Hearing Date and Time: May 31, 2011 at 2:30 p.m.

ET Objection Deadline: May 31, 2011 at 12:00 p.m. ET

KATTEN MUCHIN ROSENMAN LLP Thomas J. Leanse Dustin P. Branch 2029 Century Park East, Suite 2600 Los Angeles, California 90067 Telephone: (310) 788-4400 Facsimile: (310) 788-4471 -andAdrienne W. Blankley 575 Madison Ave New York, New York 10022 Telephone: (212) 940-8800 Facsimile: (212) 940-8776 Attorneys for The Macerich Company UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ----------------------------------------------------- x : In re: : : METROPARK USA, INC., : : Debtors. : : ----------------------------------------------------- x

Chapter 11 Case No. 11-22866 (RDD)

SUPPLEMENTAL OBJECTION OF THE MACERICH COMPANY TO THE NOTICE OF SUCCESSFUL BIDDERS (PERRY ELLIS) AND FURTHER OBJECTION TO ASSUMPTION AND ASSIGNMENT OF LEASE AND REQUEST FOR FINAL HEARING ON ASSUMPTION AND ASSIGNMENT OF THE LOS CERRITOS LEASE1 The Macerich Company (the Landlord) hereby files this supplemental objection (the Objection) to the Notice Of Successful Bidders (Perry Ellis) And Further Objection To Assumption And Assignment Of Lease and Request for Final Hearing on Assumption and Assignment of the Los Cerritos Lease, and respectfully represent as follows:

As per the agreement of the parties, no contested assumption and assignment hearing is to go forward on May 31, 2011. Therefore, unless the parties reach an agreement prior to the hearing, the May 31, 2011 hearing will serve as a status conference to schedule a final hearing on the assumption and assignment of the Los Cerritos Lease. If necessary, the Landlord will file a final objection to the assumption and assignment of the Lease in connection with that final hearing.

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I.

INTRODUCTION The Debtors and Perry Ellis International, Inc. (the "Purchaser") seeks to assume and

assign the Leases (as defined below) to a Perry Ellis entity known as Perry Ellis Menswear, LLC. The Purchaser does not provide financial information concerning the Assignee (as defined below), and no guaranty that the Purchaser will have any financial responsibility for the Leases. Finally, the Purchaser seeks to improperly amend the use provision of the Lease and does not identify the store concept that it intends to utilize at the Premises (defined below). II. BACKGROUND FACTS 1. Metropark USA, Inc. (the Debtor), filed its voluntary petition for relief under

Chapter 11 of Title 11 of the United States Code on May 2, 2011. The Debtor has continued to operate its business and manage its properties as debtor-in-possession pursuant to 11 U.S.C. 1107(a) and 1108.2 2. The Debtor leases retail space (the Premises) from the Landlord pursuant to an

unexpired lease of nonresidential real property (the Lease) at the shopping center location commonly know as Los Cerritos Center (the Center) in Cerritos, California. 3. Each Lease is a lease of real property in a shopping center as that term is used

in Section 365(b)(3). See In re Joshua Slocum, Ltd., 922 F.2d 1081, 1086-1087 (3d Cir. 1990). 4. On May 12, 2011, the Debtor filed the Motion Of The Debtor For Order (A)

Setting (1) Date To Conduct Auction Of Debtor's Interest In Certain Real Property Leases And Intellectual Property, And (2) Sale Hearing Date; (B) Approving Bidding Procedures And Terms Of Auction; (C) Establishing Cure Amounts; (D) Authorizing Debtor To Enter Into Lease Termination Agreements; (E) Approving And Authorizing Sale Of Leases And Intellectual Property To Highest Or Otherwise Best Bidder Free And Clear Of All Liens, Interests, Claims And Encumbrances Pursuant To 363 Of The Bankruptcy Code; (F) Waiving The Requirements Of Rule 6004 Of The Federal Rules Of Bankruptcy Procedure And Local Bankruptcy Rule 60042

Unless otherwise specified, all statutory references to Section are to 11 U.S.C. 101 et seq. (the Bankruptcy Code).

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1 And (G) Granting Related Relief (the "Sale Motion"),3 which seeks authority to conduct an auction of the Debtor's assets, including the Leases, and schedule a final sale hearing to approve any proposed sale of the Debtor's assets on an extremely expedited basis. 5. On May 20, 2011, the Debtor filed a Notice of Stalking Horse Agreement (the

"Stalking Horse Notice") whereby the Purchaser may an offer for the purchase of eight (8) leases, including the Lease, which it would seek to have assumed and assigned to Perry Ellis Menswear, LLC (the "Assignee"). On May 24, 2011, the Court approved an order scheduling the auction of the Debtor's leases and various other assets. 6. On May 26, 2011, the Debtor held an auction for various leases, including the

Lease, and the Purchaser was the successful bidder with respect to the Lease. The Purchaser does not definitively identify the concept which it will seek to have Assignee operate at the Premises, which may materially impact Assignee's ability to maintain the same tenant mix and balance that the Debtor's store created at the Center. Moreover, it is not clear that the Purchaser's 10-K offered as evidence of the Assignee's financial strength provides any evidence of the financial wherewithal of the Assignee. For these reasons, as well as those set forth in the Landlord's prior objection, which is incorporated herein by this reference, the Landlord objects to the assumption and assignment of the Lease to the Purchaser III. A. ARGUMENT The Purchaser provides not adequate assurance of future performance information on behalf of Assignee. 7. Despite the fact that the Bankruptcy Code directs that the Purchaser provide

evidence of adequate of future performance, neither the Debtor nor the Purchaser have provided the adequate assurance of future performance information required by the general requirements of Section 365(b), much less the heightened standards that Congress established for the assumption and assignment of shopping center leases contained in Section 365(b)(3)(A) (D).
3

Terms not otherwise defined herein shall have the meanings ascribed to them in the Sale Motion and accompanying documents.

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8.

In order to satisfy the adequate assurance of future performance burden discussed

below, the Debtor and the Purchaser need to provide, at a minimum, the following information: (i) (ii) (iii) (iv) the specific name of the proposed bidder, the proposed tenant that will act as the assignee, and the proposed name under which the assignee intends to operate the store; the potential assignees intended use for the space; audited financial statements and annual reports for the past three (3) years, including all supplements or amendments thereto; cash flow projections for the proposed assignee, the proposed assignees most recent business plan, all cash flow projection for the Leases subject to the assignment request, and any financial projections, calculations and/or proformas prepared in contemplation of purchasing the Leases; all documents and other evidence of the potential assignees retail experience and experience operating in-line stores in a shopping center; and a contact person for the proposed assignee that Landlords may directly contact in connection with the adequate assurance of future performance. The Debtor may not assume and assign the Lease unless there is adequate

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assurance of future performance under the Leases. 11 U.S.C. 365(b)(1)(C); see also 11 U.S.C. 365(f)(2). The provision of adequate assurance of future performance is an affirmative duty of the Debtor, and the Debtor bears the ultimate burden of persuasion as to issues under Section 365. See In re Rachels Industries, Inc., 109 B.R. 797, 802 (Bankr. W.D. Tenn. 1990); see also Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1309 (5th Cir. 1985). Because the Debtor and Purchase have not submitted adequate information on behalf of the Assignee, as set forth more fully below, the Court should deny the request to assume and assign the Lease to the Purchaser. B. The Landlord is entitled to heightened adequate assurance under Section 365(b)(3). 10. In this case, the Lease is a shopping center lease and, as such, the Bankruptcy

Code requires more than the basic adequate assurance of future performance of the Lease under Section 365(b)(1)(C). In re Sun TV and Appliances, Inc., 234 B.R. 356, 359 (Bankr. D. Del. 1999). The heightened adequate assurance requirements that Debtor must satisfy under Section 365(b)(3) include the following: the source of rent and that the financial condition and operating performance of the proposed assignee and its guarantors, if any, must be similar to the financial condition and operating performance of the debtor and its guarantor(s), if any, as of the time the debtor became the lessee. See 11 U.S.C. 365(b)(3)(A); -4

11.

that any percentage rent due under the lease will not decline substantially. See 11 U.S.C. 365(b)(3)(B); that assumption and assignment of the lease is subject to all provisions thereof, including (but not limited to) provisions such as a radius, location, use, or exclusivity provision, and will not breach of any such provision in any other lease, financing agreement, or master agreement relating to such shopping center. See 11 U.S.C. 365(b)(3)(C); and that assumption and assignment of the lease will not disrupt the tenant mix or balance in the shopping center. See 11 U.S.C. 365(b)(3)(D). Courts require a specific factual showing through competent evidence to

determine whether an adequate assurance of future performance has been provided. See, e.g., Matter of Haute Cuisine, Inc., 58 B.R. 390 (Bankr. M.D. Fla. 1986) (even though experts presented cash flow projections, the court found that insufficient documentary evidence had been presented); In re Bygaph, Inc., 56 B.R. 596 (Bankr. S.D.N.Y. 1986) (court granted motion to assume and assign based on assignees capital contribution, personal financial resources, and expressed willingness to devote sufficient funding which gave new restaurant a strong likelihood of succeeding, coupled with assignees experience as an owner/operator of a successful restaurant and his familys planned involvement in the day-to-day management). This adequate assurance of future performance determination must be satisfied in connection with an assumption and assignment under Section 365(f)(2)(B). Sun TV and Appliances, Inc., 234 B.R. at 370. There is no evidence that the Assignee can satisfy the use, tenant mix or other

requirements of the Lease and other leases in the Center, nor any evidence to support that he Assignee has the financial wherewithal or capitalization to perform under the Lease on a going forward basis. i. Financial Condition and Operational History 12. In determining whether a moving party provides adequate assurance of future

performance under 11 U.S.C. 365(b), courts have looked to sufficient economic backing, economic conditions, certificates, credit reports, escrow deposits or other similar forms of security or guarantee. In re Belize Airways, 5 B.R. 152 (Bankr. S.D. Fla. 1980); In re Lafayette Radio Electronics Corp., 9 B.R. 993 (Bankr. E.D.N.Y. 1981). Courts also look to the operating experience of the proposed assignee. In re Bygaph, Inc., 56 B.R. 596 (Bankr. S.D.N.Y. 1986).

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The only evidence of financial condition is the 10-K of the Purchaser, and the Declaration of John Griffin, Vice President Finance of Perry Ellis Menswear, LLC, In support of Showing of Adequate Assurance of Future Performance Under Leases to be Assumed and Assigned (the "Griffin Declaration"). None of this information give financial information with respect to the Assignee, other than the statement that the Purchaser controls 55 retail locations under this name. In addition, no evidence has been produced by the Debtor to demonstrate its own financial condition when the Leases were executed. As such, there is no benchmark against which the Assignee's financial condition (such as it is) may be measured. Finally, no information of intended use has been given by either the Purchaser, or on behalf of Assignee, other than a statement that they intend to make some alteration of the use for the Premises. There is no evidence that this complies with the use in the Lease, or that such alteration may not upset the tenant mix and balance at the Center. 13. Stalking Horse Notice and Griffin Declaration provide that the Purchaser is a

leading designer, distributor and licensor of high quality men's and women's apparel, accessories, and fragrances. It is not clear which of these concepts it intends to utilize at the Center, and without that information, Landlord cannot determine Assignee's ability to comply with the Lease, as well as other exclusives that may exist for other stores in the Center. 14. The Griffin Declaration and the 10-K of the Purchaser does not provide any

relevant adequate assurance information with respect to the Assignee. The Purchaser's 10-K is irrelevant if the Purchaser is not going to be the actual tenant, and has no liability under the Leases. Simply stating that the Assignee has no separate financial documentation does not relieve the Debtor and the Purchaser of its obligations under the Bankruptcy Code. 15. The Debtors and the Purchaser provide no substantive information with respect to

the Assignee's financial wherewithal, capitalization, or assets. As a result, the Debtor and the Purchaser cannot satisfy Section 365, and the Court should deny the assumption and assignment of the Leases.

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16.

To the extent that the later Court approves any assumption and assignment to the

Assignee, at a minimum, the Court should require the Purchaser to provide the Landlord with a guaranty of the Assignee's obligations under the Lease. Alternatively, the Landlord would accept a letter or credit, or a cash security deposit, in place of a guaranty. Pursuant to Section 365(l), the Landlord may require such a credit enhancement as security for the performance of the assignees obligations under the Lease in the event that it fails to perform on a going-forward basis. This is a reasonable condition of demonstrating adequate assurance of future performance where the Debtor and Purchaser seek approval of an assignee without providing financial information for the relevant entity. ii. Percentage Rent 17. iii. No information or evidence on this issue has been produced.

Use Provisions 18. Even prior to the 2005 amendments to the Bankruptcy Code, the Sun TV Court

found that while Congress may have previously contemplated allowable insubstantial disruptions in tenant mix and insubstantial breaches of leases, 11 U.S.C. 365(b)(3) and (f)(2) evidence Congress belief that use and tenant mix in shopping center lease are material. In re Sun TV and Appliances, Inc., 234 B.R. at 370. The Court went on to find that use provisions are at the heart of the interdependence of shopping center leases, as recognized by Congress in requiring an assignee to demonstrate an ability to adhere to them. They are crucial to the tenant mix, which is designed to attract the right number and mix of customers to the mall. In re Sun TV and Appliances, Inc., 234 B.R. at 370-371. The Court ultimately concluded that section 365(b)(3) does not permit [use provisions] to be stricken, even where (as the Debtor asserts) they prevent the Debtor from selling the [l]ease. In re Sun TV and Appliances, Inc., 234 B.R. at 371. 19. The 2005, Congress left no doubt that Sun TV (and other similar cases) we

correct. Through the BAPCPA4 amendments, Section 365(f)(1) is amended to make sure that all
4

On October 17, 2005, the Bankruptcy Abuse Prevention And Consumer Protection Act of 2005 (the BAPCPA) went into effect, clarifying, inter alia, the protections that Landlords are entitled to under 11 U.S.C. 365.

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of the provisions of Section 365(b) are adhered to and that 365(f) of the code does not override Section 365(b). Floor Statement of Senator Orrin Hatch, 151 Cong. Rec. S. 2459, 2461-62 (daily ed. March 10, 2005). In explaining the change to Section 365(f)(1), Senator Hatch stated: The bill helps clarify that an owner should be able to retain control over the mix of retail uses in a shopping center. When an owner enters into a use clause with a retail tenant forbidding assignments of the lease for a use different than that specified in the lease, that clause should be honored. Congress has so intended already, but bankruptcy judges have sometimes ignored the law. 151 Cong. Rec. S. 2459, 2461 (daily ed. March 10, 2005). 20. The changes embodied in the BAPCPA specifically preserve a landlords right to

enforce use and other lease provisions. Again, Senator Hatchs remarks in the Congressional Record clarify the intent behind Section 365(b) and 365(f): A shopping center operator. . . must be given broad leeway to determine the mix of retail tenants it leases to. Congress decided that use or similar restrictions in a retail lease, which the retailer cannot evade under nonbankruptcy law, should not be evaded in bankruptcy. It is my understanding that some bankruptcy judges have not followed this mandate. Under another provisions of the Code, Section 365(f), a number of bankruptcy judges have misconstrued the Code and allowed the assignment of a lease even though terms of the lease are not being followed. 151 Cong. Rec. S. 2459, 2461-62 (daily ed. March 10, 2005). 21. As set forth above, bankruptcy courts must strictly enforce the use and other

provisions in the Lease. This intent is echoed by comments from the House of Representatives, and the legislative history leaves no doubt that such provisions must be strictly enforced: Section 404(b) amends 365(f)(1) to assure that 365(f) does not override any part of 365(b). Thus, 404(b) makes a trustees [debtor-in-possessions] authority to assign an executory contract or unexpired lease subject not only to 365(c), but also to 365(b), which is given full effect. Therefore, for example, assumption or assignment of a lease of real property in a shopping center must be subject to the provisions of the lease, such as use clauses. (Emphasis added) H.R. Rep. No. 109-31, pt. 1, at 87, reprinted in 2005 U.S. Code Cong. & Admin. News 153. 22. The BAPCPA clarified Section 365 to reflect the Congressional intent that

Section 365(f)(1) not be used by debtors to avoid lease provisions. The language of Section 365(f), and any such ability to assume and assign the Leases, is subject to the protections provided by Section 365(b)(1) and (3). Section 365(f) does not modify Section 365(b).

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Therefore, any assignment must remain subject to all provisions of the Leases, including those provisions concerning use, radius, exclusivity, tenant mix and balance, etc. 23. follows: Assignee shall use the respective Premises for the retail sale of men's, women's and/or children's apparel including, but not limited to, woven and knit tops, sweaters, outerwear, t-shirts, dresses, skirts, jeans, casual pants; women's, men's and/or children's accessories including, but not limited to, jewelry, watches, hair accessories, sunglasses, hats, scarves, handbags, footwear, belts; women's and men's personal care including, but not limited to, cosmetics, fragrance, bath & body products, hair care; women's, men's and children's intimate apparel including, but not limited to, socks, panties, boxers, pajamas; miscellaneous gift items including magazines, books, novelty items, games, home decor, artwork and a limited selection of CD's and DVD's. Assignee shall not use more than 5% of the sales floor area for the sale, rental, display of books, magazines, periodicals and newspapers on tape, disk, CD-ROM and/or any other media (the "Ancillary Items"), and not more than 10% of the sale floor area for the sale of children's wear or footwear. The merchandise for sale at the stores, other than the Ancillary Items, shall bear the Perry Ellis, Original Penguin, and/or any other labels owned or licensed to Perry Ellis International, Inc. or any of its affiliates. 24. The Assignee must comply with the Lease, as well as any exclusives in favor of The Griffin Declaration provides that the Assignee intends to use the Premises as

other tenants in the Center in its operation of the Premises. The Bankruptcy Code does not authorize the Assignee to modify the Lease in any way, and especially with respect to the use and tenant mix and balance. The Landlord has not, and does not agree to the above use provision, or to any change in the existing use provision in the Lease. If the Purchaser intends to engage in any business that deviates from the permitted use or restrictions imposed by exclusive provisions of other leases in the Center, the Court must deny the assumption and assignment of the Lease. iv. Tenant Mix or Balance 25. The Purchaser has presented no evidence that any modification of the use of the

Premises will not disrupt tenant mix or balance. 26. The revisions to Section 365 make it clear that the Debtor cannot use Section

365(f) to render lease provisions unenforceable. While such provisions may indirectly limit the

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assignment of the Lease, Section 365(b) specifically protects these provisions.

Provisions

governing use, radius and the permitted conduct upon the Premises, therefore, are not antiassignment provisions and are not rendered unenforceable by Section 365(f). These are

negotiated provisions that legitimately preserve the Landlords control over shopping center environments. Section 365(b)(3) no longer permits even insubstantial breaches of provisions such as use, radius, location or exclusivity. These critical lease terms are enforceable under Section 365(b), and this Court should deny any attempted assignment that fails to comply with such lease provisions. C. Any sale must not be free and clear of obligations to pay all charges due under the Leases, including unbilled year-end adjustments and reconciliations. 27. The Landlord objects to any sale free and clear of the obligations to satisfy

outstanding charges under the Lease, as well as unbilled taxes, reconciliations, percentage rent, or other year-end adjustments or unbilled charges that may have accrued under the Lease prior to the assignment of the Lease, but which have not yet been billed. The Debtor, Purchaser, or Assignee continue to be responsible for all unbilled charges as they come due under the Lease, and must continue to satisfy all charges due under the Lease, including charges which have not yet been billed, reconciled and/or adjusted from pre-petition (or even post-petition) periods. Any assumption and assignment of the Lease cannot cut off the Landlords right to recover all unbilled charges that have accrued, or are accruing, under the Lease. Therefore, any assumption and assignment must provide for the full payment of all outstanding charges currently due under the Lease, as well as provide a mechanism for satisfying any accrued or accruing unbilled charges (such as reconciliation and adjustment charges) that are not yet due under the Lease. 28. Finally, the Lease provides that the Debtor must indemnify and hold the Landlord

harmless with respect to any existing claims which may not become known until after the assumption and assignment of the Lease, examples of which may include such claims as personal injuries at the Premises and damage to the Premises or Center by the Debtor or its

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agents. Any order approving the assumption and assignment of the Lease must provide that the assumption and assignment is pursuant to the terms of the Lease, including that the Assignee continues to be responsible for all such indemnification obligations, regardless of when they arose. In the alternative, the Debtor must provide (by insurance or otherwise) that it can satisfy the indemnification obligations under the Lease for any such claims that relate to the period prior to any assumption and assignment of the Leases. D. Assignment Agreement. 29. Finally, if any assumption and assignment to the Assignee is eventually approved,

Landlord requests that the Court require the Assignee to enter into a short form assignment agreement (the Agreement), in a form acceptable to Landlord, that will cause the Assignee to become directly obligated to Landlord under the Lease. The Agreement shall include the

modification of notice addresses for the parties. The Agreement is critical to Landlord for the maintenance of its lease files, and under the laws of various states, it is critical to establish privity of contract between a landlord and the assignee. E. Reservation of rights. 30. To the extent that there is a later contested hearing on the assumption and

assignment of the Lease, the Landlord reserves the right to further supplement this Objection to more specifically address issues of financial wherewithal, use, tenant mix and balance, as well as any other issues with respect to the assumption and assignment of the Lease. F. Joinder in other landlord objections. 31. To the extent consistent with the objections expressed herein, Landlord also joins

in the objections of other shopping center lessors to the Debtors proposed relief. IV. CONCLUSION To the extent that the parties have not reached an agreement as of the sale hearing, the Court should set a schedule for a final hearing on the assumption and assignment of the Lease for a contested hearing on the issues relating to such proposed assumption and assignment. The Debtor and the Purchaser have not complied with Section 365(b), and the Landlord does not - 11

consent to the assumption and assignment of the Lease to the Assignee, nor to any modification of the use of the Premises or tenant mix and balance at the Center. Finally, the Court should grant such further relief as the Court deems proper. Dated: May 31, 2011 KATTEN MUCHIN ROSENMAN LLP Attorneys for The Macerich Company By:___/s/ Adrienne W. Blankley_______________ Thomas J. Leanse Dustin P. Branch 2029 Century Park East, Suite 2600 Los Angeles, California 90067 Phone: (310) 788-4400 FAX: (310) 788-4471 Adrienne W. Blankley 575 Madison Ave New York, New York 10022 Phone: (212) 940-8800 FAX: (212) 940-8776

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