Southern Motion - Chapter 11 DIP Terms

Case Background

• Prior to the amendment, Southern Motion's DIP financing was a $5 million recourse factoring facility from Porter Capital Corporation, expandable to $6 million at Porter's sole discretion. The court approved it on an interim basis on Sept. 11, 2026 (Dkt. 93), and an agreed order entered Oct. 6, 2026 (Dkt. 134), extended that approval until a final order is entered or the interim order is modified or terminated. On Oct. 23, 2026, the debtor filed an amendment to its financing motion (Dkt. 174) requesting interim approval to convert the facility into a $6 million senior secured revolving asset-based line of credit with Porter Capital, after an alternative lender offered competing revolver terms.
• The first part of this summary discusses the terms of the revolver, followed by the terms of the prior factoring facility.

Revolver DIP Terms

DIP Commitments

• Porter Capital Corporation is providing Southern Motion, Inc. with a $6 million senior secured revolving asset-based line of credit. The revolver replaces the factoring facility that the court approved on an interim basis on Sept. 11, 2026, which the amendment describes as a $6 million facility. The amendment says the principal amount and the collateral package do not change.
• Availability is the lesser of the $6 million line amount and the borrowing base. Within availability the debtor may borrow, repay and reborrow. The loan agreement says the facility is a loan secured by the debtor's receivables and real property, not a factoring or receivables-purchase arrangement. Title to the receivables stays with the debtor, and the receivables remain estate property.
• Interim vs. final availability: the loan agreement caps total advances before the final DIP order at $6 million, which is the full line amount. The weekly borrowing base certificate form attached to the loan agreement leaves the amount on its separate interim-cap line blank.
• The proposed second interim order would let the debtor and Porter Capital operate under the new loan documents until the final hearing. Once the order is entered, Porter Capital may provide financing on the terms of the loan documents and the order.
• Advances are paid by wire or ACH into the debtor's DIP operating account, and each transfer carries a transaction fee. They are evidenced by a revolving promissory note dated Oct. 22, 2026, with a maximum principal amount of $6 million.
• Controlling document: the proposed order governs over the amended financing motion, the loan documents and any other document. The loan documents say the DIP order controls over all of them, and the loan agreement controls over the note and the security agreement.

Revised Terms Versus the Original Factoring Facility

• The line and the collateral stay the same, but the structure moves from factoring to an asset-based revolver. The amendment compares the material terms against the facility described in the original financing motion:
  • Structure: changed from a recourse receivables purchase and security agreement to a revolving asset-based line of credit
  • Line amount: $6 million, which the amendment describes as unchanged
  • Collateral: unchanged; all accounts and the real property at 1003 Denmill Rd., New Albany, Union County, Mississippi
  • Term: unchanged at six months, now with a possible 12-month extension
  • Advance rate: increased to 75% of eligible accounts from 70% of eligible accounts being purchased (up to the line amount); use of advances is still subject to the budget
  • Discount fee: eliminated; it was 0.85% for each 30 days outstanding
  • Interest rate: margin increased to WSJ prime + 11% from WSJ prime + 2; the amendment puts the effective APR at 18%, down from at least 23.6% under the original facility
  • Origination fee: reduced to 1% of the line amount, paid at closing, from 3%
  • Exit fee: still 3%, falling to 2% if the line is renewed
• The debtor says the changes give it a more workable structure that takes less of its resources to manage, along with better economics. It says it took Porter Capital's revised terms over a competing proposal to avoid the delay, extra diligence and transaction costs of moving to a new DIP lender.

Borrower / Guarantor(s)

• Southern Motion, Inc., a Mississippi corporation that also does business as SOMO Home, as borrower
• Guarantors: none, according to the term summary in the proposed order

Lender

• Porter Capital Corporation, an Alabama corporation, as lender. The CRO says Porter Capital had no prior relationship with the debtor. Its counsel on the proposed order are Watkins & Eager PLLC and Walding LLC.

Borrowing Base and Availability

• Advance rate: up to 75% of the net amount of eligible accounts, minus reserves Porter Capital may set. The same 75% applies to ordinary eligible accounts and to credit-insured accounts Porter Capital has verified. The borrowing base can never exceed the line amount.
• Eligible accounts are bona fide trade invoices arising in the ordinary course, no more than 90 days from invoice date and subject to Porter Capital's perfected first-priority lien. The following are excluded:
  • Disputed accounts, and accounts subject to offset, deduction or contra relationships or that Porter Capital considers offset-prone, to that extent
  • Accounts owed by affiliates or related parties, or arising from intercompany transactions
  • Accounts of foreign account debtors, unless backed by credit insurance or a letter of credit acceptable to Porter Capital
  • All accounts of an account debtor if 50% or more of its accounts are more than 90 days from invoice date
  • Contingent or unbilled accounts, and contract-related accounts such as progress billings and retainages
  • The amount by which a single account debtor and its affiliates exceed 25% of all eligible accounts
  • Other accounts Porter Capital treats as ineligible under its customary asset-based lending criteria
• Final eligibility definitions and exceptions are still subject to Porter Capital's approval. Porter Capital may adjust the borrowing base, reserves and eligibility after its review.
• Reserves are in Porter Capital's sole discretion. They may cover dilution, accrued and unpaid interest and fees, the exit fee, the carve-out, priority claims and other ineligibles.
• Verified insured accounts must meet several requirements:
  • They must be insured under a policy acceptable to Porter Capital that names it loss payee or assignee of proceeds, and Porter Capital must verify them with the account debtor.
  • They count only up to the insured amount, net of deductible or co-insurance.
  • The debtor must keep the policies in force, and policy proceeds go to Porter Capital.
  • Schedule 2 to the certificate form refers to an 80% advance rate for the uninsured excess of an insured account. The loan agreement and the certificate's own calculation lines apply 75%.
• Overadvances must be repaid within a cure period that runs from the earlier of the debtor learning of the overadvance or Porter Capital's written demand. The loan agreement states that period inconsistently, as two business days in words and three in numerals; the certificate form says two business days.
• No advance may be requested if it would leave excess availability negative. Porter Capital does not have to advance while an event of default continues, if the advance would create an overadvance, or after maturity.

Interest Rate

• WSJ prime + 11%, floating, with a 7% floor on prime; the amendment puts the effective APR at 18%
• The rate resets with each change in prime and is calculated on a 365/360 basis over actual days elapsed. The note states that this method produces a higher effective rate than the stated rate.
• Interest is payable monthly in arrears on the last business day of each month, starting Nov. 30, 2026, and at maturity.
• Default Rate Increase: 4%, applied to the total amount due under the note while an event of default, including nonpayment at maturity, is neither cured nor waived
• Amounts Porter Capital spends to protect the collateral bear interest at the contract rate and may be charged to the loan as advances.

Fees

• Origination Fee: 1% of the line amount ($60,000), payable on the closing date; reduced from 3% under the original facility
• Exit Fee: 3% of the line amount ($180,000) if the facility terminates during the initial term, or 2% ($120,000) if it terminates during a renewal term. It is owed on any termination, including termination by the debtor, termination by Porter Capital after an event of default, or the debtor's notice of non-renewal.
• Renewal Fee: 1% of the line amount ($60,000), payable on any renewal or extension
• Transaction Fees: $25 per wire and $10 per ACH transfer, which Porter Capital may charge to the loan as advances
• Legal Deposit: $10,000 toward Porter Capital's legal and due diligence costs for negotiating, documenting, getting court approval for and closing the facility.
  • The deposit is applied against actual costs, and Porter Capital must give the debtor an accounting.
  • Costs above the deposit, and Porter Capital's later legal fees related to the facility and the case, are paid by the debtor and may be funded as advances.
• Each fee is fully earned when due, nonrefundable and secured by the collateral as part of the DIP obligations.
• The original factoring facility's discount fee of 0.85% for each 30 days outstanding is eliminated.
• Over its 13 weeks, the budget includes $50,000 for DIP lender counsel and $144,652 for loan fees and interest. The debtor also pays Porter Capital's reasonable enforcement costs, including attorneys' fees in bankruptcy proceedings and appeals.

Maturity

• The earliest to occur of:
  • The last day of the initial term, which ends six months after the closing date, or of the renewal term if the facility is renewed
  • The effective date of a confirmed plan of reorganization
  • The closing of a section 363 sale of all or substantially all of the debtor's assets
  • Conversion or dismissal of the case
  • Acceleration of the obligations or termination of the facility
• The closing date is the date all initial conditions precedent are met and the first advance is made.
• Renewal: at Porter Capital's sole discretion, for one more period of no more than 12 months. Renewal requires Porter Capital's satisfactory underwriting, a written renewal signed by both parties, payment of the renewal fee and any required court order. Porter Capital has no obligation to renew. The debtor must give written notice of whether it elects to renew at least 30 days before the initial term ends.
• Prepayment: the note lets the debtor prepay principal in whole or in part without premium or penalty and reborrow it. However, any termination of the facility, including payment in full and termination by the debtor, is subject to the exit fee.

Milestones and Key Dates

• Final DIP order: Dec. 9, 2026. The loan agreement requires commercially reasonable efforts to have the final order entered by that date, and failure to enter it by that date is an event of default.
• Interim DIP order: the debtor must use commercially reasonable efforts to have it entered by Nov. 4, 2026.
• Interim hearing: the proposed second interim order recites an emergency evidentiary hearing on Oct. 28, 2026, attended by the debtor, the U.S. Trustee, the official committee of unsecured creditors and SPE Southern. It would grant the amended financing motion on an interim basis, subject to a final hearing, and includes good-faith findings under sections 363(m) and 364(e).
• Final order content: it is also an event of default if the final order leaves out the stay modification behind Porter Capital's springing cash dominion or leaves out the section 506(c) waiver.
• Final hearing: the proposed second interim order leaves the final hearing date and time, and the objection deadline, blank.
• Interest payments start Nov. 30, 2026. Deposit account control agreements for each collection account are due within 14 days after the closing date.
• The loan agreement, note and security agreement are each dated effective Oct. 22, 2026. The loan agreement's signature blocks for both parties are blank. The note and security agreement name CFO Mary Beth Mayer as the debtor's signatory.

Use of Proceeds and Cash Collateral

• Under the proposed order, advances may be used only for working capital and general corporate purposes, permitted costs of administering the case, and court-approved fees and expenses, each consistent with the loan documents, the order and the budget. The loan agreement limits advances to working capital as the DIP order permits, spent according to the lender-approved budget.
• The proposed order treats Porter Capital's advances as its cash collateral. They may be spent on budgeted operating and maintenance costs and budgeted administrative costs, in the amounts, categories and timing the budget sets. The budget may be amended by the court's rulings on critical vendor expenses, and any other use requires Porter Capital's consent or a court order.
• The debtor's accounts and their proceeds are also Porter Capital's cash collateral, which the debtor may use under the loan documents and the proposed order. Until an activation notice is delivered, the debtor collects accounts in the ordinary course and directs the funds in its collection accounts, subject to the loan documents and the budget.
• Cash collateral may not be used to:
  • Challenge the validity, extent, perfection, priority or enforceability of Porter Capital's liens
  • Invoke marshaling
  • Prevent, hinder or delay Porter Capital's enforcement against the DIP collateral
• While Porter Capital remains unpaid, the debtor may not sell, pledge or encumber DIP collateral except under the loan documents and the order. Each advance request must include an officer's certification that the money will be used only for permitted purposes and according to the approved budget.

Budget

• Period: 13 weeks, from the week beginning Oct. 17, 2026, through the week ending Jan. 15, 2027. The budget starts with $1.48 million of cash, projects net cash flow of negative $6.98 million and $5.7 million of DIP draws, and ends with $193,939.
• Receipts: $18.4 million in total cash receipts, between $1.33 million and $1.55 million a week.
• Operating disbursements: $22.3 million, leaving operating cash flow of negative $3.8 million for the period. The main items are:
  • Payroll and benefits: $10.3 million
  • Inventory purchases: $7.3 million
  • Taxes: $1.32 million
  • Other operating expenses: $1.11 million
  • Rent and leases: $932,166
  • Insurance: $827,882
  • Utilities: $457,500
• Non-operating disbursements: $3.1 million, including:
  • Critical vendor payments: $1.78 million, paid in weeks 1 through 5
  • Debtor professional fees: $64,500 to $82,500 a week
  • Committee professionals: $125,000 ($75,000 in week 9 and $50,000 in week 12)
  • U.S. Trustee fees: $60,945 in week 2
  • DIP lender counsel: $50,000
  • Loan fees and interest: $144,652
• Draw schedule: the first draw is $500,000 in week 2 and the largest weekly draw is $850,000 in week 3. Draws continue every week after that, and the DIP balance peaks at $5.7 million in week 13, below the $6 million line amount.
• Lowest cash point: $97,351 at the end of week 2 (week ending Oct. 30, 2026).
• SPE Southern rent: the proposed order says the budget includes a $220,000 monthly rent payment to SPE Southern. SPE Southern proposed that amount and agreed to accept it for purposes of the amended financing motion and the order. The first payment was made Sept. 8, 2026, and later payments are due on the first of each month.
  • The debtor's and SPE Southern's rights over the master lease, including the applicable rent rates, are reserved.
  • The amendment adds that the updated budget does not change the payment arrangements with SPE Southern or the U.S. Trustee in the budget attached to the Sept. 11 interim order.
• The proposed order keeps the budget subject to the court's ruling at the final hearing. The loan agreement allows the budget to be updated with Porter Capital's written consent, and the CRO says Porter Capital may use it to monitor and regulate advances.

Permitted Variance

• 10% between budgeted and actual amounts, tested weekly under the loan agreement
• The proposed order applies the 10% variance to the use of Porter Capital's advances against the budget, as the budget may be amended by the court's critical vendor rulings. The loan agreement applies it to the lender-approved budget as updated with Porter Capital's written consent.
• Budget variance reports are delivered with the monthly operating reports, to the extent the DIP order requires them.

Carve Out

• The carve-out works through the budget. The proposed order makes Porter Capital's liens and superpriority claim subject to the debtor's ability to pay its professionals by listing professional fees and required court and U.S. Trustee fees as line items in the budget. Budgeted funds can then be set aside for the professionals of the debtor and any statutory committee, paid once the court approves their compensation, and used for required court and U.S. Trustee fees.
• The loan agreement defines the carve-out as whatever carve-out the DIP order expressly provides for two items, capped at the amounts the DIP order permits:
  • Fees owed to the court clerk and the U.S. Trustee under 28 U.S.C. § 1930(a)
  • Allowed fees and expenses of debtor and committee professionals
• The budget's professional line items are debtor professional fees of $64,500 to $82,500 a week, $125,000 for committee professionals and $60,945 for U.S. Trustee fees.
• Porter Capital may set a borrowing base reserve for the carve-out. Its agreement to the carve-out does not count as consent to any surcharge of its collateral.

Securities and Priorities

• Collateral: limited to the debtor's accounts and their proceeds and its commercial real estate at 1003 Denmill Rd., New Albany, Union County, Mississippi. The real estate is subject to a first-priority deed of trust under the security deed approved in the Sept. 11 interim order. The proposed order states that only those assets secure the DIP obligations.
• The loan agreement and security agreement describe the account collateral as also covering several related items. The proposed order controls in any conflict. Those items are:
  • The deposit accounts that receive proceeds, including each collection account and its funds
  • Related books and records
  • Supporting obligations
  • The debtor's rights as an unpaid vendor
  • Credit insurance proceeds
• Priority: the two documents describe it differently, and the proposed order governs.
  • The loan agreement calls for first-priority liens under section 364(c)(2) on collateral that had no valid, perfected, unavoidable lien on the petition date. On collateral that did, it calls for senior priming liens under section 364(d)(1), ranking ahead of those existing liens and any adequate protection liens. In both cases the liens are subject only to the carve-out.
  • The proposed order grants first-priority liens on the accounts and their proceeds and on the real property under section 364(c)(2) only. It ranks them senior to other postpetition liens unless the court orders otherwise after a noticed hearing.
• Perfection: the proposed order deems the liens perfected on entry without any filing and treats all DIP liens as perfected as of the date of the Sept. 11 interim order. Porter Capital may file or record at its option and gets stay relief to do so. Under the security agreement, its interest in the collection accounts is also perfected by control.
• Superpriority claim: subject to the carve-out, the proposed order gives the DIP obligations section 364(c)(1) priority over postpetition administrative expenses, including those under sections 503(b), 506(c), 507(a) and 507(b).
  • The loan agreement ranks the superpriority claim ahead of all administrative expense, adequate protection and other claims, including those under sections 726 and 1114.
  • Under the loan agreement, the claim has recourse to all prepetition and postpetition property except Chapter 5 claims and their proceeds, and no claim senior to or pari passu with it may be allowed while the obligations are outstanding.
• Survival: the loan documents bind any trustee and survive conversion, dismissal and plan confirmation until the obligations are paid in full in cash. The loan agreement also requires the DIP order to keep the liens and superpriority claim in place through any dismissal under section 349(b).

Avoidance Actions

• Excluded. The loan agreement removes Chapter 5 claims, causes of action and their proceeds from the superpriority claim's recourse. The proposed order limits the DIP liens to the accounts, their proceeds and the Union County real property.

Waivers

• Section 506(c), section 552(b) and marshaling waivers, effective on entry of the final order:
  • Proposed order: once the final financing order is entered, and subject to the carve-out, no administrative expenses of the case or any later proceeding may be charged against or recovered from Porter Capital's DIP liens on the accounts. This covers section 506(c), section 552(b) and any similar principle. Porter Capital's prior written consent is required, and consent cannot be implied from its actions or inaction.
  • Second interim order: separately, the order itself bars using cash collateral to invoke marshaling.
  • Loan agreement: the debtor irrevocably waives any section 506(c) surcharge of the collateral or its proceeds. Administrative costs, including in a Chapter 7 case, may not be charged against Porter Capital, the collateral or proceeds without its written consent. Consent cannot be implied from Porter Capital's approval of the budget or its agreement to the carve-out.
  • Loan agreement: the debtor also waives the section 552(b) "equities of the case" exception and marshaling as to the collateral, and must have the final order bind any trustee to the waiver.
• The proposed order's waiver covers the DIP liens on the accounts, while the loan agreement's covers all collateral and Porter Capital itself. The proposed order governs in any conflict. A final order without the loan agreement's section 506(c) waiver is an event of default.

Challenge Period

• Parties in interest get 75 days from entry of the second interim order, and the creditors' committee gets at least 60 days from its formation, to investigate. This applies to the extent the order binds the estate or other parties on the validity, perfection, priority or amount of any prepetition lien Porter Capital may hold, or on a waiver of claims against Porter Capital. The proposed order sets these deadlines under Mississippi Bankruptcy Local Rule 4001(b)(1)(B)(ii).

Conditions Precedent

• The initial advance requires entry of an interim DIP order satisfactory to Porter Capital that approves the facility and grants the liens and superpriority claim. That order must stay in effect and cannot be modified without Porter Capital's consent. The initial advance also requires:
  • Payment of the origination fee, the legal deposit and any other fees then due
  • Delivery of the security agreement, the deed of trust and any other asset-based lending documents Porter Capital requires, and its satisfaction with its legal and collateral review, the title examination of the real property and its lien priority
  • An initial borrowing base certificate with current receivable and payable agings
  • True representations and warranties and no event of default
• Each later advance requires a borrowing base certificate current as of the latest weekly reporting date, with agings, plus an officer's certification of permitted use and no default. Porter Capital may ask for more information. Subject only to those conditions, and provided there is no continuing default, no overadvance and maturity has not occurred, Porter Capital must make each requested advance.
• The proposed order makes Porter Capital's financing conditional on the debtor agreeing to the order's binding effect and to its section 506(c) and 552(b) terms.

Reporting and Covenants

• Weekly reporting: a borrowing base certificate with current receivable and payable agings is due by Monday each week. Supporting schedules of sales, collections, credits and invoices are due on request.
• Monthly and case reporting:
  • Internal monthly financial statements within 30 days after month-end, certified by an authorized officer
  • A copy of each monthly operating report when filed, with any budget variance reports the DIP order requires
  • Copies of all motions, applications and proposed orders about the facility, the collateral, any sale outside the ordinary course or any plan, at least two business days before filing where practicable
• Cash management: the debtor must:
  • Keep each collection account at a bank authorized under U.S. Trustee guidelines and acceptable to Porter Capital
  • Direct all account debtors to pay only into collection accounts
  • Deliver a springing deposit account control agreement for each collection account within 14 days after the closing date
  • Open no new collection account without such an agreement
• Management: the debtor must keep executive and management personnel with substantially the same qualifications and experience, and notify Porter Capital of any change.
• Negative covenants apply unless Porter Capital gives written consent or the court orders otherwise after notice and a hearing. The debtor may not:
  • Incur borrowed-money debt other than trade debt and this facility
  • Put liens on the collateral beyond permitted liens
  • Sell accounts with recourse to anyone other than Porter Capital
  • Make distributions on capital accounts
  • Sell collateral outside the ordinary course, merge or change its line of business
  • Make loans or investments, or give guarantees outside the ordinary course
  • Seek or permit a senior or pari passu lien or claim, other section 364 credit secured by the collateral, or a nonconsensual change to the DIP order
  • Assert or support a section 506(c) surcharge
• The security agreement also bars compromising, settling or extending accounts, except ordinary-course credits and discounts shown on the next certificate.

Events of Default

• The loan agreement gives five business days to cure payment defaults and 30 days after written notice to cure general defaults. Chapter 11 case events and borrowing base defaults fall outside the 30-day cure provision. The events of default are:
  • Payment default: failure to pay any amount due, including monthly interest, an overadvance or fees, not cured within five business days after written notice or after receiving an activation notice, unless the debtor obtains an order finding the activation notice improper
  • Borrowing base default: failure to deliver a borrowing base certificate or aging report within three calendar days after it is due, failure to eliminate an overadvance on time, or failure to comply with the collection account and control agreement covenant
  • Dismissal or conversion to Chapter 7, or appointment of a Chapter 11 trustee or an examiner with expanded powers over the business
  • Reversal, vacatur, stay or nonconsensual modification of the interim or final DIP order
  • Failure to enter the final DIP order by Dec. 9, 2026, or a final order without the stay modification behind the cash dominion rights or without the section 506(c) waiver
  • Stay relief for any lienholder on the collateral, or any order granting a lien or claim senior to or pari passu with Porter Capital's, other than the carve-out
  • The debtor files or supports, without Porter Capital's consent, a plan or sale motion that does not pay the DIP obligations indefeasibly in full in cash on consummation
  • Failure to comply with any term of the DIP order, or any order surcharging collateral under section 506(c)
  • Subject to the 30-day cure: a material adverse change in financial condition, other than one that customarily results from the case, or Porter Capital's belief that the prospect of payment or performance is impaired
  • Subject to the 30-day cure: a postpetition final money judgment over $10,000 that is not adequately covered by insurance and is not discharged or bonded within 30 days
  • Subject to the 30-day cure: a default under any postpetition or assumed agreement with a third party that may materially affect the collateral or repayment
  • Standard covenant-breach, misrepresentation (including a materially false borrowing base certificate) and defective-collateralization defaults, also subject to the 30-day cure

Remedies and Springing Cash Dominion

• Acceleration: after an event of default and written notice, Porter Capital may end its commitments and, at its option, make the obligations due five business days after notice. A termination after a default entitles it to the exit fee. Except for the collection accounts and collections, enforcement against the collateral stays subject to the DIP order, including any five-business-day notice period and any stay-relief requirement in it.
• Activation notice: Porter Capital may deliver a notice of exclusive control under the control agreements (an "Activation Notice") only while an event of default continues. It may do so immediately after giving notice of a payment default.
  • At the same time, it must file the notice with the court and serve it by email and overnight courier on the debtor, Aurora as CRO, debtor counsel Maynard Nexsen, the U.S. Trustee, and any committee and its counsel.
  • Banks may act on the notice without asking whether a default exists.
• Emergency hearing: the debtor, the U.S. Trustee or the committee may request one, and the loan agreement requires the DIP order to set it within five business days after the notice is filed. Once the notice is filed, the debtor must give Porter Capital an accounting of disbursements pending or due within five business days, by payee, amount, due date and budget category.
• Activation period: the period starts when the notice is filed and ends after five business days or when the court enters an order authorizing the requested relief, whichever comes first. During it, only "Critical Disbursements" may be paid. These are budgeted payroll, payroll taxes, employee benefits for non-insiders and necessary insurance, plus any other payments Porter Capital approves in writing or the court authorizes at the emergency hearing.
• Full control: unless the court orders otherwise before the activation period ends, Porter Capital then takes full and exclusive control of each collection account without a further order, up to the amount owed.
  • It may apply the funds in any order it chooses and collect the accounts directly from account debtors, subject to the carve-out and the DIP order.
  • It must rescind the notice if every default behind it is cured or waived, or if the court so orders.
• Automatic stay: the loan agreement requires the DIP order to modify the stay so Porter Capital can deliver the activation notice and, after the activation period, exercise these rights without a further order, except as the court decides at an emergency hearing. The proposed second interim order modifies the stay as needed to permit:
  • The grant of the DIP liens
  • Actions the order authorizes or contemplates to implement the financing, including Porter Capital exercising its rights and remedies under the loan documents as the order provides
  • The transfers and applications of funds the order contemplates
• The security agreement's other remedies, including a UCC sale on 10 days' notice, a receivership and a deficiency judgment, are subject to the same cash dominion procedure and DIP order limits.

Prior Factoring Facility DIP Terms

Size and availability

• $5 million recourse factoring facility for Southern Motion, Inc., from Porter Capital Corporation, expandable to $6 million at Porter's sole discretion. The interim order entered Sept. 11, 2026 (Dkt. 93), authorizes receivables purchases, advances and discretionary overadvances pending the final hearing. That hearing was originally set for Oct. 7, and the Oct. 6 agreed order (Dkt. 134) extended the interim order until a final order is entered or the interim order is modified or terminated. The Oct. 23 amendment seeks to convert this facility into the revolver described above.
• Southern Motion is the seller and borrower, with no entity guarantors. The court found that the debtor lacked sufficient working capital to continue ordinary operations without the facility.
• Two instruments attached to the interim order paper the deal: an umbrella financing agreement, which controls where its terms contradict the others, and the underlying receivables purchase agreement with its Schedule A pricing sheet, which carries the factoring mechanics and the rate and fee grid. The interim order governs over any conflicting term in the financing motion or either agreement.
• Advances are limited to 70% of eligible receivables, subject to the line amount; the receivables agreement separately limits the outstanding face amount of purchased receivables to the line amount.
• Porter purchases receivables with full recourse and determines eligibility in its sole credit or business judgment. Eligible receivables include prepetition invoices outstanding for less than 60 days and invoices generated postpetition; advances are payable within two business days after eligibility is determined and the required receivables submission is received.
• The receivables agreement states that the relationship is that of seller and purchaser of accounts rather than borrower and lender and that the transaction does not constitute financing; the interim order approves the facility under sections 363 and 364 and grants liens and superpriority claims securing the obligations.

Interest rate

• Rate: WSJ prime plus 2%. The receivables agreement floors prime at the rate prevailing upon execution; the Aug. 26 commitment letter specifies a 6.75% floor.
• Interest accrues on the unpaid face amount of purchased receivables, less the reserve account balance, plus outstanding fees and other obligations, on an actual/360 basis. It is calculated monthly using the rate on the month's first business day and paid on the first business day of the following month.
• If prime rises above its level at execution, Porter may increase the discount fee and all other percentages in the receivables agreement and its schedules by the number of basis points separating the highest prime rate during the applicable term from the execution-date rate. If contractual interest is zero, Porter may instead require monthly payments applying that increase to net purchased receivables and other outstanding obligations on an actual/360 basis.

Fees

• Discount fee: 0.85% of each purchased receivable's face amount for each 30-day period, beginning on the invoice date, in addition to interest.
• Origination and exit fees: 3% each on the initial $5 million line. If advances exceed $5 million, each fee also applies at 3% to each $250,000 increment first accessed within the additional $1 million of capacity. The origination fee is payable at first funding; the exit fee is payable on demand upon termination, nonrenewal or repayment in full before the scheduled expiration. The commitment letter also provides for an origination/renewal fee at the beginning of each renewal term.
• Legal and due diligence deposit: $25,000, nonrefundable. The receivables agreement also requires an underwriting fee upon execution.
• Minimum term fee: Following an uncured default, 3% of the largest outstanding obligations after that default, multiplied by the number of months during which any of those obligations remain outstanding, payable on demand in addition to the exit fee.
• Late fee: 0.05% per day on amounts due until paid, with charges on purchased receivables beginning only when the debtor becomes obligated to repurchase them. Late charges are due within one business day after the event triggering liability.
• Misdirected payment fee: The greater of $5,000 or 25% of a payment on a purchased receivable that the debtor fails to forward to Porter within three business days after receipt.
• Transfer fees: $25 per wire and $10 per ACH transfer.
• The debtor bears collection, audit, inspection, filing, returned-check and other contractual expenses, generally payable within one business day after they are incurred. The interim order permits Porter to deduct reasonable case-related expenses, including outside counsel fees, from reserves, purchase payments or collections, with contemporaneous, reasonably detailed invoices to the debtor and any committee; the attached forecast carries $20,000 for DIP lender counsel.

Term and key dates

• Initial term: Six months under the receivables agreement dated Sept. 9, 2026.
• The agreement automatically renews for successive six-month terms unless the debtor gives written termination notice 60 to 90 days before expiration; any outstanding obligations at expiration trigger renewal even if timely notice was delivered.
• The court held the emergency evidentiary hearing on the financing motion Sept. 2, 2026, with the debtor, the U.S. Trustee and the landlord participating, and entered the interim order Sept. 11 granting the motion in part.
• The interim order set the final financing hearing for Oct. 7, 2026, at 10:30 a.m. CST and carried any unresolved financing objections forward to that hearing. The hearing was later continued under the Oct. 6 agreed order.

Cash collateral, reserves and recourse

• Required reserve: 30% of the unpaid balance of purchased receivables, with excess collected funds available for release daily upon request under the receivables agreement. Porter may charge obligations against the reserve; the debtor must fund any shortfall on demand.
• Porter controls collections, and the debtor must forward payments received directly within three business days. A five-business-day clearance period is added to payment receipt dates for purposes of the agreement, and Porter may debit the debtor's deposit accounts through ACH to satisfy obligations.
• Repurchase period: 90 days from the invoice date. Porter may require repurchase at the unpaid face amount plus unpaid related fees for overdue or disputed receivables, receivables affected by a customer's insolvency or payments subject to disgorgement, and all purchased receivables upon default or termination; it may collect through a reserve charge and retains its security interest after repurchase.
• The interim order permits use of receivables proceeds and advances as cash collateral within the approved budget and financing terms. The debtor may not factor, finance, pledge or sell receivables to another provider during the agreement's term.

Budget and permitted variance

• Permitted variance: 10% between budgeted and actual amounts under the interim order. Cash collateral must fund operating, maintenance and administrative expenses in the budgeted categories and periods; other uses require Porter's consent or a further court order.
• The attached forecast for Aug. 31 through Nov. 27, 2026, shows beginning cash of $57,162, approximately $5.8 million of negative net cash flow, $6 million of DIP proceeds and ending cash of $233,721. Its low point is $89,026 of cash for the week ending Sept. 11, the week carrying $1.5 million of critical vendor payments.
• The budget's DIP loan proceeds row schedules the following funding:
  • $250,000 for the week ending Sept. 11.
  • $1.25 million for the week ending Sept. 18.
  • $1.15 million for the week ending Sept. 25.
  • $1 million for the week ending Oct. 2.
  • $250,000 for each week ending Oct. 9, Oct. 16 and Oct. 23.
  • $500,000 for the week ending Oct. 30.
  • $400,000 for the week ending Nov. 6.
  • $250,000 for each week ending Nov. 13 and Nov. 20.
  • $200,000 for the week ending Nov. 27.
• The revised budget provides $220,000 in monthly rent to landlord STORE SPE Southern Motion 2018-1, LLC, with the first payment due Sept. 8, 2026, and subsequent payments due on the first of each month. This resolved the landlord's objection to omitting rent during the case's first 60 days for financing purposes, while preserving disputes over the master lease and applicable rent.
• The landlord had objected to financing (Dkt. 47) and joined the U.S. Trustee's objection (Dkt. 43); the court denied the debtor's request to delay rent payments (Dkt. 57). The budget was made subject to further rulings on the critical vendor motion (Dkt. 8), then continued to Sept. 10, 2026 (Dkt. 60), and to final financing approval. The attached forecast includes approximately $2.5 million of critical vendor payments.
• The financing agreement requires a rolling 13-week budget satisfactory to Porter. The receivables agreement requires monthly financial statements and records, updated customer lists and payables aging within 20 days after each quarter-end, and proof of payroll and other tax payments within 10 days after filing, at least monthly.

Covenants

• The debtor may not suffer any lien on any of its assets, now owned or later acquired, without Porter's prior written consent, and may not change its state of organization or its name, merge, or transfer, sell, lease or assign assets outside the ordinary course without Porter's written consent at least 30 days before the action.
• The debtor must insure all insurable property against customary risks, including fire and business interruption, in amounts and with carriers acceptable to Porter and naming Porter as additional insured and, on request, loss payee or mortgagee, with 30 days' notice of cancellation; the deed of trust separately requires all-risk replacement-cost property coverage, commercial general liability, business-interruption and, where the property lies in a special flood hazard area, flood insurance.
• The debtor must pay taxes, assessments and license fees relating to the collateral when due, keep the collateral in good repair, and give Porter or its designee access to its premises, collateral and books and records, at the debtor's expense and at any time after a default.

Use of proceeds and funding conditions

• Proceeds fund budgeted working capital and general corporate needs, permitted Chapter 11 administrative costs, court-approved fees and expenses, and facility fees, expenses and interest. Prepetition claim payments require court approval and inclusion in the budget.
• The financing agreement conditions funding on satisfactory documentation, diligence, an onsite management meeting and recurring-revenue valuation, release of existing lenders' liens, confirmation of Porter's lien priority, and an acceptable updated cash forecast and business plan. It also requires an acceptable financing order within 30 days after the financing motion, unless Porter agrees to another date.
• Under the interim order, cash collateral may not be used to contest the validity, extent, perfection, priority or enforceability of Porter's liens, to invoke marshaling or any similar doctrine against the DIP collateral, or to prevent, hinder or delay Porter's enforcement against the receivables or other collateral. The financing agreement separately bars using DIP proceeds or collateral to investigate or pursue claims against Porter or its agents, professionals, employees, officers, subsidiaries or affiliates, and requires Porter's prior written consent to use those resources to pursue dispositions or settlements of estate assets, including causes of action and avoidance actions.

Liens and priority

• First-priority liens under section 364(c)(2) secure all DIP obligations solely with the debtor's receivables and their proceeds and its Union County, Mississippi, real property, identified in the financing agreement as 1003 Denmill Road, New Albany; the financing agreement also provides for section 364(d) priming liens.
• The financing agreement makes those liens senior to any adequate protection liens of prepetition secured creditors and, apart from the Carve Out, not subject or subordinate to any lien avoided and preserved for the estate, any lien arising after the petition date in favor of a governmental unit, any intercompany or affiliate lien, or any charge under section 506(c).
• The interim order secures all obligations under the facility, expandable to $6 million, with the real property lien; the attached deed of trust caps secured principal at $5 million, excluding interest, protective advances, collection costs and attorneys' fees.
• The liens are perfected upon entry of the interim order without further filings, deemed perfected as of the petition date and senior to subsequent postpetition liens. The order also grants section 364(c)(1) superpriority administrative claims, including priority over section 507(b) claims, subject to the Carve Out. The financing agreement gives those superpriority claims recourse to all prepetition and postpetition estate property and proceeds.
• The deed of trust covers the property's improvements, fixtures, related personal property, leases, rents and proceeds. The debtor may collect rents until a continuing default, when Porter may collect them directly.

Carve Out

• Budgeted debtor and committee professional fees and required court and U.S. Trustee charges constitute the Carve Out, which takes priority over Porter's DIP liens and superpriority claims under the interim order. The debtor may set aside those funds, with professional compensation payable upon court approval.
• The attached forecast allocates $864,000 to professional fees, $125,000 to committee professionals and $81,495 to U.S. Trustee fees.

Estate protections and investigation periods

• Parties in interest have 75 days from entry of the interim order, and any committee has at least 60 days from formation, to investigate the validity, perfection, priority or amount of any prepetition Porter lien and waivers of claims against Porter, to the extent the order binds the estate or other parties on those matters.
• The interim order protects DIP obligations, payments, transfers and security grants against avoidance, recovery, defenses, setoff, recoupment and counterclaims, and provides that a later modification, vacatur or stay of the order, on appeal or otherwise, does not affect obligations incurred, Porter's ownership interest in purchased receivables, or the liens and priorities granted before it takes effect, all of which remain governed by the order. It also grants Porter section 363(m) protection for receivables purchases.

Defaults and remedies

• Three business days of default notice and continued budgeted cash use apply under the interim order to the following defaults:
  • Failure to pay Porter when due.
  • A continuing default under the receivables agreement, which includes covenant breaches and Porter's good-faith determination that repayment or performance is insecure.
  • Failure to pay budgeted administrative expenses.
  • Unconsented liens, dispositions or other actions materially impairing DIP collateral or the estate's interests in it.
  • A stay, reversal, vacatur or modification of the interim order without Porter's written consent, other than through the final financing order.
  • Loss of validity, perfection or enforceability of Porter's liens or claims.
• The debtor or any committee may seek an expedited hearing to contest whether a default occurred, and Porter consents to a hearing within five business days after that request. The receivables agreement separately provides three business days to cure payment defaults and 30 calendar days to cure nonpayment defaults before contractual termination and acceleration.
• Authority to sell receivables and use cash collateral terminates immediately, without further notice or hearing, upon:
  • Dismissal, conversion to Chapter 7 or suspension of the case.
  • Appointment of a Chapter 11 trustee or an examiner with expanded powers.
  • Stay relief permitting another party to foreclose on a material asset constituting DIP collateral.
  • Entry of an order granting a superpriority claim senior to or pari passu with Porter's claim.
• The deed of trust provides a 30-day notice and cure period for covenant breaches, except insurance, environmental and unauthorized lien or disposition breaches, which receive no notice or cure period.
• Subject to the applicable default provisions, Porter may terminate funding, accelerate obligations, withhold payments, take possession of and sell collateral, foreclose on the real property, collect rents or seek a receiver; the debtor remains liable for any deficiency and is entitled to any surplus. Porter may waive defaults or forbear in writing without surrendering later remedies.

Waivers, releases and indemnities

• Upon entry of the final financing order, administrative expenses cannot be charged against purchased receivables or Porter's liens on those receivables under sections 506(c), 552(b) or similar law without Porter's prior written consent. The receivables agreement also waives marshaling rights.
• The receivables agreement releases Porter and its officers, employees and designees from liability for acts under the agreement except willful misconduct, and excludes liability for lost profits and special or consequential damages.
• The receivables agreement conditions lien releases on a general release of Porter even after repayment; the deed of trust requires cancellation upon full payment of secured obligations and termination of funding commitments.
• The financing agreement requires the debtor to indemnify Porter and its officers, directors, employees and agents for claims arising from the agreement, collateral and related obligations, and waives environmental indemnity and contribution claims against Porter. The receivables agreement separately requires indemnification for third-party transaction claims and avoidance or preference claims, with notice of the latter within two business days after discovery.