1 2 3 4 5 6 7 8 9 10 In re 11 TC GLOBAL, INC., 12 Debtor.

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ORDER (i) APPROVING INTERIM BRIDGE FINANCING AGREEMENT; (ii) GRANTING FIRST-POSITION LIENS AND SUPERPRIORITY CLAIMS; AND (iii) SCHEDULING FINAL HEARING Page 1

UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF WASHINGTON

No. 12-20253 ORDER (i) APPROVING INTERIM BRIDGE FINANCING AGREEMENT; (ii) GRANTING FIRST-POSITION LIENS AND SUPERPRIORITY CLAIMS; AND (iii) SCHEDULING FINAL HEARING

THIS MATTER came before the Court upon the Emergency Motion for Order (i) Approving Interim Bridge Financing Agreement; (ii) Granting First-Position Liens and Superpriority Claims; and (iii) Scheduling Final Hearing (the Emergency Motion), filed by TC Global, Inc. (the Debtor), pursuant to Sections 105(a), 361, 362, 363, 364, and 365 of Bankruptcy Code seeking entry of an order granting the following relief: Authorizing, the Debtor, on interim basis, to immediately enter into and close a debtor in possession bridge financing facility pursuant to the terms of a Sale of Future Revenue Agreement (the Bridge DIP Agreement) and that certain letter agreement

B USH S TROUT & K ORNFELD

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dated October 23, 2012 with Gibraltar Business Capital ("Gibraltar ") and upon terms and conditions as in the Emergency Motion. Authorizing the granting in favor of Gibraltar, on an interim basis, of a super-priority administrative expense claim and first-position security interest in all of the Debtors assets to secure advances under the Bridge DIP Agreement, with certain limited exceptions as detailed herein. Setting a hearing on final approval of the Bridge DIP Agreement and the granting of post-petition security interests. The Court, having reviewed the files and records herein, and deeming itself fully advised, makes the following preliminary findings of fact and conclusions of law: A. The Debtor commenced this case on October 10, 2012 (the Petition Date) by filing a

voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtor has continued in possession of its property and has continued to operate and manage its business as a debtor in possession pursuant to 1107(a) and 1108 of the Bankruptcy Code. B. The Debtor operates as Tully's Coffee, a specialty gourmet coffee retailer. The

company generates revenues from its retail stores and franchised locations in the United States and through licensing fees from U.S. and foreign franchisees and sales of products to foreign customers. C. D. The Debtor has faced financial challenges for a number of years. The Debtor recently engaged the firm of Deloitte Financial Advisory Services LLP

(Deloitte). The Debtor advises that Deloitte has assisted the Debtor in a number of ways, including (i) developing alternative courses of action and strategies, (ii) confirming managements intentions to close locations based upon (among other factors) operations and existing lease terms, and

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(iii) identifying and contacting numerous entities regarding the possibility of acquiring some or all of the Debtors assets and operations, providing debtor-in-possession financing, or both. E. After extensive diligence and advice from outside expert consultants, the Debtor

determined that it would need to close a substantial number of locations in order to ultimately achieve operating profit. The Debtor commenced this case to continue its downsizing efforts, conserve its cash and manage issues related to the closed locations. F. As of the Petition Date, the Debtor advises that it operated 57 company-owned and 12

franchise locations. Since that time, the Debtor has closed nine locations that had chronically underperformed and has moved for authority to reject the leases of these locations. There are also 71 additional Tullys locations that operate as licensees in locations such as grocery stores, airports, university campuses and hotels. The Debtor has approximately 520 employees. G. Commencing in early September 2012, the Debtor has been engaged in efforts to locate

a capital provider and/or purchaser for the company. H. The Debtor advises that, with Deloittes assistance, it has identified and contacted fifty-

six capital providers as possible candidates for either providing post-petition financing and/or purchasing the company or its assets. Of these entities, thirteen indicated further interest, signed nondisclosure agreements and were provided an Offering Memorandum that Deloitte had prepared. To date, a small number of parties have indicated interest in either serving as both DIP lender and stalking horse bidder or solely as DIP lender. I. The Debtor did not have the benefit of a line of credit or similar financing for its

operations as of the Petition Date. The Debtors operations were funded exclusively from cash generated from its operations and from trade credit from its vendors and suppliers. With the

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commencement of this case, the Debtors business planning and budget forecasting assume that there will be no further trade credit and that the Debtor will need to pay its vendors on a COD or CIA basis. J. The Debtor, with Deloittes assistance, has prepared a detailed budget of operations

through the week ending March 2, 2013 (the "Budget"). A copy of the budget is attached as Exhibit A to the Declaration of Matthew Farrell filed in support of the Emergency Motion (the "Budget"). It appears from the Budget that the Debtors available cash will be almost fully depleted by the end of the week ending October 27, 2012. The Debtor advises that, because the level of remaining cash will be so low, there will at that point be no assurance that the Debtor will be able to fully fund payroll and other operating expenses during the week ending November 3, 2012. Under the circumstances, the Debtor advises that it might be forced to cease operations rather than accrue expenses without the assurances that they will be paid. K. The Debtor requires immediate access to postpetition financing in order to continue

paying its employees, maintain business operations, preserve its assets, and preserve the Debtor as an on-going concern. In the absence of such financing, the Debtor and the estate will suffer immediate and irreparable harm to the Debtor. L. The Debtor proposes to obtain from Gibraltar interim bridge financing consisting of a

facility of up to $300,000 for use in accordance with the Bridge DIP Agreement and the Budget pursuant to 364(c), (d) and (e) of the Bankruptcy Code. A copy of the Bridge DIP Agreement is attached hereto as Exhibit B. M. The Debtor advises that (i) the proposed financing is a portion of an overall strategy in

the Debtors prosecution of this case (ii) the advance provided under the Bridge DIP Agreement will permit the Debtor the time necessary to complete negotiations with other potential lenders as to a DIP credit facility in the $1.0-$2.0 million range; and (iii) this larger facility will then carry the Debtor
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through a process by which the assets related to the Debtors ongoing operations can be sold in a reasonable fashion. If such a sale can be completed, a return can be generated for creditors. N. It appears that the financial circumstances the Debtor is presently facing are very

serious. Specifically, the Debtor advises that, unless it is able to promptly obtain postpetition financing, it will be forced to close each of its locations and otherwise suspend all operations by the close of business on Sunday, October 28, 2012, in order to assure that it has sufficient cash to pay its employees and related employment taxes through that day of operations. In that event, the goingconcern value of the Debtor will be irretrievably lost. In the absence of the financing that the Bridge DIP Agreement would permit the Debtor to receive, the Debtor and the estate will suffer immediate and irreparable harm. O. It appears that the Debtor and its professionals have made a significant effort to obtain

postpetition financing. While a few of these entities expressed interest in providing the Debtor with postpetition financing, the Debtor advises that no entity other than Gibraltar committed to proceed quickly enough to meet the Debtors short-term cash needs. The Debtor is otherwise unable to obtain credit allowable only under Bankruptcy Code 364(a) or (b) and unable to obtain credit under Bankruptcy Code 364(c)(1), (c)(2) and (c)(3), except under the terms and conditions provided in the proposed Order. P. The proposed terms and conditions of the Bridge DIP Agreement are fair and

reasonable under the exigent circumstances presented and were negotiated by the parties in good faith and at arms length. The cost of the funds is above the amount that would be charged by a commercial lender in an ordinary transaction, but the Debtor is not in a position either financially or temporally to obtain such financing. Under the circumstances, the Debtor has concluded that the

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terms of the financing are within market terms and that the financing will allow the Debtor to maintain its operations going forward until negotiations with a longer-term DIP lender can be concluded. Q. The Court also finds and concludes that the terms and conditions of the Bridge DIP

Agreement were negotiated by the parties in good faith, and were instituted for the purpose of enabling Debtor to meet ongoing expenses while in chapter 11 and implement an orderly sale and of its assets for the benefit of creditors and that Gibraltar is entitled to the protections of Bankruptcy Code 363(m) and 364(e). Now, therefore, it is hereby ORDERED as follows: 1. The Emergency Motion is granted on an interim basis pursuant to the terms and

conditions of this Order. 2. The Debtor is hereby authorized to enter into and consummate the Bridge DIP

Agreement with Gibraltar, and to perform all obligations of the Merchant under the Bridge DIP Agreement, and execute and deliver any other and further documents that are reasonably necessary to effectuate the intent of the Bridge DIP Agreement. 3. The sale of Future Receivables, as defined in the in the Bridge DIP Agreement, is

approved pursuant to Bankruptcy Code 363(b) and (f) free and clear of all liens, claims, interests and encumbrances of any nature whatsoever. Purchaser is a good faith purchaser and shall be entitled to the protection provided by Section 363(m) of the Bankruptcy Code. 4. In connection with and upon Gibraltars advance of the full Purchase Price (as defined

in the Bridge DIP Agreement) to the Debtor, Gibraltar shall be granted and be deemed to hold, as security for all obligations of the Debtor to Gibraltar pursuant to Bankruptcy Code sections 364(c)(1) and (2), (i) a first and primary security interest in all of the Debtors presently owned and hereafter
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acquired assets (the Collateral) pursuant to Section 364(c) of the Bankruptcy Code as more fully described in the Bridge DIP Agreement, provided however, that the Collateral shall not include claims and causes of action arising under chapter 5 of the Bankruptcy Code; and (ii) an administrative expense claim pursuant to Bankruptcy Code 503(b) and 507 having priority over all other administrative expense claims. 5. Debtor shall not incur additional or future debtor in possession financing or any other

credit or trade accommodation which would prime the superpriority administrative expense and first and primary security interest described in this Order without the express written consent of Gibraltar unless such debtor in possession financing or accommodation satisfies all obligations owing to Gibraltar under the Bridge DIP Agreement in full upon closing. 6. The security interests granted pursuant to the Bridge DIP Agreement and this Order

shall be deemed fully perfected upon entry of this Order, and Gibraltar shall not be required to file financing statements, notices of lien, or similar instruments in any jurisdiction, or take any other action, to attach or perfect the security interests and liens granted under the Bridge DIP Agreement and this Order. 7. Gibraltar shall have the exclusive right to provide debtor in possession financing to

Debtor to and including November 2, 2012, and neither Debtor nor its representatives shall conduct discussions or enter into a debt financing transaction, directly or indirectly, with any other person or entity other than Gibraltar before November 3, 2012. 8. In addition to any defaults described in the Bridge DIP Agreement, the Debtor shall be

in default and Gibraltar is entitled to exercise any or all of its rights under the Bridge DIP Agreement upon the earlier of (a) the entry of an order converting this bankruptcy case to Chapter 7 or (b) the entry of an order appointing a Chapter 11 trustee.
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9.

Nothing in this Order shall be deemed to waive any of Gibraltars defenses, rights or

remedies under the Bridge DIP Agreement or otherwise. 10. This Order shall be binding upon and inure to the benefit of Gibraltar, the Debtor, its

creditors, the U.S. Trustee, any representative of the estate, including, without limitation, any creditors committee, the Debtors successors and assigns, and any trustee appointed under the Bankruptcy Code. 11. Notwithstanding anything to the contrary contained herein, but subject to paragraph 5

above, it is understood and agreed by the Debtor and Gibraltar, and it is expressly approved by entry of this interim order, that Heartland Payment Systems, Inc. (Heartland) shall be authorized and entitled to receive the following treatment, without prejudice to any additional or different terms the parties may negotiate or the Court may order following a further hearing: a. Heartland shall continue to collect daily payment for all its actual credit card

processing fees and charges in accordance with the applicable agreement with the Debtor. b. In addition, Heartland shall receive from the Debtor a daily payment in the

amount of $1,000 as an advance payment against actual fees and charges the Debtor incurs in connection with Heartlands administration of the gift card program. Approximately every fourteen (14) days following entry of this Order, the Debtor and Heartland shall determine the actual amount of fees and charges payable to Heartland for such services during such period, and the Debtor shall promptly pay Heartland an amount equal to the difference between the actual charges and the accumulated advance payment during such period, or, if the actual charges were less than the accumulated advance payment, Heartland shall credit such surplus to the advance payment required under by this provision for the next 14 day period.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Presented by: 16

c.

If the Debtor wishes to purchase additional gift cards from Heartland, the

Debtor shall pay for such cards in advance. d. Within two (2) business days following entry of this Order, the Debtor shall pay

Heartland the sum of $5,000 as a security deposit against potential chargeback liability for which Heartland may be liable in the future. e. paid to Heartland. f. Following entry of this Order, the Debtor and Heartland will in good faith meet The Debtor shall include a specific line item in the Budget for amounts to be

and confer with the goal of negotiating additional terms acceptable to the parties going forward, if any, to be incorporated into a stipulation that will be presented to the Court no later than November 9, 2012. 12. A final hearing on approval of the Bridge DIP Agreement shall be held on November

9, 2012, at 9:30 a.m. Notice of such hearing shall be distributed to all parties as required under the Case Management Order. / / /End of Order/ / /

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ORDER (i) APPROVING INTERIM BRIDGE FINANCING AGREEMENT; (ii) GRANTING FIRST-POSITION LIENS AND SUPERPRIORITY CLAIMS; AND (iii) SCHEDULING FINAL HEARING Page 9

By /s/ James L. Day James L. Day, WSBA #20474 Attorneys for TC Global, Inc.

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Approved as to Form; Notice of Presentment Waived by: PERKINS COIE LLP

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ORDER (i) APPROVING INTERIM BRIDGE FINANCING AGREEMENT; (ii) GRANTING FIRST-POSITION LIENS AND SUPERPRIORITY CLAIMS; AND (iii) SCHEDULING FINAL HEARING Page 10

By /s/ John S. Kaplan John S. Kaplan, WSBA #23788 Attorneys for Heartland Payment Systems, Inc. SCHWABE, WILLIAMSON & WYATT

By /s/ Richard G. Birinyi [per email authorization] Richard G. Birinyi, WSBA #09212 Attorneys for Unsecured Creditors Committee SNR DENTON US LLP

By /s/ Scott A. Stein [per email authorization] Scott A. Stein, Attorneys for Gibraltar Business Credit

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