Stipulation Regarding Global Resolution of Open Issues Between Debtor, Second Lien Lenders and Committee

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Sandra E. Mayerson (SEM-8119) Squire Sanders (US) LLP 30 Rockefeller Plaza, 23rd Floor New York, New York 10112 Telephone: +1.212.872.9800 Facsimile: +1.212.872.9815 Counsel to the Second Lien Lenders Scott E. Blakeley Ronald Clifford Blakeley & Blakeley LLP 2 Park Plaza, Suite 400 Irvine, CA 92614 Tel.: (949) 260-0611 Facs.: (949) 260-0613 Counsel to the Official Comm. of Unsecured Creditors Cathy Hershcopf Alex Velinsky Cooley LLP 1114 Avenue of the Americas New York, N.Y. 10036 Tel.: (212) 479-6138 Facs.: (212) 479-6275 Counsel to the Debtor UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK WHITE PLAINS DIVISION ---------------------------------------------------------x In re: : : METROPARK USA, INC., : : Debtor. : ---------------------------------------------------------x
Chapter 11 Case No. 11-22866 (RDD)
STIPULATION REGARDING GLOBAL RESOLUTION OF OPEN ISSUES BETWEEN DEBTOR, SECOND LIEN LENDERS AND COMMITTEE BRICOLEUR CAPITAL PARTNERS, LP, as agent for the Second Lien Lenders (as defined below), on behalf of itself and the Second Lien Lenders, by and through its undersigned -1COLUMBUS/842659.3
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counsel, along with (i) the above-captioned debtor and debtor-in-possession (the Debtor) and (ii) the Official Committee of Unsecured Creditors (the Committee and collectively with the Second Lien Lenders, the Debtor, and present and future counsel to the Debtor and counsel to the Committee, the Parties), in order to resolve outstanding global issues in this case and bring this case to resolution, hereby stipulate and agree as follows (the Stipulation): Recitals WHEREAS, the Parties desire to enter into a global settlement resolving the majority of the remaining issues in this case, including (i) amount and payment of professional fees, (ii) process for handling causes of action under Chapter 5 of the Bankruptcy Code (the Chapter 5 Claims), (iii) resignation of current counsel and retention of new counsel for the Debtor, (iv) post-petition financing to maintain the estate and prosecute the Chapter 5 Claims, (v) allowance of the claim of the Second Lien Lenders and distribution of cash collateral to the Second Lien Lenders on account of their secured claim, and other miscellaneous issues; and WHEREAS, the Parties agree that this Stipulation sets forth a framework for consensually resolving issues and providing a mechanism for handling the estate and the Chapter 5 Claims in a manner that maximizes value for the Debtor, its estate and its creditors; and WHEREAS, this Stipulation is the result of extended arms length, good faith negotiations among the Debtor, the Committee, the Second Lien Lenders, and each of their respective counsel; and WHEREAS, on May 2, 2011 (the Petition Date), the Debtor filed its voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Southern District of New York, White Plains Division (the Court); and
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WHEREAS, on May 9, 2011, an order was entered authorizing the retention and appointment of Omni Management Group as claims and noticing agent (the Claims Agent) nunc pro tunc to the Petition Date; and WHEREAS, on May 24, 2011, an order was entered authorizing the retention and employment of Cooley LLP (Cooley) as counsel for the Debtor nunc pro tunc to the Petition Date; and WHEREAS, on May 24, 2011, an order was entered authorizing the retention and employment of CRG Partners Group LLC (CRG) as financial advisor to the Debtor nunc pro tunc to the Petition Date; and WHEREAS, on May 26, 2011, an order was entered authorizing the retention and employment of Blakeley & Blakeley LLP (Blakeley) as counsel to the Committee; and WHEREAS, in addition to other prepetition secured indebtedness, the Debtor was a party to that certain Note Purchase Agreement, dated March 21, 2011 (the Prepetition Subordinated Credit Agreement) among the Debtor and Bricoleur Capital Partners, LP, as second lien agent (Agent for the Second Lien Lenders), on behalf of itself and all of the lenders under the agreement, including certain officers and directors of the Debtor (the Second Lien Lenders); and WHEREAS, as of the Petition Date, the principal balance owed under the Prepetition Subordinated Credit Agreement was approximately $825,000.00 (the Principal Amount), which has been and is secured by security interests in and liens on substantially all of the Debtors assets (the Collateral) 1; and
The Pre-petition Collateral is defined at length in the Interim Cash Collateral Orders previously entered by this Court, docket numbers 60, 157, 253, 311, 339, 358, and 377.
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WHEREAS, the claim of the Second Lien Lenders pursuant to the Prepetition Subordinated Credit Agreement, which includes, in addition to the Principal Amount, interest and enforcement costs (the Prepetition Subordinated Secured Claim), was expressly subordinated to the security interests and liens of those certain senior secured parties, which liens were paid in full during of the course of this bankruptcy proceeding, resulting in the Second Lien Lenders now having the first lien position on all of the Collateral; and WHEREAS, the terms of the Fifth Interim Agreed Order Authorizing the Limited Use of Cash Collateral and Granting Adequate Protection (the Fifth Interim Cash Collateral Order) [D.E. #339] provided, inter alia, that any challenges to the validity, priority, extent or perfection of the security interests and liens of the Second Lien Lenders in the Collateral or the validity, allowability, priority, status or amount of the Prepetition Subordinated Secured Claim were required to be brought on or before December 4, 2011; and WHEREAS, no challenges to the Second Lien Lenders Collateral or Prepetition Subordinated Secured Claim were brought by December 4, 2011, and as a result, all of the Debtors stipulations regarding the claims, liens, security interest, etc. of the Second Lien Lenders became binding upon all parties in interest in the Case, all as set forth in the Fifth Interim Cash Collateral Order and incorporated herein by reference; and WHEREAS, the Parties acknowledge that all the remaining assets of the estate other than the Chapter 5 Claims are the Collateral of the Second Lien Lenders, including, but not limited to, all cash held by the Debtor; and WHEREAS, the Debtor has in excess of $11 Million in pre-petition payments during the avoidance period which may be a lucrative source of recovery for the estate, but lacks any unencumbered funds to either analyze or prosecute the potential Chapter 5 Claims; and
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WHEREAS, the Parties have agreed on the terms for a post-petition senior secured loan from the Second Lien Lenders to the Debtor for maintenance of the estate and prosecution of Chapter 5 Claims; and WHEREAS, the Parties have reached an agreement on the final fees and expenses that they agree should be allowed as to Cooley, and to Blakeley to date, for services performed in this proceeding, which have been or will be documented by fee applications to be filed substantially contemporaneously herewith, and which includes a substantial reduction in fees as to each of Cooley and Blakeley; and WHEREAS, the Parties have determined that the resignation of Cooley as counsel to the Debtor and retention of new counsel by the Debtor is in the best interest of the Parties and the Debtors chapter 11 estate; and WHEREAS, the Second Lien Lenders requested and Cooley agreed to a $100,000 reduction in Cooleys requested fees; and WHEREAS, the Second Lien Lenders have reached a settlement with CRG on the formers appeal of CRGs final fee application, pursuant to which the Debtor owes no further payments to CRG for professional services; and WHEREAS, after months of intensive negotiations between the Second Lien Lenders and the Committee, the Parties have reached an agreement regarding the resolution of the abovenoted issues in an effort to move this Case towards closure as quickly and expeditiously as possible while pursuing the lucrative Chapter 5 Claims on behalf of the estate and its creditors; WHEREFORE, the Parties hereby agree as follows:
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Stipulation NOW, THEREFORE, in mutual consideration of the foregoing and other consideration, the value and sufficiency of which is hereby acknowledged by the Parties, the Parties stipulate and agree as follows: 1. herein. 2. Cooley hereby resigns and withdraws as counsel for the Debtor, and such The Recitals form an integral part of this Stipulation, and are incorporated fully
resignation and withdrawal shall be deemed effective as of the date of the later to occur of (i) the entry of an order approving this Stipulation, and (ii) the entry of an order approving the retention of replacement counsel for Debtor (the Cooley Resignation Effective Date). 3. The Debtor, the Second Lien Lenders, the Committee and Cooley hereby agree (i)
that Cooley will provide a $100,000 discount on the legal fees incurred by Cooley in connection with services rendered to or on account of the Debtor during the period following the Petition Date, and (ii) that all other fees and expenses incurred by Cooley in connection with services rendered to or on account of the Debtor in the period following the Petition Date shall be promptly paid in full as allowed and permitted by the Court and as set forth herein. Within 2 business days of an order approving the final fee application of Cooley becoming a final order, $109,500 (or such other amount as is allowed by the Court not to exceed $120,000, the Cooley Final Fees) shall be distributed to Cooley in full and final satisfaction of all amounts owing to Cooley as counsel to the Debtor from the cash collateral on hand. Immediately after distribution to Cooley of the Cooley Final Fees, Cooley shall turn over to the Debtor all of the Debtors remaining funds in their possession, custody or control, which amount Cooley acknowledges is approximately $227,500. The Second Lien Lenders hereby consent to such use of their cash -6COLUMBUS/842659.3
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collateral for the purposes set forth in this paragraph 3. None of the Parties will object to a final fee application filed by Cooley that does not exceed $715,000 for fees and expenses from the commencement of this case through the date of the hearing on this Stipulation. 4. The resignation of CRG as financial advisors for the Debtor shall be deemed
effective as of the date of their Final Fee Application previously heard by this Court. As more fully described in the Stipulation of Settlement filed with the District Court where the appeal of CRGs final fee application is pending, a copy of which is attached hereto as Exhibit A, CRG shall be entitled to retain all fees which CRG has already received in its capacity as financial advisor for the Debtor as full and final satisfaction of all amounts owing to CRG, and CRG shall not receive any further distributions from the estate or otherwise for its role in this case, unless it agrees to perform services at an agreed rate in the future. 5. Upon entry of an order approving the fee application of Blakeley through todays
date, a maximum of $15,658 shall be distributed to Blakeley in full and final satisfaction of all amounts owing to Blakeley up to and through the date of the entry of this Stipulation, which amount represents a negotiated fifteen percent (15%) reduction in Blakelys fees. Said amount shall be paid from the cash collateral on hand, and the Second Lien Lenders hereby consent to such use of their cash collateral. None of the Parties will object to Blakeleys fee application, so long as it does not exceed $15,658. 6. The Debtor and the Committee desire to hire Ashford-Schael LLC (Ashford
Schael) as Debtors new counsel in an effort to reduce expenses while the Chapter 5 Claims are being pursued, to provide the services set forth in and in accordance with the terms of the engagement letter (the Engagement Letter) attached hereto as Exhibit B. The Second Lien -7COLUMBUS/842659.3
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Lenders are in agreement with the retention of Ashford Schael as Debtors counsel and have agreed to loan money to the Debtor for the payment of a retainer to Ashford Schael, as more fully described below. Ashford Schaels retention application is filed simultaneously herewith as Exhibit C. 7. The Parties hereby request this Court to enter an order providing that this Court
having determined that: (i) it has jurisdiction regarding the Debtors retention of Ashford Schael under 28 U.S.C. 157 and 1334; (ii) this matter is a core proceeding under 28 U.S.C. 157(b)(2); (iii) the retention of Ashford Schael is in the best interests of the Debtor, its estate, its creditors, and other parties in interest; (iv) adequate and proper notice of the retention of Ashford Schael has been provided by the noticing of this Stipulation and no other or further notice is necessary; and (v) good and sufficient cause exists for the retention of Ashford Schael; that the Debtor is hereby authorized to retain the law firm of Ashford Schael as counsel to the Debtor and debtor-in-possession pursuant to 11 U.S.C. 327(a) and 329, immediately upon approval of this Stipulation, in accordance with the terms of the Engagement Letter and retention application. 8. Further, the Debtor will pay Ashford Schael a retainer in the amount of $30,000
(the Retainer) for services to be performed for the Debtor, which shall be held by Ashford Schael in trust for application, when approved by the Court, to fees, charges and disbursements related to services rendered to the Debtor after the date of its retention, and shall be further compensated in accordance with the procedures set forth in the Engagement Letter and in 11 U.S.C. 330 and 331 of the Bankruptcy Code, and such Bankruptcy Rules and Local Rules as may then be applicable from time to time, and such procedures as may be fixed by order of this
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Court. Such retainer is to be paid from the loan provided to the estate by the Second Lien Lenders as set forth in more detail hereinafter. 9. The Parties hereby stipulate and agree that the amount of the Second Lien
Lenders allowed claim, which is comprised of a $825,000.00 outstanding principal balance, $180,708.79 in accrued interest as of September 1, 2012 (plus $339.04 interest accruing per diem until a distribution is made), and enforcement costs including reasonable attorney fees in accordance with the Prepetition Subordinated Credit Agreement of $223,486.71 through July 30, 2012, is $1,229,194.50 (subject to additional and pending amounts) (the Allowed Claim). Upon an order approving this Stipulation becoming a final order, all of the cash then in the estate, all of which comprises cash collateral of the Second Lien Lenders, other than the cash necessary to pay the professionals in accordance with a schedule set forth in Exhibit D, shall be paid to the Agent for the Second Lien Lenders for distribution pro rata2 to the Second Lien Lenders, on account of the Allowed Claim. The amount so paid shall constitute the Second Lien Lenders Allowed Secured Claim, which amount may increase from time to time as set forth hereinafter (the Allowed Secured Claim). The Amount of the Allowed Claim minus the amount of the Allowed Secured Claim shall constitute the amount of the Second Lien Lenders claim which is deemed allowed as a general unsecured claim (the Allowed Deficiency Claim), which amount is subject to decrease from time to time as set forth hereinafter. The Allowed Secured Claim and the Allowed Deficiency Claim are each hereby deemed to be allowed claims against the estate, and the Parties hereto and any and all parties receiving notice of the hearing on
To the extent payment on the Allowed Secured Claim is for expenses and/or attorney fees, the Agent shall pay any outstanding expenses and fees first, reimburse the Second Lien Lenders who contributed payment of the expenses and attorney fees for such amounts second, and then distribute the remainder pro rata.
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this Stipulation are forever barred from objecting to said claims once an order approving this Stipulation has been entered and become final. 10. The Parties acknowledge that from time to time, the estate will collect funds
which are proceeds of the Second Lien Lenders collateral. Such amounts may include, but are not limited to, insurance proceeds, return of prepaid deposits, proceeds of class action settlements with credit card companies, and the like. The Parties hereby stipulate and agree that any funds coming into the estate other than from a Chapter 5 Claim or a post-petition loan constitutes the pre-petition cash collateral of the Second Lien Lenders to the extent of the Allowed Claim (the Subsequent Cash Collateral). All such amounts shall be deemed held in trust for the Second Lien Lenders, and upon receipt by the estate shall be promptly paid over to the Agent for the Second Lien Lenders for pro rata2 distribution to the Second Lien Lenders, up to the amount of the Allowed Claim, and subject to the balance of the instant paragraph. Any amounts so paid will be deemed to increase the amount of the Second Lien Lenders Allowed Secured Claim, and decrease the amount of the Allowed Deficiency Claim, by the amounts so paid (as recalculated, the Revised _________ Claim). If the Second Lien Lenders have already received distributions on their Allowed Deficiency Claim and, as a result of the reduction of their Allowed Deficiency Claim, such distributions, though equal to the percentage distributed to other general unsecured creditors at the time, are now in excess of the percentage distributed to other holders of allowed general unsecured claims (the Percentage Distribution), then the Debtor will withhold from the amount of cash collateral paid over to the Agent for the Second Lien Lenders an amount sufficient to make the Second Lien Lenders Percentage Distribution on their Revised Allowed Deficiency Claim equal to the Percentage Distribution previously received by all other holders of allowed general unsecured claims. Any amounts so withheld and - 10 COLUMBUS/842659.3
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retained in the estate shall thereafter be treated as proceeds from a Chapter 5 Claim. All future distributions to the Second Lien Lenders on account of their Allowed Deficiency Claim will be based on the amount of the Revised Allowed Deficiency Claim. 11. Simultaneous with paying over any Subsequent Cash Collateral, the Debtor shall
provide both the Agent for the Second Lien Lenders and the Committee with a written calculation of the Revised Allowed Secured Claim; the Revised Allowed Deficiency Claim; the amount withheld to equalize the Percentage Distributions; and the details of the calculation of the amount withheld sufficient to verify the calculation. A copy of such written notice will be filed simultaneously with the Court. If no objection to the notice is made in writing to the Debtor within ten (10) business days, then the Revised Claims shall stand as the Allowed Secured Claim and Allowed Deficiency Claim, and the amount withheld will be deemed correct and final. 12. The Parties hereby agree that, upon entry of an order approving this Stipulation,
and entry of orders on the fee applications of Cooley and Blakeley, each of Cooley and Blakeley will be paid the agreed upon amount of their fees and expenses from estate funds, which is the Collateral of the Second Lien Lenders. All remaining funds of the estate shall be immediately paid over to the Second Lien Lenders, if they have not been paid already. For the avoidance of doubt, Exhibit D attached hereto shall not only list the outstanding fees and expenses of professionals stipulated to be paid by the Parties, but also a close approximation of the total cash in the Debtors estate as of the date of the filing of this Stipulation to indicate the magnitude of the Allowed Secured Claim. 13. Upon approval by the Court of this Stipulation, the Second Lien Lenders and the
Debtor will enter into a Debtor-in-Possession Promissory Note and Security Agreement (the - 11 COLUMBUS/842659.3
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DIP Note) whereby the Second Lien Lenders will loan funds to the Debtor on a revolving basis for a maximum period of one (1) year or such later date as may be agreed in writing by the Agent for the Second Lien Lenders (the DIP Termination Date) in accordance with the terms of the DIP Note attached hereto as Exhibit E. In summary, the Second Lien Lenders will (after receiving the payout referred to in paragraph 9 hereof), upon closing of the loan (the DIP Loan), immediately loan $109,700 to the Debtor in order for the Debtor to fund (i) the Retainer to Ashford-Schael of $30,000; (ii) the past due amount owed to the Claims Agent of $18,500, (iii) the past due amount for maintenance of electronic records in the amount of $11,200, and (iv) $50,000 of seed money for prosecution of the Chapter 5 Claims, which amount may be used at the sole discretion of the Committee for any post-petition expenses of Debtor. The DIP Loan will be secured by a blanket security interest in all assets of the Debtor, including Chapter 5 Claims and proceeds therefrom, subject to a carve out for the Debtor described herein, and will bear interest at a fixed rate of five percent (5%) per annum. Additionally, the Debtor will be able to borrow a maximum of $10,000 per month for payment of estate expenses, including but not limited to U.S. Trustee fees, data storage fees, professional and consulting fees, post-petition taxes, and other post-petition administrative expenses in strict accordance with the terms of the budget (the Budget) attached to the DIP Note; provided, however, that funds not drawn in one month may be drawn the following month; and provided further, that at no time are the Second Lien Lenders required to have more than $150,000 outstanding in post-petition loans. The Committee must approve all of the Debtors draw downs on the loan. Upon the DIP Termination Date, as set forth in the DIP Note, all amounts owing to the Second Lien Lenders on account of the DIP Loan shall be immediately repaid in full. Prior to that time, the loan may be repaid and
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re-borrowed from time-to-time in accordance with the instant paragraph, so long as the amount outstanding does not exceed $150,000. 14. In order to ensure that funds are available to loan the estate as required by this
Stipulation, the Agent for the Second Lien Lenders will segregate $150,000 of proceeds from the amounts paid on the Allowed Secured Claim, and use such money to fund the revolving loan. As amounts are repaid, the Agent for the Second Lien Lenders will put such repayments in the segregated account. Any amounts in the segregated account in excess of $150,000 at any time may be distributed to the Second Lien Lenders pro rata. Upon the occurrence of the
Termination Date, all amounts in the Segregated Account will be distributed pro rata to the Second Lien Lenders, as will any repayments thereafter. 15. Any amounts not repaid in full on the Termination Date will bear interest at the
rate of ten percent (10%) per annum. 16. It is anticipated that the DIP Loan will be repaid form the net proceeds of the
Chapter 5 Claims. The Debtor agrees that all net proceeds, other than those subject to the carve out described herein, will be used first to pay down any outstanding post-petition loans. So long as there are any loans outstanding, said proceeds may not be used for any other purpose. At any point that the loan balance is zero, the Debtor can use proceeds for the payment of any administrative expenses or claims, consistent with the Bankruptcy Code and applicable law. 17. In order to ensure that the Debtor and all its creditors benefit from the agreements
herein, the Parties agree that twenty-five percent (25%) of the proceeds of the Chapter 5 Claims after payment of any contingency fee (but not expenses) owed to the lawyers prosecuting the claims (the Net Recovery) will be carved out from the blanket lien of the Second Lien Lenders - 13 COLUMBUS/842659.3
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and placed in a segregated account for the benefit of the estate. Such amounts may be used upon the approval of the Debtor and the Committee for ongoing expenses of the Debtor, prosecution of the Chapter 5 Claims, and distributions to creditors, all in accordance with the Bankruptcy Code and applicable law. Any distributions on account of allowed general, unsecured claims will include a pro rata distribution on the Allowed Deficiency Claim, and the Parties hereby stipulate and agree never to classify or attempt to classify the Allowed Deficiency Claim separately from other allowed general unsecured claims nor to seek subordination of such claim. 18. This Stipulation shall be subject to approval by the Court, and a final order of this
Court approving this Stipulation is sufficient to grant the Agent for the Second Lien Lenders, on behalf of itself and all of the Second Lien Lenders, a valid, enforceable, perfected first priority lien in all of the assets of the Debtor of whatever kind or nature, including, inter alia, the Chapter 5 Claims, and subject to the carve out provided herein; and no further documentation or filings are necessary to perfect such liens or make them enforceable against the Debtor or any subsequent trustee. If the Agent for the Second Lien Lenders chooses nonetheless to file any instrument to perfect its liens, the Debtor shall cooperate with the Agent for the Second Lien Lenders on all such filings and hereby grants the Agent for the Second Lien Lenders authority to execute any such instruments on the Debtors behalf. 19. The Parties agree that all Chapter 5 Claims shall be prosecuted by the Committee
exclusively on behalf of the Debtor for a period of one (1) year (the Exclusive Period) following the entry of an order approving this Stipulation. It is stipulated and agreed that the Chapter 5 Claims will be prosecuted by counsel selected by the Committee on a contingency fee basis, in accordance with the terms set forth in the retention agreement approved by the Debtor and Second Lien Lenders, which approval cannot be unreasonably withheld. Neither the Debtor - 14 COLUMBUS/842659.3
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nor the Second Lien Lenders will object to a contingency fee arrangement that is 30% or less of the recovered amounts. The Committee agrees to use its best efforts to recover funds on account of the Chapter 5 Claims. At the conclusion of the Exclusive Period, the Debtor, in conjunction with the Committee and the Second Lien Lenders, shall determine whether the Committee shall continue to have the exclusive ability to bring Chapter 5 Claims. The Parties agree that the Committee may hire Blakeley as counsel to prosecute any of the Chapter 5 Claims on a contingency basis as set forth above. 20. The Committee shall seek written approval from the Second Lien Lenders, which
approval shall not be unreasonably withheld, before settling any Chapter 5 Claim for which the initial recovery sought from the counter-party is greater than $250,000, and shall also seek approval from this Court before settling any Chapter 5 Claim for which the initial recovery sought from the counter-party is greater than $500,000. The Committee does not require
approval from either this Court or any other party to settle claims other than as set forth in this paragraph 20, and such settlements will be binding on the Parties. The Committee will provide monthly written reports on the status of the Chapter 5 Claims to the Debtor, Second Lien Lenders, and the Court in form and substance reasonably acceptable to the Debtor and the Second Lien Lenders. 21. Upon entry of an order approving this Stipulation, the Debtor and the Committee,
on their own behalf and on behalf of their respective partners, members, interest holders, officers, directors and agents and attorneys (collectively, the Releasing Parties), shall be deemed to have released, acquitted, and forever discharged the Second Lien Lenders, in their capacities as lenders and directors, and each Second Lien Lenders respective partners, members, interest holders, officers, directors, agents, and all professionals retained by the Second Lien - 15 COLUMBUS/842659.3
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Lenders (the Released Parties), of and from any and all claims, demands, damages, actions, causes of action, debts, costs, loss of services, expenses, compensation, liabilities or controversies of any kind whatsoever, whether sounding in tort or contract, or any statutory or common law claim or remedy of any type, whether known or unknown, latent, patent, nonexistent at the present time, and which may arise in the future relating the acts taken or neglected prior to approval of this Stipulation or are unanticipated at this time which the Releasing Parties have had, now have, or may have against the Released Parties in the future arising out of matters pertaining to this Debtor and its estate occurring on or prior to the date this Stipulation is approved by the Court, except that, none of the matters dealt with in this Stipulation are released, and the Released Parties still have all obligations set forth herein. 22. Upon entry of an order approving this Stipulation, the Second Lien Lenders and
the Debtor, on their own behalf and on behalf of their respective partners, members, interest holders, officers, directors and agents and attorneys (collectively, the Committee Releasing Parties), shall be deemed to have released, acquitted, and forever discharged the Committee, their respective partners, members, interest holders, officers, directors, agents, and all professionals retained by the Committee (the Committee Released Parties), of and from any and all claims, demands, damages, actions, causes of action, debts, costs, loss of services, expenses, compensation, liabilities or controversies of any kind whatsoever, whether sounding in tort or contract, or any statutory or common law claim or remedy of any type, whether known or unknown, latent, patent, nonexistent at the present time, and which may arise in the future relating to acts taken or neglected prior to approval of this Stipulation or are unanticipated at this time which the Committee Releasing Parties have had, now have, or may have against the Committee Released Parties in the future arising out of matters pertaining to this Debtor and its - 16 COLUMBUS/842659.3
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estate occurring on or prior to the date this Stipulation is approved by the Court, except that, none of the matters dealt with in this Stipulation are released, and the Committee Released Parties still have all obligations set forth herein. 23. Upon entry of an order approving this Stipulation, the Debtor, the Committee, and
the Second Lien Lenders on their own behalf and on behalf of their respective partners, members, interest holders, officers, directors and agents and attorneys (collectively, the Cooley Releasing Parties), shall be deemed to have released, acquitted, and forever discharged Cooley, its respective partners, members, interest holders, officers, directors and agents (the Cooley Released Parties), of and from any and all claims, demands, damages, actions, causes of action, debts, costs, loss of services, expenses, compensation, liabilities or controversies of any kind whatsoever, whether sounding in tort or contract, or any statutory or common law claim or remedy of any type, whether known or unknown, latent, patent, nonexistent at the present time, and which may arise in the future or are unanticipated at this time which the Cooley Releasing Parties have had, now have, or may have against the Cooley Released Parties in the future, arising out of matters pertaining to this Debtor and its estate, except that, none of the matters dealt with in this Stipulation are released, and the Cooley Released Parties still have all obligations set forth herein. 24. The Debtor hereby agrees to indemnify and hold harmless the Released Parties
and the Cooley Released Parties from any and all claims, causes of action, counterclaims or rights of setoff (Claims) or recoupment asserted by any party arising from and/or related to any decisions and/or distributions made by the Debtor and/or to any of the transactions contemplated by this Stipulation and the DIP Note; provided, however, that the foregoing shall not apply to Claims arising out of conduct by the Released Parties that constitutes fraud, gross - 17 COLUMBUS/842659.3
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negligence or willful misconduct. For the avoidance of doubt, nothing in this Stipulation shall modify, change or supersede any indemnification provisions that inure to the benefit of the Second Lien Lenders as set forth in the Prepetition Subordinated Loan Documents and/or the DIP Note. 25. Neither this Stipulation nor the fulfillment and performance of any of the
promises or covenants contained herein shall be construed to give rise to any claim against the Parties, including, without limitation, any claim for conflict of interest. 26. The Parties acknowledge that this Stipulation constitutes the entire agreement
among the Parties and that any other prior or contemporaneous oral or written agreements respecting its subject matter are merged with or into this Stipulation and shall have no force or effect whatsoever. The Parties shall not alter or modify this Stipulation except by an instrument in writing executed by all parties. 27. This Stipulation, including the releases and indemnification provided herein, shall
be binding upon, extend to and inure to the benefit of the undersigned parties, and all their respective past, present and future heirs, successors (including any successor trustee), and assigns, as well as all other persons and entities acting or purporting to act on their respective behalf and any firms, corporations, associations, partnerships and other entities affiliated with, controlled by or otherwise related to any of the undersigned Parties. 28. This Stipulation and any claims arising out of or related directly or indirectly to
this Stipulation shall be construed and enforced in accordance with and governed by the laws of the State of New York without regard to conflict of laws principles, except to the extent the
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provisions of the United States Bankruptcy Code and/or the Federal Rules of Bankruptcy Procedure are applicable. 29. This Stipulation may be executed and delivered (including by facsimile or
portable document format (PDF) transmission) in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed will be deemed to be an original, but all of which taken together will constitute one and the same agreement. 30. Any notices given pursuant to this Stipulation shall be given either by hand
delivery, an overnight courier service or electronic delivery addressed as follows: If to the Debtor: Courtney Schael, Esq. Ashford Schael LLC 511 Summit Avenue Westfield, N.J. 07090 (908) 255-0462 cschael@ashfordnjlaw.com If to Cooley: Cathy Herschcopf, Esq. Cooley LLP 1114 Avenue of the Americas New York, N.Y. 10036 (212) 479-6138 chershcopf@cooley.com If to the Committee: Ronald Clifford, Esq. Blakeley & Blakeley LLP 2 Park Plaza, Suite 400 Irvine, CA 92614 (949) 260-0611 rclifford@blakeleyllp.com - 19 COLUMBUS/842659.3
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If to the Agent for the Second Lien Lenders or the Second Lien Lenders: Mr. Robert Poole Bricoleur Capital Management P.O. Box 9933 Rancho Santa Fe, CA 92067 (858) 523-2000 poole@bricoleur.com with a copy to: Sandra E. Mayerson, Esq. Squire Sanders (US) LLP 30 Rockefeller Plaza, 23rd Floor New York, N.Y. 10112 (212) 872-9899 sandy.mayerson@squiresanders.com 31. The Bankruptcy Court shall retain jurisdiction over all disputes arising under or
related to this Stipulation. 32. The undersigned certify that they are duly authorized to execute this Stipulation
on behalf of their respective clients and/or the parties that are indicated below their respective signature blocks. 33. To the extent applicable, the stay set forth in Bankruptcy Rule 6004(h) shall not
be applicable to this Stipulation. Dated: September ___, 2012
- 20 COLUMBUS/842659.3
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STIPULATED AND AGREED TO BY: COOLEY LLP on behalf of itself and Debtor Metropark USA, Inc.
By: Cathy Herschcopf, Esq. cherschcopf@cooley.com Cooley LLP 1114 Avenue of the Americas New York, N.Y. 10036 Telephone: (212) 479-6138 Facsimile: (212) 479-6275
BLAKELEY & BLAKELEY LLP on behalf of itself and the Official Committee of Unsecured Creditors
By: Ronald A. Clifford, Esq. rclifford@blakeleyllp.com Blakeley & Blakeley LLP 2 Park Plaza, Suite 400 Irvine, CA 92614 Telephone: (949) 260-0611 Facsimile: (949) 260-0613
AGENT to the SECOND LIEN LENDER, on behalf of itself and all Second Lien Lenders Bricoleur Capital Management by its counsel, Squire Sanders (US) LLP
By: Sandra E. Mayerson, Esq. sandy.mayerson@squiresanders.com 30 Rockefeller Plaza, 23rd Floor New York, N.Y. 10112 Telephone: (212) 872-9800 Facsimile: (212) 872-9815 - 21 COLUMBUS/842659.3
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ASHFORD SCHAEL LLC, on behalf of itself
By: Courtney Schael, Esq. cschael@ashfordnjlaw.com Ashford Schael LLC 511 Summit Avenue Westfield, N.J. 07090 Telephone: (908) 255-0462 Facsimile: _____________
Dated: September __, 2012 New York, New York
- 22 COLUMBUS/842659.3
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Exhibit A
Exhibit A
Forthcoming
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Exhibit B
Exhibit B
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Ashford Schael LLC
511 Summit Avenue Westfield, NJ 07090 -and1371 Morris Avenue Union, NJ 07083 908-232-5566 www.AshfordNJLaw.com
Courtney A. Schael, Esq. 908-255-0462 cschael@AshfordNJLaw.com
September 19, 2012
Cynthia Harriss Chief Executive Officer Metropark USA, Inc. 5750 Grace Place Los Angeles, CA 90022 Re: In re Metropark USA, Inc. Case No. 11-22866 (RDD)
Dear Ms. Harriss: Thank you for requesting that Ashford - Schael LLC ("Ashford Schael") represent the Debtor in its pending Chapter 11 bankruptcy case. If Ashford Schael is not retained to represent the Debtor in other matters, our attorney-client relationship with the Debtor will end upon the completion of this representation. Our agreement to render legal services is as follows: Ashford Schael will bill the Debtor for services based on the time spent performing services multiplied by our regular hourly rate. Courtney A. Schael's current billing rate is $400/hour. Billing rates for other attorneys range from $225/hour to $325/hour. The billing rate for paralegals is $150.00/hour. From time to time, our rates change, and we will advise the Debtor of such changes in our monthly fee statements. All fees will be subject to Bankruptcy Court approval, any interim compensation order and the provisions of sections 330 and 331 of the Bankruptcy Code.
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Exhibit B
In addition to charges for services rendered, Ashford Schael will also bill the Debtor for disbursements. There are a variety of expenses which we will typically incur, and pay, during the course of our representation of the Debtor, including charges for computer assisted legal research, telephone, fax, Federal Express, messenger service, copying, and similar expenses. The Debtor may terminate our representation at any time, with or without cause, by notifying us that the Debtor no longer requires our legal representation. Ashford Schael also reserves the right to withdraw from our representation of the Debtor in the event circumstances may require it, subject to Court approval. We will attempt to identify these circumstances well in advance of our need to withdraw and will inform the Debtor of any situation which may lead to our withdrawal. Further, if our withdrawal should become necessary, we will promptly give the Debtor written notice of our decision and expect the Debtor to take whatever steps are necessary to accomplish our withdrawal, including executing any necessary documents. Client files are retained for seven (7) years after the file is closed. After that period, files are destroyed unless the client instructs us otherwise, in writing. If the Debtor wishes us to retain this file beyond seven years, please provide us with such request in writing. We will require an advance retainer to be applied to all fees and expenses approved by the Bankruptcy Court. Subject to Bankruptcy Court approval, the Debtor has agreed to provide us with a retainer in the amount of $30,000. The retainer will be placed into a non-interest bearing trust account. Ashford Schael will draw against those funds for the payment of fees and expenses in the manner and to the extent allowed under any interim compensation order or other orders entered by the Bankruptcy Court approving Ashford Schael's fees and expenses. Upon completion of this matter, if any portion of the retainer remains after payment in full of all fees and expenses approved by the Bankruptcy Court, we will refund the remaining portion to the Debtor. If the Debtor agrees with the above terms and you do not have any questions or concerns, please execute this letter where indicated below and return the executed copy to me. This agreement shall be subject to: (i) Bankruptcy Court approval, (ii) entry of an order of the Bankruptcy Court authorizing the Debtors post-petition payment of Ashford Schael's retainer, and (iii) entry an order approving Ashford Schael's retention as counsel to the Debtor pursuant to section 327(a) of the Bankruptcy Code.
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Exhibit B
If you should have any questions concerning this letter, please feel free to contact me. Thank you again for the opportunity to represent the Debtor. Very truly yours,
Courtney A. Schael
METROPARK USA, INC.
By: Cynthia Harriss
Date:
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Exhibit C
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ASHFORD SCHAEL LLC 511 Summit Avenue Westfield, NJ 07090 -and1371 Morris Avenue Union, NJ 07083 Telephone: (908) 232-5566 Facsimile: (908) 728-3113 Courtney A. Schael, Esq. Proposed Counsel for Debtor and Debtor in Possession
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK
Chapter 11 In re Case No. 11-22866 (RDD) METROPARK USA, INC., Debtor.
DEBTOR'S APPLICATION FOR ENTRY OF ORDER PURSUANT TO BANKRUPTCY CODE SECTIONS 327(a) AND 328 AND BANKRUPTCY RULES 2014 AND 2016 AUTHORIZING EMPLOYMENT AND RETENTION OF ASHFORD-SCHAEL LLC AS COUNSEL FOR DEBTOR, AUTHORIZING SUBSTITUTION OF ASHFORD SCHAEL LLC FOR COOLEY LLP AS COUNSEL FOR DEBTOR AND RELATED RELIEF TO THE HONORABLE ROBERT D. DRAIN UNITED STATES BANKRUPTCY JUDGE: Metropark, USA, Inc., the debtor and debtor in possession in the above-captioned case (the "Debtor"), hereby applies (the "Application") for entry of an order under sections 327(a) and 328 of title 11 of the United States Code (the "Bankruptcy Code"), Rules 2014 and 2016 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and Rules 2014-1 and 2016-1 of the Local Bankruptcy Rules for the United States Bankruptcy Court for the Southern District of New York (the "Local Rules"), authorizing the employment and retention of
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Ashford - Schael LLC ("Ashford Schael or the "Firm"), under a general retainer as the Debtor's bankruptcy counsel and authorizing the substitution of Ashford Schael for Cooley LLP (Cooley) as the Debtors bankruptcy counsel. In support of the Application, the Debtor relies upon and incorporates by reference the declaration of Courtney A. Schael in Support of Debtor's Application for Order Under 11 U.S.C. 327(a) and 328 and Bankruptcy Rules 2014 and 2016 Authorizing Employment and Retention of Ashford Schael LLC as Attorneys for Debtor, Authorizing Substitution of Ashford Schael LLC for Cooley LLP as Attorneys for the Debtor and Related Relief (the "Schael Declaration"), attached hereto as Exhibit A. In further support of the Application, the Debtor respectfully represents: BACKGROUND
1.
On or about May 2, 2011 (the "Petition Date"), the Debtor filed a
voluntary case under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Court). The Debtor is authorized to operate its business and manage its properties as debtor in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee or examiner has been appointed in this Bankruptcy Case.
2.
On or about May 6, 2011, the Office of the United States Trustee
appointed an official committee of unsecured creditors (the Committee). (Docket no. 57).
3.
On or about May 24, 2011, the Court entered an Order Under Bankruptcy
Code Section 327(a) and Bankruptcy Rules 2014 and 2016 Authorizing the Employment and Retention of Cooley LLP as Attorneys for Debtor, Nunc Pro Tunc to the Petition Date. (Docket no. 145).
4.
On or about May 24, 2011, the Court entered an Order Pursuant to
Sections 105(a) and 331 of the Bankruptcy Code and Bankruptcy Rule 2016(a) Establishing
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Procedures for Interim Monthly Compensation and Reimbursement of Expenses of Professionals (the Monthly Compensation Order). (Docket no. 154). DEBTORS BUSINESS
5.
The Debtor's business was founded in 2004 to capitalize on the large Gen
Y segment (the 25-35 year old customer) who had moved on from teen retailers, but were still looking for fashion-forward apparel and accessories. Through a multi-channel sales strategy, including sales through brick-and-mortar stores and e-commerce, Metropark catered to trendsetting young adult customers by offering a unique and highly differentiated merchandise assortment introducing a "Fashion, Music, Art" philosophy into the marketplace.
6.
Since its founding in 2004, Metropark grew rapidly from its four original
store locations to approximately 70 stores in 21 states, in addition to its newly redesigned online retail presence at www.metroparkusa.com.
7.
As a result of several internal and external factors, the Debtor faced
extraordinary liquidity constraints in the first quarter of 2011. Because of this reality, the Debtor spent the better part of the first quarter of 2011 trying to identify a financial partner to provide an equity infusion, debt investment or otherwise stabilize the financial wherewithal of the Company. Unfortunately, a transaction in the best interest of the Company, its creditors and its shareholders was not available outside of chapter 11 and the Company reached the end of its liquidity runway. Accordingly, the Debtor determined that the commencement of its bankruptcy case (the Bankruptcy Case) would provide the sole opportunity to, among other things, sell substantially all of the assets of the Debtor as a going concern or liquidation.
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STATUS OF BANKRUPTCY CASE
8.
Beginning on or about May 6, 2011, the Court entered various orders
effectuating a liquidation of the Debtors assets, including without limitation: (a) Order Pursuant to Sections 105(a), 363, 364, 365 and 554 (I) Approving Agency Agreement, (II) Approving Store Closing Sales Free and Clear of Liens, Claims and Encumbrances, (III) Approving Break-Up Fee, (IV) Authorizing the Debtor to Abandon Property, and (V) Granting Related Relief entered May 6, 2011 (docket no. 59); (b) Order (A) Setting (1) Date to Conduct Auction of Debtor's Interest in Certain Real Property and Intellectual Property, (2) Hearing Date for Approval of Auction and (3) Related Objection Deadlines; (B) Approving Bidding Procedures and Terms of Auction; and (C) Granting Related Relief entered on May 24, 2011 (docket no. 149); (c) Order Pursuant to Sections 105 and 363 of the Bankruptcy Code and Bankruptcy Rules 2002 and 6004 Authorizing and Approving (I) Designation Rights Agreement with The Cotton On Group, (II) The Sale of Certain of the Debtor's Leases, (III) Assumption and Assignment Procedures and (IV) Cure Amounts and (V) Granting Related Relief entered on June 6, 2011 (docket no. 190); and (d) Order signed on 6/27/2011 (I) Approving the Assumption and Assignment of Unexpired Leases of Nonresidential Real Property to Cotton on USA, Inc. and (II) Granting Related Relief entered on June 27, 2011 (docket no. 255). Pursuant to these and other Orders, the Debtor has liquidated substantially all of its assets.
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9.
After liquidation of substantially all of the Debtors assets, the Debtors
only remaining assets are avoidance actions under the Bankruptcy Code and applicable state law, insurance refunds and pre-paid deposits. JURISDICTION
10.
This Court has jurisdiction to consider this matter pursuant to 28 U.S.C.
157 and 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper before this Court pursuant to 28 U.S.C. 1408 and 1409. RELIEF REQUESTED
11.
By this Application, the Debtor seeks to employ and retain Ashford Schael
to substitute for Cooley as counsel for the Debtor and to represent the Debtor as its bankruptcy counsel in connection with this Bankruptcy Case. Accordingly, the Debtor respectfully requests entry of an order under sections 327(a) and 328 of the Bankruptcy Code, in substantially the form attached hereto, authorizing the Debtor to employ and retain Ashford Schael as its attorneys under a general retainer to perform the legal services that will be necessary during the remainder of this Bankruptcy Case, as summarized herein and more fully described in the Schael Declaration, attached hereto. The Debtor also seeks authorization and approval: (i) to substitute Ashford Schael for Cooley, (ii) for payment of a retainer to Ashford Schael in the amount of $30,000 as provided for and more fully described in the Stipulation and Regarding Global Resolution of Open Issues Between Debtor, Second Lien Lenders and Committee, and (iii) continuing the Monthly Compensation Order as to Ashford Schael. BASIS FOR RELIEF
12.
At the commencement of this case, the Debtor sought approval of the
retention of Cooley to represent the Debtor in its efforts to restructure its business. After the
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liquidation of substantially all of the Debtors assets and settling various matters, the Debtor believes that substituting Ashford Schael as counsel for Cooley to wind-down the affairs of the Debtor and conclude the Bankruptcy Case will be more cost effective for the estate and maximize the estates assets for the benefit of creditors. The Debtor chose Ashford Schael because Ashford Schael has extensive experience and knowledge in the field of debtors' and creditors' rights and business reorganizations under chapter 11 of the Bankruptcy Code. Further, Ashford Schaels size, structure and hourly rates, will allow Ashford Schael to cost effectively act as wind-down counsel for the Debtor.
13.
The Debtor desires to employ Ashford Schael under a general retainer
because of the legal services that will be required in connection with winding down of the Bankruptcy Case. As noted above, the Debtor believes Ashford Schael is well qualified and uniquely able to act on the Debtor's behalf in winding up the affairs of the Debtor in a cost effective manner. SERVICES TO BE RENDERED
14.
The services of attorneys under a general retainer are necessary to enable
the Debtor to execute faithfully its duties as debtor in possession. Subject to further order of this Court, Ashford Schael will be required to render various services to the Debtor including, among others, the following: (a) advising the Debtor with respect to its powers and duties as debtor and debtor in possession in the continued liquidation and wind down of its business; (b) attending meetings and negotiating with the Committee and other parties in interest with respect to the final liquidation and distribution in the Bankruptcy Case;
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(c)
taking all necessary actions to protect and preserve the Debtor's estate, including the defense of any actions commenced against the estate, negotiations concerning litigation in which the Debtor may be involved, and objections to claims filed against the estate;
(d)
preparing, on behalf of the Debtor, motions, applications, answers, orders, reports, and papers necessary to the administration and winding down of the estate;
(e) (f)
advising the Debtor on its various options for concluding the Bankruptcy Case; preparing and negotiating on the Debtor's behalf any documents or pleadings to effectuate a conclusion of the Bankruptcy Case and taking any necessary action on behalf of the Debtor to wind down the Debtors affairs and conclude the Bankruptcy Case;
(f)
advising the Debtor in connection with the sale of assets or liquidation of any remaining assets;
(g)
performing other necessary legal services and providing other necessary legal advice to the Debtor in connection with this Bankruptcy Case; and
(h)
appearing before this Court, any appellate courts, and the United States Trustee (the "U.S. Trustee") and protecting the interests of the Debtor's estate before such courts and the U.S. Trustee.
15.
It is necessary and essential that the Debtor, as debtor in possession,
employ attorneys under a general retainer to render the foregoing professional services. Ashford Schael has indicated a willingness to act on behalf of, and render such services to, the Debtor. DISINTERESTEDNESS OF ASHFORD SCHAEL
16.
To the best of the Debtor's knowledge, and except as otherwise set forth
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herein and in the accompanying Schael Declaration, the member(s), counsel and associates of Ashford Schael: (a) do not have any connection with the Debtor or its affiliates, its creditors or any other party in interest, or their respective attorneys and accountants, the U.S. Trustee or any person employed in the office of the same, or any judge in the Bankruptcy Court or the United States District Court for the Southern District of New York or any person employed in the offices of the same; (b) are "disinterested persons," as that term is defined in Bankruptcy Code section 101(14); and (c) do not hold or represent any interest adverse to the estate.
17.
Declaration:
To the best of the Debtor's knowledge and except as set forth in the Schael
(a) Neither Ashford Schael nor any attorney employed by the Firm holds or represents an interest adverse to the Debtor's estate. (b) Neither Ashford Schael nor any attorney employed by the Firm is or was a creditor or an insider of the Debtor. (c) Neither Ashford Schael nor any attorney employed by the Firm is or was, within two years before the Petition Date, a director, officer, or employee of the Debtor. (d) Ashford Schael does not have an interest materially adverse to the interest of the estate or of any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in the Debtor, or for any other reason. (e) No attorney employed by Ashford Schael is related to any United States District Judge or United States Bankruptcy Judge for the Southern District of New York or to the U.S. Trustee for such district or to any known employee in the office thereof.
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18.
In view of the foregoing, the Debtor believes that Ashford Schael is a
"disinterested person" within the meaning of Bankruptcy Code section 101 (14), as modified by Bankruptcy Code section 1107(b).
19.
Ashford Schael has informed the Debtor that throughout this case,
Ashford Schael will continue to conduct periodic conflicts analyses to determine whether it is performing or has performed services for any significant parties in interest in this Bankruptcy Case and that it will promptly update this Application and disclose any material developments regarding the Debtor or any other pertinent relationships that come to Ashford Schael's attention by way of a supplemental Declaration. PROFESSIONAL COMPENSATION
20.
The Debtor understands that Ashford Schael intends to apply to the Court
for allowances of compensation and reimbursement of expenses in accordance with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, the guidelines established by the U.S. Trustee, the Monthly Compensation Order, and further orders of this Court, for all services performed and expenses incurred on behalf of the Debtor. The Debtor understands that Ashford Schael will seek compensation for the services of each attorney and paraprofessional acting on behalf of the Debtor in this case at the then-current rate charged for such services on a non-bankruptcy matter.
21.
The hourly rates as set forth in the Exhibit 1 of the Schael Declaration are
the Firm's standard hourly rates for work of this nature. These rates are set at a level designed to compensate Ashford Schael fairly for the work of its attorneys and legal assistants and to cover the fixed and routine overhead expenses. Consistent with the Firm's policy with respect to its other clients, Ashford Schael will continue to charge the Debtor for all other services provided
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and for other charges and disbursements incurred in the rendition of services. These charges and disbursements include, among others, costs of telephone charges, photocopying (at a reduced, rate of $0.10 per page for black-and-white copies and a higher commensurate charge for color copies), travel, business meals, computerized research, messengers, couriers, postage, witness fees and other fees related to trials and hearings.
22.
Ashford Schael has agreed to accept as compensation such sums as may
be allowed by the Court on the basis of the professional time spent, the rates charged for such services, the necessity of such services to the administration of the estate, the reasonableness of the time within which the services were performed in relation to the results achieved, and the complexity, importance, and nature of the problems, issues or tasks addressed in this Bankruptcy Case.
23.
Other than as set forth in the Schael Declaration, no arrangement is
proposed between the Debtor and Ashford Schael for compensation to be paid in this Bankruptcy Case.
24.
Except for sharing arrangements between Ashford Schael and its
respective contract employees, Ashford Schael has no agreement with any other entity to share any compensation received, nor will any be made, except as permitted under section 504(b)(1) of the Bankruptcy Code.
25.
The Debtor submits that the engagement and retention of Ashford Schael
on the terms and conditions set forth herein is necessary and in the best interests of the Debtor, its estate, and its creditors and should be approved.
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NOTICE
26.
The Debtor has served notice of this Application on: (i) the U.S. Trustee
(Attn: Susan Golden, Esq.), (ii) Cooley LLP, 1114 Avenue of the Americas, New York, New York 10036 (Attn: Cathy Hershcopf, Esq.), counsel for the Debtor; (ii) Squire Sanders LLP, 30 Rockefeller Plaza, New York, New York 10112 (Attn: Sandra E. Mayerson, Esq.), counsel for Bricoleur L.P., Jon and Ellen Bortz, Robert Poole, and Orval Madden, individually, and as Trustee of the Madden Family Trust; (iii) Blakeley & Blakeley, LLP, 2 Park Plaza, Suite 400, Irvine, CA 92614 (Attn: Ronald A. Clifford, Esq.), counsel for the Committee; and (iv) and all parties filing notices of appearances. In light of the nature of the relief requested, the Debtor submits that no other or further notice need be provided.
27.
No previous request for the relief sought herein has been made by the
Debtor to this or any other court. WHEREFORE, the Debtor respectfully requests that the Court enter an order (i) authorizing the Debtor to employ and retain Ashford Schael under a general retainer as the Debtor's bankruptcy counsel, (ii) authorizing and approving the substitution of Ashford Schael for Cooley, (iii) continuing the Monthly Compensation Order with respect to Ashford Schael, and (v) granting such other and further relief as is just and proper. Dated: September ___, 2012 Los Angeles, California
Respectfully submitted, Metropark USA, Inc.
_____________________________________ By: Cynthia Harriss Name: Cynthia Harriss Title: Chief Executive Officer
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EXHIBIT A SCHAEL DECLARATION
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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK
Chapter 11 In re Case No. 11-22866 (RDD) METROPARK USA, INC., Debtor.
DECLARATION OF COURTNEY SCHAEL IN SUPPORT OF DEBTOR'S APPLICATION FOR ENTRY OF ORDER PURSUANT TO BANKRUPTCY CODE SECTIONS 327(a) AND 328 AND BANKRUPTCY RULES 2014 AND 2016 AUTHORIZING EMPLOYMENT AND RETENTION OF ASHFORDSCHAEL LLC AS COUNSEL FOR DEBTOR, AUTHORIZING SUBSTITUTION OF ASHFORD SCHAEL LLC FOR COOLEY LLP AS COUNSEL FOR DEBTOR AND RELATED RELIEF I, Courtney Schael, hereby declare that the following is true and correct to the best of my knowledge, information, and belief:
1.
I am the sole member of the firm of Ashford-Schael LLC ("Ashford
Schael" or the "Firm"),1 which maintains offices for the practice of law at 511 Summit Avenue, Westfield, New Jersey 07090 and 1371 Morris Avenue Union, New Jersey 07083. I submit this declaration and statement in support of the Debtor's Application for Entry of Order Pursuant to Bankruptcy Code Sections 327(a) and 328 and Bankruptcy Rules 2014 and 2016 Authorizing Employment and Retention of Ashford Schael LLP as Counsel for Debtor, Authorizing Substitution of Ashford Schael LLC for Cooley LLP as Counsel for the Debtor and Related Relief (the "Application") filed by the debtor and debtor in possession in the above-captioned case (the "Debtor") contemporaneously herewith. Except as otherwise indicated, I have personal
Capitalized terms not otherwise defined herein shall have the meaning set forth in the Application.
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knowledge of the matters set forth herein and, if called as a witness, would testify competently hereto.
QUALIFICATION OF PROFESSIONALS
2.
I am the sole member of Ashford Schael and will be responsible for all
aspects of Ashford Schael's representation of the Debtor in this Bankruptcy Case. I am admitted in the State of New York and the State of New Jersey and to the Third Circuit Court of Appeals, United States District Court Southern District of New York, United States District Court Eastern District of New York and United States District Court District of New Jersey. I have extensive experience in representing debtors, committees and liquidating trustees in chapter 11 cases in New York, Delaware and New Jersey, including: In re National Pool Construction, Inc., 0934394 (KCF) (Bankr. D.N.J.); In re Medford Crossings North LLC, 07-25115 (GB) (Bankr. D.N.J.); In re Sitnal, Inc. f/k/a Lantis Eyewear Corporation, 04-13589 (ALG) (Bankr. S.D.N.Y.); In re APF, Co., 98-1596 (PJW) (Bankr. D. Del.); In re Jack Benun, 03-32195-MS (Bankr. D.N.J.); In re FINOVA, Inc., Case No. 01-00698 (PJW) (Bankr. D. Del.); In re Atlantic City Boardwalk Associations L.P., 99-18903 (JW); In re First Interregional Advisors Corp., 9722513 (RG); In re Consumers Distributing, Inc., 94-36579-KCF (Bankr. D.N.J.); In re Kingsland Drum & Barrel Co., Inc., 94-26701 (NLW); In re Custom Alloy Corporation, 9335476 (WHG) (Bankr. D.N.J.) and In re Custom Alloy Santa Cruz, Inc., 93-35475 (WHG) (Bankr. D.N.J.); and In re Lanidex Center Building D Limited Partnership, 93-26405 (NLW) (Bankr. D.N.J.)
3.
Ashford Schael regularly employs experienced bankruptcy attorneys and These
paralegals on a contract basis to work on matters for Ashford Schaels clients.
experienced bankruptcy practitioners come from various backgrounds and include former clerks
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for the United States Bankruptcy Court and attorneys formerly employed in the restructuring departments of large law firms in New York and/or New Jersey.
4.
this Bankruptcy Case.
I believe that Ashford Schael is well qualified to represent the Debtor in
SERVICES TO BE RENDERED
5.
The Debtor has requested that Ashford Schael render various services to
the Debtor including, among others, the following: (a) advising the Debtor with respect to its powers and duties as debtor and debtor in possession in the continued liquidation and wind down of its business; (b) attending meetings and negotiating with the Committee and other parties in interest with respect to the final liquidation and distribution in the Bankruptcy Case; (c) taking all necessary action to protect and preserve the Debtor's estate, including the defense of any actions commenced against the estate, negotiations concerning litigation in which the Debtor may be involved, and objections to claims filed against the estate; (d) preparing, on behalf of the Debtor, motions, applications, answers, orders, reports, and papers necessary to the administration and winding down of the estate; (e) advising the Debtor on its various options for concluding the Bankruptcy Case;
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(f)
preparing and negotiating on the Debtor's behalf any documents or pleadings to effectuate a conclusion of the Bankruptcy Case and taking any necessary action on behalf of the Debtor to wind down the Debtors affairs and conclude the Bankruptcy Case;
(f)
advising the Debtor in connection with the sale of assets or liquidation of any remaining assets;
(g)
performing other necessary legal services and providing other necessary legal advice to the Debtor in connection with this Bankruptcy Case; and
(h)
appearing before this Court, any appellate courts, and the United States Trustee (the "U.S. Trustee") and protecting the interests of the Debtor's estate before such courts and the U.S. Trustee.
6.
Subject to this Court's approval of the Application, Ashford Schael is
willing to serve as the Debtor's counsel and to perform the services described above. DISINTERESTEDNESS OF ASHFORD SCHAEL
7.
To the best of my knowledge, the member and the attorneys employed by
Ashford Schael: (a) do not have any connection with the Debtor or its affiliates, its creditors or any other party in interest, or their respective attorneys and accountants, the U.S. Trustee or any person employed in the office of the same, or any judge in the Bankruptcy Court or the United States District Court for the Southern District of New York or any person employed in the offices of the same; (b) are "disinterested persons," as that term is defined in Bankruptcy Code section 101(14); and (c) do not hold or represent any interest adverse to the estate.
8.
Ashford Schael's conflict check system (the "Conflict Check System") is a
computerized database of current and former clients and adverse and related parties that is
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regularly maintained and updated. In addition, Ashford Schael maintains a list of former clients I represented while employed at other law firms which are also reviewed for conflicts. I am responsible for overseeing the system and check all matters for conflicts prior to accepting any new matter. ASHFORD SCHAEL'S CONNECTIONS WITH THE DEBTOR AND OTHER RELATED PARTIES
9.
Except as otherwise set forth herein, the member and attorneys employed
by Ashford Schael: (i) do not have any connection with the Debtor, the Debtor's creditors, or any other party in interest, or their respective attorneys and accountants except as disclosed herein, and (ii) pursuant to the Bankruptcy Code, do not represent any other entity having an adverse interest in connection with this Bankruptcy Case.
10.
Ashford Schael has not, does not, and will not represent any of the current
clients or their respective affiliates or subsidiaries or in other matters directly adverse to the Debtor during the pendency of this Bankruptcy Case.
11.
(a)
Except as otherwise set forth herein, to the best of my knowledge: Neither Ashford Schael nor any attorney employed by the Firm holds or represents an interest adverse to the Debtor's estate.
(b)
Neither Ashford Schael nor any attorney employed by the Firm is or was a creditor or an insider of the Debtor.
(c)
Neither Ashford Schael nor any attorney employed by the Firm is or was, within two years before the Petition Date, a director, officer, or employee of the Debtor.
(d)
Ashford Schael does not have an interest materially adverse to the interest of the estate or of any class of creditors or equity security holders, by
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reason of any direct or indirect relationship to, connection with, or interest in the Debtor specified in the foregoing paragraphs, or for any other reason.
12.
In view of the foregoing, Ashford Schael is a "disinterested person" within
the section 101(14) of the Bankruptcy Code. PROFESSIONAL COMPENSATION
13.
During the course of this Bankruptcy Case, Ashford Schael will invoice
the Debtor no less frequently than monthly for services rendered and charges and disbursements incurred. Pursuant to the Monthly Compensation Order, such invoices will constitute a request for interim payments against the Firm's reasonable fees to be determined at the conclusion of the case.
14.
For professional services, Ashford Schael's fees are based in part on its
standard hourly rates, which are periodically adjusted. The hourly rates charged by Ashford Schael in connection with this matter are set forth in Exhibit 1 hereto. The hourly rates are subject to periodic increases in the normal course of the Firm's business, often due to the increased experience of the particular professional.
15.
The hourly rates as set forth in Exhibit 1 hereto are the Firm's standard
hourly rates for work of this nature. These rates are set at a level designed to compensate Ashford Schael fairly for the work of its attorneys and legal assistants and to cover the fixed and routine overhead expenses. Consistent with the Firm's policy with respect to its other clients, Ashford Schael will continue to charge the Debtor for all other services provided and for other charges and disbursements incurred in the rendition of services. These charges and disbursement include, among others, costs of telephone charges, photocopying (at a reduced rate of $0.10 per
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page for black-and-white copies and a higher commensurate charge for color copies), travel, business meals, computerized research, messengers, couriers, postage, witness fees and other fees related to trials and hearings.
16.
Ashford Schael intends to apply to the Court for allowance of
compensation for professional services rendered and reimbursement of expenses incurred in this Bankruptcy Case in accordance with applicable provisions of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy Rules and orders of this Court, including without limitation, the Monthly Compensation Order. Ashford Schael will seek compensation for the services of each attorney and paraprofessional acting on behalf of the Debtor in this case at the then-current standard rate charged for such services on a non-debtor bankruptcy matter.
17.
Ashford Schael has agreed to accept as compensation such sums as may
be allowed by the Court on the basis of the professional time spent, the rates charged for such services, the necessity of such services to the administration of the estate, the reasonableness of the time within which the services were performed in relation to the results achieved, and the complexity, importance, and nature of the problems, issues or tasks addressed in this Bankruptcy Case.
18.
Other than as set forth herein, no arrangement is proposed between the
Debtor and Ashford Schael for compensation to be paid in this Bankruptcy Case.
19.
Except for sharing arrangements among Ashford Schael and its respective
contract employees, Ashford Schael has no agreement with any other entity to share any compensation received, nor will any be made, except as permitted under section 504(b)( 1) of the Bankruptcy Code.
20.
Other than set forth above, as of the date of this Declaration, I am not
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aware of the existence of any claims, or potential claims, against any of the interested parties. Accordingly, the Firm has not obtained conflict waivers from any creditors of the Debtor or other interested parties that the Firm currently represents on matters unrelated to the Debtor or the Bankruptcy Case.
21.
Ashford Schael will file supplemental declarations regarding this retention Additionally, as a matter of
if any additional relevant information comes to its attention.
retention and disclosure policy, Ashford Schael will periodically review its past and present relationships with entities materially participating in this case from time to time and will file a supplemental disclosure affidavit, if warranted. I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge and belief. Executed this ___th day of September 2012. ASHFORD-SCHAEL LLC
___________________________ By: Courtney Schael, Esq.
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EXHIBIT 1 ASHFORD SCHAEL LLC HOURLY RATES Professional Courtney A. Schael Rochelle Weisburg Anthony Vassallo Deborah Tanenbaum Joshua Levy Lorraine Santoro Year Admitted 1993 1991 1994 1987 2007 N/A Title Member Attorney Attorney Attorney Attorney Paralegal Hourly Rate $400.00 $325.00 $300.00 $300.00 $225.00 $150.00
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Exhibit D
To be provided.
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Exhibit E
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DEBTOR-IN-POSSESSION REVOLVING PROMISSORY NOTE AND SECURITY AGREEMENT DATE: MAKER: PAYEE: PRINCIPAL AMOUNT OF NOTE: September __, 2012 METROPARK USA, INC., as debtor and debtor-in-possession (the Maker) BRICOLEUR CAPITAL PARTNERS, LP, as agent on behalf of itself and certain lenders (the Agent or Payee)
ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00)
FOR VALUE RECEIVED, Maker has requested funds from Payee in order to facilitate the administration of Makers bankruptcy estate and prosecution of certain potential causes of action; Payee has agreed to such an advance of funds on the terms and conditions of this Promissory Note and Security Agreement (this Note); and, therefore, Maker promises and agrees to pay, without presentment, demand, protest or notice of any kind all of which are hereby expressly waived, to Payee, or order, at Payees offices at 16236 San Dieguoto Rd., Rancho Santa Fe, CA 92067, or at such other place as the holder hereof may from time-to-time designate, the principal sum of ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) with interest commencing from the date hereof and enforcement costs,, or such amount as may have been advanced pursuant to the terms hereof, to be paid as follows: 1. ADVANCES.
Advances shall be made from time to time as set forth in that certain Stipulation (as defined herein), which is hereby incorporated by reference herein, and in accordance with the Budget (as defined herein) up to the principal amount of this Note. 2. SEPARATE OBLIGATION.
The obligations of the Maker set forth herein, and as further described in the Stipulation, shall be separate and distinct obligations from the obligations of Maker to Payee under that certain Note Purchase Agreement dated March 21, 2011 (the Subordinated Note), as agreed upon as to the outstanding balance by Maker and Payee pursuant to that certain Stipulation; provided, however, that all Collateral securing the Subordinated Note shall secure the obligations set forth herein as well. 3. MATURITY.
All principal and interest and costs shall be due and payable on the Termination Date as that term is defined in the Stipulation, unless such day is not a Business Day, in which case the Termination Date shall be the next succeeding Business Day.
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4.
FIXED INTEREST RATE.
(a) Fixed interest (Fixed Interest) shall accrue from the date of this Note up to but excluding the date of repayment of this Note on the unpaid balance of this Note at the rate of five percent (5%) per annum; provided, however, that on and after the Termination Date, any amounts outstanding shall accrue interest at the fixed rate of ten percent (10%) per annum.. (b) The Fixed Interest provided herein shall be calculated for the actual number of days the principal is outstanding on the basis of a 360-day year and compounded daily. 5. PREPAYMENT. The unpaid principal balance of this Note may be prepaid, in whole or in part, at any time without penalty, provided that all interest and other charges accrued to the date of prepayment are also paid in full. Any amounts so prepaid may be borrowed again by the Maker in accordance with the terms hereof and of the Stipulation; so long as, the outstanding principal amount never exceeds One Hundred Fifty Thousand ($150,000) Dollars. 6. MANDATORY PRE-PAYMENT. At any such time as the Debtor receives any proceeds from a Chapter 5 Claim (as defined in the Stipulation), seventy-five percent (75%) of such proceeds, net of any contingency legal fees owed (but not of expenses) shall immediately be paid to Payee to the full extent of any outstanding principal, interest and enforcement costs. Such funds may not be used for ay other purpose unless and until the Maker does not owe Payee any further amounts. 7. FORM OF PAYMENTS. Principal and interest shall be payable in lawful money of the United States of America in immediately available funds. 8. CREDITING OF PAYMENTS AND ACCRUAL OF INTEREST. Each payment hereunder shall be credited first to any accrued charges for enforcement then to accrued Fixed Interest. The payment due on the Maturity Date shall be credited first to any accrued charges, then to accrued Fixed Interest and then to principal. Any accrued and unpaid charges or Fixed Interest shall be added to the principal on a daily basis and thereafter shall accrue interest at the rate provided herein. 9. REPRESENTATIONS AND WARRANTIES. Maker makes the following representations and warranties which shall be true, correct, and complete in all respects as of the date hereof and as of any future date on which any amounts are outstanding under this Note: (a) Location of Chief Executive Office and Assets. The chief executive office of Maker is located at [ ]. The Debtor has no assets outside the State of California. (b) Due Organization and Qualification. Maker is duly organized and existing and in good standing under the laws of the jurisdiction of its incorporation and qualified and licensed to do business in that jurisdiction and in each other jurisdiction in which the conduct of its business would require it to be qualified and licensed to do business.
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(c)
Due Authorization; No Conflict.
(i) The execution, delivery, and performance by Maker of this Note have been duly authorized by all necessary corporate action and approved by the Official Committee of Unsecured Creditors (the Committee). As the directors of the Maker are not disinterested, the terms have been negotiated with and approved by the Committee. (ii) The execution, delivery, and performance by Maker of this Note once approved by the Bankruptcy Court does not and will not (i) violate any provision of federal, state, provincial or local law or regulation applicable to it or any order issued by any court or regulatory body having jurisdiction over Maker, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation or material lease, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets other than as set forth herein, or (iv) require any approval or consent of any Person under any material contractual obligation. (iii) The execution, delivery, and performance by Maker of this Note does not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any federal, state, provincial, foreign, or other Governmental Authority or other Person, provided, however, that the obligations of Maker and Payee under this Note are expressly conditional upon approval of this Note, all terms set forth herein and the Stipulation by the Court. (iv) This Note, and all other documents contemplated hereby, when executed and delivered by Maker will be the legally valid and binding obligations of Maker, enforceable against Maker in accordance with their respective terms and shall not violate any applicable law, including, but not limited to, any provision of the Bankruptcy Code. (v) The Liens granted by Maker to Payee in and to its properties and assets pursuant to this Note are validly created, perfected and are first-priority Liens subordinate to no other Liens on such property and assets. 10. AFFIRMATIVE COVENANTS. Maker covenants and agrees that, until full and final payment of this Note, and unless Payee shall otherwise consent in writing, Maker shall do all of the following: (a) U.S. Trustee Fees. Cause all fees of the U.S. Trustee imposed pursuant to any statute or guidelines, including but not limited to any fees payable pursuant to 28 U.S.C. 1930(a)(6), to be paid before delinquency or before the expiration of any extension period. (b) No Setoffs or Counterclaims. Make payments hereunder without setoff or counterclaim and free and clear of, and without deduction or withholding for or on account of, any federal, state, or local taxes. (c) Compliance with Laws. Comply with the requirements of all applicable laws, rules, regulations, and orders of any governmental authority, including but not limited to the
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United States Bankruptcy Code and all other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, would not have and could not reasonably be expected to have a Material Adverse Change. (d) Financial Information. Timely file all monthly operating reports as required under Federal Rule of Bankruptcy Procedure 2015(a) and any guidelines issued by the U.S. Trustee. (e) Operation of Debtor. Conduct the affairs of the estate in compliance with the Makers obligations as a debtor and debtor-in-possession under the Bankruptcy Code. (f) Chapter 5 Claims. Hold 75% of the proceeds of all Chapter 5 Claims, net of contingency legal fees, in trust for the benefit of Payee, and promptly pay over such amounts to Payee to the full extent of any sums owed to Payee by Maker. (g) To account to Payee in writing as to the status of all Chapter 5 Claims and proceeds therefrom on a monthly basis. (h) To promptly turn over to Payee any proceeds of the Collateral for the Subordinated Note which Maker may receive. 11. NEGATIVE COVENANTS. Maker covenants and agrees that, until full and final payment of this Note, Maker shall not do any of the following without Payees prior written consent: (a) Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except Indebtedness owing to Payee. (b) Liens. Create, incur, assume, or permit to exist, directly or indirectly, any Lien on or with respect to any of its property or assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except as authorized herein. (c) Restrictions on Fundamental Changes. File a plan of reorganization that is inconsistent with Makers obligations contained within this Note or seek to convert, or consent to the conversion of, the Bankruptcy Proceeding from a case under Chapter 11 of the Bankruptcy Code to a case under Chapter 7 of the Bankruptcy Code or seek to appoint, or consent to the appointment of, a Chapter 11 trustee. (d) Disposal of Assets. Convey, sell, lease, assign, transfer, or otherwise dispose of, in one transaction or a series of transactions, any of its properties or assets except as otherwise set forth herein. (e) Change Name/Location. Change its name, corporate structure, or identity, or add any new fictitious name or change the state where it is located.
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(f) Guarantee. Guarantee or otherwise become in any way liable with respect to the obligations of any third Person. (g) Nature of Business. Engage in any business or activity that is inconsistent with the liquidation of Makers assets. (h) Distributions and Payments. Make any distribution or payment to any person or entity that is not (a) expressly authorized in the Stipulation; (b) set forth in the Budget, or (c) otherwise approved by the Bankruptcy Court after sufficient notice and an opportunity for Payee to be heard. 12. EVENTS OF DEFAULT AND REMEDIES.
(a) The occurrence of any one or more of the following events shall constitute an Event of Default hereunder, and upon such Event of Default, the entire principal balance outstanding hereunder, together with all accrued interest and other amounts payable hereunder shall become immediately due and payable and the holder hereof shall have and may exercise any and all rights and remedies available at law or in equity, including, without limitation, selling or otherwise disposing of the Collateral as provided under the Uniform Commercial Code: (i) Nonpayment of principal, interest or other amounts when the same shall become due and payable hereunder; (ii) Failure to pay and account for Chapter 5 Claims proceeds to Payee as provided herein and in the Stipulation; (iii) The failure of Maker to comply with any provision, condition, covenant or agreement of this Note or the Stipulation; (iv) The occurrence of any Material Adverse Change in the condition (financial or otherwise) of Maker or any person or entity who is or may become liable hereunder; (v) false; or (vi) Failure to promptly pay to Payee account for any proceeds received from the Collateral securing the Secured Note; and (vii) The failure of Maker to comply with any provision of any document, instrument or agreement executed in connection with the indebtedness evidenced hereby or any security document securing the indebtedness evidenced by this Note, including without limitation, the Stipulation. Any statement, representation or warranty contained herein shall be
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13.
RIGHTS AND REMEDIES.
(a) Upon the occurrence, and during the continuation, of an Event of Default Payee may, at its election pursue one or more of the following remedies in addition to any remedy provided by law: (i) File a notice of default before the Bankruptcy Court and, within three (3) business days of filing such notice (Default Notice), terminate Makers authority to borrow under this Note; (ii) Declare the entire Note immediately due and payable and charge Fixed Interest thereafter at the rate applicable after the Termination Date; (iii) Withhold any advance requested hereunder by Maker;
(iv) Pursue any of Payees rights and remedies provided for in this Note, the Stipulation, any other agreement with Maker, or any of Payees rights and remedies under applicable law; (v) Settle or adjust disputes and claims directly with Adversary Parties for amounts and upon terms which Payee considers advisable and enforce Makers rights against the Adversary Parties, and in such cases, Payee will credit the obligations owing under this Note with only the net amounts received by Payee in payment of such disputed Accounts after deducting all Payees expenses incurred or expended in connection therewith without carve out for the estate; (vi) Without notice to or demand upon Maker, make such payments and do such acts as Payee considers necessary or reasonable to protect its security interests in the Collateral (Protective Advances). Maker agrees to assemble the Collateral if Payee so requires, and to make the Collateral available to Payee as Payee may designate. (vii) After three days from the filing of a Default Notice before the Bankruptcy Court, and without constituting a retention of any collateral in satisfaction of an obligation (within the meaning of Section 9-620 of the Uniform Commercial Code), set off and apply to the obligations under this Note any and all (i) balances and deposits of Maker held by Payee, or (ii) indebtedness at any time owing to or for the credit or the account of Maker held by Payee; (viii) Hold, as cash collateral, any and all balances and deposits of Maker held by Payee, to secure the full and final repayment of all of the obligations under this Note; (ix) Payee is hereby granted a license or other right to use, without charge, Makers labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in satisfying Makers obligations hereunder and Makers rights under all licenses and all franchise agreements shall inure to Payees benefit;
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(x) Following three (3) business days from the filing of a Default Notice, Sell any Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Makers premises) as Payee determines is commercially reasonable. It is not necessary that the Collateral be present at any such sale; (xi) Maker acknowledges that any sale of Collateral in compliance herewith will have been made on sufficient notice and in a commercially reasonable manner; (xii) Payee may credit bid and purchase at any public sale; and
(xiii) Any deficiency that exists after disposition of the Collateral as provided above will constitute a super-priority administrative expense claim against Makers bankruptcy estate pursuant to section 507(b) of the Bankruptcy Code. Any excess will be returned, without interest and subject to the rights of third Persons, by Payee to Makers bankruptcy estate. (b) The remedies of the holder hereof, as provided in this Note and in any other agreement related to this Note, shall be cumulative and concurrent, and may be pursued singularly, successively or together, at the sole discretion of the holder hereof, and may be exercised as often as occasion therefor shall arise. No act of omission or commission by the holder hereof, including specifically any failure to exercise any right, remedy or recourse provided for hereunder or under applicable law, shall be deemed to be a waiver or release of any right, remedy or recourse, such waiver or release to be effected only through a written document executed by the holder hereof. A waiver or release with reference to any one event shall not be construed as continuing, as a bar to, or as a waiver or release of, any subsequent right, remedy or recourse as to a subsequent event. 14. SECURITY. Maker hereby grants to Payee a security interest in all of its property of whatever kind in, to or under which Maker now has or hereafter acquires any right, title or interest, whether present, future or contingent (the Collateral), including, without limitation: (a) All causes of action of Makers bankruptcy estate, including, without limitation, those arising under Chapter 5 of the Bankruptcy Code; (b) (c) (d) (e) (f) (g) (h)
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(i) rights of Maker;
all deposit accounts in which Maker has an interest and all letter-of-credit
(j) any money, or other assets of Maker that now or hereafter come into the possession, custody, or control of Maker or its bankruptcy estate, any other cash of Maker and any other personal property or interests in personal property of Maker of any description whatsoever, and (k) the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the Collateral, and any and all Accounts of Maker, the Company Books of Maker, Equipment of Maker, General Intangibles of Maker, Inventory of Maker, Negotiable Collateral of Maker, goods, money, deposit accounts, or other tangible or intangible property resulting from the sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof. Maker grants a security interest in the Collateral to secure the payment or performance of the following obligations of Maker: (i) Makers obligations under this Note, including all future advances hereunder; (ii) all of Makers other present and future obligations to Payee other than the Allowed Deficiency Claim as defined in the Stipulation; (iii) the repayment of any amounts that Payee (a) may advance or spend for the maintenance or preservation of the Collateral and (b) any other expenditures that Payee may make under the provisions of this Note or for the benefit of Maker; (iv) all amounts owed under any modifications, renewals or extensions of any of the foregoing obligations; and (v) all other amounts now or in the future owed by Maker to Payee other than the Allowed Deficiency Claim as defined in the Stipulation. Maker agrees that, from time to time, Maker shall: (i) execute all documents and take all other actions requested by the Payee to perfect any security interests in connection with this Note, and (ii) execute and record all documents, file additional financing statements, amend any existing financing statements and continuation statements and take any other actions reasonably requested by the Payee to grant a security interest in the Collateral or to perfect, further perfect, evidence or continue the rights, claims or security interest of the Payee with respect to the Collateral, including, without limitation, a pledge agreement. Maker hereby authorizes Payee to file financing statements covering the Collateral and naming Maker as debtor and Payee as secured party in such jurisdictions as Payee deems appropriate in its sole discretion and hereby authorizes the filing of any such financing statements which may have occurred on or prior to the date hereof. Notwithstanding the foregoing, no documents, filings, financing statements, instruments or the like are necessary to create a valid, perfected and enforceable lien in favor of Payee upon the Collateral. Upon the entry of an Order by the Bankruptcy Court approving the Stipulation and this Note, Payee shall have a valid, perfected and enforceable lien against all of the Debtors property of whatever kind and wherever located. If said Order is subsequently revoked, modified or reversed, Payee shall nonetheless have a valid, perfected, and enforceable security interest in the above Collateral for any amounts loaned prior to such revocation, modification or reversal, and all interest accrued thereon and enforcement costs in respect thereof. NEWYORK/152529.3 8
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15. CARVEOUT. So long as Maker is not in default hereunder, there shall be carved out from the Payees Collateral twenty-five percent (25%) of the proceeds received from all Chapter 5 Claims, net of any contingency fees (but not expenses) owed for the benefit of the Debtors estate. Such amounts will be placed in a segregated account of the Debtor and may be used freely by the Debtor, upon approval of the Committee, for day-to-day operating costs, litigation costs and expenses, professional fees, and distributions to creditors, all in accordance with the Bankruptcy Code and applicable law. Immediately upon the occurrence of an event of default, the carveout will be discontinued, and the Payee will have a valid, perfected and enforceable lien on 100% of all future proceeds of Chapter 5 Claims. At no time, however, will the Payee have a lien on any monies that have been deposited in accordance with the terms of this Note in the segregated account prior to an Event of Default. The carveout will terminate upon the occurrence of an Event of Default whether or not Payee gives notice of the Event of Default. 16. ATTORNEYS FEES. In the event of a default under this Note or in the event Payee seeks legal advice in order to enforce the provisions of this Note, Maker agrees to pay all enforcement costs, including, without limitation, all attorneys fees incurred by Payee. If any action is brought to enforce or interpret the provisions of this Note, the prevailing party shall be entitled to a reasonable sum for attorneys fees. 17. GOVERNING LAW AND SEVERABILITY. This Note is made pursuant to, and shall be construed and governed by, the laws of the State of New York. If any provision of this Note is construed or interpreted by a court of competent jurisdiction to be void, invalid or unenforceable, such decision shall affect only those provisions so construed or interpreted and shall not affect the remaining provisions of this Note. 18. TIME OF ESSENCE. Time is of the essence of this Note and each and every provision hereof. 19. PAYMENT WITHOUT OFFSET. Principal and interest shall be paid without setoff, counterclaim or other deduction of any nature. 20. ASSIGNMENT. Payee or other holder of this Note may assign all or a portion of its rights, title and interest in this Note to any person, firm, corporation or other entity without the consent of Maker. 21. RELATIONSHIP. The relationship of the parties hereto is that of borrower and lender and it is expressly understood and agreed that nothing contained in this Note shall be interpreted or construed to make Maker and Payee partners, joint venturers or participants in any other legal relationship except for borrower and lender. 22. WAIVER. Except as set forth in this Note, to the extent permitted by applicable law, Maker, and each person who is or may become liable hereunder, waives and agrees not to assert demand, diligence, grace, presentment for payment, protest, notice of nonpayment, nonperformance, extension, dishonor, maturity, protest and default. Payee may extend the time for payment of or renew this Note, release any party from liability hereunder, and any such extension, renewal, release or other indulgence shall not alter or diminish the liability of Maker or any other person or entity who is or may become liable on this Note except to the extent expressly NEWYORK/152529.3 9
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set forth in a writing evidencing or constituting such extension, renewal, release or other indulgence. 23. HEADINGS. The subject headings of the paragraphs of this Note are included for purposes of convenience only, and shall not affect the construction or interpretation of any of its provisions. 24. NO WAIVER BY PAYEE. No delay or failure of Payee in exercising any right hereunder shall affect such right, nor shall any single or partial exercise of any right preclude further exercise thereof. 25. AMENDMENTS. No amendment, modification, change, waiver, release or discharge hereof and hereunder shall be effective unless evidenced by an instrument in writing and signed by the party against whom enforcement is sought. 26. BINDING NATURE. The provisions of this Note shall be binding upon Maker and the heirs, personal representatives, successors and assigns of Maker, including any subsequent Chapter 7 Trustee, and shall inure to the benefit of Payee and any subsequent holder of all or any portion of this Note, and their respective successors and assigns. 27. EVIDENCE OF INDEBTEDNESS. This Note and the records of the Payee shall conclusively evidence the principal amount outstanding, and any accrued interest thereon, pursuant hereto. 28. NOTICE TO PAYEE. Maker shall give prompt written notice to the Payee of any fact that would prohibit the making of any payment required to be made hereunder. Notwithstanding this provision or any other provision in this Note, the Payee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment required to be made hereunder unless the Payee shall have received such notice thereof; and, prior to the receipt of any such written notice, the Payee shall be entitled in all respects to assume that no such facts exist. 29. SAVINGS CLAUSE. Maker understands and believes that the terms and conditions of this Note comply with the laws of the State of New York, including the usury laws; however, if any interest or other charges in connection with this lending transaction are ever determined to exceed the maximum amount permitted by law, then Maker agrees that: (a) the amount of interest or charges payable pursuant to this lending transaction shall be reduced to the maximum amount permitted by law; and (b) any excess amount previously collected from Maker in connection with this transaction that exceeded the maximum amount permitted by law, will be credited against the principal balance then outstanding hereunder. If the outstanding principal balance hereunder has been paid in full, the excess amount paid will be refunded to Makers bankruptcy estate as directed by Maker. 30. LEGAL REPRESENTATION. Maker acknowledges and confirms that it is represented by separate legal counsel in connection with this agreement and the transactions contemplated hereby.
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31. DEFINITIONS AND CONSTRUCTION. Any term used in the Uniform Commercial Code and not defined in this Note has the meaning given to the term in the Uniform Commercial Code. Capitalized terms not defined elsewhere in this Note shall have the following definitions: Accounts has the meaning assigned thereto in the Uniform Commercial Code of the applicable jurisdiction with respect to Maker. Adversary Party means any party against whom an adversary proceeding alleging any claims under Chapter 5 of the Bankruptcy Code or any similar or related claims arising under state law have been or may be asserted by Maker, Makers bankruptcy estate, the Committee or any representative of any of the foregoing. Affiliate means as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person, including, without limitation, any Person who is in any way related by blood or by marriage to such Person. For purposes of this definition, control of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. Bankruptcy Code means the United States Bankruptcy Code, 11 U.S.C. 101 et seq., as the same may be amended or modified hereafter. Bankruptcy Court means the United States Bankruptcy Court for the Southern District of New York, White Plains Division. Bankruptcy Proceeding means the voluntary chapter 11 proceeding of the Maker pending before the Bankruptcy Court and assigned Case Number 11-22866-rdd. Budget means the budget attached to this Note as Exhibit A. Business Day means any day that is not a Saturday, Sunday, or other day on which national banks are authorized or required to close. Chattel Paper has the meaning assigned thereto in the Uniform Commercial Code of the applicable jurisdiction with respect to Maker. Collateral has the meaning set forth in [Paragraph 13 of the Note]. Company Books means, with respect to Maker, all of such Makers books and records including: ledgers; records indicating, summarizing, or evidencing such Makers properties or assets (including the Collateral of such Maker) or liabilities; all information relating to such Makers business operations or financial condition; and all computer programs, disk or tape files, printouts, runs, or other computer prepared information.
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Exhibit E
Equipment means, with respect to Maker, all of such Makers present and hereafter acquired machinery, machine tools, motors, equipment, furniture, furnishings, fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods (other than consumer goods, farm products, or Inventory), wherever located, including, (a) any interest of such Maker in any of the foregoing, and (b) all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing. General Intangibles means, with respect to Maker, all of such Makers present and future general intangibles, including any payment intangibles, and other personal property (including contract rights, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, patents, trade names, trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, rights to payment and other rights under any royalty or licensing agreements, infringement claims, computer programs, information contained on computer disks or tapes, literature, reports, catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax refund claims), other than goods, Accounts, and Negotiable Collateral. Governmental Authority means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. Indebtedness means, with respect to Maker: (a) all obligations of such Maker for borrowed money, (b) all obligations of such Maker evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations of such Maker in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations of such Maker under capital leases, (d) all obligations or liabilities of others secured by a Lien on any property or asset of such Maker, irrespective of whether such obligation or liability is assumed, and (e) any obligation of such Maker guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with recourse to such Maker) any indebtedness, lease, dividend, letter of credit, or other obligation of any other Person. Inventory has the meaning assigned thereto in the Uniform Commercial Code of the applicable jurisdiction with respect to Maker. Lien means any interest in property securing an obligation owed to, or a claim by, any Person other than the owner of the property, whether such interest shall be based on the common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, adverse claim or charge, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also including reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting real property.
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Exhibit E
Material Adverse Change means (a) the conversion of Makers Bankruptcy Proceeding to a proceeding under Chapter 7 of the Bankruptcy Code, the dismissal of Makers Bankruptcy Proceeding or the appointment of a Chapter 11 trustee to administer Makers Bankruptcy Proceeding, (b) the material impairment of Makers ability to perform its obligations under any agreements, notes or instruments applicable to it or of Payee to enforce the obligations under this Note or realize upon the Collateral, (c) a material adverse effect on the value of the Collateral or the amount that Payee would be likely to receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of such Collateral, or (d) a material impairment of the priority of Payees Liens with respect to the Collateral. Negotiable Collateral means, with respect to Maker, all of such Makers present and future letters of credit, notes, drafts, instruments, investment property, security entitlements, securities, documents, personal property leases (wherein such Maker is the lessor), chattel paper, and the Company Books of such Maker relating to any of the foregoing. Person means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof. Stipulation means that certain [Stipulation Regarding Global Resolution of Open Issues Between Debtor, Second Lien Lenders and Committee] filed before the Bankruptcy Court on August __, 2013 [Doc. ___] in the Bankruptcy Proceeding. Termination Date has the meaning set forth in the Stipulation and is the date when all amounts under the Note are due and payable by Maker. U.S. Trustee means the Office of the United States Trustee for Region 2. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOLLOWS]
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Exhibit E
IN WITNESS WHEREOF, the duly authorized representative of Maker has executed this Promissory Note as of the date set forth above. MAKER: METROPARK USA, INC. By:______________________________________ Name: [________] Title: [____________]
ACKNOWLEDGED AND AGREED TO BY THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF METROPARK USA, INC. /s/ Ronald A. Clifford Blakely & Blakely, LLP 2 Park Plaza, Suite 400 Irvine, CA 92614 Phone: (949) 260-0611 Fax: (949) 260-0613 Counsel for the Official Committee of Unsecured Creditors of Metropark USA, Inc.
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Exhibit E
Exhibit A Monthly Budget Not to Exceed: Compensation to Debtors Officer, Rick Hicks............................................ $ Claims Agent ................................................................................................ $ Data Storage.................................................................................................. $ Counsel for Debtor (to be taken first from Retainer and then from borrowings under the Note)............................................. Counsel for the Committee ........................................................................... Miscellaneous Litigation Expenses............................................................... UST Trustee Fees.......................................................................................... $ 1,400 5,000 1,000 2,500
NEWYORK/152529.3

Stipulation Regarding Global Resolution of Open Issues Between Debtor, Second Lien Lenders and Committee

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Stipulation Regarding Global Resolution of Open Issues Between Debtor, Second Lien Lenders and Committee

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11-22866-rdd

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Chapter 11 Case No. 11-22866 (RDD)

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be applicable to this Stipulation. Dated: September ___, 2012

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ASHFORD SCHAEL LLC, on behalf of itself

Dated: September __, 2012 New York, New York

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Ashford Schael LLC

Courtney A. Schael, Esq. 908-255-0462 cschael@AshfordNJLaw.com

September 19, 2012

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METROPARK USA, INC.

By: Cynthia Harriss

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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

Chapter 11 In re Case No. 11-22866 (RDD) METROPARK USA, INC., Debtor.

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On or about May 2, 2011 (the "Petition Date"), the Debtor filed a

On or about May 6, 2011, the Office of the United States Trustee

On or about May 24, 2011, the Court entered an Order Pursuant to

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As a result of several internal and external factors, the Debtor faced

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STATUS OF BANKRUPTCY CASE

Beginning on or about May 6, 2011, the Court entered various orders

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After liquidation of substantially all of the Debtors assets, the Debtors

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

At the commencement of this case, the Debtor sought approval of the

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The Debtor desires to employ Ashford Schael under a general retainer

The services of attorneys under a general retainer are necessary to enable

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It is necessary and essential that the Debtor, as debtor in possession,

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In view of the foregoing, the Debtor believes that Ashford Schael is a