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Item 1.03.
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Bankruptcy or Receivership.
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As previously disclosed, on May 27, 2020
(the “Petition Date”), Tuesday Morning Corporation (the “Company”) and certain of its direct and indirect
subsidiaries (collectively with the Company, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”)
under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court
for the Northern District of Texas, Dallas Division (the “Bankruptcy Court”). The Chapter 11 Cases are being administered
jointly under the caption “In re: Tuesday Morning Corporation, et. al., Case No. 20-31476-HDH-11.”
The Debtors will continue to operate their
businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On May 28, 2020, the Bankruptcy Court approved a variety
of “first day” motions, including motions to obtain customary relief intended to ensure the Debtors’ ability
to continue their ordinary operations after the Petition Date.
Interim DIP Order
On May 28, 2020, the Bankruptcy Court issued
an interim order [Docket No. 67] (the “Interim DIP Order”) approving, among other things, (1) the Debtors’ entry
into the Senior Secured Super Priority Debtor-in-Possession Credit Agreement (the “DIP ABL Credit Agreement”) among
the Debtors, JPMorgan Chase Bank, N.A., as administrative agent, for itself and the other lenders, which provides for a super priority
secured debtor-in-possession revolving credit facility in an aggregate amount of up to $100 million (the “DIP Facility”),
and (2) the Debtors’ use of cash collateral in accordance with the terms of the DIP ABL Credit Agreement. Pursuant to the
Interim DIP Order, an initial amount of up to $50 million will be available for revolving loans under the DIP Facility, with the
remaining amounts to become available upon entry of a final order by the Bankruptcy Court.
On May 29, 2020, the Company entered into
the DIP ABL Credit Agreement. The lenders under the DIP ABL Credit Agreement are the existing lenders under the Credit Agreement,
dated August 18, 2015 and as previously amended (the “Pre-Petition ABL Credit Agreement”), among the Debtors, JPMorgan
Chase Bank, N.A., in its capacity as administrative agent, swingline lender and issuing bank, and the Commitment Parties as lenders.
The DIP ABL Credit Agreement includes conditions
precedent, representations and warranties, affirmative and negative covenants, and events of default customary for financings of
this type and size. The DIP ABL Credit Agreement requires the Debtors to, among other things, maintain certain minimum liquidity
requirements, obtain additional debtor-in-possession financing in an amount of up to $25 million secured by the Debtors’
real estate, and receive approval of a plan of reorganization or sale of substantially all assets of the Debtors through the chapter
11 process by agreed upon deadlines.
Under the terms
of the DIP ABL Credit Agreement, amounts available for advances would be subject to a borrowing base generally consistent
with the borrowing base under the Pre-Petition ABL Credit Agreement, subject to certain agreed upon exceptions. The DIP ABL
Credit Agreement requires that all proceeds of advances under the DIP Facility be used only for ordinary course general
corporate and working capital purposes, costs of administration of the Chapter 11 Cases, certain professional fees and fees
and expenses relating to the DIP Facility, in each case, in accordance with a cash flow budget that will be updated
periodically (the “Budget”), subject to certain permitted variances. The DIP ABL Credit Agreement requires that
all cash received by the Debtors (other than proceeds of the DIP Facility) be applied to repay outstanding amounts under the
Pre-Petition ABL Credit Agreement.
The commitments of the lenders under the
DIP ABL Credit Agreement will terminate and outstanding borrowings under the DIP ABL Credit Agreement will mature at the earliest
of the date which is one hundred eighty (180) days after the Petition Date; the date of consummation of a sale of all or substantially
all of the Debtors’ assets; the effective date of a plan of reorganization; or upon the occurrence of an event of default
under the DIP ABL Credit Agreement or such other date as the outstanding borrowings under the DIP ABL Credit Agreement are accelerated.
The foregoing summary of the DIP ABL Credit
Agreement is qualified in its entirety by reference to the full text of the DIP ABL Credit Agreement, a copy of which is attached
hereto as Exhibit 10.1 and incorporated by reference herein.
Interim NOL Order
On May 29, 2020, the Bankruptcy Court issued
an interim order [Docket No. 98] (including the exhibits attached thereto, the “Interim NOL Order”) designed to assist
the Debtors in preserving certain net operating losses and other tax attributes by establishing, among other things, notification
and hearing procedures (the “Procedures”) relating to proposed transfers of the Company’s common stock and the
taking of worthless stock deductions and setting a final hearing to consider the issues addressed in the Interim NOL Order. The
Procedures, among other things, restrict transfers involving, and require notice of the holdings of and proposed transactions by
any person or “entity” (as defined the applicable U.S. Treasury Regulations) owning or seeking to acquire ownership
of 4.5% or more of the Company’s common stock. The Interim NOL Order provides that any actions in violation of the Procedures
(including the notice requirements) would be null and void ab initio, and (a) the person or entity making such a transfer
would be required to take remedial actions specified by the Debtors to appropriately reflect that such transfer of the Company’s
common stock is null and void ab initio and (b) the person or entity making such a declaration of worthlessness with respect
to the Company’s common stock would be required to file an amended tax return revoking such declaration and any related deduction
to reflect that such declaration is void ab initio.
A hearing to consider entry of a final order
approving the Procedures will be held on June 15, 2020, at 1:30 p.m. prevailing Central time. Any objections or response to entry
of the final order shall be filed no later than June 14, 2020, at 4:00 p.m., prevailing Central Time, and served on the parties
identified in the Notice of Procedures.
The foregoing summary is qualified in its
entirety by reference to the full text of the Interim NOL Order, a copy of which is attached hereto as Exhibit 4.1 and incorporated
by reference herein.