Listen to the bankruptcy court hearing of defense contractor Noble Supply & Logistics, LLC et al. held September 16, 2026

Good morning. We are on the record in Noble Supply and Logistics LLC, which is Case Number 20300And69. Let me thank the parties. I know this is all set on very short notice. And the briefing that came through has been very helpful.

And I appreciate you all scramble to do that. So I don't take that for granted. I appreciate that. I guess, I'm happy to start by getting a little bit of an understanding of the lay of the land. And before we launch into evidence and argument, I guess, I'd like to understand if we could sort of crystallize where there are disputes.

So, Mr. Veena, happy to start with you.

Good morning, Your Honor. For the record, David Deane of Coleshotts on behalf of the debtors. As the court is aware, we're here today on the debtors' motion to compel Defense Logistics Agency or DLA to pay the debtors certain undisputed amounts necessary to maintain the debtors operations in these cases. With me today is my co counsel, Seth Van Alden and Rob, Abergotti, both of whom submitted declarations in support of the motion today. Now as detailed in the motion, we're here, your honor, because on September 4, with no notice or explanation to us, the DLA instituted a complete block on all the payments owed to the debtors.

As of the date of the motion, the DLA owed the debtors more than $3,000,000 on account of invoices that had been properly submitted and scheduled for payment. In just a few days since the motion was filed, your honor, the number had increased has increased to over $5,800,000 and will increase to $8,000,000 in the next couple of weeks. Importantly, the debtors books and records reflect over $32,000,000 owed by the DLA to the debtors in total. And $26,000,000 that $32,000,000 is contained and included in the debtors thirteen week interim budget that was approved by the court on an interim basis a couple of weeks ago. Now, as you're as you'll hear from Mr.

Albergotti today, there's simply no way for the debtors to remain in Chapter 11 and in compliance with its covenants if if these undisputed amounts aren't perceived by the debtors in the next couple of weeks. And I think just I think it might be important to give you an update on the sale process. The the IOI deadline was yesterday. We did receive seven IOIs. We feel pretty good about the sale process right now.

And I think allowing us to continue with that process would be value maximized

for everybody. So I get you need the money.

We need the money.

And I get that if you get the money, you're going to use it for good and valuable purposes that will maximize value for the benefit of everybody. I get all of that. The question is, are you entitled to the money?

Well, we believe so.

Right now, I understand. But so I'm much more interested in that than in the fact that you need it. Let's assume you need it. There are lots of times when people need money in order to run a case, but if they don't have a legal right to it, the bank support can't help them, right?

But certainly, we'll get into the argument, but I'll just give you a

few Yes, so I want to give you a chance to be heard. But I guess, having read the government's papers, I guess, where let me just rattle off the issues on which I'm most interested and concerned. And I'll need help on the math, because I mean, I've read the papers, but I haven't really sat down and puzzled through like with a spreadsheet, okay, exactly what parts are associated with which arguments. But, so the government's there are various claims that the government makes that it's entitled to a right of set off, right? Part of it is this disincentive payment that it looks like it's a net 7,700,000 And there's also these False Claims Act claims as to which they're asserting the right of set off.

And so when you say that there are amounts that are undisputedly owed, I guess my question is, if there's stuff that's indisputably owed after in excess of what the government claims is owed to it, that's one thing. And if though but if the rights of set off would consume the payables, that's another. And then we've got questions of, okay, do we have mutuality? And if the claims that are subject to set off are disputed and liquidated, then what do we do? And so, that's those are the questions that as I get on the bench, I don't know the answer to.

There were other points that were made about whether the contracts are executory, whether we need

I don't think we're going to get that

back then.

And that seemed to me less critical to the determination than the questions that I started with. So, in any event, I hope that's making some sense. That's sort of what I'm struggling with as I get on the bench.

Yes. Let me try to respond to the last part first. I don't think we need to decide whether the contract's executory today was an alternative argument to enforce the stay. So, I don't think that that's really germane to the so much germane to the hearing today. I think where we're ultimately going to come out is that we agree that we owe the government the $537 under the settlement agreement.

We believe that the rest of the amount is purely an ipso facto bankruptcy trigger that's an unenforceable penalty. So it's a very disputed amount, and we don't think it's over. The disincentive payments, what they failed to mention in their declaration and their paper, which we'll put into evidence today when we get there, is that we actually asserted an $80,000,000 claim against them for breach of those contracts. And that $7,900,000 disincentive payment is part of that and is also highly in dispute. And I'll show you the pleading or the letter that we submitted in the form of the claim that specifically knows that those amounts are in dispute.

And when we get into legal argument, I'll explain to you why I don't think STRUMP, allows an administrative hold for set off of disputed amounts. And if this were just about the $537,000, your honor, we would have agreed to that. We wouldn't be here today.

Okay.

It's about the disputed amounts. Okay. So that's really what this this hearing boils down to, in a nutshell. And I think more most importantly, your honor, is they we believe that they have delayed the filing of a motion for relief in violation of the state to try to get these issues decided. So I understand.

If we have what is really a strump issue, I don't know that I know all the answers, but at least I know how to think about that. And I'm just trying to do

I do think this is a strump issue. This case is where this I think today's hearing is about whether the administrative hold, so to speak, the block on the CAGE codes, the block on payments that they indisputably owed us was proper under the doctrine of Strumpf.

Okay. So, I think I know how to think. And so look, if that's if what we have is that legal issue, I mean, there may be, I don't know if the facts are disputed or not. Look, I understand some of the claims are disputed. I don't think anyone is asking me today to liquidate those undisputed claims, well, not speak for any of you.

You're welcome to put on evidence and ask me to do that. But let me ask this other question just so I understood by way of framing. Is there a mutuality issue? Does the debtor tend there's a mutuality issue with respect to the claim of set off? Or do you acknowledge that there is sufficient mutuality that to the extent the claim is that the disputed claim is valid, it's the government has a set off right?

As far well, there's one issue on mutuality that I don't think we dispute right now, but they haven't filed a full robust motion. We haven't had a

chance to brief it.

But just as a threshold matter, today, we don't appear to have a dispute on the position the government's taken on the unitary creditor theory. But I think it's going to take a little bit more analysis for us to decide the pre versus post issue and when the claims arose. So we haven't quite gotten there in the analysis because this response was just filed.

I see. No, I understand. No, my question, let's assume assume the government is a single, The United States is a single entity. I didn't know if different debtor entities created mutuality issues.

I don't believe so, Your Honor, but it's something that we would need to analyze a little

bit further. Okay. But you're not here making that?

We're not here. Our position is we're not here to argue whether they are entitled to relief from state because they haven't filed a motion. We think they should have had to have done that very promptly after issuing a hold under the construct structure.

So, I understand that position. And but look, the case was the passage of time in this case has all been relatively short. So, I understand you're saying they should have moved faster, maybe you're right, maybe you're not. I'm inclined and look, I get that you need the money right away. But I set this hearing as promptly as I reasonably could after the motion was filed.

So, here we are. And I guess, I'm interested if there's authority for your proposition that Strumf doesn't have application where the counterparties claim against the debtor is disputed?

We have a Third Circuit case and under common law that says you can only set off disputed claims.

Well, so I know you can't actually affect set off. But I guess, let me just

Yeah, the question is can you put a hold on something while you figure it out? That's the issue.

Exactly. And is there a case that answers that question?

There is no case directly on point that answers it one way or the other that we're familiar with because this is STRUP is about banks.

No, I understand. But the common sense point of I've got this right of set off and I shouldn't be required to send the money out the door and thereby lose my right has a common sense to it. And I guess my common sense reaction to it, again I'm just making this up, so I don't know if there is case where it says the other the opposite, I'd be interested in understanding it. But my common sense reaction is, well, if that's the case, we should set up a prompt estimation procedure and do the best we can to liquidate it. And that's exactly what five zero six is about, right, is about when full liquidation would delay the administration of the case, that seems to be a basis to make people move quickly.

That's not going to get you paid tomorrow. So I guess I'm interested in understanding is that way of thinking about dealing with this problem a way to think about it, are there cases that I should read in order to be smarter about that? I know we're all moving fast and we're all doing the best we can, but that's where my head is.

We're not aware of any authority where a creditor has been allowed to put an administrative hold on place in place in connection with the disputed claim.

Okay. I understand that. That's the issue. Are there cases that say this administrative hold is improper because the claim is subject to bona fide dispute?

No. But there are cases that say you cannot set off.

I understand. I understand. I understand that. Okay.

So the

question is, can you exercise leverage as a litigation party and basically block the debtor from getting paid when the amounts are dispute?

Put another way, does it make sense for a court when that's the case to set up an expedited process to bottom it out and get it resolved promptly?

Well, the other thing that I think is highly relevant here is that you're going to hear from Mr. Albigati supplemental director today, there's going to be $32,000,000 of most of which is going to be undisputed that the DLA owes to us. So if you allow us to get paid the incremental amounts that we're asking for today, pending that resolution, they're still going to be more than adequately protected to affect that.

That's an evidentiary question. If the maximum amount of their set off is otherwise adequately protected. I believe it is. Okay. Well, if you can show me that, that would make a difference.

Okay.

Let me

hear from the government and see what The United States thinks about the question in front of me. And again, I do appreciate you're here on very short notice and I appreciate the paper. But if you can help me with some of the questions that I was discussing with Mr. Dean, that would be very helpful.

Good morning, Your Honor. Alastair, just going to do on behalf of The United States. I do appreciate the court's comments about recognizing sort of the short notice and we appreciate the court accommodating witnesses. I think Your Honor touched on exactly the point about set off, which is that as shown in the papers and the evidence, the dealer hasn't actually performed the set off. In other words, the hold is what's in place and so Right.

No, I get you have an effective set off. If you had, there'd be we'd be having a different conversation because right, so three sixty two(seven) makes really clear you can't have done that. So you're not getting that many points for not having done it because it would be expressly prohibited. Yes. But I appreciate it nevertheless.

But the question is, you've placed an administrative hold, Strumpf isn't really about disputed claims, right? It's about the bank and there's a liquidated loan and there's a bank account, not these sort of inchoate claims. And so I get the common sense behind your paper of, yes, but we shouldn't lose our rights in the meantime. But I also there's a common sense to Mr. Dean's point of, yes, but you can't like strangle us in the meantime.

So help me think about and if there's law that I'm not aware of that helps me think about those questions, I'd be interested in what that is. Does that make am I making any sense?

You are, your Honor. And I'm also not aware as Mr. Dean noted of any controlling precedent that would influence or sway the Court in that sense. But

I have to say, sometimes I love how interesting my job is and other times I have a different reaction how interesting my job is. So, but let me let you continue.

So, Your Honor, I think you alluded to the sort of expedited process where we could obviously I would get the agency to work diligently on sort of an estimation to help the court get that answer. But I think we're still left with this position of they're not the debtors are not going to get paid tomorrow. And so we're sort of at a loss in that sense, Your Honor.

All right. So let me ask you this. If I heard evidence today that persuaded me that well, can I ask you another couple of questions first? The underlying right to payment is on a government contract. Your papers don't say, judge under the Tucker Act, only the court of claims can tell us what that contract means or make any of those sorts of arguments.

So, I take it, you know what you're doing, you did that on purpose and that I'm allowed to resolve the disputes that the parties have brought me?

Your Honor, we would to the extent that was before the court, we I mean, DLA's position is that the Court of Federal Claims has concurrent jurisdiction

Concurrent, okay. After

a certain point in time and that's a certain point in time, we my understanding is that it's after the contracting officers made a decision and the debtor can either appeal it.

But there's no exclusive jurisdiction. There's no argument about exclusive jurisdiction. You haven't said and you're not saying that the questions that the debtors put before me are questions I don't have the authority to resolve?

We didn't put that in the

papers, your honor. Very well. And if I were then to conclude based on the record that I'm going to hear today that the maximum amount of your claims against the debtor are less than other amounts that will be due to you from the debtor, therefore requiring you to make the payment of what is indisputably due now wouldn't deprive you of your right of set off. If the evidence shows that, would that be a sense I understand you that you're not agreeing that that's what the evidence will show and I have no idea what the evidence will show. But if the evidence were to show that, would that be a sensible way to resolve this particular dispute or would there still be a reason I couldn't do that?

I think

Your Honor mentioned indisputable. So understanding that that's Exactly. Just assuming

the evidence showed that that wasn't subject to bona fide dispute. If you show that the amount they're asking you is not actually owed by you to them, that's a totally different thing?

Yes. And so that's what we intend to do. But yes, if the alternatives here that you just explained, Your Honor.

Okay. So then I guess I kind of need to hear this evidence about what are the disputes about the amounts owed. Is that where everyone is?

Yes, Your Honor.

Okay, very well. Thank you.

May I just deal with the documentary evidence before we call the witness to the stand? Sure. And I'd like to just ask for permission to hand up a couple of other documents that weren't in the binder in response to what they filed. I'm handing two would you like one or two?

Two copies would be helpful.

I'm handing you what we're going to ask to be marked as Exhibit four and then we're handing you a demonstrative that we're going to put on the screen, show the witness, but we're not going

to move into that.

Okay, very well. Thank you.

And just so the court knows, Exhibit four, the letter from Arnold and Porter is the claim that we filed against the DLA relating to the $7,900,000 And we'll we'll discuss, that later. But I just wanted to identify that for now, your honor. And we do have a stipulation with the with the DOJ on exhibits.

Okay.

We've agreed that, the debtors, first of all, will agree to admit the three declarations supporting the opposition without objection and without cross. I do understand that one of the three witnesses may not be available until noon. We have no questions for that witness. If your Honor has any questions, then We'll sort that out if we can sort that out later.

And I appreciate everyone's on short notice and I appreciate everyone scrambling to be as available as you have been.

And then with respect to our exhibits, Exhibit one is the declaration Mr. Alfragotti and as well as the three exhibits attached to his declaration. We've agreed that those would be admitted without objection. The declaration and mister Van Alton, which is a transmittal declaration with the emails with the DLA prior to filing the motion attached. And exhibit three is a dupe dupe of one of the attachments to their declaration, which is the settlement agreement.

This is the settlement agreement that they based the $3,000,000 claim on that we say we owe 500,000 on. So we would, at this point, move all of those exhibits into evidence and subject to any other discussion the Corps wants to have about them, we would then call Mr. Albigati.

Stand. So first, is there any objection to admission of into evidence of the exhibits to which Mr. Dean referred?

No objection, no.

Okay. So those will be admitted and happy to hear from the witness. So you should call your witness. Okay.

The debtors call Robert Albergotti to the stand. Okay.

Mr. Albergotti, if you could take the stand and Ms. Barccell, if you could swear to it.

Robert Albergotti,

Good morning, Mr. Albergoti. Thank you for coming today. Do you happen to have a copy of the witness and exhibit binder in front of you? Okay, thank you.

I may direct you to certain things in there. I'd like to just start out by asking you a couple of questions about the CAGE code block discussed in your declaration. When did the debtors first learn that the DLA instituted a block against the CAGE codes?

The initial indication was September 4. And, after

and how did you receive notification of it?

One of the accounts receivable clerks at the company was attempting to upload invoices into the wide area workflow for the DLA and received an automated response that rejected an invoice saying that the rejection was due to chapter 11.

And is that, the note attached to your declaration as exhibit one? Correct. It is. Thank you. Now after receiving this auto generated email, what did the debtors do to understand from the DLA the reasons for the block prior to the debtors filing of

the motion on September 9? We asked, I asked counsel to contact their counter, our counterparts at DLA and their legal department, which I believe Mr. Van Alton sent an email or several emails trying to understand the issues as well as highlight some other operational issues that we wanted to have a discussion on. And we did not receive a response at that point.

Are those emails included in Mr. Van Alton's, declaration as exhibits one and two?

Yes, they are. Now,

did the debtors receive any explanation from the DLA between September 3, when you first learned about the block and the filing of the motion as to why the block was instituted other than the fact that the debtors had filed for bankruptcy?

No. Not that I'm aware of.

Can you just explain to the court, mister Albergotti, what the impact is of the CAGE code block on the debtor's ability to submit and pay invoices?

Yes. So we we have an intention of continuing to to fulfill obligations to both the DLA and other government agencies, which require us to pay vendors on a post petition basis promptly, as well as addressing some pre petition critical vendor payments to to facilitate shipments. The inability to access cash that was forecasted to come in has curtailed the ability to make any vendor disbursements, frankly, to any material amount. So we're, we are effectively only able to make payroll payments at this point.

And just to clarify, are the debtors able to be paid any of the invoices that the DLA has posted as being due?

Anything that's flagged to the CAGE code 1HEN99, my understanding is blocked for payment. We have received some de minimis payments on other CAGE codes related to other entities in the Noble chain, but the vast majority is the case code that we're talking about today. I'd

like to just direct your attention to exhibit three in your declaration, which is the chart that you prepared and submitted, showing the $3,200,000 alleged in the motion is being due and owing by the DLA as of the filing of the motion. Do you see that, sir?

I do, yes. And I

just want to confirm a couple of things about this chart. At the bottom, the total invoices sum up to a little over 3.2%. Are you aware of any disputes as to the 3.2% in invoices identified on this spreadsheet? I am not, no. Have the overdue invoices gone up since your declaration was submitted?

Yes, it's just over $5,000,000 as of today. And then over the next couple of weeks, it'll grow to $8,000,000

And are you aware of any disputes with respect to those amounts?

None that have been flagged to my attention.

Now did you have a chance to review the DOJ's objection to the motion that was filed?

I did.

And do you agree with the statements that large amounts of the $3,200,000 that we led you do or not yet do?

I don't agree fully with their assertion.

Can you explain why not?

Yes. So the extract here does reference an invoice date of August. If we just look at the first row of the 940 for the $912,000 invoice, it it says the invoice issue date is 06/30/2026, and the invoice received date is August 24. The discrepancy there is the time period between with which we provide proof of delivery to the DLA, and we're actually permitted via the contracting process to upload the invoice into the wide area workflow. And on this specific instance, the goods were actually delivered to the DLA on June 15.

So it's now been three months since we incurred our cost to deliver the product until the payment

should have been received.

So you do believe that all of those amounts are due and owing as of today?

I believe these are all due and owing as of today.

I'd like to direct your attention to the screen. Can you see the screen?

Yes.

Okay. Thank you. Can you identify this, for the court, this document?

Yeah. This is a chart that I put together, for counsel to to boil down the flow of goods into cash for Noble in a very simplistic form. There's a lot of steps along the way in this, but this just tries to boil it down into kind of some bite sized elements.

Can you just briefly walk the court through these steps from the date that the goods are delivered until we receive payment?

Yes. So Assuming the court is even slower than your counsel of understanding how things work?

Yes. So on the far left, it's goods delivered. But obviously before goods are delivered, Noble would receive a sales order from the government saying we would like a product delivered to this military unit. And we would be awarded that sales order. We would engage with our vendors to get the product shipped to the right location and those would be delivered by a third party freight forwarder.

After the goods are delivered, the third party logistics company provides us proof of delivery, which is kind of similar to a FedEx tracking receipt, which would include a signature from the recipient at the various base with military unit. So that it's got a wet signature or an electronic signature on it identifying who received the product. Our billing team will then work with their respective contacts at the DLA to provide the proof of delivery, so that they can start their reconciliation process to ensure that the right quantity and the right product was delivered, to the unit. Once we receive that confirmation, typically via email, the invoice can then be submitted to the wide area workflow. And then once it gets its various approvals through the wide area workflow inside of DLA, we have visibility into it into the expected payment date and then the payment is released on or about the payment date.

And so anywhere from like the time from when goods are delivered to payment can be anywhere from fifteen days on the short end all the way up to ninety days or longer, kind of as we talked about on the first invoice on this page.

Okay. Thank you. Can we just turn to the next slide, please? Can you identify this slide for the court, please?

Yes. This is a chart that I put together with the Portage Point team that kind of bridges what Noble's books and records indicate as to the open accounts receivable owed to it from the Defense Logistics Agency, from what's on our books back to what's in the wide area workflow, which is what we have visibility to.

And just to confirm, can you describe to the core what information you used to prepare this slide?

Yes. So the source information is predominantly from Noble's NetSuite accounting system. And then we linked that back to an extract from the DLA's wide area workflow, which we download daily to understand what invoices have been approved, what requires additional reconciliation and, when we could, in theory, expect payment.

Okay. I'd like I think it's important to explain the various columns that you prepared to bridge the the 31.8. So I'm just going to walk you through those and actually explain what they are and why you categorized each of them there. So let's start with the $8,000,000 that you have noted as scheduled for payment. Can you describe what that references?

Yes. So that is invoices that we can see inside of the wide area workflow that have gone through the entire approval process inside of the military's approval chain and have been assigned a prospective payment date in the system. So it's accounts receivable that we view as good and owing in the sense that the customer has gone through their entire approval process and assigned a payment date to it.

Now the 3.2 in the motion, is that consumed in the $8,000,000 here?

Yes. That's part of the 8,000,000.

And is the 5,000,000 that you mentioned a few minutes ago that the amount has increased to since the filing of your declaration, Is that also encompassed in the $8,000,000

Yes, correct. We tried to break out the week we would have expected payment.

Is that the arrow down?

That's the arrow down into the line across.

So what does the arrow can you just explain to the core briefly what that arrow refers to? Yes.

So when you look inside the wide area workflow for that $8,000,000 you can see approximately $8,000,000 in invoices with assigned payment dates. And if you then kind of just map it to a week, it would fall in there. So, the before seventhirty onetwenty six column, there's approximately $100,000 of invoices that for whatever reason have been kind of hung up in the payment process. And then if you go further to the right, based on the date we downloaded this wide area workflow, we would have expected $800,000 in additional payments the week ending the September 4 and then $5,700,000 in payments the week of the eleventh, dollars 700,000 this week, dollars 400,000 next week and 300,000 the next week.

Now are you aware of any disputes with respect to this $8,000,000

I'm not.

Okay. The next column is $2,900,000 in researching quantity, quantity and or price discrepancy. Do you see that one? I do. Can you explain what that is?

Yes. So in the wide area workflow, there's a comment field that you can see. So one of them is commented scheduled for payment. One of them is researching quantity and or price discrepancies. And so what these typically will be is an invoice was provided to DLA.

There's a mismatch between what the receiving officer had of what was in the shipment versus what the invoice said or a mismatch between what the purchase order said and what the sales order said. And there's a reconciliation that just needs to take place between the company and the customer. So typically, I think these are what I would kind of think of as light disputes. So kind of maybe a paperwork mismatch or something. But we can see that they're working their way through the process in the wide area workflow, but are not yet fully approved for payment.

And then do you expect ultimately that the 2.9 would be approved for payment after the, mismatches and the reconciliation construct was finished?

Yeah. I would assume the vast majority of that would be central payment.

Now let's talk about the next column, reasons and remark OB, what does that mean?

So again, in the wide area workflow, there is a comment field that then references to a code. And there's about $1,700,000 that are flagged as reason code B. And then within the procurement world reason code B is for lack of a better word a dispute code. So we effectively couldn't reconcile the order quantity or pricing or there's some other dispute that exists of we shipped the wrong product or the product was never ordered, but it was signed for. And so I think if we think of like kind of magnitudes of dispute, this 1.7 would be less likely to be collected because there's a more valid dispute than just some price or quantity mismatch.

Okay. Thank you. What about the pending goods receipt posting from DLA for ten point one?

So these columns to the right from here are not in the wide area workflow, but are in our accounts receivable ledger. And so this 10.1 is representing goods that have been delivered to DLA, signed for, we have the electronic proof of delivery and have transmitted the proof of delivery to the relevant counterparty inside of DLA. And we're just waiting for confirmation from the contracting officer or counterparty that we're okay to bill the invoice.

So, yes, go ahead.

Are you aware of any disputes with respect to this $10,100,000

I am not, no.

Do you anticipate those ultimately being approved for payment?

Yes.

How about the $5,500,000 pending sign receiving report?

Yep. So the 5.5 are for goods that have been delivered to the end customer. However, we have not received the final shipping documentation back from our third party logistics provider. So we're ready to invoice, but we haven't provided the signed shipping documents back to the DLA to get authorization to pay or for authorization to upload the invoice for payment.

And are you aware of any disputes with respect to the $5,500,000

I am not, no.

And do you anticipate that $5,500,000 ultimately being approved and paid? I would, yes. Okay. Let's talk about the 3.3 FSG 53. Can you just first explain to the court what FSG 53 is?

Yes. So FSG 53 was a contract that Noble entered into with the Defense Logistics Agency to provide, specialized MRO equipment and supplies. It subsequently was a contract that was terminated on June 30. There's a number of disputes that we have with the government about how that contract was performed against. And I think as the government alluded to in their motion or their objection, they have some counterclaims against us.

But ultimately, we filed a $86,000,000 claim against the DLA shortly before we filed Chapter 11 to preserve our rights in that, under that contract.

Can you just turn to the back of the exhibit book? It's the loose letter from our end of the quarter. Is this the claim that you're referring to?

It is,

yes. Now is the $3,300,000 directly involved in this claim?

It is not directly involved, but it would be subsumed in the claim. So when we put the bar chart together just for ease of breaking our our accounts receivable up into different buckets, we just said anything FSG 53 related that hasn't already been scheduled for payment or received by the DLA and to the WAF file should just be put to the side to not conflate matters. And so we think these are valid receivables that are owed to the company. I think DLA might have a different opinion of that. But we just wanted to highlight that there is this value, this amount of money that we have in our receivables ledger that we believe is owed to us.

I just want to direct you to page four of Exhibit four and page five of 58. Let me know when you're there at the bottom where it says start seventh.

That's is that the Arnold and Porter letter?

Yes, sir.

Page five.

Page at the bottom of page seven and the top of page five, where it says, Noble disputes DLAs demand for payment of the $7,900,000 disincentive amount. Do you see that? I do. Yes. Is that consistent with your understanding that the debtors dispute the $7,900,000 Yes.

Is that $7,900,000 the same $7,900,000 that's identified in the in the opposition that was filed? I believe it is. And that amount is approximately 10 times what the debtors are alleging the DLA owes us as a result of the alleged breach. Correct?

Correct.

Okay.

Can you explain the $100,000 of invoices ready to submit the block? Yes. So

where we first saw the indication of cage code issues was on or about September 4 when one of our accounts receivables clerks were working to upload invoices specifically related to the FSG 53 contract, but under the one HEN nine nine CAGE code and received the automated response, those invoices have been rejected. The invoice upload process is a fairly laborious process. The woman, spent some time uploading, I think, 10 or 15 of these invoices just to get a similar rejection. And so there's roughly $100,000 of invoices that have been rejected, that we haven't uploaded. So once those would be uploaded, they would likely move into the FSG 53 column.

But there there are invoices that have been kind of rejected in our ability to upload into certain parts of the wide area workflow.

Now since the filing of the motion and your declaration, have you done some further investigation into the impact that the Cages Cove Block may have had on the ability to upload new invoices?

Yeah. I spoke with our team yesterday to understand if we're still having invoicing issues. And they said that in some instances, invoices are going through and other invoices, they're still being blocked. And they're kind of the comment that was made is there's no rhyme or reason for what's getting through and what's not. So it's a fairly inconsistent process with our ability to upload invoices to DLA.

And is other just everything else?

Yes, everything else that's on the books and records.

And so what does total open balance of $31,800,000

mean? That is what, if you look at our accounts receivable ledger, we've got $31,800,000 of receivables owed to us from the Defense Logistics Agency.

So is it fair to say that, at least $26,000,000 of the amounts on this chart are for invoices for which you were not aware of any dispute? Yes. I know this is obvious, but for the record, can you just explain to the court the impact that not being able to receive monies from the DLA under these contracts would have on the ability to administer these bankruptcy cases? Yes, I think we would,

over the next few weeks, quickly become administratively insolvent in our inability to fund basic operations, including payroll and benefits to the employee base, probably by the end of two or three weeks from today.

Is that about how long do you think the debtors could survive in Chapter 11 without payment from DLA?

Correct.

I have no further questions on the director, Your Honor.

Okay. Any questions for examination?

I have yes, sir. Just briefly. Very well. Good morning, Mr. Alvarado.

Good morning. You mentioned that you reviewed The United States objection. Is that correct? Yes. And do you have a telephone account?

I have to use some time.

Is it in the binder? I do not know if it's in here.

Mr. Abigati, could you turn to paragraph 12 or page I'm on page 10. Do you have that? This is Yep. ECF one twenty four.

Where the the header is DLA, has maintained the status quo? Correct.

Yeah. Paragraph 28 refers to acknowledging the receipt of a proper invoice. What's your understanding of what a proper invoice is?

I believe that would be fulfilling all of the requirements in the contract regarding price, quantity and proof of delivery and receipt from the government. I'm sure there's other steps along the way inside of DLA, but I'm not 100% sure what those would be.

And in the demonstrative debtors council put up, I don't know if it's possible to put it up, so he can refer to it. The first one had a workflow. We got to put it back up. Yes, I can do it. Okay.

Thank you. On the previous, thank you. Do you see number five says invoice submitted? Correct. And so what's your understanding of how much time the DLA has to pay once an invoice is submitted?

I think I believe under the Prompt Payment Act, it is within thirty days. And then there's obviously the small business provisions, there's various provisions that would accelerate those payments.

Understood. And, going back to, sorry to have you move around, your declaration Exhibit three, it's the spreadsheet where both in our motion and you sort of just testified to it as well, you see invoice received dates for August 24 and August 21 on those first two lines? Correct. Based on those dates, is it fair to say that the thirty days haven't lapsed?

That is correct. But also, I think what we would also see is the invoice issue date is also June 30. I understand there's like a discrepancy there, but that's the reconciliation process that the company goes through with DLAC.

And so would it be fair to say that that issue or that discrepancy is a dispute as to the payment being due on a certain date?

I'm not sure if could you ask that.

Sure. Happy to ask it again. So is it fair to say then that whether payment is due is in dispute based on the fact that those invoice received dates and today's date don't add up to thirty days yet?

What I would say though, like in response to that is DLA has assigned a payment date to that, and that's that forecasted date column. So in DLA's process, they have approved the payment and we've made forecasts based on those paid approved dates. And the goods have also already been received by the government for over sixty days at this point. And so, like, I get it, but there's numerous examples that we can go back and forth around when payment would be due based on when invoices were. And the first contact that we had with DLA on this specific line was August 6 asking for confirmation of proof of delivery, which DLA did not respond to until August 23 or twenty fourth, I

believe. Understood.

So there was three week delay on DLA's part on that of when we actually provided all of the relevant information.

Understood. But, what's your understanding of the forecasted date? That doesn't necessarily trump the contract dispute act that you cited, correct?

Objection, cost a legal conclusion.

I'm not going to have the witness give his legal understanding. But if you can I will permit him to describe what the practice has been in his experience as a business matter?

Since we were since I got engaged with the company in July, almost without fail, the forecasted date that we see in WAF is the date the government pays. Maybe there's a day or two discrepancy, but typically it's every week when we get the refreshed wide area workflow file, it will list a certain number of payments on a certain date and we will, within a very tight margin, see those payments come through.

Understood. Thank you, Mr. Albarnelli. If, my colleagues or opposing counsel wouldn't mind going to the next monstrative, please? Mr.

Albigrauti, you noted that, I believe it's starting from the $10,100,000 amount, that column Yes. So the right, that doesn't appear in the WAWF, the wider workflow? Like that information is, in other words, not within DLA's knowledge?

It should be within DLA's knowledge, but in the extract that we run-in forecasting our receivables, it's not in the report that we generate on a daily basis to track this. But they should be aware of the order, especially on the 10.1, the order that was placed, delivered and received, there's just a reconciliation process that goes through while we're confirming with the relevant counterparties in DLA that they have everything they need for us to upload the invoice into the wide area workflow.

Understood. Moving to the column to the left, there's the $1,700,000 that counsel had asked you about. It's the one that says reasons and remarks would be. In your declaration, you noted that in the preparation of the spreadsheet, you I believe this is ECF103.

Do you have that in front of you?

This is your declaration, page three of ECF one zero three, paragraph eight and nine.

Yep. I'm there.

I think it's four bullets down with a nine, you've noted that following columns were removed from schedule because they are relevant to the motion, one being reason code. Is that what you're referring to, reason code?

Yes. We were what we were trying to identify is just the invoices that were scheduled for payments. Okay. And it was more of a formatting issue to try to get it to fit into the file. But we're not disputing that the reason code exists.

And there's $1,700,000 of invoices that are in various forms of dispute with DLA. Okay.

So you just said they're in dispute, correct?

Yes. There is a host of reasons under reason code B for which an invoice could not be moved for payment. And the team at Noble works kind of diligently with DLA to reconcile those items.

I think at one point when counsel was asking you, you mentioned that DLA might have a different opinion of that. Do you recall what you're referring to?

I think of just more on the FSG 53 of those invoices are due given the ongoing disputes with that. And if you look at those specific invoices, there's I mean, there's a lot of small dollar invoices just because the nature of that contract is large volume, small dollar quantities. And there's a number of mismatches, products shipped to the wrong location. There's just the commentary in that is lengthy around if those invoices are kind of, I would say, matched on both sides. And so I would assume given the litigation that may take place around the FSG 53 contract, those invoices likely kind of get reserved and dealt with as part of a larger settlement around the FSG dispute.

No further questions.

Okay. Anything by way of

redirect? Okay.

Thank you,

your honor. Adam Harris from Truman and William Schulte on behalf of Blue Torch Finance as a secured lender.

Okay. Good

morning, Mr. Albergotti. How are you? Morning.

I'm good.

Just a couple of quick questions. The chart that's up on the screen right now, you have the objection from the government in front of you?

I do, yes.

Okay. You can take

a look at paragraph three, which is as of the petition date, 20,380 delivery orders remained outstanding. And then it refers to prior cancellations about 11,800 of them?

Correct.

So there's about 9,000 orders that are still outstanding. Is that right?

That's correct.

Are those accounted for anywhere in this chart?

Some of them may be in the invoices ready to submit but blocked, but not 9,000. That was that's a 100 or so.

And what is the anticipated timing for performance by the company for delivery of those orders?

I'm not a 100% on all of them, but they're like as we go through every day, we are continuing to perform on those orders and ship those orders out to the best of our ability.

So in effect, the government is asking you to continue to perform in the terms of this contract, but basically saying we're not going to pay you with respect to your pre petition obligations?

I don't

know if that's a legal question. I think the concern that I would have is failure for us to collect on receivables and have cash to continue to pay our employees would make it almost impossible to perform on that contract.

Has anybody from DLA contacted you with respect to the performance relative to the 9,000 outstanding orders?

Not that I'm aware of and not that I've had contact with.

No further questions around.

Okay, Very well.

Just very briefly, Your Honor, Mr. Avogati, I just want to have a I just want you to clarify how, you and I, when we were talking or using the word dispute, when I was asking you whether you were aware of any disputed, disputes as to the the 8,000,000, the 2.9, the 10.1, and the 5.5. Okay? Were you referring to substance or timing of payment?

I should say.

What's your response to the objection?

I'm happy to rephrase, but I thought that the question was clear as to what I was asking the question.

I think it's clear enough. So I'll

have a rule

of the objection and you can answer to the extent you are able to.

I think when I think about the disputes, I think it's more around a price and quantity dispute around and maybe a little de dispute, not a defined term dispute, but a reconciliation process that needs to take place that may delay the timing of payments.

So when you were speaking to me about whether these amounts were in dispute, you were not referring to whether it might be due, there may be some very a couple of days of variation as to when the payment was actually due and payable under the contract, correct? Correct.

Especially for the $8,000,000 that there would be some variability on the days that the payment might be received. And then it becomes less certain on the timing of payment as we look at the 2.9 and the 1.7 because there's additional work that needs to be done between both Noble and the customer to understand what the discrepancy is.

And just to clarify, are you aware of any substantive dispute, not payment timing, with respect to the $8,000,000 the $10,100,000 or

the $5,500,000 I'm not, no.

And do you believe that any substantive dispute with respect to $2,900,000 will ultimately be resolved?

I don't have any reason to believe that it wouldn't be. But given that there's $1,700,000 that's over time has moved like has not been able to be reconciled on an easy basis, my suspicion is some portion of that 2,900,000 million dollars will move into the $8,000,000 category and some portion would move into the $1,700,000

Thank you, Ron. I have no further questions.

Okay. Any other party have questions for Mr. Alberghati? If not, thank you very much for your testimony. You may step down and Mr.

Deane, you may call your next witness.

That concludes the evidentiary presentation, Your Honor.

Okay. I'm happy to hear from the government then.

Your Honor, I think I just had a couple of points that I wanted to bring up. One of which has to do with It's in relation to this, the total balance that's projected at $31,800,000 I think I wanted to point out, Your Honor, that notwithstanding the total amount of claims that the debtors, are projecting to be owed to them, The United States also has time up to 180 to file its proof of claim and to gather, that information and to present that is also owed. So I guess the point being that, it sort of leaves the court back to where you started, your honor, which is that you might need a claims estimation process.

So I understand that. And based on the evidence I've heard so far, I've got any number of questions. But it seems to me, just as a matter of ordinary process, we should give you the opportunity to present your evidentiary case. And then we can have a conversation about what to do in light of what the evidence is, if that makes sense to you.

Yes, that's fine. Okay.

So I understand your point. And I just think we ought to proceed in the sort of the normal course and address the various questions that arise from the evidence after I've got a full body of evidence?

Your Honor, I believe that their declarations were their evidence and they've already been admitted. I don't think they have anything else, but I just Okay.

Well, if that's the case, then that's the case. I just, is there anything further on an evidentiary basis that The United States

I mean, as counsel pointed out, the declarations demonstrate the DLA's position as to whether there is a payment dispute. And so I don't anticipate calling witness unless the court has questions about DLA.

So I have one set of questions. And if they're answered by your declarations and I've missed it, then you should tell me. But Mr. Albergotti's testimony and the emails he attached identify DLA taking the view that basically claims were not being paid on account of the bankruptcy. And I sort of want to understand what the government's position is about that feels like at least first blush feels like an ipso facto thing.

And so, I don't know if there's a position, if this is a factual question about policy or just a legal position. But if there's anything you can tell me to help me understand what the government's view of that is, that would be helpful to me.

Understood, Your Honor. And I think, I don't think Your Honor missed anything in the briefs or in the declaration. And I will say that the witness in particular that is unavailable till noon is the one that was attesting to, the fact that this was administrative hold that, in regards to Mr. Alberatti's testimony that they received notice on September 4, we're still sort of within this period where the information needs to get disseminated. And so it was inadvertent to the extent that was the phrasing, but it has since been corrected, I believe, and the witness declarations demonstrate that.

And that's Ms. Saude's Someday's declaration, Your Honor.

Okay. Let me just take a minute to refresh on those declarations.

Do you think we could take a five minute break for argument? Would that be okay?

Certainly, actually it might be helpful. If why don't we take fifteen minutes? I'd like to look at the material and we can come back at 11:15 and discuss further.

Thank you.

Okay. So until then, we're in recess. Thank you.

Thank you for the break, Your Honor. We appreciate it and thank you for the extended break. I had a bunch of things I was going to say, but listening to what you

apologize for a second. And when I left the bench, I grabbed my phone that I need to do authenticate to log on. And now I'm here and I can't log on and I therefore can't take notes. And if I were smarter, I'd be able to get through this without it. But because I'm not, I need to grab my phone.

So let let me recess for a second. And because I have the greatest team in showbiz, you haven't. Okay. Hold on one second. Okay, very well.

My apologies. I'm with you so far.

Thank you, Your Honor. I had a lot of things I was going to say about Strump and the related issues. But I tried to listen to you and the conversation we had earlier and the concerns that you have. So I think I know where you are. So I'm going to be brief and I'm going to focus on what I think you care about today and then you could tell me if you disagree and we can have a conversation about that.

Okay. Before we relaunch, I take it notwithstanding whatever conversations you have, I still have this question to resolve and that I've got a decision to make.

That is correct.

Okay. Thank you.

I think sort of where this hearing has evolved to and boiled down to from my perspective, and I think you would agree with me is, can you allow us to get paid while the DLA is adequately protected on whatever set off rates it's alleging while that dispute is resolved? And we think the evidence shows that the answer to that is yes. As you know, we allege that we're at $3,200,000 as of the filing of the motion, dollars 5,000,000 now and 8,000,000 will come due in the next few weeks. The evidence was undisputed that there is no dispute. Other than a couple of days here and there with respect to at least $23,000,000 of monies that's going to come due in owing by DLA to the debtors by the end of November.

And so what have they alleged? They have alleged, we're owed a little under $3,000,000 under the settlement agreement. I'll talk about that in a minute. And then we're at $7,900,000 under this FSG contract. So even if you accept everything they said to be completely accurate.

What about the False Claims Act claim?

That's the false claims act claim is to settle the settlement agreement claim is my understanding.

That's been reduced to a settlement?

That's the settlement agreement claim. Counsel can correct me if I'm wrong. I believe that's the case.

Got it. Okay.

Okay. So there's just two claims that they've alleged against us. One is the settlement agreement claim, the false tax claim, and then the other is the $7.09 that's consumed in this litigation that we commenced against them for $80,000,000 So my first, response to your to your honor's question is they are absolutely adequately protected just by virtue of the mere dollars that are going to be owed after the eight is paid for the next few weeks. If there was any dispute beyond that, I want to make a couple of observations. One about a couple about the agreement the settlement agreement claim itself and then a couple about the $7,900,000 claim consumed in our litigation against them.

Let me start with making a couple of observations about the settlement agreement. I just want to point your honor in exhibit three in the binder to the provision that we're dealing with here, and that and the one in dispute. And that is, on Page 10 of the settlement agreement. It's paragraph nine sub

eight. So my form of binder has tabs for Exhibit one and Exhibit two and not a tab with Exhibit three, unless you mean Exhibit three to Exhibit one.

I think it's Exhibit I think we updated the binder yesterday after we got

so

let me get you a copy of Exhibit three. Okay. Your Honor, may I hand off a copy of Exhibit three? I apologize, I thought that you

had a

copy of this in the binder.

And it's possible that that exists and it's my fault? No worries. Yes. And never eliminate the possibility that it's my fault.

This is the same document that's attached to their declaration that was docketed as well. Just for the record, your honor. So if you ever want to look at it on the docket, it's there. So what we're talking about here is page 10 and it's paragraph nine e two. And what what this paragraph says in relevant part is if there is a bankruptcy filing, then the settlement amount basically blows up and goes to $3,400,000 So the agreed amount that we owe them now is $537,000 We don't dispute what they say about that.

But what we do strongly contest is the enforceability of this provision, which is an objective and very clear unenforceable penalty and if so fact of clause.

Walk me through the specific so this is paragraph 9E. And The United States has an undisputed non contingent liquidated allowed claim that's noble in the amount of roughly $3,500,000 less payments received under ONE provided, however, that such payments are not otherwise avoided and recovered from The United States by a receiver trustee custodian. That's different from saying

Well, I think you got to start with E on the third line. It says if before the settlement amount. It's it's a third line.

I see. If they're voided for any reason.

And then it goes on to say if before the settlement is paid in full, Noble files for bankruptcy then. And then it explains the result of of that in

two. I see. Thank you. Before the settlement, Noble commences a bankruptcy proceeding. I see.

So there are countless and we just got this like this morning, but there are countless decisions that talk about what a penalty

So you might understand the way five forty one treats ipso

facto clauses.

Well, I was actually going to talk about the distinction between a penalty and a liquidated damages provision in the context of this. But this is a clear penalty from our perspective that this is an ipso facto clause, it's unenforceable. So our position is you could rule on this. This is a purely legal issue.

I understand that.

I don't think we need an estimation hearing on this.

No, I understand that question at that point also. But help me with the math. The effect of this increases the government's claim under the settlement from what to what?

$5.37 to $3.02 minuteus the payments that have been made, which is about $2.09. It's in their objection.

Okay.

Listen, but that's the spread of the dispute is about $2,400,000

And I take it your fundamental positions. Okay, even if we owe them $3,000,000 that's still It's so They're still there. So therefore, if I accept that there's no reason for me to hurt my head over this.

The math still works. I just, I only say if you're going to say anything about an estimation hearing on the other piece of it, which I'll talk about in a minute. I don't think we need to do that here because this is purely a legal issue that the court could rule on.

Okay. So I'm with you that far.

Okay. Now, let's talk about the seven-nine. And again, it's the same concept. They've got plenty of money that's going to come due in the next several months that's undisputed that could cover that. But more to the point, what would an estimation proceeding on this look like?

I mean, this is a pretty complicated claim that we put in 58 page single spaced letter, right? But I think all you have to do is find that our claim is at least seven our $80,000,000 claim is at least $7,900,000 and it becomes a wash. It's like a defense

or I understand.

So my point is they're adequately protected to allow us to get paid and have released this case in so many different ways.

So Mr.

Dean, this is helpful. And so, apologies, although I've read the papers, there have been a lot of numbers floating around and your floating bar chart is helpful for me to put these in buckets. But just so I let me pull up your floating bar chart for a second. Okay.

So

I understand the $8,000,000 I certainly understand that some of the two you can have a conversation about whether the $2,900,000 is either disputed or not disputed. I think I understand what the record tells me about that. I understand that the $1,700,000 let's call that disputed. And the 3.3 that you claim as a receivable under FSG, 53, that's clearly disputed. Right?

Not necessarily. It's sort of encompassed in all of that. We don't have a reason to believe that these invoices right now are disputed, but we do anticipate that if we're going to be litigating this whole FSG contract with them, they may raise appropriate terms and potentially dispute Let me make sure

I understand the state of play. The $80,000,000 that you're claiming under FSG3, that's your only thing you're showing on this bar chart as to that $80,000,000 is this $3,300,000

That's what our invoices for work.

That's what you've already invoiced and there's a dispute about the rest and they you may or may not get it. Correct. And the issue about the settlement payment and thus I'm sorry, the incentive payment issue is encompassed within that. So if they win that, that will reduce that claim by 7,700,000

That's correct, Your Honor.

Okay. All right. So I understand that. And then the other moving part is this settlement agreement your Exhibit three in which they have a claim against you that is either for $2,900,000

or for $500,000,000

depending on the ipso facto question?

Correct.

And so the maximum that you may owe.

Nearly almost $11,000,000

It's

the $3,000,000 here, it's the $8,000,000 I see. About $11,000,000 And some of the amounts that you're claiming you might not get. So, right, like say the $1,700,000 and maybe some of the 2.9 But that's not But

we're at least going to get the 20. Okay.

All right. I understand. Okay. All right. So I think I understand what you're saying.

This is taking the time to actually understand the evidence has been helpful. So I appreciate your patience with me, but I think I get

it. There's a lot involved. I know we're doing this in a very short period of time. So, I appreciate your honor's indulgence. I don't think it makes sense for me to get into any of the other legal issues.

I really just wanted to explain to you why we think that we should get this cage block released today and start getting paid. They're completely protected, not just by the set off on our litigation claim, but the amounts due. And I think this ipso facto provision in the settlement agreement is very tenuous at best in any event.

Understood. Okay. All right. Thank you. So, Mr.

Gislander, help me with please, please come up. So, okay. So, what's exactly the government's position here?

I think, Your Honor, the government's position is Mr. Dean is right that two claims have been presented before the court, the $80,000,000 And then on their side, they've obviously presented, in supplemental declarations, in mister Albigati's testimony this, contract dispute act, dollars 80,000,000 claim. I think the government's point is, we're just, what we're seeking is adequate protection. And obviously, we have a dispute over the dollar amount because the government anticipates filing further proof of claim that would fix the dollar amount?

So look, I want to be respectful of the government's rights here, right? I mean, I'm not going to this is a court and we're going to do this according to the law and the record and be respectful of the fact that you've got time to file your proof of claim. But, what we're not going to do is sort of strangle the debtor needlessly in the meantime. So, what I really want to understand is let's you haven't presented me with any evidence today about amounts due to the government other than this $3,000,000 and the potential $8,000,000 in the incentive payments, right? It's $11,000,000 and that's the maximum subject the government is going to continue its investigation, it's going to do what it's going to do.

But based on the record before me, all I've got is $11,000,000 right?

Yes,

Robert. And so, if the government were to and it seems to me that what the record shows me, tell me if you disagree, is that really the only basis for withholding the payments that were described as otherwise being scheduled to be made since the petition date is essentially a strung for argument that you need to freeze those amounts in order to protect your right of set off?

Correct. And so we can file that motion for we can say to file our set off motion.

Okay. So look, I'm not going to stop you from protecting your rights, but it seems to me based on the record before me, there is a way to get the case there is plenty of money in future amounts that will be due from the government to the debtor to allow us to get through a sale process and then sort that out. I was prepared look, I was prepared to set a very quick estimation process, if necessary. And I'm still sort of happy to do that, but I don't really see the need for us all to be our have our hair on fire. If what we're talking about is is protecting your right to get paid to retain 11,000,000 worth of set off in a world in which it's pretty clear that there's more than that in the pipeline, including for amounts that haven't yet been shipped, but are going to be.

And so it doesn't seem to be necessary to create an look, the debt is running out of money in two weeks, right? And so if we're going to do an estimation, what we're going to do is we're going to have a hearing in a week, where we were going to do an estimation and figure out what's owed and resolve all of that. And we could do that, but to what end? Why that's going to be a sloppy, fast, highly expedited process in which we sacrifice getting it as right as we can because we have an emergency. And if we had a real emergency, that's what I would do.

But just looking at this record before me, I don't think it's necessary to do that in order to protect the government's interest. And so let me pause there for a second. And if you think that there's something that I'm misunderstanding or I've got the facts wrong, I want to make sure I've listened to you fully.

Sure. Your Honor, I appreciate that. And it's not so much that you've misapprehended anything that the debtors have said. I think The United States maintains that by virtue of filing that letter, that $80,000,000 or whatever is mentioned, that supplemental exhibit that was filed today, in the same way that as you've already recognized, the government has its right to file its proof of claims in amounts that we anticipate will be in excess of that. That $80,000,000 in our view, although it was received in debent today, your honor, shouldn't be

calculated. Let's assume that I'm not crediting any of the $80,000,000 and I'm really going making this decision based only on this chart and the record about there being future deliveries in the millions of dollars as to which the debtors going to deliver the product and they'll send invoices. And if there remains at that point a receivable due to the government, the government will be able to set off against that. And I'd retain the authority to resolve that. So why isn't that sufficient to ensure that we can get to a sale process, maximize value for everybody and still not prejudice the government's interests?

Your Honor, on that point, I would direct the court's attention to our objection and more specifically the background where we describe each of the contracts and highlight which ones have been expired under their own terms terminated. So when the court's premise is that there's still three deliveries, The United States would dispute that and so.

Okay, that's fair. So let's and the record I've got on that is not crystal clear. Okay. Mr. Dean, can I ask you this question and don't go very far?

Sure.

I'll be right there.

Because I'm trying look, before you come up, let me tell both of you. This is sort of how I view the world, right? Strumpf says what it says. No one seems it clearly contemplates surely when there's an undisputed relationship back and forth, you're allowed to freeze. It doesn't tell us what happens when there's a dispute.

But the references in that opinion to parties moving quickly for stay relief and the like clearly contemplate that we're not going to basically freeze the case indefinitely to the detriment of the estate and other creditors for this purpose. So, and in the absence of any other authority that gives me any greater clarity, what I take from this and the principle that I glean is therefore the court ought to based on the record before it set up an appropriate process and exercise its discretion wisely to set up a process that protects the rights of the party that's entitled to set off on the one hand and balance that against the interest of the estate in maximizing value for others on the other and use your best judgment to come up with a process that's rational. So does anyone disagree that that's like the best thing I can do under the circumstances?

We agree, Your Honor. Thank you. No disagreement, Your Honor.

All right. So that's so we now agree on what the question is. So what's the answer? And there I'm interested in hearing a little more from both of you. The motion that I've got is asking me for relatively narrow relief about the first this week or so, right?

So help me.

Yes, I actually have the proposed order here. I want to address that. So that was at the time since then the amounts have increased and we've also asked for the relief for them to perform under the contract and to unlock the cage clip code. So the idea was that they would pay us the amounts overdue now, but they would continue to honor the invoices and pay them as they go forward until such time

Can we stop there for a second? And let me go back, Mr. Guzman. The locking of the CAGE code that stops them from submitting additional invoices?

That's not correct, Your Honor. Based on the declaration.

So tell me what is the story?

So they're able to submit, but I believe, Ms. Dawei, sorry, testified that it's just that DFAS, who's managing the payments does not issue final payment, but it's

So you don't dispute the proposition that they should be permitted, that it would be improper to block them from submitting invoices?

Correct, which is why we submitted exactly

that they're Okay. All right. So if there are details that need to be worked out, you can work through that. But that's

certainly On that issue. And just to clarify, Your Honor, when the mode when all this was going on originally, we were having problems uploading invoices. So we assume that the locking of the CAGE code prevented us from doing that.

And I get that and everyone's working fast and look the government representing The United States, I appreciate it's a complicated thing. It's a large bureaucracy. There are a lot of and so I'm assuming that everyone here is proceeding in the best of faith, doing their best with a complicated circumstance. And so I'm not no one's to be faulted if there's a disconnect that happens in life. But it sounds to me like there isn't a dispute that the government agrees that you should be permitted to submit invoices.

And if there's some step that needs to be taken to cause that to happen, the government will do that. And if you need an order from me, you should include that in the order that we're going to end up with today. And if that's helpful to the lawyer for the government in getting its clients to do what it needs to do, I'm happy to try to be helpful. All right.

So Yes. And the CAGEGCO's block is basically just blocking their payment processor from paying us on invoices that have been already approved.

Okay. All right. Okay. So I understand. And that's they're taking the position that they're entitled to do that as an administrative freeze.

And what I want to figure out is what's an appropriate mechanism. It seems to me at a gut level from having heard this testimony that there is a way to set up a process that will get you through a sale process and get enough money into the estate to run the case, while at the same time protecting the interests of The United States to preserve whatever set off rights it may have. And what I'm interested in really fleshing out is, let's talk about the details of what that looks like. Am I making sense?

It

does. It makes absolute sense.

So from the debtors' perspective, how much needs to be released and when in order to get us to whatever point you think you need us to get to and explain to me how we can do that while protecting the government's interest.

Would you mind if I took a quick break and consulted with Mr. Alba? I think I need to talk to our finance guys.

Sure. Do you mind if I took

a quick break and

consulted with Mr. Alba? I think I need to talk to our finance guys. Sure. Do you

mind if I take

your projections a little bit more?

Yes. And

look, let

me tell both sides. This is I can do this or I can have you do it. And but this is where we're going to end up. We're going to end up with some mechanism that creates some of that directs some short term funding as necessary. And then what we do on the back end, I'm happy to have a further conversation about or you can talk about.

Are you guys if the government is comfortable that there is enough in there that we can let it roll out, we can. If the government wants after two or three weeks to have an estimation hearing where we can estimate its claim and then liquidate it and then you would effect set off then, we can do that. I'll tell you preliminarily, this looks like an ipso facto clause to me and that seems like that's likely to reduce the amount. I don't again, I haven't that hasn't been briefed. So I don't want to rule or pre rule, but just from reading the words, I don't that's how it looks to me.

And so, therefore, it seems to me the likely maximum amount is likely protected by allowing this case to run for a few weeks and then doing an estimation then.

And What I would like to ask, but I just want to make sure before we take a break I do that is, I understand, I think the question is, at what point in time will we get to $11,000,000 that the government owes us under these invoices? I don't know whether we can even answer that, but I'm going to try to get you an answer to that.

Okay. Is that the question? Short answer. Yes, I mean, and it's 11 in

Undisputed. 11 of the undisputed.

Right. And if we can get to a point where we can set up a mechanism where before we threaten their ability to get paid in full, if they win everything, How do we fund the case until then and set up a mechanism then where then we'll decide what the claim is and make a decision and allow it to roll forward thereafter?

If you could give us a couple of minutes, I can

I'm happy to either give look, I'm also happy to give the parties the time to talk about what such a mechanism would look like, if you think that would be helpful.

Okay. I think I need to have a conversation with Why

don't you first talk to your finance team and then We'll confer

with them before we come back and we'll see whether we can work something out.

And if you can't, I'm happy to make a decision. I'm not punting. I just think that we have the usual having you entrust your fate to a monkey with a gun. If you're able to figure this out, consensually among yourselves, you might do better than I'm going to do. So again, I'm willing to make a decision.

I just want to be respectful that all of you know your case better than I do.

I think I know, I understand what you're looking for.

All right, very well. Does anyone have any objection to proceeding in that fashion?

No, you're not.

Okay, very well. Okay, so look, we'll recess. Thank you. Just let Ms. Parks know when you want to come in.

I will. Okay, thank you very much.

Alright.

Mr. Dean, before you start, I want you to know that I found the version of the binder with Exhibit three.

Okay. I feel much better now.

Thank you.

So, yes, it was my fault,

like I had predicted. Well, I

have good news for you too. I have good news for you too. I think we have an agreement on how we will proceed. We're going to need to revise an order. But let me just put on the record what I think the order would say that we proposed.

First and foremost, we are going to agree to allow the DLA to set off the $5.37 under the settlement agreement against the 3 two now. So we would put that in the order. And so on the settlement agreement, that would only leave what we call the ipso facto. And if they get that, it would credit against the payment that we made against them. And if we win that issue, then there's not there would be nothing due under the settlement agreement.

At that

point, all we would have to deal with would be be 7.9. We would also agree that on the in the ten point one and five point five buckets and those go up and down daily, we would agree not to let those collective balances, dip anywhere below 10.5%. So, we'll figure out the exact math in the order, but it's roughly the 11% that the deal is claiming as us minus the $5.37 that we're going to pay them now to add to make sure they're adequately protected pending the hearing. And we would propose that the hearing on estimation be scheduled for around October 16. I know we have an omnibus hearing that day.

I don't know if that gives you enough time or but that's sort of what we're thinking is that we would just use the omnibus hearing to have the estimation.

That is fine with me and if the parties can work out a schedule for presenting whatever briefing schedule you want. And I'm not I don't need more than a day with the material beforehand in order to be prepared for it.

Yes, I was going to suggest that we would talk afterwards and put a briefing schedule in the proposed order for the estimation hearing and we will go from there. So we'll take a shot at revising the order. And then once we get it agreed to with the DLA, we'll file it under certification, if that's okay with your Honor.

Certainly, Mr. Gizmondo. Is what Mr. Dean describes agreeable to The United States? Yes, your Honor.

Okay. Look, this actually is a commercial and sensible way to work through our day. And I think it preserves everybody's rights. It's more precisely tailored than if I had to craft it. So, thank you all for doing this for me.

But, I'm satisfied that that is an appropriate resolution and I'd be happy to enter an order under certification when it comes around. Anything else that I can do to be helpful while we're here today?

We have nothing further, Your Honor, on behalf of the debtors.

Okay. Any other party in interest wish to be heard further while we're here?

Nothing further from the government, Your Honor.

Okay. Anyone any of the parties on Zoom wish to be heard? It doesn't look that way. So, look, I appreciate that you all scrambled. I get that that was challenging, but part of what we do here is to deal with emergencies.

And so, I do appreciate everyone's flexibility. I moved the hearing up because schedule got complicated. So, thank you all for accommodating that. We'll go ahead and enter this order when it comes through. Anything else comes up in the meantime, you all know how to find us.

But until then, we're adjourned. Thank you.