Broadview DIP

7/31/2019 Broadview DIP

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Rachel C. StricklandJennifer J. HardyAnna C. BurnsWILLKIE FARR & GALLAGHER LLP787 Seventh Avenue

New York, New York 10019(212) 728-8000

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK------------------------------------------------------xIn re : Chapter 11

:Broadview Networks Holdings, Inc., et al., 1 : Case No. 12-__________ ( )

:Debtors. : (Joint Administration Pending)

------------------------------------------------------ xDEBTORS MOTIO N FOR INTERIM AND FINAL ORDERSUNDER 11 U.S.C. 105, 361, 362, 363(c), 364(c)(1), 364(c)(2),

364(c)(3), 364(d)(1), 364(e) AND 507 AND FED. R. BANKR. P. 2002, 4001AND 9014: (I) AUTHORIZING DEBTORS TO OBTAIN POSTPETITION

FINANCING; (II) AUTHORIZING DEBTORS TO USE CASH COLLATERAL;(III) GRANTING ADEQUATE PROTECTION TO PREPETITION

SECURED LENDERS; AND (IV) SCHEDULING A FINAL HEARINGPURSUANT TO BANKRUPTCY RULES 2002, 4001 AND 9014

TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE:

1 The last four digits of the taxpayer identification numbers of the Debtors follow in parentheses:(i) Broadview Networks Holdings, Inc. (0798); (ii) A.R.C. Networks, Inc. (0814); (iii) ARC Networks, Inc.(4934); (iv) ATX Communications, Inc. (2245); (v) ATX Licensing, Inc. (9838); (vi) ATXTelecommunications Services of Virginia, LLC (3888); (vii) BridgeCom Holdings, Inc. (2965); (viii)BridgeCom International, Inc. (3985); (ix) BridgeCom Solutions Group, Inc. (3989); (x) Broadview

Networks, Inc. (1082); (xi) Broadview Networks of Massachusetts, Inc. (8054); (xii) Broadview Networksof Virginia, Inc. (6404); (xiii) Broadview NP Acquisition Corp. (2734); (xiv) BV-BC AcquisitionCorporation (7846); (xv) CoreComm-ATX, Inc. (0529); (xvi) CoreComm Communications, LLC (2077);(xvii) Digicom, Inc. (0777); (xviii) Eureka Broadband Corporation (6004); (xix) Eureka Holdings, LLC(1318); (xx) Eureka Networks, LLC (1244); (xxi) Eureka Telecom, Inc. (3720); (xxii) Eureka Telecom of VA, Inc. (5508); (xxiii) InfoHighway Communications Corporation (0551); (xxiv) Info-HighwayInternational, Inc. (8543); (xxv) InfoHighway of Virginia, Inc. (1600); (xxvi) nex-i.com, inc. (7035);(xxvii) Open Support Systems LLC (9972); and (xxviii) TruCom Corporation (0714). The Debtorsexecutive headquarters address is 800 Westchester Avenue, Rye Brook, NY 10573.

12-13581 Doc 11 Filed 08/22/12 Entered 08/22/12 18:20:24 Main DocumentPg 1 of 36

8824200120822000000000015

Docket #0011 Date Filed: 8/22/2012


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The debtors and debtors in possession in the above-captioned cases (collectively,

the Debtors ), by and through their proposed attorneys, Willkie Farr & Gallagher LLP,

represent:

RELIEF REQUESTED

1. The Debtors hereby move for entry of an interim order, substantially in the

form annexed hereto as Exhibit B (the Interim Order ),2 and a final order (the Final Order 3

and, together with the Interim Order, the Orders ), under sections 105(a), 361, 362, 363, 364

and 507 of title 11 of the United States Code (the Bankruptcy Code ), Rules 2002, 4001 and

9014 of the Federal Rule s of Bankruptcy Procedure (the Bankruptcy Rules ) and Rule 4001 -2

of the Local Bankruptcy Rules for the Southern District of New York (the Local Rules ):

(a) authorizing the Debtors to enter into a postpetition financing arrangement (as amended,

modifie d and in effect from time to time, the DIP Credit Facility ) and as provided in that

certain Debtor in Possession Amended and Restated Credit Agreement as hereafter amended,

supplemented or otherwise modified from time to time, (the DIP Agreement and, c ollectively

with all agreements, guaranties, collateral agreements, documents and instruments, including that

certain Ratification and Amendment Agreement to be entered into among the Debtors, the DIP

Agent and the DIP Lenders delivered or executed from time to time in connection therewith, as

hereafter amended, supplemented or otherwise modified from time to time, the DIP

Documents ), which shall amend and restate, in its entirety, the Prepetition Credit Agreement, 4

2 Capitalized terms used but not defined herein, unless otherwise noted, shall have the meanings ascribed tothem in the DIP Agreement.

3 A copy of the proposed Final Order shall be filed with the Court prior to the commencement of the FinalHearing (as defined herein).

4 A copy of the DIP Agreement is annexed hereto as Exhibit A.



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and to grant the lenders thereunder security interests and super-priority administrative expense

status with respect to the obligations arising thereunder; (b) authorizing the Debtors to use

collateral subject to liens and security interests, including Cash Collateral (as defined below);

(c) granting adequate protection in respect thereof; (d) scheduling a final hearing pursuant to

Bankruptcy Rule 4001 with respect to the relief requested herein (the Motion ); and

(e) granting related relief.

2. In support of the Motion, the Debtors rely upon and incorporate by

reference the Declaration of Michael K. Robinson, President and Chief Executive Officer of

Broadview Networks Holdings, Inc., In Support of Chapter 11 Petitions and First Day Pleadings(the Robinson Declaration ), which was filed with the Court on the date hereof. The Debtors

respectfully seek entry of the Orders, inter alia:

(a) authorizing: (i) the Borrowers to obtain up to $25,000,000 in aggregateprincipal amount of postpetition senior secured super-priority debtor-in-possession financing (the DIP Financing ) on the terms and conditionsset forth in the Interim Order and the DIP Documents, among BroadviewNetworks Holdings, Inc., Broadview Networks, Inc., Broadview Networksof Massachusetts, Inc., Broadview Networks of Virginia, Inc. andBridgecom International, Inc. (collectively, the Borrowers ), and each of the Debtors other than the Borrowers as guarantors (the Guarantors ),The CIT Group/Business Credit, Inc. (CITBC ), as Administrative Agent(in such capacity, the DIP Agent ) for itself and such other financialinstitutions that may become a party thereto from time to time(collectively, the DIP Lenders ); (ii) a dollar-for-dollar roll-up of theExisting ABL Obligations (as defined below), consisting of approximately$13.9 million (the Roll-Up Loans ); and (iii) for each of the Guarantors,to jointly and severally guaranty on a secured basis the Borrowersobligations in respect of the DIP Financing;

(b) authorizing the Debtors to execute and deliver the DIP Agreement and theother DIP Documents and to perform such other and further acts as may benecessary or appropriate in connection therewith;

(c) granting automatically perfected, priming, valid and enforceable seniorsecured, security interests in and liens on substantially all of the assets of the Debtors, whether now owned or hereafter acquired subject only to(i) the Carve-Out, (ii) the liens securing the ABLs Second Priority



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Collateral (as defined below) pursuant to the terms of the IntercreditorAgreement (as defined below), and (ii) any permitted liens identified in theDIP Documents;

(d) authorizing the Debtors to: (i) use the cash collateral as such term isdefined in section 363 of the Bankruptcy Code (the Cash Collateral ) inwhich the lenders under the Existing ABL Facility (as defined below) andholders of Senior Secured Notes (as defined below) have an interest,pursuant to sections 361, 362 and 363 of the Bankruptcy Code, and allother Prepetition Collateral (as defined below); and (ii) provide adequateprotection to holders of Senior Secured Notes, including monthly cashpayments of postpetition interest and fees in respect of the Senior SecuredNotes;

(e) authorization for the DIP Agent to accelerate the Loans and terminate theCommitments under the DIP Agreement upon the occurrence andcontinuance of an Event of Default, subject to the terms of the DIPAgreement and the Interim Order;

(f) subject to entry of the Final Order, authorizing the Debtors to grant liens tothe DIP Lenders on the proceeds of the Debtors claims and causes of action (but not on the actual claims and causes of action) arising undersections 544, 545, 547, 548, 549 and 550 of the Bankruptcy Code(collectively, the Avoidance Actions );

(g) subject to entry of the Final Order, a prohibition on any person seeking tosurcharge the DIP Collateral (as defined below) pursuant to section 506(c)of the Bankruptcy Code or any other applicable law or principle of equity;

(h) vacating and modifying the automatic stay imposed by section 362 of theBankruptcy Code to the extent necessary to implement and effectuate theterms and provisions of the DIP Documents and the Orders;

(i) (i) authorizing the Borrowers, on an interim basis, to borrow under the DIPAgreement an aggregate principal amount not to exceed $16,000,000 atany time outstanding prior to the entry of the Final Order, (ii) authorizingthe Debtors to use the Cash Collateral and the other Prepetition Collateral,and (iii) granting adequate protection to the holders of Senior SecuredNotes; and

(j) scheduling, pursuant to Bankrupt cy Rule 4001, a final hearing (the FinalHearing ) for this Court to consider entry of the Final Order authorizingand approving on a final basis the relief requested herein, includingwithout limitation, for the Borrowers on a final basis to utilize the DIPFinancing and for the Debtors to continue to use the Cash Collateral andthe other Prepetition Collateral subject to the terms of the DIP Documentsand the Final Order.



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PRELIMINARY STATEMENT 5

3. The purpose of these prepackaged cases is to implement a consensual

balance sheet restructuring necessitated by the impending maturity of the Senior Secured Notes

issued by the Debtors. The Prepackaged Plan was negotiated with the intention of addressing the

Debtors balance sheet while at the same time minimizing the adverse impact of these cases on

the Debtors business es. With that goal in mind, the Prepackaged Plan provides for the

unimpairment of most of the Debtors stakeholders, including holders of general unsecured

claims and the claims under the Existing ABL Facility.

4. The Debtors requests pursuant to this Motion to enter into the DIP Credit

Facility and utilize Cash Collateral similarly promote the Debtors goal of preserving the value of

their enterprise. First, as the Debtors do not hold any unrestricted cash, the Debtors must obtain

the ability to use Cash Collateral in order to continue operating their business, maintain business

relationships with vendors and suppliers, provide services to their customers, retain their

workforce by making payroll and satisfy other working capital and operational needs. Second, to

provide the Debtors key constituents, including vendors, suppliers, employees, independent

sales agents and customers with the confidence that the Debtors will have sufficient cash to allow

such parties to continue to deal with the Debtors in the ordinary course of business regardless of

these cases and, to the extent additional liquidity is required to operate their business, the Debtors

must obtain the ability to utilize DIP Financing.

5. One of the most compelling aspects of the DIP Financing is that it is

simply an amendment and restatement and refinancing of the Debtors $25 million Existing ABL

5 Unless indicated otherwise, capitalized terms used but not defined in this section have the meaningsascribed to them below, or in the DIP Documents, as applicable.



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Facility with many of the same material terms, including the same interest rate and the same

collateral package. The DIP Documents themselves constitute an amendment and restatement of

the Prepetition Credit Agreement (as defined below) and effect a refinancing of the Existing ABL

Obligations (as defined below). While the Debtors are seeking to r oll-up the loans under the

Existing ABL Facility, it is important to note that once the roll -up is given effect, holders of

Senior Secured Notes, the only secured party who will be primed by the roll -up, will be in the

same position as they were prior to the Petition Date. Specifically, a fter the roll -up, holders of

Senior Secured Notes will have a second priority lien on certain collateral of the Debtors, with

only the liens with respect to the $25 million DIP Credit Facility ahead of them just as theyhave the liens with respect to the $25 million Existing ABL Facility ahead of them today. The

holders of Senior Secured Notes will have a first priority lien on certain other collateral of the

Debtors, with the liens with respect to the DIP Credit Facility behind them, just as the liens with

respect to the Existing ABL Facility are behind them today. So while the DIP Credit Facility is a

priming, roll -up facility, as it is simply replacing the Existing ABL Facility in its entirety with

a facility of the same size and the same relative priority with respect to the collateral of the

holders of Senior Secured Notes, it does not prejudice third parties.

6. Further, to protect holders of Senior Secured Notes to the extent that the

value of any Prepetition Collateral, including Cash Collateral, is diminished due to the Debtors

use of such collateral in the course of these cases, the Debtors have agreed to provide adequate

assurance, which includes monthly cash interest payments.

7. As these transactions benefit holders of Senior Secured Notes, among the

Debtors other stakeholders, it is no wonder that the Required Consenting Noteholders who

collectively hold more than two-thirds of the Senior Secured Notes have expressly approved of



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the Debtors entry into th e DIP Credit Facility and their use of Cash Collateral on the terms

described herein.

BACKGROUND

8. On the date hereof (the Petition Date ), Broadview Networks Holdings,

Inc. ( BVNH ) and each of the other Debtors filed a voluntary petition for relief under chapter

11 of the Bankruptcy Code. The Debtors intend to continue in the possession of their respective

properties and the management of their respective businesses as debtors in possession pursuant to

sections 1107 and 1108 of the Bankruptcy Code. The Debtors have requested that these chapter

11 cases be consolidated for procedural purposes. As of the date hereof, no trustee, examiner or

official committee has been appointed in any of the Debtors c ases.

A. Prepetition Capital Structure.

9. As of the Petition Date, the Debtors had approximately $335 million of

outstanding liabilities under the Existing ABL Facility and the Senior Secured Notes (each as

defined below), as well as certain capital leases. The Debtors prepetition capital structure is

described in more detail below.

(1) Existing ABL Facility.

10. Certain of the Debtors are borrowers under a $25 million five-year

revolving credit facility (the Existing ABL Facility ) governed by that certain Credit

Agreement, dated as of August 23, 2006 and amended as of July 27, 2007, November 23, 2010,

December 8, 2011, May 31, 2012 and July 19, 2012 (as further amended and modified, and

together with any ancillary documents, the Prepetition Credit Agreement ), by and among the

Borrowers, The CIT Group/Business Credit, Inc. as administrative agent, and the lenders from

time to time a party thereto (the Existing ABL Lenders ).



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11. Indebtedness under the Existing ABL Facility is guaranteed by

substantially all of BVNHs direct and indirect subsidiaries that are not borrowers thereunder and

is secured by a first priority security interest in accounts, inventory, deposit accounts, cash,

securities accounts, investment property, lock boxes, capital stock and general intangibles,

among other assets, as described in the Intercreditor Agreement, as defined below, (the First

Priority Collateral ), and a second priority security interest in substantially all of the remainder

of the Debtors assets (the ABLs Second Priority Collateral , and together with the First

Priority Collateral , the Prepetition Collateral ). As of the Petition Date, BVNH had

approximately $13.9 million of outstanding borrowings under the Existing ABL Facility. OnJuly 19, 2012, the Existing ABL Facility was amended to extend its maturity through September

5, 2012.

(2) Senior Secured Notes.

12. On November 14, 2007, BVNH issued $300 million in aggregate principal

amount of senior secured notes due 2012 (the Senior Secured Notes ) pursuant to that certain

Indenture for 11 3/8% Senior Secured Notes due 2012, dated as of August 23, 2006, and

supplemented as of September 29, 2006, May 14, 2007 and May 31, 2007 among Broadview

Networks Holdings, Inc., as Issuer, certain other Debtors, as Guarantors, and The Bank of New

York, as Trustee and Collateral Agent. The Senior Secured Notes mature on September 1, 2012.

13. The obligations under the Senior Secured Notes are guaranteed on a senior

secured basis, jointly and severally, by each of BVNHs existing and future domestic restricted

subsidiaries. The Senior Secured Notes are se cured by a lien on substantially all of the Debtors

assets. Pursuant to the terms of the Intercreditor Agreement (defined below), the holders of

Senior Secured Notes have a first priority security interest in the ABLs Second Priority



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Collateral, and their security interests in the First Priority Collateral are contractually

subordinated to the liens that secure the Existing ABL Facility.

(3) The Intercreditor Agreement.

14. The Debtors are party to that certain Intercreditor Agreement, dated as of

August 23, 2 006 and amended as of May 10, 2007 (the Intercreditor Agreement ), by and

among The CIT Group/Business Credit, Inc., as administrative agent under the Prepetition Credit

Agreement, The Bank of New York, as indenture trustee, collateral agent and second priority

agent with respect to the Senior Secured Notes and the Debtors.

B. Events Leading Up to the Chapter 11.

15. For more than a year and a half prior to the Petition Date, the Company

and its management team diligently explored potential transactions in an effort to have sufficient

capital to satisfy the Senior Secured Notes at maturity. In October 2010, the Company retained

Jefferies & Company, Inc. ( Jefferies ) as its investment banker to evaluate strategic

alternatives, and in December 2011, the Company retained Evercore Group, L.L.C. ( Evercore )

as its financial advisor to assist the Company with respect to a refinancing or restructuring

transaction and other strategic alternatives.

16. As part of their engagements, the Debtors financial advisors worked with

the Board of Directors of BVNH and the Companys management to pursue strategic

alternatives, including mergers and acquisitions, an investment in the Company, a sale of all or

substantially all of the assets of the Company, or a sale of certain operations or discrete assets of

the Company. In connection with such efforts, certain parties expressed preliminary interest in

various transactions with respect to the Debtors assets. For a variety of reasons, such

transactions did not develop. The Company also explored other strategic options, such as a



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refinancing, including through a notes offering launched in June 2011 which due to, among other

things, the effects of global economic conditions on the debt market, could not be consummated.

17. During this time, the Company also sought to negotiate with its largest

bondholders, and, in the second quarter of 2012, certain of the Debtors largest bondholders

retained legal and financial restructuring advisors to work with the Company to pursue a

potential balance sheet restructuring, while the Company was simultaneously continuing to

explore other opportunities. Due to macroeconomic trends, and trends specific to the Companys

industry, the Company was unable to obtain new financing or to achieve a sale transaction with

sufficient value to pay the Senior Secured Notes in full prior to maturity.18. Therefore, it became clear that a consensual balance sheet restructuring

with holders of the Senior Secured Notes was the Companys best option to maximize value for

the Companys stakeholders. Upon the execution of customary confidentiality agreements, the

Debtors provided certain bondholders with information regarding the Debtors operations,

projections and business plan to facilitate their ability to negotiate and assess a potential

restructuring plan with the Company. After good- faith, arms -length negotiations, the Debtors

reached an agreement with holders of over two-thirds of the aggregate principal amount of the

Senior Secured Notes (the Required Consenting Noteholders ) and holders of approximately

70% of the preferred equity interests in BVNH (the Consenting Equity Holders ). On July 13,

2012, the Debtors, the Required Consenting Noteholders and the Consenting Equity Holders

entered into a restructuring sup port agreement (as amended, the Restructuring Support

Agreement ) whereby such parties agreed to support a restructuring pursuant to a prepackaged

chapter 11 plan.



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C. The Prepackaged Plan.

19. Prior to the Petition Date, the Debtors solicited votes on the Joint

Prepackaged Plan of Reorganization for Broadview Networks Holdings, Inc. And Its Affiliated

Debtors (including all exhibits, schedules, appendices, and supplements thereto, and as amended,

modified, or supplemented from time to time, the Prepackaged Plan ), through their disclosure

statement related to the Prepackaged Plan (the Disclosure Statement ). If consummated, the

restructuring transactions contemplated in the Prepackaged Plan will substantially de-lever the

Debtors and provide cost savings and additional needed liquidity for the Debtors by, among other

things, reducing the amount of outstanding debt securities issued by the Debtors by half.

20. Generally, the Prepackaged Plan provides that: 6

(a) holders of the Senior Secured Notes shall receive their pro ratashare of (i) 97.5% of the common stock (the New CommonStock ) of reorganized BVNH subject to dilution by shares of NewCommon Stock issued pursuant to the management equity plan orupon exercise of the New Warrants (as defined below), and(ii) $150 million of new 10.5% senior secured notes due 2017;

(b) a new exit facility that will provide total borrowing availabilityupon consummation of the Prepackaged Plan of no less than$25 million;

(c) the repayment in full and termination of the Debtors obligationsunder the Existing ABL Facility and the DIP Credit Facility;

(d) the issuance of (i) 2.5% of the New Common Stock, subject todilution by shares of New Common Stock issued pursuant to themanagement equity plan or upon exercise of the New Warrants,and (ii) two series of 8-year warrants to purchase up to (A) 11% of the New Common Stock, and (B) 4% of the New Common Stock

(collectively, the New Warrants ), in each case , subject todilution by the management equity plan to be issued on a pro rata

6 All summaries herein of terms contained in the Prepackaged Plan are provided for convenience only. Theterms set forth in the Prepackaged Plan control in all respects.



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basis to holders of the Debtors outstanding existing preferredequity interests in exchange for the cancellation of such interests;

(e) the cancellation of all of the existing equity interests in BVNH;

(f) unimpairment of all general unsecured creditors; and

(g) the retirement of the Senior Secured Notes.

21. The Debtors s olicitation for votes to accept or reject the Prepackaged Plan

was launched on July 13, 2012. After a 30-day solicitation period, with ballots submitted on

behalf of more than 86% in amount of the Senior Secured Notes, the Debtors received the

acceptances in excess of the statutory thresholds specified in section 1126(c) of the Bankruptcy

Code with respect to the Prepackaged Plan. As of the August 13, 2012 voting deadline, the

Debtors received acceptances from holders of 75% in dollar amount of the Senior Secured Notes

and 95% in number of such holders submitting a ballot. 7 In addition, holders of 99.99% of the

Existing Preferred Interests who voted on the Prepackaged Plan voted in favor of the

Prepackaged Plan. The Company has contemporaneously filed a motion requesting a hearing

date for the confirmation of the Prepackaged Plan, and the approval of the Debtors disclosure

statement and prepetition solicitation procedures.

D. The Debtors Decision to Enter into th e DIP Agreement.

22. As a bankruptcy filing became more likely, the Debtors determined that

obtaining third-party, postpetition financing without the consent of their current secured lenders

would be impracticable given the Debtors lack of substantial unencum bered assets on which

non-priming liens can be granted. The Debtors determined that the DIP Lenders presented the

7 In addition to the hundreds of timely ballots, the Debtors also received two late ballots. Including lateballots, the Debtors received votes in favor of the Prepackaged Plan from 95% in number of holders of theSenior Secured Notes who voted on the Prepackaged Plan, and holders of Senior Secured Notes who holdmore than 80% in the amount of Senior Secured Notes who voted on the Prepackaged Plan.



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most comprehensive and beneficial source for postpetition financing in light of their knowledge

and familiarity with the Debtors due to their historic transactions with them.

23. The Debtors also considered a number of other factors in determining

whether to enter into the DIP Agreement, including the fact that CITBC serves as the

administrative agent and lender under the Existing ABL Facility. Accordingly, CITBC has a

substantial base of knowledge with respect to the Debtors capital structure, the Prepetition

Collateral and the Debtors businesses all of which created considerable efficiencies in the

negotiation and documentation of the DIP Credit Facility, and enabled CITBC to act with the

speed necessitated by the Debtors restructuring process. 24. The Debtors conducted arms -length, good-faith negotiations with CITBC,

during which negotiations CITBC agreed to various accommodations and acceded to certain of

the Debtors requests, including the extension of the maturity with respect to the Existing ABL

Facility to provide the Debtors with sufficient runway to file these cases after the completion of

their solicitation process with respect to the Prepackaged Plan. Exercising sound business

judgment, the Debtors determined that the proposal for debtor-in-possession financing advanced

by the DIP Lenders was the most favorable under the circumstances, could be documented and

accessed quickly, and adeq uately addressed the Debtors reasonably foreseeable liquidity needs

while maximizing the value of the Debtors assets and estates. This determination was informed

by, among other considerations, the ability of the Debtors to procure a commitment of up to

$25 million and the consent of the holders of Senior Secured Notes pursuant to the terms of the

Intercreditor Agreement. Furthermore, CITBC indicated that it would not consent to the priming

of its liens on the Prepetition Collateral by a third party. In addition, the terms of the DIP



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Financing were approved by the Required Consenting Holders, who hold greater than two-thirds

of the Senior Secured Notes.

25. Therefore, on July 18, 2012, the Debtors and CITBC entered into that

certain Senior Revolving DIP F acility Commitment Letter (the Commitment Letter ),

whereby CITBC agreed to provide the DIP Credit Facility to the Debtors pursuant to the terms of

the Commitment Letter and an attached term sheet. Pursuant to the Commitment Letter, CITBC

agreed to provide the DIP Financing on terms substantially similar to the Existing ABL Facility,

including the same interest rate, but with revisions to the borrowing base which would provide

additional liquidity to the Debtors during the course of these cases. For the foregoing reasons,the Debtors submit that entry of the Interim and Final Orders approving the terms of the DIP

Agreement is in the best interests of their estates, their respective creditors and other parties in

interest.

JURISDICTION

26. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C.

157 and 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper

before this Court pursuant to 28 U.S.C. 1408 and 1409. The statutory bases for the relief

requested herein are sections 105(a), 361, 362, 363, 364 and 507 of the Bankruptcy Code.

THE DIP CREDIT FACILITY

A. The Debtors Need for Liquidity .

27. The value of the Debtors estates is dependent primarily on their ability to

continue providing communications and information technology services to its customers.

Interruption of their business would severely impede the Debtors ability to continue operations

and maintain the value of the estates for the benefit of their stakeholders. In order to continue



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their operations and preserve the value of their estates on a going-forward basis, the Debtors

require the immediate use of Cash Collateral.

28. While the Debtors currently project that they will have sufficient Cash

Collateral to fund ongoing operations during the course of these cases, they, in their business

judgment, believe that access to the DIP Financing is immediately necessary (a) to provide

comfort to third parties, such as the Debtors vendors, customers, employees and sales agents

regarding the adequacy of the Debtors liquidit y and (b) to provide the Debtors with additional

liquidity in the event that their financial results or cash flow are weaker than expected, or in the

event these cases are substantially delayed or are more costly than anticipated.29. The DIP Financing, in the aggregate amount of $25,000,000, will provide

the Debtors with liquidity to fund, in combination with Cash Collateral, their operating, working

capital and capital expenditure needs during the course of these chapter 11 cases. The Debtors

seek immediate access to $16,000,000 of the DIP Financing on an interim basis.

B. Terms of the DIP Credit Facility and Orders.

30. The principal terms of the proposed DIP Financing, including the

provisions of the DIP Agreement and Interim Order required to be highlighted in this Motion

pursuant to Bankruptcy Rule 4001(c) and Local Rule 4001-2 of the Local Bankruptcy Rules for

the Southern District of New York are as follows: 8

Borrowers : Broadview Networks Holdings, Inc., Broadview Networks,Inc., Broadview Networks of Massachusetts, Inc., BroadviewNetworks of Virginia, Inc. and Bridgecom International, Inc.

8 Capitalized terms used in this section but not otherwise defined herein shall have the meanings ascribed tosuch terms in the DIP Documents. This summary is qualified in its entirety by the provisions of the DIPDocuments and the Interim Order, as applicable.



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Guarantors : All Debtors that are not Borrowers.

Administrative Agent : CITBC.

DIP Lenders : CITBC or other lenders from time to time party to the DIPAgreement.

DIP Credit Facility :FRBP 4001(c)(1)(B)

LBR 4001-2(a)(1)

$25,000,000 senior secured revolving credit facility.

Letter of Credit Sublimit: LBR 4001-2(a)(3) DIP Agreement Section 3.1

$5,000,000 Letter of Credit sub-facility, provided that theAdministrative Agent shall have no obligation to arrange forthe issuance of any such Letter of Credit if, after giving effectto such issuance, (a) the L/C Obligations would exceed the L/CCommitment, (b) the aggregate principal amount of outstanding Revolving Credit Loans, plus any amountsremaining outstanding or unpaid with respect to the Existing

ABL Obligations, plus the aggregate amount of L/CObligations would exceed the lesser of (x) the RevolvingCredit Commitment and (y) the Borrowing Base Amount, or(c) following the occurrence of an L/C Collateral Event, theL/C Cash Collateral as reflected in the L/C Cash CollateralAccount is less than an amount equal to 105% of the L/CObligations.

Closing Date : The date on which the initial funding of the DIP Credit Facilityoccurs pursuant to the Interim Order (the DIP Closing Date ),which shall be not later than the fourth business day followingthe Petition Date.

Borrowing Base : LBR 4001-2(a)(1) DIP Agreement Section 2.1

All advances under the DIP Credit Facility will be subject to aborrowing base formula. The Debtors anticipate they will haveapproximately $22 million of availability under such formulaimmediately following the DIP Closing Date.

Interest Rates :FRBP 4001(c)(1)(B)

LBR 4001-2(a)(3) DIP Agreement Section 5.1

LIBOR Rate plus 3.25% with respect to LIBOR Rate Loansand Base Rate plus 2.25% with respect to Base Rate Loans.Default interest of an additional 2.0% arising upon theoccurrence of an Event of Default.

Maturity :

FRBP 4001(c)(1)(B DIP Agreement Section 2.4

The earliest of (a) the date that is 180 days after the DIP

Closing Date, (b) the last termination date set forth in the mostrecent Order, (c) the effective date of the Prepackaged Plan,(d) the date that the Revolving Credit Commitment is reducedto $0 pursuant to Section 2.5 of the DIP Agreement, or (e) thedate of termination of the Revolving Credit Commitment bythe Administrative Agent on behalf of the Lenders pursuant toSection 11.2(a) of the DIP Agreement . (the DIP FacilityMaturity Date ).



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Optional Prepayments : LBR 4001-2(a)(13) DIP Agreement Section 2.4(c)

The Borrowers may at any time and from time to time prepayRevolving Credit Loans in whole or in part.

Fees : LBR 4001-2(a)(3)

Commitment Fee: 0.5% of the aggregate committed amount,which amount was paid prepetition.

DIP Agreement Section 5.3 Unused Line Fee: 0.5% of the average daily unused portion of the Revolving Credit Commitment.

DIP Agent Fee : $25,000 fee fully earned and payable to theDIP Agent on the DIP Closing Date.

DIP Agreement Section 3.3 L/C Fees and Costs : With respect to each Letter of Credit, theBorrowers must pay (a) a monthly commission equal to theundrawn face amount of such Letter of Credit multiplied by3.25%, (b) an issuance fee equal to the face amount of suchLetter of Credit multiplied by 0.125%, and (c) reimbursement

for normal and customary costs and expenses incurred orcharged by the Issuing Bank.

Purpose/Roll-Up : LBR 4001-2(a)(7) DIP Agreement Section 9.12

The DIP Credit Facility will be used to fund ongoing workingcapital requirements during the pendency of the BankruptcyCases, to pay for Bankruptcy Court approved fees and expensesincurred in the Bankruptcy Cases, and for general corporatepurposes. The DIP Agreement also requires that the DIPCredit Facility will be used by the Borrowers to roll up on adollar-for-dollar basis and pay in full the aggregate principalamount of outstanding borrowings under the Existing ABLFacility, together with all costs, fees, expenses (including

attorneys fees and legal expenses) and other charges accrued,accruing or chargeable with respect thereto (collectively, theExisting ABL Obligations ).

Collateral :FBR 4001(c)(1)(B)(i) and (xi)

LBR 4001-2(a)(iv) DIP Agreement Section 4.1 Interim Order 12-13

The DIP Credit Facility will be secured by (a) a first prioritysuperpriority administrative claim and expense under thesection 364(c)(1) of the Bankruptcy Code as well as a firstpriority lien on all claims and, after the entry of the Final Orderthe proceeds of chapter 5 avoidance actions under theBankruptcy Code, and (b) pursuant to sections 364(c) and (d)of the Bankruptcy Code, as applicable, (i) first priorityperfected security interests in and liens upon all collateral

securing the obligations under the Existing ABL Facility if such collateral is secured (or intended to be secured) by firstpriority security interests and liens under the Existing ABLFacility, and (ii) second priority perfected security interests inand liens upon all collateral securing obligations under theExisting ABL Facility if such collateral is secured (or intendedto be secured) by second priority liens under the Existing ABLFacility.



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Validity of DIP Liens :FBR 4001(c)(1)(B)(iii)

DIP Agreement Section 4.2 Interim Order 14

The DIP Liens securing the Obligations shall be deemed validand perfected and duly recorded by entry of the Interim Orderor Final Order, whichever occurs first. The DIP Agent shallnot be required to file any financing statements, mortgages,notices of lien or similar instruments in any jurisdiction orfiling office or to take any other action in order to validate orperfect the Lien granted by or pursuant to the Orders, the DIPAgreement or any other DIP Document.

Conditions Precedent:FBR 4001(c)(1)(B)

LBR 4001-2(a)(2)

Closing and the initial funding under the DIP Credit Facilitywill be subject to the satisfaction of usual and customaryconditions precedent, including but not limited to:

DIP Agreement Section 6.11. Execution and delivery of the DIP Documents;

2. The Borrowers and their subsidiaries shall have noprepetition debt that will survive the closing of the DIPCredit Facility other than (i) the Existing ABL

Obligations, to the extent not rolled up into the DIP CreditFacility, (ii) the Senior Secured Notes and (iii) otherscheduled debt, which may include certain capital leasesand other customary obligations, existing on the DIPClosing Date;

3. DIP Agent shall have received such legal opinions, officercertificates and other documents and instruments as arecustomary for transactions of this type or as it mayreasonably request;

4. Evidence of a valid and perfected first and second priority

security interest in the Collateral (as defined in the DIPAgreement and other DIP Documents) which Collateralincludes, for the avoidance of doubt, the PrepetitionCollateral, as and to the extent that such Collateral arises,exists or comes into existence any time on or after PetitionDate, and subject to the entry of the Final Order, anyproceeds or property recovered in connection with thesuccessful prosecution or settlement of any claimspursuant to sections 502(d), 544, 545, 547, 548, 549, 550,551 or 553 of the Bankr uptcy Code (collectively, the DIPCollateral );

5. DIP Agent and DIP Lenders shall have received and bereasonably satisfied with evidence that the Borrowers insurance policies are in full force and effect, consistentwith historical norms under the Prepetition CreditAgreement;

6. DIP Agent and DIP Lenders shall have receivedBorrowers most up-to-date 13-week cash flow forecast(for the period commencing on the Petition Date) for the



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Borrowers and their subsidiaries (the Updated Budget ),and to the extent that each of the Total Cash Receipts andthe Total Cash Disbursements for the 13-week periodfollowing the date of commencement of these cases, eachtaken individually on a cumulative basis, as set forth insuch Updated Budget varies adversely by more than 25%from the Total Cash Receipts and the Total CashDisbursements each taken individually on a cumulativebasis and for the same time period, as set forth in theApproved Budget, then in such event, such UpdatedBudget must be satisfactory to DIP Agent and DIPLenders;

7. With respect to matters affecting or pertaining to the DIPCollateral, the DIP Agent or the DIP Lenders, includingthe Orders and the documents related to the PrepackagedPlan, the Debtors shall have complied in all materialrespects with the notice and other requirements of the

Bankruptcy Code in a manner reasonably acceptable toDIP Agent;

8. The Court shall have found that the DIP Loans are madeby the DIP Lenders and that all obligations incurred by theDebtors under the D IP Agreement are in good faithwithin the meaning of section 364(e) of the BankruptcyCode;

9. Entry by the Court of the Interim Order, by no later thanthree (3) business days after the Petition Date in form andsubstance reasonably satisfactory to the DIP Agent and the

DIP Lenders;

10. DIP Agent shall have received substantially final drafts of all pleadings, and other documents to be filed with, andsubmitted to, the Bankruptcy Court prior to the DIPClosing Date in connection with the DIP Credit Facility,including all first day pleadings in form and substancereasonably satisfactory to the Administrative Agent.

11. The DIP Agent shall have received a substantially finaldraft of the proposed confirmation order and plan of reorganization (collec tively, the Plan Documents ) of

the Borrowers, the terms and conditions of which shall bereasonably acceptable to the DIP Agent and the DIPLenders; and

12. DIP Agent and DIP Lenders shall have received all fees,costs and expenses due and payable to it on or prior to theDIP Closing Date.

Waiver of Automatic Stay : Upon the occurrence of an event of default, the automatic stay



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FBR 4001(c)(1)(B)(iv) DIP Agreement Section 11.2

shall be modified and vacated (at DIP Agents election) , without any further application, motion or notice to, or orderfrom the Bankruptcy Court, to permit the DIP Agent toexercise its remedies under the DIP Agreement and the LoanDocuments, without further application or motion to, or orderfrom, the Bankruptcy Court.

Waiver of Rights under Section 506(c) :FBR 4001(c)(1)(B)(x)

DIP Agreement Section 4.8 Interim Order 13(b)

No Person will be permitted to surcharge the Collateral undersections 506(c) or 552(b) of the Bankruptcy Code (orotherwise), nor shall any costs or expenses whatsoever beimposed against the DIP Agent, the DIP Lenders or Collateral,except for the Carve-Out. The prohibition on surcharging orpriming of the Liens of the DIP Agent, the DIP Lenders or theCollateral will survive the termination of the DIP Agreementand the dismissal of the Bankruptcy Cases, such that no Personwill be permitted to obtain a Lien or rights (through any means,at law or in equity) which in any case is equal or senior to theLiens of DIP Agent on the Collateral.

Final Financing Order :FBR 4001(c)(1)(B)(vii)

DIP Agreement Section 6.2(e)(ii)

The Bankruptcy Court shall on or before the twenty-sixth (26 th)calendar day following the Petition Date, have entered the FinalFinancing Order authorizing the secured financing under theDIP Credit Facility on the terms and conditions contemplatedby the DIP Documents. The DIP Agent and the DIP Lendersshall not provide any loans other than those authorized underthe Interim Order unless, on or before the fortieth (40 th)calendar day following the Petition Date, such Final FinancingOrder shall have been entered, there shall be no appeal or othercontest with respect to either of such orders and the time toappeal or contest such orders shall have expired, and such order

shall have otherwise become a final order. The Final FinancingOrder shall provide that the DIP Liens are automaticallyperfected by the entry of the Final Financing Order;

Representationsand Warranties:FBR 4001(c)(1)(B)(iv)

DIP Agreement Article VII

The DIP Credit Facility contains such representations andwarranties by the Borrowers consistent with the Existing ABLFacility (with modifications typical for debtor-in-possessionfacilities of this type), including that notwithstanding theprovisions of section 362 of the Bankruptcy Code, upon thematurity of any of the obligations, the DIP Agent and DIPLenders shall be entitled to payment of such obligations at theexpiration of the Remedies Notice Period (as defined below)

and to enforce the remedies provided in the DIP Agreement orunder applicable law, without further application to or order bythe Bankruptcy Court. All representations and warranties madeunder the DIP Agreement shall be made or deemed to be madeat and as of the Closing Date, unless otherwise provided, shallsurvive the Closing Date and shall not be waived by theexecution and delivery of the DIP Agreement, anyinvestigation made by or on behalf of the DIP Lenders or anyborrowing under the DIP Agreement.



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Reporting: DIP Agreement Article VII and Section9.10

The Borrowers will provide the DIP Agent and DIP Lenderswith periodic financial reporting, including, without limitation:weekly thirteen (13) week cash flow forecasts; audited annualfinancial statements; unaudited quarterly and monthly financialstatements; annual financial projections; compliancecertificates; notice of material events; collateral reporting;periodic borrowing base certificates; receivables and payablesagainst aging reports and such other information reasonablyrequested by DIP Agent or any DIP Lender. Borrowers will berequired to reimburse DIP Agent for not more than one fieldaudit during the pendency of these cases, so long as no defaultor event of default has occurred under the DIP Credit Facility.

Indemnification:FBR 4001(c)(1)(B)(ix)

DIP Agreement Section 5.9

The Debtors, jointly and severally, indemnify each of the DIPLenders against any loss or expense which may arise or beattributable to each DIP Lenders obtaining, liquidating or employing deposits or other funds acquired to effect, fund or

maintain any DIP Loan (a) as a consequence of any failure bythe Borrowers to make any payment when due of any amountdue hereunder in connection with a LIBOR Rate Loan, (b) dueto any failure of the Borrowers to borrow, continue or converton a date specified therefor in a Notice of Borrowing or Noticeof Conversion/Continuation or (c) due to any payment,prepayment or conversion of any LIBOR Rate Loan on a dateother than the last day of the Interest Period therefor.

Joint Debtor Obligations: LBR 4001-2(a)(14) Interim Order 14b

No Debtor shall have any right of contribution, reimbursementor subrogation from any other Debtor, or any other Debtorsassets as a result of such Debtors use of Cash Collateral or DIP

Loans.

Waiver of Causes of Action:FBR 4001(c)(1)(B)(viii)

Interim Order 4(h)

Subject to right of a party- in-interest to object to such releaseas provided in the Interim Financing Order and Final FinancingOrder, as applicable, each Debtor forever waives and releasesany and all claims, counterclaims, causes of action, defensesand setoff rights against the Prepetition Secured Parties,whether arising at law or in equity, including, withoutlimitation, any recharacterization, subordination, avoidance orother claim arising under or pursuant to section 105 or chapter5 of the Bankruptcy Code or under any other similar provisionsof applicable state or federal law.

Financial Covenants: DIP Agreement Section 9.18

The DIP Credit Facility will require that the Borrowers at alltimes maintain Liquidity (defined below) of not less than$12,500,000. For purposes of this covenant, Liquidity means as of any date of determination, the sum of (i) theamount that the Borrowers are entitled to borrow under the DIPCredit Facility after giving effect to all outstanding obligationsand reserves thereunder, plus (ii) the Borrowers unimpairedcash on hand in deposit accounts, upon which the DIP Agent



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(for itself and as agent for the DIP Lenders) has a perfectedfirst priority security interest.

Events of Default:FBR 4001(c)(1(B)

LBR 4001-2(a)(10) and (11) DIP Agreement Section 11.1

DIP Credit Facility will be subject to usual and customaryevents of default, including but not limited to:

1. Default in payment of principal or interest of any DIP Loanor Reimbursement Obligation;

2. Certain events of default related to the Bankruptcy Cases,including conversion to a case under Chapter 7 of theBankruptcy Code; appointment of a trustee; any action iscommenced by the Debtors, or any other person obtains anorder (whether oral or written, interim or final, and whetheror not entered on the docket of the court) adverse to theDIP Agent or the DIP Lenders, in the Bankruptcy Case, toobtain additional financing or use Cash Collateral or to

incur indebtedness secured by a lien with priority equal toor superior to the DIP Liens or which is given superprioritystatus; notice is given of a sale under section 363 of theBankruptcy Code of Collateral as to which the DIP Agentand DIP Lenders are not proposed to be paid in full; anorder granting relief from or modifying the automatic stayof section 362 of the Bankruptcy Code to permit executionor enforcement of any liens on Collateral; filing of anapplication or an order by the Bankruptcy Court appointinga trustee, or an examiner with enlarged powers without theprior written consent of the DIP Agent; an order by theBankruptcy Court, without the prior written consent of the

DIP Agent, permitting any administrative expense or anyclaim to have administrative priority equal or superior tothe priority of the DIP Agent or granting a Lien on theCollateral other than a Permitted Lien; failure to file orfailure of the Bankruptcy Court to confirm aReorganization Plan containing provisions consistent withthe DIP Agreement regarding termination and releases of the DIP Agent and DIP Lenders within the exclusivityperiod provided in section 1121 of the Bankruptcy Code;any action is commenced by the Debtors, or any otherperson obtains an order (whether oral or written, interim orfinal, and whether or not entered on the docket of the court)

adverse to the DIP Agent or DIP Lenders to invalidate,reduce or otherwise impair the Liens or security interests of the DIP Agent; the invalidity of any Lien or securityinterest created by the DIP Agreement for any reason; anyaction is commenced by the Debtors, or any other personobtains an order (whether oral or written, interim or final,and whether or not entered on the docket of the court)adverse to the DIP Agent or the DIP Lenders, whichcontests any provision of any of the DIP Agreement or the



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validity, perfection, priority, nonavoidability orenforceability of any of the Liens and security interests of the DIP Agent or the DIP Lenders, as applicable; and suchother usual and customary events of defaults for similarfacilities, including an order reversing, vacating, staying ormodifying either the Interim Order or the Final Orderwithout the consent of the DIP Agent;

3. Termination of the Restructuring Support Agreement;

4. Default in either the payment of any Indebtedness (otherthan the DIP Loans or any Reimbursement Obligation) theaggregate outstanding amount of which post-petitionIndebtedness is in excess of $500,000 beyond the periodof grace if any, provided in the instrument or agreementunder which such Indebtedness was created, theobservance or performance of any other agreement orcondition relating to any post-petition Indebtedness (other

than the DIP Loans or any Reimbursement Obligation) theaggregate outstanding amount of which Indebtedness is inexcess of $500,000 or contained in any instrument oragreement evidencing, securing or relating thereto or anyother event shall occur or condition exist, the effect of which default or other event or condition is to cause anysuch Indebtedness to become due prior to its statedmaturity, or any such post-petition Indebtedness shall bedeclared due and payable, or required to be prepaid,mandatorily redeemed or repurchased prior to the statedmaturity thereof;

5. Default in the payment when due, or in the performance orobservance, of any obligation or condition of any MaterialContract post-petition;

6. Occurrence of any change of control; and

7. Any Debtor brings a motion, or any other person obtainsan order adverse to the DIP Agent or the DIP Lenders, inthe Bankruptcy Case, to contest the validity orenforceability of any DIP Loan Document or any DIPLien.

Enforcement of Remedies Interim Order 22(b) Upon or after the occurrence of any Event of Default, the DIPAgent and, as applicable, each DIP Lender shall be fullyauthorized, in its sole discretion, to exercise all remediesavailable to it under the DIP Documents and applicable law,provided that the DIP Agent shall, except to the extent theBankruptcy Court approves a shorter notice period, provide (i)five (5) days notice to the Debtors (with a copy to counsel tothe Committee, if any, counsel to the ad hoc group of SeniorSecured Noteholders, and the U.S. Trustee) prior to the



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termination of the Debtors right to use Cash Collateral, and (ii)seven (7) days notice to the Debtors (with a copy to counsel tothe Committee, if any, counsel to the ad hoc group of SeniorSecured Noteholders, and the U.S. Trustee) prior to theenforcement of the DIP Liens or exercise of any other rights orremedies against the DIP Collateral ((i) and (ii), the RemediesNotice Period ).

Governing Law andJurisdiction:

DIP Agreement Section 13.5

State of New York and the Bankruptcy Code.

C. The DIP Agreement Is the Best Available Under the Circumstances.

31. The Debtors submit that entry into the DIP Agreement is in the best

interests of the Debtors, their respective estates and creditors. Substantially all of the Debtors

assets are encumbered by the liens and security interests securing the Senior Secured Notes and

the Existing ABL Facility. Thus, if the Debtors received financing from a third party, absent

payment in full of the obligations owed under the Existing ABL Facility, the Debtors would be

required to attempt to prime the liens of the Existing ABL Lenders, which have indicated that

they would not consent to such priming. Notwithstanding these challenges, the Debtors sought

alternatives to the proposal made by the DIP Lenders. At the Companys direction, Evercore

approached six potential financing sources and each indicated that it would not be willing to

extend postpetition financing to the Debtors on an unsecured or junior basis.

32. In addition, on August 6, 2012, the Debtors received a non-binding

proposal for potential debtor-in-possession financing. This proposal was accompanied by a term

sheet for an alternative plan and was not available to the Debtors as a stand-alone financing

alternative.

33. Other than the Icahn DIP Proposal, which the Debtors determined to not

be in the best interests of their stakeholders for the reasons set forth above, the Debtors were

unable to locate a lender willing to provide financing on an unsecured or subordinated basis.



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Further, if the Debtors had been able to locate another debtor-in-possession lender willing to

provide a credit facility, such a facility could not have been secured by liens that primed the liens

of the Existing ABL Lenders without added cost and extensive litigation; thus, any such non-

consensual priming facility would have depleted the Debtors resources and introduced

additional uncertainty in these cases.

34. Moreover, as set forth above, the Debtors considered a number of factors

and engaged in good-faith negotiations with the DIP Lenders prior to determining to enter into

the DIP Agreement. The DIP Lenders ability to act quickly was a significant factor in the

Debtors determination to accept the DIP Lenders proposal. Further, the Debtors believe thatthe terms and conditions of the DIP Agreement are fair and reasonable under the circumstances.

Accordingly, the Debtors request that the DIP Lenders be afforded the benefits of section 364(e)

of the Bankruptcy Code.

35. For the reasons set forth above, the Debtors respectfully request that the

Court approve the Debtors use of Cash Collateral and entry into the DIP Credit Facility pursuant

to the terms set forth in the Orders and DIP Documents.

BASIS FOR RELIEF REQUESTED

36. Bankruptcy Code section 364(c) provides:

If the [debtor in possession] is unable to obtain unsecured creditallowable under section 503(b)(1) of this title as an administrativeexpense, the court, after notice and a hearing, may authorize theobtaining of credit or the incurring of debt

(1) with priority over any or all administrative expenses of the kindspecified in section 503(b) or 507(b) of this title;

(2) secured by a lien on property of the estate that is not otherwisesubject to a lien; or

(3) secured by a junior lien on property of the estate that is subjectto a lien.



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11 U.S.C. 364(c).

Bankruptcy Code section 364(d)(1) provides:

The court, after notice and a hearing, may authorize the obtainingof credit or the incurring of debt secured by a senior or equal lienon property of the estate that is subject to a lien only if

(A) the [debtor in possession] is unable to obtain such creditotherwise; and

(B) there is adequate protection of the interest of the holder of thelien on the property of the estate on which such senior or equal lienis proposed to be granted.

11 U.S.C. 364(d).

Bankruptcy Rule 4001(c)(2) provides, in relevant part:

The court may commence a final hearing on a motion for authorityto obtain credit no earlier than 14 days after service of the motion.If the motion so requests, the court may conduct a hearing beforesuch 14 day period expires, but the court may authorize theobtaining of credit only to the extent necessary to avoid immediateand irreparable harm to the estate pending a final hearing.

Fed. R. Bankr. P. 4001(c)(2).

Bankruptcy Rule 4001(d) provides, in relevant part, thata motion for approval [to modify or terminate the automatic stay]shall be served on (1) any committee elected under 705 orappointed under 1102 of the Code, or its authorized agent

. . . .

Unless the court fixes a different time, objections may be filedwithin 14 days of the mailing of notice.

Fed. R. Bankr. P. 4001(d)(1) - (2).

A. The DIP Agreement.

37. As set forth above, the Debtors believe that they would be unable to obtain

acceptable postpetition financing on an unsecured basis or on a junior priority basis to the



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Existing ABL Facility and the Senior Secured Notes in an amount, and within the timeframe, that

the Debtors required.

38. The Debtors negotiated the DIP Agreement at arms length a nd have

determined, in the exercise of their sound business judgment, that it is the best proposal under the

circumstances. Courts grant a debtor considerable deference in acting in accordance with its

business judgment. See, e.g., In re Ames Dept Stores, Inc., 115 B.R. 34, 40 (Bankr. S.D.N.Y.

1990) (courts have discretion under section 364 of the Bankruptcy Code to permit debtors to

exercise reasonable business judgment so long as (i) the terms of the financing agreement do not

leverage the bankruptcy process and powers, and (ii) the financing agreements purpose isprimarily to benefit the estate, not a party in interest).

39. The financing under the DIP Agreement provides the Debtors with the

liquidity necessary in case its unencumbered cash and Cash Collateral are insufficient to enable

them, inter alia: (a) to minimize disruption to their business; (b) to preserve and maximize the

value of their estates for the benefit of all creditors; and (c) to avoid immediate and irreparable

harm to their business, their creditors, their employees and their assets. Without the DIP

Financing, the Debtors would be compelled to operate under an unreasonably tight liquidity

margin, which could render the Debtors unable to meet their direct operating expenses and suffer

irreparable harm and jeopardize their chances at a successful reorganization.

B. Use of Cash Collateral.

40. Section 363(c)(2) of the Bankruptcy Code provides that the Debtors may

not use, sell or lease cash collateral unless (A) each entity that has an interest in such cash

collateral consents; or (B) the court, after notice and a hearing, authorizes such use, sale, or lease

in accordance with the provisions of this section. 11 U.S.C. 363(c)(2). The Required



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Consenting Noteholders and Existing ABL Lenders h ave consented to the Debtors use of Cash

Collateral on the terms and conditions set forth in the Interim Order.

41. In addition to the need for debtor-in-possession financing, the Debtors

require immediate use of the Cash Collateral pending a Final Hearing on this Motion. The

Debtors use of Cash Collateral is critical to the Debtors ability to pay operating expenses,

including payroll and the costs of administration of their chapter 11 cases. Such use prejudices

no one; to the contrary, it affirmatively and directly benefits the estates and creditors by

enhancing the prospects of a successful reorganization. The Interim Order is the product of

extensive negotiations with the DIP Lenders and the Required Consenting Noteholders andreflects the terms under which they would consent to the use of the Cash Collateral.

42. Based upon the foregoing, the Debtors request that the Court authorize the

Debtors to use the Cash Collateral in accordance with the terms set forth in the Interim Order and

the DIP Agreement.

C. Adequate Protection.

43. Section 363(e) of the Bankruptcy Code provides that on request of an

entity that has an interest in property used . . . or proposed to be used . . . by [a debtor in

possession], the court, with or without a hearing, shall prohibit or condition such use . . . as is

necessary to provide adequate protection of such interest. 11 U.S.C. 363(e). Section 361 of

the Bankruptcy Code delineates certain forms of adequate protection, which include periodic

cash payments, additional liens, replacement liens and other forms of relief. 11 U.S.C. 361.

What constitutes adequate protection must be decided on a case-by-case basis. See In re

OConnor , 808 F.2d 1393, 1396-97 (10th Cir. 1987); In re Martin, 761 F.2d 472, 474 (8th Cir.

1985); Shaw Indus., Inc. v. First Natl Bank (In re Shaw Indus., Inc.), 300 B.R. 861, 865-66

(Bankr. W.D. Pa. 2003) (quoting In re Sharon Steel Corp., 159 B.R. 165, 169 (Bankr. W.D. Pa.



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1993)). The focus of adequate protection is to protect a secured creditor against diminution in

the value of its interest in the particular collateral during the period of use. See In re Swedeland

Bev. Group, Inc. , 16 F.3d 552, 564 (3d Cir. 1994) (the whole purpose of adequate protection for

a creditor is to insure that the creditor recei ves the value for which he bargained prebankruptcy.

(citation omitted)).

44. In exchange for the Debtors use of the Prepetition Collateral, the Debtors

have agreed to provide certain adequate protection to the holders of Senior Secured Notes and the

Existing ABL Lenders, as the holders of secured claims that will be primed to secure the

obligations under the DIP Agreement.9

To that end, the Debtors and the Required ConsentingNoteholders have negotiated, and the Debtors request that the Court approve, as of the Petition

Date, certain protections of the interests of holders of Senior Secured Notes in the Prepetition

Collateral from any diminution in value.

45. Such protections (collectively, the Adequate Assurance ) include

granting the holders of Senior Secured Notes and the Existing ABL Lenders adequate protection

liens on the Prepetition Collateral, subject to the terms and priorities of the Intercreditor

Agreement, and superpriority administrative claims under section 507(b) of the Bankruptcy Code

to the extent of diminution in value, subject to the superpriority claims with respect to the DIP

Credit Facility. The Debtors have also agreed to provide, as adequate protection to holders of

Senior Secured Notes, monthly cash interest payments on the aggregate principal amount of the

Senior Secured Notes at the rate of 10.5% per annum, and the reimbursement of the reasonable

9 Section 364(d) of the Bankruptcy Code requires that adequate protection be provided where the liens of secured creditors are being primed to secure the obligations under a debtor-in-possession financing facility.See 11 U.S.C. 364(d).



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and documented out-of-pocket fees and expenses with respect to the financial and legal advisors

to the Required Consenting Noteholders.

46. The proposed Adequate Assurance is intended to protect the holders of

Senior Secured Notes from diminution in the value of their interests in the Prepetition Collateral

during the period it is used by the Debtors. See, e.g., In re Kain, 86 B.R. 506, 513 (Bankr. W.D.

Mich. 1988); In re Beker Indus. Corp., 58 B.R. 725, 736 (Bankr. S.D.N.Y. 1986). The Debtors

believe that the proposed Adequate Assurance is fair and reasonable and in accord with section

361 of the Bankruptcy Code.

47.

The Required Consenting Noteholders have agreed that the AdequateAssurance described above is sufficient to allow the Debtors to use the Cash Collateral as the

Debtors proceed through chapter 11 and simultaneously to protect their interest in the Prepetition

Collateral. Based upon the foregoing, the Debtors request that the Court authorize the Debtors to

access the Prepetition Collateral and the DIP Collateral, including, without limitation, the Cash

Collateral, and to provide adequate protection in accordance with the terms set forth in the

Interim Order.

D. Consent of Holders of Senior Secured Notes.

48. As discussed above, the Required Consenting Noteholders, holding greater

than two- thirds of the Senior Secured Notes, have consented to the Debtors use of Cash

Collateral and the Debtors entr y into the DIP Credit Facility pursuant to the terms of the Interim

Order. Pursuant to Section 6.1 of the Intercreditor Agreement, other than with respect to the

granting of security interests in the ABLs Second Priority Collateral , holders of Senior Secured

Notes have contractually agreed to consent to the DIP Credit Facility. Section 6.1 of the

Intercreditor Agreement provides, among other things:



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If the Company or any other Grantor shall be subject to anyInsolvency or Liquidation Proceeding and the First Priority Agentshall desire to permit the use of cash collateral or to permit theCompany or any other Grantor to obtain financing under Section363 or Section 364 of Title 11 of the United States Code or any

similar Bankruptcy Law in an aggregate principal amount thatwhen taken together with the principal amount of First Lien Claimsunder the Credit Agreement does not exceed [$25 million] and, inany event, which is not to be secured by any of the ABLs Second Priority Collateral , then the Second Priority Agent, on behalf of itself and the Second Priority Lenders, agrees that it will raise noobjection to such use of cash collateral or DIP Financing and willnot request adequate protection or any other relief in connectiontherewith (except to the extent permitted by Section 6.3 or relatingto the ABLs Second Priority Collateral) and, to the extent theLiens securing the First Priority Claims are subordinated or pari

passu with such DIP Financing, will subordinate its Liens in theCommon Collateral (o ther than the ABLs Second PriorityCollateral) to such DIP Financing (and all Obligations relatingthereto) on the same basis as the Liens on the First PriorityCollateral that secures the Second Priority Claims are subordinatedto the Liens thereon that secures the First Priority Claims underthis Agreement, . . .

(emphasis added, capitalized terms as defined in the Intercreditor Agreement).

49. However, even though the DIP Credit Facility does contemplate liens on

the ABLs Second Priority Collateral , such liens will be expressly junior in priority to the liens of

the holders of Senior Secured Notes, and will be in the place of the junior liens in the ABLs

Second Priority Collateral under the Existing ABL Facility; therefore, such liens are without

prejudice to holders of Senior Secured Notes.

50. Further, to compensate holders of Senior Secured Notes to the extent that

the interest of holders of Senior Secured Notes in the Prepetition Collateral is diminished due to

the Debtors use of such Prepetition Collate ral, the Debtors propose to provide holders of Senior

Secured Notes with Adequate Assurance, including monthly cash interest payments on the Senior

Secured Notes at a rate of 10.5% per annum. Therefore, the holders of Senior Secured Notes are

not prejudiced by the granting of junior liens on the ABLs Second Priority Collateral , which,



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pursuant to the terms of the Intercreditor Agreement, would be the sole basis for an objection by

a holder of Senior Secured Notes to the terms of the DIP Credit Facility.

E. Roll-Up.

51. The Roll Up Loans were a material part of the negotiation process, and

required by the DIP Lenders as a condition for providing post-petition financing. Indeed, the

Existing ABL Lenders have indicated that they would not have agreed to be primed by new

lenders, and would not have consented to the Debtors use of Cash Collateral , absent the Roll-Up

of the outstanding balance under the Existing ABL Facility. Further, as the Prepackaged Plan

provides for the payment in full in cash of the claims under the Existing ABL Facility, the

deemed payment of such claims immediately pursuant to the DIP Credit Facility only alters the

timing of such payment, and does not prejudice the rights of other parties in interest in these

cases.

52. Courts in this District, as well as elsewhere, have approved roll-ups in

recent chapter 11 cases. See, e.g., In re Velo Holdings Inc., Case No. 12-11384 (MG) (Bankr.

S.D.N.Y. April 23, 2012); In re Blockbuster Inc., Case No. 10-14997 (BRL) (Bankr. S.D.N.Y.

Oct. 27, 2010); In re Uno Rest. Holdings Corp., Case No. 10-10209 (MG) (Bankr. S.D.N.Y. Feb.

18, 2010) ; In re Tronox Inc., Case No. 09-10156 (ALG) (Bankr. S.D.N.Y. Feb. 6, 2009); In re

Lyondell Chem. Co., Case No. 09-10023 (REG) (Bankr. S.D.N.Y. Jan. 6, 2009); In re WP Steel

Venture LLC, Case No. 12-11661 (KJC) (Bankr. D. Del. June 21, 2012); In re Foamex Int l Inc.,

Case No. 09-10560 (KJC) (Bankr. D. Del. Feb. 18, 2009); In re Aleris Int l, Inc., Case No. 09-

10478 (BLS) (Bankr. D. Del. Feb. 12, 2009). Consistent with this authority, the Debtors

respectfully submit that the Court should approve the Debtors decision to accept and enter into

the DIP Facility.



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F. Modification of the Automatic Stay.

53. Section 362 of the Bankruptcy Code provides for an automatic stay upon

the filing of a bankruptcy petition. The proposed DIP Agreement and Interim Order contemplate

the modification of the automatic stay to the extent necessary to permit the Debtors and the DIP

Agent and DIP Lenders to take all actions necessary to implement the DIP Agreement and the

Interim Order. However, pursuant to Local Rule 4001-2(c), the DIP Lenders will provide seven

(7) days notice to the Debtors, U.S. Trustee and other parties after an event of default before

enforcing remedies under the DIP Documents, and five ( 5) days notice to such parties before

terminating the use of Cash Collateral.

54. Stay modification provisions of this type are customary components of

postpetition debtor-in- possession financing facilities and, in the Debtors business judgment, are

reasonable under the circumstances, and will provide the Debtors and other parties reasonable

time to cure or contest an event of default. Accordingly, the Debtors request that the Court

authorize the modification of the automatic stay in accordance with the terms set forth in the

Interim Order.

G. Interim Approval and Irreparable Harm.

55. Bankruptcy Rule 4001 provides that a final hearing on a motion to obtain

postpetition financing and use of cash collateral may not be commenced earlier than fourteen

(14) days after the service of such motion. Upon request, however, the Court is empowered to

conduct a preliminary, expedited hearing on the motion and to authorize the use of cash collateral

and proposed debtor-in-possession financing to the extent necessary to avoid immediate and

irreparable harm to a debtors estate.

56. The Debtors have an urgent and immediate need for cash to continue to

operate. Absent access to Cash Collateral, and, if necessary, the DIP Credit Facility, the Debtors



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would have no ability to meet their ongoing obligations to suppliers, vendors, employees and

other creditors. If the Debtors are unable to pay their ongoing obligations, they will not be able

to operate. In contrast, the Debtors use of Cash Collateral and access when needed to the DIP

Facility will ensure that the going concern value of their assets is preserved, a value

substantially greater than the value which would be realized if the Debtors were forced to cease

operations immediately due to a lack of liquidity. Accordingly, the Debtors request that the

Court conduct a preliminary hearing on the Motion and authorize the Debtors, from the entry of

the Interim Order until the Final Hearing, to use Cash Collateral and obtain credit pursuant to the

DIP Credit Facility to the extent necessary to avoid immediate and irreparable harm to theirestates.

H. Establishing Notice Procedures and Scheduling the Final Hearing.

57. Notice of the request for the authority to enter into the Interim Order will

be given to: (a) the Office of the United States Trustee for the Southern District of New York;

(b) counsel to the administrative agent under the Debtors prepetition and postpetition revolving

credit agreements; (c) the financial institutions where the Debtors maintain deposit accounts;

(d) counsel to the Required Consenting Noteholders; (e) the Debtors thirty (30) largest

unsecured creditors on a consolidated basis; (f) the Debtors landlords; (g) any known holders of

prepetition liens on the Prepetition Collateral; (h) the Internal Revenue Service; (g) the Securities

and Exchange Commission; (h) the United States Attorney for the Southern District of New

York; and (i) the Federal Communications Commission. The Debtors submit that, under the

circumstances, no further notice of the hearing on the interim financing is necessary and request

that any further notice be dispensed with and waived.



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58. The Debtors further request that the Court schedule the Final Hearing and

authorize them to mail copies of the entered Interim Order, which fixes the time, date and manner

for the filing of objections to entry of the Final Order.

59. The Debtors request that the Court consider such notice of the Final

Hearing to be sufficient notice under Bankruptcy Rules 2002 and 4001.

60. No previous request for the relief sought herein has been made to this

Court or any other court.



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CONCLUSION

WHEREFORE the Debtors request that the Court (a) enter an order substantially

in the form of the proposed Interim Order; (b) after the Final Hearing, enter the Final Order

substantially in the form that shall be filed with the Court; and (c) grant such other and further

relief as this Court may deem just and proper.

Dated: August 22, 2012New York, New York

WILLKIE FARR & GALLAGHER LLPProposed Attorneys to Debtors and

Debtors in Possession

By: /s/ Jennifer J. HardyRachel C. StricklandJennifer J. HardyAnna C. Burns

787 Seventh AvenueNew York, New York 10019(212) 728-8000



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EXHIBIT A

DIP Agreement

12-13581 Doc 11-1 Filed 08/22/12 Entered 08/22/12 18:20:24 Exhibit A - DIPAgreement Pg 1 of 121


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BUSINESS # 1644424 v.9

$25,000,000DEBTOR IN POSSESSION AMENDED AND RESTATED CREDIT AGREEMENT

dated as of August __, 2012,by and among

BROADVIEW NETWORKS HOLDINGS, INC.,BROADVIEW NETWORKS, INC.,

BROADVIEW NETWORKS OF MASSACHUSETTS, INC.,BROADVIEW NETWORKS OF VIRGINIA, INC., and

BRIDGECOM INTERNATIONAL, INC.,as Borrowers, Debtors and Debtors in Possession,

VARIOUS FINANCIAL INSTITUTIONS AND OTHER PERSONS FROM TIME TOTIME PARTIES HERETO,

as Lenders,

and

THE CIT GROUP/BUSINESS CREDIT, INC.,as Administrative Agent

_______________________________



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TABLE OF CONTENTS

ARTICLE I. DEFINITIONS ..........................................................................................................2

Section 1.1 Definitions........................................................................................................2Section 1.2 Other Definitions and Provisions ...................................................................32

Section 1.3 Accounting Terms ..........................................................................................33Section 1.4 UCC Terms ....................................................................................................33Section 1.5 Rounding ........................................................................................................33Section 1.6 References to Agreement and Laws ..............................................................33Section 1.7 Times of Day..................................................................................................33Section 1.8 Letter of Credit Amounts ...............................................................................33

ARTICLE II. REVOLVING CREDIT FACILITY ......................................................................33

Section 2.1 Revolving Credit Loans .................................................................................33Section 2.2 Intentionally Omitted .....................................................................................34Section 2.3 Procedure for Advances of Revolving Credit Loans ....................................34

Section 2.4 Repayment and Prepayment of Revolving Credit Loans ...............................34Section 2.5 Permanent Reduction of the Revolving Credit Commitment ........................35Section 2.6 Termination of Revolving Credit Facility ......................................................36

ARTICLE III. LETTER OF CREDIT FACILITY .......................................................................37

Section 3.1 L/C Commitment ...........................................................................................37Section 3.2 Procedure for Issuance of Letters of Credit ...................................................37Section 3.3 Commissions and Other Charges ...................................................................38Section 3.4 L/C Participations ..........................................................................................38Section 3.5 Reimbursement Obligation of the Borrowers ................................................39Section 3.6 Effect of Letter of Credit Application ............................................................40

ARTICLE IV. SUPERPRIORITY CLAIMS, LIENS, ETC ........................................................41Section 4.1 Superpriority Claims and Collateral Security ................................................41Section 4.2 No Filings Required .......................................................................................41Section 4.3 Grants, Rights and Remedies .........................................................................41Section 4.4 No Discharge; Survival of Claims .................................................................42Section 4.5 Survival ..........................................................................................................42Section 4.6 Disavowal and Waiver of Any Subsequent Relief Based on Changed

Circumstances ................................................................................................42Section 4.7 Exclusive Remedy For Any Alleged Post-Petition Claim .............................43Section 4.8 Prohibition on Surcharge, Etc ........................................................................44Section 4.9 Marshaling Obligations ..................................................................................44

ARTICLE V. GENERAL LOAN PROVISIONS ........................................................................44

Section 5.1 Interest............................................................................................................44Section 5.2 Notice and Manner of Conversion or Continuation of Loans........................45Section 5.3 Fees ................................................................................................................46Section 5.4 Manner of Payment ........................................................................................46Section 5.5 Evidence of Indebtedness ..............................................................................47Section 5.6 Adjustments ...................................................................................................47



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Section 5.7 Nature of Obligations of Lenders Regarding Extensions of Credit;Assumption by the Administrative Agent .....................................................48

Section 5.8 Changed Circumstances Affecting LIBOR ...................................................49Section 5.9 Indemnity .......................................................................................................49Section 5.10 Increased Costs ............................................................................................50

Section 5.11 Taxes ............................................................................................................51Section 5.12 Mitigation Obligations; Replacement