided herein, (iii) using or seeking to use any insurance proceeds related to the DIP Collateral without the consent of the DIP Collateral Trustee; or (iv) incurring indebtedness other than in accordance with the Budget or other than as permitted in the Operative DIP Facility Documents.  None of the Carve-Out Amount, proceeds of DIP Notes, nor any Cash Collateral shall be used in connection with (i) preventing, hindering, or delaying enforcement or realization upon the “Collateral” (as defined in the Prepetition Notes Indenture, the “Prepetition Notes Collateral”) by the Prepetition Notes Trustee or the holders of the Prepetition Notes or the exercise of rights by Prepetition Notes Trustee once an Event of Default has occurred and is continuing, (ii) using, seeking to use, selling, or otherwise disposing of any Prepetition Notes Collateral other than as provided herein, or (iii) using or seeking to use any insurance proceeds related to the Prepetition Notes Collateral without the consent of the Prepetition Notes Trustee.

					
						For the avoidance of doubt, only the (i) the liens securing, and the superpriority claims in respect of, the DIP Note Obligations and the Prepetition Notes Obligations, and (ii) the liens on all DIP Collateral, other than North America ABL Priority Collateral, securing the obligations under the DIP ABL Facility and the Prepetition ABL Facility and the superpriority claims in respect of such obligations shall be subject and subordinate to the Carve-Out.

				
	
					
						Cash Management:

					
					
						Subject to approval by the Bankruptcy Court, after commencement of the Chapter 11 Cases, the DIP Debtors shall use a cash management system that is the same as or substantially similar to its cash management system in effect prior to such date, provided,  however, the DIP Debtors shall establish the Proceeds Account and all proceeds of the DIP Notes shall be maintained solely in the Proceeds Account (except as set forth herein).  Any material changes from such prepetition cash management system or the Proceeds Account must be acceptable to the DIP Trustees in their respective sole discretion.3

				
	
					
						Conditions Precedent to

					
						Effectiveness:

					
					
						The Operative DIP Facility Documents will contain conditions precedent (the “Conditions Precedent”) to the effectiveness of the Operative DIP Facility Documents as are customary for debtor-in-possession financings of this type, including.

				

		
			 
		

		

		
			3 Note to Draft: Subject to review of cash management system.  Cash management arrangements must be acceptable to DDJ.
		

		
			
		

		

		 

		

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						1.    The filing of the Chapter 11 Cases with the Bankruptcy Court on or before November 20, 2017 (the date of such filing, the “Petition Date”).

					
						2.    The preparation, authorization, and execution of the Operative DIP Facility Documents (including a customary closing certificate with respect to the satisfaction of certain conditions) with respect to the DIP Facility, in form and substance satisfactory to the DIP Collateral Trustee.

					
						3.    (a) The interim order of the Bankruptcy Court approving the DIP ABL Facility (the “Interim DIP ABL Order”) in form and substance satisfactory to the DIP Collateral Trustee and the Required DIP Noteholders shall have been entered and be in full force and effect, (b) the documentation evidencing or relating to the DIP ABL Facility shall be in form and substance satisfactory to the DIP Collateral Trustee and the Required DIP Noteholders, (c) the DIP ABL Facility shall have closed, and (d) the DIP Debtors shall be permitted to draw under the DIP ABL Facility, subject to the borrowing base (calculated in the manner set forth in the Prepetition ABL Agreement, subject to a $7.5 million block, to be automatically reduced to $5 million upon court approval of a Stalking Horse Bid that provides for payment in full of the DIP ABL Facility and Prepetition ABL Obligations.  For the avoidance of doubt, the Interim DIP ABL Order may be the same order as the Interim DIP Order.

					
						4.    The Chapter 11 Cases of the Debtors shall not have been dismissed or converted to a case under chapter 7 of the Bankruptcy Code.

					
						5.    No trustee under chapter 11 of the Bankruptcy Code or examiner with enlarged powers beyond those set forth in section 1106(a)(3) and (4) of the Bankruptcy Code shall have been appointed in the Chapter 11 Cases of the Debtors.

					
						6.    All First Day Orders shall have been entered by the Bankruptcy Court and shall be reasonably acceptable in form and substance to the DIP Collateral Trustee.

					
						7.    The Issuer and Guarantors shall have made no payments after the Petition Date on account of any debt or other claims arising prior to the Petition Date without the consent of the DIP Collateral Trustee and the Required DIP Noteholders, or pursuant to the First Day Orders.

					
						8.    Within three business days after the Petition Date (or such later date as the DIP Collateral Trustee and the Required DIP Noteholders may agree in their respective sole discretion), the Bankruptcy Court shall have entered an interim order

				

		
			 
		

		
			
		

		
			

		 

		

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						(the “Interim DIP Order”) in form and substance satisfactory to the DIP Collateral Trustee and the Required DIP Noteholders, which Interim DIP Order shall, among other things, (a) authorize and approve the DIP Facility on an interim basis on the terms and conditions provided in the Operative DIP Facility Documents, including approval of the grant of the DIP Protections, (b) provide the DIP Collateral Trustee and the DIP Noteholders with customary releases acceptable to the DIP Collateral Trustee and the Required DIP Noteholders and such other orders and findings as the DIP Collateral Trustee or the Required DIP Noteholders may require, (c) provide the adequate protection described in the “Adequate Protection” section below, (d) provide for the vacation of the automatic stay without further order of the Bankruptcy Court to permit the enforcement of the DIP Trustees’ and DIP Noteholders’ remedies under the DIP Facility and related documents (and with the consent of the DIP Collateral Trustee, the enforcement of the remedies of the Prepetition Notes Trustee and the Holders of the Prepetition Notes under the Prepetition Notes Documents), including without limitation the enforcement, upon five business days’ prior written notice, of such remedies against the DIP Collateral (or if applicable, the Prepetition Collateral) following the occurrence of an Event of Default; (e) prohibit the assertion of claims arising under Section 506(c) of the Bankruptcy Code or assertion of the “equities of the case” exception of Section 552 of the Bankruptcy Code, in each case against any or all of the DIP Trustees and the DIP Noteholders, and, subject to entry of the Final DIP Order, the Prepetition Notes Trustee and the holders of the Prepetition Notes; (f) require all landlords to provide access to DIP Collateral and subordinate all landlord’s or other similar liens to the DIP Liens; (g) find that the DIP Noteholders are extending credit to the DIP Debtors in good faith within the meaning of Section 364(e) of the Bankruptcy Code and make such other orders and findings as the DIP Collateral Trustee or the Required DIP Noteholders may require in connection with the DIP Trustees, the DIP Noteholders and the DIP Obligations; (h) include stipulations by the DIP Debtors with respect to the Prepetition Notes Obligations and liens securing such obligations, establish the Investigation Period (as defined below), and contain a determination by the Bankruptcy Court that, subject to the Investigation Period, the Prepetition Notes Obligations constitute legal, valid, and binding obligations of the DIP Debtors, enforceable in accordance with its terms and not subject to avoidance, recharacterization, recovery, attack, off-set, counterclaim, defenses, or claims of any kind pursuant to the Bankruptcy Code or other applicable law and that the liens securing the Prepetition Notes Obligations are legal, valid, perfected,

				

		
			 
		

		
			
		

		
			

		 

		

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						enforceable, and non-avoidable; (i) recognize the right of the DIP Trustees, DIP Noteholders, the Prepetition Notes Trustee, and holders of the Prepetition Notes to credit bid in a sale pursuant to a plan of reorganization or section 363 of the Bankruptcy Code; and (j) subject to entry of the Final DIP Order, no chapter 11 plan of the DIP Debtors shall provide for the impairment of the Roll-Up Obligations or the other Prepetition Notes Obligations except with the advance written consent of a two-thirds majority (by principal amount of Roll-Up Notes or Prepetition Notes held, as applicable) and a one-half majority (by number of Roll Up DIP Noteholders or Prepetition Noteholders, as applicable) of the holders of Roll-Up Notes or the Prepetition Notes, as applicable (for the avoidance of doubt, the Roll-Up Obligations may be impaired pursuant to a chapter 11 plan of the DIP Debtors, subject to the foregoing sentence); which Interim DIP Order shall be in full force and effect, shall not have been reversed, vacated, or stayed, and shall not have been amended, supplemented or otherwise modified without the prior written consent of the DIP Collateral Trustee, the Required DIP Noteholders, and the DIP Notes Trustee, in their respective sole discretion.

					
						9.    The DIP Debtors shall waive the right to “cram down” the Prepetition Notes Obligations under section 1129(b) of the Bankruptcy Code without the consent of the Required DIP Noteholders.

					
						10.  All motions and other documents to be filed with and submitted to the Bankruptcy Court in connection with the DIP Facility and the approval thereof shall be in form and substance satisfactory to the DIP Collateral Trustee and the Required DIP Noteholders.

					
						11.  The entry into the Operative DIP Facility Documents shall not violate any requirement of law and shall not be enjoined, temporarily, preliminarily, or permanently.

					
						12.  All fees and expenses (including reasonable and documented out-of-pocket fees and expenses of counsel) of the DIP Collateral Trustee and the DIP Noteholders and the Prepetition Notes Trustee on or before the Closing Date shall have been paid (whether accrued pre-petition or post-petition).

					
						13.  The delivery of a 13-week cash flow projection acceptable to the DIP Collateral Trustee and the Required DIP Noteholders in all respects (the “Initial Budget”), which shall be the Budget (as defined below) until modified in accordance with the procedures described herein. 

				

		
			 
		

		
			
		

		
			

		 

		

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						14.  The DIP Collateral Trustee shall have a valid and perfected lien on and security interest in the DIP Collateral with the priority described herein.

					
						15.  Each DIP Noteholder who has requested the same at least five business days prior to the Closing Date shall have received, at least three business days prior to the Closing Date, “know your customer” and similar information.

					
						16.  The DIP Collateral Trustee shall have received a borrowing request from the Issuer in accordance with the terms of the Operative DIP Facility Documents.

					
						17.  The DIP Collateral Trustee shall have received customary officer’s certificates from the DIP Debtors certifying and attaching organizational documents, officer incumbency and resolutions authorizing the transactions.

					
						18.  The Intercreditor Agreement shall have been amended on terms and conditions acceptable to the DIP Collateral Trustee and Required DIP Noteholders.

					
						The Conditions Precedent shall have been met by November 21, 2017 (the “Closing Date”).  

				
	
					
						Conditions Precedent to each Loan

					
					
						On the funding date of each Loan (a) there shall exist no event of default or default under the Operative DIP Facility Documents, (b) the representations and warranties in the Operative DIP Facility Documents shall be true and correct in all material respects (or in the case of representations and warranties with a “materiality” qualifier, true and correct in all respects) except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties shall have been correct in all material respects of such earlier date, (c) the making of such Loan shall not violate any requirement of law and shall not be enjoined, temporarily, preliminarily, or permanently, (d) the making of the Loan shall not result in the aggregate outstandings under the DIP Facility exceeding the amount authorized by the Interim DIP Order or the Final DIP Order, as applicable, (e) the Interim DIP Order and the Final DIP Order, as applicable, shall be in full force and effect and shall not have been vacated, reversed, or stayed in any respect or modified or amended in any manner (except, in the case of any such modifications or amendments, with the consent of the DIP Collateral Trustee, the Required DIP Noteholders, and the DIP Notes Trustee), (f) the applicable order of the Bankruptcy Court approving the DIP ABL Facility, whether on an interim basis or a final basis, shall be in full force and effect and shall not have been vacated, reversed, or stayed in any respect or modified or amended so as to be reasonably not acceptable to the DIP Collateral Trustee, the Required DIP Noteholders, or the DIP Notes Trustee, and no default or event of default under the DIP ABL Facility shall have

				

		
			 
		

		
			
		

		
			

		 

		

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						occurred and be continuing, and (g) the requisite percentage of holders of the Prepetition Notes shall have consented to the DIP Facility, including the DIP Protections.

				
	
					
						Investigation and Challenge

					
					
						Subject to entry of the Final DIP Order, the stipulations of the DIP Debtors and findings of the Bankruptcy Court (a) that the claims in respect of the Prepetition Notes Indenture constitute legal, valid, and binding obligations of the DIP Debtors, enforceable in accordance with its terms and not subject to avoidance, recharacterization, recovery, attack, off-set, counterclaim, defenses, or claims of any kind pursuant to the Bankruptcy Code or other applicable law and (b) that the liens securing the Prepetition Notes Obligations are legal, valid, perfected, enforceable, and non-avoidable, shall in each case be subject to a challenge period (the “Investigation Period”) (i) for any official committee of unsecured creditors (the “Committee”), ending as of the later of 60 calendar days after the formation of the Committee or 75 calendar days after the Petition Date, or (ii) for all other parties, ending as of 75 calendar days after the Petition Date.  Any party, including the Committee, seeking to assert, pursue, or otherwise preserve any claims or causes of action must have obtained standing to pursue such claims or causes of action and must have actually commenced suit or other prosecution thereof, in each case within the challenge period.

					
						No more than $50,000 of Cash Collateral constituting DIP Collateral shall be used to pay for any fees or expenses incurred by the Committee in investigating any such claims or causes of action.  In no event shall any Cash Collateral constituting DIP Collateral be used to pay for any fees or expenses incurred by the Committee in investigating claims or causes of action related to the DIP Facility.

					
						To the extent that the Prepetition Notes Obligations or any portion thereof are found not to constitute valid obligations of the DIP Debtors by a final order not subject to appeal, the Roll-Up Obligations shall be reduced accordingly and reinstated as Prepetition Notes Obligations as though the roll-up had not occurred with respect to such Roll-Up Obligations.

				
	
					
						Representations and Warranties

					
					
						The Operative DIP Facility Documents will contain representations and warranties as are customary for debtor-in-possession financings of this type (including as necessary to address the filing and pendency of the Chapter 11 Cases), including with respect to: valid existence, requisite power, due authorization, no conflict with applicable law or contractual obligations,  governmental consents, enforceability of the Operative DIP Facility Documents, financial statements and projections, no material adverse effect, no restricted junior payments, no adverse proceedings, taxes, properties, environmental matters, no default under the Operative DIP Facility Documents or contractual obligations, governmental regulations, margin stock, employee matters, employee benefit plans, fees, compliance with law, governmental and other approvals, no material

				

		
			 
		

		
			
		

		
			

		 

		

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						misstatements, PATRIOT Act, communication paths, dealer programs, non-competition agreements, deposit accounts, anti-terrorism, OFAC and similar laws, tax status, and the continued effectiveness of the DIP Orders.

				
	
					
						Financial Reporting Requirements

					
					
						On Thursday of each week (beginning on the second Thursday following entry of the Interim DIP Order), the DIP Debtors shall provide to the DIP Trustees a variance report in form acceptable to the DIP Trustees (each, a “Variance Report”) with respect to the four-week period ended the immediately preceding Friday or, if shorter, the period beginning on the Petition Date and ending on the immediately preceding Friday (each a “Testing Period”), setting forth (a) the actual cash receipts and disbursements for such immediately preceding week on a line-item basis and available cash on hand as of the end of such period, (b) the variance in dollar amounts of the actual receipts and disbursements for each weekly period from those reflected for the corresponding period in the Budget, (c) a description of the nature of any positive or negative variance of greater than five percent (5%) in any line item, and (d) whether the DIP Debtors complied with the budget covenants for the applicable testing period.  The DIP Debtors shall also provide the financial reporting required under the Prepetition Notes Indenture and the Prepetition ABL Agreement to the DIP Trustees.

					
						On the first business day of each month, the DIP Debtors shall provide to the DIP Trustees an updated proposed rolling 13-week cash flow projection (a “Proposed Budget”).  Upon written confirmation from the DIP Collateral Trustee or the DIP Notes Trustee that such Proposed Budget is in form and substance satisfactory to the DIP Collateral Trustee or the DIP Notes Trustee and the Required DIP Noteholders, such Proposed Budget shall then become the “Budget” for all purposes.  Until the DIP Collateral Trustee or the DIP Notes Trustee delivers notice to the Issuer indicating that such Proposed Budget is in form and substance satisfactory to the DIP Collateral Trustee or the DIP Notes Trustee and the Required DIP Noteholders, the Budget last approved by the DIP Collateral Trustee or the DIP Notes Trustee and the Required DIP Noteholders (the “Budget”) shall continue as the then-effective Budget.  Notwithstanding the foregoing, after the occurrence and during the continuation of an Event of Default, the DIP Debtors shall provide an updated Proposed Budget as described above, but on a weekly basis each Wednesday.

				
	
					
						Budget Covenants

					
					
						The DIP Debtors shall comply with the Budget, subject to the following permitted variances:  (a) with respect to the “Total Operating Receipts” section of the Budget, (i) for the first Testing Period, 20%, and (ii) thereafter, 15%, and (b) with respect to the “Total Operating Disbursements” section of the Budget, (i) for the first Testing Period, 15%, and (ii) thereafter, 12%.  Compliance with the Budget shall be tested weekly on a rolling four-week basis; provided that after the occurrence and during the continuation of an

				

		
			 
		

		
			
		

		
			

		 

		

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						Event of Default, the Budget shall be tested weekly on a weekly basis.  Subject to such variance, the DIP Debtors shall not be permitted to expend amounts in excess of the disbursements set forth in the Budget.  Any deviation from the Budget beyond any applicable permitted variance shall constitute an Event of Default (as defined below) unless waived in writing by the DIP Collateral Trustee or the DIP Notes Trustee.  For the avoidance of doubt, any adequate protection payments (including professional fees) made on account of the Prepetition ABL Obligations and the payment of the DIP Collateral Trustee’s and the DDJ Noteholders’, the other Backstop DIP Noteholders and the DIP ABL Collateral Trustee’s professional fees shall be included in the Budget; provided,  however, that such included amounts (a) shall not constitute a cap on the amount of any such payments that the DIP Debtors are obligated to pay and (b) solely with respect to the professional fees of the DIP Debtors, any statutory committee appointed in the cases, the DIP Collateral Trustee, the DIP Notes Trustee, the DDJ Noteholders, the other Backstop DIP Noteholders and the DIP ABL Collateral Trustee, shall be excluded in any calculations for purposes of testing compliance with the Budget solely to the extent that such amounts exceed the projected amount set forth in the Budget.  

				
	
					
						Affirmative Covenants

					
					
						The Operative DIP Facility Documents will contain affirmative covenants, in form and substance satisfactory to the DIP Collateral Trustee and the DIP Notes Trustee, as are customary for debtor in possession financings of this type, including the following:  financial statements and other reports (including Variance Reports), notice of default or event of default, litigation, ERISA and events reasonably expected to have a material adverse effect, preservation of existence, payment of taxes and other obligations, maintenance of properties, maintenance of insurance, access to properties and inspection rights, maintenance of books and records, compliance with laws, environmental disclosure and compliance, additional guarantors and collateral, further assurances, non-consolidation, cash management systems, activities of management, maintenance of underwriting guidelines, licenses and permits, key-person life insurance, maintenance of UL certification, payment of any amounts due as “adequate protection” (as such term is used in the Bankruptcy Code) for the use of the collateral securing the Prepetition ABL Obligations and the Prepetition Notes Obligations and Cash Collateral, delivery of all pleadings, motions, and other documents filed with the Bankruptcy Court on behalf of the DIP Debtors in the Chapter 11 Cases to the DIP Collateral Trustee and DIP Notes Trustee and their counsel, compliance with Budget, compliance with the Milestones (as defined below), compliance with terms of leaseholds, material contracts, appraisals, and administration of deposit accounts.

					
						In addition, the Operative DIP Facility Documents will contain an affirmative covenant by the Issuer and each Guarantor to cause each

				

		
			 
		

		
			
		

		
			

		 

		

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						of its direct and indirect subsidiaries to operate in the ordinary course of business.

				
	
					
						Negative Covenants

					
					
						The Operative DIP Facility Documents will contain negative covenants, in form and substance satisfactory to the DIP Collateral Trustee and the DIP Notes Trustee, as are customary for debtor-in-possession financings of this type, including, without limitation, the following:  limitations on debt and guarantees, limitations on liens, limitation on granting negative pledges, limitations on dividends, redemptions and repurchases with respect to capital stock, limitations on cancellation of debt and on prepayments, redemptions and repurchases of debt, limitations on restrictions on distributions from subsidiaries, limitations on investments, loans and advances, limitations on mergers, consolidations, dispositions and acquisitions, limitations on disposal of subsidiary interests, limitations on sale and lease-back transactions, limitations on transactions with affiliates, limitations on changes in business, limitations on holding company activities, limitations on amendment of constituent documents and documents governing material indebtedness, limitations on changes in accounting treatment and reporting practices or the fiscal year, limitations on cash management changes, limitations on changes to underwriting guidelines, limitations with respect to acquisition or changes to communication paths, limitations on activities related to anti-terrorism, OFAC and other similar laws, limitations on incurring or permitting additional super-priority claims or the grant of adequate protection (other than as provided herein), limitations on use of proceeds, and a restriction on capital expenditures (which will be set to permit any capital expenditures made in accordance with the Budget, subject to permitted variances).

					
						In addition, the Operative DIP Facility Documents will contain negative covenants (a) prohibiting any transfers of property of any kind by any of the DIP Debtors to any of their non-Debtor affiliates and prohibiting any transfer to RII except as expressly set forth in the Budget to fund the DIP Debtors’ share of certain shared services and (b) prohibiting any of the direct or indirect subsidiaries of Issuer or the Guarantors from taking any action outside the ordinary course of business, including without limitation incurrence of indebtedness, granting of liens or pledges, paying dividends or making other payments, disposition or acquisition of any assets, the making of investments, repayment of debt prior to its stated maturity, and other actions to be identified therein.

				
	
					
						Chief Restructuring Officer

					
					
						For so long as the DIP Facility remains outstanding, unless the Required DIP Noteholders and the DIP ABL Agent otherwise agree, starting no later than fourteen (14) calendar days after the Petition Date, the DIP Debtors shall retain a chief restructuring officer reasonably acceptable to the Required DIP Noteholders and the DIP ABL Agent (the “CRO”), with such responsibilities and authority typically provided to chief restructuring officers in chapter 11 cases.  The DIP Noteholders, the DIP Trustees, and the DIP ABL Agent

				

		
			 
		

		
			
		

		
			

		 

		

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						shall be entitled to communicate directly with the CRO on any matter relating to the DIP Debtors, their businesses, or the restructuring process.

				
	
					
						Events of Default

					
					
						The Operative DIP Facility Documents will contain defaults and events of default (“Defaults” and “Event of Default”, respectively) as are customary for debtor-in-possession financings of this type, including without limitation, the events of default listed on Annex A.

				
	
					
						Remedies

					
					
						Upon the occurrence and during the continuance of an Event of Default, (i) the DIP Collateral Trustee or the DIP Notes Trustee may, in its sole and absolute discretion, immediately (a) deliver a notice of an Event of Default; (b) terminate the commitment to make any unfunded portion of the DIP Facility and refuse any requests by the DIP Debtors for withdrawals from the Proceeds Account except to fund regular payroll and other expenses critical to keep the business of the DIP Debtors operating in accordance with the Budget; (c) terminate the Operative DIP Facility Documents as to any future liability or obligation of the DIP Trustees and the DIP Noteholders; (d) accelerate the obligations to repay the DIP Facility, (e) declare the occurrence of the Termination Date, and/or (f) deliver a notice terminating the DIP Debtors’ ability to withdraw from the Proceeds Account and the DIP Debtors’ consensual use of Cash Collateral effective five (5) days after such delivery except that DIP Debtors’ consensual use of Cash Collateral in the Proceeds Account shall terminate immediately upon notice other than to fund regular payroll and other expenses critical to keep the business of the DIP Debtors operating in accordance with the Budget, and (ii) the automatic stay of section 362 of the Bankruptcy Code shall be terminated five (5) days after the DIP Collateral Trustee or DIP Notes Trustee delivers a notice of an Event of Default to the DIP Debtors, without further order of the Bankruptcy Court and without the need for filing any motion for relief from the automatic stay or any other pleading, for the purpose of permitting the DIP Collateral Trustee or the DIP Notes Trustee (or with the consent of the DIP Collateral Trustee, the Prepetition Notes Trustee and holders of the Prepetition Notes) to do any of the following:  (x) foreclose on the DIP Collateral (or if applicable, the Prepetition Collateral) and (y) enforce all of the rights under the Operative DIP Facility Documents (or if applicable, the Prepetition Notes Documents).  In any hearing on any request to re-impose or continue the automatic stay of section 362(a) of the Bankruptcy Code, the only issue that may be raised by any party in opposition thereto shall be whether, in fact, an Event of Default has occurred and is continuing under the Operative DIP Facility Documents, and the DIP Debtors shall waive their right to and shall not be entitled to seek relief, including, without limitation, under section 105 of the Bankruptcy Code, to the extent that such relief would in any way impair or restrict the rights and remedies of the DIP Collateral Trustee, the DIP Notes Trustee, or the DIP Noteholders (or, if applicable, the Prepetition Notes Trustee and the holders of the Prepetition Notes) as set forth in the Interim DIP Order

				

		
			 
		

		
			
		

		
			

		 

		

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						or Final DIP Order (as applicable) or the Operative DIP Facility Documents (or, if applicable, the Prepetition Notes Documents).

				
	
					
						Adequate Protection

					
					
						Subject to the Carve-Out, as adequate protection of the interests of the Prepetition ABL Agent and the Prepetition ABL Lenders in the Notes Priority Collateral securing their claims under the Prepetition ABL Agreement, the DIP Debtors shall (i) pay interest and letter of credit fees currently and reasonable professional fees of the Prepetition ABL Agent and Prepetition ABL Lenders (whether incurred pre-petition or post-petition), solely using North America ABL Priority Collateral and not, in any event, funds from the Proceeds Account or otherwise that constitute proceeds of the DIP Notes, (ii) for diminution in value, provide for adequate protection replacement liens on the Notes Priority Collateral, (iii) for diminution in value, provide for super-priority expenses of administration senior to all other administrative expense claims (except as set forth in the last sentence of this paragraph), and (iv) provide such other adequate protection as is agreeable to the Prepetition ABL Agent and acceptable to the DIP Collateral Trustee, the DIP Notes Trustee, and the Required DIP Noteholders.

					
						Subject to the Carve-Out, as adequate protection of the interests of the Prepetition Notes Trustee and the holders of the Prepetition Notes in the collateral securing their claims under the Prepetition Notes Indenture, the DIP Debtors shall (i) for diminution in value, provide for adequate protection replacement liens on the DIP Collateral, and (ii) for diminution in value, provide for super-priority expenses of administration senior to all other administrative expense claims (except as set forth in the last sentence of this paragraph).

					
						The Prepetition Notes Trustee and the holders of the Prepetition Notes shall not be subject the equitable doctrine of marshaling, and, subject to the entry of the Final DIP Order (as defined below), shall not be subject to any rights, claims, charges, or liens arising under section 506(c) or “the equities of the case” exception of section 552(b) of the Bankruptcy Code.

					
						The New Money DIP Obligations shall be payable in full in cash on the effective date of any confirmed plan of reorganization of the DIP Debtors except to the extent otherwise agreed by the DIP Noteholder holding the affect New Money DIP Obligations.  The Roll Up Obligations shall be payable in full in cash on the effective date of any confirmed plan of reorganization of the DIP Debtors unless the holders of two-thirds in amount of all Roll Up Obligations agree, on behalf of all holders of Roll Up Obligations, to a different treatment.

				
	
					
						Final Order

					
					
						No later than thirty-five (35) calendar days after the Petition Date (or such later date as the DIP Collateral Trustee and the DIP Notes Trustee may agree in their respective sole discretion), the Bankruptcy Court shall have entered a final order authorizing and approving the DIP Facility (the “Final DIP Order,” and, together

				

		
			 
		

		
			
		

		
			

		 

		

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						with the Interim DIP Order, the “DIP Orders”) and the transactions contemplated thereby, which shall be in form and substance satisfactory to the DIP Collateral Trustee, the DIP Notes Trustee, and the Required DIP Noteholders, and shall include all approvals of the Interim DIP Order as well as those approvals subject to the entry of the final order, including approval of the Roll-Up Obligations.

				
	
					
						Milestones

					
					
						The Operative DIP Facility Documents and the DIP Orders shall provide that failure by the DIP Debtors to meet any of the following milestones (collectively, the “Milestones”) shall constitute an Event of Default under the Operative DIP Facility Documents: 4

					
						1.No later than ten (10) calendar days after the Petition Date, the Debtors shall file a motion (i) to approve the sale of the substantially all of the Debtors’ assets pursuant to Section 363 of the Bankruptcy Code (the “Sale”), and (ii) to approve sale and bidding procedures with respect to the Sale, in each case in form and substance satisfactory to the DIP Collateral Trustee and the Required DIP Noteholders in their respective sole discretion (the “Sale and Bid Procedures Motion”).  If the Sale includes any DIP ABL Priority Collateral, such Sale shall provide for the payment in full in cash of the Prepetition ABL Obligations and the DIP ABL Obligations at the closing thereof and shall otherwise be on terms and conditions acceptable to the DIP Collateral Trustee and the Required DIP Noteholders in their respective sole discretion.

					
						2.No later than fourteen (14) calendar days after the Petition Date, the Debtors shall have selected and retained, subject to Bankruptcy Court approval, a CRO reasonably acceptable to the Required DIP Noteholders and the DIP ABL Agent, and thereafter the Debtors shall use commercially reasonable efforts to obtain such Bankruptcy Court approval reasonably promptly.

					
						3.No later than thirty-five (35) calendar days after the Petition Date (subject to the Bankruptcy Court’s calendar), the Bankruptcy Court shall have entered an order granting the relief requested in the Sale and Bid Procedures Motion (such order, the “Bidding Procedures Order”), which shall, among other, things, (a) provide for the DIP Noteholders, at the direction of the Required DIP Noteholders, and Prepetition Noteholders, at the direction of the requisite percentage of the Prepetition Notes, to have the right to credit bid in the sale process for up to the full amount of their DIP Obligations and Prepetition Notes Obligations, as applicable, and (b) otherwise be acceptable to the DIP ABL Agent, the DIP Collateral Trustee and the Required DIP Noteholders in their respective sole discretion.  The Sale shall be conducted pursuant to

					
						 

				

		
			 
		

		

		
			4 Revised to reflect the Milestones in the Interim Order.
		

		
			 
		

		
			
		

		

		 

		

			24

		

 

	
					
						

					
						 

					
					
						the bidding procedures as set forth in the Bidding Procedures Order.

					
						4.No later than seventy-five (75) calendar days after the Petition Date, the Debtors shall select a stalking horse bid acceptable to the ABL Agent, the DIP Collateral Trustee and the Required DIP Noteholders in connection with a further auction, which bid shall provide, at a minimum for the payment in full in cash of all Prepetition ABL Obligations and DIP ABL Obligations  (the “Stalking Horse Bid”) and obtain Bankruptcy Court approval of the Stalking Horse Bid and related bid protections, which shall be acceptable to  the DIP Collateral Trustee  and the Required DIP Noteholders in their respective sole discretion. The Milestone set forth in this Paragraph may be extended by the Required DIP Noteholders, in their sole discretion, for up to twenty-five (25) days so long as no Event of Default has occurred, and it may be waived by the Required DIP Noteholders, in their sole discretion, if they have made a bid for all or substantially all of Debtors’ assets (including the DIP ABL Priority Collateral) and such bid would otherwise meet the terms of a DIP Noteholders Credit Bid (as defined below).

					
						5.No later than one hundred and thirty (130) calendar days after the Petition Date, the Debtors shall conduct an auction for substantially all of their assets (the “Auction”) in accordance with the Bidding Procedures Order.

					
						6.No later than one (1) calendar day after the Auction concludes, the Debtors shall declare a “successful bidder” and “back-up bidder” for the Sale in accordance with the Bidding Procedures Order.

					
						7.No later than five (5) calendar days after the conclusion of the Auction, the Bankruptcy Court shall have approved the Sale and entered an order authorizing and approving the Sale (the “Sale Order”) and the transactions contemplated thereby, in each case, in form and substance satisfactory to the Debtors, the DIP ABL Agent, the DIP Collateral Trustee, the DIP Notes Trustee, and the Required DIP Noteholders in their respective sole discretion; provided that the Debtors and the DIP Noteholders shall negotiate in good faith regarding the terms of a wind-down of the Debtors after consummation of the Sale (it being understand that the foregoing proviso does not obligation any of the parties to reach agreement on the terms of a wind-down).

					
						8.The Sale shall close no later than one hundred and sixty (160) calendar days after entry of the Petition Date, and the Prepetition ABL Obligations and the DIP ABL Obligations shall

					
						 

				

		
			 
		

		
			
		

		
			

		 

		

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						be indefeasibly paid in full in cash at the closing of such Sale in accordance with the DIP ABL Loan Documents.

					
						In the event the highest or otherwise best offer received by DIP Debtors in accordance with the Sale Procedures Order at the Auction provides for the payment in full of all Prepetition ABL Obligations and all DIP ABL Obligations (an “ABL Covering Bid”), and the liens in favor of the DIP Noteholders and the Prepetition Noteholders cannot or will not be consensually released upon the consummation of such ABL Covering Bid, the Required DIP Noteholders shall be obligated to make a credit bid, on behalf of all DIP Noteholders, for all or a portion of the DIP Debtors’ assets, which bid shall provide for the payment in full in cash of all Prepetition ABL Obligations and DIP ABL Obligations (unless otherwise agreed by the Prepetition ABL Agent or DIP ABL Agent, as applicable) at closing, shall be on terms and conditions reasonably acceptable to the DIP ABL Agent and Prepetition ABL Agent, and shall otherwise be on terms and conditions that in their totality are at least as favorable to the DIP Debtors and their estates as the highest or otherwise best third party bid, except that the credit bid of the applicable portion of the DIP Notes Obligations (and if applicable the Prepetition Notes Obligations) shall be treated as cash consideration (such bid, the “DIP Noteholders Credit Bid”).

				
	
					
						Expenses

					
					
						The Issuer and each Guarantor shall agree jointly and severally to pay (and the Budget shall provide for payment of) all reasonable and documented out-of-pocket costs, expenses and disbursements of the DIP Collateral Trustee, the DIP Notes Trustee, the Required DIP Noteholders,  and the other DIP Noteholders (with the consent of the Required DIP Noteholders) (which in each case shall include reasonable fees, expenses, and disbursements of counsel and any financial or strategic advisors or consultants): (i) in connection with the negotiation, preparation, execution, and delivery of any documents in connection with the Operative DIP Facility Documents, the DIP Noteholders Credit Bid, the purchase of all DIP Notes, and/or the Chapter 11 Cases, such costs and expenses including, without limitation, all due diligence, audit, insurance, appraisal, and consultant costs and expenses, and all search, filing, and recording fees, incurred or sustained by the DIP Collateral Trustee, the DIP Notes Trustee, and/or the DIP Noteholders in connection with the DIP Facility, the Operative DIP Facility Documents, the Prepetition Notes Documents and/or the DIP Noteholders Credit Bid or the transactions contemplated thereby, the administration of the DIP Facility and/or the Prepetition Notes Documents, and any amendment or waiver of any provision thereof (in each case, whether or not any such transactions are consummated), (ii) relating to financial diligence and third-party appraisers retained by or on behalf of any or all of the DIP Collateral Trustee, the DIP Notes Trustee, or the DIP Noteholders, in connection with the interpretation, enforcement, or protection of any of their rights and remedies under Operative DIP Facility Documents

				

		
			 
		

		
			
		

		
			

		 

		

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						or in connection with DIP Notes made thereunder or under the Prepetition Notes Documents or the Prepetition Notes, and (iii)  in connection with the negotiation, preparation, execution, and delivery of any documents in connection with the Sale, including the DIP Noteholders Credit Bid.

					
						The foregoing fees and expenses shall be subject to a 14-calendar-day review period in favor of the Committee and the Office of the United States Trustee.

				
	
					
						Assignments

					
					
						No consent of any Issuer or Guarantor required for any assignments or participations.  All assignments and participations in connection with the DIP Notes shall require a pro rata transfer of New Money DIP Notes, Roll-Up Notes, and Prepetition Notes.

				
	
					
						Governing Law

					
					
						State of New York.  

				
	
					
						Advisors to the DDJ Noteholders, the other Backstop DIP Noteholders and the Required DIP Noteholders

					
					
						Latham & Watkins LLP, as counsel, and Alvarez & Marsal Securities LLC, as financial advisor.

				

		
			
		

		
			

		 

		

			27

		

 

		

		
			Annex A
		

		
			 
		

		
			Events of Default under the DIP Facility shall include (in addition to those identified in the body of this Summary of Terms and Conditions), without limitation:
		

		
			(a)          entry of an order without the prior consent of the DIP Collateral Trustee, the DIP Notes Trustee, and the Required DIP Noteholders amending, supplementing, or otherwise modifying any of the DIP Orders;
		

		
			(b)          reversal, vacation, or stay of the effectiveness of any DIP Order;
		

		
			(c)          the occurrence of any default or event of default under the DIP ABL Facility;
		

		
			(d)          the filing of any motion by the DIP Debtors to dismiss the Chapter 11 Cases or convert the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code, or the dismissal of the Chapter 11 Cases or conversion of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code;
		

		
			(e)          termination, expiration, or shortening of the DIP Debtors’ exclusivity periods under section 1121 of the Bankruptcy Code;
		

		
			(f)          appointment of a chapter 11 trustee for any of the DIP Debtors;
		

		
			(g)          except as expressly provided in the Term Sheet, any sale of, or the filing of any motion to sell, all or any substantial portion of the DIP Debtors’ (or their direct or indirect subsidiaries) assets, including the equity of any direct or indirect subsidiary, outside the ordinary course of business pursuant to section 363 of the Bankruptcy Code or otherwise that does not provide for a committed transaction providing sufficient proceeds to cause the DIP Obligations and the Prepetition Notes Obligations to be paid in full in cash at the closing of such sale, taking into account the priority of such DIP Obligations and Prepetition Notes Obligations;
		

		
			(h)          appointment of an examiner with enlarged powers relating to the operation of the business of any of the DIP Debtors;
		

		
			(i)          the DIP Debtors fail to maintain sufficient cash, reserves, and projected borrowing capacity to pay all accrued administrative obligations and other administrative claims when due;
		

		
			(j)          granting of relief from the automatic stay in the Chapter 11 Cases to permit foreclosure or enforcement on assets of the DIP Debtors having an aggregate value in excess of an amount to be agreed;
		

		
			(k)          any DIP Debtor’s filing a motion requesting or supporting, or entry of an order granting, (1) any super-priority claim or lien which is senior to or pari passu with the DIP Obligations or the Prepetition Notes Obligations, or (2) additional or replacement financing, in each case if not permitted by the Operative DIP Facility Documents;
		

		
			(l)          institution of any judicial proceeding, or the filing of any motion, by any DIP Debtor seeking to challenge the validity of any portion of the Operative DIP Facility Documents, the DIP Obligations, the Prepetition Notes Documents, or the Prepetition Notes Obligations or the applicability or enforceability of same or which seeks to void, avoid, limit, subordinate, or otherwise adversely affect any claim or security interest created by or in relation to the Operative DIP Facility
		

		
			
		

		
			

		 

		

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			Documents or the Prepetition Notes Indenture or related documents or the entry of any order of the Bankruptcy Court having any such effect;
		

		
			(m)         the allowance of any claim or claims under Section 506(c) of the Bankruptcy Code or otherwise against the DIP Collateral Trustee, the DIP Notes Trustee, the DIP Noteholders, the Prepetition Notes Trustee, or any holders of the Prepetition Notes, their respective claims, or the DIP Collateral or the Prepetition Notes Collateral, or the filing by any DIP Debtor of a motion supporting such allowance;
		

		
			(n)          the payment of, or granting adequate protection with respect to, any pre-petition debt; provided,  however, that this paragraph shall not apply to any payments or granting of adequate protection with respect to the Prepetition Notes Obligations or the Prepetition ABL Obligations on the terms set forth herein or otherwise acceptable to the DIP Collateral Trustee, the DIP Notes Trustee, and the Required DIP Noteholders;
		

		
			(o)          the filing of a plan (or, the proposal, support, or failure to oppose an unfiled plan) by any party of reorganization that does not provide for the payment in full of the DIP Obligations and the Prepetition Notes Obligations without the prior written consent of the DIP Collateral Trustee, the DIP Notes Trustee, and the Required DIP Noteholders;
		

		
			(p)          failure to comply with the Budget (subject to the permitted variances described herein);
		

		
			(q)          the liens or super-priority claims granted with respect to the DIP Obligations or the Prepetition Notes Obligations cease to be valid, perfected, and enforceable in any respect;
		

		
			(r)          the entry of an order amending, supplementing, staying, vacating, or otherwise modifying the Bidding Procedures Order or any Sale Order, or any violation of any term or condition set forth in the Bidding Procedures Order or any Sale Order, in each case without the prior written consent of the DIP Collateral Trustee, the DIP Notes Trustee, and the Required DIP Noteholders, or the filing by any DIP Debtor of any motion or application seeking the entry of any such order without the prior written consent of the DIP Collateral Trustee, the DIP Notes Trustee, and the Required DIP Noteholders;
		

		
			(s)          any breach of any provision of any DIP Order;
		

		
			(t)          any breach of any covenants set forth herein or the covenants or other terms of the Operative DIP Facility Documents (including the Milestones), subject to cure periods for certain covenants to be mutually agreed; and
		

		
			(u)          any DIP Debtor’s filing a motion requesting or supporting, or entry of an order granting, authorizing or approving, any action adverse to the DIP Collateral Trustee, the DIP Notes Trustee, the DIP Noteholders, the Prepetition Notes Trustee, or the holders of the Prepetition Notes or their rights and remedies or their interest in the DIP Collateral or the Prepetition Notes Collateral.
		

		 

		

			29

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