S & H Systems - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• S&H Systems, Inc., as Debtor-in-Possession

Agent / Lender(s)

• Corporate Billing, a division of SouthState Bank, NA and/or its affiliates or subsidiaries, as Secured Party
• Corporate Billing also served as the prepetition lender under the Pre-Petition Agreement dated July 15, 2025

DIP Commitments

• Post-petition financing structured as account purchases under the Pre-Petition Agreement, whereby the Debtor sells its accounts to the Secured Party on a secured basis
  • Advances provided so long as the ratio of the Debtor's obligations to Secured Party to the value of eligible accounts does not exceed the ratio set forth in the Pre-Petition Agreement
  • The Secured Party agreed to consider making purchases of eligible accounts from the Debtor in its sole discretion
• As of the petition date, the Debtor was indebted to the Secured Party in the amount of approximately $20,900,000 secured by the collateral described in the Pre-Petition Agreement
• Amounts advanced are needed in the ordinary course of business and not for any purpose prohibited by law

Cash Collateral

• The Debtor is authorized to use cash collateral, defined as all of the Debtor's cash as such term is defined in the Bankruptcy Code, in accordance with the Budget and subject to the Carve-Out
• Cash collateral does not include funds advanced by the Secured Party to the Debtor
• Any cash collateral heretofore received by the Debtor shall be immediately paid to Secured Party; cash collateral hereafter coming into the Debtor's possession shall be paid to Secured Party immediately upon receipt
• To the extent Ace Funding Source or Fiji Funding has a security interest in the Debtor's cash collateral, such interest is deemed junior to Secured Party and the Debtor is authorized to use any such junior secured creditor's cash collateral in accordance with the Budget

Fees

• The obligations include Secured Party's attorneys' fees and expenses incurred in connection with the negotiation, documentation, closing, and enforcement of the Pre-Petition Agreement and the protection of Secured Party's rights in the bankruptcy case

Maturity

• The authorization to use cash collateral terminates 90 days following the date of the order, unless agreed upon by the Secured Party
• The termination may be extended by Secured Party and the Debtor by written agreement without further notice, motion, or order of the Court

Carve Out

• The aggregate of:
  • All fees required to be paid to the Clerk of the Bankruptcy Court and to the Office of the United States Trustee under 28 USC § 1930(a)
  • All reasonable fees and expenses allowed by the Bankruptcy Court after application therefor, by persons retained by the Debtor pursuant to 11 USC §§ 327, 328, 330 and/or 331 in an amount not to exceed $400,000
• The Carve-Out survives conversion of the case to chapter 7, appointment of a chapter 7 or 11 trustee, and dismissal of the case
• The Carve-Out has priority over all liens, claims, administrative expense status, and priority granted to Corporate Billing

Use of Proceeds

• The Debtor may use the proceeds of any advance under the Pre-Petition Agreement only in accordance with the Budget
• The Debtor is authorized to maintain any and all pre-petition insurance agreements related to the Pre-Petition Agreement regardless of when any insurance premiums thereunder accrued
• Neither the proceeds of any advance from Secured Party, the Carve-Out, nor any cash collateral shall be used to investigate, assert, commence, or continue any action or claim against Secured Party or to object to or contest the validity, perfection, priority, or enforceability of any rights or claims of the Secured Party
  • This limitation applies only to the debtor in possession and not to any trustee or creditors' committee appointed in the case

Challenge Period and Budget

• A cash budget prepared by the Debtor reflecting its anticipated cash income and expenses for the periods reflected therein was attached to the Motion as Exhibit C
• If requested by Secured Party, on or before the fourth Friday of each month, the Debtor shall submit to Secured Party a comparison of all items set forth in the Budget with the actual performance for the same period, showing for each item the dollar and percentage variation
  • An adverse variation in any item of more than 10% constitutes a default under the Agreement
• The Debtor shall supply new budgets from time to time to Secured Party, so that Secured Party is in possession of a budget covering at least sixty days into the future
  • If a new budget reflects an excess of cash outflow over cash income during the period it covers, Secured Party may declare the Pre-Petition Agreement to be in default
• Each new budget shall reflect, for each line item, the basis of the calculation and include any supporting documents, data, or calculations as Secured Party may reasonably require to verify accuracy
• Each new budget shall be certified by the Debtor's Chief Financial Officer, or such other preparer as shall be acceptable to Secured Party, to have been prepared based on the best information available to the Debtor and to be accurate to the best of the preparer's knowledge
• The Debtor admits, without prejudice to the rights of an Official Committee of Unsecured Creditors and third parties to challenge, that as of the petition date the Debtor was indebted to the Secured Party, without defense, counterclaim, recoupment or setoff, in the aggregate amount of approximately $20,900,000, secured by a valid, enforceable and properly perfected first priority lien in the collateral described in the Pre-Petition Agreement

Securities and Priorities

• The obligations constitute an administrative expense claim under Section 364(c)(1) of the Bankruptcy Code, deemed allowed without any further filing by Secured Party, with priority over any and all administrative expenses of the kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code
• The Secured Party is granted a security interest in the collateral as set forth in the Pre-Petition Agreement effective as of the date of the filing of the bankruptcy case, as collateral for all present and future obligations of the Debtor to Secured Party, pursuant to Section 364(c)(2) and 364(d)(1) of the Bankruptcy Code
• The Secured Party's security interest is senior to the claim of any entity now or hereafter claiming an interest in the collateral other than:
  • Any secured creditor that has a right of setoff or recoupment
  • Any purchase money security interest perfected prior to the date shown in the financing statement in favor of Corporate Billing
• The Secured Party's security interest is specifically deemed senior to the claims of:
  • ACE Funding Source with respect to a credit agreement dated September 25, 2025 for which such creditor filed a UCC-1 Financing Statement on January 22, 2026
  • Fiji Funding with respect to a credit agreement dated December 26, 2025, for which such creditor does not appear to have filed a UCC-1 Financing Statement
• The liens granted to Secured Party are deemed validly granted, duly attached, and properly perfected, without the need of any additional actions being taken by or on behalf of Secured Party, including filing or recording of Uniform Commercial Code financing statements
• The Secured Party is afforded the protection of Section 364(e) of the Bankruptcy Code with regard to the reversal or modification on appeal of the order, or to the modification, vacating, or other amendment of the order by the Court
• Debtor's customers are directed to pay Debtor or the Secured Party in accordance with the Pre-Petition Agreement
• Any pre-petition notices issued or sent by ACE Funding Source or Fiji Funding to Debtor's customers directing such customers to pay either such creditor are void pending further orders of the Court
• For administrative convenience, Secured Party may record the pre-petition transactions and post-petition transactions arising under the Pre-Petition Agreement in one account, and apply payments on a "first in, first out" basis
• The automatic stay provisions of 11 U.S.C. Section 362 are lifted and terminated to enable Secured Party to implement the provisions of the order and to permit Secured Party to demand and receive collections on account of the collateral, and to apply those collections to the obligations

Adequate Protection

Dematic Corp.

• No provision of the order and no security interest, lien, or other right or interest granted under the order shall impair, extinguish, prime, or subordinate Dematic Corp.'s right to setoff or recoup any pre-petition claim of Dematic Corp. against any pre-petition deposit, payment, or other funds paid by Debtor and held by Dematic Corp.
  • Dematic Corp. obtained a $1.9 million security deposit from the Debtor at the time of granting credit to the Debtor and currently has possession of that deposit

Waivers

• In consideration of the Carve-Out, the Debtor will not seek to surcharge the Secured Party or its collateral with any expenses of the type described in Section 506(c) or 552(b) of the Bankruptcy Code unless it obtained Secured Party's prior written consent to the incurrence of such expenses
• Secured Party and Debtor may amend, modify, supplement, waive the provisions of, and/or extend the term of the agreements contemplated without further order of the Court provided that same does not materially alter the provisions thereof

Events of Default

• An event of default under the order includes the following:
  • The Debtor's failure to perform or comply with any of the terms, conditions, or covenants of the order
  • The Debtor's failure to perform or comply with any of the terms, conditions, or covenants of the Pre-Petition Agreement
  • The termination of the order by its own terms, operation of law, or court order
  • The dismissal of the bankruptcy case
  • The appointment of a trustee under the Bankruptcy Code
  • A deterioration in the advance formula from what it was on the petition date
  • The conversion of the bankruptcy case to a case under another chapter of the Bankruptcy Code
• Upon the occurrence of a default, Secured Party shall provide the Debtor written notice of such default to the Debtor and counsel for the Debtor
• If the default is not curable, or is curable by the Debtor and the Debtor fails to cure the default within 24 hours from the time of service of such notice, all of the following shall be deemed to have occurred unless otherwise waived by Secured Party in writing:
  • Secured Party's consent regarding the Debtor's use of the cash collateral pursuant to the order is terminated without further notice
  • The Debtor shall not use any cash collateral for any purpose
  • The Debtor shall not seek authority to use any cash collateral
  • The Debtor shall hold and segregate all cash collateral in trust for Secured Party
  • Secured Party shall be entitled to an expedited hearing on a motion for immediate relief from the automatic stay under Section 362 within not less than five court days from the date of the default, subject to the Court's calendar
    • The only issue for consideration by the Court with respect to the stay relief motion is whether a default has occurred