Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 1 of 14

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1 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 1 of 14 IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION In re: ROOMSTORE, INC., Debtor. Chapter 11 Case No. 11- MOTION OF DEBTOR FOR ORDER UNDER 11 U.S.C. 105(a) AND 366, AND BANKRUPTCY RULE 6003 (I) APPROVING DEBTOR S ADEQUATE ASSURANCE OF PAYMENT TO UTILITY COMPANIES, (II) ESTABLISHING PROCEDURES FOR RESOLVING REQUESTS BY UTILITY COMPANIES FOR ADDITIONAL ASSURANCE OF PAYMENT, AND SCHEDULING A HEARING WITH RESPECT TO CONTESTED ADEQUATE ASSURANCE OF PAYMENT REQUESTS The debtor and debtor-in-possession (the Debtor ) in the above-captioned chapter 11 case (the Bankruptcy Case ) hereby seeks the entry of an order (the Utility Order ), in the form attached hereto as Exhibit A, pursuant to sections 105(a) and 366 of title 11 of chapter 11 of the United States Code, 11 U.S.C. 101, et seq., as amended (the Bankruptcy Code ), and Rule 6003 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), (i) approving Debtor s adequate assurance of post-petition payment of the Utility Companies (as defined LOWENSTEIN SANDLER PC Kenneth A. Rosen (NJ Bar No ) (Admission Pro Hac Vice Pending) Bruce D. Buechler (NJ Bar No ) (Admission Pro Hac Vice Pending) Mary E. Seymour (NJ Bar No ) (Admission Pro Hac Vice Pending) Cassandra M. Porter (NJ Bar No ) (Admission Pro Hac Vice Pending) Andrew David Behlman (NJ Bar No ) (Admission Pro Hac Vice Pending) 65 Livingston Avenue Roseland, New Jersey (973) and - KAPLAN & FRANK, PLC Troy Savenko (Va. Bar No ) Leslie A. Skiba (Va. Bar No ) 7 East 2nd Street ( ) Post Office Box 2470 Richmond, Virginia (804) Proposed Co-Counsel to the Debtor and Debtor-in-Possession

2 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 2 of 14 herein), (ii) establishing procedures (the Additional Adequate Assurance Procedures ) for resolving any subsequent requests for additional adequate assurance of payment by the Utility Companies, (iii) scheduling a hearing on any Additional Adequate Assurance Requests (as defined below), and (iv) such other relief as deemed necessary by the Court (the Motion ). In support of the Motion, the Debtor relies upon and incorporates by reference the Brubaker Declaration (as defined herein) and states as follows PRELIMINARY STATEMENT 1. In connection with the operation of its business and management of its properties, including its Retail Stores and Warehouses (as defined herein), the Debtor receives utility services (the Utility Services ) from various companies and Utility Service providers (the Utility Companies ), including providers of water and sewage, satellite and cable television, gas and natural gas, pest control services, ambient and background music for its stores, electricity, trash and recycling, circuit service for Wide-Area-Network ( WAN ), telephone and cellular phone services, and internet access (collectively, the Utilities ). A list of Utility Companies is attached hereto as Exhibit B Prior to the Petition Date, the Utility Companies provided Utility Services to the Debtor at various locations. The continuation of Utility Services post-petition is crucial to the continued operations of the Debtor and, ultimately, the Debtor s ability to reorganize. BACKGROUND 3. On the date hereof (the Petition Date ), the Debtor commenced the Bankruptcy Case by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code. 1 The Debtor s inclusion of certain services or list of Utility Companies on Exhibit B to this Motion (the List ) does not mean that all Utility Companies are considered a utility within the meaning of Bankruptcy Code section 366 or the Utility Services are services within the meaning of section

3 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 3 of No trustee or examiner has been appointed in the Bankruptcy Case. No official committee of unsecured creditors of the Debtor has yet been appointed. The Debtor continues to manage and operate its business as a debtor-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 5. The Debtor was founded in 1992 in Dallas, Texas with four retail furniture stores. With over $300 million in net sales for its fiscal year ending 2010, the Debtor is one of the thirty largest furniture retailers in the United States. 6. Currently, the Debtor is headquartered in Richmond, Virginia and operates a chain of sixty-three retail furniture stores, including both large-format stores and clearance centers (collectively the Retail Stores ) in eight states: Pennsylvania, Maryland, Virginia, North Carolina, South Carolina, Florida, Alabama, and Texas. In addition, the Debtor has seven warehouses and distribution centers (the Warehouses ) located in Maryland, North Carolina, Texas, and Virginia that service the Retail Stores. 7. Prior to the Petition Date, the Debtor commenced store closing sales at five of its Retail Stores, located in Hoover, Alabama; Fayetteville, North Carolina; Houston, Texas, Norfolk, Virginia, and Baltimore, Maryland. 8. General information about the Debtor, its business, its capital structure, the events leading to the filing of its Bankruptcy Case, and the relief sought by the Debtor in its various First Day Pleadings is contained in the Declaration of Lewis M. Brubaker, Jr., Senior Vice President and Chief Financial Officer of RoomStore, Inc., in Support of Chapter 11 Petition and First Day Pleadings (the Brubaker Declaration ) filed contemporaneously herewith. JURISDICTION 9. This Court has jurisdiction over this Motion under 28 U.S.C. 157 and This is a core proceeding under 28 U.S.C. 157(b). 10. Venue is proper under 28 U.S.C and

4 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 4 of The statutory predicates for the relief sought herein are sections 105(a) and 366 of the Bankruptcy Code and Bankruptcy Rule RELIEF REQUESTED 12. By this Motion, the Debtor seeks the entry of an Order (i) approving the Debtor s segregation of blocked funds to be held by Wells Fargo Bank, N.A. (the Bank ) in the amount of $270,000 in a segregated account (the Utility Blocked Account ) to provide Utility Companies with adequate assurance of payment under Bankruptcy Code sections 366(b) and 366(c)(1)(A) and deeming all Utility Companies to be adequately assured of payment pursuant to section 366(b), (ii) approving the Additional Adequate Assurance Procedures, as set forth below, as the sole method for resolving disputes with Utility Companies regarding adequate assurance of payment, (iii) scheduling a hearing, to be held on or before a day that is thirty days after the Petition Date, on any Additional Adequate Assurance Requests that are disputed by the Debtor, and (iv) such other relief as deemed necessary by the Court. PROPOSED ADEQUATE ASSURANCE REQUEST PROCEDURES 13. By this Motion, the Debtor seeks to preserve the protections that Utility Companies have under the Bankruptcy Code, while affording the Debtor an opportunity to provide and negotiate adequate assurance of payment without facing the threat of imminent termination of Utility Services. In particular, the Debtor requests approval of certain procedures that balance the protections afforded the Utility Companies under Bankruptcy Code section 366 and the Debtor s need for continuous and uninterrupted Utility Services. 14. The Debtor fully intends to pay all post-petition obligations owed to the Utility Companies in a timely manner. Moreover, the Debtor expects that its operating cash flow and borrowings under its proposed post-petition credit facility will be sufficient to pay such postpetition utility obligations. -4-

5 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 5 of The Debtor proposes to establish the Utility Blocked Account, in accordance with the terms and conditions of the Debtor s proposed post-petition credit facility and the proposed form of order granting this motion attached hereto, in the amount of $270,000, which amount is equal to the charges incurred by the Debtor for approximately two weeks of Utility Services from all of the Utility Companies during the one year period prior to the Petition Date. The Utility Blocked Account will be established either by permitting the Bank to block available borrowing in amount equal to $270,000 or by segregating the funds into a separate account to be administered in accordance with the Utility Order. The Utility Blocked Account would serve as a cash security deposit to provide adequate assurance of payment for Utility Services provided to the Debtor post-petition. 16. The Utility Blocked Account may be drawn on by a Utility Company in a manner that is substantially similar to a letter of credit. In the event the Debtor fails to timely pay for post-petition Utility Services when due in accordance with normal pre-petition invoice terms, the Utility Company would be permitted to submit a payment request (the Payment Request ), substantially in the form attached to the Utility Order as Exhibit C, to the Bank in the amount of the due but unpaid charges for post-petition services, rounded to the nearest $100. The Payment Request only requires that the Utility Company (i) certify that the Debtor defaulted in the payment for post-petition Utility Services and that the post-petition amounts due on account of such Utility Services are outstanding and unpaid; (ii) certify that the amount requested is not and does not relate to an additional adequate assurance of payment request, and (iii) provide the Bank with wire transfer or other payment instructions, as more fully set forth in Exhibit C, and (iv) simultaneously send a copy of the Payment Request to the Debtor and its counsel. -5-

6 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 6 of Any payments made from the Utility Blocked Account shall be made by the Bank in the order that the Payment Requests were actually received by the Bank. 2 PROPOSED ADDITIONAL ADEQUATE ASSURANCE REQUEST PROCEDURES The Debtor submits that the Utility Blocked Account, in conjunction with the Debtor s ability to pay for future Utility Services in the ordinary course of business (collectively, the Proposed Adequate Assurance ), constitutes sufficient adequate assurance of payment. Nonetheless, the Debtor anticipates that certain Utility Companies may not find the Utility Blocked Account satisfactory and may request additional adequate assurance of payment pursuant to Bankruptcy Code section 366(c)(2) ( Additional Adequate Assurance ). 19. Accordingly, the Debtor proposes that any such requests be addressed as follows: (a) Except as provided by the Additional Adequate Assurance Procedures, the Utility Companies shall not discontinue, alter or refuse service on account of any unpaid prepetition charges, or require additional adequate assurance of payment other than the Utility Blocked Account. (b) The Debtor will serve a copy of the Utility Order on the Utility Companies within two business days after entry of the Utility Order on the Court s docket granting the relief requested herein. 2 The Bank shall have no obligation to investigate the bona fides of the Payment Request, and as set forth in the proposed Utility Order attached hereto, the Debtor will assume all risks with respect to the acts and omissions of, or misuse of the Utility Blocked Account by the respective Utility Companies that are the beneficiaries of such Utility Blocked Account. Moreover, the Debtor s only recourse in the event of an improper Payment Request is against the party making such Payment Request and not against the Bank. 3 This section of the Motion is intended as a summary of the procedures set forth in the Utility Order and is qualified in its entirety by the Utility Order. In the event there is a discrepancy between the procedures in the Motion and those in the Utility Order, the Utility Order shall control in all respects. Parties are strongly encouraged to refer to the Utility Order. -6-

7 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 7 of 14 (c) In the event that a Utility Company maintains that the Utility Blocked Account is not satisfactory adequate assurance of payment as contemplated by Bankruptcy Code section 366(c)(2), the Utility Company must serve a request (an Additional Adequate Assurance Request ) for adequate assurance in addition to or in lieu of its rights in the Utility Blocked Account so that it is received by the Debtor and its counsel no later than five business days prior to the Determination Hearing (as defined below) (the Additional Adequate Assurance Request Deadline ). (d) Any Additional Adequate Assurance Request must: (i) be made in writing, (ii) set forth the location(s) for which Utility Services are provided, (iii) set forth the detailed reasons why the Utility Company requests Additional Adequate Assurance; (iv) set forth what the Utility Company would accept as satisfactory adequate assurance of payment, and (v) set forth the contact information with an electronic mail address to which the Debtor may respond to the Additional Adequate Assurance Request. (e) Upon the Debtor s receipt of an Additional Adequate Assurance Request, the Debtor will either (i) advise the Utility Company in writing on or before a day that is no less than three business days prior to the Determination Hearing (as defined below) that the Additional Adequate Assurance Request is acceptable, (ii) consensually resolve the Additional Adequate Assurance Request with the Utility Company prior to the Determination Hearing, or (iii) contest the Utility Company s request pursuant to Bankruptcy Code section 366(c)(3) at a hearing (the Determination Hearing ) to be held on before the day that is thirty days after the Petition Date, or such other date as the Debtor and the Utility Company may agree. (f) If the Debtor agrees that the Additional Adequate Assurance Request is acceptable, or the Debtor and the Utility Company consensually resolve the Additional Adequate Assurance Request before the hearing, the Debtor may remove the Utility Company from Exhibit B and the amount in the Utility Blocked Account shall be reduced by the amount -7-

8 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 8 of 14 corresponding to the two week average ascribed by the Debtor to the services such entity provided to the Debtor prior to the Petition Date. (g) The Determination Hearing will be an evidentiary hearing at which the Court will determine whether the Utility Blocked Account and the additional adequate assurance of payment requested by the Utility Company should be modified pursuant to Bankruptcy Code section 366(c)(3)(A). 20. The Debtor further requests that any Utility Company that does not serve an Additional Adequate Assurance Request by the Additional Adequate Assurance Request Deadline shall be deemed to have received adequate assurance of payment within the meaning of Bankruptcy Code section 366(c)(2), and shall further be deemed to have waived any right to seek additional adequate assurance during the course of the Debtor s chapter 11 case, except as provided in Bankruptcy Code sections 366(b)(2) or 366(c)(3), as applicable To the extent that the Debtor subsequently identifies additional providers of Utility Services or determines that an entity was improperly included as a Utility Company, the Debtor seeks authority, in its sole discretion and without further order of Court, to amend Exhibit A attached to the proposed Utility Order to add or delete any Utility Company. 22. The Debtor proposes to have the terms of the proposed order attached hereto apply to any such subsequently identified Utility Company. Moreover, for those Utility Companies that are subsequently added to Exhibit B of this Motion, the Debtor will serve a copy of this Motion and the Utility Order entered with respect to the Motion on such Utility Company, along with an amended Exhibit B. Such subsequently added entities would then have twenty days from service of the Utility Order to make an Additional Adequate Assurance Request. For 4 The Debtor reserves its right to challenge any section 503(b)(9) claim filed by a Utility Company on any basis, including, without limitation, that such Utility Company received benefits on account of inclusion as a Utility Company on Exhibit B. -8-

9 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 9 of 14 any entity that is removed from Exhibit B, the Debtor shall provide notice of such entity s removal and such entity will have an opportunity to object. 23. In the event that any Utility Company, including a subsequently added Utility Company, files and/or serves an Additional Adequate Assurance Request after the Additional Adequate Assurance Request Deadline, such request shall be treated as a request under Bankruptcy Code section 366(b) and shall be granted, if at all, only after the Utility Company making such request schedules such request for hearing, on notice, in accordance with the provisions of the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure, including Bankruptcy Code section 366(b). 24. All Utility Companies, including subsequently added Utility Companies, shall be prohibited from altering, refusing, or discontinuing Utility Services to the Debtor absent further order of this Court, in accordance with Bankruptcy Code section 366(a). 25. To the extent any entity that is not listed on Exhibit B believes it provides the Debtor with Utility Services within the meaning of Bankruptcy Code section 366, that entity must make a written request to be added to Exhibit A within twenty days of the date the Utility Order is entered by the Court (the Twenty Day Period ). The Debtor requests that a failure to make a written request within the Twenty Day Period shall bar such entity from altering, refusing or discontinuing the services it provides to the Debtor under to section 366 of the Bankruptcy Code, absent further order of the Court. The Debtor maintains that the relief requested herein strikes a fair balance between the rights of Utility Companies and the rights of the Debtor under the Bankruptcy Code and the need, for the benefit of the Debtor and its estate, for the Debtor to continue to receive the Utility Services upon which its business depends. The Debtor does not believe that the Utility Companies will be prejudiced by the establishment of the Utility Blocked Account, the uninterrupted continuation of the Utility Services, and the approval of the Additional Adequate Assurance Procedures. -9-

10 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 10 of 14 BASIS FOR RELIEF 26. The relief requested herein is proper pursuant to sections 105(a) and 366 of the Bankruptcy Code. Section 366 of the Bankruptcy Code is specifically designed to simultaneously protect the interests of the Debtor and the Utility Companies. The interests of the Debtor are protected to the extent that the Bankruptcy Code prohibits the automatic termination of Utility Services on account of outstanding prepetition invoices. Likewise, the interests of the Utility Companies are protected to the extent the Bankruptcy Code requires the Debtor to provide adequate assurance of payment for future Utility Services. See, H.R. Rep. No , at 350 (1978), as reprinted in 1978 U.S.C.C.A.N. 5963, 6306; see also, In re Syroco, Inc., 374 B.R. 60, (Bankr. D.P.R. 2007). 27. During the first thirty days after the Petition Date, a Utility Company may not alter, refuse or discontinue services to a chapter 11 debtor on account of outstanding pre-petition invoices (the Utilities Stay Period ). See, 11 U.S.C. 366(c)(2). Upon expiration of the Utilities Stay Period, however, a Utility Company may terminate its services if the debtor has not provided the Utility Company with adequate assurance of payment in the form of a deposit or other security for post petition services. See, 11 U.S.C. 366(b). 28. Section 366(c)(1)(A) of the Bankruptcy Code, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ( BAPCPA ), defines adequate assurance of payment as (i) a cash deposit; (ii) a letter of credit; (iii) a certificate of deposit; (iv) a surety bond; (v) a prepayment of utility consumption; or (vi) another form of security that is mutually agreed upon between the utility and the debtor or the trustee. Although the amended provision specifies the form of assurance, the determination of whether the amount of assurance is deemed adequate remains within this Court s discretion. See, In re Circuit City Stores, Inc., 2009 WL , at *4 (Bankr. E.D. Va. Jan. 14, 2009) 5 ; see also, Long Island Lighting Co. v. 5 A copy of this opinion is attached hereto as Exhibit D. -10-

11 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 11 of 14 Great Atlantic & Pacific Tea Co., Inc. (In re The Great Atlantic & Pacific Tea Co., Inc.), 2011 WL at *6 (S.D.N.Y. Nov. 14, 2011)(affirming bankruptcy court s decision to permit debtor to set aside a cash deposit in the equivalent amount of two-weeks worth of utility services) Prior to the enactment of BAPCPA, courts had the discretion under [ ] 366 to determine the amount, if any, of adequate assurance payments or collateral required to a utility company. See, Circuit City, id. (citing Va. Elec. & Power Co. v. Caldor, Inc., 117 F.3d 646, (2d Cir. 1997)). Since BAPCPA s enactment almost six years ago, courts construing section 366(b) of the Bankruptcy Code have recognized that adequate assurance of payment does not constitute an absolute guaranty of a debtor s ability to pay. See Circuit City, 2009, WL at 4 (citing In re Adelphia Bus. Solutions, Inc., 280 B.R. 63, 80 (Bankr. S.D.N.Y. 2002)). 30. In addition, section 105(a) of the Bankruptcy Code provides that the Court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. The purpose of section 105(a) is to assure the bankruptcy courts power to take whatever action is appropriate or necessary in aid of the exercise of its jurisdiction. 2 COLLIER ON BANKRUPTCY , at (16th ed. Rev. 2011). The Debtor respectfully submits that this Court should use its equitable powers under section 105(a) because the relief requested is necessary to ensure normal operations at the Debtor s facilities as they transition into chapter 11. The Debtor will suffer a severe cash drain if any Utility Company is permitted to condition postpetition services on the payment of an exorbitantly burdensome deposit or other extreme forms of adequate protection. The relief sought herein is thus necessary to the extent it prevents a Utility Company from conditioning post-petition Utility Services on unreasonable demands. 31. As set forth above, if the Utility Companies are permitted to terminate Utility Services on the thirty-first day after the Petition Date, a substantial disruption to the Debtor s 6 A copy of this opinion is attached hereto as Exhibit E. -11-

12 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 12 of 14 operations will occur, and the Debtor s business will be irreparably harmed. If faced with the imminent termination of Utility Services, the Debtor may be forced to pay any amount demanded by the Utility Companies to avoid the cessation of essential Utility Services. 32. The Debtor submits that the procedures set forth herein constitute an orderly process for providing adequate assurance of payment to the Utility Companies, without risking irreparable harm to the estate. The Court has discretion to modify any request for assurance of payment, and assurance of payment need only be adequate in light of the facts and circumstances of a given case. See e.g., Circuit City, 2009 WL at *5 (internal citations omitted); see also, So. Cal. Edison Co. v. Crystal Cathedral Ministries, 454 B.R. 124, 130 (C.D. Cal. June 30, 2011). However, as set forth above, and in accordance with section 366(c)(1)(A) of the Bankruptcy Code, the Debtor will provide Additional Adequate Assurance of payment, if deemed necessary by the Court, if a Utility Company makes an Additional Adequate Assurance Request. 33. Without the procedures set forth herein, the Debtor would be forced to address requests by Utility Companies in a haphazard manner at a critical period, while the Debtor is trying to conduct this chapter 11 case. The Debtor could be forced to capitulate to almost any demand made by the Utility Companies, or face the discontinuation of Utility Services and a potential shutdown of its business. The orderly process contemplated by the procedures set forth herein will avert such a potentially disastrous outcome, enabling the Debtor to make a smooth transition into chapter 11, while ensuring a fair process for providing adequate assurance to the Utility Companies to the extent required. 34. Based on the foregoing facts and authorities, the Debtor believes that granting the relief requested will not prejudice the rights of the Utility Companies under section 366 of the Bankruptcy Code and cause to satisfy Bankruptcy Rule

13 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 13 of 14 NOTICE 35. Notice of this Motion will be given to (i) the Office of the United States Trustee for the Eastern District of Virginia; (ii) counsel to the Debtor s prepetition lender; (iii) the Debtor s twenty-five largest unsecured creditors; and (iv) the Utility Companies. WAIVER OF MEMORANDUM OF LAW 36. Pursuant to Rule (G) of the Local Rules of the Bankruptcy Court and because there are no novel issues of law presented in the Motion and all applicable authority is set forth in the Motion, the Debtor respectfully requests that the Court waive the requirement that this Motion be accompanied by a separate memorandum of law. NO PRIOR REQUEST 37. No previous request for the relief sought herein has been made to this or any other Court. WHEREFORE, the Debtor respectfully requests that the Court enter an Order, substantially in the form annexed hereto as Exhibit A, granting the relief requested herein and such other and further relief as the Court may deem just and proper. -13-

14 Case DOT Doc 6 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Main Document Page 14 of 14 Dated: December 12, 2011 Richmond, Virginia Respectfully submitted, /s/ Troy Savenko LOWENSTEIN SANDLER PC Kenneth A. Rosen (NJ Bar No ) (Admission Pro Hac Vice Pending) Bruce D. Buechler (NJ Bar No ) (Admission Pro Hac Vice Pending) Mary E. Seymour (NJ Bar No ) (Admission Pro Hac Vice Pending) Cassandra M. Porter (NJ Bar No ) (Admission Pro Hac Vice Pending) Andrew David Behlman (NJ Bar No ) (Admission Pro Hac Vice Pending) 65 Livingston Avenue Roseland, New Jersey (973) and - KAPLAN & FRANK, PLC Troy Savenko (Va. Bar No ) Leslie A. Skiba (Va. Bar No ) 7 East Second Street ( ) Post Office Box 2470 Richmond, Virginia (804) Proposed Counsel to the Debtor and Debtor in Possession -14-

15 Case DOT Doc 6-1 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Proposed Order Exh. A Page 1 of 10 EXHIBIT A IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION In re: ROOMSTORE, INC., Debtor. Chapter 11 Case No. 11- ORDER UNDER 11 U.S.C. 105(a) AND 366, AND BANKRUPTCY RULE 6003 (I) APPROVING DEBTOR S ADEQUATE ASSURANCE OF PAYMENT TO UTILITY COMPANIES, (II) ESTABLISHING PROCEDURES FOR RESOLVING REQUESTS BY UTILITY COMPANIES FOR ADDITIONAL ASSURANCE OF PAYMENT, AND (III) SCHEDULING A HEARING WITH RESPECT TO CONTESTED ADEQUATE ASSURANCE OF PAYMENT REQUESTS Upon the motion (the Motion ) of the Debtor 1 pursuant to Bankruptcy Code sections 105(a) and 366 and Bankruptcy Rule 6003, for an order: (i) approving Debtor s adequate 1 Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Motion. LOWENSTEIN SANDLER PC Kenneth A. Rosen (NJ Bar No ) (Admission Pro Hac Vice Pending) Bruce D. Buechler (NJ Bar No ) (Admission Pro Hac Vice Pending) Mary E. Seymour (NJ Bar No ) (Admission Pro Hac Vice Pending) Cassandra M. Porter (NJ Bar No ) (Admission Pro Hac Vice Pending) Andrew David Behlman (NJ Bar No ) (Admission Pro Hac Vice Pending) 65 Livingston Avenue Roseland, New Jersey (973) and - KAPLAN & FRANK, PLC Troy Savenko (Va. Bar No ) Leslie A. Skiba (Va. Bar No ) 7 East 2nd Street ( ) Post Office Box 2470 Richmond, Virginia (804) Proposed Co-Counsel to the Debtor and Debtor-in-Possession

16 Case DOT Doc 6-1 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Proposed Order Exh. A Page 2 of 10 assurance of post-petition payment of the Utility Companies 2, (ii) establishing procedures (the Additional Adequate Assurance Procedures ) for resolving any subsequent requests for Additional Adequate Assurance of payment by the Utility Companies, (iii) scheduling a hearing on any Additional Adequate Assurance Requests, and (iv)such other relief as deemed necessary by the Court; and the Court having reviewed the Motion and the Brubaker Declaration; and the Court having determined that the relief requested in the Motion is in the best interests of the Debtor, its estate, its creditors, and other parties in interest; and it appearing that proper and adequate notice of the Motion has been given and that no other or further notice is necessary; and upon the record herein; and after due deliberation thereon; and good and sufficient cause appearing therefor, it is hereby ORDERED, ADJUDGED, and DECREED that: 1. The Motion is GRANTED. A. The Utility Blocked Account, the Payment Request, and Proof of Payment Certification. 2. The Debtor shall have reserved or segregated the amount of $270,000 which shall be placed in a segregated account to be held by Wells Fargo Bank (the Bank ) to be administered in accordance with this Utility Order (the Utility Blocked Account ), as adequate assurance of payment, under Bankruptcy Code section 366(b), of charges incurred by the Debtor for Utility Services provided by the Utility Companies after the Petition Date, subject to the Debtor s right to decrease the funds reserved in the Utility Blocked Account in accordance with this Utility Order or to otherwise seek authority from the Court to decrease the funds reserved in the Utility Blocked Account. 2 A list of Utility Companies is attached to the Motion as Exhibit B ( List ). The List may be modified in the Debtor s discretion pursuant to the terms of the Additional Adequate Assurance Request Procedures described in the Motion. The Debtor s inclusion of certain Utility Services on the List does not mean that the Utility Companies are a utility within the meaning of Bankruptcy Code section 366 or the Utility Services are such services within the meaning of Bankruptcy Code section 366.

17 Case DOT Doc 6-1 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Proposed Order Exh. A Page 3 of So long as the Utility Blocked Account is funded in an amount not less than $270,000 the Debtor shall be deemed to have furnished all Utility Companies, including Utility Companies subsequently added to Exhibit B of the Motion, with adequate assurance of payment under section 366(b) of the Bankruptcy Code. In the event that the Debtor is unable to fund the Utility Blocked Account in the amount of $270,000, the Debtor shall provide notice to the United States Trustee and any Official Committee of Unsecured Creditors to the Debtor appointed in this Bankruptcy Case. 4. In the event the Debtor fails to timely pay for post-petition Utility Services when due in accordance with normal pre-petition invoice terms, the Utility Company to which any such payment is owed shall be entitled to submit a Payment Request, in the form attached to the Motion as Exhibit C (which is hereby approved in its entirety), to the Debtor and the Bank in the amount of the unpaid charges rounded up to the nearest $100 owed to such Utility Company for such post-petition Utility Services. 5. Notice of any Payment Request shall be sent to the Debtor: RoomStore, Inc., Patterson Ave., Richmond, VA 23238, Attention: Brian D. Bertonneau, Esq., with copies by first class postage paid mail to counsel for the Debtor, Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, NJ 07068, Attention: Bruce Buechler, Esq., as indicated in the form of Payment Request attached hereto. Through the Payment Request, such Utility Company shall be permitted to only seek payment for unpaid post-petition utility charges that were due in accordance with normal pre-petition invoice terms, and not payment for any additional adequate assurance of payment requests.

18 Case DOT Doc 6-1 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Proposed Order Exh. A Page 4 of In the Payment Request, the Utility Company shall (i) certify that the Debtor defaulted in the payment of post-petition Utilities Services and amounts on account of such Utility Services are due, outstanding, and unpaid, (ii) certify that the amount requested is not and does not relate to an additional adequate assurance request, and (iii) provide the Bank with wire transfer or other payment instructions. 7. Any payments made from the Utility Blocked Account shall be made by the Bank in the order that the Payment Requests were actually received by the Bank. 8. The Bank shall have no obligation to investigate the bona fides of any request to decrease the Utility Blocked Account. The Debtor assumes all risks with respect to the acts and omissions of, or misuse of the Utility Blocked Account by the respective Utility Companies that are the beneficiaries of such Utility Blocked Account. In furtherance and not in limitation of the foregoing, the Bank shall not be responsible for: (i) the misapplication by any Utility Company of the proceeds of any payment from funds reserved pursuant to such Utility Blocked Account; or (ii) any consequences arising from the Bank s actions, other than actions resulting from the Bank s gross negligence or willful misconduct. The Debtor s only recourse in the event of an improper Payment Request is against the party making such Payment Request and not against the Bank. 9. Any payments to the Utility Companies shall be without prejudice to any and all rights, claims and/or defenses of the Debtor with respect to such Payment Request, including but not limited to the Debtor s right to contest such Payment Request in this Court, or any court with jurisdiction. Any payments made with funds reserved in the Utility Blocked Account shall be made in the order that the Payment Requests were actually received by the Debtor. In the event

19 Case DOT Doc 6-1 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Proposed Order Exh. A Page 5 of 10 that the Debtor lacks sufficient availability, the Bank shall have no obligation to replenish such Utility Blocked Account. The Bank will transfer any remaining funds held in the Utility Blocked Account in accordance with the Debtor s instructions upon a commitment termination date. B. The Additional Adequate Assurance Procedures. 10. The Additional Adequate Assurance Procedures are hereby approved as follows: (a) Except as provided by the Additional Adequate Assurance Procedures, the Utility Companies are forbidden to discontinue, alter or refuse service on account of any unpaid prepetition charges, or require additional adequate assurance of payment other than the Utility Blocked Account. (b) The Debtor will serve copy of the Utility Order on the Utility Companies within two business days after entry of the Utility Order on the Court s docket granting the relief requested herein. (c) In the event that a Utility Company maintains that the Utility Blocked Account is not satisfactory adequate assurance of payment as contemplated by Bankruptcy Code section 366(c)(2), the Utility Company must serve a request (an Additional Adequate Assurance Request ) for adequate assurance in addition to or in lieu of its rights in the Utility Blocked Account so that it is received by the Debtor and its counsel no later than five

20 Case DOT Doc 6-1 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Proposed Order Exh. A Page 6 of 10 (5) business days prior to the Determination Hearing (as defined below)(the Additional Adequate Assurance Request Deadline ). (d) Any Additional Adequate Assurance Request must: (i) be made in writing, (ii) set forth the location(s) for which Utility Services are provided, (iii) set forth why the Utility Company needs Additional Adequate Assurance, (iv) set forth what the Utility Company would accept as satisfactory adequate assurance of payment, and (iv) set forth the contact information with an electronic mail address to which the Debtor may respond to the Additional Adequate Assurance Request. (e) Upon the Debtor s receipt of an Additional Adequate Assurance Request, the Debtor will either (i) advise the Utility Company in writing on or before a day that is no less than three business days prior to the Determination Hearing (as defined below) that the Additional Adequate Assurance Request is acceptable, (ii) consensually resolve the Additional Adequate Assurance Request with the Utility Company prior to the Determination Hearing, or (iii) contest the Utility Company s request pursuant to Bankruptcy Code section 366(c)(3) at a hearing (the Determination Hearing ) to be held on, 2012, or such other date as the Debtor and the Utility Company may agree. (f) If the Debtor agrees that the Additional Adequate

21 Case DOT Doc 6-1 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Proposed Order Exh. A Page 7 of 10 Assurance Request is acceptable, or the Debtor and the Utility Company consensually resolve the Additional Adequate Assurance Request before the hearing, the Debtor may remove the Utility Company from Exhibit B to the Motion and the amount in the Utility Blocked Account shall be reduced by the amount corresponding to the two week average ascribed by the Debtor to the services such entity provided to the Debtor prior to the Petition Date. (g) The Determination Hearing will be an evidentiary hearing at which the Court will determine whether the Utility Blocked Account and the additional adequate assurance of payment requested by the Utility Company should be modified pursuant to Bankruptcy Code section 366(c)(3)(A). 11. Absent further order of this Court, the Utility Companies, including any subsequently added Utility Companies, are prohibited from altering, refusing, or discontinuing service to or discriminating against the Debtor on account of unpaid prepetition invoices or due to the commencement of these cases, or requiring the Debtor to pay a deposit or other security in connection with the provision of post-petition Utility Services, other than in accordance with the Additional Adequate Assurance Procedures contained herein. 12. Any Utility Company that does not serve an Additional Adequate Assurance Request by the Additional Adequate Assurance Request Deadline shall be deemed to have received adequate assurance of payment that is satisfactory to such Utility Company within the

22 Case DOT Doc 6-1 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Proposed Order Exh. A Page 8 of 10 meaning of Bankruptcy Code section 366(c)(2), and shall further be deemed to have waived any right to seek additional adequate assurance during the course of the Debtor s chapter 11 case, except as provided in Bankruptcy Code section 366(c)(3). 13. The Debtor is authorized, in its sole discretion, to amend Exhibit B of the Motion to add or delete any entity, and this Order shall apply to any such entity that is subsequently added to Exhibit B hereto. (a) For Utility Companies that are subsequently added to Exhibit B, the Debtor shall serve a copy of this Order on such Utility Company, along with an amended Exhibit B, and such subsequently added entities shall have twenty days from service of this Order to make an Additional Adequate Assurance Request. (b) For any entity that is removed from Exhibit B, the Debtor shall provide notice of such entity s removal and such entity shall have twenty days from service of the notice to file an objection with the Court and serve such objection on counsel to the Debtor so as to be received by such date. If an objection is not properly filed and served, the entity will be deemed removed from Exhibit B and will not be treated as a Utility Company for purposes of this Order. In the event an objection is properly filed and served, the Court shall schedule a hearing to consider entity s removal and objection thereto. Pending resolution of the objection, the entity shall continue to be treated as a Utility Company for purposes of this Order. 14. In the event that any Utility Company, including a subsequently added Utility Company, files and/or serves an Additional Adequate Assurance Request after the Additional Adequate Assurance Request Deadline, such request shall be treated as a request under Bankruptcy Code sections 366(b) or 366(c)(3), as applicable, and shall be granted, if at all, only

23 Case DOT Doc 6-1 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Proposed Order Exh. A Page 9 of 10 after the Utility Company making such request schedules such request for hearing, on notice, in accordance with the provisions of the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure, including Bankruptcy Code sections 366(b) or 366(c)(3). 15. To the extent any entity that is not listed on Exhibit A believes it provides the Debtor with Utility Services within the meaning of Bankruptcy Code section 366, that entity must make a written request to be added to the list within twenty days of the date of this Order (the Twenty Day Period ). Failure to make a written request within the Twenty Day Period bars such entity from terminating the services it provides to the Debtor pursuant to section 366 of the Bankruptcy Code. 16. Notwithstanding anything to the contrary herein, the Debtor s right to challenge any claim on any basis filed pursuant to Bankruptcy Code sections 501 or 503(b)(9), including, without limitation, claims filed by Utility Companies or entities removed or deemed removed from Exhibit B, are preserved. 17. The Debtor is authorized, but not directed to pay on a timely basis in accordance with their prepetition practices all undisputed invoices in respect of post-petition Utility Services rendered by the Utility Companies to the Debtor. 18. The Court finds and determines that the requirements of Bankruptcy Rule 6003 are satisfied and that the relief requested is necessary to avoid immediate and irreparable harm. 19. Nothing in this Order or the Motion shall be deemed to constitute post-petition assumption or adoption of any agreement under Bankruptcy Code section The requirement under Local Bankruptcy Rule (G) to file a memorandum of law in connection with the Motion is hereby waived.

24 Case DOT Doc 6-1 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Proposed Order Exh. A Page 10 of Notwithstanding Bankruptcy Rule 6003, this Order shall be effective and enforceable immediately upon its entry. 22. This Court retains jurisdiction to hear and determine all matters arising from or related to the implementation or interpretation of this Order. ENTERED: WE ASK FOR THIS: UNITED STATES BANKRUPTCY JUDGE LOWENSTEIN SANDLER PC Kenneth A. Rosen (NJ Bar No ) (Admission Pro Hac Vice Pending) Bruce D. Buechler (NJ Bar No ) (Admission Pro Hac Vice Pending) Mary E. Seymour (NJ Bar No ) (Admission Pro Hac Vice Pending) Cassandra M. Porter (NJ Bar No ) (Admission Pro Hac Vice Pending) Andrew David Behlman (NJ Bar No ) (Admission Pro Hac Vice Pending) 65 Livingston Avenue Roseland, New Jersey (973) and - KAPLAN & FRANK, PLC Troy Savenko (Va. Bar No ) Leslie A. Skiba (Va. Bar No ) 7 East Second Street ( ) Post Office Box 2470 Richmond, Virginia (804) Proposed Counsel to the Debtor and Debtor in Possession CERTIFICATION UNDER LOCAL RULE (C) I hereby certify that notice of the Debtor s intent to seek entry of the foregoing proposed order was provided to the parties identified in the Motion and copy of this proposed order was provided to the Office of the United States Trustee for the Eastern District of Virginia prior to submission to this Court.

25 Case DOT Doc 6-2 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Exhibit(s) B - List of Utility Companies Page 1 of 12 EXHIBIT B LIST OF UTILITY COMPANIES

26 Case DOT Doc 6-2 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Exhibit(s) B - List of Utility Companies Page 2 of 12 VEND NAME ROOMSTORE'S ACCT #(s) ALABAMA GAS CORPORATION ' ALABAMA GAS CORPORATION ' ALABAMA POWER ' ALABAMA POWER ' ALLIED WASTE SERVICES ' ALLIED WASTE SERVICES ' ALLIED WASTE SERVICES ' ALLIED WASTE SERVICES ' ALLIED WASTE SERVICES ' ALLIED WASTE SERVICES ' ALLIED WASTE SERVICES ' ALLIED WASTE SERVICES #853 ' ALLIED WASTE SERVICES #853 ' ALLIED WASTE SERVICES #853 ' ALLIED WASTE SERVICES #853 ' ALLIED WASTE SERVICES #853 ' ALLIED WASTE SERVICES #853 ' AMERICAN DISPOSAL COMMERCIAL ' ANNE ARUNDEL COUNTY ' ANNE ARUNDEL COUNTY ' ANNE ARUNDEL COUNTY ' ANNE ARUNDEL COUNTY ' AT&T ' AT&T ' AT&T ' AT&T ' AT&T ' AT&T ' AT&T ' AT&T ' AT&T ' AT&T '817 a AT&T '817 A A AT&T '817A AT&T ' AT&T ' AT&T ' AT&T ' AT&T ' AT&T ' AT&T ' AT&T MOBILITY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY '

27 Case DOT Doc 6-2 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Exhibit(s) B - List of Utility Companies Page 3 of 12 VEND NAME ROOMSTORE'S ACCT #(s) ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' ATMOS ENERGY ' BESSEMER UTILITIES ' BEXARMET WATER DISTRICT ' BGE ' 9707 BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' BGE ' CAPE FEAR PUBLIC UTILITY AUTHO ' CAPE FEAR PUBLIC UTILITY AUTHO ' CAROLINA WASTE SERVICES LLC ' CENTERPOINT ENERGY ' CENTERPOINT ENERGY ' CENTERPOINT ENERGY ' CENTERPOINT ENERGY ' CENTERPOINT ENERGY ' CENTURYLINK ' CENTURYLINK '

28 Case DOT Doc 6-2 Filed 12/12/11 Entered 12/12/11 14:08:13 Desc Exhibit(s) B - List of Utility Companies Page 4 of 12 VEND NAME ROOMSTORE'S ACCT #(s) CENTURYLINK ' CENTURYLINK ' CENTURYLINK ' CENTURYLINK ' CENTURYLINK ' CENTURYLINK ' CENTURYLINK ' CENTURYLINK ' CENTURYLINK ' CENTURYLINK ' CENTURYLINK ' CENTURYLINK ' CHARLESTON WATER SYSTEM ' CHARLESTON WATER SYSTEM ' CHARLESTON WATER SYSTEM ' CITY OF ARLINGTON ' CITY OF ARLINGTON ' CITY OF AUSTIN UTILITIES ' CITY OF AUSTIN UTILITIES ' CITY OF AUSTIN UTILITIES ' CITY OF AUSTIN UTILITIES ' CITY OF AUSTIN UTILITIES ' CITY OF AUSTIN UTILITIES ' CITY OF AUSTIN UTILITIES ' CITY OF BALTIMORE ' CITY OF DENTON UTILITIES ' CITY OF DURHAM ' CITY OF FALLS CHURCH ' CITY OF FARMERS BRANCH ' CITY OF FARMERS BRANCH ' CITY OF GRAPEVINE WATER ' CITY OF GRAPEVINE WATER ' CITY OF GRAPEVINE WATER ' CITY OF HOUSTON ' CITY OF HOUSTON WATER DEPT ' CITY OF HOUSTON WATER DEPT ' CITY OF HOUSTON WATER DEPT ' CITY OF MESQUITE ' CITY OF MESQUITE ' CITY OF PLANO UTILITIES ' CITY OF PLANO UTILITIES ' CITY OF RALEIGH ' CITY OF RALEIGH ' CITY OF TALLAHASSE ' CITY OF TEMPLE TEXAS ' CITY OF TYLER '