UNITED STATES BANKRUPTCY COURT FOR OF No.omnimgt.com/CMSVol2/pub_47267/691229_48.pdf · 2018. 9....
Transcript of UNITED STATES BANKRUPTCY COURT FOR OF No.omnimgt.com/CMSVol2/pub_47267/691229_48.pdf · 2018. 9....
Objection Deadline: September 26,2018 at 4:00 p.m. (EST)Hearing Date: October 3, 2018 at I l:00 a.m. (EST)
UNITED STATES BANKRUPTCY COURTFOR THE EASTERN DISTRICT OF NEW YORK
In re Chapter 11
Case No. 18-45284 (NHL)
(Jointly Administered)
Seasons Corporate, et al.,
Debtors.
OMNIBUS OBJECTION OF'SUPERSOL TO DEBTORS'MOTIONS TO (I) APPROVE ABOVE-MARKET INSIDER
POST.PETITION FINANCING' AND (II) ESTABLISH BIDDINGPROCEDURES AND BID PROTECTI ONS FOR PROPOSED SALE TO INSIDER2
Robert M. NovickMichele L. AngellKASOWITZ BENSON TORRES LLP1633 BroadwayNew York, New York 10019Telephone: (212) 506-17 00
Counselfor L&N Consulting Group, LLC andSuper Sol, LTD
I Debtors'EmergencyMotionPursuantto I1U.S.C. $$10t 361,362,363 and364forlnterimandFinalOrdersAuthorizing Debtors (i) to Obtain Post-Petition Financing and to Grant Superpriority Liens and Clqims Pursuant to
I t U.S.C. $6a@ and (d); (ii) to utilize Cqsh Collateral and Grant Adequate Protection to Prepetition Secure
Creditors; (iii) Modifying the Automatic Stay; (iv) Scheduling a Finql Hearing Pursuqnt to Bankruptcy Rules
4001 (b) and (c) and (v) Granting Related Relief' fDocket No. l0] (the "Financing Motion").
2 Debtors' Motionfor Orders Pursuant to Sections 105(A), 363, 365 and 503 of the Bankruptcy Code and
Bankruptcy Rules 2002, 6004 qnd 6006: (A)(i) Establishing Bidding Procedures and Bid Protections inConnection
with the Sale of Certain of the Assets of the Debtors, (ii) Approving the Form and Manner of Notices, (iii) Approving
the Asset Purchase Agreement Subject to Higher qnd Better Offers and (iv) Settling q Sale Hearing Date; and
(B)(i) Approving the Sale of Certain Assets of the Debtors Free and Clear of Liens, Claims qnd Encumbrances,
(ii) Authorizing the Assumption and Assignment of Executory Contracts; and (iii) Granting Related Relief [DocketNo. 12] (the "Bid Procedures Motion," and together with the Financing Motion, the "Motions").
Case 1-18-45284-nhl Doc 48 Filed 09/26/18 Entered 09/26/18 15:50:21
TABLE OF CONTENTS
Preliminary Statement..
Factual Background ..................
4. SKNY and the Debtors Are Not Entitled to Findings ConcemingNon-Insider Status, Business Judgment or Good Faith ..........'.'..'.
Paqe
1
J
JA. The Supersol Indebtedness.
B. The DIP Financing - a Cynical Device to Hand Seasons to SKNY......'..'...........'. 6
C. The Bid Procedures Motion........
D. At Least One Better Alternative Transaction Is Available.
E. The Mystery of SKNY
The Motions Should Be Denied
A. The Motions Are Subject to the Entire Fairness Standard... ...............12
B. The Bid Procedures Motion Should Be Denied - Under Any Standard............... 15
1. There Is a Higher and Better Offer. l5
2. SKNY is Not Entitled to the Breakup Fee and Expense
Reimbursement. ... t7
3. The Bid Procedures Motion Does Not Describe Adequate, or Any,Marketing or Diligence Processes ....20
4. Additional Objections to Bid Procedures Motion.."..
5. Reservation of Rights with Respect to Sale Order.....
22
25
C The DIP Motion Should Be Denied
1. Credit Is Available on More Favorable Terms. 26
2. The Unattainable DIP Budget Renders the DIP a Mere Ruse toDeliver the Debtors to SKNY 27
3. Continued DIP Financing Should Not Be Conditioned Upon a Sale
to SKNY.., 28
7
8
8
,.,.12
26
29
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5
6
The Roll-Up Is an Undisclosed Bribe to Bloom.
The DIP Lenders' Fees and Expenses Should Be Limited and
Subject to Wider Review.
30
30
31Conclusion...
11
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TABLE OF AIITHORITIES
Cases
Inre 495 Cent. ParkAve. CorP.,136 B.R.626 (Bankr. S.D.N.Y' 1992)......
In re Bidermann Indus. U.S.A.,
203 B.R. 547 (Bank'r. S.D.N.Y. 1997)
In re Duro Indus.,No. 02-16131-CJK,2004 Bankr. LEXIS 1235 (Bankr. D. Mass. Aug.26,
2004)......
In re Family Christian, LLC,533 B.R. 600 (Bankr. W.D. Mich. 2015).'.'........
In re Flour City Bagels, LLC,557 B.R. 53 (Bankr. W.D.N.Y. 2016)
Gey Assocs, Gen. P'ship v. 310 Assocs', L,P.,No.01-8-2798 (REG),2002U.S. Dist. LEXIS 20759 (S.D.N.Y. Oct.23,
2002)
In re Gulf Coast Oil CorP.,
404 B.R. 407 (Bankr. S.D. Tex' 2009)
In re Innkeepers USA Tr.,442 B.R. 227 (Bank.'r. S.D'N.Y. 20 1 0)
In re Integrated Res.,
147 B.R. 650 (S,D.N.Y. 1992).......,.
Jacobs v. D'Alessandro (In re Dewey & Leboeuf LLP),
Nos. 12-12321 (MG), 14-01919 (MG), 2014Bankr. LEXIS 4051 (Bankr.
S.D.N.Y. Sept. 23, 2014)
Knapp v. Seligson (In re Ira Haupt & Co'),361F.2d164 (2d Cir. 1966).
In re L.A. Dodgers LLC,457 B.R. 308 (Bankr. D. Del. 20lI)
Inre Med. Software So/s',
286 B.R. 431 (Bankr. D. Utah 2002)
Page(s)
.26
13,17,20
.20
.....t2, r5
..12, 14
17, 18
.20
12, 13,16,20
..........19
..t4
13
iii
passtm
Case 1-18-45284-nhl Doc 48 Filed 09/26/18 Entered 09/26/18 15:50:21
Official Comm. of (lnsecured Creditors of Enron Corp. v. Enron Corp. (In re
Enron Corp.),33s B.R. 22 (S.D.N.Y. 200s)...........
Ricket & Assocs., Inc. v. Smith (In re Rickel & Assocs., Inc.),272 B,R. 7 4 (Bank'r. S.D.N.Y. 2002) .....
In re Tiara Motorcoach Corp.,212 B.R. 133 (Bankr. N.D. Ind' 1997).
Statutes
1 I U.s.C. $ 101(3lXBXiii)...............
11u.S.C. $ 101(31XCXv)
Other Authorities
Administrative Order No. 557 ........
CPLR $ 7s10
James R. Hagerty, Robert Klein Set Up Firm to Help Lenders Protect Homes
Going Through Foreclosure, Wall Street Journal (May 1 1, 2018)
,.,12
,.,.12
18,19
I4
........14
..,,.. passim
.4
........10
1V
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L&N Consulting Group, LLC and Super Sol, LTD (together, 66SWrsQf"), as and for their
omnibus (1) further objection to the Financing Motion and (2) objection to the Bid Procedures
Motion (the "Objection"), represent as follows:
PRE,LIMIN STATEMENT3
The Motions must be denied because they are a scheme for insiders to retain control and
ownership of the Debtors' business, and confer millions of dollars of other undisclosed benefits
on themselves, all while paying legitimate creditors little or nothing.
The Debtors were authorized and directed to enter into the proposed borrowing and sale
transactions with "SKNY" by their President, Board of Managers member, and controlling
equity holder Zvi Bloom. Yet, the Debtors and SKNY have not seen fit to disclose that Bloom
will be relieved of over $3 million of personal liabilities to SKNY if the proposed loan from
SKNY (the "DIP Financing") receives final approval. Bloom is a co-obligor on SKNY's alleged
prepetition debt. The Debtors and SKNY propose to repay the prepetition debt with the DIP
Financing, thereby satisfying Bloom's personal obligations with post-petition liens and super-
priority claims against the Debtors. This explains why the Debtors refused all other offers of
financing, and it requires denying final approval of the Financing Motion.a
The Bid Procedures Motion, too, is infected by self-dealing. For years, the Debtors have
been paying rent on an unusable "shell" of a store in the Cleveland arca.5 The resulting cash
drain has deepened the Debtors' insolvency and drained assets from Debtors with operating
3 Capitalized terms used in this preliminary Statement and not otherwise defined shall have the meanings ascribed to
them in the body of this Objection.
a see In re L.A, Dodgers LLC,457 B.R. 308 (Bankr. D. Del. 2011), discussed infra.
s Transcript of First Day Hr'g, Sept. 17, 2018 ("Sept. 17 Tr."), ar46:72-20. The Sept. l7 Tr. is annexed hereto as
Exhibit A,
Case 1-18-45284-nhl Doc 48 Filed 09/26/18 Entered 09/26/18 15:50:21
stores. The Debtors have placed the Cleveland store landlord, Cleveland Kosher Market, on
their list of their 30 largest non-insider creditors (#11), with nearly $300,000 owed under the
lease. SKNY proposes to cure and assume the lease as part of the asset sale. The landlord,
however, is not a non-insider, but a Bloom entity. The albatross of a lease was not an arm's-
length transaction - Bloom even executed the lease on behalf of the landlord entity. Assumption
of the lease as part of the proposed SKNY sale will provide another undisclosed windfall to
Bloom.
SKNY, too, is an insider that has not fully disclosed its connections to the Debtors and
Bloom. Indeed, at the First Day Hearing, the Debtors and SKNY affirmatively misrepresented
that SKNY's connections to the Debtors and Bloom consisted only of equity and debt
investments that began in February 2018. (See infra.) Documents reviewed by Supersol
demonstrate this is false. The operating agreement for Seasons Corporate (which, in turn,
controls the membership interests of all the other Debtors) shows that SKNY has had its 15%
equity interest since no later than December 2015. Moreover, it shows that SKNY is not a mere
minority equity owner; it owns 100% of Seasons Corporate's "Class B Units" which come with,
among other rights, membership on the Debtors' Board of Managers. (Consequently, SKNY
itself executed the corporate resolution authorizing Seasons to borrow money from SKNY.)
SKNY received millions of dollars of transfers from the Debtors in20l1. Furthermore, tax
records reflect that SKNY was paying substantial funds to one of Bloom's Seasons-related
entities in2016, if not earlier. The nature of those payments is still a mystery.
These cases cry out for a trustee.
On top of all the undisclosed self-dealing, the Motions are not in the best interests of the
Debtors and their estates. As a matter of law, no deference may be afforded to the Debtors'
2
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business judgment amidst this nest of conflicts. The proposed DIP loan and asset sale are subject
to the entire fairness standard, and they clearly fail because thelz are not the best financing or sale
terms available to the Debtors. The Debtors continue to prosecute the Motions after receiving an
alternate offer that they conceded in open court was higher and better than SKNY's. The
Debtors also refused to so much as respond to a reorganizationproposal made by Supersol
months ago, instead letting their business devolve into its current dire state so as to manufacture
the perception of an immediate need to take insider financing. At the same time, the SKNY
proposal to purchase Seasons for $12 million provides essentially nothing to unsecured creditors.
Based upon the transactions before the Cout1, there does not appear to be any point to these cases
except to enrich Bloom and allow SKNY to hang on to Seasons' business, debt free.
Equally disturbing, as the Court heard in connection with the Debtors' first day motions,
the Motions are packed with terms designed to chill bidding for the Debtors' assets and thwart a
higher and better sale to third parties. As discussed at the initial hearing in these cases held on
September 17,2018 (the "First Day Hearing"), the proposed financing also is tied improperly to
the selection of SKNY as stalking horse bidder and pursuit of an asset sale to SKNY. Per its
terms, the DIP Financing goes into default if the Debtors pursue a higher and better transaction.
Although some of these provisions were struck from the interim financing ordero the Debtors are
still pursuing them on a final basis. The Motions therefore should be denied'
FACTUAL CKGROUND
A- The Sunersol Indebtedness.
1. Supersol holds an unsatisfied judgment (the "Judgment"), entered jointly and
severally against certain of the Debtors and others, by the Supreme Court of New York, New
york County (the "$Iate._Q,ou4"), on May 1, 2018, in the case captioned L&N Consulting Grp.,
LLC, et al, v. Bloom, et aL,Index No. 650632 12018 (the "State Court Case"). (State Court Case
aJ
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Doc. No. 57.) The Judgment debtors are Debtors Blue Gold Equities LLC, Central Ave. Market
LLC, Lawrence Supermarket LLC, Amsterdam Ave. Market LLC, Upper West Side Market
LLC, and Scarsdale Supermarket LLC (the "supersol Debtors"), as well non-debtors Zvi Bloom
("Bloom") and Mayer Gold ("Gold"). Pursuant to CPLR $ 7510, the Judgment confirmed an
arbitration award issued by the Beth Din of America (the "Beth Din") on August2,20I7, as
modified on January 10, 2018, in favor of L&N Consulting Group, LLC in the amount of
$8,325,328 .96, and Super Sol, LTD in the amount of $31,578'95, excluding post-judgment
statutory interest (the "supersol Indebtedness").
Z. The Supersol Indebtedness arose from certain Debtors', and Bloom and Gold's,
purchase of four profitable6 and formerly Supersol-branded stores located in Manhattan,
Scarsdale, Queens and Lawrence, New York (the o'supersol Stores"), which the Debtors have
operated under the Seasons name. The Debtors used the profits generated by the Supersol
Stores, and used their credit to incur mountains of additional debt (sometimes in violation of
obligations to other creditors), to finance an inept expansion into other geographic areas, rather
than pay the purchase price for the Supersol Stores as it came due. There are thus, in effect, two
silos of Seasons stores: those purchased from Supersol, and those that may have been the
beneficiaries of fraudulent transfers from, or fraudulently incurred obligations by, the Debtors
that own the former Supersol Stores. No payments have been made by the Debtors in respect of
the Supersol Indebtedness since March 2016.7
6 Following the acquisition by Seasons, the Supersol stores were "throwing off . . . a nice amount of profit." Sept.
17 Tr. at 42:17 -18 (Debtors' counsel speaking)'
7 The Amendecl Declqration of Joel Getzler Pursuant to Local Bankruptcy Rule 1007-4 and in Support of Chapter
I I petitions qnd First Day lviotions [Docket No, 34] (the "Getzler Declaration"), fl 19, claims, in passive voice, that
the Supersol Creditors "were paid" $600,000 in 201 8. That payment was made by a non-Debtor third party in
exchange for a subordinate inierest in the Supersol Judgment, and has no relevance to the Debtors' or their cases,
It did not in any way exacerbate the Debtors' financial distress'
4
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3. Paragraph 19 of the Getzler Declaration purports to provide some history to the
Supersol Indebtedness. The drafter of Mr. Getzler's declaration apparently did not review the
relevant documents, because all of the dates are materially incorrect. Pursuant to the sale
agreements for the Supersol Stores, a binding arbitration proceeding before the Beth Din was
instituted in or about October 2016, and a hearing was held on February 22,2017. The Beth Din
issued an award in favor of Supersol on Augus t 2, 2017 . On January 1 0, 20 1 8, the Beth Din
corrected and reduced the award as a result of a computational error made in the August 2,2017
decision. Both the original and corrected arbitration awards pre-dated the Debtors' alleged pre-
petition secured indebtedness to SKNY. That is, the Debtors began creating secured
indebtedness in favor of their shareholder only after they knew they were unable to pay their
debts as they came due.
4. Similarly, at the First Day Hearing, Debtors' counsel made some incorrect
remarks to suggest that the Supersol Indebtedness may have been refinanced and increased so as
to create an aura of possibly avoidable obligations. Pursuant to the Rooker-Feldman doctrine,
the Court does not have jurisdiction to review the Judgment. However, the issues to which the
Debtors alluded in Court were duplicative with arguments they raised successfully before the
Beth Din. The Beth Din awarded Supersol, and the Judgment reflects, only the unpaid principal
balance from the original 2010-11 asset sales. The Beth Din reduced Supersol's claim to unpaid
principal from the sale on the grounds that the restructurings violated Biblical prohibitions on
charging and paying de facto interest rather than avoidance concepts.s But the result is the same
- any potentially avoidable components of the contractual debt are already excluded from the
computation of the Judgment amount. Thus, the Debtors' attempts to cast aspersions on the
8 The Beth Din decisions are on file with the State Court and can be provided to this Court if a need arises
5
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bonafi.des or enforceability of the Judgment are frivolous.
B. The DIP Financins - a cynical Device to Hand seasons to SKNY.
5. The Debtors commenced their bankruptcy cases and filed the Motions late on
Sunday, September 16,2018, the eve of a three-week period during which their business is
frequently closed, and many of their professionals are unavailable, due to Jewish holidays.
Although it is unclear from the Financing Motion papers, the Debtors clarified at the First Day
Hearing that they seek to borrow $9.3 million from SKNY, comprised of $6 million of new
borrowings (some of which will be periodically round-tripped to SKNY as interest and fees), and
a ,'roll-up'o of SKNY's $3.25 million of alleged prepetition secured debt (without waiving any
claims or defenses, the "Prepetition SKNY Debt"). Bloom is an obligor on the Prepetition
SKNY Debt but would not be an obligor for the DIP Financing.e Thus, by virtue of the roll-up,
Bloom will obtain at least $3.25 million of personal benefit from the DIP Financing. This alone
explains why other potential lenders were shown the door while SKNY, the only party that could
offer Bloom a roll-up, was selected.
6. The Financing Motion and the Bid Procedures Motion are tied together. The DIP
Financing is conditioned upon the sale of the Debtors' business to SKNY for $12 million before
adjustments pursuant to the Bid Procedures Motion. Failure to sell the Debtors' assets to SKNY'
or so much of them as SKNY chooses to take, is a DIP Financing default that allows SKNY to
shut down future funding of the cases, even if a clearly higher and better offer is available. (See
DIp Loan and Security Agreemenl [Docket No. 10-1] (the "DIP Agreement,'o cited &s "DA"),
gg 9.1(e), (0, (i), (m), (n).) Despite the existence of third parties who have expressed interest in
e See Amended qnd Restated promissory Note (the "Promissory Note"). The Promissory Note is annexed hereto as
Exhibit B.
6
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financing the DIP andlor bidding for Seasons' business, the Debtors have designed a locked-up
chapter 11 process that is designed primarily for the benefit of SKNY and Bloom.
7. After repayment of the $9.3 million financing, plus additional exit fees and any
unpaid interest, and payment of such other priority claims and costs that may be required for a
plan to become effective, SKNY's bid will leave general unsecured creditors with pennies on the
dollar, if anything at all.
8. One of the shams of the DIP Financing is that it is predicated upon a budget that
the Debtors have no realistic chance of meeting. The Debtors' DIP budget fDocket No. 10-1]
(the "Budget") is based on assumptions that the Debtors' revenues from operations will increase
by almost 200%- to a level the)i had not attained even before their liquidity crisis - all while
suffering the negative consequences of their bankruptcy. Indeed, the Budget preposterously
projects that the Debtors' weekly revenues will rise from approximately $950,000 for weeks in
September in which Jewish holidays generate extra demand, to approximately $2 million just a
few weeks later. (See Budget.) More importantly, the Debtors will not have sufficient cash to
operate (according to the Budget) and will become administratively insolvent if their revenues
are off by as little as l0o/o from their farfetched projections. That means that SKNY will be able
to walk away with Seasons - whether by exercising rights to foreclose before a competitive sale
process has occurred, or by lending additional money to eliminate any possibility that anyone
other than SKNY will receive any sale proceeds.
C. The Bid Motion.
g. In the middle of the night prior to the First Day Hearing, the Debtors filed the Bid
Procedures Motion, incorrectly expecting the Court might hear it on less than24 hours' notice in
violation of Administrative Order No. 557 ("Order No. 557") $ 2(c). The Bid Procedures
Motion, as filed, seeks approval of bid procedures [Docket No. 12-1], Schedule 1, (the "Bid
7
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Procedures" cited as "BP"), including payments of a Breakup Feel0 and Expense Reimbursement
to SKNY, and contemplates eventual entry of an order fDocket No. 12'2) (the ooSale Order")
approving a sale of substantially all the Debtors'assets to SKNY for $12 million [DocketNo.
12-31 (theooAPA").
10. The Bid Procedures Motion discloses nothing about SKNY, notwithstanding that
Order No. 557 mandates that an insider sale must be disclosed conspicuously in a separate
section of the sale motion as an o'Extraordinary Provision." See Order No. 557, $ 1(dxi).
D. At Least One Better Transaction Is Available.
11. At the First Day Hearing, the Debtors conceded on the record that they had
received a competing offer from DC Brothers II LLC ("DC Brothers") to provide cheaper DIP
financing, and to purchase the Debtors' assets for a higher price and with less expensive bid
protections. (Sept. 17 Tr. at 62:15-20 see also infra.) The Debtors further acknowledged that
their co-chief restructuring officers viewed DC Brothers' offer as o'in fact a better bid." (Sept. 17
Tr. at 63:8-9.)
E. The Mvsterv of SKNY.
lZ. Because the Debtors and SKNY seek findings from the Court that the DIP
Financing has been negotiated at arm's-length and in good faith (and even if they did not), full
disclosure of who is behind SKNY and such persons or entities' relationships to the Debtors is
obviously essential. Yet, the Debtors and SKNY are doing their utmost to hide the ball, even
when asked for disclosure directly by the Court:
THE COURT: Okay. All right. So February 2018, that's where we
began with SKNY, correct?
ro Capitalized terms used in this objection and not otherwise defined shall have the meanings ascribed to them in the
8
Bid Procedures Motion,
Case 1-18-45284-nhl Doc 48 Filed 09/26/18 Entered 09/26/18 15:50:21
MR. SCHWED: Correct, Your Honor. So --
THE COURT: Okay. So who is SKNY LLC?
MR. SCHWED: I'm going to let Mr. Klestadt describe who his
client is.
MR. KLESTADT: Your Honor, SKNY is an investment vehicle for
initially a family office, and now there are several participants,
individuals.
THE COURT: A familY what did You saY?
MR. KLESTADT: Office. And now there are several participants
in the entitY.
THE COURT: Okay. And I need to know what relationship those
particiPants have to the debtors.
MR. KLESTADT: None, Your Honor, None to the insiders, ifthat's what you're asking. They have no -- there are no familial
relationships. SKNY had an equity interest in Seasons Corporate as
part of the initial -- of transaction back in February of 201 8.
THE COURT: So it was in February 2018 that they got the equity
interest?
MR. KLESTADT: Yes.
Sept. 17 Tr. at 50:19-51:15.
13. The Debtors and SKNY seriously misinformed the Court. Although the
prepetition SKNY Debt may not have been created until 2018 - after the Debtors and SKNY
knew that the Debtors were unable to pay their unsecured creditors - SKNY's equity-level
control and other financial ties to the Debtors and Bloom date back much further. The Operating
Agreement for Seasons Corporate shows that by December, 2015, SKNY controlled an entire
class of equity, which carried with it many rights, including the right to have membership on the
Debtors, Board of Managers. Bloom's tax records, obtained by Supersol in connection with the
State Court Case, reflect that one of his entities has been receiving substantial payments from
9
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SKNY in relation to the Debtors since at least as far back as 2016.11 Supersol has sought, but not
yet received, discovery as to the fult history of financial ties between SKNY and its principals,
and Seasons and its principals, including millions of dollars paid to SKNY in20l6.
14. Second, the Debtors and SKNY have failed to identify who is behind the
anonymously initialed SKNY, beyond the unhelpful explanation that it is "a family office" with
ooseveral participants, individuals." Sept. 17 Tr. at 51 : l-2. II is Supersol's understanding that the
"family office" constitutes the family or estate of Robert'oMendy" Klein of Cleveland ("Mendy
Klein"). The membership authorization (the "Resolution") attached to the Debtors' chapter 11
petition (the "Petition") [Case No. 18-45280, Docket No. 1] is signed by Nathan Klein, Mendy
Klein's son ("Nathan Klein").12 Mendy Klein made a fortune profiting from the post-Lehmann
U.S. housing crisis by providing foreclosure support services.13 Upon further information and
belief, the "family office" investments are managed by an alumnus of Oaktree Capital and York
Capital, aggressive distressed debt investors.
15. Third, while the Debtors have disclosed that SKNY is'oonly" al5o/o equity
holder, SKNY controls an entire class of membership interests and likely has a blocking position
preventing the Debtors from accepting alternative financing proposals. (,See Resolution.)
presumably SKNY would not have executed a Resolution authorizing the Debtors obtaining
financing from itself unless its authorization was required.
16. Supersol does not know the identity of the o'several participants, individuals"
n The Supersol Creditors will be prepared to present this document at the October 3, 2018 hearing but have not filed
it to protect what may be sensitive financial information'
12 The Resolution is annexed hereto as Exhibit C.
13 James R. Hagerty, Robert Klein Set Up Firm to Help Lenders Protect Homes Going Through Foreclosure,Wall
Street Journal (Mav I I , 201 g), https://www.wsj.com/articles/robert-klein-set-up-firm-to-help-lenders-protect-homes-eoing-through-foreclosure- I 526049000'
10
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(Sept. 17 Tr. at 5l:2) in SKNY, let alone what relevant relationship they may have. The Debtors
and SKNY have not disclosed them.
17. As noted above, Bloom, who appears to control the majority of the Debtors' Class
A Units, and upon information and belief is a member of the Debtors' Board of Managers, will
receive significant undisclosed personal financial benefits if the Motions are granted: relief from
$3.25 million of personal liability to SKNY, and payments in respect of his secret Cleveland
lease.
18. On September 18, 2018, Supersol transmitted letters (the "Informal Discovery
Letters',) to the Debtors and SKNY requesting narrowly targeted discovery aimed at assessing,
inter alia, SKNy's role and conduct with respect to the proposed DIP and sale transactions (the
.olnformal Discovery").to On Sunday, September 23,2018, approximately twenty minutes before
the 49-hour Sukkot holiday commenced at sundown,15 the Debtors provided Supersol with
limited documents which, broadly speaking, appear to consist of: (1) documents concerning
Bank United loans; (2) Cleveland store documents, including rent, contracts, and invoices;
(3) operating agreements; (4) leases; (5) loan documents concerning the 2018 Prepetition SKNY
Debt; and (6) a smattering of financial reports. The Debtors have not yet provided such critical
information as other offers they have received to provide financing or to purchase assets, the
history of financial ties to SKNY, their communications with SKNY and other potential lenders
and bidders, or substantiation for the farfetched revenue projections in the Budget. SKNY has
not yet produced any documents at all.
ra The Informal Discovery Letters are annexed hereto as Exhibits D and E.
15 The Debtors' conduct in this regard is par for the course. Everything they have provided to Supersol - even
simple notice of their 4:00 p.m. bint<ruptly hlings - has come either in the middle of the night or immediately prior
to the start of a holidaY.
11
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THE MOTIONS SHOULD BE DENIED
A. The Motions Are Subiect to the Entire Fairness Standard.
D. The Debtors assert that the Motions should be approved under the business
judgment standard. (See, e.g.,Bid Procedures Motion l|fl 51-58.) They are incorrect.
"fT]ransactions that benefit insiders must withstand heightened scrutiny before they can be
approved under $ 363(b)." Official Comm. of (Insecured Creditors of Enron Corp. v. Enron
Corp. (In re Enron Corp.),335 B.R. 22,28 (S.D.N.Y. 2005) (collecting cases); see also L.A.
Dodgers,457 B.R. at 3 13 (rejecting business judgment and applying "entire faimess" standard to
a debtor's selection of a DIP where the DIP would relieve a shareholder of personal liability).
20. ooThis requires proof of fair dealing and fair price and terms." Id,; see In re Flour
City Bagels, LLC,557 B.R. 53, 78 (Bankr. W.D.N.Y. 2016) (applying heightened scrutiny and
rejecting sale of substantially all of debtor's assets to sole managing member); In re Family
Christian, LLC, S33 B.R. 600, 622 (Bankr. W.D. Mich. 2015) ("Where a proposed sale would
benefit an insider of a debtor, the court is required to give heightened scrutiny to the fairness of
the value provided by the sale and the good faith of the parties in executing the transaction'")
(citing Rickel & Assocs., Inc, v. Smith (In re Rickel & Assocs., Inc,),272 B'R. 74, 100 (Bankr.
S.D.N.y. 2002)); Inre Innkeepers U|ATr.,4428.R.227,231 (Bankr. S.D.N.Y. 2010) (refening
to the ,'heightened scrutiny/entire fairness standard" that "closely examines transactions
involving insiders"); Inre Med. Software So/s.,286 B.R. 43I,445 (Bankr. D. Utah 2002) (where
o,asset sale is to a purported insider, the purchaser has a heightened responsibility to show that
the sale is proposed in good faith and for fair value").16
16 In fact, even when the bidder is a non-insider and "pre-confirmation $ 363(b) sale is of all, or substantially all, of
the Debtor's property, and is proposed during the beginning stages of_the case, the sale transaction should be closely
scrutinized, and ihe p.opon.ni bears a heightined burden ofproving the elements necessary for authorization'"
Med. Software Sols.,286 B'R' at445'
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21. Indeed, "the conduct of bankruptcy proceedings not only should be right but must
seem right.o' In re Bidermann Indus. U.S.A., 203 B.R. 547,549 (Bankr. S.D.N.Y. 1997)
(rejecting insider transaction under heightened scrutiny) (quoting Knapp v. Seligson (In re Ira
Haupt & Co.),361 F .2d 164, 168 (2d Cir. 1966)) (Friendly, J.). The Court already has
acknowledged that prudent point. See Sept. 17 Tr. at 126:9-18 (THE COURT: "It should not be
a default if the Debtor decides that it wants to amend its . . . motion to change the stalking horse.
The appearance of it, otherwise, is tenible. Putting aside the fact that it doesn't make sense to
me and it's not the law, the appearance is terrible. The idea here is to maximizethe value of the
assets."). "The good faith inquiry is relevant to both the heightened scrutiny and business
judgment standards." Innkeepers,442 B.R. at 233 (rejecting insider transaction under either
heightened scrutiny or business judgment)
22. Here, the application of the entire fairness standard is not subject to reasonable
dispute, because there are multiple insider benefits and non-arm's-length aspects to the proposed
DIP Financing and Bid Procedures - putting aside the Debtors' calculated failure to make full
disclosure. Without even getting to SKNY, the benefits to Bloom - relief from over $3.25
million of personal liability and cure payments for a controversial non-arm's-length lease - are
enough by themselves:
The evidence shows that if Debtors, controlled by [debtors'principall, did not seek court approval for the fproposed DIP] Loan,
fdebtors' principat] would personally owe $5.25 million to
fproposed DIP lender]. Such potential personal liability clearlycompromised Debtors'/[principal's] independent judgment.
Therefore, Debtors' decision is not entitled to review using the
business judgment standard. Instead, the Court must reviewDebtors' decision to accept the fproposed DIP] Loan applying the
entire faimess standard. This requires proof of fair dealing and fairprice and terms. The Debtors did not establish that the terms of the
[proposed DIP] Loan are entirely fair, particularly given [competingDIP lender's] competing terms . . . .
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Had Debtors negotiated with [competing DIP lender], a moreeconomically viable loan may have developed - but at a high cost tothe Debtors' decision-maker, [debtors' principal]. The Courttherefore concludes that Debtors' decision is not entitled todeference as a matter of business judgment. Consequently, Debtorshad to prove the entire faimess of the fproposed DIP] Loan -- faitdealing and fair price. fCompeting DIP lender's willingness toextend . . . credit on better terms and Debtors' refusal to negotiate
with [competing DIP lender] precludes a finding of entire fairness,
L.A. Dodgers,457 B.R. at 313-14 (citation omitted).
23. It should also not be subject to reasonable dispute that SKNY qualifies as an
insider. "Courts recognize two types of insiders-statutory and non-statutory." Jacobs v.
D'Alessandro (In re Dewey & Leboeuf LLP), Nos. 12-12321 (MG), 14-01919 (MG), 2014
Bankr. LEXIS 4051, at*16-17 (Bankr. S.D.N.Y. Sept. 23, 2014). Aooperson in control of the
debtor" is its statutory insider. 11 U.S.C. $$ 101(3lXBXiii), (CXv). "The inquiry is fact-
specific and can tum on a case-by-case basis from the totality of the circumstances." Dewey &
Leboeuf,2014 Bankr. LEXIS 405I, at*17 (quotation and ellipses omitted). Likewise, courts
generally determine non-statutory insider status by examining the closeness of the relationship
between the parties, the degree of control exerted over the debtor and whether transactions were
conducted at arm's length. Id. at*20 (quotation omitted).
24. As discussed above, SKNY controls an entire class of equity, and it (or its
designee) sits on the Debtors' Board of Managers. Mendy Klein's son, Nathan Klein, signed the
Resolution authorizing the Debtors' bankruptcy filings and borrowing from SKNY. That in and
of itsetf demonstrates insider status, because SKNY could not authorizethe Debtors'bankruptcy
filings without being ooin control" of the Debtors. See Flour City Bagels, 557 B.R. at 84 (secured
lender turned managing member was an insider where it "filed the bankruptcy in [the debtor's]
name"). (If there remains any doubt, the Court should at least postpone adjudication of the
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Motions until the Debtors and SKNY have provided fulsome disclosure, including making
witnesses available for deposition upon reasonable notice.)
25. The Motions can be denied out of hand because the Debtors, having erroneously
relied on the business judgment standard, have made no attempt to demonstrate either the
fairness of price or the good faith of dealings, behind the Motions. See Family Christian,533
B.R. at 628-29 ("The court will not find good faith simply because the Committee has
emphatically supported the transaction . . . . Instead, given the insider relationships in these
cases, the court would expect . . . evidence in support of the alleged good faith nature of the
proposed transaction."). Moreover, Order No. 557 provides that the following must be disclosed
in a sale motion as anooExtraordinary Provision": "If the motion proposes a sale to an insider, as
defined in the Bankruptcy Code, the motion must disclose what measures have been taken to
ensure the fairness of the sale process and the proposed transaction." Order No. 557, $ 1(dxi).
The Motions do not disclose any such o'msasures" because there have been none. The Debtors
have not carried their burden as to either of the Motions.
B. The Bid Motion Should Be Denied - Under Anv Standard.
1. There Is a Hieher and Better Offer.
26. SKNY cannot be approved to serve as the Debtors' stalking horse under any
standard, when the Debtors have conceded on the record in court that they received a higher and
better offer:
MR. SCHWED: I just want to point out that [DC Brothers' counsel]
is here together with his client. They've presented us . . . with a termsheet of terms under which they would provide the [DIP] facilityand under which they would buy the assets of the company . . . .
Regarding the bid protection, their bid protection fee is 2.5 percent
as opposed to SKNY which is 3 percent. Their outside date forclosing is January 15th as opposed to December 31. And the --perhaps the most significant difference is that their price for the
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purchase agreement is 13 million as opposed to SKNY's price of 12
million. [* * *]
[I]t's hard to look at the DIP without looking at the asset purchase
agreement.
And when you look at the two of them combined, because the asset
purchase agreement begins with the stalking horse bid of $13million, it is the view of Mr. Getzler or Mr. Henrich that that, as a
combined bid, is in fact a better bid.
We will say that we did commit to SKNY that we would present
their bid as a stalking horse bid, because they wete not willing to putthe last round of funding in unless we agreed to go forward withthem on a DIP loan and go forward with them on an asset purchase
agreement.
Sept. 17 Tr. at 60 Il-17,62:15-20,63:3-14. The Court agreed that the Debtors could withdraw
the Bid Procedures Motion. See id. at 116:24-25; lt9:6-7 ("I have had many experiences where
parties came in and they substituted one stalking horse for another because they made a better
deal . . . . [The Debtor] did it [filed the Bid Procedures Motion], and then it can withdraw it.").
Yet, the Debtors have not.
27. Given the foregoing, it is remarkable that the Debtors continue to prosecute the
Motions as filed, and demonstrates that SKNY is running the show. The Debtors' continued
pursuit of bid procedures with a stalking horse that is not the best bid cannot possibly be an
exercise of sound, or any, business judgment. See Innkeepers, 442 B.R. at 233 (finding it would
reject insider transaction even under business judgment standard: "While the Debtors state . . .
that they are aware of no potential alternative that would provide creditors with richer tecoveries,
it does not appear from the evidence presented that they have canvassed the possible altematives
at this point."). Here, the Debtors actually heve oocanvassed" at least one alternative, yet are
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pursuing what they considered and objectively is aworse bid.17
7 SKNY is Not E ed to the Breakun Fee and Exnense Reimbursement.
28. Breakup fees and other bid protections should be rejected by bankruptcy courts
where "(1) the relationship of the parties who negotiated the breakup fee is tainted by self-
dealing or manipulation; (2) the fee hampers, rather than encourages, bidding; or (3) the amount
of the fee is unreasonable relative to the proposed purchase pdce." Gey Assocs. Gen. P'ship v.
3I0 Assocs., L.P.,No. 01-8-2798 (REG) ,2002 U.S. Dist. LEXIS 20759, at *5 (S.D.N.Y. Oct'
23,2002) (citation omitted) (emphasis added); Bidermann, 203 B.R. at 552 (same).
29. Breakup fees are especially inappropriate where, as here, there are multiple
bidders present. For example, rn Gey Assocs, Gen. P'ship, where the debtor "had two buyers
drooling" to purchase its property, the district court affirmed the bankruptcy court's ruling that
"[t]hebreakup fee... didnotencouragebidding. Indeed... inthis context, abreakupfee...
was both unnecessary (as there were already multiple bidders) and inappropriate (in that it
hampered [debtor's] ability to sell the Property to [potential alternative purchaser])." 2002 U.S.
Dist. LEXIS 20759, at x5.
30. The proposed Breakup Fee and Expense Reimbursement fail under all three of the
tests (which are disjunctive). First, the relationship between the Debtors and SKNY is plainly
tainted by self-dealing and manipulation. In addition to the multiple undisclosed relationships,
insider control, and personal benefits discussed above, SKNY's argument at the First Day
Hearing demonstrated that it would pressure and threaten the Debtors into prosecuting the Bid
r? While the DC Brothers' bid is clearly higher and better, it may still suffer from some of the same issues as the
SKNY bid with respect to restricting the Debtors' ability to pursue better and higher offers. Supersol's objection
should not be taken as a whole-hearted endorsement of the DC Brothers' bid unless certain anticipated bid-chilling
provisions are removed.
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Procedures Motion, even if they withdrew it so as to pursue a better offer:
MR. SCHWED: [T]o the extent that [DC Brothers] or somebodyelse steps forward and presents an asset purchase agreement orstalking horse agreement which is materially, substantially better forthe estate, the Debtor will support it.
THE COURT: You'll amend your [Bid Procedures] motion?
MR. SCHWED: Correct, Your Honor.
MR. KLESTADT: Your Honot, no, that's where I take issue. TheDebtor has to proceed with the motion that's on file. That's theobligation that the Debtor has under my asset purchase agreement
[T]he Debtor is under contract, Your Honor, under the asset
purchase agreement, to present that motion . . . . [T]he Debtor has
the obligation to, at a minimum, present the motion . . . . [T]heDebtor has the contractual obligation to present the offer, to have
the bidding procedures approved. . . . The procedures provide formy client's offer to be the stalking horse offer . . . . [A]t a minimum,Your Honor, the Debtor must present the motion as it is. It cannotwithdraw the stalking horse motion.
MR. SCHWED: Your Honor, I don't disagree with anything MrKlestadtsaid....
MR. KLESTADT: Your Honor, the Debtor, in my view, is bound
to prosecute the motion to Your Honor . . . . [T]he remedy wouldbe an unsecured claim for breach of contract . . . . I may be entitledto whatever profits we may have obtained by operating the business,
or lost opportunity costs.
Sept. 17 Tr. at 113:15-25,114:5-115:3, 117:13-118:4. We thus have a transcribed record of the
insider's threats.
31. Second, because there already are multiple offers on the table, the Breakup Fee
and Expense Reimbursement hamper, rather than encourage, bidding. See Gey Assocs. Gen.
P'ship,2002U.S.Dist.LEXIS20759,at*5. InInreTiaraMotorcoachCorp.,2I2B.R.I33
(Bankr. N.D. Ind. 1997), as another example, the court reasoned that a oobreakup fee arrangement
would chill bidding" where competing entities that had requested bid packages "did so without
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solicitation and without the approval of the proposed breakup fee." Id. at 138 (footnote omitted).
The court further explained that it "did not hear testimony or receive documentation as to the
time, effort, expense and risk that [stalking horse] contributed to the proposed sale," and that,
although the debtor would have ceased operations earlier without the stalking horse's letter of
intent to purchase the assets, o.without evidence conceming [stalking horse's] time, effort,
expense and risk, the court cannot determine whether the breakup fee is justified." Id.; see In re
Integrated Res., 147 B.R. 650, 660 (S.D.N.Y. 1992) ("[T]he court should consider whether the
proposed acquiror attracted other bidders or simply received a potential windfall."). SKNY's bid
did nothing to ooattract" DC Brothers. DC Brothers had been negotiating a transaction with the
Debtors well before the petition date, and put its offer on the record at the First Day Hearing half
aday after the Bid Procedures Motion was filed, having communicated it to the Debtors even
earlier. The Breakup Fee and Expense Reimbursement are therefore improper under this test as
well
32. Third, the proposed $360,000 Breakup Fee, plus $150,000 Expense
Reimbursement, are unreasonable. The Bid Procedures somewhat misleadingly state that the
Breakup Fee is "3.Tyo of the Purchase Price," and "$360,000.00 (or 3Yo of the Purchas Price)."
(Bid Procedures Motion fl 32(g); BP, $ D.) However, "Purchase Price" is defined as $12 million
which includes nearly $10 million that SKNY proposes to credit bid or roundtrip back to itself -
in effect a foreclosure (based mostly upon debt that did not even exist a month ago). (Bid
Procedures Motion tf 15; BP, $ D; APA, Art. II, $ 2.3(aXb).) The actual net value to the estate
from SKNY's bid will be less than $2.75 million - without even adjusting for the portions of the
DIP Financing proceeds earmarked for SKNY's interest and fees. SKNY's proposed Breakup
Fee of $360,000 actually represents l3Yo of the consideration to the estates, not3Yo. Adding the
19
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additional $150,000 Expense Reimbursement to the "Breakup Fee" brings the total bid
protection fees to $510,000, which is some lgYo of the net value of the bid to the estate. That is
far above market and patently unreasonable in an arm's length transaction, let alone an insider
sale like this one. The Breakup Fee and Expense Reimbursements should only be calculated on
the basis of the value that the SKNY bid (if otherwise approved) provides to stakeholders other
than SKNY itself.
3. The Bid Procedures Motion Does Not DescribeAdequate. or Anv" Marketing or Diligence Processes.
33. The Bid Procedures Motion says nothing whatsoever about the Debtors'
marketing and diligence processes - prepetition or postpetition. "The principal justification for $
363(b) sales is that aggressive marketing in an active market assures that the estate will receive
maximumbenefit." Inre Gulf Coast Oil Corp.,404 B.R. 407,424 (Bankr. S.D. Tex.2009).
Thus, a sale process should follow'oan intensive effort to drum up the best price obtainable by
creditors." Bidermann, 203 B.R. at 552; see Innkeepers,442 B.R. at 232 ("The Debtors did not
run any marketing process . . . . U]t does not appear that Innkeepers has contacted any potential
investors outside the capital structure . . ."); Inre Duro Indus., No. 02-16131-CJK, 2004 Bankr.
LEXIS 1235,at*19 (Bankr. D. Mass. Aug.26,2004) ("There was simply no [marketing] effort
here . . . certainly no effort sufficient to dispel the notion that this case was not filed, and the sale
process was not designed, simply to wash the assets though bankruptcy for the benefit of the
Lender.").
34. The Bid Procedures Motion contains a section heading entitled "Pre-Petition
Marketing and Sale Process" - yet, the section fails to discuss marketing but for a single
sentence: "Prior to the Petition Date, the Debtors engaged in discussions with other possible
purchasers, including at least one who may present alternative bids at the Sale." (Bid Procedures
20
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Motion \24; see also id. nn20-23.) Careful combing of all the Bid Procedures Motion
documents reveals only one (possible) act of possible marketing buried in the Bid Procedures:
the Debtors will provide notice of the auction and sale and the Bid Procedures by mail to o'all
parties identified by the Debtors as potentially having an interest in acquiring some or all of the
Acquired Assets." (BP, $ E (ix).)t8 This is required by Order No. 557, anyway. See Order No'
ss7, $ 2(b).
35. Beyond that, the burden is on interested parties to somehow learn that the
Debtors' assets are for sale and reach out to the Debtors themselves. (BP, $$ E-F.) The Bid
Procedures do not require the Debtors to take any meaningful steps to market their assets and
solicit additional bids. Such an omission is especially problematic in this case, where Supersol
and others have previously attempted to negotiate a transaction and were ignored - yet now the
Debtors have suddenly accepted an insider deal.
36. Likewise, the Bid Procedures Motion is void of disclosure as to how the diligence
materials will be made available. Supersol has found it exceedingly difficult to obtain diligence
materials from the Debtors. The Debtors propose only that "Potential Bidders" "shall be
permitted to conduct diligence with respect to the Acquired Assets." (BP, $ F.) There is no
disclosure as to how information will be exchanged - for example, whether the Debtors will
create an electronic data room - and what materials the Debtors commit to making available.
Any bid procedures should, at a minimum, expressly require the Debtors to provide bidders with
meaningful diligence materials concerning their operating performance and history.
rs The Bid procedures Motion provides that the Debtors would serve a copy of their Proposed order (defined herein)
on ,.all parties who have made an expression of interest in acquiring the Acquired Assets or the Business within
twelve itZ; months prior to the date of the Motion." (Bid Procedures Motion tf 48')
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4. Additional Obiections to Bid Procedures Motion.
37. Timeline. The Bid Procedures Motion does not set forth proposed dates for a bid
deadline, auction, objection deadline (presumably to the sale), or sale hearing. (BP, $ B; Order
(A) Approving Bidding Procedures for the Sale of Substantially all of the Debtors' Assets, (B)
Scheduling an Auction and a Sale Hearing Related thereto, (C) Approving the Form and Manner
of Notice of the Auction and the Sale Hearing, and (D) Approving Bidding Protections [Docket
No. 12-1] (the "Proposed Order") fl'1| 3, 6,8,74.) The only dates disclosed are that the APA
requires entry of the Proposed Order by October 9,2018, and the annexed Sale Order by
December 31, 2018. (Bid Procedures Motion fl 30(b).) Any sale process must be on a schedule
that maximizes participation by other prospective bidders. It is impossible to evaluate the
reasonableness of the process with blank dates. Given the proposed December 31, 2018 deadline
for entry ofa sale order, prospective bidders can be provided at least 60 days to conduct
diligence and submit initial bids.
38. Qualified Bidders Cannot be Determined in Debtors' Sole Discretion. While the
Bid Procedures provide, for the most part, that the Debtors must make key decisions'oin
consultation" with the official committee of unsecured creditors (the "UCC"), the Debtors
purport to determine in their sole discretion whether a bidder is a "Qualified Bidder." (BP,
$ G(i).) This is impermissible, especially where, as here, the stalking horse is an insider. The
UCC and other large creditors should be consulted and informed in advance of all decisions in
the sale process, including the determination of whether bid packages constitute "Qualified
Bids."
39. All Bids. The Bid Procedures provide: "For a Bid Package submitted by a
Potential Bidder to qualify as a Qualified Bid, the purchase price in that bid must provide for net
cash inan amount not less than $12,600,000 which represents the Purchase Price, the maximum
22
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amount of the Bidding Protections anda $100,000 minimum overbid." (BP, $ G(iiD (emphasis
added),) With less than $2.75 million possibly available for creditors other than SKNY, setting
the next incremental bid $600,000 higher, all in cash, is unreasonable. The Debtors, in
consultation with the UCC, should be permitted to consider bids in all forms.
40 Discretion The Bid Procedures Motion
proposes that SKNY will have the sole discretion to elect to assume contracts, and the
responsibility to pay cure costs. (Bid Procedures Motion l|fl 38, 40.) This provides SKNY with
too much optionality in terms of what contracts and leases they cure or force the Debtors to
reject, and renders it impossible to evaluate the value and fairness of the proposed purchase
pnce.
4I. DIP Default Interest. Any bid procedures order should make abundantly clear
that SKNY is not entitled to collect default interest if another bidder is chosen. Otherwise,
SKNY would effectively get a "double dip" on its proposed Breakup Fee (to the extent it
otherwise may be approved), further stacking the deck against a competitive sale process.
42. Rebidding. Order No. 557 provides: "If a break-up or topping fee is requested,
the Sale Procedures Order should state whether the stalking horse will be deemed to waive the
break-up or topping fee by rebidding. In the absence of a waiver, the Sales Procedure Order
should state whether the stalking horse will receive a ocredit' equal to the break-up or topping fee
if the stalking horse is the successful bidder at a higher price than the stalking horse's initial bid."
Order No. 557, $ 1(bXiv)(3). The Proposed Order does not so specify.
43. Disclosure of Gold's Employment Agreement. Order No. 557 provides that "[i]f
the proposed buyer has discussed or entered into any agreements with management or key
employees regarding compensation or future employment, the motion must disclose the material
z)
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terms of any such agreements, and what measures have been taken to ensure the fairness of the
sale and the proposed transaction in the light of any such agreements." Order No' 557, $ 1(dxii).
The Bid Procedures Motion contains exactly one sentence in this regard: ooPurchaset intends to
offer employment to Mayer Gold, who is an insider of the Debtors." (Bid Procedures Motion
flfl 28, 30(a).) The Debtors should disclose the terms of Gold's employment. Needless to say, the
offer of continuing employment to Gold, the third member of the Debtors' Board of Managers,
further taints the Motions.
44. Sale of Avoidance Actions. Order No. 557 also provides: "If the Debtor seeks to
sell its rights to pursue avoidance claims under chapter 5 of the Bankruptcy Code, the sale
motion must so state and provide an explonation of the basis therefor." Order No. 557, $ 1(dXx)
(emphasis added). The Bid Procedures Motion provides that SKNY is to acquire avoidance
actions, purportedly against non-insiders (Bid Procedures Motion fl 30(g)), but offers no
ooexplanation of the basis therefor." OrderNo. 557, $ 1(d)(x).
45. No Bids After Auction. Order No. 557 provides: "The Sale Procedures Order
should provide that the Court will not consider bids made after the auction has been closed,
unless a motion to reopen the auction is made and granted." Otder No. 557, $ 1(bXv)(s). The
proposed Order does not so specify.le Supersol recommends against the inclusion of such a
provision in these particular cases. While late bids can be an inconvenience, given the
complexity of evaluating the Debtors' assets, the under-disclosed insider influences on the sale
process, and most of all, the extremely scant value available for unsecured creditors, Supersol
does not believe that there should be any restrictions on the consideration of any bids.
ts The Bid procedures Motion does provide: "No bids shall be considered by the Debtors or the Bankruptcy Court
unless a party submitted a Competing bffer in accordance with the Bidding Procedures and participated in the
Auction." (Bid Procedures Motion U 32(k)')
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46. Return of Deposits. The Bid Procedures provide that the deposits of Qualified
Bidders who are not determined to be the Successful Bidder or Backup Bidder will be returned
within five business days after entry of the Sale Order. (Bid Procedures Motion tT32(cXy).) To
encourage bidding, deposits of unsuccessful bidders should be returned within three business
days of the auction, not five days after eventual entry of the Sale Order.
Date. There is a conflict in the Bid Procedures Motion regarding the date47.
by which the sale must close. The Bid Procedures Motion and, at first glance, the APA, provide
that the sale must be consummated by December 3 1 , 20 1 8. (Bid Procedures Motion nn 27 ,
30(b); APA Art. II, $ 2.5.) Yet, the proposed APA also provides that SKNY may terminate the
APA if the closing has not occurred by December 15, 2018. (1d,, Att, VIII, $ 8.1(c), (e).) This
should be corrected.
5. Reservation of Rishts Resnect to Sale Order
48. Order No. 557 provides: "When an auction is contemplated in cases filed under
chapter 11 . . . the Debtor should ordinarily file a single motion seeking the entry of two orders to
be considered at two separate hearings. The first order (the oosale Procedures Order") will
approve procedures for the sale process, including any protections for an initial, or stalking horse
bidder ("stalking horse")o and the second order (the "Sale Order") will approve the sale to the
successful bidder at the auction." Order No. 557, $ 1(a). The Proposed Order here appears to
comply with that requirement, providing that nothing contained therein o'precludes any party in
interest from objecting to the Sale in accordance with the objection procedures set forth herein,
and no parly shall be deemed to have consented to the Sale by virtue of not having objected to
the Bidding Procedures requested in the Motion." (Proposed Order n22.)
49. Neverthelesso out of an abundance of caution, Supersol expressly reserves all
rights to object to the final sale order. This present Objection is not intended to comprise or
25
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foreclose Supersol's potential objections to approval of the APA or any alternative asset
purchase agreement, or to entry of the Sale Order or any sale order. Supersol reserves all of its
rights to object to any of the foregoing on any grounds, whether or not raised herein, prior to and
at any sale hearing, in accordance with any deadlines the Court establishes.
C. The DIP Motion Be Denied.
50. In the interest of brevity, Supersol refers the Court to the discussions set forth
above regarding the insider-nature of the proposed DIP Financing, the lack of arm's-length
negotiations, the inapplicability of the business judgment standard, the Debtors' and SKNY's
material failures of disclosure, and the Debtors' failure to accept a higher and better offer of
financing. Supersol also incorporates by reference the arguments it made at the First Day
Hearing. In addition, Supersol objects to approval of the DIP for the following reasons.
l. Credit Is Available on More Favorable Terms.
51. The Debtors bear'othe burden of proving that: (1) ft]hey are unable to obtain
unsecured credit per 11 U.S.C. $ 364(b), i.e., by allowing a lender only an administrative claim
per 11 U.S.C. 503(b)(1XA); (2) [t]he credit transaction is necessary to preserve the assets of the
estate; and (3) [t]he terms of the transaction are fair, reasonable, and adequate, given the
circumstances of the debtor-borrower and the proposed lender." L,A, Dodgers, 457 B.R. at 3 12
(citations omitted). Likewise, "[t]he first prong of 11 U.S.C. $ 364(d) requires the debtor to
show that alternate financing is unavailable.'o In re 495 Cent. Park Ave. Corp., 136 B.R' 626,
630 (Bankr. S.D.N.Y. 1992).
52. The Debtors ask the Court to find, inter alia, that they: "are unable to obtain
financing from sources other than ISKNY] on terms more favorable"; oohave been unable to
obtain sufficient unsecured credit"; and oohave also been unable to obtain credit: (a) having
priority over administrative expenses of the kind specified in sections 503(b), 507(a) and 507(b)
26
Case 1-18-45284-nhl Doc 48 Filed 09/26/18 Entered 09/26/18 15:50:21
of the Bankruptcy Code; (b) secured by a lien on property of the Debtors and their Estates that is
not otherwise subject to a lien; or (c) secured by a junior lien on property of the Debtors that is
subject to a lien that is on terms more favorable than the DIP Facility." (Proposed DIP Order !J
VI (b).) The Court should decline to do so.
53. As discussed above, the Debtors (to their credit) disclosed the existence of higher
and better funding at the First Day Hearing from DC Brothers. Moreover, Supersol sought to
develop and advance its own proposal for a DIP loan and a pre-negotiated chapter 11 plan
months ago, before the Debtors' business and need for funds had grown so dire, but the Debtors
refused to engage with Supersol. The Debtors have just begun to provide basic diligence
information to Supersol, and are providing the bare minimum at the latest possible time. Other
than the acknowledgement of the DC Brothers offer at the First Day Hearing - DC Brothers and
its counsel were in Court, leaving the Debtors no option - the Debtors have not provided
disclosure of what other offers were potentially available and from whom, or what process they
undertook to seek financing.
54. Accordingly, the Court cannot enter the section 364 findings requested by the
Debtors. In fact, the Court should not approve the SKNY DIP Financing at all. See L'4.
Dodgers,457 B.R. at3l4 (rejecting DIP proposal where: "Had Debtors negotiated with
falternate potential lender], a more economically viable loan may have developed.").
2. The Unattainable DIP Budget Renders the DIPa Mere Ruse to Deliver the Debto rs to SKNY.
55. The DIP Financing should not be approved because it is all but guaranteed to go
into default as a result of the ridiculous revenue projections in the Budget, leaving the Debtors
administratively insolvent and in the hands of SKNY before a sale and marketing process can be
completed. Even during better times, the Debtorso average weekly revenues in the winter
27
Case 1-18-45284-nhl Doc 48 Filed 09/26/18 Entered 09/26/18 15:50:21
months between the Jewish holiday selling seasons were not at the levels assumed by the Budget.
It is impossible to credit that they will rise from the approximately $950,000-per-week range to
approximately $2 million per week over the course ofjust a few weeks while the Debtors are
suffering the consequences of their bankruptcy, and the loss of goodwill from customers and
vendors alike precipitated by their dilatory decision to file.
56. The DIP Financing Budget provides the Debtors with only a $300,000 cash
cushion above Budget. If the Debtors miss their absurd projections by 10%, they will be out of
cash in a few weeks. If the Debtors increase sales by 50% - a tremendously positive result - in a
week they project increasing sales by l00oA, their cash could be exhausted in a matter of days.
The results could be a DIP default, administrative insolvency and possibly dark stores. But
unlike if the Court were to deny approval of the Financing Motion, the Debtors would become
administratively insolvent with millions of dollars of additional obligations to SKNY ahead of
non-insider creditors. A default should not be a foregone conclusion before the financing is
approved, but the Debtors' absurd revenue projections all but guaranty a default. With a built-in
default, the DIP Financing is only a mechanism to deliver Seasons into the hands of SI(NY - and
provide millions of dollars of benefits to Bloom in the process.
3 Continued DIP Financins Should Not Be Conditioned U on a Sale to SKNY
57. Supersol reiterates its interim objections to the DIP Financing insofar as it
requires a sale to SKNY upon penalty of default. (Supersol would likewise object to such
provisions in a competing DIP-sale package.) As discussed on the record at the First Day
Hearing, section 9 of the DIP Agreement constitutes an impermissible attempt to lock the
Debtors into selling their assets to SKNY, and all but dooms an open and competitive bidding
28
Case 1-18-45284-nhl Doc 48 Filed 09/26/18 Entered 09/26/18 15:50:21
process. (See DA gg 9.1(e), (0, (i), (m), (tr).)20 The DIP Agreement continues to provide that
terminating the APA with SKNY to sell to a higher bidder, would constitute a DIP default,
entitling SKNY to stop funding the cases so that the Debtors are unable to proceed to close on
the higher offer. SKNY would also be entitled to collect default interest, effectively giving it a
"double dip" on break-up fees if another bidder were chosen. (See id., e.g., $ 9.1(0, (i).) The
DIP Agreement also cross-defaults with defaults under the APA, even though the APA has not
received Court approval and will not for many months if ever. SKNY is transparently using the
DIP to provide it with a veto of any sale other than a sale to itself - even one that pays SKNY in
fult. The interim financing order entered on September 28,2018 fDocket No. 14] (the "Interim
DIP Order"), removed these provisions. The final DIP Order should do so as well'
4. SKNY and the Debtors Are Not Entitled to Findings ConcerningNon- Status. .fudsment or Faith.
58. As discussed above, no deference to the Debtors' business judgment in selecting
the DIP Financing is appropriate here, because the Debtors' independent judgment has been
compromis ed, See, e.g., L.A. Dodgers,457 B.R. at313 (applying "entire faimess" standard to
selection of a DIp because the DIP would relieve a principal of personal liability). The Debtors
have not, and cannot, make the necessary evidentiary showings to demonstrate SKNY is not an
20 The DIp Agreement as filed (notwithstanding the Interim DIP Order) impermissibly provides, in relevant part:
In addition to the Events of Default under the Interim DIP order and/or Final DIP order, the following shall
constitute a Default:(e) An Event of Default (as defined in the APA) has occurred and is continuing under the APA; or
ifj fn. filing of a Chapter 11 PIan for the Debtors does not provide for the consummation of the
transactions contemplated by the APA or the payment in cash in full of the DIP Obligations on or
before the MaturitY Date; or ' ' , .
(i) The APA is terminated for any reason other than a default of the Lender under the APA; or ' ' ' '
im) The Bidding Procedures Order (as defined in the APA), which authorizethe Lender to credit
Uid tne Prepetition Indebtedness and the DIP Obligations pursuant to Sections 363(0 and 363(k)'
shall not have been entered by the Bankruptcy Court on or prior to October 9,2018; or
(n) The Sale Order approving the Sale to Lender shall not have been entered by the Bankruptcy
Court on or prior to December 15, 2018 ' ' . .
29
Case 1-18-45284-nhl Doc 48 Filed 09/26/18 Entered 09/26/18 15:50:21
insider, that the DIP Financing was negotiated at arm's-length, and "proof of fair dealing and fair
price and terms." 1d. "Business judgment" is off the table as a matter of law. The Court should
deny such findings, as it did with respect to the Interim DIP Order.
5. The Roll-Up Is an Undisclosed Bribe to Bloom.
59. Supersol objects to the o'roll-up" as an undisclosed payoff to Bloom. See supra.
Moreover, the Debtors have not demonstrated any justification for converting the Prepetition
SKNY Debt into postpetition super-priority debt.
6. The DIP Lenders' Fees and Expenses Should Be Limitedand Subiect to Wider Review.
60. The Debtors' DIP order as proposed, fl 3, provides for payment of fees and
expenses, including attorneys' fees, of SKNY. SKNY is wearing at least four hats - bidder for
the Debtors' assets, prepetition creditor, managing member, and prepetition equity holder. To
the extent the Financing Motion is approved, the approval order should provide that SKNY may
only charge the estates for fees incurred in its role of DIP lender, and must provide sufficiently
detailed invoices for parties to determine whether it is in compliance and whether its fees are
reasonable. It would be inappropriate for one bidder to be advantaged over others by receiving
reimbursement of its legal fees from the estates, in addition to whatever expense reimbursements
may eventually be authorized under a bid procedures order. That is especially true when the
bidder is an insider with undue influence over the Debtors and their cases.
30
Case 1-18-45284-nhl Doc 48 Filed 09/26/18 Entered 09/26/18 15:50:21
CONCLUSION
For the foregoing reasons, Supersol requests that the Court deny the Motions, or in the
alternative, delay consideration of the Motions until a UCC has been appointed and, along with
other interested parties, has had adequate discovery of the matters pertinent to the Motions. To
the extent the Court is otherwise inclined to grant the Motions, Supersol requests that the Court
condition such approval on modification of the Motions to address the matters raised above.
Dated: September 26, 2018New York, New York
KASOWITZ BENSON TORRES LLP
By : /s/ Robert M.Robert M. Novick ([email protected])Michele L. Angell ([email protected])1633 BroadwayNew York, New York 10019Telephone: (212) 506-17 00
Counsel.for L&N ConsultingGroup, LLC and Super Sol, LTD
31
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EXHIBIT A
Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 UNITED STATES BANKRUPTCY COURT
2 EASTERN DISTRICT OF NEW YORK
3 Case No. 1-18-45280-nhl
4 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
5 In the Matter of:
6
7 BLUE GOLD EQUITIES LLC,
8 Debtor.
9 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
10 Case No. 1-18-45281-nhl
11 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
12 In the matter of:
13
14 AMSTERDAM AVENUE MARKET LLC,
15 Debtor.
16 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
17 Case No. 1-18-45282-nhl
18 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
19 In the matter of:
20
21 LAWRENCE SUPERMARKET LLC,
22 Debtor.
23 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
24
25
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 Case No. 1-18-45283-nhl
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
3 In the matter of:
4
5 SEASONS CLEVELAND LLC,
6 Debtor.
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
8 Case No. 1-18-45284-nhl
9 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
10 In the matter of:
11
12 SEASONS CORPORATE,
13 Debtor.
14 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
15 Case No. 1-18-45285-nhl
16 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
17 In the matter of:
18
19 WILMONT ROAD MARKET LLC,
20 Debtor.
21 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
22
23
24
25
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 Case No. 1-18-45286-nhl
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
3 In the matter of:
4
5 SEASONS LAKEWOOD LLC,
6 Debtor.
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
8 Case No. 1-18-45287-nhl
9 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
10 In the matter of:
11
12 CENTRAL AVENUE MARKET LLC,
13 Debtor.
14 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
15 Case No. 1-18-45288-nhl
16 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
17 In the matter of:
18
19 SEASONS CLIFTON LLC,
20 Debtor.
21 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
22
23
24
25
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1 Case No. 1-18-45289-nhl
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
3 In the matter of:
4
5 UPPER WEST SIDE SUPERMARKET LLC,
6 Debtor.
7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
8 Case No. 1-18-45290-nhl
9 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
10 In the matter of:
11
12 SEASONS EXPRESS INWOOD LLC,
13 Debtor.
14 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
15 Case No. 1-18-45291-nhl
16 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
17 In the matter of:
18
19 SEASONS MARYLAND LLC,
20 Debtor.
21 - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
22
23
24
25
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 United States Bankruptcy Court2 271-C Cadman Plaza East3 Brooklyn, NY 1120145 September 17, 20186 2:16 PM789101112131415161718192021 B E F O R E :22 HON NANCY HERSHEY LORD23 U.S. BANKRUPTCY JUDGE2425 ECRO: D. CARTER
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 HEARING re 1-18-45280-nhl [13] Order to Schedule Hearing on
2 First Day Motions. (RE: related document(s) [3] Motion for
3 Joint Administration filed by Debtor Blue Gold Equities LLC
4
5 HEARING re 1-18-45280-nhl [5] Application to Employ Omni
6 Management Group, Inc. as claims and Noticing agent for the
7 debtors with proposed order and retainer agreement
8
9 HEARING re 1-18-45280-nhl [6] Motion to Authorize/Direct
10 debtors to maintain current cash management system and
11 existing bank accounts for the pendency of the cases
12
13 HEARING re 1-18-45280-nhl [7] Motion to Authorize/Direct the
14 debtors to pay certain prepetition wages and compensation
15 and maintain and continue employee benefit programs in the
16 ordinary course and authorizing banks to honor and process
17 checks and transfers related to such employee obligations
18
19 HEARING re [8] Motion to Authorize/Direct debtors authority
20 to pay pre-petition sales tax and PACA vender claims
21
22
23
24
25
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 HEARING re 1-18-45280-nhl [9] Motion to Prohibit/Enjoin/
2 Restrain (i) all utility providers from altering, refusing,
3 or discontinuing services to the debtors; (ii) directing all
4 utility providers to provide continued and uninterrupted
5 utility service to the debtors; (iii) approving the debtors
6 proposed adequate assurance of future payment in accordance
7 with section 366(c) of the Bankruptcy Code; and (iv)
8 granting related relief
9
10 HEARING re 1-18-45280-nhl [10] Emergency Motion to Use Cash
11 Collateral and motion pursuant to 11U.S.C. 105, 361, 362 363
12 and 364 for interim and final orders authorizing debtors to
13 obtain post petition financing and to grant superpriority
14 lians and claims and modifying the stay and scheduling a
15 final hearing pursuant to Bankruptcy Rule 4001(B) and (C)
16 and granting related relief
17
18 HEARING re 1-18-45280-nhl [11] Motion to Authorize/Direct
19 debtors to maintain and file a consolidated creditor matrix
20 and mailing matrix and authorizing the filing of a
21 consolidated list of the top 30 unsecured creditors; and
22 authorizing debtors to continue use of their prepetition
23 forms and extending the deadline for debtors filing of the
24 statements and schedules through sixty days from the
25 petition date
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 HEARING re 1-18-45280-nhl [12] Motion for Sale of Property
2 under Sec. 363(b) / pursuant to 105, 363, 365 and 503 of
3 Title 11 of the United States Code and rules 2002, 6004, and
4 6006 of the Federal Rules of Bankruptcy Procedure and local
5 rules 6004-1, 6006-1 and 9006-1 for the sale of
6 substantially all of the Debtors assets free and clear of
7 all liens, claims and encumbrances, to the Purchaser for a
8 purchase price of approximately $12 million. The Sale
9 Transaction is subject to higher and better offers pursuant
10 to the Bidding Procedures
11
12 HEARING re 1-18-45281-nhl [2] Motion for Joint
13 Administration of Case 18-45280 with Case(s) 18-45281, 18-
14 45282, 18-45283, 18-45284, 18-45285, 18-45286, 18-45287, 18-
15 45288, 18-45289, 18-45290 and 18-45291 with proposed order
16 Filed by Nathan Schwed on behalf of Amsterdam Avenue Market
17 LLC.
18
19 HEARING re 1-18-45282-nhl [2] Motion for Joint
20 Administration of Case 18-45280 with Case(s) 18-45281, 18-
21 45282, 18-45283, 18-45284, 18-45285, 18-45286, 18-45287, 18-
22 45288, 18-45289, 18-45290 and 18-45291 with proposed order
23 Filed by Nathan Schwed on behalf of Wilmont Road Market LLC.
24
25
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 HEARING re 1-18-45283-nhl [2] Motion for Joint
2 Administration of Case 18-45280 with Case(s) 18-45281, 18-
3 45282, 18-45283, 18-45284, 18-45285, 18-45286, 18-45287, 18-
4 45288, 18-45289, 18-45290 and 18-45291 with proposed order
5 Filed by Nathan Schwed on behalf of Seasons Cleveland LLC.
6
7 HEARING re 1-18-45284-nhl [2] Motion for Joint
8 Administration of Case 18-45280 with Case(s) 18-45281, 18-
9 45282, 18-45283, 18-45284, 18-45285, 18-45286, 18-45287, 18-
10 45288, 18-45289, 18-45290 and 18-45291 with proposed order
11 Filed by Nathan Schwed on behalf of Seasons Corporate.
12
13 HEARING re 1-18-45285-nhl [2] Motion for Joint
14 Administration of Case 18-45280 with Case(s) 18-45281, 18-
15 45282, 18-45283, 18-45284, 18-45285, 18-45286, 18-45287, 18-
16 45288, 18-45289, 18-45290 and 18-45291 with proposed order
17 Filed by Nathan Schwed on behalf of Wilmont Road Market LLC.
18
19 HEARING re 1-18-45286-nhl [2] Motion for Joint
20 Administration of Case 18-45280 with Case(s) 18-45281, 18-
21 45282, 18-45283, 18-45284, 18-45285, 18-45286, 18-45287, 18-
22 45288, 18-45289, 18-45290 and 18-45291 with proposed order
23 Filed by Nathan Schwed on behalf of Seasons Lakewood LLC.
24
25
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 HEARING re 1-18-45287-nhl [2] Motion for Joint
2 Administration of Case 18-45280 with Case(s) 18-45281, 18-
3 45282, 18-45283, 18-45284, 18-45285, 18-45286, 18-45287, 18-
4 45288, 18-45289, 18-45290 and 18-45291 with proposed order
5 Filed by Nathan Schwed on behalf of Central Avenue Market
6 LLC.
7
8 HEARING re 1-18-45289-nhl [2] Motion for Joint
9 Administration of Case 18-45280 with Case(s) 18-45281, 18-
10 45282, 18-45283, 18-45284, 18-45285, 18-45286, 18-45287, 18-
11 45288, 18-45289, 18-45290 and 18-45291 with proposed order
12 Filed by Nathan Schwed on behalf of Upper West Side
13 Supermarket LLC.
14
15 HEARING re 1-18-45290-nhl [2] Motion for Joint
16 Administration of Case 18-45280 with Case(s) 18-45281, 18-
17 45282, 18-45283, 18-45284, 18-45285, 18-45286, 18-45287, 18-
18 45288, 18-45289, 18-45290 and 18-45291 with proposed order
19 Filed by Nathan Schwed on behalf of Seasons Express Inwood
20 LLC.
21
22
23
24
25
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1 HEARING re 1-18-45291-nhl [2] Motion for Joint
2 Administration of Case 18-45280 with Case(s) 18-45281, 18-
3 45282, 18-45283, 18-45284, 18-45285, 18-45286, 18-45287, 18-
4 45288, 18-45289, 18-45290 and 18-45291 with proposed order
5 Filed by Nathan Schwed on behalf of Seasons Maryland LLC.
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25 Transcribed by: Sonya Ledanski Hyde
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 A P P E A R A N C E S :23 LAMONICA HERBST & MANISCALCO LLP4 Attorneys for Mayer Gold, Interested Party5 3305 Jerusalem Avenue, Suite 2016 Wantagh, NY 1179378 BY: JORDAN PILEVSKY910 UNITED STATES DEPARTMENT OF JUSTICE11 Attorney for the U.S. Trustee12 U.S. Federal Office Building13 201 Varick Street, Suite 100614 New York, NY 100141516 BY: WILLIAM CURTIN17 RACHEL WEINBERGER1819 KASOWITZ BENSON TORRES LLP20 Attorneys for Super Sol, LTD, Creditor21 1633 Broadway22 New York, NY 100192324 BY: MICHELE ANGELL25 ROBERT M. NOVICK
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 ZEICHNER ELLMAN & KRAUSE LLP2 Attorneys for the Debtors3 1211 Avenue of the Americas4 New York, NY 1003656 BY: NATHAN SCHWED78 KLESTADT WINTERS JURELLER SOUTHARD & STEVENS LLP9 Attorneys for SKNY LLC, Creditor10 200 West 41st Street, 17th Floor11 New York, NY 100361213 BY: TRACY L. KLESTADT14 BRENDAN M. SCOTT1516 NORTON ROSE FULBRIGHT US LLP17 Attorneys for DC Brothers II LLC, Creditor18 1301 Avenue of the Americas19 New York, NY 100192021 BY: SAMUEL S. KOHN22232425
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 DUANE MORRIS2 Attorneys for Bank United3 30 South 17th Street4 Philadelphia, PA 1910356 BY: LAWRENCE J. KOTLER78 DEBELLO DONNELLAN WEINGARTGEN et al.9 Attorneys for Debello Donnellan et al.10 One North Lexington Avenue11 White Plains, NY 106011213 BY: DAWN KIRBY1415 JAMES A. COPELAND16 Interested Party17 666 Fifth Avenue18 New York, NY 101031920 SCHIFF HARDIN21 Attorneys for Scarsdale22 666 Fifth Avenue, 17th Floor23 New York, NY 101032425 BY: ALYSON M. FIEDLER
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
1 P R O C E E D I N G S
2 CLERK: You may be seated. Matters 1 through 20
3 on today's calendar in the cases of Blue Gold Equities LLC,
4 Amsterdam Avenue Market LLC, Lawrence Supermarket LLC,
5 Seasons Cleveland LLC, Seasons Corporate, Wilmot Road Market
6 LLC, Seasons Lakewood LLC, Central Avenue Market LLC,
7 Seasons Clifton LLC, Upper West Side Market LLC, Seasons
8 Express Inwood LLC, and Seasons Maryland LLC first day
9 motions.
10 THE COURT: Okay. I will take appearances first
11 in the courtroom and then on the phone to the extent that
12 people are hearing and not just listening. Okay.
13 MR. SCHWED: Good afternoon, Your Honor. Nathan
14 Schwed, Zeichner Ellman & Krause, proposed counsel to the
15 debtors.
16 MR. JANOVSKY: Peter Janovsky, Zeichner Ellman &
17 Krause also proposed counsel for the debtors.
18 MR. GUTTMANN: Good afternoon, Your Honor. Robert
19 Guttmann, Zeichner Ellman & Krause, proposed counsel for the
20 debtors.
21 MR. KLESTADT: Good afternoon, Your Honor. Tracy
22 Klestadt, Klestadt Winters Jureller Southard & Stevens with
23 my partner, Brendan Scott. We represent SKNY LLC pre-
24 petition secured creditor and proposed DIP lender.
25 MR. CURTIN: William Curtin and Rachel Weinberger
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1 for the United States Trustee, Your Honor.
2 MR. KOHN: Your Honor, Samuel Kohn of Norton Rose
3 Fulbright on behalf of DC Brothers to the proposed competing
4 DIP lender.
5 THE COURT: Proposed competing?
6 MR. KOHN: DIP lender.
7 THE COURT: Oh, okay.
8 MR. KOHN: Thank you.
9 THE COURT: And there's somebody --
10 MS. KIRBY: Your Honor, this is --
11 THE COURT: -- on the phone listening.
12 MAN 1: Well, there's some --
13 MS. KIRBY: This is Dawn Kirby of Debello
14 Donnellan.
15 THE COURT: I'm not -- I'm not ready.
16 MS. KIRBY: I have been contact --
17 THE COURT: Kirby, I'm not ready.
18 MS. KIRBY: Oh, I'm so sorry.
19 THE COURT: Thank you. I'm not ready. Just give
20 me a minute. I just wanted to make it clear I think that
21 you've got -- there is somebody on listen only, or was that
22 going to, be you?
23 MR. KOHN: Your Honor, yes, there's somebody on
24 listen only from Norton Rose.
25 THE COURT: Okay. Got it.
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1 MR. KOHN: Thank you.
2 THE COURT: Okay.
3 MR. NOVICK: Your Honor, Robert Novick, Kasowitz
4 Benson Torres for L&N Consulting Group and Super Sol LTD who
5 we may refer to collectively as Super Sol. Thank you.
6 THE COURT: Thank you.
7 MR. KOTLER: Good afternoon, Your Honor. Larry
8 Kotler of Duane Morris. I'm here on behalf of Bank United.
9 THE COURT: Who else in the courtroom that wants
10 to be identified? Okay, now, Ms. Kirby, go ahead.
11 MS. KIRBY: Thank you, Your Honor. Dawn Kirby,
12 Debello Donnellan. I've been contacted by a group of
13 interested parties but not yet retained, so I'll just be
14 listening today.
15 THE COURT: And I have somebody else.
16 MR. PILEVSKY: Jordan Pilevsky, LaMonica Herbst &
17 Maniscalco on behalf of Mayer Gold.
18 THE COURT: Okay. Can we take up motion for joint
19 administration so that we make our dockets legitimate
20 because right now they're not? We only -- we only docketed
21 in one place, so let's do that, and then we'll figure out
22 what we do next.
23 MR. SCHWED: Thank you, Your Honor. Good
24 afternoon.
25 THE COURT: Good afternoon.
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1 MR. SCHWED: Your Honor, the motion for joint
2 administration is to jointly administer the 12 cases that
3 have been filed. The lead case is Blue Gold Equities LLC,
4 and all the other cases are either affiliates. There's one
5 entity that is a parent, the Seasons Corporate LLC is
6 actually the parent of all these entities. It is the 100
7 percent member of all the other debtors. And for
8 administration purposes, we seek to consolidate the case.
9 THE COURT: Very well. Seasons Corporate's a
10 debtor?
11 MR. SCHWED: Yes, it is.
12 THE COURT: Okay. Thank you. Okay. But
13 notwithstanding, that's going to be -- it's all going to be
14 under --
15 MR. SCHWED: The Blue Gold.
16 THE COURT: Okay.
17 MR. SCHWED: Yeah.
18 THE COURT: Does anybody want to be heard on the
19 joint administration motion? I don't think it implicates
20 anything else, but --
21 MR. NOVICK: No. Thank you, Your Honor. So very,
22 very briefly, not to waste time on this, is just a limited
23 objection. We think it would make a lot more sense if the
24 caption was Seasons Corporate, being not only the parent but
25 the way that creditors can find and identify the company in
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1 bankruptcy. Nobody's heard of Blue Gold Equities, which is
2 apparently just one of the stores.
3 And a reservation, as we mentioned and you
4 probably saw in the filings, there's atoner case pending in
5 the Southern District, and we don't have any objection with
6 a joint administration, but I haven't ever seen joint
7 administration across multiple districts before, and to the
8 extent a motion to transfer venue might come to move the
9 case -- move the cases where the first filed case was, we
10 don't think joint administration should prejudice that.
11 THE COURT: I was welcoming you all here.
12 MR. NOVICK: I feel welcome. Thank you.
13 THE COURT: Good. Maybe I didn't do it well
14 enough. Welcome, everybody.
15 Okay. Well, let's -- I mean, it's a fair
16 question. Is there a reason why the Seasons Corporate,
17 which is the parent of all of these companies, is not the
18 main case?
19 MR. SCHWED: We don't have a problem if the
20 caption, if the lead caption will now be changed to Seasons
21 Corporate, Your Honor.
22 THE COURT: Do we have a problem with that?
23 CLERK: (Indiscernible).
24 THE COURT: Seasons Corporate will be the main
25 case. Does anyone have a problem to that? Okay. And you
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1 don't object to that.
2 MR. SCHWED: NO, we do not object, Your Honor.
3 MR. CURTIN: No objection, Your Honor.
4 THE COURT: Okay. Let's do that. That seems --
5 that makes more sense. Okay. So you can -- you're going to
6 -- you're basically amending your motion.
7 MR. SCHWED: Yes.
8 THE COURT: So that --
9 MR. SCHWED: I did.
10 THE COURT: -- Seasons Corporate will be the lead
11 case, and everything will be docketed under that, and we'll
12 change the caption. So when you upload that order, you'll
13 upload it with that amendment for the --
14 MR. SCHWED: Correct, Your Honor. We'll do that.
15 Yes.
16 MR. CURTIN: And, Your Honor, I'd just like to see
17 that order before it gets the amended orders --
18 THE COURT: Yes.
19 MR. CURTIN: Before it gets uploaded, please.
20 THE COURT: Okay. Did you have any preference?
21 MR. SCHWED: If we could just get out of the way
22 some of the things that the US Trustee has no issue with,
23 and I assume nobody else will have any issues with either,
24 such as the order for the -- regarding the claim's agent.
25 THE COURT: We have a couple -- the clerk has a
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1 couple of things, but we can take that out. We don't have
2 to waste time. Just a second.
3 There were a couple of minor items. They weren't
4 in the application. I mean, the -- the most significant of
5 them is that on page 4, Section 9, Item H, we're missing a
6 statement that they will maintain an electronic platform for
7 purposes of filing proofs of claim. Assuming that's not a
8 problem.
9 MR. SCHWED: Your Honor, that's paragraph 5, Item
10 H?
11 THE COURT: Page 4, Section 9, Item H. I'm being
12 told something is missing. Let me get to it.
13 MR. SCHWED: I'm not seeing --
14 THE COURT: Let me find it because I'm working off
15 of an email. We're talking about the application.
16 MR. SCHWED: It's on page 5, there is H. Maintain
17 --
18 THE COURT: Page -- yeah. Page 4 has a listening.
19 MR. SCHWED: Right, and it spills over --
20 THE COURT: Section -- page 4, Section 9, right?
21 So maintain an electric platform for purposes of filing
22 proofs of claim. So there it is.
23 MR. SCHWED: Right.
24 MR. CURTIN: Yeah. It's there, Your Honor.
25 MR. SCHWED: Exactly, Your Honor. That's --
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1 THE COURT: I apologize.
2 MR. SCHWED: No problem. Okay.
3 THE COURT: Okay. The other things I think are
4 minor, and the only other thing they wanted was in the order
5 on page 5 in the last (indiscernible) paragraph, fourth line
6 down. They say you omitted after holding and maintaining
7 such records for a period of blank years following the
8 closing of the case.
9 Again, the other -- the other issues are minor.
10 They compared it to what's on the website, but that one they
11 say they -- you need a paragraph that says that.
12 MR. SCHWED: Okay.
13 THE COURT: Okay. Okay. Anybody -- with that
14 being said, anybody have any objection to the entry of that
15 order as a first day order?
16 MR. CURTIN: No, Your Honor.
17 THE COURT: And a final order? Okay. So that
18 motion is granted, as is the joint administration motion, if
19 I didn't make that clear, as amended.
20 Okay. Go ahead.
21 MR. SCHWED: Your Honor, just to clarify with
22 respect to the (indiscernible) motion, the United States
23 Trustee has requested that we do not go forward with that
24 today, and we agreed to that.
25 THE COURT: Okay. We'll pick a new date.
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1 MR. SCHWED: Okay. Now, with respect to this sale
2 motion, US Trustee has again requested that we not go
3 forward, and we do not plan to go forward today, but if
4 possible, we would like to get just a hearing date for
5 bidding procedures.
6 THE COURT: Yes. Yeah. There is no way the it
7 was going to take up -- just so every -- I was going to say
8 that at the beginning so that everybody would get less
9 nervous. That wasn't happening today, not as a first day
10 and not in this case scenario.
11 MR. SCHWED: Understood, Your Honor. So, if
12 possible, we would like to request September 4 -- October
13 4th, if that is a possibility.
14 THE COURT: 10:00 a.m.?
15 MR. SCHWED: 10:00 a.m.? Sure.
16 THE COURT: That all right with everybody?
17 MR. CURTIN: Yes, Your Honor.
18 MAN 2: Yes, Your Honor.
19 MR. SCHWED: And, Your Honor, if we can put
20 utilities on the same day?
21 THE COURT: If you can wait that long, yeah.
22 MR. CURTIN: They have 30 days, Your Honor. It
23 can wait. We have till October 17th before you need the
24 order.
25 THE COURT: Okay. We may have to move a few
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1 things. Okay.
2 MR. SCHWED: With respect to the creditor matrix
3 motion, the US Trustee has proposed some matters. We got
4 them shortly before we left our offices, and we don't -- we
5 don't really have any problem with the US Trustee's comments
6 to the order, so we would be willing to agree to go along
7 with this.
8 MR. CURTIN: Do you want me to put them on the
9 record quickly, Your Honor?
10 THE COURT: Quickly.
11 MR. CURTIN: Okay. They're going to include that
12 we got rid of the omission of the claims amount from the
13 creditors' matrix so that they will include the claims
14 amount. The check and existing business form language was
15 modified to the standard print -- stamp what you have, and
16 then once you print new ones, print debtor in possession on
17 that. We reduced the extension of time -- the first
18 extension of time -- on the schedule from 60 days to 30
19 days, which takes it to before the 341 meeting. And that's
20 it.
21 THE COURT: Anybody else want to be heard? Okay.
22 With those changes, I'm going to grant that motion.
23 MR. SCHWED: Thank you, Your Honor. Next, if we
24 can deal with the sales tax and PACA motion.
25 THE COURT: Go ahead.
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1 MR. SCHWED: US Trustee has made some edits to and
2 comments to the motion. We are fine with their comments.
3 THE COURT: Mr. Curtin.
4 MR. CURTIN: Your Honor, the substantive comment
5 is we want, before anything gets paid on either pre-petition
6 taxes or PACA, we want documentation that all of -- those
7 are all current -- current due claims. And then in the
8 order, the second order paragraph is drafted as for
9 approximately 125,000 in taxes and 470 and PACA claims. We
10 added that to an amount not to exceed on both. And that is
11 it.
12 THE COURT: Counsel, Mr. Novick?
13 MR. NOVICK: Thank you. I have a limited
14 objection on sales tax, and this would probably apply for
15 the employee withholdings as well.
16 As we read the filings, the debtors have only
17 $50,000 of cash on hand and are claiming $125,000 of sales
18 tax collected. So what that suggests is that they were
19 collecting sales tax as well as employee withholding, and
20 the funds were not kept in trust but were misappropriated
21 someplace.
22 As such, we have a situation where the taxing
23 authorities have pre-petition claims, and they're entitled
24 to a priority eventually, but they're not using funds that
25 are currently held in trust for them, at least not
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1 completely. And they're instead borrowing DIP money post-
2 petition to pay pre-petition claims.
3 THE COURT: Not yet.
4 NOVICK: Well, they aspire to.
5 THE COURT: Right.
6 NOVICK: So there seems to have been a substantial
7 amount of money that was collected from customers, withheld
8 from employees, and was not saved by the company unless they
9 can advise us that we're not reading the DIP budgets
10 correctly where it showed how much cash was on hand.
11 And if they're holding trust funds that go to
12 sales tax, they should pay them. If they're holding trust
13 funds deducted from employee wages, those should go where
14 they're supposed to be going. But they should not be
15 borrowing post-petition money to pay funds that --
16 obligations for funds that aren't in the estate.
17 And the extra wrinkle on this is that these are
18 taxes where typically management -- where ownership can be
19 held liable for them.
20 THE COURT: All right. Well, let's put aside
21 withholding for a moment because I understood that
22 withholding is outsourced, that the -- that employee -- we
23 can talk about that. The employee payments -- the payments
24 with respect to the employees and employee withholding is
25 outsourced.
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1 MR. SCHWED: Correct, Your Honor. There's a
2 company called StaffPro, which advised --
3 THE COURT: Right. We'll get to that, but let's
4 pick up the point about the sales tax, which is 125,000
5 versus the total amount of 50,000, and we don't know how
6 much of that is supposed to be in trust. Was any of that,
7 or was there separate monies?
8 MR. SCHWED: Your Honor, it's my understanding
9 that the monies were generally comingled.
10 THE COURT: So Mr. Novick is correct?
11 MR. SCHWED: Mr. Novick's correct, at least to a
12 degree. Sales taxes were comingled with general -- general
13 funds. Correct. Yes, Your Honor. At least, that was the
14 case before we had a CRO in place. Management -- the former
15 CEO of the company has not been involved since Mr. Getzler
16 and Mr. Henrich have been involved. They've taken over
17 management of the company. And obviously, the kind of
18 comingling that may have happened before is not happening
19 going forward.
20 But right now, we are dealing with an issue. And
21 the issue is that sales taxes have to be paid. These are
22 pre-petition obligations that we believe, under the
23 circumstances, should be paid.
24 THE COURT: Well, if -- you have to be paid if you
25 have the money to pay them
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1 MR. SCHWED: Well, again, as part of the DIP
2 financing that we believe will hopefully come in --
3 THE COURT: That was me. We didn't need it to be
4 more romantic. Sorry. Go ahead.
5 MR. SCHWED: Yeah. There's no question that
6 unless we have the financing, it's going to be hard to pay.
7 There is money coming in on a regular basis. So, for
8 instance, even now there are some limited sales. The sales
9 are down dramatically. The shelves in the stores are close
10 to empty and getting emptier every day. So every day -- but
11 there still is money coming in on a regular basis. There
12 would be money coming in that probably could pay that if we
13 didn't have DIP funding, but then we wouldn't be able to pay
14 other -- other type of expenses. So --
15 THE COURT: And the -- what about -- how much is
16 PACA?
17 MR. SCHWED: PACA is, I believe four -- about
18 $470,000. And again, that's -- that's not necessarily items
19 that are past due. That's simply items that have been --
20 that have been sold, and it doesn't mean that this -- the
21 (indiscernible) doesn't mean there's any problem regarding
22 because the company does have money. It, you know, and it
23 has money coming on a regular basis. PACA funds are not
24 segregated.
25 THE COURT: Wait. Two different issues. As
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1 monies are coming in on a regular basis, the sales tax
2 portion should be, again segregated and paid.
3 MR. SCHWED: Absolutely.
4 THE COURT: That you're telling me --
5 MR. SCHWED: Right.
6 THE COURT: -- is now going to happen.
7 MR. SCHWED: That's going to happen.
8 THE COURT: Okay. I don't think that -- I don't
9 think that's the nature of the objection. So we can hold it
10 off, decide if we can handle it later today, or decide if it
11 should be put on a different day.
12 MR. SCHWED: Well, frankly, if we put it off for a
13 short amount of time, I don't think's going to be a huge
14 problem. I don't think -- if we don't pay the sales taxes
15 tomorrow, I don't think there's going to be immediate
16 repercussions. There may be somewhere down the road, but
17 right -- not right now.
18 With PACA, maybe a little different. It may be a
19 problem to get some of them to deliver. That may complicate
20 the debtor's ability --
21 THE COURT: Well, how much were you seeking to pay
22 PACA under this motion? Were there --
23 MR. SCHWED: There -- it's $470,000. We've seen
24 authorization to pay up to that amount. Obviously, it'll be
25 based on the actual bills that are reviewed and determined
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1 to have to be -- that have to be paid.
2 THE COURT: Mr. Curtin.
3 MR. CURTIN: Well, that was the point that I
4 started with is that we don't have any information as to
5 what exactly they're proposing to pay, so we'd need that
6 prior. So maybe an idea would be if we could put this off
7 --
8 THE COURT: We move that also?
9 MR. CURTIN: Very short among of time.
10 THE COURT: Right.
11 MR. CURTIN: So that the debtor has some time to
12 --
13 THE COURT: Well, I mean --
14 MR. CURTIN: I mean I --
15 THE COURT: I think we're going to be back here in
16 a shorter month of time than October 4th.
17 MR. CURTIN: Right.
18 THE COURT: So --
19 MR. CURTIN: So if we can --
20 THE COURT: Why don't we put that --
21 MR. CURTIN: Wherever our interim day ends up,
22 maybe we can do that.
23 THE COURT: Why don't we put that on, and I'll
24 just -- we'll get -- we'll work on a date in a little while.
25 MR. CURTIN: And of course, a lot of this is
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1 contingent on what happens with the DIP, so...
2 THE COURT: Right. Okay. So are we going to have
3 similar issues with respect to wage -- the wage claim? You
4 didn't talk about the wage claim yet, did you? You did not.
5 MR. CURTIN: We do have similar issues because,
6 Your Honor, price on the motion, it just forecloses a lump
7 sum amount. It doesn't break it down by employee. It
8 doesn't give us --
9 THE COURT: Right.
10 MR. CURTIN: -- any information on --
11 THE COURT: The --
12 MR. CURTIN: So I can't speak to the urgency of
13 the timing as far as that, but we did have similar issues.
14 THE COURT: How much of that -- how much of the
15 information is available to the debtor that that StaffPro
16 has? I assume all of it, no?
17 MR. SCHWED: Yeah. I've actually -- upon
18 receiving Mr. Curtin's comments, I reached out to StaffPro.
19 They are compiling the list that Mr. Curtin is asking for.
20 THE COURT: Okay.
21 MR. SCHWED: Which is a detailed list. There are
22 over -- about 400 employees, but they're preparing a
23 detailed list for every employee, the amount that is due to
24 that employee both in terms of payroll and in terms of
25 medical insurance, medical coverage.
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1 THE COURT: Right. And as I read it, it was not
2 so much -- at least a piece of -- a big piece of this was
3 not so much that it fell in the middle but that it read like
4 you failed to make pre-petition payroll.
5 MR. SCHWED: Yeah, so --
6 THE COURT: Because there was a footnote that
7 seemed to indicate that.
8 MR. SCHWED: So let me clarify because there is a
9 typo in terms of the dates. Mr. Curtin actually raised it,
10 and we intended to raise it anyway. The papers say that the
11 wages that are due are for the week of -- from 9/2 to 9/7.
12 In fact --
13 THE COURT: Payable on the 12th.
14 MR. SCHWED: -- what is due is the following week.
15 It's the week of 9/9 to 9/14, which is due to be paid.
16 Normally it would be paid this Wednesday. Because this
17 Wednesday's Yom Kippur, it'll be paid Thursday. But that's
18 what we're talking about. So it's -- it's essentially the
19 wages that were accrued pre-petition, which are due -- this
20 week, will be due Thursday. And we need the authorization
21 to pay because it was incurred pre-petition.
22 THE COURT: So if we don't -- if we do -- don't do
23 that today, with that additional information, we could be
24 talking about needing to do it on Thursday, correct?
25 MR. SCHWED: Yes, Your Honor. I mean, if we don't
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1 give them money on Thursday, especially in light of the fact
2 that we've had a couple of weeks now -- our payroll was
3 delayed and people left -- there's that risk that more
4 people who now will say -- post-bankruptcy it happened
5 again. Forget it. This place is not for me.
6 So there's a risk of losing employees. We cannot
7 take that risk because we think the company will be damaged
8 severely if it loses its well-trained employees.
9 THE COURT: I don't think -- again, it seems to
10 me, though, that between now and -- you're not going to have
11 a lot of time between now and -- you have part of tomorrow
12 -- but between now and Thursday to compile that information
13 for Mr. Curtin, so we're probably looking at Thursday
14 anyway, right?
15 MR. SCHWED: I believe it might -- I might even
16 have an email.
17 THE COURT: Okay.
18 MR. SCHWED: I know that he told me he was working
19 on it and trying to get it to me as soon as possible.
20 THE COURT: All right. well, why don't we -- why
21 don't we basically put that motion on for second call. And
22 if we can get that information together, we'll do it today.
23 Otherwise, I'm prepared to see you all back here Thursday.
24 MR. CURTIN: We had some other issues on that
25 motion though, Your Honor, but we'll -- we can talk about it
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1 later.
2 THE COURT: No, you can put them on the record.
3 MR. CURTIN: We want to disclose -- and it's kind
4 of part and parcel, but there's no disclosure as the
5 insider, so we would want to know which employees, if any,
6 are insiders. And we would request that those be put onto
7 the final.
8 We also made an interim, by the way. We made this
9 an interim order, and then if we get a committee, committee
10 can look at it, and we can have it on for final maybe on
11 that October 4th day.
12 MR. SCHWED: Your Honor, as far as insiders, so
13 let me clarify. The only insider that is actually -- for
14 any wages -- is Mr. Mayer Gold, who actually is in the
15 courtroom. Mr. Mayer -- Mayer Gold has a small percentage
16 of ownership in the corporate parent. He helped start this
17 business 20 years ago. He was in the grocery business for
18 many years. He is not a financial person. He is a grocery
19 person, and he does -- everybody -- anybody who's dealt with
20 him has unanimously said that he's an important cog in this
21 wheel, and without him, this business would have a really
22 hard time running.
23 THE COURT: But he -- they -- he wants to know how
24 much, and --
25 MR. SCHWED: No, understood.
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1 MR. CURTIN: But again, because we just had that
2 one number, so we don't know whether --
3 MR. SCHWED: I just want to clarify that there is
4 one insider.
5 THE COURT: Okay.
6 MR. SCHWED: That is an employee, and its Mayer
7 Gold, and that's it. So -- and again, we will get him that
8 information, but we think it's important that he be paid
9 immediately, or as soon as possible.
10 MR. CURTIN: then the rest of them are edits to
11 the order. Should I go through those now?
12 THE COURT: You don't have to.
13 MR. CURTIN: Okay. There -- I --
14 THE COURT: Well, go ahead.
15 MR. CURTIN: I just want to see if there are any
16 highlights.
17 THE COURT: All right.
18 MR. CURTIN: No, we've kind of hit the highlights.
19 I can do it either later or if we come back on Thursday.
20 THE COURT: Mr. Novick, you want to add something
21 about the wage order?
22 MR. NOVICK: Yes. Thank you. We have no
23 objection to the employees getting paid wages post-petition
24 or pre-petition, other than possibly the insider subject to
25 more information. Most of them are lower-paid wage earners,
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1 and they're important to the business.
2 We just reiterate our objection that it seemed
3 from the motion that a portion of the money sought to be
4 approved here was going to pay trust funds that were
5 supposed to have been withheld and seemed to have been
6 comingled and used. There seems to be some ambiguity as to
7 whether that's the case with the payroll firm, but to the
8 extent that it is, we object to post-petition funds being
9 used to pay. Monies management -- senior management didn't
10 segregate and now is facing personally liability for it.
11 THE COURT: So if I understand the other footnote,
12 with the -- in that -- where -- was a StaffPro, that
13 StaffPro earlier in the year did make payments. You just
14 haven't paid them.
15 MR. SCHWED: Correct. And now -- and because of
16 that, they no longer will advance anything unless we
17 actually pay them in advance.
18 THE COURT: So I'm -- I don't know -- it's not --
19 it was -- it was not clear to me that with -- that they --
20 you owe withholding. Is that -- do you know whether you owe
21 any withholding?
22 MR. SCHWED: On that $500,000? No, we don't.
23 They paid it all. StaffPro paid it.
24 THE COURT: Okay.
25 nacho: That's why they have --
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1 THE COURT: All right. So any --
2 MR. SCHWED: -- they have a claim.
3 THE COURT: Any withholding you owe is current.
4 MR. SCHWED: Is current, as far as I'm -- that's
5 my understanding this whole time. Yes.
6 THE COURT: Okay.
7 MR. CURTIN: And the schedule that we're asking
8 for will presumably show that.
9 THE COURT: Right. Okay.
10 MR. SCHWED: Your Honor, the next motion I'd like
11 to deal with is the cash management motion. We've -- the
12 debtors each have multiple accounts. Those accounts
13 traditionally get swept on a daily basis up to the parent.
14 And the parent then -- there's a process under which it
15 distributes money in order to pay necessary expenses on a
16 daily basis.
17 Just to -- I'll get to, you know, some of the
18 history soon, but just to give a general idea regarding the
19 business itself, it's a very lean and perhaps understaffed
20 management team. It's Mr. Gold. He has an assistant in the
21 office, and this business is too large for the two of them,
22 which is one of the reasons why Mr. Getzler and Mr. Henrich
23 and people from their office are actively involved in taking
24 over management, and making sure that going forward these
25 businesses are managed the way a business of this size
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1 should be managed.
2 But because of that, the US Trustees insistence
3 that we not continue the accounts that we have, it's just
4 going to add a layer of complication on the difficulty that
5 we're having administratively as it is.
6 And for that reason, we request -- wherein, you
7 know, banks that a -- are not objectionable -- we're talking
8 about Wells Fargo and Chase. You know, they cannot be
9 objectionable. We certainly understand the requirement that
10 we have to stamp every check with debtor in possession, and
11 we're certainly prepared to do that. But we request that we
12 be authorized to maintain the current management systems and
13 not be required to actually open brand-new accounts for the
14 debtor in possession.
15 MR. CURTIN: Your Honor, I think you've heard a
16 little bit already about some concerns that are starting to
17 come up with the debtor's existing cash management system.
18 So we object to this motion at this point. We object to the
19 -- to Your Honor approving it.
20 THE COURT: Well, the objections are not -- are
21 not aimed at the depositories.
22 MR. CURTIN: No, but they're aimed at the system.
23 There are some questions. And I don't -- I'm not -- I don't
24 know. I've had, you know, just a few hours with the papers,
25 so --
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1 THE COURT: Me too.
2 MR. CURTIN: But there are some questions that
3 need -- that we need to work through with the debtors
4 regarding the system and whether they -- whether -- first of
5 all, whether there are any issues that need to be corrected
6 from the pre-petition practices, which I think the answer to
7 that we're all kind of on the same page. There are. But
8 are those systems issues? Are they the people that were
9 running the systems? I just don't know at this point.
10 And then just more generally, we -- we do object
11 to the 345 waiver, as traditionally we do. You know, if
12 Your Honor were to waive the requirements in 345, we're
13 allowed to keep them -- allow them to keep their funds in
14 non-debtor in possession bank accounts, the court and
15 everyone else loses the protection of our office monitoring
16 those accounts because if they're not debtor in possession
17 accounts, we don't have the ability to monitor like we do
18 with debtor in possession accounts.
19 One suggestion I made to the debtors very
20 preliminarily -- again they -- we haven't had a chance to
21 really work through this -- is short term opening some type
22 of debtor in possession sweep account in the corporate case
23 so that the sweep that they're doing anyway on a daily basis
24 sweeps whatever funds are coming in to that account.
25 These are all things we just need to work through,
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1 so at this point we're -- we object to entry of an order on
2 this motion. Maybe if we do, do a short interim -- another
3 hearing before the 4th, a couple days will give us some time
4 to work through that, but usually we just have
5 (indiscernible) --
6 THE COURT: Well, obviously in the interim they're
7 going to continue to maintain it the way they've been
8 maintaining it until we --
9 MR. CURTIN: Right. I can't consent to that, but
10 I understand.
11 THE COURT: Well, I'm not shutting them down on
12 that. I'm not shutting the business down on that motion.
13 MR. CURTIN: Understood. But I'm, again,
14 proposing a short-term kind of gradual progression. But
15 those are -- those are the concerns.
16 That's a good point. Ms. Weinberger just reminded
17 me that we are above FDIC limit, so we don't have -- it's
18 not a situation -- potentially above FDIC limits, so we
19 don't have that protection either. So if we are going to
20 keep this account, we may be talking about bonding.
21 THE COURT: Well, I thought that's what you were
22 going to say, but okay. All right.
23 Okay, well, let's decide if that's a Thursday
24 issue. Right now it'll be for Thursday. Okay.
25 MR. SCHWED: Your Honor, so you're going to
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1 schedule another hearing for that?
2 THE COURT: We'll either do -- we'll either look
3 at it for Thursday, or we'll look at it for the 4th. We'll
4 get back to that at the end of the hearing.
5 MR. SCHWED: Okay. Your Honor, that leaves us
6 with the debtor in possession financing motion.
7 THE COURT: Okay. So --
8 MR. SCHWED: We -- I'd like --
9 THE COURT: I got it. I got it. Just it's such
10 an obvious question. Could you have picked a worst time to
11 call this case? I mean, if you had to pick -- I mean, maybe
12 today would've been worse than last night.
13 MR. CURTIN: Your Honor, when Mr. Klestadt first
14 told me -- told me about that the case was coming, he said
15 -- told me of the timing, I said, "What's the nature of the
16 business?" When he told me, I said, "Really?"
17 THE COURT: Well, it just sort of occurred to me.
18 I guess I didn't -- I mean, it seemed -- it seemed after I
19 read the papers that there was some planning maybe involved
20 in this, or at least some planning. And that -- it just
21 seemed to me that this maybe should've been filed a few
22 weeks before maybe Rosh Hashanah so you would've had full --
23 I mean, I just -- I -- I'm really curious about that.
24 MR. SCHWED: Sure. Sure.
25 THE COURT: Maye it's none of my business.
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1 MR. SCHWED: Absolutely, Your Honor.
2 THE COURT: But --
3 MR. SCHWED: I -- I'd like to talk a little about
4 the history of this case and how we got here.
5 THE COURT: Okay.
6 MR. SCHWED: Okay. So the core -- the original
7 stores that are Seasons were initially stores that were run
8 as Super Sols. There were four stores, okay, one in Queens,
9 one in Lawrence, one in Manhattan, and one in Scarsdale.
10 THE COURT: And the first purchase was just the
11 one Queens store.
12 MR. SCHWED: The first purchase was the one Queens
13 store, and a few month later there was the other three
14 stores. And, you know, there were issues regarding -- with
15 the purchase and so on. I'm not going to get into any of
16 that right now. But those stores, after a couple of years,
17 became profitable, and it was throwing off a nice -- a nice
18 amount of profit. And then they began to expand and open up
19 other stores. And on an operational basis, they were
20 generally profitable. Most of the stores were contributing
21 nice amounts of money to the bottom line.
22 The -- the problem with this business is that as a
23 result of the purchase of the Super Sol stores, the debt
24 that was undertaken in connection with that purchase was
25 enormous. And no -- despite --
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1 THE COURT: What was it initially?
2 MR. SCHWED: So the initial debt was approximately
3 $15 million.
4 THE COURT: What was the -- what was -- we're
5 talking about for the first four?
6 MR. SCHWED: For the first four in total, yes.
7 THE COURT: What was -- what was the purchase
8 price; do you know?
9 MR. SCHWED: Approximately $15 million.
10 THE COURT: Oh, okay.
11 MR. SCHWED: Yeah. $15 million was the -- was the
12 approximate purchase price.
13 THE COURT: Okay. And the debt was also $15
14 million?
15 MR. SCHWED: No, I'm sorry. The debt --
16 THE COURT: You said $15 million in debt. I asked
17 you what the purchase price was.
18 MR. SCHWED: Oh, I'm sorry. I misspoke. The
19 purchase price was $15 million. I did not mean to refer to
20 debt.
21 THE COURT: Okay.
22 MR. SCHWED: Okay. What I want was the debtors --
23 the obligations on that loan because the $15 million was not
24 paid in cash. Obviously at that time, there were some small
25 payments that were made in the first couple of years. But
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1 ultimately, the majority of those payments were to be paid
2 over a period of several years. And that was, I believe, in
3 20 -- it began in 2011, I believe.
4 THE COURT: And that was unsecured indebtedness
5 initially?
6 MR. SCHWED: Yeah, yeah, yeah. I mean, the sale
7 -- the sale of Queens was to an entity called Blue Gold,
8 Blue Gold Entities. The sale of the three other stores was
9 to Steve Bloom and Mayer Gold, individually. So there was
10 no security interest in connection with that sale initially,
11 not that I know of. I haven't -- I haven't seen anything.
12 Subsequently, a couple years later, that loan --
13 that debt was restricted, and instead of straightforward
14 promissory notes for that amount, the debt was restricted to
15 be paid over a long period of time with total debt of
16 approximately $18 million. And the four operating entities
17 which --
18 THE COURT: 18 -- 18 million, you said?
19 MR. SCHWED: 18 million.
20 THE COURT: Okay.
21 MR. SCHWED: It was increased because of the
22 longer term. And the --
23 THE COURT: And remained unsecured.
24 MR. SCHWED: Yeah. And was done as a consulting
25 agreement. So it was payments under consulting agreement to
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1 the former owners of Super Sol.
2 The payments that were required under that consult
3 --
4 THE COURT: But they weren't providing consulting
5 services.
6 MR. SCHWED: That's correct, Your Honor.
7 THE COURT: As far as we know.
8 MR. SCHWED: That's what I've been told.
9 THE COURT: Okay.
10 MR. SCHWED: I've been told they did not provide
11 any consulting services. The payments that they received --
12 they were supposed to receive under that agreement -- began
13 slightly less than 2 million and kept on increasing over
14 each year I believe. And they got to the point of 2.2, 2.3
15 million.
16 The company began experiencing problems because
17 even though it was profitable, in addition to paying large
18 amounts of money to the prior owners, the -- they began to
19 open new stores, and then they began to do construction in
20 new stores. They did construction in the stores -- the
21 brand-new store in Scarsdale, which is actually completed,
22 and it's -- was ready to be opened. Had to be money to --
23 THE COURT: They already have a Scarsdale stores,
24 right?
25 MR. SCHWED: There's a small one, and in the same
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1 shopping center --
2 THE COURT: Oh, so this is the large one.
3 MR. SCHWED: This is the large one.
4 THE COURT: That you referred to as a small and a
5 large.
6 MR. SCHWED: Everything right. Right. So the
7 small one was -- as it is small, it was too small. And the
8 potential was there for a much larger one. They built it,
9 and it was completed, ready to open.
10 They also did construction of a store in
11 Baltimore, which is operating. But again, all the -- all
12 this construction drained cashflow tremendously. They also
13 did construction in Cleveland. That store was stopped --
14 construction was stopped dead in its tracks. The shell is
15 there, but the inside has not really been constructed to the
16 point where it can be -- where it can be turned into a
17 store.
18 What happens over time as a result of the payments
19 to the prior owners and the expenses incurred in connection
20 with all this construction, the cashflow was drained
21 dramatically. And over time, there was less money. They
22 began -- they defaulted on the payments to the prior owner,
23 which led over a period of a couple years, to first a
24 proceeding in (indiscernible). And then ultimately an award
25 in favor of the prior owner and the judgment issued
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1 confirming that award.
2 And then the entity L&N begin enforcing
3 proceedings where they froze the account, and that was close
4 to the nail on the coffin, but it wasn't yet because there
5 was still a decent amount of sales in the stores, and they
6 were still generating cashflow. And this was -- this was in
7 the spring of 2018.
8 Over the past few months, as a result of that and
9 as a result of the fact that Bank United also seized
10 $600,000 from the debtor's account. Those two events
11 together totally destroyed the debtor's cashflow and made
12 restocking of the stores very difficult.
13 And gradually over the past few months, the store
14 shelves have been emptying out, some stores more than other
15 depending on traffic and depending how management believed
16 was the best use of whatever money it had to stop which
17 stores it might generate the most profit from and the most
18 cashflow.
19 There were -- at one point in time, there was a
20 CFO brought in to the company that did not work out, and I
21 think he left the company a couple months ago. There have
22 been attempts by the former CEO. He reached out to many
23 different parties trying to come up with some kind of
24 structure where the companies could be funded, and they
25 would be able to go forward and remain in business. And
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1 those -- those efforts lasted over a period of several
2 months, into the summer.
3 It became clear in the past month or so that those
4 efforts were not going to come to fruition, and it was -- a
5 determination was made that at a minimum, we needed to have
6 proper management in here, so one of the things -- and there
7 was the possibility of a bankruptcy filing.
8 My firm was retained. Shortly thereafter, the
9 Getzler Henrich firm was retained to come in as consultants
10 and help try to see what they can do and see what the value
11 is. There was an initial thought that maybe there might
12 even be the ability to fund outside of bankruptcy, just get
13 new investors who will take over the equity, fund the
14 business, and get the stores stocked so that it can actually
15 generate profit because the belief among everybody who's
16 seen these stores is that these stores have the potential to
17 generate profit. That's a universal belief.
18 There are some stores that are not as profitable
19 and perhaps will be -- will be closed at some time in the
20 future because they don't contribute much, but there
21 certainly are at least several stores that do contribute to
22 the bottom line when the traffic is at its peak, when
23 they're fully stocked.
24 So we got to the point in the past few weeks --
25 THE COURT: Can you tell me a little bit about
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1 Bank United?
2 MR. SCHWED: Sure. Bank United --
3 THE COURT: They're here too. Okay.
4 MR. SCHWED: So, yeah. Bank United extended a
5 loan to Seasons Corporate. The loan was, I believe,
6 approximately $10 million. That loan was secured by the
7 assets of Seasons Corporate, which as a practical matter
8 were -- is its membership -- 100 percent membership interest
9 in each of the operating entities.
10 The operating entities guaranteed that loan but
11 did not pledge a collateral to support that loan. So as a
12 practical matter, Bank United is secured only by membership
13 interest in operating entities that are now all in
14 bankruptcy.
15 THE COURT: So the debtor had no secured
16 creditors.
17 MR. SCHWED: The debt -- the --
18 THE COURT: Debtors had no secured creditors
19 before you came along.
20 MR. SCHWED: Actually, yeah. Correct, Your Honor.
21 SKNY --
22 THE COURT: No, I know. But before that?
23 MR. SCHWED: Before that? Before that, other than
24 -- as I described Bank United for -- just for the share, so
25 the membership interest, there were no secured creditors.
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1 THE COURT: Right, and other than maybe some
2 other, you know, equipment leasing or whatever.
3 MR. SCHWED: Right. There's -- there was actually
4 a fair among of loans. The Cleveland alone I believe has
5 about, I think, $1.5 million that has been drawn down on
6 equipment loans, and there are other substantial equipment
7 loans out there.
8 But other than those, which are secured by their
9 own equipment, there are no other secured lenders.
10 THE COURT: Okay. And before you -- before you
11 get to 2018 and SKNY, I noticed that you have quite a number
12 of evictions pending. What is the situation with the
13 leases?
14 MR. SCHWED: So they're all still -- they're still
15 in effect. There have been no cancelations, no
16 terminations. There are, you know, there are several of
17 them at different stages, but they're all still at early
18 stages. There has been no warrant of eviction issued.
19 THE COURT: Okay. All right. so February 2018,
20 that's where we began with SKNY, correct?
21 MR. SCHWED: Correct, Your Honor. So --
22 THE COURT: Okay. So who is SKNY LLC?
23 MR. SCHWED: I'm going to let Mr. Klestadt
24 describe who his client is.
25 MR. KLESTADT: Your Honor, SKNY is an investment
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1 vehicle for initially a family office, and now there are
2 several participants, individuals.
3 THE COURT: A family what did you say?
4 MR. KLESTADT: Office. And now there are several
5 participants in the entity.
6 THE COURT: Okay. And I need to know what
7 relationship those participants have to the debtors.
8 MR. KLESTADT: None, Your Honor. None to the
9 insiders, if that's what you're asking. They have no --
10 there are no familial relationships. SKNY had an equity
11 interest in Seasons Corporate as part of the initial -- of
12 transaction back in February of 2018.
13 THE COURT: So it was in February 2018 that they
14 got the equity interest?
15 MR. KLESTADT: Yes.
16 THE COURT: Okay. So why don't you describe what
17 they got in February 2018. They got a blanket lien and an
18 equity interest?
19 MR. KLESTADT: Yes. There was a $5 million equity
20 investment and a two -- initially a $1 million, then
21 increased to $2 million secured loan.
22 THE COURT: All right. Well, a $2 million secured
23 loan, okay, until we get to September.
24 MR. KLESTADT: Until we get to recent events, yes.
25 THE COURT: Right. Okay.
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1 MR. KLESTADT: Then it was increased.
2 THE COURT: February and then March.
3 MR. KLESTADT: Yes.
4 THE COURT: Okay. Go ahead.
5 MR. SCHWED: Your Honor, by the end of August,
6 cashflow was completely -- or severely depleted, and there
7 was a real issue regarding paying payroll. And unless there
8 was going to be immediate funding, the debtors were going to
9 have to shut down their operations. SK --
10 THE COURT: Or file, right?
11 MR. SCHWED: Or file. Or file. Correct.
12 THE COURT: Yeah. That's the part I didn't get.
13 Okay.
14 MR. SCHWED: Correct.
15 THE COURT: Why they didn't -- okay.
16 MR. SCHWED: Okay. There was -- there was still
17 the belief that we could do this outside of bankruptcy.
18 That was the belief. The belief was that bankruptcy would
19 mean a very expensive process, and if it could be avoided,
20 it was worth avoiding. And there was the hope that there
21 were people out there that were willing to invest in this
22 business that we could create that type of investment, which
23 would keep the businesses alive and avoid a bankruptcy if
24 possible.
25 So because of the payroll issue, because of the
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1 ultimately the need to retain professionals, SKNY agreed to
2 amend their pre-petition -- their loan -- and increase it by
3 $1 million -- up to $1 million. So they made -- it was a
4 potential availability.
5 THE COURT: How much of that was drawn down?
6 MR. SCHWED: So initially, they drew down about
7 650,000 in change. The payroll was about -- I think it was
8 about 251 or 256, so -- plus 400 to the professionals, so it
9 was about 650 in change.
10 THE COURT: Together 650.
11 MR. SCHWED: Together. Then there was an
12 additional crisis occurred because there were cancelations
13 of the debtor's insurance policies that were going to kick
14 in early last week. And the decision was made for them to
15 fund an additional $100,000 to pay that, to pay the
16 insurance to keep the insurance from lapsing. Because had
17 the insurance lapsed, the stores wouldn't -- would not have
18 opened the next day. They were going to lapse last week
19 Monday on the first day of Rosh Hashanah.
20 So it was on Friday -- literally Friday before
21 Rosh Hashanah SKNY agreed to fund the additional funds so
22 that on Rosh Hashanah they don't lapse, and before the day
23 after Rosh Hashanah was over -- open -- over, the stores
24 could still open.
25 In the meantime, we began working on petitions.
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1 We began working on DIP funding because without the DIP
2 funding, bankruptcy wasn't really going to do much good. We
3 would've -- we would've been out of business. We would've
4 lost our employees, and -- and we still face that
5 possibility if we don't have DIP funding.
6 So we engaged in negotiations. SKNY expressed the
7 willingness to provide DIP funding. Then ultimately that
8 turned into a DIP loan that was combined with an agreement
9 to purchase the assets. And that's what's been presented to
10 the court, which is a DIP loan which is contingent on them
11 being the stalking horse for an asset purchase agreement.
12 THE COURT: So it was 2 million. I'm trying to
13 get to the three. So the six -- the 650 was of the 1
14 million.
15 MR. SCHWED: Yes. And the way you get to the --
16 I'll tell you how to get to the number because --
17 THE COURT: Because you've got the three two --
18 MR. SCHWED: Yeah. I'll get you that number, Your
19 Honor.
20 THE COURT: Either was 3 million 650 or 2 million
21 650. But it wasn't 3 million 250.
22 MR. SCHWED: I'll tell you how to get to 3 million
23 250. It was 2 million principle, but by the time they were
24 doing these loans, there were additional -- there was
25 interest and other -- there was default interest and other
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1 expense that had been incurred. It was approximately 2
2 million 350. And then they advanced a total of 750 above
3 that. That gets us to 3 million one. And they've incurred
4 a large amount of expenses, and so they have advised that
5 their total debt right now is in -- is in the approximate
6 sum of 3 million 250. Again, that's a round number. It may
7 be a couple dollars less than that, but in a round number,
8 that's the correct number.
9 THE COURT: Okay. So I'm going to hear from
10 everybody. Before I heard -- before I heard from anybody,
11 there's no way I'm going to approve a rollup as a first day
12 order. I'm not going to do it. Now that's the end of the
13 game. Somebody better gets up and say so because I'm not
14 approving a rollup today.
15 MR. KLESTADT: Your Honor, we're aware of that.
16 It's requested --
17 THE COURT: You -- how are you aware of it? I
18 just said it.
19 MR. KLESTADT: No, it -- we anticipated, I should
20 say.
21 THE COURT: Oh, okay.
22 MR. KLESTADT: It's -- for the final hearing, we
23 will be requesting it.
24 THE COURT: Okay. So we're taking it out of the
25 interim all together.
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1 MR. KLESTADT: Yes.
2 THE COURT: It's not my only issue before. I
3 heard it from other people, or actually just from one entity
4 so far.
5 So the way you married the DIP loan with the sale
6 process, I understood some of it, but some of it was unique,
7 and the unique stuff is what's troubling me.
8 Now, I thought I read in the application, but then
9 I didn't see it in the -- in the agreement, the APA, and I
10 didn't see it in the order, but let's just be clear about
11 this. I thought I read in the application the typical
12 provision that the debtor can't use the DIP money to sue
13 you, to challenge you, to do all the things that they do.
14 And then there was an and. And they can't use it
15 in order to basically market the property for a higher and
16 better offer.
17 MR. KLESTADT: That's --
18 THE COURT: You didn't really mean that, right?
19 MR. KLESTADT: No. No, Your Honor.
20 THE COURT: It's in that application.
21 MR. KLESTADT: No, no. That's not -- if that's
22 there, we'll correct it.
23 THE COURT: Because you can't do that.
24 MR. KLESTADT: Right.
25 THE COURT: Good. I don't know he -- that was --
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1 somebody else caught that. Okay. So, okay. I thought, nah,
2 he didn't mean that. So, okay. So that -- the concept
3 here, assuming you are the DIP lender is that you also are
4 interested in purchasing it, and so you want to be the
5 stalking horse.
6 MR. KLESTADT: Correct.
7 THE COURT: Okay. And for that, you would want to
8 get certain typical stalking horse situations.
9 MR. KLESTADT: Yes.
10 THE COURT: You also want to be able to credit bid
11 on the other side of it.
12 MR. KLESTADT: Yes.
13 THE COURT: But let's be clear that this is going
14 to have to be a sale that is marketed so that we make sure
15 that we get the highest and best offer for the assets.
16 MR. KLESTADT: Your Honor, I understanding that
17 there is -- my understanding is there are interested parties
18 already swirling about who've expressed interest, which is
19 fine. We're prepared to have ether assets go to auction and
20 have a fully, you know, robust process. The Getzler Henrich
21 firm has been retained. We're papered to go on with the
22 process.
23 THE COURT: Okay. So the other things that Mr.
24 Novick mentioned in his objection, where he actually pulled
25 some of these threads together -- and again, maybe some of
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1 it was not intentional, and that is that you sort of had an
2 event of -- seemed to have an event of default, you tie --
3 it'll be tied together whether or not you were going to be
4 the highest invest offer. I mean, I -- you're going to need
5 to divorce those.
6 MR. KLESTADT: Your Honor, I think the intention
7 was that if there's going to be an alternative transaction,
8 we don't want -- we don't want to have to have then further
9 led at that point. But it's not intended for there to be --
10 THE COURT: But it shouldn't be an event of
11 default.
12 MR. KLESTADT: Well, it's not intended to be an
13 event of default such that the loan becomes due and payable
14 that moment. If that was unclear from the drafting, we will
15 -- we will correct that.
16 THE COURT: It was. Okay. So what's also unclear
17 is -- I know we're not talking about the rollup today -- but
18 was unclear is, to me, as to how much new money are we
19 talking about?
20 MR. KLESTADT: The answer is, Your Honor, as of
21 the filing, $5.7 million of new money. We're now prepared.
22 THE COURT: So it's all -- it would -- we're
23 talking about all new money.
24 MR. KLESTADT: Yes.
25 THE COURT: in the DIP loan.
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1 MR. KLESTADT: Yes. Yes.
2 THE COURT: None of that being used to pay off --
3 MR. KLESTADT: Correct.
4 THE COURT: -- so that they've got a net amount.
5 MR. KLESTADT: Correct.
6 THE COURT: They've got $5.7 million, and we can
7 talk about why you think we need that. But okay.
8 MR. KLESTADT: Correct. And --
9 THE COURT: So that's all new money.
10 MR. KLESTADT: And the $5.7 million number?
11 THE COURT: There's 4 million on an interim and
12 1.7 million on a final.
13 MR. KLESTADT: Yes, And, Your Honor, my client's
14 prepared to fund up to 6 million in total. The $5.7
15 million-dollar number came from the budget that was provided
16 to us yesterday by the (indiscernible) firm.
17 THE COURT: So I'm going to want you to think --
18 I'm going to hear from everybody, but I want you to think
19 about -- because there were other people in the room who've
20 expressed interest to fund. I want to know between now and
21 Sukkot or Simchat Torah, I mean, between now and the end of
22 the month, which is when the end of the holidays sort of
23 coincide with the end of the month, I think, what you need
24 as a minimum in order to operate and put stuff on the
25 shelves. So that's -- we're talking about two weeks
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1 basically. And I'm going to be looking for a plain vanilla
2 DIP loan for those two weeks, without prejudice to anybody's
3 position after that. So that's where I'm going today. I'm
4 not going with $4 million. At least, that's my thinking,
5 but I want to hear from everybody else, including you.
6 MR. SCHWED: Your Honor, before I get there, I
7 just want to --
8 THE COURT: Well, I want to hear from everybody,
9 and then you're going to have to, I think, probably have to
10 talk amongst yourselves.
11 MR. SCHWED: Before we -- before I go there, Your
12 Honor, I just want to point out that Mr. Kohn is here
13 together with his client. They've presented us right before
14 -- this afternoon, right before the hearing, they presented
15 us with a term sheet of terms under which they would provide
16 the facility and under which they would buy the assets of
17 the company.
18 So it is in some ways similar to the SKNY
19 proposal. They're, again, linked. The DIP loan --
20 THE COURT: Well, there's a lot about that
21 proposal, as I said, that's problematic. And it looks like
22 that is going to be problematic over there too.
23 MR. SCHWED: Understood. Again, I just want to
24 lay it out so you can see -- know what's going on.
25 Now, there are differences. I just want to point
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1 out some of the differences, and I'll allow Mr. Kohn, to
2 present anything else he wants to add.
3 Mr. Kohn's client, it's DC Brothers II LLC, and
4 under the DC Brothers' proposal, they have proposed a DIP
5 loan commitment of $6 million. The interest rate is the
6 same as the SKNY interest rate, at least the base interest
7 rate. It's at 6 percent.
8 The default rate that they -- propose is 10
9 percent --
10 THE COURT: Instead of 12.
11 MR. SCHWED: As opposed to SKNY, which is 12,
12 correct. The maturity date is January 15th, 2019, which is
13 30 days later than SKNY's maturity date. It -- obviously
14 there's no rollup in there. There is no -- they don't -
15 obviously don't have any interest payments on any of the --
16 any type of loan because they don't have the pre-petition
17 lender. Again, it's just lining up how the two types of
18 proposals compare.
19 The exit fee for DC Brothers is estimated at
20 $120,000 whereas the exit fee for SKNY is $180,000.
21 Regarding the other provisions, they're generally quite
22 similar. They don't -- they change very little.
23 Regarding avoidance actions, the -- they're not
24 interested in any course of auction or any avoidance actions
25 other than against vendors because --
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1 THE COURT: Wait a minute. Let's distinguish.
2 They're not getting those in any event as security for a DIP
3 because they're not (indiscernible) but they're talking
4 about as a purchase.
5 MR. SCHWED: Purchase, correct.
6 THE COURT: Because part of your purchase was
7 avoidance actions, and you are not interested in avoidance
8 actions except as to vendors?
9 MR. KOHN: Yes. That's correct, Your Honor.
10 MR. SCHWED: Yeah, that's all they were -- and
11 they're not interested in any other potential course of
12 actions, not that we at this point know of any other than --
13 other than possible avoidance actions that are, you know,
14 mentioned in our papers regarding the prior owner.
15 Regarding the bid protection, their bid protection
16 fee is 2.5 percent as opposed to SKNY which is 3 percent.
17 Their outside date for closing is January 15th as opposed to
18 December 31. And the -- perhaps the most significant
19 difference is that their price for the purchase agreement is
20 13 million as opposed to SKNY's price of 12 million.
21 Now, it's -- it's that last item that obviously is
22 a significant item. Frankly, to be perfectly honest,
23 regarding the DIP loan, we don't see -- and (indiscernible)
24 Mr. Getzler and Mr. Henrich, see a significant difference
25 between the two, but when you get to the asset purchase
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1 agreement, the problem is because, again, they're linked. I
2 understand, Your Honor we'll deal with that, but at least as
3 they're presented, based on the linkage, it's hard to look
4 at the DIP without looking at the asset purchase agreement.
5 And when you look at the two of them combined,
6 because the asset purchase agreement begins with the
7 stalking horse bid of $13 million, it is the view of Mr.
8 Getzler or Mr. Henrich that that, as a combined bid, is in
9 fact a better bid.
10 We will say that we did commit to SKNY that we
11 would present their bid as a stalking horse bid, because
12 they were not willing to put the last round of funding in
13 unless we agreed to go forward with them on a DIP loan and
14 go forward with them on an asset purchase agreement.
15 THE COURT: Well, I think you made that
16 commitment. You filed it on the docket, it's right there,
17 it's on the calendar.
18 MR. SCHWED: Again, I'm putting everything,
19 everything that's been agreed to on the record so this way,
20 everybody understands exactly what's transpired and where we
21 are. So that's what's on the table right now, is a note --
22 THE COURT: Right. So you have a lot, you have --
23 I mean, you have -- and there looked like there were maybe a
24 couple of other people -- I don't know, the interests on the
25 phone. I will tell you that it's very important to me that
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1 we do everything we can quickly to get a committee. Do we
2 think in this case we're likely to get a committee?
3 MR. CURTIN: I would think so, Your Honor.
4 THE COURT: Every time I ask that question, I get
5 poked. Now that I think in this case --
6 MR. CURTIN: I can never totally predict, but
7 we'll -- I mean, hopefully, the time doesn't impact that too
8 much, but we'll do our best to. Obviously, we haven't done
9 it yet.
10 THE COURT: Right.
11 MR. CURTIN: We've been doing this in the last
12 three hours. But probably tomorrow, we'll get the --
13 everything scheduled.
14 THE COURT: Because the committee would be, you
15 know --
16 MR. CURTIN: Right, in terms of evaluating.
17 THE COURT: -- would want to be able to weigh in
18 and evaluate, as well as others certain --
19 MR. CURTIN: We'll, of course, make every effort
20 to. This case is begging for a committee, certainly.
21 THE COURT: Then there was -- and then, I guess, I
22 don't know if you want to deal with the person you bought
23 from, but apparently, Mr. Novick also is indicating he's got
24 -- ready to do some DIP financing. So it sounds like
25 there's a lot of interest in the room.
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1 MR. SCHWED: Yeah.
2 THE COURT: And maybe some on the phone.
3 MR. SCHWED: I've had multiple conversations with
4 Mr. Novick for the past few weeks. Initially, he indicated
5 that if I provided him with the information as it was
6 developing, he might come today and actually present a
7 counter-proposal. He decided not to; that's fine.
8 THE COURT: Well, he's looking for information, he
9 says.
10 MR. SCHWED: No, and that's understood. I mean,
11 the truth be told, SKNY might have a little more information
12 than him, but it's not like they have a lot. If there's a
13 problem in this case that the information has been hard to
14 get, which is one of the other reasons why, when you asked
15 before, why did we not file this quicker. Getting a budget
16 in this case was an incredible task. Everything takes very
17 long because the financial information is hard to pull out
18 of the records.
19 THE COURT: So we start with a premise that
20 concerns us.
21 MR. SCHWED: No, and that's why it was so
22 important --
23 MR. CURTIN: And the budget we have, Your Honor,
24 has -- we'll get to it later, but the budget is not great.
25 THE COURT: Yeah.
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1 MR. SCHWED: Your Honor, and that was -- and that
2 concerned us from the moment we got involved, and that's why
3 we felt it was critical to immediately get professionals in
4 and we think we got two excellent professionals in the
5 Getzler Henrich firm. So we believe that going forward,
6 that problem will be resolved.
7 But it doesn't change the fact that in terms of
8 providing information to anybody, it took a long time. We
9 did the best we could. We provided information to Mr. Kohn.
10 We only began speaking, I think, maybe a week ago? And in
11 the past week, he asked for information. I provided
12 everything he asked for, and he's provided a proposal. So
13 it's not like it's impossible. He did it. Mr. Novick's
14 client decided not to do and that's fine. I have no problem
15 with that.
16 But the important thing is, I think, for the
17 estate, and including Mr. Curtin's concerns when we first
18 talked about the case, is that, you know, there is this
19 issue about some initial lender, and maybe that is an
20 insider who's been bidding, but there's a third party also.
21 So at least we get fresh blood involved on something that's
22 not an insider, that's actually at the table. So we know
23 they're going to end up with, hopefully, a sale that's going
24 to be a fair arms' length sale.
25 THE COURT: I want to hear from everybody, and
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1 then I want to understand whether you really need some money
2 between now and these holidays. Is it going to make a big
3 difference? And how can we do that and not jeopardize the
4 competition in the room? But let's think about that for a
5 minute.
6 MR. SCHWED: Sure.
7 THE COURT: Let me hear from Mr. Klestadt.
8 MR. KLESTADT: Your Honor, on that subject, our
9 understanding, and perhaps we should Mr. Getzler on the
10 stand, is that there is an emergent need for the $4 million
11 in order to restock the stores properly for the upcoming
12 holiday season. And, you know, part and parcel of that --
13 THE COURT: Again, the upcoming holiday season,
14 half of which is behind us.
15 MR. KLESTADT: Half of which, Your Honor. But as
16 I understand it, if Your Honor were to approve the interim
17 $4 million today, we would be able to fund that tomorrow.
18 And by the way, Your Honor, the money is sitting in my
19 escrow account. We have signed, signed loan agreement.
20 We're ready to go, Your Honor. We've invested a lot of time
21 in this, and there's no issue, Your Honor, with regard to
22 financial wherewithal. The money is in my escrow account.
23 If Your Honor were to sign an interim order, the
24 $4 million would be funded. As I understand it, that
25 money's going to be used substantially to buy product to
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1 stock the stores for the upcoming two-week period
2 representing the holidays.
3 And that is an important period, Your Honor, for
4 the Debtors; that's what we were led to believe, and that's
5 why my clients agreed to step up to the plate.
6 MR. SCHWED: Your Honor, and there's a related
7 point to that. Number one, you know, while it is later than
8 we'd like, there still is a fair amount of days which will
9 generate a substantial amount of sales if the stores are
10 stocked, and that's the clear belief of everybody involved.
11 In addition --
12 THE COURT: That's why I got on a train before
13 dawn this morning from Upstate New York to be here because I
14 understand that need. But I also want to -- I also don't
15 want us to do anything on the first day that is going to
16 basically, you know, guarantee everything else that's going
17 to happen the rest of the -- I mean, I'm not going to --
18 we're not going finish the case today.
19 MR. SCHWED: There's one other point related to
20 that, which is that there are concession vendors. These
21 stores, each of them, have multiple concession vendors.
22 They sell their own product. And they're in there because
23 of the traffic generated in these stores. The fact that the
24 stores are now close to empty has resulted in, I think, one
25 or maybe more actually having left, and quite a few of them
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1 have one foot out the door.
2 So if we go another couple of weeks with empty
3 stores -- and we've been telling them, don't worry, we're
4 going to be in bankruptcy soon, we're going to have DIP
5 funding, and you're going to see the traffic's going to be
6 back in there. And if we now go another few weeks until
7 after (indiscernible) and we wait until then to stock the
8 stores, many of them may be gone.
9 And so, that's another factor we could consider
10 besides for, you know, just losing the sales, maybe more
11 important is losing the concessions.
12 THE COURT: Okay. So I think you need to, if
13 we're going to do this today, I think we're going to need to
14 -- after I hear from more people, take a second call. And I
15 am looking for the most plain vanilla interim DIP order I
16 can get. As much as I -- again, I don't, you know, whether
17 somebody's a stalking horse, not a stalking horse, that's
18 okay. As long as they don't have crossover, you know,
19 built-in advantages, is I guess what was I think I found
20 problematic and so did others.
21 MR. KLESTADT: Your Honor, I apologize. I don't
22 understand what the crossover problems are, because there's
23 still -- there's still going to be a bidding procedures
24 hearing, there's still going to be an auction, subject to
25 higher and better offers.
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1 THE COURT: Well, you just have to go, maybe you
2 have to take a closer look at the documents because there
3 were, both in the application and the proposed order. And
4 then again, there are a lot of findings that, you know me by
5 now, I only make findings once I make findings.
6 If you want -- if you and the Debtor, you and the
7 Debtor have stipulations -- well, you wouldn't have that
8 situation. But if you have stipulations you want to enter
9 into about your prepetition indebtedness, you can do that.
10 I'm not going to make them as findings today.
11 MR. KLESTADT: That's fine, Your Honor.
12 THE COURT: So you have to move those to a
13 different part of the order, you know that.
14 MR. KLESTADT: That's acceptable; that's not a
15 problem.
16 THE COURT: But I think that, I think that the
17 Debtor needs a little time with the Debtor's professionals
18 to figure out -- if they want to walk out of here today
19 with, you know, DIP financing, they need to figure out, you
20 know, who they're asking to the prom.
21 MR. KLESTADT: Well, Your Honor, from my client's
22 position, we're the one that's been asked to the prom.
23 THE COURT: You've already been asked.
24 MR. KLESTADT: Yes, and we have a signed document
25 already to that effect. I mean, unless Your Honor is
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1 preparing --
2 THE COURT: Well, when you say a signed -- wait a
3 minute.
4 MR. KLESTADT: Pardon?
5 THE COURT: When you have a signed document.
6 MR. KLESTADT: We have a loan agreement that has
7 been signed, subject to Court approval.
8 THE COURT: Good, good.
9 MR. KLESTADT: Yes. My point, Your Honor -- you
10 know, the question, Your Honor, is, are you opening this up,
11 the debtor-in-possession financing, in essence to a
12 competitive auction for the DIP? I mean, we would be
13 opposed to that. But, obviously, that's within Your Honor's
14 purview. And that's really the question because, otherwise,
15 there's one DIP facility.
16 THE COURT: $4 million on an interim order is a
17 lot of money.
18 MR. KLESTADT: Yes.
19 THE COURT: I've been told things are so, I guess,
20 the shelves are so naked that that's what it's going to take
21 for the next couple of weeks between now and the end of the
22 month. I mean, is that really what it's going to take if
23 you're telling me that's really the number? I asked you
24 what you really thought the number was going to be. You
25 have experts in the room.
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1 MR. SCHWED: In response, I have somebody -- I'd
2 rather have somebody who's an expert who can speak to this.
3 THE COURT: Right. So I think that I would like
4 you to -- you know, you can take different rooms to caucus.
5 I can give you more rooms if you need it. But I think,
6 again, it's not -- my job here today is to do absolutely
7 what is necessary and no more.
8 I'm operating without a committee. I have to be
9 that voice in the room until there's a committee. I don't -
10 - I'm trying to -- I don't know, nobody really estimated for
11 me on your deal versus your deal, which I just heard about
12 now. What is going to be left at the end of the day for
13 creditors? I have no idea what that is.
14 MR. KLESTADT: You mean the asset sale, Your
15 Honor?
16 THE COURT: Yeah, after you're paid.
17 MR. KLESTADT: I don't think anyone knows that
18 until schedules are filed and you have a better idea of what
19 the landscape's going to be. But, Your Honor, understand,
20 please --
21 THE COURT: I don't -- because I don't want to --
22 I don't -- go ahead.
23 MR. KLESTADT: Your Honor, my client is not
24 seeking to force itself on the Debtor. You know, my clients
25 are lending money because we have been told it is necessary
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1 in order to preserve value.
2 My suggestion to Your Honor is that we put Mr.
3 Getzler on the stand. He can tell the story firsthand
4 because he's told the story to my clients, and Your Honor
5 will have the benefit of that information directly.
6 THE COURT: Well, as far as that premise, that the
7 money is necessary?
8 MR. KLESTADT: Yes.
9 THE COURT: For purposes of this conversation now,
10 I'll accept that premise. The question is, how much and
11 under what terms? Mr. Kohn?
12 MR. KOHN: Yes, thank you, Your Honor, for giving
13 me the opportunity to let you know a little bit about and to
14 respond to the things that you're going to be -- that was
15 said before.
16 I was hoping that you'd beat me up instead of Mr.
17 Klestadt about these, about these documents. Because as far
18 as we were concerned, we understood -- and I hope that's
19 still the case -- that the Debtor has chosen us this morning
20 over Mr. Klestadt's client.
21 And the reason I think they chose us is because of
22 Your Honor's very critical questions. The last question
23 about a minute or two ago is, what's left for unsecureds?
24 One thing we know is that based on our DIP, there'll be a
25 million dollars left more than unsecured than under Mr.
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1 Klestadt's DIP. That's absolutely, and I think absolutely--
2 THE COURT: Well, you mean 12 versus 13.
3 MR. KOHN: Yes.
4 THE COURT: Well, a million dollars, we still
5 don't know the bottom line.
6 MR. KOHN: Right.
7 THE COURT: Okay.
8 MR. KOHN: But there's definitely on the -- yes,
9 on the numerator, the numerator will be --
10 THE COURT: And you're going to bid against each
11 other.
12 MR. KOHN: That's right. But as soon as --
13 THE COURT: I mean, I hope.
14 MR. KOHN: But as soon as we come in, the bar is a
15 million dollars higher. It's immediate value. There's no
16 stipulations at all, there are no stipulations. There's no
17 concerns of SKNY being on both sides of the loan
18 transactions, because they controlled corporate, which
19 controlled the operating entities, which entered into these
20 agreements with SKNY.
21 THE COURT: Well, they have a minority share.
22 MR. KOHN: I --
23 THE COURT: I mean, I know that they're audacious,
24 that they've been very much involved and maybe they think in
25 more control than we know, and then people want discovery
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1 about that. But it's a minority interest, right?
2 MR. SCHWED: Yes.
3 THE COURT: Okay, on paper.
4 MR. KOHN: Okay, right. We really have to look at
5 the LLC agreement to really see whether that minority
6 interest had more power than others.
7 THE COURT: Correct.
8 MR. KOHN: Okay. First of all --
9 THE COURT: And Mr. Novick is interested in
10 looking at that too, right?
11 MR. KOHN: And DC -- that's the point, that's the
12 point. Because our bid won't have anything related to the
13 prepetition lenders. We'll give them some adequate
14 protections, some replacement liens; we'll be priming them.
15 Because nobody knows sitting here today whether their liens
16 and claims are valid, particularly because they were on both
17 sides of the transaction to some extent.
18 THE COURT: Well, and they're recent. We don't
19 know if they've properly perfected, although they did put in
20 that they'll give the committee some amount of time,
21 although not a lot of time.
22 MR. KOHN: And whether some also give to avoidance
23 issues. Yes, absolutely, Your Honor. Just to say a little
24 bit about DC Brothers. One of the principals of DC Brothers
25 has been in the food business for over 30 years. This is
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1 Mr. Joseph (indiscernible), who is the courtroom in the back
2 room. And he is -- this is a strategic independent third-
3 party issue to purchase the business through the DIP loan.
4 And so, they are experts in the food business,
5 very prominent in the community and everybody knows them.
6 So, you know, Mr. Klestadt said --
7 THE COURT: You're talking about the Jew- -- which
8 community?
9 MR. KOHN: Yes, the Jewish community.
10 THE COURT: Geographically.
11 MR. KOHN: The customer base, the employee base.
12 THE COURT: But geographically, we're talking
13 about?
14 MR. KOHN: The creditor base, the creditor base,
15 anybody that's involved in this Seasons bankruptcy. And to
16 get a named description, they know that they're able to --
17 they will have the wherewithal and they have the wherewithal
18 to fund today, this afternoon -- not tomorrow morning. As
19 soon as Your Honor enters the order, even this afternoon.
20 THE COURT: Well, he'll fund this afternoon too.
21 MR. KOHN: Yes.
22 THE COURT: He's got it in his escrow, he told me.
23 MR. KOHN: Exactly, but I'm just saying that we
24 will as well, okay? So I could actually hand up Your Honor
25 what was -- what Mr. Schwed was --
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1 THE COURT: Well, no, I don't want --
2 MR. KOHN: Oh, you don't want to have anything on
3 it? Okay.
4 THE COURT: Again, I'm going to give --
5 MR. KOHN: Okay. So I'm not going to say anything
6 more than that.
7 THE COURT: All right.
8 MR. KOHN: But, other than there is substantial.
9 And we didn't, like, sabotage the case. We've been talking
10 for a while. Mr. (indiscernible) was actually, even before
11 I got involved, was talking to some people about purchasing
12 the assets of Seasons way back when. And we didn't, like,
13 sabotage and come and say, here, we filed. We were
14 negotiating days --
15 THE COURT: Okay. I mean, yeah, okay. All right.
16 And the other thing I want to just say before Mr. Klestadt
17 gets up again, is that they -- while I've said that we don't
18 have an unsecured creditors' committee, we at least have in
19 the courtroom the two the largest unsecured creditors in the
20 case. So that's -- I'm going to want to hear from them.
21 Again, they may have -- you may have said that, let me just
22 say that. Are there are any others? You can have a seat.
23 Are there any others?
24 MR. KOHN: There's just one last thing I'd like to
25 say, Your Honor.
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1 THE COURT: Yeah, go ahead.
2 MR. KOHN: If you don't mind.
3 THE COURT: Yes, go ahead.
4 MR. KOHN: So Mr. Klestadt says that it's sort of
5 like a DIP auction, and we -- this is a surprise to us. I
6 mean, I would like the Debtor's witness to get up and go on
7 the stand and say, based on their best -- better business
8 judgment which DIP is better, and they could do that
9 immediately.
10 THE COURT: Well, but -- no, no. Right now, the
11 Debtors have made a motion put before me that DIP loan,
12 okay. They have to withdraw that motion and put another
13 motion before me or whatever they have to do. Because right
14 now, the motion that's on is the motion for them to do the
15 DIP loan. You may have made a deal -- not a deal, but a
16 discussion this morning. But that's right now what's on my
17 calendar. I mean, that's --
18 MR. KOHN: Right, so we have to hear from the
19 Debtor their position on that.
20 THE COURT: Yes, and we have to hear creditors.
21 MR. KLESTADT: Thank you, Your Honor.
22 THE COURT: Yeah, come on up. You didn't note
23 your appearance. Who are you?
24 MS. FIEDLER: I wasn't prepared to talk today, but
25 I will now. Alyson Fiedler with Schiff Hardin, appearing on
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1 behalf of one of the landlords, the Scarsdale one, in
2 particular.
3 THE COURT: Oh, the landlord, okay. You're an
4 attorney?
5 MS. FIEDLER: I am.
6 THE COURT: Oh, okay.
7 MS. FIEDLER: And I appreciate you being cautious,
8 and we're concerned too. We're reviewing the papers that we
9 just received as well. And any limitations you can include
10 in the order and reservations of rights for the landlord,
11 Scarsdale, and other unsecured creditors, I appreciate.
12 THE COURT: Okay.
13 MR. KOTLER: Good afternoon, Your Honor. Larry
14 Kotler of Duane Morris, here on behalf of Bank United. One
15 consensus with my client is we're a very large creditor in
16 this case, okay. Maybe we're unsecured, maybe we're
17 partially secured, but we're a very significant creditor.
18 Your Honor, I had absolutely no notice of any of
19 this until the 12th -- I'm sorry, 11:55 today. Thankfully--
20 THE COURT: Well, you were supposed to have a
21 notice by 11:00.
22 MR. KOTLER: Well, I didn't get notice from the
23 Debtor. I actually got notice from Mr. Novick.
24 THE COURT: Okay.
25 MR. KOTLER: And the reason why Mr. Novick knew to
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1 give me notice is because I entered my appearance in the
2 involuntary that he filed in the Southern District. So I'm
3 not an unknown commodity. I was, there's only nine docket
4 entries in that case, and I'm one of them. I'm also known
5 to Mr. Getzler very -- and Mr. Henrich. I'm also known to
6 Mr. Klestadt, so it's --
7 THE COURT: Well, I'm glad you're here.
8 MR. KOTLER: Okay. I have literally had
9 absolutely no ability to speak to my client, other than on a
10 very perfunctory basis while I was on route from my office
11 to the subway. We would appreciate the most vanilla order
12 with a full restoration of rights. And if there's going to
13 be a competing bid, then I think we have to have notice to
14 all parties.
15 And I think I would urge the U.S. Trustee to form
16 a committee as quickly as possible, because somebody really
17 needs to kick the tires here and determine which is the
18 better DIP and which may be the better APA.
19 THE COURT: Right. But the question is, we don't
20 -- you know, withering on the vine. The question is,
21 they're telling me I got to approve some money because,
22 otherwise, you won't have anything to sell, Judge.
23 MR. KOTLER: But, you know, Your Honor, I hear
24 you.
25 THE COURT: I know, and I have to find the
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1 balance. Okay? And that's why I said I really want to know
2 the minimum amount of money that you need in order to make a
3 reasonable looking, a store look reasonable between now and
4 the end of the month and so that, right. I mean, that's the
5 balance.
6 MR. KOTLER: Right, you're absolutely right, Your
7 Honor. And I don't think anybody in this room would argue
8 that, you know, an empty store is going to preserve value.
9 THE COURT: Yeah. What aggravates me and I'm sure
10 it aggravates -- I'll bet it aggravates counsel for the
11 Debtor, is that we -- is that it became so empty before we
12 got here.
13 MR. KOTLER: Right.
14 THE COURT: It's very frustrating to me. In this
15 half of season and we'll have this month and it sounds like
16 it's really stark.
17 MR. KOTLER: And that's, but Your Honor hit the
18 nail on the head. Why did they file now?
19 THE COURT: I know, but we can't change that.
20 MR. KOTLER: And they've created this emergency,
21 Your Honor, they really have. And the other thing that I
22 would argue is that between now and the end of the month,
23 how many days, how many days are these stores really going
24 to be open, knowing they're closing?
25 THE COURT: Well, it's not that. It's Sukkot and
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1 it's all the meals in this. I mean, I know a little bit
2 about the religion. It's that it's Sukkot Torah. I mean,
3 again, they've lost a bit of it, but they've got -- they've
4 got to -- you know, basically, it's holiday between now and
5 the end of the month.
6 MR. KOTLER: Simchat Torah is actually next month,
7 Your Honor.
8 THE COURT: No, no, it ends -- it all begins with
9 one and ends with the other. And I know this because I have
10 to keep that calendar.
11 MR. KOTLER: I thought it was --
12 THE COURT: And so, I think we're over by the very
13 beginning of October.
14 MR. KOTLER: Yeah, I think the 2nd of October.
15 THE COURT: I think October 1 or September 31.
16 Right, right, it's all together.
17 MR. KOTLER: Again, Your Honor, I think it's very
18 unfair to the creditor constituency to have something rammed
19 down their throats on an emergent basis; when, frankly, this
20 was not an unknown issue. They knew about this. They could
21 have filed, you know, in August; they could have filed in
22 July. There was a lot that they could have done. And now
23 that they've, you know, essentially, you know, thrown
24 gasoline all over the place and now, they're arguing --
25 THE COURT: Well, again, and I'm not -- again, I
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1 said they really have to be divorced in the sense that since
2 I'm not taking up bidding procedures today, I'm not taking
3 up a stalking horse. So if somebody wants, feels that
4 they're better positioned if they're the DIP lender, so be
5 it. But I am not -- I'm going to divorce those two
6 concepts.
7 MR. KOTLER: But even if we, even if -- what I'm
8 saying, though, Judge, is if there's -- if a competitor --
9 if a competitor's bid, other than SKNY, is decided upon
10 today, how are creditors going to know what --
11 THE COURT: It's not a bid that's -- now, we're
12 talking about just some DIP -- we're talking about some DIP
13 money. Okay?
14 MR. KOTLER: But it's still -- but they're
15 connected. I don't think -- maybe I misheard, but it was my
16 understanding that the whole reason why there's a
17 competitive bid is so that they could be the first.
18 THE COURT: Right. They're interested in
19 purchasing.
20 MR. KOTLER: Right.
21 THE COURT: Right.
22 MR. KOTLER: I don't know if you uncouple both,
23 whether you still have a competitive --
24 THE COURT: Well, no, but they're entitled to
25 credit bid the amount of their obligation.
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1 MR. KOTLER: Well, I think the only party who
2 could do that is Mr. Klestadt's client, and I think there's
3 issues concerning Mr. Klestadt's. There's no other secured
4 creditor besides Mr. Klestadt.
5 THE COURT: Right, that's right. No, you're
6 correct.
7 MR. KOTLER: And then I think there's some issues
8 there. And that's another reason why I think they should be
9 in because I think there could be recharacterization issues
10 with Mr. Klestadt's clients. But, ultimately, all I'm --
11 THE COURT: So do you want to lend?
12 MR. KOTLER: That's the one thing I do know, is
13 that my client does not want to.
14 THE COURT: Okay. So the question is, who's going
15 to lend with the most plain vanilla order where everybody's
16 rights are preserved and I do as little damage as possible,
17 do no harm.
18 MR. KOTLER: That is what we would like, Your
19 Honor.
20 THE COURT: Me too.
21 MR. KOTLER: Thank you.
22 MR. KLESTADT: Your Honor, we're prepared to give
23 as plain vanilla order as possible. We'll go through it
24 with Mr. Curtin, with the Debtor, anyone else who wants to
25 go through the order.
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1 THE COURT: I think that we have a debtor-in-
2 possession that has to decide, again, which motion they want
3 to proceed. Do they want to substitute a new motion for the
4 one that I've got before me? The one that I've got before
5 me, I will tell you, I'm not signing in the form I have it
6 in. It's got to look -- it's got to become a plain vanilla.
7 MR. KLESTADT: One point, Your Honor. If the
8 Debtors were to withdraw this motion and try and substitute
9 another motion that sought to prime my client's existing
10 secured debt, we would object to that. So it's one, Your
11 Honor, for my client to prime itself; it's quite another for
12 another party to come in. And I don't see how that would
13 lead to any financing happening any time soon; certainly,
14 not in the next 24 hours.
15 I think, Your Honor, what I would ask Your Honor
16 to do is to entertain testimony from Mr. Getzler with regard
17 to the need and the amount, because that's -- I think what
18 we're focused on is the 4 million. If we get over that
19 hurdle, then it's a question of working through the form of
20 the order.
21 THE COURT: I'm not saying that's not going to
22 happen, but, first, we have to figure this out. Mr. Novick.
23 You also want to lend, right?
24 MR. NOVICK: We don't especially want to lend. We
25 offered to lend because we would rather put some money into
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1 the case, rather than have a locked-up process that affects
2 value for the rest of the Chapter 11. And in that regard,
3 we even set forth in our papers, that if the Debtor needed a
4 modest amount of money as sort of a bridge DIP to get
5 through these sort of issues they're having now, we'd be
6 willing to put it in. We offered up to $2 million.
7 THE COURT: So you said 2.
8 MR. NOVICK: We said 2.
9 THE COURT: They think they need twice that.
10 MR. NOVICK: Okay. Well, I'm pretty sure they
11 don't need twice that. And this is just a few points I'm
12 going to put for the record, because I realize the Court
13 understood most of our arguments; maybe not in all their
14 details, but has generally accepted our Complaint, which is
15 about (indiscernible).
16 THE COURT: Well, no, what happened is I had a lot
17 of the same concerns you had before I got your papers a few
18 minutes before the hearing.
19 MR. NOVICK: Okay. I don't need to take credit
20 for it. I just want to put a couple of things onto the
21 record: number one is, I don't know whose home at the Debtor
22 that's negotiating with SKNY. And I say that of a couple of
23 pieces of information I have in the papers: number one, in
24 the petitions, there are board resolutions authorizing the
25 Debtor, consent of sole member to enter into the DIP loan
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1 with SKNY.
2 They're signed by three people: Mr. Gold, who you
3 heard about; Mr. Bloom, who is a large equity holder and I
4 believe is still a director or manager but is not the CEO;
5 and the third is SKNY, LLC, Class B member name is Mr. Klein
6 and manager. So they actually signed the board resolutions
7 authorizing them to borrow from them since.
8 At the same time, we've had a lot of documents
9 signed by Mr. Getzler as CRO. But if you look carefully
10 through his declaration, it says that he will not become CRO
11 and will not assume the role until the Debtors acquire D&O
12 insurance for him. So unless there was an error in the
13 papers, I think he's just an outside consultant now and not
14 an officer or the directors, unless they want to correct
15 that.
16 So we have an arm's length issue on the face of
17 the papers, that we have nobody else home apparently, except
18 SKNY.
19 And at the same time, we have another party here
20 saying we have higher and better money available. And I
21 think in order to get priming liens in order to get super-
22 priority administrative treatment, the Court has to make a
23 finding based on evidence that the DIP loan the Debtors
24 takes is the highest and best available funding. They
25 couldn't get funding on any better terms.
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1 And here you have on the record right from the
2 Debtor, as well as the lender, that higher and better firms
3 are available staring the Debtor in the face. So I don't
4 know how that can get approved. It's not that the Court may
5 or may not have authority to authorize a DIP auction; it's
6 that the Debtor has to make a showing that they're taking
7 the highest and best money, and they've made the opposite
8 showing.
9 THE COURT: Correct.
10 MR. NOVICK: So they've -- I applaud them for
11 seeking highest and best value for the creditors; this is
12 what we want them to do. And with a competitive process,
13 we're that much less likely to step in and try to loan money
14 because that was all we were interested in ensuring.
15 Now, the $4 million question, I'd also like to
16 just note a few items about that. And they are the items is
17 the --
18 THE COURT: On the budget.
19 MR. NOVICK: On the budget.
20 THE COURT: You probably should put that on -- you
21 can put that on the record, and then I want to hear from Mr.
22 Curtin. It only makes sense to discuss this before we break
23 for discussion.
24 MR. NOVICK: Maybe it does, but I'll just --
25 THE COURT: No, I think it does make sense. Go
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1 ahead.
2 MR. NOVICK: I'd like to just note a couple of the
3 lines. Number one, the Court heard over and over again how
4 important it is for the Debtor to get stocked for the
5 holiday season. Sukkot starts Sunday night, in the middle
6 is Wednesday -- Tuesday and Wednesday is Rosh Hashanah,
7 Friday and Saturday is the Sabbath.
8 There's one and a half business days for the
9 Debtor to get the financing, call up their suppliers, have
10 trucks ship everything to all these stores, put it out on
11 shelves and sell it. It doesn't seem like they're going to
12 make a lot of money between now and the beginning of next
13 week.
14 THE COURT: It's why I asked that question.
15 MR. NOVICK: Okay. The other very interesting
16 thing is cash from sales and the DIP budget. Next three
17 weeks through October 11th have annual cash from sales of
18 963,000, 931,000, 914,000. And then after October 12th, it
19 goes 1.3 million, 1.6 million, 1.8 million, 2 million and on
20 and on increasingly upward.
21 So the DIP budget itself says that these next
22 couple of weeks are not the most material or important weeks
23 for the business. They are actually selling at half the
24 rate that they will be on ordinary weeks when there's no
25 holidays.
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1 The other interesting line I want to put out is
2 the orders of grocery.
3 THE COURT: I'm sorry, what did you say?
4 MR. NOVICK: The inventory restocking.
5 MR. CURTIN: Inventory restocking.
6 THE COURT: Oh, okay.
7 MR. NOVICK: They've got themselves buying $1.6
8 million of inventory immediately, another million dollars
9 the next week, and a small amount, 60,000, the week after
10 that, and then that's it for the rest of the case. They're
11 spending -- the math at one point, I don't think the math
12 adds up, but it looks like --
13 MR. CURTIN: The math doesn't add up.
14 MR. NOVICK: It's looks like up to $4 million;
15 $2.5 million is buying food that's supposed to last for the
16 entire budget through the end of the case. And I don't know
17 how they do that, because I would think a lot of it spoils.
18 But they certainly don't need interim financing to put 13 or
19 however many weeks of budget line items are in this, on the
20 shelves in the first week of the case when they're only
21 planning the smallest amount of sales of all the days in the
22 cases.
23 So I think you could look at that, and I'm sure
24 there'll be explanations offered. But the DIP budget itself
25 suggests that actually, the revenues during the next week or
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1 two or three are going to be at their lowest point, and that
2 there's really no reason to be buying all this food at the
3 interim financing hearing. And, in fact, the interim loan
4 can be considerably less than $4 million.
5 MR. CURTIN: Your Honor, I think most of our
6 points have been covered. The inventory restocking is the
7 obvious one. And, again, as everyone can see, there's
8 literally nothing for the next six weeks. It doesn't make
9 any sense.
10 But one issue that hasn't come up, if you go a
11 little bit down from that, there's a line item for total
12 other payments of almost a million dollars. It's not broken
13 down; it's just added onto the first week of borrowing.
14 Which, again, as was point out, is really a day and a half
15 week of business.
16 So there seems to be substantial fat here that can
17 be trimmed. So, I mean, just those numbers alone are 2.5,
18 plus another million, 3.5; that's a good chunk of the 4
19 million. So when I hear that -- and I didn't know anything
20 about the competing offer until Your Honor heard it as well.
21 So when I hear that that number is 2 million, even that,
22 quite frankly, seems to high. But the 4 million is kind of
23 -- seems to me to be (indiscernible).
24 THE COURT: No, they're also --
25 MR. CURTIN: I think they're at 2 million, right?
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1 THE COURT: No. Novick, no, no, no, the SuperSol
2 was talking 2 million in their papers. You're still --
3 they're at 4 million also. They don't have to lend so much.
4 Again, we can talk about a two-week order, not a -- because
5 this order was going to be much longer than that. You just
6 tell me what you need for, like, a one-week order.
7 MR. KLESTADT: No, Your Honor, the intention was
8 two weeks.
9 MR. CURTIN: No, that's a two-week order. That's
10 what they intended. It was two weeks because remember, they
11 want the final -- they haven't yet, but they're going to and
12 we're going to ask you for the final DIP hearing on that
13 same October 4th date or whatever, so we're really talking
14 about a two-week period. That 4 million was the two weeks.
15 THE COURT: Oh, okay. Well, that's some- --
16 again, points taken.
17 MR. CURTIN: Obviously, we have given some
18 comments on the order and vanilla'd it up, probably not as
19 much as Your Honor wanted, but some of it. So it doesn't
20 make sense to go through any of those now because we don't
21 know where we're going, but we took out some provisions.
22 THE COURT: Okay.
23 MR. CURTIN: So anyway, we don't have an agreement
24 on any of those yet. That was just something to get
25 started.
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1 THE COURT: I have a feeling that more than one
2 little room -- I mean, this is a room too -- is going to be
3 -- do we have any more rooms? Okay. So Judge Craig's
4 courtroom will be available. This courtroom, that room, and
5 if Judge Craig has a room, we'll get a room I think.
6 There's at least four places, including plus the hallway.
7 I don't want to leave you open ended. So I don't
8 want to leave the time that I come back here open ended.
9 Let's come back at 4:30 and see where we are. Okay? Thank
10 you. Okay, so you've got everyone on the floor, you can go.
11 (BREAK)
12 THE COURT: Okay. Mr. Schwed.
13 MR. SCHWED: Okay, Your Honor. So we've caucused
14 and this is what we've come up with, subject to Mr. Curtin's
15 approval. But we had an opportunity to lay out all the
16 possible relief.
17 [CROSSTALK/LAUGHTER]
18 MR. SCHWED: It's late in the day, Judge. So the
19 amount that we need, in terms of replenishing and basic
20 items that have to be paid, is $3.2 million. That's for
21 going forward, replenishment, and the various items that we
22 need to actually spend.
23 THE COURT: Hello? Hello? 3.2 million, go ahead.
24 MR. SCHWED: Okay. In addition, something that I
25 didn't know before.
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1 THE COURT: You said 4, and then we got 4 --
2 MR. SCHWED: 3.2, which is replenishment of the
3 stores; that's primarily what that is.
4 THE COURT: Okay.
5 MR. SCHWED: And there are a couple of other
6 items, and Mr. Weil -- I'm sorry, Mr. Henrich will explain
7 some of the detail if you have further questions.
8 In addition, what I learned today is that PACA
9 suppliers all did not ship today. They essentially, their
10 counsel -- and, apparently, they're all represented by one
11 counsel -- advised that unless PACA payments are made,
12 there's going to be no shipments going forward, which means
13 that no produce is coming to the stores; that's a problem.
14 THE COURT: Unless their --
15 MR. SCHWED: Their number if 470.
16 THE COURT: That's the prepetition amount.
17 MR. SCHWED: That's the prepetition number.
18 THE COURT: So that's the critic- -- that would be
19 in the critical vendor category, right?
20 MR. SCHWED: Correct, Your Honor. And that was a
21 motion that we had, which we addressed before our bid; that
22 was with the sales tax, and we decided to defer sale taxes.
23 I thought we could defer PACA, but based on what happened
24 today, we cannot defer PACA.
25 THE COURT: And they're not -- did anyone give
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1 them notice of today? You said they were represented by
2 somebody.
3 MR. SCHWED: Yeah, no, I was not aware of that.
4 We did give notice to the 30 largest creditors, which I
5 think included several PACA vendors, and I think there were
6 also conversations. Mr. Getzler and Mr. Henrich had
7 conversations with counsel for PACA, and maybe they can
8 speak to it a little more regarding those conversations.
9 But that is, you know, that's a problem. And if we don't
10 address it, then that could impact everything else behind
11 it.
12 So that's our number, Your Honor. In terms of the
13 details, I'm going to allow somebody from Getzler Henrich to
14 address it.
15 THE COURT: That's your number. But did you
16 figure out who you favor to give it to you? Wasn't that
17 part of what we --
18 MR. SCHWED: Yes, Your Honor, that is. And the
19 way, where we stand right now is that the Debtor recommends
20 -- based on conversations with Mr. Klestadt, who has now
21 advised me that he is prepared to delink the DIP loan and
22 the asset purchase agreement, which basically means that he
23 would like to go forward as a DIP lender.
24 He would like the motion for the asset purchase
25 agreement to be scheduled for a hearing, his motion for his
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1 agreement. However, he understands that if there is a
2 competing bid for a stalking horse lender, the Court may
3 consider that, and at that time, make a decision as to who
4 was going to be the stalking horse bidder.
5 THE COURT: Okay.
6 MR. SCHWED: And the point is that if SKNY is not
7 the stalking horse bidder, that will not trigger default
8 under the DIP facility.
9 THE COURT: All right. I mean, okay. Where there
10 -- I thought you had other -- there were other criteria.
11 MR. SCHWED: I'm sorry?
12 THE COURT: I thought there were other criteria as
13 well. But we can -- why don't we, we'll come back to this,
14 it sounds like. Why don't we -- you want to put somebody on
15 the stand?
16 MR. SCHWED: If you like, Your Honor, or I can
17 just have Mr. Henrich just go through the number with you.
18 Whatever you like, either way.
19 THE COURT: What's -- why don't we put him on the
20 stand, you can ask him questions.
21 MR. SCHWED: Sure.
22 THE COURT: And anybody else can follow up by way
23 of what's necessary. And then, again, we have to figure out
24 who was -- we have to compare the terms. Who's coming up?
25 (WITNESS WILLIAM HENRICH SWORN IN)
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1 CLERK: Please raise your right hand. Do you
2 affirm that the testimony you're about to give is the truth
3 and nothing but the truth?
4 MR. HENRICH: I do.
5 CLERK: Please have a seat. Say and spell your
6 name for the record.
7 MR. HENRICH: It's William Henrich, H-E-N-R-I-C-
8 H. Thank you.
9 THE COURT: I'm sorry, what's your first name?
10 MR. HENRICH: Sure, Bill or William. Thank you.
11 DIRECT EXAMINATION OF WILLIAM HENRICH
12 BY MR. SCHWED:
13 Q Good afternoon, Mr. Henrich. You've heard the
14 proceedings that went on today. Tell the Court, first of
15 all, what is your connection to the Debtor?
16 A I am one of the two co-chief restructuring officers.
17 Q And how long have you been in that position?
18 A Engagement letter is dated August 29th. I believe it
19 was signed August 30th. But as of the petition date, we
20 became CROs.
21 Q Okay. And since the time you became the CRO, have you
22 gained information to enable you to determine the needs of
23 the Debtor over the next couple of weeks?
24 A Yes.
25 Q In connection with the debtor-in-possession financing
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1 that's been presented to the Court, were you involved in the
2 preparation of the budget that's been presented to the
3 Court?
4 A Yes.
5 MR. SCHWED: Your Honor, I'd like to hand the
6 witness a copy of the budget.
7 MR. HENRICH: Thank you.
8 Q After the Court adjourned last, did you have an
9 opportunity to make a determination in what is critical and
10 essential for the next two weeks?
11 A Yes.
12 Q Okay. And could you tell the Court what items you
13 believe are critical and essential and what is the total
14 amount that is needed to go forward for the next two weeks?
15 A Sure. Well, the critical amount -- and let me rephrase
16 it this way. We started with $4 million, which is the need
17 that's depicted on the bottom of Page 2 of 2 in the second
18 column, the column entitled September 28th, and you see the
19 number $3,892,052, so that was the basis of the original $4
20 million. That involves -- that includes monies being spent
21 for inventory restocking.
22 In those two weeks -- and, again, this is about
23 the fourth line of numbers on Page 2 of 2. In the two
24 weeks, September 21st and September 28th, 1.6 million in the
25 first week, and 1.040 million in the second week.
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1 We're prepared to adjust that, and I do want to
2 make one clarification, which we shared with the U.S.
3 Trustee, which was mentioned before we broke. This
4 inventory restocking line is not the entire purchases of
5 groceries for the 13-week period of the DIP.
6 If you look on Page 1 of 1, about a third of the
7 way down, there's a section entitled CGS, which is cost of
8 goods sold, and there are lines underneath it, concessions,
9 groceries, and produce, total groceries and concessions. So
10 the inventory restocking, because the shelves are in many
11 cases bare in the stores today, is a one-time replenishment
12 of the stores. And the routine purchases of product is
13 depicted on this first page on total groceries and
14 concessions. So I just wanted to clarify the misnomer that
15 was made to the Court earlier.
16 In the inventory restocking line, we're prepared
17 to reduce that by 300,000. And we get that, we get that by
18 deferring the restocking of the Manhattan store, which we
19 feel we can do because there's only one concession vendor in
20 that store, and we're very concerned about replenishing
21 traffic through the stores to maintain our concession
22 relationships. But with only one concession vendor in that
23 particular store, we're prepared to defer the restocking of
24 Manhattan.
25 In addition, included in here, is the
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1 stocking of the new Scarsdale store. So there are Scarsdale
2 stores, Your Honor; there's a little Scarsdale and a big
3 Scarsdale. The existing store is the little Scarsdale. We
4 weren't seeking to replenish that store. We were seeking to
5 close that and open up new Scarsdale. But for purposes of
6 this exercise, we would look to defer, after the two-week
7 timeframe, to do the inventory stocking of big Scarsdale,
8 and that's about a quarter million dollars for that store.
9 In addition, when you -- and let's proceed
10 down the lines right underneath the inventory restocking.
11 We had contemplated paying the prepet- -- the sales tax
12 pursuant to the motion, the prepetition sales tax, because
13 that typically is due on the 20th of the month, which was
14 this week and that's why it was scheduled for this week.
15 But we will defer that and willing incur whatever penalty
16 might be levied on that.
17 The other line item that we're contemplating
18 deferring, but there's a real risk based on what you heard
19 Mr. Schwed say before, is deferring the PACA amount, the
20 470,000. And as I shared with the U.S. Trustee, there's a
21 detailed list of the vendors and the amounts owed to those
22 vendors, so there's detail behind -- considerable detail
23 behind these two summary pages in the development of the
24 DIP. So, you know, we would push that out to the October
25 5th week, but there's a real risk in attempting to get the
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1 vendors to ship the produce to the stores, so we would have
2 to talk to them.
3 So that would bring it down to potentially 3.2
4 million, depending on whether or not -- yeah, obviously,
5 there's a preference to try to fund the PACA at 3.7, if the
6 Court would allow; or we would incur the risk of not paying
7 the PACA and trying to defer it and still try to solicit the
8 vendors' support, which may be very challenging.
9 THE COURT: Do you think there's a middle ground?
10 MR. HENRICH: It's difficult to do a middle
11 ground across stores. It's more about servicing individual
12 stores. Again, part --
13 THE COURT: No, I don't -- I mean, I know around
14 about PACA.
15 MR. HENRICH: No, I understand, and that's what
16 I'm -- that's hard to say. I've been involved in cases with
17 PACA before, the PACA Trade Council and there's counsel that
18 typically represents PACA. They're pretty vigorous in their
19 pursuit of getting PACA claims paid out of the gate, and
20 they advise their clients accordingly to leverage the
21 Debtors to be able to pay PACA. I'm skeptical whether
22 there's a middle ground possibly, and I've been in several
23 cases that have had PACA representation before.
24 I think that answers the question, and I'm happy
25 to answer, you know, Your Honor's questions about other
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1 aspects of the budget. What we didn't, what we couldn't do
2 in a very quick fashion, is clearly the sales or represented
3 by the cash collections, total cash received, obviously
4 contemplate sale of produce, PACA. If we don't have produce
5 to sell, that would be reduced; that obviously impacts the
6 budget. But in the half-hour break, we're unable to do it.
7 But the real focus here was, especially given that
8 this has gone on, our understanding, well before our
9 involvement, that the shelves have been bare for weeks. But
10 there is a captive audience, there is a core customer base
11 that continues to come to purchase what they can, whatever
12 is on -- what is on the shelves.
13 In conjunction with filing Chapter 11, we want to
14 be able to send the message back, and starting with the
15 circulars that we're going to go out with, that we're back.
16 We're in bankruptcy, but we have funding, and the stores
17 will be stocked again. And that -- and while we may not
18 have all the shipments of goods sufficient to capture all
19 the Sukkot sales, that's understood. I mean, Your Honor's
20 calculation was appropriate.
21 But it's about ramping up the stores, getting the
22 product in at first chance, getting the message out to the
23 community that the stores are back in business in full force
24 and bringing the customer base back up. And that's why you
25 see the ramping up of the collections, which is representing
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1 the sales, over time. Right now, the company has been
2 generating, even at its -- in its depressed cash constraint
3 state, about a million dollars a week, or subbed a million
4 dollars a week, so that's we're here.
5 And we figure once we -- if we order the goods now
6 and get those goods in, we'll start seeing that ramp up over
7 time. We'll bring the customer base back. But we need to
8 get that message out to be able to rehabilitate the value of
9 the company; that we do have parties of interest in the
10 courtroom that are willing to pay value for this, but we're
11 trying to rehabilitate the stores to realize that value.
12 Q So is it your view that the lowest amount that would
13 accomplish what you're trying to accomplish for the next --
14 going forward, and certainly the next two weeks, is $3.2
15 million is what would be necessary in terms of the stores
16 and, in addition, the PACA payment as well.
17 A The 3.7 is preferred; the 3.2 has a risk with respect
18 to the PACA.
19 THE COURT: All right, so I guess that's 3.6. We
20 went from 3.892 to 3.67; is that right, assuming PACA has to
21 get paid in full?
22 MR. HENRICH: If we wait about 300,000, yes, or
23 3.59, so it's about 3.7.
24 THE COURT: Just for the record, I would like you
25 to ask the witness what happens if you don't get the amount
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1 of money.
2 Q Examiner, could you tell the Court, please, what would
3 happen if you don't get the amount of money that you've just
4 described as being necessary?
5 A You know, from our experience, understanding of the
6 community, and also in discussions with Mayer Gold as well,
7 I think that it could be devastating between filing Chapter
8 11 and continuing for an extended period of time of not
9 having goods in the stores to satisfy the customer base.
10 But equally important is, you know, the
11 concessions are skittish to begin with about what our status
12 is, other vendors are skittish, and we need to be able to
13 bring that customer base back, bring the traffic back to the
14 stores to be able to maintain those concessions and vendors
15 supporting the store, and that's done by bring the traffic
16 back.
17 Q Thank you.
18 THE COURT: I have a question about, what is --
19 under, on the second page, under other vendors. What is
20 concession vendors advance?
21 MR. HENRICH: Right. So a number of these
22 concessions vendors have gone weeks without payment, and
23 some of them are cash strapped, right? So they've indicated
24 to us that they need some funding in advance to be able to -
25 - for them to make the purchases of their product to bring
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1 to the stores. So that's about a half-weeks in dollars;
2 that's maybe a little more than a half-a-weeks of actual
3 concession purchases or something of that nature.
4 But it's giving us the opportunity to sprinkle to
5 some of the concession vendors some cash in advance towards
6 their purchases. Basically, all these vendors have said
7 they'll support us on CIA or COD, and this gives us some
8 money for basically the CIA.
9 THE COURT: Okay, so that's in -- that's on top of
10 the concession expenditures on the first page.
11 MR. HENRICH: Yes.
12 THE COURT: Okay.
13 MR. HENRICH: Yes. And as I explained to the
14 U.S. Trustee, is that we recapture that advance in our
15 calculation of post-sale accrued administrative expenses.
16 It's not depicted here.
17 THE COURT: Okay.
18 MR. HENRICH: Right, but I shared the schedule
19 and showed them that that was our methodology.
20 THE COURT: Do you have anything else?
21 MR. SCHWED: No.
22 THE COURT: Okay.
23 MR. SCHWED: Thank you, Your Honor.
24 THE COURT: Does anybody else want to question the
25 witness? No? Okay, you may step down.
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1 MR. HENRICH: Thank you, Your Honor.
2 THE COURT: Okay. So let's go over what we're
3 looking at then.
4 MR. SCHWED: Just to remind the Court that we had
5 previously deferred the wages motion to second call as well.
6 THE COURT: Okay. Well, let's first do the -- I
7 guess it makes sense now to do the DIP first.
8 MR. SCHWED: Okay.
9 THE COURT: So what are we looking at in -- do I
10 have a plain vanilla proposal yet?
11 MR. SCHWED: I think it is, Your Honor.
12 MR. KLESTADT: Your Honor, Tracy Klestadt for
13 SKNY. Your Honor, Mr. Curtin and my partner, Mr. Scott, who
14 had to leave unfortunately, have gone through Mr. Curtin's
15 comments. We've accepted I think substantially all of them
16 to make this as plain vanilla as possible.
17 I think Your Honor expressed some concerns about
18 the linkage between our DIP agreement and the asset purchase
19 agreement. I think, Your Honor, that can be eliminated by
20 deleting -- and we'll include the paragraph in the order --
21 the loan agreement, Section 9.1.
22 THE COURT: Well, let me get to the -- what
23 document is this now?
24 MR. KLESTADT: The asset purchase -- the loan
25 agreement, Your Honor.
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1 THE COURT: I know. What number?
2 MR. KLESTADT: The loan and security agreement
3 that's attached.
4 THE COURT: Just give me a number.
5 MR. KLESTADT: Pardon me?
6 THE COURT: Just what number in the book.
7 MR. KLESTADT: It's docket no. 10.
8 THE COURT: That's not what I'm asking. Hold on.
9 The DIP is -- 20? Okay. I have a lot of little, a lot of
10 comments myself, so I want to be sure and see what I can
11 capture. Go ahead, what were you going to say?
12 MR. KLESTADT: I was going to show Your Honor
13 what's the -- in the agreement, Section 9 in the events of
14 default, and 9.1(I). I think if we delete that, it takes
15 care of the problem. And that one sentence, Your Honor,
16 means the APA is terminated for any reasons other than the
17 default of the lender under the APA. That's removed as an
18 event of default. I think that de-links the DIP agreement
19 from the APA sufficiently.
20 Your Honor, it's Page 19 and 20 of the DIP loan
21 agreement.
22 THE COURT: Right now, I see it. I'm just trying
23 to -- what subsection were you just reading?
24 MR. KLESTADT: 9.1(I).
25 THE COURT: Okay. So all references to rollup are
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1 gone.
2 MR. KLESTADT: For the interim order, Your Honor.
3 THE COURT: Yes, that's what -- I'm going to talk
4 about the interim order.
5 MR. KLESTADT: And we're preserving all rights of
6 the committee, if appointed, to investigate and to object,
7 et cetera, et cetera.
8 THE COURT: What period?
9 MR. CURTIN: Extending the challenge period to
10 what's in the local rule, Your Honor: 60 if the committee's
11 appointed, 60 past retention of counsel; if no committee's
12 appointed, then 75 past the final order.
13 THE COURT: Okay. Are you still at December 31?
14 MR. KLESTADT: Yes, Your Honor, although I can
15 extend that. But it was thought that would be, from an
16 accounting standpoint, from an operation's standpoint, to
17 use that as the break point for transaction.
18 THE COURT: Okay. So we are now talking about an
19 interim amount of --
20 MR. KLESTADT: 3.7 million, Your Honor, I believe.
21 THE COURT: Right, and change. I just had it.
22 That's why -- $3,670,000, right? Plus, we -- yeah, thank
23 you. Okay, we're going to take out all of the -- we're
24 going to move all of these findings --
25 MR. KLESTADT: Yes, they'll become stipulations --
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1 THE COURT: -- for various causes.
2 MR. KLESTADT: They'll become stipulations, Your
3 Honor --
4 THE COURT: Okay.
5 MR. KLESTADT: -- obviously subject to further
6 finding in a final order.
7 MR. CURTIN: Everything with respect to 506(c) is
8 out also, for the interim order.
9 THE COURT: So the lien situation is replacement
10 liens, correct?
11 MR. KLESTADT: For cash collateral?
12 THE COURT: Yes.
13 MR. KLESTADT: Yes.
14 THE COURT: Okay.
15 MR. KLESTADT: But for the new money coming in,
16 Your Honor, it's prime liens.
17 THE COURT: I understand that.
18 MR. CURTIN: Neither the priming lien nor the
19 replacement liens are attaching to Chapter 5 cause of
20 action.
21 THE COURT: Right.
22 MR. KLESTADT: That's fine.
23 THE COURT: Right. I don't think they did before.
24 MR. KLESTADT: No, they didn't, Your Honor.
25 THE COURT: They are going to -- the offer,
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1 though, does. Okay.
2 MR. KLESTADT: The offer --
3 THE COURT: We're not there doing that, right.
4 Now what is the carve-out now?
5 MR. CURTIN: The modifications we made to the --
6 proposed modifications to the carve-out, we slightly
7 increased the Chapter 7 burial expenses, and we also equaled
8 out the professional carve-out so it's -- to comply with the
9 local rules, so it's an aggregate amount to be split however
10 it's split between Debtors' Counsel and Committee Counsel
11 (indiscernible) 1525. Other than that, it's got the court
12 fees, it's got the US Trustee fees, pretty standard carve-
13 out.
14 MR. KLESTADT: That's fine, Your Honor.
15 THE COURT: Okay, there were some concerns about
16 my making findings in connection with the lender, other
17 than, again, the plain vanilla findings.
18 MR. CURTIN: I think we've pulled all those into
19 stipulations, so that's just (indiscernible).
20 THE COURT: Okay, good.
21 MR. CURTIN: The caveat here, of course, I was
22 doing this on the fly.
23 THE COURT: No, I understand.
24 MR. CURTIN: When we get done, we're going to go
25 back and look, but I think we --
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1 THE COURT: And I'll read it, once I get it.
2 MR. CURTIN: We've also one kind of general
3 comment. In several places throughout the order, we've made
4 it very clear that -- and all this is only with respect to
5 money that's actually lent, pursuant to this interim order.
6 So there's a couple places where, when I was reading it, I
7 thought it was a little confusing, so you'll see in probably
8 10 or 12 different locations, we've added the clarification
9 that anything that's being granted it only subject to what's
10 actually lent.
11 MR. KLESTADT: That's acceptable, Your Honor.
12 THE COURT: Okay. And I guess, it seems to me, as
13 I said, we're probably going to add notice of -- I didn't
14 put it in my order, because (indiscernible), you have the
15 United States Attorney here. That probably should happen,
16 as well as, as you said, if you know who (indiscernible)
17 counsel is.
18 Just a funny -- you have a footnote that I was --
19 thought was -- I had a question about on Page 14. You say
20 DIP collateral shall include collateral provided by non-
21 Debtor entities in the proceeds thereof to the fullest
22 extent possible under applicable law, provided, however --
23 I'm not going to -- you know, I can't expand my jurisdiction
24 over that. Is there, in this agreement, collateral being
25 provided by non-Debtor entities? Footnote 4 on Page 14.
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1 MR. CURTIN: I think we can delete that, Your
2 Honor.
3 THE COURT: Okay.
4 MR. CURTIN: I can't say with 100 percent
5 certainty (indiscernible) the loan documents I don't think
6 there's --
7 THE COURT: I don't know what that was referencing
8 because I didn't see anything in there.
9 MR. CURTIN: I'll look again, but --
10 MR. KLESTADT: We'll delete that, Your Honor.
11 THE COURT: All right, so now we've got to get --
12 just to clarify for the record, because it certainly is not
13 clear as we stand now, and that is finding with respect to
14 the fact that this was the -- this particular proposal is in
15 the best interest of the estate and that you cannot get this
16 credit on more favorable terms, since there was plenty of
17 discussion before that you could. So understanding the --
18 taking into account the agreed upon modifications, I need
19 something for the record to clarify that. Anybody want to
20 be heard? Oh, that worked for Mr. Schwed, then. Sure.
21 MR. SCHWED: Your Honor, regarding other offers
22 that have been presented today, at this point, for a DIP
23 loan, that offer, we -- the Debtor considers that offer to
24 be relatively comparable and not something that is
25 substantially significantly better for the estate. And
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1 therefore, the Debtor is -- believes that we should go
2 forward with the DIP loan that is presented by Mr.
3 Klestadt's client.
4 THE COURT: Okay, and just one point of
5 clarification. It is not -- is it, or is it -- did we untie
6 it to the point that they are not necessarily the stalking
7 horse and you're going to be looking at that motion as to
8 who the stalking horse is, or no?
9 MR. SCHWED: Yes, but I want to clarify it, I
10 mean, with a caveat. I think what Mr. Klestadt is going to
11 -- got up to tell you is that the Debtor will -- has
12 presented a motion to proceed with an asset purchase
13 agreement by Mr. Klestadt's client as the stalking horse.
14 We ask that Your Honor schedule a hearing in connection with
15 that, and to the extent that Mr. Kohn's client or somebody
16 else steps forward and presents an asset purchase agreement
17 or stalking horse agreement which is materially,
18 substantially better for the estate, the Debtor will support
19 it.
20 THE COURT: You'll amend your motion?
21 MR. SCHWED: Correct, Your Honor.
22 MR. KLESTADT: Your Honor, no, that's where I take
23 issue. The Debtor has to proceed with the motion that's on
24 file. That's the obligation that the Debtor has under my
25 asset purchase agreement. If someone wants to come along
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1 and file an objection and say I have another stalking horse
2 offer, that's fine. Then we can come to a hearing and Your
3 Honor can make the determination whether or not a --
4 THE COURT: Why does the Debtor have to do that?
5 MR. KLESTADT: Because the Debtor is under
6 contract, Your Honor, under the asset purchase agreement, to
7 present that motion. It's subject -- the motion --
8 THE COURT: Having nothing to do with the fact
9 that you're the interim DIP lender.
10 MR. KLESTADT: Correct. Correct, we have untied
11 those by virtue of that removal event of default that I
12 mentioned earlier. But now, Your Honor, the Debtor has the
13 obligation to, at a minimum, present the motion. Someone
14 else comes along and says Your Honor, I have a better
15 stalking horse offer, then it's up to Your Honor whether to
16 not to entertain another stalking horse offer.
17 But at this point, Your Honor, the Debtor has the
18 contractual obligation to present the offer, to have the
19 bidding procedures approved, and it's up to Your Honor
20 whether or not to approve them. The procedures provide for
21 my client's offer to be the stalking horse offer, again,
22 subject to court approval. If Your Honor says no, there's
23 another stalking horse offer and we're going to substitute
24 that in, that's fine. But at a minimum, Your Honor, the
25 Debtor must present the motion as is. It cannot withdraw
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1 the stalking horse motion.
2 MR. SCHWED: Your Honor, I don't disagree with
3 anything Mr. Klestadt said.
4 THE COURT: Okay.
5 MR. HENRICH: Your Honor, I'm not understanding
6 what under contract means. Under contract, what Mr.
7 Klestadt is referring to, is the APA that was filed last
8 night, which is a pre-petition contract that is subject
9 totally, in toto, to Your Honor's approval. And therefore,
10 it's sort of -- it can be, if Your Honor wanted it to be and
11 if the Debtor would withdraw it, to be void ab initio,
12 because there's no such -- there's no binding contract,
13 which its condition was to be approved by Your Honor.
14 So, in all of bankruptcy, I've never heard of a
15 binding contract, pre-petition, being (indiscernible) on
16 Your Honor or the Debtor to go forward with that motion.
17 Debtor always needs to be able to obtain higher and better
18 offers as a stalking horse bidder. As a matter of fact, we
19 were told this by the Debtor, Mr. Schwed, a few minutes ago,
20 that the purpose of the (indiscernible) of the APA was that
21 we can come in as a stalking horse bidder without any
22 approval -- without any consequences to the estates.
23 Now, I'm not sure the US Trustee focused on this,
24 but there is -- there are other provisions in the DIP that
25 relate to the APA, other than the events of the call, such
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1 as the exit fee. The exit fee goes into play when -- is
2 triggered when there -- eventually, down the road, there's
3 an alternative transaction and SKNY does not (indiscernible)
4 assets. So that is -- it's not totally (indiscernible) yet.
5 There are other provisions and stipulations that have to do
6 with the APA. You would have to take a look at it carefully
7 to see that it was totally (indiscernible).
8 But the point was, I mean, we're told by Mr.
9 Schwed a few minutes ago that we would be able to come in
10 and present a stalking horse bid without any penalty to the
11 estate whatsoever, without any penalty on the DIP, without
12 any defaults, or without any cost to the Debtors at all.
13 And as a matter of mechanics of whether the Debtor withdraws
14 the motion or not, or -- I don't think we're going to object
15 to a motion. I think we can object. I think the Debtor has
16 to be able to present to Your Honor the best stalking horse
17 bid, and I think that's what we were told was going to
18 happen.
19 MR. KLESTADT: Your Honor, I respectfully
20 disagree.
21 THE COURT: Well, I'll tell you that before I
22 approve a stalking horse, subject to better and higher
23 offers, I have had many experiences where parties came in
24 and they substituted one stalking horse for another because
25 they made a better deal. So, it's also news to me. I'm not
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1 sure what -- you know, is a pre-petition agreement, I don't
2 think I agree with you.
3 I think that, again, it's not as if I approve the
4 stalking horse so that the stalking -- or whether it's with
5 break-up fees or any other thing. I haven't done that yet.
6 MR. KLESTADT: No, you haven’t, Your Honor.
7 THE COURT: The case was filed last night.
8 MR. KLESTADT: I understand that, Your Honor.
9 However --
10 THE COURT: People here -- $8 million unsecured
11 creditors got an hour-and-a-half notice, so the idea that --
12 the idea that folks are bound, I don't think so.
13 MR. KLESTADT: Your Honor, the Debtor, in my view,
14 is bound to prosecute the motion to Your Honor. Now, at
15 that point --
16 THE COURT: Or what?
17 MR. KLESTADT: Your Honor, I believe --
18 THE COURT: Or what? What is your -- or what?
19 What is your remedy?
20 MR. KLESTADT: Your Honor, the remedy would be an
21 unsecured claim for breach of contract.
22 THE COURT: Isn't it -- they'll reject the
23 contract.
24 MR. KLESTADT: They could reject the contract.
25 THE COURT: What are your damages?
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1 MR. KLESTADT: At this point, standing here, Your
2 Honor, I don't know. It may be -- I may be entitled to
3 whatever profits we may have obtained by operating the
4 business, or lost opportunity costs. I haven't even begun
5 to think about that, Your Honor, all right? But from my
6 standpoint --
7 THE COURT: In New York?
8 MR. KLESTADT: Pardon me?
9 THE COURT: In New York?
10 MR. KLESTADT: Yes.
11 THE COURT: Under New York law?
12 MR. KLESTADT: Yes. But at this point, Your
13 Honor, all right, the Debtor has a contract and an
14 obligation to present the stalking horse offer to Your
15 Honor. Parties can come in and object and say no, I've got
16 a better stalking horse offer, and Your Honor can then say
17 to the don't --
18 THE COURT: I know, because I think what you're
19 doing is you're undermining the Debtor's business judgment.
20 MR. KLESTADT: No, Your Honor.
21 THE COURT: Because the Debtor -- as the debtor in
22 possession, I'm supposed to give some deference to the
23 business judgment of the Trustee or the debtor in
24 possession.
25 MR. KLESTADT: And right now, Your Honor, it's the
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1 Debtor's business judgment to have signed the motion --
2 excuse me, sign the asset purchase agreement, subject to
3 Bankruptcy Court approval, and entered into a contract which
4 obligates it to present the motion to Your Honor for
5 approval.
6 THE COURT: It did it, and then it can withdraw
7 it. It filed it again, but I'm not hearing it today, and
8 there hasn't been enough notice of it, so I disagree.
9 MR. KLESTADT: You're entitled, Your Honor.
10 MS. KIRBY: Your Honor, this is Dawn Kirby. May I
11 speak?
12 THE COURT: Yes.
13 MS. KIRBY: Oh, good. There was a problem with
14 the phone line for the last bit. I have been contacted and
15 am in the process of being retained by a number of the
16 concessioners, and to the extent that however the order
17 turns out, I wanted to advise The Court that the
18 concessioners may be taking the position that the monies
19 that were collected on behalf of their sales were to be held
20 by the Debtor in trust, with the Debtor allowed to keep a
21 part of the funds as a commission. However, the funds
22 themselves belong to the concessioners, who sold their own
23 goods to customers. So, to the extent that there is any
24 carve-out and language concerning potential claims for trust
25 funds for monies that are not property of the Debtor, I just
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1 wanted to raise this issue and alert you to it, and not
2 have it as a surprise for everyone down the line.
3 THE COURT: Well, nice that you let us know,
4 because there's been no discussion about that other than,
5 again, talking about --
6 MS. KIRBY: I have -- during -- I also only had
7 about an hour's notice of this hearing, and during this time
8 period that I've been on the phone, at least two of the
9 concessioners have sent me copies of their contracts, and I
10 think they have -- they may have an argument, a strong
11 argument, along those lines. But it would be something that
12 would have to be, obviously, presented before The Court for
13 a decision.
14 THE COURT: Thank you --
15 MS. KIRBY: This is all happening so fast, there
16 may be trust fund issues.
17 THE COURT: Thank you for previewing that. A lot
18 of people have stood.
19 MR. NOVIC: Thank you.
20 THE COURT: State your name again for the record.
21 MR. NOVIC: Sorry, Rob Novic, Kasowitz, for the
22 Super Sol Creditors. Just to conclude the last little
23 divergence, I don't think there can be any breach of a
24 contract or a condition precedent to the contract is that
25 The Court approves the contract. I don't think it's any
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1 more complicated than that.
2 I just -- I know the hour is growing late and --
3 THE COURT: Yeah, I thought we'd be here much
4 longer, so we're okay.
5 MR. NOVIC: Oh, okay. And we've gotten an awful
6 lot of what Super Sol had hoped to get out of the hearing,
7 but we do have one issue we want to harp on, which is the
8 untying of the two agreements. If I could ask Your Honor to
9 look again at Filing 10-1, which is the -- at Page 20 and
10 21, which is the list of defaults under the loan agreement.
11 There were --
12 THE COURT: We're talking about now the --
13 MR. NOVIC: The DIP.
14 THE COURT: The DIP?
15 MR. NOVIC: Yeah.
16 THE COURT: We're in -- well, you're looking at
17 what would be the order?
18 MR. NOVIC: No, the loan agreement.
19 THE COURT: Oh, the agreement?
20 MR. NOVIC: Yes.
21 THE COURT: Okay, hold on. I got it. Now give me
22 the page again
23 MR. NOVIC: They removed one of the connections --
24 THE COURT: Give me the page again.
25 MR. NOVIC: Page 20.
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1 THE COURT: Yeah.
2 MR. NOVIC: Which starts on Page 19, that section.
3 THE COURT: Yes.
4 MR. NOVIC: They removed one of the connections
5 that ties the two motions together, but there were five or
6 six in here, and the others are still there. So I'd like to
7 point out the following that I think all have to come out in
8 order to effectuate Your Honor's -- I don't know if it was
9 advice or a ruling. E, in event of default as defined in
10 the APA has occurred and is continuing under the APA. An
11 APA fault should not be a DIP default, especially before the
12 APA has been the winning bid.
13 F, the filing of a Chapter 11 plan for the Debtors
14 that does not provide for the consummation of the
15 transactions contemplated by the APA or payment in cash in
16 full of the DIP obligations. That's only the first part --
17 okay, maybe that one's all right because of the second half,
18 but not too clearly.
19 M, the bidding procedures order, as defined in the
20 APA, which authorize --
21 THE COURT: So F is okay because of the "or,"
22 correct?
23 MR. NOVIC: F is okay because of the "or." I'll
24 take that one back. M, the bidding procedures order, as
25 defined in the APA, which authorizes the lender to credit
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1 bid the pre-petition indebtedness and the DIP obligations,
2 pursuant to section 363(f) and 363(k), shall not have been
3 entered by The Court on or prior to October 9, 2018. Again,
4 we have a DIP default tied to entry of approval of the APA.
5 THE COURT: Well, particularly since we're having
6 this other conversation now about --
7 MR. NOVIC: Yes. Yes.
8 THE COURT: One second.
9 MR. NOVIC: And O, the Bankruptcy Court authorized
10 or approves an alternative transaction, as defined in the
11 APA, or the Debtors withdraw or seek authority to withdraw
12 their motion seeking approval of the transactions
13 contemplated by the APA.
14 THE COURT: Exactly what we're talking about now.
15 MR. NOVIC: Now, yeah.
16 THE COURT: So in other words, your position would
17 be that if they withdraw their motion to approve your client
18 as the stalking horse, that would be a default under the
19 DIP?
20 MR. KLESTADT: I'd be glad to waive that, Your
21 Honor.
22 THE COURT: You would?
23 MR. KLESTADT: But, Your Honor, I'm not prepared
24 to waive M. That's a typical requirement in DIP loans of
25 any type, the timing for a bidding procedures order, so that
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1 the case doesn't drag on and that there are benchmarks for
2 progress in the case.
3 THE COURT: Well the problem -- well, let's go
4 back. The problem with a lot of this is the way DIP
5 obligations is defined. DIP obligations is defined -- DIP
6 obligations includes everything, includes the roll-up,
7 includes -- I mean, the DIP obligations has a massive, you
8 know, all-inclusive definition here. So you're going to
9 have to fix -- that's the problem with the interim order.
10 That's why it really can't -- it shouldn't -- you want to
11 talk about it in the final order, maybe. But in the interim
12 order, when we're not talking about a roll-up, gives you an
13 amount that you're bidding.
14 MR. KLESTADT: That's actually a problem I didn't
15 even contemplate.
16 THE COURT: Well, yes, DIP obligations is defined
17 to include everything, including the roll-up, which I'm not
18 considering today.
19 MR. NOVIC: The concern is not that there are
20 milestones for a sale process, which --
21 THE COURT: No, not at all.
22 MR. NOVIC: -- which is as -- which is common.
23 The problem is that there are milestones for approval of
24 this APA and this set of bidding procedures. If it just
25 said a bidding procedures order, then that would not be
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1 objection.
2 MR. KLESTADT: I can agree to that, Your Honor. A
3 bidding procedures order is entered by October 9th.
4 MR. NOVIC: With lower-case B, P, and O.
5 THE COURT: I mean, so this has to be gone through
6 fairly closely.
7 MR. NOVIC: Yes.
8 THE COURT: I assume by tomorrow morning, right?
9 MR. KLESTADT: Well, Your Honor, yes. I haven't
10 said that, Your Honor. I assume Mr. Schwed is going to ask
11 you to (indiscernible) the record, because the Debtor is
12 going to be looking for us to wire funds tomorrow.
13 THE COURT: No. Work tonight. Work tomorrow. My
14 computer goes wherever I go. You'll circulate the order and
15 circulate the agreement, and hopefully, you will have caught
16 all of this. But just so we're clear, I'm still troubled
17 with where we just were a few minutes ago, and that is I --
18 you want to come up?
19 MR. HENRICH: Yeah, just looking at, just to
20 supplement the record --
21 THE COURT: Go ahead.
22 MR. HENRICH: -- because Your Honor should look at
23 Section 2.9 as well, which references alternate transaction
24 and APA. There's a 2 percent exit fee.
25 MR. KLESTADT: Your Honor, that we require.
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1 MR. HENRICH: We're prepared to do it without it.
2 MR. KLESTADT: Well, he wasn't earlier, Your
3 Honor, and that's part of the pricing of the transaction.
4 This does not link the two transactions. There's just a
5 patch for the purpose -- it's part of the pricing.
6 THE COURT: No, I can't do anything about that as
7 long as they're continuing to go with it. But again, I
8 don't agree with you. Just so we're clear here, I do not
9 believe -- I would not call it a default. It should not be
10 a default if the Debtor decides that it wants to amend its
11 order to do a stalking horse. I mean --
12 MR. KLESTADT: Amend its motion.
13 THE COURT: Amend its motion, I'm sorry, amend its
14 motion to change the stalking horse. The appearance of it,
15 otherwise, is terrible. Putting aside the fact that it
16 doesn't make sense to me and it's not the law, the
17 appearance is terrible. The idea here is to maximize the
18 value of the assets.
19 MR. KLESTADT: Which it still can do, Your Honor.
20 There's no prohibition on the Debtor marketing the assets.
21 THE COURT: Why do you care so much?
22 MR. KLESTADT: Your Honor, my client is the one
23 that's stepped up here. We invested the time, the effort,
24 the fees --
25 THE COURT: Well your client stepped up because it
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1 was in the position to step up. I doubt, you know, people
2 want to get into that. But other people apparently are
3 willing to step up, too.
4 MR. KLESTADT: Well, they didn't, Your Honor.
5 With all due respect to the people showing up as Johnny-
6 come-latelies, they weren't here when the emergency funds
7 were needed pre-petition, for -- to retain the professionals
8 --
9 THE COURT: The Johnny-come-lately here has to do
10 with the timing of this filing, and you were around to help
11 figure that out, I assume, or your client.
12 MR. KLESTADT: Absolutely, Your Honor. We were
13 pushing and pushing and pushing. There's no question about
14 that.
15 THE COURT: Okay, so I am telling you, and so
16 let's make it clear, because I'll strike it if it's there,
17 that it is not any event of default, under this or any other
18 agreement, if the Debtor decides to amend its motion for
19 bidding procedures in approval of a stalking horse.
20 MR. KLESTADT: Very well, Your Honor.
21 THE COURT: Want me to so order that on the
22 record?
23 MR. KLESTADT: Very well, Your Honor.
24 THE COURT: I couldn't be clearer, right?
25 MR. KLESTADT: You cannot be clearer.
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1 THE COURT: Anybody else? Okay, I am -- the
2 reason I'm not so ordering the record is because, again, I
3 think everyone should go home -- I'm getting you out of here
4 early -- get on conference calls, read this document
5 closely, and for purposes of the interim order, for purposes
6 of the interim order, you can put in the provisions of the
7 order that says that all of these provisions don't apply for
8 purposes of the interim order that are just leaking that
9 they may want to have in the final order. But certainly,
10 I'm not going to -- I'm not approving it otherwise, because
11 otherwise, I don't think they're divorced. So, is that
12 clear? All right, and you're going to be taking a look as
13 well, correct?
14 MR. CURTIN: Yes, Your Honor, absolutely.
15 THE COURT: Okay. So the way to do this is to --
16 now, let's go back, because we want to not leave any -- we
17 want to figure out when we're coming back. The wage packet
18 is with sales tax and the wages are different, so we've got
19 two to deal with.
20 MR. SCHWED: Yes, Your Honor.
21 THE COURT: Okay, I mean, with respect to PACA, I
22 would like to see if you couldn't negotiate it with the
23 understanding that the Debtor will use best efforts to see
24 if it can get them to shift with some number less than what
25 you're -- a ceiling. But, subject to hearing from anybody
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1 else before I rule, I would prepare to allow them to go up
2 to the $470, if that's what it's going to require. Does
3 anybody else want to state an objection before I state that?
4 Okay. I would like the --
5 MR. CURTIN: Your Honor, one of the -- sorry.
6 They did provide -- I don't have it yet, but I saw it.
7 There is a breakdown of exactly who the PACA Creditors, so
8 they'll be able to provide that, and that was the other part
9 of what I'd asked for. So that's why I'm not objecting.
10 THE COURT: Okay, and that -- so it's, again, the
11 nature of a critical vendors.
12 MR. CURTIN: No.
13 THE COURT: No, it's not.
14 MR. CURTIN: I don't believe.
15 THE COURT: It's in the nature of --
16 MR. CURTIN: Because it's not -- it did not say
17 funds. It's the PACA funds, so they're technically not --
18 THE COURT: Okay.
19 MR. CURTIN: Right. So I don't think it's
20 critical that it is.
21 THE COURT: Okay.
22 MR. CURTIN: They're borrowing for it, but it's
23 not a critical vendor.
24 THE COURT: Right, okay. Okay. All right, so up
25 to that amount in the borrowing for that purpose, and see if
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1 you can, again, negotiate something south of that. That
2 would be good.
3 So that portion of the motion is approved, and the
4 portion relating to sales tax we're going to put over until
5 the fourth? Is that what --
6 MR. SCHWED: Yes, Your Honor.
7 THE COURT: Okay. Now, on payroll --
8 CLERK: Circulate and submit all (indiscernible)?
9 THE COURT: They're going to circulate and submit
10 it, yeah. With respect to wages, there's more information
11 that you--
12 MR. CURTIN: Yes, Your Honor, I thought I'd made
13 it clear before, we don't have an issue with the concept of
14 paying employees, clearly. We sent our edits to the order.
15 I don't know how much time they've had to look at them. I
16 don't think they're especially controversial. But the --
17 THE COURT: But you're also looking for exhibits.
18 MR. CURTIN: -- again, the substantive piece is
19 the breakdown, yeah, which that I have not seen yet. I saw
20 the PACA; I have not seen the employees. So, I mean, the
21 ways we've done it in the past is, actually, you've approved
22 -- I don't know whether you, but somebody has -- one judge
23 has approved it, subject to that being provided. And then,
24 once it has been provided, then the order is uploaded so
25 that it obviates the need to come back just for that. And
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1 then, that way, if anyone thinks there's an issue, we can --
2 THE COURT: Okay, well why don't you do --
3 MR. CURTIN: It's also not something that's
4 typically filed because they don't -- but that's the way
5 we've done it in the past. I don't know if that's the way
6 you want to proceed. I'm happy to come back on Thursday if
7 --
8 THE COURT: No, no, if that's the only thing we're
9 coming back for…
10 MR. CURTIN: Yeah, I don't think we need --
11 MR. SCHWED: That would certainly be my preference
12 as well, Your Honor.
13 THE COURT: All right, well --
14 MR. CURTIN: For cash management, too, Ms.
15 Weinberger just reminded me. We still have that open issue.
16 So, I mean, I --
17 MR. SCHWED: Your Honor, if possible, it would
18 certainly be my hope that we could continue the current cash
19 management at least until October 4, and by then we'll
20 hopefully get you the confirmation --
21 MR. CURTIN: I can't consent to it.
22 THE COURT: He can't consent to it. Well, you
23 know what?
24 MR. CURTIN: And again, if Your Honor is
25 considering some type of interim -- again, making it clear
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1 that we don't consent to any -- but if you're considering
2 that, we would request that any interim order direct that
3 the Debtors begin now to open those debtor-in-possession
4 accounts and start instituting a sweep to those accounts
5 instead of the other accounts, which shouldn't interfere as
6 much as collections and so on.
7 THE COURT: So you're suggesting that they --
8 you're not suggesting, but you're saying that if I were to
9 allow them to continue the current cash management, that
10 they --
11 MR. CURTIN: Just through October 4.
12 THE COURT: -- you want them to sweep into an
13 approved depository.
14 MR. CURTIN: Yes.
15 MR. SCHWED: Your Honor, if I can have one second.
16 Your Honor, we can certainly do that, and we can open a DIP
17 account for corporate and sweep money to the account. To be
18 clear, corporate, once it receives the money, actually then
19 distributes that money. Like I said, it gets it on a daily
20 basis and uses that money to fund expenses of the DIP
21 (indiscernible). So it will actually often send the money
22 right back to the non-DIP account. I just want to be clear
23 on the record that that's the way it's going to work, at
24 least on an interim basis.
25 MR. CURTIN: The idea is whatever -- and it may be
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1 a non-issue, but whatever access there is will remain in the
2 debtor-in-possession account. And then the argument that
3 we're going to make is this is the first step towards -- you
4 know, usually the way it works is you start at the sweep,
5 and then the payment accounts are easier to switch over than
6 your collections account. I don't know whether it's that
7 way with this type of business. So that's what we'll be
8 arguing for, but again, not consenting to any of it. Just,
9 if you're going to go that route, Your Honor, we would
10 request that you at least direct them to get started with --
11 in that -- with that said.
12 THE COURT: I will allow you to continue the way
13 you're doing it with that proviso that you're going to open
14 a DIP account and the excess will get swept into that,
15 without prejudice to the right of the US Trustee and anyone
16 else to object on the adjourn date of what would be an
17 interim order. In other words --
18 MR. CURTIN: Right, and assuming that we don't
19 come to an agreement on it, we'll file it -- we'll file an
20 objection to that motion for the (indiscernible).
21 THE COURT: Okay, so is that okay to go to the
22 fourth, then? Or you want to go -- I mean, I have --
23 there's another week. No, there's a holiday, right? Hold
24 on.
25 MR. CURTIN: The fourth.
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1 THE COURT: The fourth? Okay, the fourth. So
2 with respect to cash management, I will so order the record
3 to the following effect: That you can continue proceeding
4 in the manner you're proceeding, providing that you, as soon
5 as possible, open up a DIP account at approved depository,
6 and that the excess, after you've done whatever else you do,
7 gets swept into that account without prejudice to the rights
8 of the Office of the US Trustee or anybody else to object at
9 an adjourned hearing on an interim order, which we'll have
10 on October 4. I'm not going to enter order, just so order
11 the record.
12 MAN 1: That's fine.
13 THE COURT: And we'll have a hearing on the
14 interim order, subject to any objections you'd want to file
15 before that.
16 MR. CURTIN: Thank you, Your Honor.
17 MAN 1: Thank you.
18 THE COURT: Payroll. So let's just go back
19 because we skipped. So, subject to you -- I mean, we could
20 --
21 MR. CURTIN: Right, let's just --
22 THE COURT: -- settle it on two days' notice.
23 MR. CURTIN: I don't know if we have time, Your
24 Honor.
25 MR. SCHWED: I might be able -- again, I believe I
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1 may actually have it or I'll be getting it momentarily. I
2 haven't had a chance to find it.
3 MR. CURTIN: I understand.
4 MR. SCHWED: I think I have no problem getting it
5 to you by tomorrow.
6 THE COURT: Okay, well if you can -- all right,
7 satisfy the Office of the United States Trustee on this one,
8 it would be nice if we can have just either a sing-off or
9 letting me know that --
10 MR. CURTIN: That's fine. We will -- I have no
11 problem signing off on that, Your Honor. That's fine.
12 THE COURT: Okay, fine, so you --
13 MR. CURTIN: Well, I have no problem signing off
14 on that assuming I have no objections, but the concept --
15 THE COURT: Assuming -- yes, if you don't sign off
16 on it, let me know and we'll have to do some kind of
17 telephonic hearing.
18 MR. CURTIN: Schedule something on Thursday maybe?
19 Okay.
20 THE COURT: In lieu of you coming in on -- anybody
21 coming in on the 20th, we can do something by telephone if
22 we have to.
23 MR. CURTIN: Yeah, that makes sense, especially if
24 it's just wages. That makes sense. Thank you.
25 THE COURT: Well, it's just wages.
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1 MR. CURTIN: It is just wages, right.
2 THE COURT: To somebody (indiscernible), it's very
3 important.
4 MR. CURTIN: I meant just as -- not just --
5 THE COURT: I know. I know what you meant. Okay,
6 but that as an interim?
7 MR. CURTIN: Yes, Your Honor, absolutely. Yes,
8 Your Honor.
9 THE COURT: Okay, with the hearing on the final --
10 MR. CURTIN: The final can be on the fourth.
11 THE COURT: On the fourth?
12 MR. CURTIN: Yes, please, Your Honor. Subject to
13 anybody requesting that it -- but you know, for now, we can
14 schedule it for the fourth.
15 THE COURT: And you're looking to have a hearing
16 on a final DIP on the fourth, or are we going later than
17 that?
18 MR. SCHWED: Yes. Yes, we are, Your Honor.
19 THE COURT: You are? You're looking to have a
20 hearing on a final DIP on the fourth?
21 MR. SCHWED: Yes. Yes, along with the bidding
22 procedures on the sale motion.
23 THE COURT: That's up to the Debtor.
24 MR. SCHWED: Yes, Your Honor, we had mentioned
25 that before, also, but yeah. Yeah.
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1 THE COURT: Well, it's up to the Debtor as to
2 whether -- what it's going to do with its motion, because I
3 made clear --
4 MR. SCHWED: Well, I mean, at this point we do
5 want to have a hearing on the fourth for bidding procedures.
6 I mean, obviously, you know, if we receive something in
7 between that we believe is in the best interest of the
8 estate to proceed with a different stalking horse bid, then
9 we'll go with that.
10 MR. CURTIN: My understanding of the agreement,
11 though, I think where we ended up though is there's going to
12 be a hearing on bidding procedures, small B, small P, on
13 that date.
14 MR. SCHWED: Right.
15 MR. CURTIN: Right? Whether it's capital or lower
16 case, we'll --
17 THE COURT: Okay, got it.
18 MR. KOTLER: Your Honor, with respect to the
19 hearing on the final DIP, is there any way --
20 THE COURT: The final DIP.
21 MR. KOTLER: The final DIP. Is there any way we
22 can -- I'm sorry. For the record, Larry Kotler, Duane
23 Morris, on behalf of Bank United. Is there any way we can
24 tie that from the formation of a committee and potential --
25 THE COURT: I may not approve what -- is there a
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1 provision I have to -- is there a provision for default if I
2 don't approve a final?
3 MR. CURTIN: No. And the committee, we're going
4 to endeavor to do that next week, so --
5 MR. KLESTADT: Your Honor, we would potentially
6 entertain a second interim --
7 THE COURT: Okay, understand that that's my
8 intention. I want a committee to look at this.
9 MR. KLESTADT: I understand, Your Honor, it's
10 important for a committee to be formed, if a committee is
11 formed.
12 THE COURT: With all the holidays --
13 MR. KLESTADT: Right, that's why I'm hedging a
14 little bit, because it's going to be a little bit more
15 difficult than usual.
16 THE COURT: Right.
17 MR. KLESTADT: But the goal would be to get it
18 done next week.
19 THE COURT: Okay, we may be looking at a second
20 interim on the fourth.
21 MR. KOTLER: Okay, thank you, uh.
22 MR. SCHWED: Your Honor, unfortunately, the
23 calendar doesn't work for us the way we laid out the dates.
24 The problem is that our two weeks are up the week before
25 October 4th. October 4th is Thursday, and two weeks from
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1 today is not going to take us to October 4th.
2 THE COURT: It takes you to October 3rd. October
3 2nd? What's two weeks? Today is --
4 MR. SCHWED: It takes us to October 1st, which is
5 actually --
6 THE COURT: I'm sorry, today is the 17th.
7 MR. SCHWED: Right.
8 THE COURT: I'm sorry.
9 MR. SCHWED: So it takes us through the 30th, but
10 the problem is, we're not going to have a hearing until the
11 fourth, which means we're not going to be in a position to
12 make expenditures that we need to do on the third and the
13 fourth.
14 THE COURT: Well what are you going to do about
15 the fact that it's a Jewish holiday?
16 MR. SCHWED: The first and the second is. Of
17 course, right.
18 THE COURT: Yes.
19 MR. KLESTADT: So you're closed.
20 MR. SCHWED: Our concern is only the third and the
21 fourth. I mean, there's a budget -- there are budget items
22 that have to be spent that week.
23 THE COURT: So when do you want to come back?
24 MR. SCHWED: I mean, the only possibility is some
25 day the week before, either the 27th or the 28th, I suppose.
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1 Much as I don't want to come that -- believe me, Your Honor,
2 it's the middle of Sukkot. I certainly don't want to be
3 here on the in-between days. But if we have no choice --
4 MR. KLESTADT: Your Honor, that doesn't work for
5 me or my client.
6 MR. CURTIN: Were we talking about some type of
7 bridge to --
8 THE COURT: Why doesn't the interim --
9 MR. CURTIN: Why don't we make the interim just go
10 to that date?
11 THE COURT: Yeah.
12 MR. SCHWED: The problem is, again, based on the
13 budget, it doesn't work.
14 MR. CURTIN: I understand.
15 MR. SCHWED: That week, there's a significant
16 expenditure.
17 THE COURT: Which is?
18 MR. CURTIN: That day? It's not a week; it's a
19 day.
20 THE COURT: Which is?
21 MR. SCHWED: I mean, there's going to be payroll
22 for the week before, which is $250,000 or $260,000 right
23 away that has to be paid that week, Wednesday, on the third.
24 And then there are other items. I mean, I don't have the
25 exact --
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1 THE COURT: Well, I think you need to spend a few
2 minutes looking at this, because normally, I would just say
3 -- again, maybe that's why you got to make a deal on PACA.
4 I don't know what else to tell you. You're telling me that
5 you need more -- you're telling me you need more money.
6 MR. CURTIN: Well, can we leave it as is for now
7 and then you figure out -- I mean, you still have a week now
8 to figure that out and crunch the numbers.
9 MR. SCHWED: Figure out what? I mean, if I have
10 no more use of money, then there's nothing to figure out.
11 MR. CURTIN: I don't know. I didn't pick the
12 dates. But, I mean, you're talking about changing
13 everything.
14 MR. SCHWED: I'm sorry?
15 MR. CURTIN: I said you're talking about changing
16 everything that we just went through, so --
17 MR. SCHWED: I'm just saying, not for the first
18 two weeks, but changing -- just giving us something in the
19 third week. That's what I'm saying.
20 MR. CURTIN: You're increasing the interim, so I'm
21 not --
22 MR. SCHWED: I mean, let's be realistic. We are
23 incurring the payroll for the week before, so we certainly
24 have that expense, which is going to have to take -- they
25 have to deal with.
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1 THE COURT: Well, does the third help you?
2 MR. CURTIN: Which is how much?
3 MR. SCHWED: It's about $250,000.
4 THE COURT: Does the third help you?
5 MR. SCHWED: It's better than the 4th, but it's
6 not much of a difference.
7 THE COURT: When is payroll?
8 MR. SCHWED: Payroll is due on the third for the
9 week before.
10 THE COURT: Okay, so what about having the hearing
11 on the third, before you make payroll? (indiscernible)
12 picked a bad time to file this case.
13 MR. SCHWED: Your Honor, is the afternoon of the
14 third available?
15 THE COURT: Yeah, but morning certainly would be
16 better.
17 CLERK: Actually, (indiscernible).
18 THE COURT: Which ones?
19 CLERK: (indiscernible).
20 THE COURT: Where are you?
21 CLERK: You're looking at the 3rd of October.
22 THE COURT: Yeah.
23 CLERK: (indiscernible).
24 THE COURT: Oh, at the end of the day.
25 CLERK: Yeah, so we had proposed -- we had blocked
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1 off (indiscernible).
2 THE COURT: Yeah, but I don't want them to sit
3 through this whole --
4 CLERK: Yeah. I think the morning would be
5 better, if you did it before (indiscernible).
6 THE COURT: We could do it at 1:00, right?
7 CLERK: Well, (indiscernible) day? I mean, I
8 don't know if --
9 THE COURT: I don't know if they're even going
10 forward. But we could break from whatever they're doing and
11 then do it at 1:00, if we had to.
12 MR. SCHWED: And there's a chance that we find
13 ourselves in the position, then, that we're just doing
14 another interim. And if we do that, then we can have that -
15 - it shouldn't be a lengthy hearing.
16 THE COURT: Right.
17 MR. SCHWED: It's either going to be -- I don't
18 think it would be lengthy either way, right? Because if a
19 committee comes in and there is some objection to going
20 forward with the final, then it's going to be an interim and
21 there will be some type of agreement on the interim, or
22 there will be an agreement on the fine. So, 1:00 should be
23 fine.
24 THE COURT: How much more money are we talking
25 about for the next period? Aren't they producing cash here
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1 for this? I mean, we -- weren't you just trying to convince
2 me that you're going to produce more cash by filling up
3 these shelves?
4 MR. SCHWED: The problem is that, as explained to
5 me by Mr. Gold, right after the holiday is over, right after
6 yontif, if the stores are not properly stocked, you've just
7 destroyed the whole good will. There are people who travel
8 away for the holiday, they come back, you know, it's just a
9 -- it's an important time. So, not to stock and have empty
10 shelves, because during the holiday the shelves will empty
11 out, or at least somewhat, you need to be able to restock
12 them and have it restocked after the holiday. And that's
13 why I asked him whether it was possible to push the
14 restocking that was scheduled for that week, and he says
15 that's going to hurt the company -- it's going to have a
16 dramatic impact on the company; that's what he said.
17 MR. CURTIN: That's only $60,000.
18 MR. SCHWED: Restocking for that -- no. For that
19 week, it's $560,000.
20 THE COURT: And payroll is?
21 MR. SCHWED: Payroll is about $250,000.
22 MR. CURTIN: I'm not in a position to consent to
23 that at this point, Your Honor. Then we're over the $4
24 million. It would kind of negate everything that we've
25 done.
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1 THE COURT: No, right.
2 MR. CURTIN: So I want that put over until we get
3 -- until we either have a committee or we don't. I think
4 the number where we are is good. And if they need to figure
5 out a way to get a hearing next week, after we have a
6 committee, or early, so be it, but I'm not amenable to
7 increasing that number.
8 THE COURT: I can give you the third.
9 MR. SCHWED: What time, Your Honor?
10 THE COURT: One o'clock -- you said the afternoon.
11 Is 1:00 okay, or you need later?
12 MR. SCHWED: Yes. Yeah, 1:00 is fine.
13 THE COURT: All right, I'm going to stick you in
14 before a whole bunch of consumer cases because I don't want
15 all you sitting around through consumer cases.
16 MR. SCHWED: Your Honor, just to be clear, at that
17 time we're doing just the wages, or we're doing the other
18 things that were scheduled for the fourth? I mean, I'd like
19 to do everything. We have bidding procedures, we have the
20 final DIP, although, I mean, that would be --
21 MR. CURTIN: I think we should do both days.
22 THE COURT: I mean --
23 MR. CURTIN: I mean, unless Your Honor is saying -
24 - because there's no way we're going to get that done if
25 we're putting before a calendar. I mean, this is just
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1 another self-created scheduling issue.
2 THE COURT: Unless -- unless -- do we know that
3 this thing is going forward in the morning? I may have the
4 whole morning.
5 MR. CURTIN: So let's do the morning.
6 THE COURT: But I need to check. You said the
7 morning was no good?
8 MR. CURTIN: But not 1:00 before a 2:00 calendar.
9 MR. SCHWED: It's not ideal, but if we have to,
10 we'll do the morning.
11 CLERK: (indiscernible).
12 THE COURT: Why don't we just move it?
13 CLERK: Yeah, that's what (indiscernible) said,
14 why don't we --
15 THE COURT: We're going to adjourn something for
16 you folks.
17 CLERK: So we can do 10:30.
18 THE COURT: I have the whole morning for you. I
19 have until 3:00. I have the whole day (indiscernible) 3:00.
20 MR. SCHWED: Your Honor, my preference would be to
21 start a little later, because I'm out a couple days before
22 that, and I may need to, you know, just have a little
23 opportunity to get ready for this.
24 THE COURT: Okay, 11:00?
25 MR. SCHWED: It'll do.
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1 THE COURT: Is that okay? Somebody else sighed.
2 MR. CURTIN: No, Your Honor. I (indiscernible).
3 I apologize. Eleven's great.
4 THE COURT: Okay, in which case I'm hoping you
5 don't have to come back. So, wait a minute. I guess the
6 point is we've got, like, objections to deal with, too, if
7 you want to file objections.
8 MR. CURTIN: Right. I think that the two hours
9 makes a -- I was talking about trying to stick it all into
10 an hour. It just -- it wasn't going to happen. Now we have
11 three hours.
12 THE COURT: All right, so let's have the third
13 instead of the fourth, and if we don't finish on the third -
14 -
15 MR. CURTIN: Then we've got (indiscernible).
16 THE COURT: -- we'll use the fourth, but we're
17 going to adjourn these things to the third, not the fourth.
18 And so, I guess objections should be -- in this case, gives
19 you enough time to do it a week before, so objections by the
20 26th.
21 MR. CURTIN: How about the --
22 THE COURT: What, the 28th?
23 MR. CURTIN: It's -- those holidays kill me,
24 because then -- I mean, if --
25 THE COURT: Well, no, I'm not including the
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1 committee. The committee can come in and object until the
2 hearing.
3 MR. CURTIN: Okay. Okay, okay.
4 THE COURT: I mean, I'm not -- I'm talking about
5 everyone else.
6 MR. CURTIN: Okay, that was only my reaction.
7 MR. SCHWED: Your Honor, so you're saying
8 objections by the 26th?
9 THE COURT: Objections by the 26th. I'm not
10 including the committee in that, because I don't have a
11 committee. If I have a committee, different story. But the
12 committee can -- I want to hear from the committee,
13 regardless of whether they file an objection a week before.
14 MR. CURTIN: Okay.
15 THE COURT: So take off the fourth. Erase the
16 fourth, put down the third, and we'll push something else.
17 Sure.
18 MR. NOVIC: Yes, thank you. Hopefully, this is a
19 prophylactic comment. We pushed off a lot of the findings
20 that were in the interim order for the final order on the
21 DIP in order to allow people to test them and develop a
22 factual record to support them -- arms-length bargaining, no
23 relationships, et cetera.
24 THE COURT: Right, and (indiscernible) people who
25 appear before me all the time, no, I just don't stick
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1 findings in them. I mean, I have to make findings.
2 MR. NOVIC: And then, I think that was completely
3 correct and something we were asking for.
4 THE COURT: Then that's where I am.
5 MR. NOVIC: But I mean, as we've noted, we would
6 like to have an opportunity to conduct limited discovery
7 before the final hearing.
8 THE COURT: Well, I don't --
9 MR. NOVIC: I think we can do that in the time we
10 have available, but it will require cooperation from people.
11 And we'll be happy to get our list out tonight of people
12 we'd like to --
13 THE COURT: There are a lot of holidays.
14 MR. NOVIC: There are. It's going to be
15 difficult, but what are we supposed to do?
16 THE COURT: Including for those who celebrate
17 Columbus Day, in addition to everything else, which is --
18 oh, that’s a week later. I'm sorry, that's a week later.
19 MR. NOVIC: But, you know, the nature of the
20 objection was that there wasn't enough notice and
21 opportunity to test out some rather hard-to-believe findings
22 about the relationships (indiscernible) the party, the lack
23 of availability of other financing, and it would really
24 defeat the purpose of moving those to the final order if
25 nobody is going to get any discovery in the meantime.
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1 THE COURT: Well, there was availability of other
2 financing, apparently, but at this point, they went with the
3 Movants (indiscernible).
4 MR. NOVIC: Right. I mean, we think there's
5 perhaps more. And if there's none, there's none. There's
6 very little to do on it.
7 THE COURT: So what do you want me -- you want to
8 do informal discovery?
9 MR. NOVIC: I think we can do informal discovery.
10 I think we can make a letter request. I just want to assure
11 that we'll have parties' cooperation, and I want to sort of
12 lay down the --
13 THE COURT: I think we're asking a lot in the time
14 table, I guess is what I'm saying. If I have a contested
15 motion, though, I then will give you discovery.
16 MR. NOVIC: Following the fourth?
17 THE COURT: No, no, a week before. In other
18 words, if you file objections to either the continued
19 interim or the final, you file those objections by the 26th.
20 That's what I said as to anybody who's here, but not
21 necessarily the committee.
22 MR. NOVIC: Okay.
23 THE COURT: So you file objections the 26th. If
24 you haven't had informal discovery then and we have a fight
25 on our hands, then there will be discovery. I'll do a
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1 contested matter scheduling order with respect to the final
2 DIP financing. The interim will continue, though.
3 MR. NOVIC: Okay, perfect. Thank you.
4 THE COURT: I'm not encouraging it.
5 MR. SCHWED: Thank you, Your Honor. So just to be
6 clear, if that happens, then the fourth is going to be --
7 third is going to be just a hearing on the interim, and then
8 we'll have --
9 THE COURT: That, plus it depends upon also the
10 formation of the committee. I'm not inclined to move ahead
11 on final. Plus, I still got this -- got an issue -- I mean,
12 isn't there become a more significant difference between
13 funding if you abandon the rollup?
14 MR. KLESTADT: No, Your Honor.
15 THE COURT: Okay, so…
16 MR. SCHWED: Your Honor, I think it's fair to
17 point out that the rollup for the Debtor in some ways has a
18 disadvantage, but it actually has an advantage in the sense
19 that right now, the interest rate on the pre-petition
20 financing is at 12 percent. Under the rollup, it goes down
21 to 6 percent. I just want to point that out.
22 THE COURT: All right, we can take it up, the
23 issue, as long as everyone has an opportunity to know that
24 that's what's being proposed. Whatever was proposed
25 originally, except for continuing to keep the two items
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1 divorced, so to speak, all other aspects of what you're
2 seeking, you continue to seek, correct?
3 MR. SCHWED: Right.
4 THE COURT: Okay. So if anybody wants to file
5 objections, they should do so a week before, except for a
6 newly formed committee, who I will hear up to the hearing.
7 Did we leave anything out now? Just to recap, can we recap?
8 MR. CURTIN: I think we're good.
9 THE COURT: We need to recap.
10 CLERK: (indiscernible).
11 THE COURT: Yes, they are going to be circulating
12 one that they wanted me to so order, but I'm not doing that,
13 but I'll sign it in the morning if you work on it tonight,
14 right? The interim DIP and cash collateral, that's going to
15 be circulated tonight or tomorrow morning.
16 When were you planning to get these shelves
17 stocked? I mean, originally, you know, there was some
18 discussion about a hearing tomorrow morning, which Mr.
19 Curtin and other people had asked for, and I said no, it had
20 to be today.
21 MR. SCHWED: So the plan is that we would get
22 financing tomorrow. Orders would be placed tomorrow, and
23 hopefully, deliveries would happen Thursday morning and the
24 stores would get stocked for Thursday. They'd have sales on
25 Thursday, minimal, but certainly Friday and Sunday. Sunday
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1 is an important day. It's the day right before the holiday.
2 THE COURT: Okay.
3 MR. SCHWED: And then you have the in-between
4 days, after (indiscernible), you know, Wednesday, Thursday,
5 and Friday, which are substantial shopping days because they
6 follow with a Shabbos and a (indiscernible).
7 THE COURT: Okay, so you need to have -- folks,
8 you need to work tonight on this, because I need to have an
9 order in shape tomorrow. Or, if you need a -- hopefully,
10 you won't need a call, but…
11 MR. SCHWED: And, Your Honor, just for logistical
12 purposes, I said the money is in my escrow account, but in
13 order for me to send the wire out to the Debtor, I'd have to
14 have the order before 4:00, entered by Your Honor.
15 THE COURT: I'm assuming people are going home by
16 then, too.
17 MR. SCHWED: Yes.
18 THE COURT: Okay.
19 MR. SCHWED: Well do the best we can to get it
20 turned around tonight.
21 THE COURT: I think you got to turn it around
22 tonight. I'm traveling in the morning, but my computer is
23 always with me, subject to internet connection. I always
24 have my hot spot.
25 I just want to recap what we're doing
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1 (indiscernible), because this is important. So, we are
2 doing a hearing on final cash collateral and DIP or
3 continued interim on the third. We're adjourning that
4 portion of the motion regarding sales tax to the third.
5 We're having a hearing on small-B, small-P bidding
6 procedures on the third. I'm leaving something out.
7 CLERK: The cash management.
8 THE COURT: Cash management hearing on interim on
9 the third.
10 MR. SCHWED: And utilities, Your Honor.
11 THE COURT: And utilities. Is that it? All you
12 lawyers, somebody should be checking us. Wages, we've
13 handled.
14 MR. CURTIN: And the other orders. The other
15 motions that you granted at the beginning, the Debtor is
16 going to circulate the proposed -- the amended proposed
17 orders on those. The joint -- we changed the joint admin.
18 THE COURT: Yeah, joint administration. Did we
19 leave anything out?
20 CLERK: I think (indiscernible).
21 THE COURT: Oh, we have a -- okay, you're going to
22 make a couple of changes on that, on the omni thing, right?
23 MR. SCHWED: Yes, Your Honor.
24 THE COURT: Okay. Cash management, pre-petition
25 wages, utilities --
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1 MR. CURTIN: When I said the other motions, I was
2 referring to the omni and also the claims matrix/other
3 administrative issues, the extension of time on the schedule
4 that --
5 THE COURT: Right, those you're circulating and
6 you'll upload.
7 MR. CURTIN: Yeah. I think they're just accepting
8 my changes on that one, but we'll --
9 MR. SCHWED: So you'll circulate a --
10 MR. CURTIN: No, I already did, so you'll just
11 need to accept my changes or not.
12 MR. SCHWED: You sent it in Word?
13 MR. CURTIN: Yep.
14 THE COURT: Okay. And --
15 MR. CURTIN: I can send it again, Your Honor.
16 (indiscernible) so I can send it again.
17 THE COURT: Okay, and 30 days on the extension
18 instead of 60.
19 MR. CURTIN: Right.
20 CLERK: And just so we're clear, because now
21 there's going to be a different (indiscernible) case,
22 (indiscernible).
23 THE COURT: Yeah, so you've got to change your --
24 sorry, got to change the caption. Can we move the motion
25 for joint administration (indiscernible)? Well, we put the
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1 motion every case.
2 CLERK: Well, I'll put the motion to where it's
3 going to be on the lead case (indiscernible).
4 THE COURT: Right, but the motion for joint
5 administration could be in all the cases, but --
6 CLERK: It is already.
7 THE COURT: All right, and it was amended -- being
8 amended on the record, and the orders now have to show it as
9 (indiscernible). We all clear about that?
10 MAN 3: Meaning the motions don't have to be re-
11 filed on the new main case, the first two motions.
12 CLERK: I was going to do the ones that are being
13 carried.
14 THE COURT: Yeah, but anything else you file,
15 including all of these orders, use the (indiscernible)
16 caption.
17 MAN 3: Right, and when the joint admin order gets
18 entered tomorrow, presumably --
19 THE COURT: It's going to say that.
20 MAN 3: -- then everybody will kick over to the
21 new (indiscernible).
22 THE COURT: Right, got it. Okay, anything else?
23 MR. SCHWED: Thank you, Your Honor.
24 MR. KLESTADT: Thank you, Your Honor.
25 THE COURT: Take care, everybody. Safe travels.
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1 (Whereupon these proceedings were concluded at
2 06:10 PM)
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1 I N D E X
2
3 RULINGS
4 Page Line
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6 Order to maintain electronic 22 18
7 platform granted
8 Joint administration motion granted 22 18
9 Motion to include claims amount 24 22
10 in creditors' matrix
11 Critical vendors motion approved 130 3
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1 C E R T I F I C A T I O N
2
3 I, Sonya Ledanski Hyde, certified that the foregoing
4 transcript is a true and accurate record of the proceedings.
5
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8 Sonya Ledanski Hyde
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20 Veritext Legal Solutions
21 330 Old Country Road
22 Suite 300
23 Mineola, NY 11501
24
25 Date:
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18-45284 8:14,219:3,9,15,21 10:310:10,17 11:3
18-45285 8:14,219:3,9,15,21 10:310:10,17 11:3
18-45286 8:14,219:3,9,15,21 10:310:10,17 11:3
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
apologize 22:169:21 147:3
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beat 73:16began 42:18 44:3
45:12,16,18,1946:22 50:20 53:2554:1 66:10
begging 64:20beginning 23:8
82:13 89:12154:15
begins 63:6 82:8begun 118:4behalf 8:16,23 9:5
9:11,17,23 10:510:12,19 11:516:3 17:8,17 79:179:14 119:19137:23
belief 48:15,1752:17,18,18 68:10
believe 27:22 28:228:17 33:15 44:244:3 45:14 49:550:4 66:5 68:487:4 97:18 98:13108:20 117:17126:9 129:14134:25 137:7140:1 149:21
believed 47:15believes 113:1belong 119:22benchmarks
124:1benefit 6:15 73:5benson 12:19 17:4best 47:16 57:15
64:8 66:9 78:787:24 88:7,11112:15 116:16128:23 137:7153:19
bet 81:10better 8:9 55:13
56:16 63:9 69:2572:18 78:7,880:18,18 83:487:20,25 88:2112:25 113:18114:14 115:17116:22,25 118:16142:5,16 143:5
bid 57:10 62:1562:15 63:7,8,9,1163:11 74:10 75:1280:13 83:9,11,1783:25 94:21 96:2116:10,17 122:12123:1 137:8
bidder 96:4,7115:18,21
bidding 8:10 23:566:20 69:23 83:2
114:19 122:19,24123:25 124:13,24124:25 125:3127:19 136:21137:5,12 145:19154:5
big 32:2 67:2100:2,7
bill 97:10bills 29:25binding 115:12,15bit 38:16 48:25
73:13 75:24 82:182:3 91:11 119:14138:14,14
blank 22:7blanket 51:17blocked 142:25blood 66:21bloom 44:9 87:3blue 1:7 6:3 15:3
18:3,15 19:1 44:744:8
board 86:24 87:6bonding 40:20book 107:6borrow 87:7borrowing 26:1
26:15 91:13129:22,25
bottom 42:2148:22 74:5 98:17
bought 64:22bound 117:12,14brand 38:13
45:21breach 117:21
120:23break 31:7 88:22
93:11 102:6108:17 117:5143:10
breakdown 129:7130:19
brendan 13:1415:23
bridge 86:4 140:7briefly 18:22bring 101:3 103:7
104:13,13,15,25bringing 102:24broadway 12:21broke 99:3broken 91:12brooklyn 5:3brothers 13:17
16:3 61:3,4,1975:24,24
brought 47:20budget 59:15
65:15,23,24 88:1888:19 89:16,2190:16,19,24 98:298:6 102:1,6139:21,21 140:13
budgets 26:9building 12:12built 46:8 69:19bunch 145:14burial 110:7business 24:14
34:17,17,21 36:137:19,21,25 40:1241:16,25 42:2247:25 48:14 52:2254:3 75:25 76:3,478:7 89:8,2391:15 102:23118:4,19,23 119:1133:7
businesses 37:2552:23
buy 60:16 67:25buying 90:7,15
91:2
[banks - buying] Page 5
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
c
c 5:2 7:7,15 12:115:1 97:7 109:7159:1,1
cadman 5:2calculation
102:20 105:15calendar 15:3
63:17 78:17 82:10138:23 145:25146:8
call 33:21 41:1169:14 89:9 106:5115:25 126:9153:10
called 27:2 44:7calls 128:4cancelations
50:15 53:12capital 137:15caption 18:24
19:20,20 20:12155:24 156:16
captive 102:10capture 102:18
107:11care 107:15
126:21 156:25carefully 87:9
116:6carried 156:13carter 5:25carve 110:4,6,8,12
119:24case 1:3,10,17 2:1
2:8,15 3:1,8,154:1,8,15 8:13,138:20,20 9:2,2,8,89:14,14,20,2010:2,2,9,9,16,1611:2,2 18:3,8 19:419:9,9,18,2520:11 22:8 23:10
27:14 36:7 39:2241:11,14 42:464:2,5,20 65:1365:16 66:18 68:1873:19 77:9,2079:16 80:4 86:190:10,16,20 117:7124:1,2 125:4137:16 142:12147:4,18 155:21156:1,3,11
cases 6:11 15:318:2,4 19:9 90:2299:11 101:16,23145:14,15 156:5
cash 6:10 7:1025:17 26:10 37:1138:17 43:24 89:1689:17 102:3,3103:2 104:23105:5 109:11122:15 131:14,18132:9 134:2143:25 144:2152:14 154:2,7,8154:24
cashflow 46:12,2047:6,11,18 52:6
category 94:19caucus 72:4caucused 93:13caught 57:1
125:15cause 109:19causes 109:1cautious 79:7caveat 110:21
113:10ceiling 128:25celebrate 149:16center 46:1central 3:12 10:5
15:6
ceo 27:15 47:2287:4
certain 6:14 57:864:18
certainly 38:9,1148:21 64:20 85:1390:18 103:14112:12 128:9131:11,18 132:16140:2 141:23142:15 152:25
certainty 112:5certified 159:3cetera 108:7,7
148:23cfo 47:20cgs 99:7challenge 56:13
108:9challenging 101:8chance 39:20
102:22 135:2143:12
change 20:12 53:753:9 61:22 66:781:19 108:21126:14 155:23,24
changed 19:20154:17
changes 24:22154:22 155:8,11
changing 141:12141:15,18
chapter 86:2102:13 104:7109:19 110:7122:13
chase 38:8check 24:14 38:10
146:6checking 154:12checks 6:17
chief 97:16choice 140:3chose 73:21chosen 73:19chunk 91:18cia 105:7,8circulars 102:15circulate 125:14
125:15 130:8,9154:16 155:9
circulated 152:15circulating
152:11 155:5circumstances
27:23claim 21:7,22 31:3
31:4 37:2 117:21claim's 20:24claiming 25:17claims 6:6,20 7:14
8:7 24:12,13 25:725:9,23 26:275:16 101:19119:24 155:2158:9
clarification 99:2111:8 113:5
clarify 22:21 32:834:13 35:3 99:14112:12,19 113:9
class 87:5clear 8:6 16:20
22:19 36:19 48:356:10 57:13 68:10111:4 112:13125:16 126:8127:16 128:12130:13 131:25132:18,22 137:3145:16 151:6155:20 156:9
clearer 127:24,25
[c - clearer] Page 6
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
clearly 102:2122:18 130:14
clerk 15:2 19:2320:25 97:1,5130:8 142:17,19142:21,23,25143:4,7 146:11,13146:17 152:10154:7,20 155:20156:2,6,12
cleveland 2:5 9:515:5 46:13 50:4
client 50:24 60:1361:3 66:14 72:2373:20 79:15 80:984:2,13 85:11113:3,13,15123:17 126:22,25127:11 140:5
client's 59:1370:21 85:9 114:21
clients 68:5 72:2473:4 84:10 101:20
clifton 3:19 15:7close 28:9 47:3
68:24 100:5closed 48:19
139:19closely 125:6
128:5closer 70:2closing 22:8 62:17
81:24cod 105:7code 7:7 8:3coffin 47:4cog 34:20coincide 59:23collateral 7:11
49:11 109:11111:20,20,24152:14 154:2
collected 25:1826:7 119:19
collecting 25:19collections 102:3
102:25 132:6133:6
collectively 17:5columbus 149:17column 98:18,18combined 54:8
63:5,8come 19:8 28:2
35:19 38:17 47:2348:4,9 65:6 74:1477:13 78:22 85:1291:10 93:8,9,1496:13 102:11113:25 114:2115:21 116:9118:15 122:7125:18 127:6,9130:25 131:6133:19 139:23140:1 144:8 147:5148:1
comes 114:14143:19
coming 28:7,11,1228:23 29:1 39:2441:14 94:13 96:24109:15 128:17131:9 135:20,21
comingled 27:927:12 36:6
comingling 27:18comment 25:4
111:3 148:19comments 24:5
25:2,2 31:1892:18 106:15107:10
commission119:21
commit 63:10commitment 61:5
63:16committee 34:9,9
64:1,2,14,20 72:872:9 75:20 77:1880:16 108:6110:10 137:24138:3,8,10,10143:19 145:3,6148:1,1,10,11,11148:12,12 150:21151:10 152:6
committee's108:10,11
commodity 80:3common 124:22community 76:5,8
76:9 102:23 104:6companies 19:17
47:24company 18:25
26:8 27:2,15,1728:22 33:7 45:1647:20,21 60:17103:1,9 144:15,16
comparable112:24
compare 61:1896:24
compared 22:10compensation
6:14competing 16:3,5
80:13 91:20 96:2competition 67:4competitive 71:12
83:17,23 88:12competitor 83:8competitor's 83:9compile 33:12compiling 31:19
complaint 86:14completed 45:21
46:9completely 26:1
52:6 149:2complicate 29:19complicated
121:1complication 38:4comply 110:8computer 125:14
153:22concept 57:2
130:13 135:14concepts 83:6concern 124:19
139:20concerned 66:2
73:18 79:8 99:20concerning 84:3
119:24concerns 38:16
40:15 65:20 66:1774:17 86:17106:17 110:15
concession 68:2068:21 99:19,21,22104:20 105:3,5,10
concessioners119:16,18,22120:9
concessions 69:1199:8,9,14 104:11104:14,22
conclude 120:22concluded 157:1condition 115:13
120:24conduct 149:6conference 128:4confirmation
131:20
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
confirming 47:1confusing 111:7conjunction
102:13connected 83:15connection 42:24
44:10 46:19 97:1597:25 110:16113:14 153:23
connections121:23 122:4
consensus 79:15consent 40:9
86:25 131:21,22132:1 144:22
consenting 133:8consequences
115:22consider 69:9
96:3considerable
100:22considerably 91:4considering
124:18 131:25132:1
considers 112:23consolidate 18:8consolidated 7:19
7:21constituency
82:18constraint 103:2constructed 46:15construction
45:19,20 46:10,1246:13,14,20
consult 45:2consultant 87:13consultants 48:9consulting 17:4
44:24,25 45:4,11
consumer 145:14145:15
consummation122:14
contact 16:16contacted 17:12
119:14contemplate
102:4 124:15contemplated
100:11 122:15123:13
contemplating100:17
contested 150:14151:1
contingent 31:154:10
continue 6:157:22 38:3 40:7131:18 132:9133:12 134:3151:2 152:2
continued 7:4150:18 154:3
continues 102:11continuing 104:8
122:10 126:7151:25
contract 114:6115:6,6,8,12,15117:21,23,24118:13 119:3120:24,24,25
contracts 120:9contractual
114:18contribute 48:20
48:21contributing
42:20control 74:25
controlled 74:1874:19
controversial130:16
conversation 73:9123:6
conversations65:3 95:6,7,8,20
convince 144:1cooperation
149:10 150:11copeland 14:15copies 120:9copy 98:6core 42:6 102:10corporate 2:12
9:11 15:5 18:5,2419:16,21,24 20:1034:16 39:22 49:549:7 51:11 74:18132:17,18
corporate's 18:9correct 20:14 27:1
27:10,11,13 32:2436:15 45:6 49:2050:20,21 52:11,1455:8 56:22 57:658:15 59:3,5,861:12 62:5,9 75:784:6 87:14 88:994:20 109:10113:21 114:10,10122:22 128:13149:3 152:2
corrected 39:5correctly 26:10cost 99:7 116:12costs 118:4council 101:17counsel 15:14,17
15:19 25:12 81:1094:10,11 95:7101:17 108:11
110:10,10 111:17counter 65:7country 159:21couple 20:25 21:1
21:3 33:2 40:342:16 43:25 44:1246:23 47:21 55:763:24 69:2 71:2186:20,22 89:2,2294:5 97:23 111:6146:21 154:22
course 6:16 30:2561:24 62:11 64:19110:21 139:17
court 1:1 5:115:10 16:5,7,9,1116:15,17,19,2517:2,6,9,15,18,2518:9,12,16,1819:11,13,22,2420:4,8,10,18,2020:25 21:11,14,1821:20 22:1,3,1322:17,25 23:6,1423:16,21,25 24:1024:21,25 25:3,1226:3,5,20 27:3,1027:24 28:3,15,2529:4,6,8,21 30:2,830:10,13,15,18,2030:23 31:2,9,1131:14,20 32:1,632:13,22 33:9,1733:20 34:2,2335:5,12,14,17,2036:11,18,24 37:137:3,6,9 38:2039:1,14 40:6,1140:21 41:2,7,9,1741:25 42:2,5,1043:1,4,7,10,13,1643:21 44:4,18,2044:23 45:4,7,9,23
[confirming - court] Page 8
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
46:2,4 48:25 49:349:15,18,22 50:150:10,19,22 51:351:6,13,16,22,2552:2,4,10,12,1553:5,10 54:10,1254:17,20 55:9,1755:21,24 56:2,1856:20,23,25 57:757:10,13,23 58:1058:16,22,25 59:259:4,6,9,11,1760:8,20 61:1062:1,6 63:15,2264:4,10,14,17,2165:2,8,19,2566:25 67:7,1368:12 69:12 70:170:12,16,23 71:271:5,7,8,16,1972:3,16,21 73:6,974:2,4,7,10,13,2174:23 75:3,7,9,1876:7,10,12,20,2277:1,4,7,15 78:1,378:10,20,22 79:379:6,12,20,2480:7,19,25 81:981:14,19,25 82:882:12,15,25 83:1183:18,21,24 84:584:11,14,20 85:185:21 86:7,9,1286:16 87:22 88:488:9,18,20,2589:3,14 90:3,691:24 92:1,15,2293:1,12,23 94:1,494:14,16,18,2595:15 96:2,5,9,1296:19,22 97:9,1498:1,3,8,12 99:15101:6,9,13 103:19
103:24 104:2,18105:9,12,17,20,22105:24 106:2,4,6106:9,22 107:1,4107:6,8,22,25108:3,8,13,18,21109:1,4,9,12,14109:17,21,23,25110:3,11,15,20,23111:1,12 112:3,7112:11 113:4,20114:4,8,22 115:4116:21 117:7,10117:16,18,22,25118:7,9,11,18,21119:3,6,12,17120:3,12,14,17,20120:25 121:3,12121:14,16,19,21121:24 122:1,3,21123:3,5,8,9,14,16123:22 124:3,16124:21 125:5,8,13125:21 126:6,13126:21,25 127:9127:15,21,24128:1,15,21129:10,13,15,18129:21,24 130:7,9130:17 131:2,8,13131:22 132:7,12133:12,21 134:1134:13,18,22135:6,12,15,20,25136:2,5,9,11,15136:19,23 137:1137:17,20,25138:7,12,16,19139:2,6,8,14,18139:23 140:8,11140:17,20 141:1142:1,4,7,10,15142:18,20,22,24
143:2,6,9,16,24144:20 145:1,8,10145:13,22 146:2,6146:12,15,18,24147:1,4,12,16,22147:25 148:4,9,15148:24 149:4,8,13149:16 150:1,7,13150:17,23 151:4,9151:15,22 152:4,9152:11 153:2,7,15153:18,21 154:8154:11,18,21,24155:5,14,17,23156:4,7,14,19,22156:25
courtroom 15:1117:9 34:15 76:177:19 93:4,4103:10
coverage 31:25covered 91:6craig 93:5craig's 93:3create 52:22created 81:20
146:1credit 57:10 83:25
86:19 112:16122:25
creditor 7:1912:20 13:9,1715:24 24:2 76:1476:14 79:15,1782:18 84:4
creditors 7:2118:25 24:13 49:1649:18,25 72:1377:18,19 78:2079:11 83:10 88:1195:4 117:11120:22 129:7158:10
crisis 53:12criteria 96:10,12critic 94:18critical 66:3 73:22
94:19 98:9,13,15129:11,20,23158:11
cro 27:14 87:9,1097:21
cros 97:20crossover 69:18
69:22crosstalk 93:17crunch 141:8curious 41:23current 6:10 25:7
25:7 37:3,4 38:12131:18 132:9
currently 25:25curtin 12:16
15:25,25 20:3,1620:19 21:24 22:1623:17,22 24:8,1125:3,4 30:2,3,9,1130:14,17,19,21,2531:5,10,12,1932:9 33:13,2434:3 35:1,10,1335:15,18 37:738:15,22 39:240:9,13 41:1364:3,6,11,16,1965:23 84:24 88:2290:5,13 91:5,2592:9,17,23 106:13108:9 109:7,18110:5,18,21,24111:2 112:1,4,9128:14 129:5,12129:14,16,19,22130:12,18 131:3131:10,14,21,24132:11,14,25
[court - curtin] Page 9
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
133:18,25 134:16134:21,23 135:3135:10,13,18,23136:1,4,7,10,12137:10,15 138:3140:6,9,14,18141:6,11,15,20142:2 144:17,22145:2,21,23 146:5146:8 147:2,8,15147:21,23 148:3,6148:14 152:8,19154:14 155:1,7,10155:13,15,19
curtin's 31:1866:17 93:14106:14
customer 76:11102:10,24 103:7104:9,13
customers 26:7119:23
d
d 5:25 15:1 158:1d&o 87:11daily 37:13,16
39:23 132:19damage 84:16damaged 33:7damages 117:25date 7:25 22:25
23:4 30:24 61:1261:13 62:17 92:1397:19 133:16137:13 140:10159:25
dated 97:18dates 32:9 138:23
141:12dawn 14:13 16:13
17:11 68:13119:10
day 6:2 15:822:15 23:9,2028:10,10 29:1130:21 34:11 53:1853:19,22 55:1168:15 72:12 91:1493:18 139:25140:18,19 142:24143:7 146:19149:17 153:1,1
days 7:24 23:2224:18,19 40:361:13 68:8 77:1481:23,23 89:890:21 134:22140:3 145:21146:21 153:4,5155:17
dc 13:17 16:3 61:361:4,19 75:11,2475:24
de 107:18dead 46:14deadline 7:23deal 24:24 37:11
63:2 64:22 72:1172:11 78:15,15116:25 128:19141:3,25 147:6
dealing 27:20dealt 34:19debello 14:8,9
16:13 17:12debt 42:23 43:2
43:13,15,16,2044:13,14,15 49:1755:5 85:10
debtor 1:8,15,222:6,13,20 3:6,133:20 4:6,13,20 6:318:10 24:16 30:1131:15 38:10,1439:14,16,18,22
41:6 49:15 56:1270:6,7,17 71:1172:24 73:19 78:1979:23 81:11 84:2485:1 86:3,21,2588:2,3,6 89:4,995:19 97:15,23,25111:21,25 112:23113:1,11,18,23,24114:4,5,12,17,25115:11,16,17,19116:13,15 117:13118:13,21,21,23119:20,20,25125:11 126:10,20127:18 128:23132:3 133:2136:23 137:1151:17 153:13154:15
debtor's 29:2038:17 47:10,1153:13 70:17 78:6118:19 119:1
debtors 6:7,10,146:19 7:3,5,5,12,197:22,23 8:6 13:215:15,17,20 18:725:16 37:12 39:339:19 43:22 49:1851:7 52:8 68:478:11 85:8 87:1187:23 101:21110:10 116:12122:13 123:11132:3
december 62:18108:13
decent 47:5decide 29:10,10
40:23 85:2decided 65:7
66:14 83:9 94:22
decides 126:10127:18
decision 53:1496:3 120:13
declaration 87:10deducted 26:13default 54:25 58:2
58:11,13 61:896:7 107:14,17,18114:11 122:9,11123:4,18 126:9,10127:17 138:1
defaulted 46:22defaults 116:12
121:10defeat 149:24defer 94:22,23,24
99:23 100:6,15101:7
deference 118:22deferred 106:5deferring 99:18
100:18,19defined 122:9,19
122:25 123:10124:5,5,16
definitely 74:8definition 124:8degree 27:12delayed 33:3delete 107:14
112:1,10deleting 106:20delink 95:21deliver 29:19deliveries 152:23department 12:10depending 47:15
47:15 101:4depends 151:9depicted 98:17
99:13 105:16
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
depleted 52:6depositories
38:21depository 132:13
134:5depressed 103:2describe 50:24
51:16described 49:24
104:4description 76:16despite 42:25destroyed 47:11
144:7detail 94:7 100:22
100:22detailed 31:21,23
100:21details 86:14
95:13determination
48:5 98:9 114:3determine 80:17
97:22determined 29:25devastating 104:7develop 148:21developing 65:6development
100:23difference 62:19
62:24 67:3 142:6151:12
differences 60:2561:1
different 28:2529:11,18 47:2350:17 70:13 72:4111:8 128:18137:8 148:11155:21
difficult 47:12101:10 138:15
149:15difficulty 38:4dip 15:24 16:4,6
26:1,9 28:1,1331:1 54:1,1,5,7,854:10 56:5,1257:3 58:25 60:260:19 61:4 62:262:23 63:4,1364:24 69:4,1570:19 71:12,1573:24 74:1 76:378:5,8,11,1580:18 83:4,12,1286:4,25 87:2388:5 89:16,2190:24 92:12 95:2195:23 96:8 99:5100:24 106:7,18107:9,18,20111:20 112:22113:2 114:9115:24 116:11121:13,14 122:11122:16 123:1,4,19123:24 124:4,5,5124:7,16 132:16132:20,22 133:14134:5 136:16,20137:19,20,21145:20 148:21151:2 152:14154:2
direct 6:9,13,197:18 97:11 132:2133:10
directing 7:3directly 73:5director 87:4directors 87:14disadvantage
151:18
disagree 115:2116:20 119:8
disclose 34:3disclosure 34:4discontinuing 7:3discovery 74:25
149:6,25 150:8,9150:15,24,25
discuss 88:22discussion 78:16
88:23 112:17120:4 152:18
discussions 104:6distinguish 62:1distributes 37:15
132:19district 1:2 19:5
80:2districts 19:7divergence
120:23divorce 58:5 83:5divorced 83:1
128:11 152:1docket 63:16 80:3
107:7docketed 17:20
20:11dockets 17:19document 6:2
70:24 71:5 106:23128:4
documentation25:6
documents 70:273:17 87:8 112:5
doing 39:23 54:2464:11 110:3,22118:19 133:13143:10,13 145:17145:17 152:12153:25 154:2
dollar 59:15dollars 55:7 73:25
74:4,15 90:891:12 100:8 103:3103:4 105:1
donnellan 14:8,916:14 17:12
door 69:1doubt 127:1drafted 25:8drafting 58:14drag 124:1drained 46:12,20dramatic 144:16dramatically 28:9
46:21drawn 50:5 53:5drew 53:6duane 14:1 17:8
79:14 137:22due 25:7 28:19
31:23 32:11,14,1532:19,20 58:13100:13 127:5142:8
e
e 5:21,21 12:1,115:1,1 97:7 122:9158:1 159:1
earlier 36:1399:15 114:12126:2
early 50:17 53:14128:4 145:6
earners 35:25easier 133:5east 5:2eastern 1:2ecro 5:25edits 25:1 35:10
130:14effect 50:15 70:25
134:3
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
effectuate 122:8effort 64:19
126:23efforts 48:1,4
128:23either 18:4 20:23
25:5 35:19 40:1941:2,2 54:2096:18 135:8139:25 143:17,18145:3 150:18
electric 21:21electronic 21:6
158:6eleven's 147:3eliminated 106:19ellman 13:1 15:14
15:16,19email 21:15 33:16emergency 7:10
81:20 127:6emergent 67:10
82:19employ 6:5employee 6:15,17
25:15,19 26:13,2226:23,24 31:7,2331:24 35:6 76:11
employees 26:826:24 31:22 33:633:8 34:5 35:2354:4 130:14,20
emptier 28:10empty 28:10
68:24 69:2 81:881:11 144:9,10
emptying 47:14enable 97:22encouraging
151:4encumbrances
8:7
endeavor 138:4ended 93:7,8
137:11ends 30:21 82:8,9enforcing 47:2engaged 54:6engagement 97:18enjoin 7:1enormous 42:25ensuring 88:14enter 70:8 86:25
134:10entered 74:19
80:1 119:3 123:3125:3 153:14156:18
enters 76:19entertain 85:16
114:16 138:6entire 90:16 99:4entities 18:6 44:8
44:16 49:9,10,1374:19 111:21,25
entitled 25:2383:24 98:18 99:7118:2 119:9
entity 18:5 44:747:2 51:5 56:3
entries 80:4entry 22:14 40:1
123:4equaled 110:7equally 104:10equipment 50:2,6
50:6,9equities 1:7 6:3
15:3 18:3 19:1equity 48:13
51:10,14,18,1987:3
erase 148:15error 87:12
escrow 67:19,2276:22 153:12
especially 33:185:24 102:7122:11 130:16135:23
essence 71:11essential 98:10,13essentially 32:18
82:23 94:9estate 26:16 66:17
112:15,25 113:18116:11 137:8
estates 115:22estimated 61:19
72:10et 14:8,9 108:7,7
148:23ether 57:19evaluate 64:18evaluating 64:16event 58:2,2,10,13
62:2 107:18114:11 122:9127:17
events 47:1051:24 107:13115:25
eventually 25:24116:2
everybody 19:1423:8,16 34:1948:15 55:10 59:1860:5,8 63:2066:25 68:10 76:5156:20,25
everybody's84:15
eviction 50:18evictions 50:12evidence 87:23exact 140:25
exactly 21:25 30:563:20 76:23123:14 129:7
examination97:11
examiner 104:2exceed 25:10excellent 66:4excess 133:14
134:6excuse 119:2exercise 100:6exhibits 130:17existing 6:11
24:14 38:17 85:9100:3
exit 61:19,20116:1,1 125:24
expand 42:18111:23
expenditure140:16
expenditures105:10 139:12
expense 55:1141:24
expenses 28:1437:15 46:19 55:4105:15 110:7132:20
expensive 52:19experience 104:5experiences
116:23experiencing
45:16expert 72:2experts 71:25
76:4explain 94:6explained 105:13
144:4
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
explanations90:24
express 4:1210:19 15:8
expressed 54:657:18 59:20106:17
extend 108:15extended 49:4
104:8extending 7:23
108:9extension 24:17
24:18 155:3,17extent 15:11 19:8
36:8 75:17 111:22113:15 119:16,23
extra 26:17
f
f 5:21 122:13,21122:23 123:2159:1
face 54:4 87:1688:3
facility 60:1671:15 96:8
facing 36:10fact 32:12 33:1
47:9 63:9 66:768:23 91:3 112:14114:8 115:18126:15 139:15
factor 69:9factual 148:22failed 32:4fair 19:15 50:4
66:24 68:8 151:16fairly 125:6familial 51:10family 51:1,3far 31:13 34:12
37:4 45:7 56:473:6,17
fargo 38:8fashion 102:2fast 120:15fat 91:16fault 122:11favor 46:25 95:16favorable 112:16fdic 40:17,18february 50:19
51:12,13,17 52:2federal 8:4 12:12fee 61:19,20 62:16
116:1,1 125:24feel 19:12 99:19feeling 93:1feels 83:3fees 110:12,12
117:5 126:24fell 32:3felt 66:3fiedler 14:25
78:24,25 79:5,7fifth 14:17,22fight 150:24figure 17:21 70:18
70:19 85:22 95:1696:23 103:5127:11 128:17141:7,8,9,10145:4
file 7:19 52:10,1152:11 65:15 81:18113:24 114:1133:19,19 134:14142:12 147:7148:13 150:18,19150:23 152:4156:14
filed 6:3 8:16,239:5,11,17,23 10:510:12,19 11:518:3 19:9 41:2163:16 72:18 77:13
80:2 82:21,21115:7 117:7 119:7131:4 156:11
filing 7:20,23 21:721:21 48:7 58:21102:13 104:7121:9 122:13127:10
filings 19:4 25:16filling 144:2final 7:12,15
22:17 34:7,1055:22 59:12 92:1192:12 108:12109:6 124:11128:9 136:9,10,16136:20 137:19,20137:21 138:2143:20 145:20148:20 149:7,24150:19 151:1,11154:2
financial 34:1865:17 67:22
financing 7:1328:2,6 41:6 64:2470:19 71:11 85:1389:9 90:18 91:397:25 149:23150:2 151:2,20152:22
find 18:25 21:1480:25 135:2143:12
finding 87:23109:6 112:13
findings 70:4,5,570:10 108:24110:16,17 148:19149:1,1,21
fine 25:2 57:1965:7 66:14 70:11109:22 110:14
114:2,24 134:12135:10,11,12143:22,23 145:12
finish 68:18147:13
firm 36:7 48:8,957:21 59:16 66:5
firms 88:2first 6:2 15:8,10
19:9 22:15 23:924:17 39:4 41:1342:10,12 43:5,643:25 46:23 53:1955:11 66:17 68:1575:8 83:17 85:2290:20 91:13 97:997:14 98:25 99:13102:22 105:10106:6,7 122:16133:3 139:16141:17 156:11
firsthand 73:3five 122:5fix 124:9floor 13:10 14:22
93:10fly 110:22focus 102:7focused 85:18
115:23folks 117:12
146:16 153:7follow 96:22
153:6following 22:7
32:14 122:7 134:3150:16
food 75:25 76:490:15 91:2
foot 69:1footnote 32:6
36:11 111:18,25
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
force 72:24102:23
forecloses 31:6foregoing 159:3forget 33:5form 24:14 80:15
85:5,19formation 137:24
151:10formed 138:10,11
152:6former 27:14 45:1
47:22forms 7:23forth 86:3forward 22:23
23:3,3 27:1937:24 47:25 63:1363:14 66:5 93:2194:12 95:23 98:14103:14 113:2,16115:16 143:10,20146:3
found 69:19four 28:17 42:8
43:5,6 44:16 93:6fourth 22:5 98:23
130:5 133:22,25134:1,1 136:10,11136:14,16,20137:5 138:20139:11,13,21145:18 147:13,16147:17 148:15,16150:16 151:6
frankly 29:1262:22 82:19 91:22
free 8:6fresh 66:21friday 53:20,20
89:7 152:25 153:5froze 47:3
fruition 48:4frustrating 81:14fulbright 13:16
16:3full 41:22 80:12
102:23 103:21122:16
fullest 111:21fully 48:23 57:20fund 48:12,13
53:15,21 59:14,2067:17 76:18,20101:5 120:16132:20
funded 47:2467:24
funding 28:1352:8 54:1,2,5,763:12 69:5 87:2487:25 102:16104:24 151:13
funds 25:20,2426:11,13,15,1627:13 28:23 36:436:8 39:13,2453:21 119:21,21119:25 125:12127:6 129:17,17
funny 111:18further 58:8 94:7
109:5future 7:6 48:20
g
g 15:1gained 97:22game 55:13gasoline 82:24gate 101:19general 27:12,12
37:18 111:2generally 27:9
39:10 42:20 61:2186:14
generate 47:1748:15,17 68:9
generated 68:23generating 47:6
103:2geographically
76:10,12getting 28:10
35:23 62:2 65:15101:19 102:21,22128:3 135:1,4
getzler 27:1537:22 48:9 57:2062:24 63:8 66:567:9 73:3 80:585:16 87:9 95:695:13
give 16:19 31:833:1 37:18 40:372:5 75:13,20,2277:4 80:1 84:2294:25 95:4,1697:2 107:4 118:22121:21,24 145:8150:15
given 92:17 102:7gives 105:7
124:12 147:18giving 73:12
105:4 141:18glad 80:7 123:20go 17:10 22:20,23
23:2,3 24:6,2526:11,13 28:435:11,14 47:2552:4 57:19,2160:11 63:13,1467:20 69:2,6 70:172:22 78:1,3,684:23,25 88:2591:10 92:20 93:1093:23 95:23 96:1798:14 102:15
106:2 107:11110:24 113:1115:16 124:3125:14,21 126:7128:3,16 129:1133:9,21,22134:18 137:9140:9
goal 138:17goes 89:19 116:1
125:14 151:20going 16:22 18:13
18:13 20:5 23:7,724:11,22 26:1427:19 28:6 29:6,729:13,15 30:1531:2 33:10 36:437:24 38:4 40:740:19,22,25 42:1548:4 50:23 52:8,853:13,18 54:255:9,11,12 57:1358:3,4,7 59:17,1860:1,3,4,9,22,2466:5,23,23 67:267:25 68:15,16,1768:18 69:4,4,5,569:13,13,23,2470:10 71:20,22,2472:12,19 73:1474:10 77:4,5,2080:12 81:8,2383:5,10 84:1485:21 86:12 89:1191:1 92:5,11,1292:21 93:2,2194:12,12 95:1396:4 102:15103:14 107:11,12108:3,23,24109:25 110:24111:13,23 113:7113:10 114:23
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
116:14,17 124:8125:10,12 128:10128:12 129:2130:4,9 132:23133:3,9,13 134:10136:16 137:2,11138:3,14 139:1,10139:11,14 140:21141:24 143:9,17143:19,20 144:2144:15,15 145:13145:24 146:3,15147:10,17 149:14149:25 151:6,7152:11,14 153:15154:16,21 155:21156:3,12,19
gold 1:7 6:3 12:415:3 17:17 18:318:15 19:1 34:1434:15 35:7 37:2044:7,8,9 87:2104:6 144:5
good 15:13,18,2117:7,23,25 19:1340:16 54:2 56:2571:8,8 79:1391:18 97:13110:20 119:13130:2 144:7 145:4146:7 152:8
goods 99:8 102:18103:5,6 104:9119:23
gotten 121:5gradual 40:14gradually 47:13grant 7:13 24:22granted 22:18
111:9 154:15158:7,8
granting 7:8,16
great 65:24 147:3groceries 99:5,9,9
99:13grocery 34:17,18
90:2ground 101:9,11
101:22group 6:6 17:4,12growing 121:2guarantee 68:16guaranteed 49:10guess 41:18 64:21
69:19 71:19103:19 106:7111:12 147:5,18150:14
guttmann 15:1815:19
h
h 21:5,10,11,1697:7,8
half 67:14,1581:15 89:8,2391:14 102:6 105:1105:2 117:11122:17
hallway 93:6hand 25:17 26:10
76:24 97:1 98:5handle 29:10handled 154:13hands 150:25happen 29:6,7
68:17 85:22 104:3111:15 116:18147:10 152:23
happened 27:1833:4 86:16 94:23
happening 23:927:18 85:13120:15
happens 31:146:18 103:25
151:6happy 101:24
131:6 149:11hard 28:6 34:22
63:3 65:13,17101:16 149:21
hardin 14:2078:25
harm 84:17harp 121:7hashanah 41:22
53:19,21,22,2389:6
haven’t 117:6he'll 76:20head 81:18hear 55:9 59:18
60:5,8 66:25 67:769:14 77:20 78:1878:20 80:23 88:2191:19,21 148:12152:6
heard 18:18 19:124:21 38:15 55:1055:10 56:3 72:1187:3 89:3 91:2097:13 100:18112:20 115:14
hearing 6:1,1,5,96:13,19 7:1,10,157:18 8:1,12,19 9:19:7,13,19 10:1,810:15 11:1 15:1223:4 40:3 41:1,455:22 60:14 69:2486:18 91:3 92:1295:25 113:14114:2 119:7 120:7121:6 128:25134:9,13 135:17136:9,15,20 137:5137:12,19 139:10142:10 143:15
145:5 148:2 149:7151:7 152:6,18154:2,5,8
hedging 138:13held 25:25 26:19
119:19hello 93:23,23help 48:10 127:10
142:1,4helped 34:16henrich 27:16
37:22 48:9 57:2062:24 63:8 66:580:5 94:6 95:6,1396:17,25 97:4,7,797:10,11,13 98:7101:10,15 103:22104:21 105:11,13105:18 106:1115:5 125:19,22126:1
herbst 12:3 17:16hershey 5:22high 91:22higher 8:9 56:15
69:25 74:15 87:2088:2 115:17116:22
highest 57:15 58:487:24 88:7,11
highlights 35:1635:18
history 37:18 42:4hit 35:18 81:17hold 29:9 107:8
121:21 133:23holder 87:3holding 22:6
26:11,12holiday 67:12,13
82:4 89:5 133:23139:15 144:5,8,10144:12 153:1
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
holidays 59:2267:2 68:2 89:25138:12 147:23149:13
home 86:21 87:17128:3 153:15
hon 5:22honest 62:22honor 6:16 15:13
15:18,21 16:1,216:10,23 17:3,717:11,23 18:1,2119:21 20:2,3,1420:16 21:9,24,2522:16,21 23:11,1723:18,19,22 24:924:23 25:4 27:1,827:13 31:6 32:2533:25 34:12 37:1038:15,19 39:1240:25 41:5,1342:1 45:6 49:2050:21,25 51:852:5 54:19 55:1556:19 57:16 58:658:20 59:13 60:660:12 62:9 63:264:3 65:23 66:167:8,15,16,18,2067:21,23 68:3,669:21 70:11,21,2571:9,10 72:15,1972:23 73:2,4,1275:23 76:19,2477:25 78:21 79:1379:18 80:23 81:781:17,21 82:7,1784:19,22 85:7,1185:15,15 91:5,2092:7,19 93:1394:20 95:12,1896:16 98:5 100:2105:23 106:1,11
106:12,13,17,19106:25 107:12,15107:20 108:2,10108:14,20 109:3109:16,24 110:14111:11 112:2,10112:21 113:14,21113:22 114:3,6,12114:14,15,17,19114:22,24 115:2,5115:10,13,16116:16,19 117:6,8117:13,14,17,20118:2,5,13,15,16118:20,25 119:4,9119:10 121:8123:21,23 125:2,9125:10,22,25126:3,19,22 127:4127:12,20,23128:14,20 129:5130:6,12 131:12131:17,24 132:15132:16 133:9134:16,24 135:11136:7,8,12,18,24137:18 138:5,9,22140:1,4 142:13144:23 145:9,16145:23 146:20147:2 148:7 151:5151:14,16 153:11153:14 154:10,23155:15 156:23,24
honor's 71:1373:22 101:25102:19 115:9122:8
hope 52:20 73:1874:13 131:18
hoped 121:6hopefully 28:2
64:7 66:23 125:15
131:20 148:18152:23 153:9
hoping 73:16147:4
horse 54:11 57:557:8 63:7,1169:17,17 83:396:2,4,7 113:7,8113:13,17 114:1114:15,16,21,23115:1,18,21116:10,16,22,24117:4 118:14,16123:18 126:11,14127:19 137:8
hot 153:24hour 102:6 117:11
121:2 147:10hour's 120:7hours 38:24 64:12
85:14 147:8,11huge 29:13hurdle 85:19hurt 144:15hyde 11:25 159:3
159:8
i
idea 30:6 37:1872:13,18 117:11117:12 126:17132:25
ideal 146:9identified 17:10identify 18:25ii 7:3 13:17 61:3iii 7:5immediate 29:15
52:8 74:15immediately 35:9
66:3 78:9 90:8impact 64:7 95:10
144:16
impacts 102:5implicates 18:19important 34:20
35:8 36:1 63:2565:22 66:16 68:369:11 89:4,22104:10 136:3138:10 144:9153:1 154:1
impossible 66:13inclined 151:10include 24:11,13
79:9 106:20111:20 124:17158:9
included 95:599:25
includes 98:20124:6,6,7
including 60:566:17 93:6 124:17147:25 148:10149:16 156:15
inclusive 124:8increase 53:2increased 44:21
51:21 52:1 110:7increasing 45:13
141:20 145:7increasingly
89:20incredible 65:16incur 100:15
101:6incurred 32:21
46:19 55:1,3incurring 141:23indebtedness 44:4
70:9 123:1independent 76:2indicate 32:7indicated 65:4
104:23
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
indicating 64:23indiscernible
19:23 22:5,2228:21 40:5 46:2459:16 62:3,2369:7 76:1 77:1086:15 91:23110:11,19 111:14111:16 112:5115:15,20 116:3,4116:7 125:11130:8 132:21133:20 136:2142:11,17,19,23143:1,5,7 146:11146:13,19 147:2147:15 148:24149:22 150:3152:10 153:4,6154:1,20 155:16155:21,22,25156:3,9,15,21
individual 101:11individually 44:9individuals 51:2informal 150:8,9
150:24information 30:4
31:10,15 32:2333:12,22 35:8,2565:5,8,11,13,1766:8,9,11 73:586:23 97:22130:10
initial 43:2 48:1151:11 66:19
initially 42:7 43:144:5,10 51:1,2053:6 65:4
initio 115:11inside 46:15insider 34:5,13
35:4,24 66:20,22
insiders 34:6,1251:9
insistence 38:2instance 28:8instituting 132:4insurance 31:25
53:13,16,16,1787:12
intended 32:1058:9,12 92:10
intention 58:692:7 138:8
intentional 58:1interest 44:10
49:8,13,25 51:1151:14,18 54:25,2557:18 59:20 61:561:6,6,15 64:2575:1,6 103:9112:15 137:7151:19
interested 12:414:16 17:13 57:457:17 61:24 62:762:11 75:9 83:1888:14
interesting 89:1590:1
interests 63:24interfere 132:5interim 7:12
30:21 34:8,9 40:240:6 55:25 59:1167:16,23 69:1571:16 90:18 91:391:3 108:2,4,19109:8 111:5 114:9124:9,11 128:5,6128:8 131:25132:2,24 133:17134:9,14 136:6138:6,20 140:8,9141:20 143:14,20
143:21 148:20150:19 151:2,7152:14 154:3,8
internet 153:23inventory 90:4,5
90:8 91:6 98:2199:4,10,16 100:7100:10
invest 52:21 58:4invested 67:20
126:23investigate 108:6investment 50:25
51:20 52:22investors 48:13involuntary 80:2involved 27:15,16
37:23 41:19 66:266:21 68:10 74:2476:15 77:11 98:1101:16
involvement102:9
involves 98:20inwood 4:12
10:19 15:8issue 20:22 27:20
27:21 40:24 52:752:25 56:2 66:1967:21 76:3 82:2087:16 91:10113:23 120:1121:7 130:13131:1,15 133:1146:1 151:11,23
issued 46:2550:18
issues 20:23 22:928:25 31:3,5,1333:24 39:5,842:14 75:23 84:384:7,9 86:5120:16 155:3
it'll 29:24 32:1740:24 58:3 146:25
item 21:5,9,1162:21,22 91:11100:17
items 21:3 28:1828:19 88:16,1690:19 93:20,2194:6 98:12 139:21140:24 151:25
iv 7:7
j
j 14:6james 14:15janovsky 15:16,16january 61:12
62:17jeopardize 67:3jerusalem 12:5jew 76:7jewish 76:9
139:15job 72:6johnny 127:5,9joint 6:3 8:12,19
9:1,7,13,19 10:1,810:15 11:1 17:1818:1,19 19:6,6,1022:18 154:17,17154:18 155:25156:4,17 158:8
jointly 18:2jordan 12:8 17:16joseph 76:1judge 5:23 80:22
83:8 93:3,5,18130:22
judgment 46:2578:8 118:19,23119:1
july 82:22jureller 13:8
15:22
[indicating - jureller] Page 17
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
jurisdiction111:23
justice 12:10
k
k 123:2kasowitz 12:19
17:3 120:21keep 39:13,13
40:20 52:23 53:1682:10 119:20151:25
kept 25:20 45:13kick 53:13 80:17
156:20kill 147:23kind 27:17 34:3
35:18 39:7 40:1447:23 91:22 111:2135:16 144:24
kippur 32:17kirby 14:13 16:10
16:13,13,16,17,1817:10,11,11119:10,10,13120:6,15
klein 87:5klestadt 13:8,13
15:21,22,22 41:1350:23,25 51:4,851:15,19,24 52:152:3 55:15,19,2256:1,17,19,21,2457:6,9,12,16 58:658:12,20,24 59:159:3,5,8,10,1367:7,8,15 69:2170:11,14,21,2471:4,6,9,18 72:1472:17,23 73:8,1776:6 77:16 78:478:21 80:6 84:484:22 85:7 92:795:20 106:12,12
106:24 107:2,5,7107:12,24 108:2,5108:14,20,25109:2,5,11,13,15109:22,24 110:2110:14 111:11112:10 113:10,22114:5,10 115:3,7116:19 117:6,8,13117:17,20,24118:1,8,10,12,20118:25 119:9123:20,23 124:14125:2,9,25 126:2126:12,19,22127:4,12,20,23,25138:5,9,13,17139:19 140:4151:14 156:24
klestadt's 73:2074:1 84:2,3,10113:3,13
knew 79:25 82:20know 27:5 28:22
33:18 34:5,2335:2 36:18,2037:17 38:7,8,2438:24 39:9,1142:14 43:8 44:1145:7 49:22 50:250:16 51:6 56:2557:20 58:17 59:2060:24 62:12,1363:24 64:15,2266:18,22 67:1268:7,16 69:10,1669:18 70:4,13,1970:20 71:10 72:472:10,24 73:13,2474:5,23,25 75:1976:6,16 80:20,2380:25 81:1,8,1982:1,4,9,21,23,23
83:10,22 84:1286:21 88:4 90:1691:19 92:21 93:2595:9 100:24101:13,25 104:5104:10 107:1111:16,23 112:7117:1 118:2,18120:3 121:2 122:8124:8 127:1130:15,22 131:5131:23 133:4,6134:23 135:9,16136:5,5,13 137:6141:4,11 143:8,9144:8 146:2,22149:19 151:23152:17 153:4
knowing 81:24known 80:4,5knows 72:17
75:15 76:5kohn 13:21 16:2,2
16:6,8,23 17:160:12 61:1 62:966:9 73:11,1274:3,6,8,12,14,2275:4,8,11,22 76:976:11,14,21,2377:2,5,8,24 78:2,478:18
kohn's 61:3113:15
kotler 14:6 17:7,879:13,14,22,2580:8,23 81:6,1381:17,20 82:6,1182:14,17 83:7,1483:20,22 84:1,784:12,18,21137:18,21,22138:21
krause 13:1 15:1415:17,19
l
l 13:13l&n 17:4 47:2lack 149:22laid 138:23lakewood 3:5 9:23
15:6lamonica 12:3
17:16landlord 79:3,10landlords 79:1landscape's 72:19language 24:14
119:24lapse 53:18,22lapsed 53:17lapsing 53:16large 37:21 45:17
46:2,3,5 55:479:15 87:3
larger 46:8largest 77:19 95:4larry 17:7 79:13
137:22lasted 48:1late 93:18 121:2latelies 127:6lately 127:9laughter 93:17law 111:22 118:11
126:16lawrence 1:21
14:6 15:4 42:9lawyers 154:12lay 60:24 93:15
150:12layer 38:4lead 18:3 19:20
20:10 85:13 156:3leaking 128:8
[jurisdiction - leaking] Page 18
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
lean 37:19learned 94:8leases 50:13leasing 50:2leave 93:7,8
106:14 128:16141:6 152:7154:19
leaves 41:5leaving 154:6led 46:23 58:9
68:4ledanski 11:25
159:3,8left 24:4 33:3
47:21 68:25 72:1273:23,25
legal 159:20legitimate 17:19lend 84:11,15
85:23,24,25 92:3lender 15:24 16:4
16:6 57:3 61:1766:19 83:4 88:295:23 96:2 107:17110:16 114:9122:25
lenders 50:975:13
lending 72:25length 66:24
87:16 148:22lengthy 143:15,18lent 111:5,10letter 97:18
150:10letting 135:9leverage 101:20levied 100:16lexington 14:10liability 36:10liable 26:19
lians 7:14lien 51:17 109:9
109:18liens 8:7 75:14,15
87:21 109:10,16109:19
lieu 135:20light 33:1limit 40:17limitations 79:9limited 18:22
25:13 28:8 149:6limits 40:18line 22:5 42:21
48:22 74:5 90:190:19 91:11 98:2399:4,16 100:17119:14 120:2158:4
lines 89:3 99:8100:10 120:11
lining 61:17link 126:4linkage 63:3
106:18linked 60:19 63:1links 107:18list 7:21 31:19,21
31:23 100:21121:10 149:11
listen 16:21,24listening 15:12
16:11 17:14 21:18literally 53:20
80:8 91:8little 29:18 30:24
38:16 42:3 48:2561:22 65:11 70:1773:13 75:23 82:184:16 91:11 93:295:8 100:2,3105:2 107:9 111:7120:22 138:14,14
146:21,22 150:6llc 1:7,14,21 2:5
2:19 3:5,12,19 4:54:12,19 6:3 8:178:23 9:5,17,2310:6,13,20 11:513:9,17 15:3,4,4,515:6,6,6,7,7,8,815:23 18:3,550:22 61:3 75:587:5
llp 12:3,19 13:1,813:16
loan 43:23 44:1249:5,5,6,10,1151:21,23 53:254:8,10 56:558:13,25 60:2,1961:5,16 62:2363:13 67:19 71:674:17 76:3 78:1178:15 86:25 87:2388:13 91:3 95:21106:21,24 107:2107:20 112:5,23113:2 121:10,18
loans 50:4,6,754:24 123:24
local 8:4 108:10110:9
locations 111:8locked 86:1logistical 153:11long 23:21 44:15
65:17 66:8 69:1897:17 126:7151:23
longer 36:1644:22 92:5 121:4
look 34:10 41:2,363:3,5 70:2 75:481:3 85:6 87:990:23 99:6 100:6
110:25 112:9116:6 121:9125:22 128:12130:15 138:8
looked 63:23looking 33:13
60:1 63:4 65:869:15 75:10 81:3106:3,9 113:7121:16 125:12,19130:17 136:15,19138:19 141:2142:21
looks 60:21 90:1290:14
lord 5:22loses 33:8 39:15losing 33:6 69:10
69:11lost 54:4 82:3
118:4lot 18:23 30:25
33:11 60:20 63:2264:25 65:12 67:2070:4 71:17 75:2182:22 86:16 87:889:12 90:17 107:9107:9 120:17121:6 124:4148:19 149:13150:13
lower 35:25 125:4137:15
lowest 91:1103:12
lump 31:6
m
m 12:25 13:1414:25 122:19,24123:24
mailing 7:20main 19:18,24
156:11
[lean - main] Page 19
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
maintain 6:10,157:19 21:6,16,2138:12 40:7 99:21104:14 158:6
maintaining 22:640:8
majority 44:1making 37:24
110:16 131:25man 16:12 23:18
134:12,17 156:10156:17,20
managed 37:2538:1
management 6:66:10 26:18 27:1427:17 36:9,937:11,20,24 38:1238:17 47:15 48:6131:14,19 132:9134:2 154:7,8,24
manager 87:4,6manhattan 42:9
99:18,24maniscalco 12:3
17:17manner 134:4march 52:2market 1:14 2:19
3:12 8:16,23 9:1710:5 15:4,5,6,756:15
marketed 57:14marketing 126:20married 56:5maryland 4:19
11:5 15:8massive 124:7material 89:22materially 113:17math 90:11,11,13matrix 7:19,20
24:2,13 155:2
158:10matter 1:5,12,19
2:3,10,17 3:3,103:17 4:3,10,1749:7,12 115:18116:13 151:1
matters 15:2 24:3maturity 61:12,13maximize 126:17maye 41:25mayer 12:4 17:17
34:14,15,15 35:644:9 104:6
meals 82:1mean 19:15 21:4
28:20,21 30:13,1432:25 41:11,11,1841:23 43:19 44:652:19 56:18 57:258:4 59:21 63:2364:7 65:10 68:1770:25 71:12,2272:14 74:2,13,2377:15 78:6,1781:4 82:1,2 91:1793:2 96:9 101:13102:19 113:10116:8 124:7 125:5126:11 128:21130:20 131:16133:22 134:19137:4,6 139:21,24140:21,24 141:7,9141:12,22 143:7144:1 145:18,20145:22,23,25147:24 148:4149:1,5 150:4151:11 152:17
meaning 156:10means 94:12
95:22 107:16115:6 139:11
meant 136:4,5mechanics 116:13medical 31:25,25meeting 24:19member 18:7
86:25 87:5membership 49:8
49:8,12,25mentioned 19:3
57:24 62:14 99:3114:12 136:24
message 102:14102:22 103:8
methodology105:19
michele 12:24middle 32:3 89:5
101:9,10,22 140:2milestones 124:20
124:23million 8:8 43:3,9
43:11,14,16,19,2344:16,18,19 45:1345:15 49:6 50:551:19,20,21,2253:3,3 54:12,1454:20,20,21,22,2355:2,3,6 58:2159:6,10,11,12,1459:15 60:4 61:562:20,20 63:767:10,17,24 71:1673:25 74:4,1585:18 86:6 88:1589:19,19,19,1990:8,8,14,15 91:491:12,18,19,21,2291:25 92:2,3,1493:20,23 98:16,2098:24,25 100:8101:4 103:3,3,15108:20 117:10144:24
mind 78:2mineola 159:23minimal 152:25minimum 48:5
59:24 81:2 114:13114:24
minor 21:3 22:4,9minority 74:21
75:1,5minute 16:20 62:1
67:5 71:3 73:23147:5
minutes 86:18115:19 116:9125:17 141:2
misappropriated25:20
misheard 83:15misnomer 99:14missing 21:5,12misspoke 43:18modest 86:4modifications
110:5,6 112:18modified 24:15modifying 7:14moment 26:21
58:14 66:2momentarily
135:1monday 53:19money 26:1,7,15
27:25 28:7,11,1228:22,23 33:136:3 37:15 42:2145:18,22 46:2147:16 56:12 58:1858:21,23 59:967:1,18,22 71:1772:25 73:7 80:2181:2 83:13 85:2586:4 87:20 88:788:13 89:12 104:1
[maintain - money] Page 20
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
104:3 105:8109:15 111:5132:17,18,19,20132:21 141:5,10143:24 153:12
money's 67:25monies 27:7,9
29:1 36:9 98:20119:18,25
monitor 39:17monitoring 39:15month 30:16
42:13 48:3 59:2259:23 71:22 81:481:15,22 82:5,6100:13
months 47:8,1347:21 48:2
morning 68:1373:19 76:18 78:16125:8 142:15143:4 146:3,4,5,7146:10,18 152:13152:15,18,23153:22
morris 14:1 17:879:14 137:23
motion 6:2,9,136:19 7:1,10,11,188:1,12,19 9:1,7,139:19 10:1,8,1511:1 17:18 18:118:19 19:8 20:622:18,18,22 23:224:3,22,24 25:229:22 31:6 33:2133:25 36:3 37:1037:11 38:18 40:240:12 41:6 78:1178:12,13,14,1485:2,3,8,9 94:2195:24,25 100:12106:5 113:7,12,20
113:23 114:7,7,13114:25 115:1,16116:14,15 117:14119:1,4 123:12,17126:12,13,14127:18 130:3133:20 136:22137:2 150:15154:4 155:24156:1,2,4 158:8,9158:11
motions 6:2 15:9122:5 154:15155:1 156:10,11
movants 150:3move 19:8,9 23:25
30:8 70:12 108:24146:12 151:10155:24
moving 149:24multiple 19:7
37:12 65:3 68:21
n
n 12:1 15:1 97:7158:1 159:1
nacho 36:25nah 57:1nail 47:4 81:18naked 71:20name 87:5 97:6,9
120:20named 76:16nancy 5:22nathan 8:16,23
9:5,11,17,23 10:510:12,19 11:513:6 15:13
nature 29:9 41:15105:3 129:11,15149:19
necessarily 28:18113:6 150:21
necessary 37:1572:7,25 73:796:23 103:15104:4
need 22:11 23:2328:3 30:5 32:2039:3,3,5,25 51:653:1 58:4 59:7,2367:1,10 68:1469:12,13 70:1972:5 81:2 85:1786:9,11,19 90:1892:6 93:19,2298:16 103:7104:12,24 112:18130:25 131:10139:12 141:1,5,5144:11 145:4,11146:6,22 152:9153:7,8,8,9,10155:11
needed 48:5 86:398:14 127:7
needing 32:24needs 70:17 80:17
97:22 115:17negate 144:24negotiate 128:22
130:1negotiating 77:14
86:22negotiations 54:6neither 109:18nervous 23:9net 59:4never 64:6 115:14new 1:2 12:14,22
13:4,11,19 14:1814:23 22:25 24:1638:13 45:19,20,2148:13 58:18,21,2359:9 68:13 85:3100:1,5 109:15
118:7,9,11 156:11156:21
newly 152:6news 116:25nhl 1:3,10,17 2:1
2:8,15 3:1,8,154:1,8,15 6:1,5,96:13 7:1,10,18 8:18:12,19 9:1,7,139:19 10:1,8,1511:1
nice 42:17,17,21120:3 135:8
night 41:12 89:5115:8 117:7
nine 80:3nobody's 19:1non 39:14 111:20
111:25 132:22133:1
normally 32:16141:2
north 14:10norton 13:16 16:2
16:24note 63:21 78:22
88:16 89:2noted 149:5notes 44:14notice 79:18,21,22
79:23 80:1,1395:1,4 111:13117:11 119:8120:7 134:22149:20
noticed 50:11noticing 6:6notwithstanding
18:13novic 120:19,21
120:21 121:5,13121:15,18,20,23121:25 122:2,4,23
[money - novic] Page 21
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
123:7,9,15 124:19124:22 125:4,7148:18 149:2,5,9149:14,19 150:4,9150:16,22 151:3
novick 12:25 17:317:3 18:21 19:1225:12,13 26:4,627:10 35:20,2257:24 64:23 65:475:9 79:23,2585:22,24 86:8,1086:19 88:10,19,2489:2,15 90:4,7,1492:1
novick's 27:1166:13
number 35:250:11 54:16,1855:6,7,8 59:10,1568:7 71:23,2486:21,23 89:391:21 94:15,1795:12,15 96:1798:19 104:21107:1,4,6 119:15128:24 145:4,7
numbers 91:1798:23 141:8
numerator 74:9,9ny 5:3 12:6,14,22
13:4,11,19 14:1114:18,23 159:23
o
o 5:21 15:1 123:9125:4 159:1
o'clock 145:10object 20:1,2 36:8
38:18,18 39:1040:1 85:10 108:6116:14,15 118:15133:16 134:8148:1
objecting 129:9objection 18:23
19:5 20:3 22:1425:14 29:9 35:2336:2 57:24 114:1125:1 129:3133:20 143:19148:13 149:20
objectionable38:7,9
objections 38:20134:14 135:14147:6,7,18,19148:8,9 150:18,19150:23 152:5
obligates 119:4obligation 83:25
113:24 114:13,18118:14
obligations 6:1726:16 27:22 43:23122:16 123:1124:5,5,6,7,16
obtain 7:13115:17
obtained 118:3obviates 130:25obvious 41:10
91:7obviously 27:17
29:24 40:6 43:2461:13,15 62:2164:8 71:13 92:17101:4 102:3,5109:5 120:12137:6
occurred 41:1753:12 122:10
october 23:12,2330:16 34:11 82:1382:14,15 89:17,1892:13 100:24123:3 125:3
131:19 132:11134:10 138:25,25139:1,2,2,4142:21
offer 56:16 57:1558:4 91:20 109:25110:2 112:23,23114:2,15,16,18,21114:21,23 118:14118:16
offered 85:25 86:690:24
offers 8:9 69:25112:21 115:18116:23
office 12:12 37:2137:23 39:15 51:151:4 80:10 134:8135:7
officer 87:14officers 97:16offices 24:4oh 16:7,18 43:10
43:18 46:2 55:2177:2 79:3,6 90:692:15 112:20119:13 121:5,19142:24 149:18154:21
okay 15:10,1216:7,25 17:2,1017:18 18:12,12,1619:15,25 20:4,520:20 22:2,3,1222:13,13,17,20,2523:1,25 24:1,1124:21 29:8 31:231:20 33:17 35:535:13 36:24 37:637:9 40:22,23,2441:5,7 42:5,6,843:10,13,21,2244:20 45:9 49:3
50:10,19,22 51:651:16,23,25 52:452:13,15,16 55:955:21,24 57:1,1,257:7,23 58:1659:7 69:12,1874:7 75:3,4,876:24 77:3,5,1577:15 78:12 79:379:6,12,16,2480:8 81:1 83:1384:14 86:10,1989:15 90:6 92:1592:22 93:3,9,1093:12,13,24 94:496:5,9 97:2198:12 105:9,12,17105:22,25 106:2,6106:8 107:9,25108:13,18,23109:4,14 110:1,15110:20 111:12112:3 113:4 115:4121:4,5,21 122:17122:21,23 127:15128:1,15,21 129:4129:10,18,21,24129:24 130:7131:2 133:21,21134:1 135:6,12,19136:5,9 137:17138:7,19,21142:10 145:11146:24 147:1,4148:3,3,3,6,14150:22 151:3,15152:4 153:2,7,18154:21,24 155:14155:17 156:22
old 159:21omission 24:12omitted 22:6
[novic - omitted] Page 22
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
omni 6:5 154:22155:2
once 24:16 70:5103:5 111:1130:24 132:18
one's 122:17ones 24:16 142:18
156:12open 38:13 42:18
45:19 46:9 53:2353:24 81:24 93:793:8 100:5 131:15132:3,16 133:13134:5
opened 45:2253:18
opening 39:2171:10
operate 59:24operating 44:16
46:11 49:9,10,1372:8 74:19 118:3
operation's108:16
operational 42:19operations 52:9opportunity
73:13 93:15 98:9105:4 118:4146:23 149:6,21151:23
opposed 61:1162:16,17,20 71:13
opposite 88:7order 6:1,7 8:15
8:22 9:4,10,16,2210:4,11,18 11:420:12,17,24 22:422:15,15,17 23:2424:6 25:8,8 34:935:11,21 37:1540:1 55:12 56:1056:15 59:24 67:11
67:23 69:15 70:370:13 71:16 73:176:19 79:10 80:1181:2 84:15,23,2585:20 87:21,2192:4,5,6,9,18103:5 106:20108:2,4,12 109:6109:8 111:3,5,14119:16 121:17122:8,19,24123:25 124:9,11124:12,25 125:3125:14 126:11127:21 128:5,6,7128:8,9 130:14,24132:2 133:17134:2,9,10,10,14148:20,20,21149:24 151:1152:12 153:9,13153:14 156:17158:6
ordering 128:2orders 7:12 20:17
90:2 152:22154:14,17 156:8156:15
ordinary 6:1689:24
original 42:698:19
originally 151:25152:17
outside 48:1252:17 62:17 87:13
outsourced 26:2226:25
owe 36:20,20 37:3owed 100:21owner 46:22,25
62:14
owners 45:1,1846:19
ownership 26:1834:16
p
p 12:1,1 15:1125:4 137:12154:5
pa 14:4paca 6:20 24:24
25:6,9 28:16,1728:23 29:18,2294:8,11,23,2495:5,7 100:19101:5,7,14,17,17101:18,19,21,23102:4 103:16,18103:20 128:21129:7,17 130:20141:3
packet 128:17page 21:5,11,16
21:18,18,20 22:539:7 98:17,2399:6,13 104:19105:10 107:20111:19,25 121:9121:22,24,25122:2 158:4
pages 100:23paid 25:5 27:21
27:23,24 29:230:1 32:15,16,1735:8,23,25 36:1436:23,23 43:2444:1,15 72:1693:20 101:19103:21 140:23
paper 75:3papered 57:21papers 32:10
38:24 41:19 62:1479:8 86:3,17,23
87:13,17 92:2paragraph 21:9
22:5,11 25:8106:20
parcel 34:4 67:12pardon 71:4
107:5 118:8parent 18:5,6,24
19:17 34:16 37:1337:14
part 28:1 33:1134:4 51:11 52:1262:6 67:12 70:1395:17 101:12119:21 122:16126:3,5 129:8
partially 79:17participants 51:2
51:5,7particular 79:2
99:23 112:14particularly
75:16 123:5parties 17:13
47:23 57:17 80:14103:9 116:23118:15 150:11
partner 15:23106:13
party 12:4 14:1666:20 76:3 84:185:12 87:19149:22
patch 126:5pay 6:14,20 26:2
26:12,15 27:2528:6,12,13 29:1429:21,24 30:532:21 36:4,9,1737:15 53:15,1559:2 101:21103:10
[omni - pay] Page 23
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
payable 32:1358:13
paying 45:17 52:7100:11 101:6130:14
payment 7:6103:16 104:22122:15 133:5
payments 26:2326:23 36:13 43:2544:1,25 45:2,1146:18,22 61:1591:12 94:11
payroll 31:24 32:433:2 36:7 52:7,2553:7 130:7 134:18140:21 141:23142:7,8,11 144:20144:21
peak 48:22penalty 100:15
116:10,11pendency 6:11pending 19:4
50:12people 15:12 33:3
33:4 37:23 39:852:21 56:3 59:1963:24 69:14 74:2577:11 87:2 117:10120:18 127:1,2,5144:7 148:21,24149:10,11 152:19153:15
percent 18:7 49:861:7,9 62:16,16112:4 125:24151:20,21
percentage 34:15perfect 151:3perfected 75:19perfectly 62:22
perfunctory80:10
period 22:7 44:244:15 46:23 48:168:1,3 92:14 99:5104:8 108:8,9120:8 143:25
person 34:18,1964:22
personally 36:10peter 15:16petition 6:20 7:13
7:25 15:24 25:525:23 26:2,2,1527:22 32:4,19,2135:23,24 36:839:6 53:2 61:1697:19 115:8,15117:1 123:1 127:7151:19 154:24
petitions 53:2586:24
philadelphia 14:4phone 15:11
16:11 63:25 65:2119:14 120:8
pick 22:25 27:441:11 141:11
picked 41:10142:12
piece 32:2,2130:18
pieces 86:23pilevsky 12:8
17:16,16place 17:21 27:14
33:5 82:24placed 152:22places 93:6 111:3
111:6plain 60:1 69:15
84:15,23 85:6106:10,16 110:17
plains 14:11plan 23:3 122:13
152:21planning 41:19,20
90:21 152:16plate 68:5platform 21:6,21
158:7play 116:1plaza 5:2please 20:19
72:20 97:1,5104:2 136:12
pledge 49:11plenty 112:16plus 53:8 91:18
93:6 108:22 151:9151:11
pm 5:6 157:2point 27:4 30:3
38:18 39:9 40:140:16 45:14 46:1647:19 48:24 58:960:12,25 62:1268:7,19 71:975:11,12 85:790:11 91:1,1496:6 108:17112:22 113:4,6114:17 116:8117:15 118:1,12122:7 137:4144:23 147:6150:2 151:17,21
points 86:11 91:692:16
poked 64:5policies 53:13portion 29:2 36:3
130:3,4 154:4position 60:3
70:22 78:19 97:17119:18 123:16
127:1 139:11143:13 144:22
positioned 83:4possession 24:16
38:10,14 39:14,1639:18,22 41:671:11 85:2 97:25118:22,24 132:3133:2
possibility 23:1348:7 54:5 139:24
possible 23:4,1233:19 35:9 52:2462:13 80:16 84:1684:23 93:16106:16 111:22131:17 134:5144:13
possibly 35:24101:22
post 7:13 26:1,1533:4 35:23 36:8105:15
potential 46:848:16 53:4 62:11119:24 137:24
potentially 40:18101:3 138:5
power 75:6practical 49:7,12practices 39:6pre 6:20 15:23
25:5,23 26:227:22 32:4,19,2135:24 39:6 53:261:16 115:8,15117:1 123:1 127:7151:19 154:24
precedent 120:24predict 64:6preference 20:20
101:5 131:11146:20
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
preferred 103:17prejudice 19:10
60:2 133:15 134:7preliminarily
39:20premise 65:19
73:6,10preparation 98:2prepare 129:1prepared 33:23
38:11 57:19 58:2159:14 78:24 84:2295:21 99:1,16,23123:23 126:1
preparing 31:2271:1
prepet 100:11prepetition 6:14
7:22 70:9 75:1394:16,17 100:12
present 61:263:11 65:6 114:7114:13,18,25116:10,16 118:14119:4
presented 54:960:13,14 63:398:1,2 112:22113:2,12 120:12
presents 113:16preserve 73:1
81:8preserved 84:16preserving 108:5presumably 37:8
156:18pretty 86:10
101:18 110:12previewing
120:17previously 106:5price 8:8 31:6
43:8,12,17,19
62:19,20pricing 126:3,5primarily 94:3prime 85:9,11
109:16priming 75:14
87:21 109:18principals 75:24principle 54:23print 24:15,16,16prior 30:6 45:18
46:19,22,25 62:14123:3
priority 25:2487:22
probably 19:425:14 28:12 33:1360:9 64:12 88:2092:18 111:7,13,15
problem 19:19,2219:25 21:8 22:224:5 28:21 29:1429:19 42:22 63:165:13 66:6,1470:15 94:13 95:9107:15 119:13124:3,4,9,14,23135:4,11,13138:24 139:10140:12 144:4
problematic60:21,22 69:20
problems 45:1669:22
procedure 8:4procedures 8:10
23:5 69:23 83:2114:19,20 122:19122:24 123:25124:24,25 125:3127:19 136:22137:5,12 145:19154:6
proceed 85:3100:9 113:12,23131:6 137:8
proceeding 46:24134:3,4
proceedings 47:397:14 157:1 159:4
proceeds 111:21process 6:16
37:14 52:19 56:657:20,22 86:188:12 119:15124:20
produce 94:1399:9 101:1 102:4102:4 144:2
producing 143:25product 67:25
68:22 99:12102:22 104:25
professional110:8
professionals 53:153:8 66:3,4 70:17127:7
profit 42:18 47:1748:15,17
profitable 42:1742:20 45:17 48:18
profits 118:3programs 6:15progress 124:2progression 40:14prohibit 7:1prohibition
126:20prom 70:20,22prominent 76:5promissory 44:14proofs 21:7,22proper 48:6properly 67:11
75:19 144:6
property 8:156:15 119:25
prophylactic148:19
proposal 60:19,2161:4 65:7 66:12106:10 112:14
proposals 61:18propose 61:8proposed 6:7 7:6
8:15,22 9:4,10,169:22 10:4,11,1811:4 15:14,17,1915:24 16:3,5 24:361:4 70:3 110:6142:25 151:24,24154:16,16
proposing 30:540:14
prosecute 117:14protection 39:15
40:19 62:15,15protections 75:14provide 7:4 45:10
54:7 60:15 114:20122:14 129:6,8
provided 59:1565:5 66:9,11,12111:20,22,25130:23,24
providers 7:2,4providing 45:4
66:8 134:4provision 56:12
138:1,1provisions 61:21
92:21 115:24116:5 128:6,7
proviso 133:13pull 65:17pulled 57:24
110:18
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
purchase 8:842:10,12,15,23,2443:7,12,17,1954:9,11 62:4,5,662:19,25 63:4,663:14 76:3 95:2295:24 102:11106:18,24 113:12113:16,25 114:6119:2
purchaser 8:7purchases 99:4,12
104:25 105:3,6purchasing 57:4
77:11 83:19purpose 115:20
126:5 129:25149:24
purposes 18:821:7,21 73:9100:5 128:5,5,8153:12
pursuant 7:11,158:2,9 100:12111:5 123:2
pursuit 101:19purview 71:14push 100:24
144:13 148:16pushed 148:19pushing 127:13
127:13,13put 23:19 24:8
26:20 29:11,1230:6,20,23 33:2134:2,6 59:2463:12 73:2 75:1978:11,12 85:2586:6,12,20 88:2088:21 89:10 90:190:18 96:14,19111:14 128:6130:4 145:2
148:16 155:25156:2
putting 63:18126:15 145:25
q
quarter 100:8queens 42:8,11,12
44:7question 19:16
28:5 41:10 64:471:10,14 73:10,2280:19,20 84:1485:19 88:15 89:14101:24 104:18105:24 111:19127:13
questions 38:2339:2 73:22 94:796:20 101:25
quick 102:2quicker 65:15quickly 24:9,10
64:1 80:16quite 50:11 61:21
68:25 85:11 91:22
r
r 5:21 12:1 15:197:7 159:1
rachel 12:1715:25
raise 32:10 97:1120:1
raised 32:9rammed 82:18ramp 103:6ramping 102:21
102:25rate 61:5,6,7,8
89:24 151:19reached 31:18
47:22reaction 148:6
read 25:16 32:1,341:19 56:8,11111:1 128:4
reading 26:9107:23 111:6
ready 16:15,17,1945:22 46:9 64:2467:20 146:23
real 52:7 100:18100:25 102:7
realistic 141:22realize 86:12
103:11really 24:5 34:21
39:21 41:16,2346:15 54:2 56:1867:1 71:14,22,2371:24 72:10 75:475:5 80:16 81:181:16,21,23 83:191:2,14 92:13124:10 149:23
reason 19:16 38:673:21 79:25 83:1684:8 91:2 128:2
reasonable 81:3,3reasons 37:22
65:14 107:16recap 152:7,7,9
153:25recapture 105:14receive 45:12
137:6received 45:11
79:9 102:3receives 132:18receiving 31:18recharacterization
84:9recommends
95:19record 24:9 34:2
63:19 86:12,21
88:1,21 97:6103:24 112:12,19120:20 125:11,20127:22 128:2132:23 134:2,11137:22 148:22156:8 159:4
records 22:765:18
reduce 99:17reduced 24:17
102:5refer 17:5 43:19references 107:25
125:23referencing 112:7referred 46:4referring 115:7
155:2refusing 7:2regard 67:21
85:16 86:2regarding 20:24
28:21 37:18 39:442:14 52:7 61:2161:23 62:14,15,2395:8 112:21 154:4
regardless 148:13regular 28:7,11
28:23 29:1rehabilitate 103:8
103:11reiterate 36:2reject 117:22,24relate 115:25related 6:2,17 7:8
7:16 68:6,1975:12
relating 130:4relationship 51:7relationships
51:10 99:22148:23 149:22
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
relatively 112:24relief 7:8,16 93:16religion 82:2remain 47:25
133:1remained 44:23remedy 117:19,20remember 92:10remind 106:4reminded 40:16
131:15removal 114:11removed 107:17
121:23 122:4repercussions
29:16rephrase 98:15replacement
75:14 109:9,19replenish 100:4replenishing
93:19 99:20replenishment
93:21 94:2 99:11represent 15:23representation
101:23represented 94:10
95:1 102:2representing 68:2
102:25represents 101:18request 23:12
34:6 38:6,11132:2 133:10150:10
requested 22:2323:2 55:16
requesting 55:23136:13
require 125:25129:2 149:10
required 38:1345:2
requirement 38:9123:24
requirements39:12
reservation 19:3reservations
79:10resolutions 86:24
87:6resolved 66:6respect 22:22 23:1
24:2 26:24 31:3103:17 109:7111:4 112:13127:5 128:21130:10 134:2137:18 151:1
respectfully116:19
respond 73:14response 72:1rest 35:10 68:17
86:2 90:10restock 67:11
144:11restocked 144:12restocking 47:12
90:4,5 91:6 98:2199:4,10,16,18,23100:10 144:14,18
restoration 80:12restrain 7:2restricted 44:13
44:14restructuring
97:16result 42:23 46:18
47:8,9resulted 68:24retain 53:1 127:7
retained 17:1348:8,9 57:21119:15
retainer 6:7retention 108:11revenues 90:25reviewed 29:25reviewing 79:8rid 24:12right 17:20 21:19
21:20,23 23:1626:5,20 27:3,2029:5,17,17 30:1030:17 31:2,9 32:133:14,20 35:1737:1,9 40:9,22,2442:16 45:24 46:646:6 50:1,3,1951:22,25 52:1055:5 56:18,2460:13,14 63:16,2163:22 64:10,1672:3 74:6,12 75:175:4,10 77:7,1578:10,13,16,1880:19 81:4,6,6,1382:16,16 83:18,2083:21 84:5,585:23 88:1 91:2594:19 95:19 96:997:1 100:10 103:1103:19,20 104:21104:23 105:18107:22 108:21,22109:21,23 110:3112:11 118:5,13118:25 122:17125:8 127:24128:12 129:19,24129:24 131:13132:22 133:15,18133:23 134:21135:6 136:1
137:14,15 138:13138:16 139:7,17140:22 143:6,16143:18 144:5,5145:1,13 147:8,12148:24 150:4151:19,22 152:3152:14 153:1154:22 155:5,19156:4,7,17,22
rights 79:10 80:1284:16 108:5 134:7
risk 33:3,6,7100:18,25 101:6103:17
road 2:19 8:239:17 15:5 29:16116:2 159:21
rob 120:21robert 12:25
15:18 17:3robust 57:20role 87:11roll 124:6,12,17rollup 55:11,14
58:17 61:14107:25 151:13,17151:20
romantic 28:4room 59:19 64:25
67:4 71:25 72:976:2 81:7 93:2,2,493:5,5
rooms 72:4,5 93:3rose 13:16 16:2,24rosh 41:22 53:19
53:21,22,23 89:6round 55:6,7
63:12route 80:10 133:9routine 99:12rule 7:15 108:10
129:1
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
rules 8:3,4,5110:9
ruling 122:9rulings 158:3run 42:7running 34:22
39:9
s
s 6:2 8:13,20 9:2,89:14,20 10:2,9,1611:2 12:1 13:2115:1
sabbath 89:7sabotage 77:9,13safe 156:25sale 8:1,5,8 23:1
44:6,7,8,10 56:557:14 66:23,2472:14 94:22 102:4105:15 124:20136:22
sales 6:20 24:2425:14,17,19 26:1227:4,12,21 28:8,829:1,14 47:5 68:969:10 89:16,1790:21 94:22100:11,12 102:2102:19 103:1119:19 128:18130:4 152:24154:4
samuel 13:21 16:2satisfy 104:9
135:7saturday 89:7saved 26:8saw 19:4 129:6
130:19saying 76:23 83:8
85:21 87:20 132:8141:17,19 145:23148:7 150:14
says 22:11 65:978:4 87:10 89:21114:14,22 128:7144:14
scarsdale 14:2142:9 45:21,2379:1,11 100:1,1,2100:3,3,5,7
scenario 23:10schedule 6:1
24:18 37:7 41:1105:18 113:14135:18 136:14155:3
scheduled 64:1395:25 100:14144:14 145:18
schedules 7:2472:18
scheduling 7:14146:1 151:1
schiff 14:20 78:25schwed 8:16,23
9:5,11,17,23 10:510:12,19 11:513:6 15:13,1417:23 18:1,11,1518:17 19:19 20:220:7,9,14,21 21:921:13,16,19,23,2522:2,12,21 23:123:11,15,19 24:224:23 25:1 27:1,827:11 28:1,5,1729:3,5,7,12,2331:17,21 32:5,832:14,25 33:15,1834:12,25 35:3,636:15,22 37:2,437:10 40:25 41:541:8,24 42:1,3,642:12 43:2,6,9,1143:15,18,22 44:6
44:19,21,24 45:645:8,10,25 46:3,649:2,4,17,20,2350:3,14,21,2352:5,11,14,1653:6,11 54:15,1854:22 60:6,11,2361:11 62:5,1063:18 65:1,3,1065:21 66:1 67:668:6,19 72:1 75:276:25 93:12,13,1893:24 94:2,5,1594:17,20 95:3,1896:6,11,16,2197:12 98:5 100:19105:21,23 106:4,8106:11 112:20,21113:9,21 115:2,19116:9 125:10128:20 130:6131:11,17 132:15134:25 135:4136:18,21,24137:4,14 138:22139:4,7,9,16,20139:24 140:12,15140:21 141:9,14141:17,22 142:3,5142:8,13 143:12143:17 144:4,18144:21 145:9,12145:16 146:9,20146:25 148:7151:5,16 152:3,21153:3,11,17,19154:10,23 155:9155:12 156:23
scott 13:14 15:23106:13
season 67:12,1381:15 89:5
seasons 2:5,12 3:53:19 4:12,19 9:59:11,23 10:1911:5 15:5,5,6,7,715:8 18:5,9,2419:16,20,24 20:1042:7 49:5,7 51:1176:15 77:12
seat 77:22 97:5seated 15:2sec 8:2second 21:2 25:8
33:21 69:14 98:1798:25 104:19106:5 122:17123:8 132:15138:6,19 139:16
section 7:7 21:521:11,20,20 99:7106:21 107:13122:2 123:2125:23
secured 15:2449:6,12,15,18,2550:8,9 51:21,2279:17 84:3 85:10
security 44:1062:2 107:2
see 20:16 33:2335:15 48:10,1056:9,10 60:2462:23,24 69:575:5 85:12 91:793:9 98:18 102:25107:10,22 111:7112:8 116:7128:22,23 129:25
seeing 21:13103:6
seek 18:8 123:11152:2
seeking 29:2172:24 88:11 100:4
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
100:4 123:12152:2
seen 19:6 29:2344:11 48:16130:19,20
segregate 36:10segregated 28:24
29:2seized 47:9self 146:1sell 68:22 80:22
89:11 102:5selling 89:23send 102:14
132:21 153:13155:15,16
senior 36:9sense 18:23 20:5
83:1 88:22,2591:9 92:20 106:7126:16 135:23,24151:18
sent 120:9 130:14155:12
sentence 107:15separate 27:7september 5:5
23:12 51:23 82:1598:18,24,24
service 7:5services 7:3 45:5
45:11servicing 101:11set 86:3 124:24settle 134:22severely 33:8 52:6shabbos 153:6shape 153:9share 49:24 74:21shared 99:2
100:20 105:18sheet 60:15
shell 46:14shelves 28:9 47:14
59:25 71:20 89:1190:20 99:10 102:9102:12 144:3,10144:10 152:16
shift 128:24ship 89:10 94:9
101:1shipments 94:12
102:18shopping 46:1
153:5short 29:13 30:9
39:21 40:2,14shorter 30:16shortly 24:4 48:8should've 41:21show 37:8 107:12
156:8showed 26:10
105:19showing 88:6,8
127:5shut 52:9shutting 40:11,12side 4:5 10:12
15:7 57:11sides 74:17 75:17sighed 147:1sign 67:23 119:2
135:15 152:13signed 67:19,19
70:24 71:2,5,787:2,6,9 97:19119:1
significant 21:462:18,22,24 79:17140:15 151:12
significantly112:25
signing 85:5135:11,13
simchat 59:2182:6
similar 31:3,5,1360:18 61:22
simply 28:19sing 135:8sit 143:2sitting 67:18
75:15 145:15situation 25:22
40:18 50:12 70:8109:9
situations 57:8six 54:13 91:8
122:6sixty 7:24size 37:25sk 52:9skeptical 101:21skipped 134:19skittish 104:11,12skny 13:9 15:23
49:21 50:11,20,2250:25 51:10 53:153:21 54:6 60:1861:6,11,20 62:1663:10 65:11 74:1774:20 83:9 86:2287:1,5,18 96:6106:13 116:3
skny's 61:1362:20
slightly 45:13110:6
small 34:15 43:2445:25 46:4,7,7,790:9 137:12,12154:5,5
smallest 90:21sol 12:20 17:4,5
42:23 45:1 120:22121:6
sold 28:20 99:8119:22
sole 86:25solicit 101:7sols 42:8solutions 159:20somebody 16:9,21
16:23 17:15 55:1357:1 72:1,2 80:1683:3 95:2,1396:14 113:15130:22 136:2147:1 154:12
somebody's 69:17someplace 25:21somewhat 144:11sonya 11:25 159:3
159:8soon 33:19 35:9
37:18 69:4 74:1274:14 76:19 85:13134:4
sorry 16:18 28:443:15,18 79:1990:3 94:6 96:1197:9 120:21126:13 129:5137:22 139:6,8141:14 149:18155:24
sort 41:17 58:159:22 78:4 86:4,5115:10 150:11
sought 36:3 85:9sounds 64:24
81:15 96:14south 14:3 130:1southard 13:8
15:22southern 19:5
80:2speak 31:12 72:2
80:9 95:8 119:11
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
152:1speaking 66:10spell 97:5spend 93:22 141:1spending 90:11spent 98:20
139:22spills 21:19split 110:9,10spoils 90:17spot 153:24spring 47:7sprinkle 105:4staffpro 27:2
31:15,18 36:12,1336:23
stages 50:17,18stalking 54:11
57:5,8 63:7,1169:17,17 83:396:2,4,7 113:6,8113:13,17 114:1114:15,16,21,23115:1,18,21116:10,16,22,24117:4,4 118:14,16123:18 126:11,14127:19 137:8
stamp 24:1538:10
stand 67:10 73:378:7 95:19 96:1596:20 112:13
standard 24:15110:12
standing 118:1standpoint 108:16
108:16 118:6staring 88:3stark 81:16start 34:16 65:19
103:6 132:4 133:4146:21
started 30:4 92:2598:16 133:10
starting 38:16102:14
starts 89:5 122:2state 103:3 120:20
129:3,3statement 21:6statements 7:24states 1:1 5:1 8:3
12:10 16:1 22:22111:15 135:7
status 104:11stay 7:14step 68:5 88:13
105:25 127:1,3133:3
stepped 126:23,25steps 113:16steve 44:9stevens 13:8 15:22stick 145:13 147:9
148:25stipulations 70:7
70:8 74:16,16108:25 109:2110:19 116:5
stock 68:1 69:7144:9
stocked 48:14,2368:10 89:4 102:17144:6 152:17,24
stocking 100:1,7stood 120:18stop 47:16stopped 46:13,14store 42:11,13
45:21 46:10,13,1747:13 81:3,899:18,20,23 100:1100:3,4,8 104:15
stores 19:2 28:942:7,7,8,14,16,19
42:20,23 44:845:19,20,20,2347:5,12,14,1748:14,16,16,18,2153:17,23 67:1168:1,9,21,23,2469:3,8 81:2389:10 94:3,1399:11,12,21 100:2101:1,11,12102:16,21,23103:11,15 104:9104:14 105:1144:6 152:24
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94:9
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support 49:11101:8 105:7113:18 148:22
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think's 29:13thinking 60:4
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thinks 131:1third 66:20 76:2
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72:21 74:25 77:177:2,16,20 81:184:11,13 85:2,385:23,24 86:2087:14 88:12,2190:1 92:11 93:7,896:14 99:1 102:13105:24 107:10112:19 113:9121:7 124:10125:18 127:2,21128:9,16,17 129:3131:6 132:12,22133:22 134:14137:5 138:8139:23 140:1,2143:2 145:2,14147:7 148:12150:7,7,10,11151:21 153:25
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Case 1-18-45284-nhl Doc 48-1 Filed 09/26/18 Entered 09/26/18 15:50:21
EXHIBIT B
Case 1-18-45284-nhl Doc 48-2 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45284-nhl Doc 48-2 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45284-nhl Doc 48-2 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45284-nhl Doc 48-2 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45284-nhl Doc 48-2 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45284-nhl Doc 48-2 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45284-nhl Doc 48-2 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45284-nhl Doc 48-2 Filed 09/26/18 Entered 09/26/18 15:50:21
EXHIBIT C
Case 1-18-45284-nhl Doc 48-3 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45280-nhl Doc 1 Filed 09/16/18 Entered 09/16/18 16:51:17Case 1-18-45284-nhl Doc 48-3 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45280-nhl Doc 1 Filed 09/16/18 Entered 09/16/18 16:51:17Case 1-18-45284-nhl Doc 48-3 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45280-nhl Doc 1 Filed 09/16/18 Entered 09/16/18 16:51:17Case 1-18-45284-nhl Doc 48-3 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45280-nhl Doc 1 Filed 09/16/18 Entered 09/16/18 16:51:17Case 1-18-45284-nhl Doc 48-3 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45280-nhl Doc 1 Filed 09/16/18 Entered 09/16/18 16:51:17Case 1-18-45284-nhl Doc 48-3 Filed 09/26/18 Entered 09/26/18 15:50:21
Case 1-18-45280-nhl Doc 1 Filed 09/16/18 Entered 09/16/18 16:51:17Case 1-18-45284-nhl Doc 48-3 Filed 09/26/18 Entered 09/26/18 15:50:21
EXHIBIT D
Case 1-18-45284-nhl Doc 48-4 Filed 09/26/18 Entered 09/26/18 15:50:21
K A S O W I T Z B E N S O N T O R R E S L L P
ROBERT M. NOVICK
DIRECT DIAL: (212) 506-1758DIRECT FAX: (212) 835-5058
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 506-1700
FAX: (212) 506-1800
ATLANTAHOUSTON
LOS ANGELESMIAMI
NEWARK
SAN FRANCISCOSILICON VALLEYWASHINGTON DC
September 18, 2018
VIA EMAIL
Tracy KlestadtKlestadt Winters Jureller Southerd & Stevens LLP200 West 41st StreetNew York, New York [email protected]
Re: Discovery Requests
Dear Tracy,
On behalf of Super Sol Ltd. and L&N Consulting Group, LLC, and as a follow up to thediscussion on the record yesterday, we write to request that SKNY agree to engage in informaldiscovery on an expedited basis concerning issues raised by the Debtors’ post-petition financingand asset sale motions.
At this time, and reserving all rights, we request that SKNY produce the documents listedon the attached Document Request, and make Mitch Wolf and Nathan Klein available fordepositions in advance of the October 3, 2018 hearing.
Please get back to us as soon as possible. Given the schedule and the holidays, time is ofthe essence.
Very truly yours,
/s/ Robert M. Novick
Robert M. Novick
Enclosure
cc. Michele L. AngellNathan SchwedPeter JanovskyRobert GuttmanWilliam E. Curtin
Case 1-18-45284-nhl Doc 48-4 Filed 09/26/18 Entered 09/26/18 15:50:21
DOCUMENT REQUESTS
1. All documents concerning the Proposed DIP.
2. All documents concerning efforts to obtain alternative financing to the Proposed DIP.
3. All documents concerning or supporting the revenue assumptions set forth in the Budget,and all drafts of the Budget and communications concerning the drafts.
4. All documents concerning any debt, equity, or other investment at any time by SKNY inthe Debtors.
5. All documents reflecting payments from the Debtors to SKNY, or any other entity youbelieve to be affiliated with Robert “Mendy” Klein or his estate and controlled entities.
6. All correspondence or agreements concerning the debtors between or among the Debtors,Zvi Bloom, Mayer Gold on one hand, and SKNY, Robert Mendy Klein, Nathan Kleinand Mitchel Wolf, on the other.
7. All correspondence or agreements concerning the Debtors between or among Getzler,Henrich & Associates (“Getzler”) and SKNY; and all correspondence or agreementsconcerning SKNY between Getzler and the Debtors.
8. All correspondence or agreements concerning the Debtors between or among the Debtorsand:
(a) Robert “Mendy” Klein;
(b) Mitch Wolf;
(c) Nathan Klein;
(d) Greg Zilberstein;
(e) Morris Wolfson;
(f) Joseph Bistritzky;
(g) Ari Chitrick;
(h) Abraham Fruchtlander.
9. All documents concerning the APA.
10. All documents since September 1, 2017 concerning efforts to market and sell orotherwise transfer all or substantially all of the Debtors’ assets either as a whole or inparts.
11. All proposals, offers or expressions of interest since September 1, 2017 to purchase all,substantially all or parts of the Debtors assets.
Case 1-18-45284-nhl Doc 48-4 Filed 09/26/18 Entered 09/26/18 15:50:21
2
12. All documents since September 1, 2017 concerning any efforts or plans to recapitalize,restructure or refinance the Debtors.
13. All documents since January 1, 2018 concerning the Debtors’ value, financial conditionand performance, including but not limited to financial statements, valuations, andprojections.
14. All documents concerning the corporate governance of the Debtors.
15. All documents concerning the membership or other equity rights and powers of SKNYwith regard to the Debtors.
16. The identity of all parties participating or investing in the Proposed DIP through SKNY.
17. The identity of all parties participating in the proposed APA through SKNY.
DEFINITIONS AND INSTRUCTIONS
As used in this Document Request, the following words shall have the definitions listed
below. Terms not defined have the meanings assigned to them, if any, by sections 101 and 102
of the Bankruptcy Code, or other applicable law or rules.
a. Any/all, and/or, singular/plural, gender: The singular includes the plural and vice versa.The use of any gender includes the masculine and feminine genders. The use of thedisjunctive “or” includes the conjunctive “and” and vice versa. The use of the word “all”shall be construed as “any and all,” the word “any” shall be construed as “any and all,”and the word “each” shall be construed as “all and each.”
b. APA means the Asset Purchase Agreement by and among Debtors and SKNY LLC datedSeptember 14, 2018.
c. Budget means the Proposed DIP Budget annexed as Exhibit B to the Proposed DIP (ECFDoc. No. 10-1 in Case No. 18-45280-nhl).
d. Communication means and includes, without limitation, statements, discussions,negotiations, conversations, speeches, meetings, remarks, questions, answers, paneldiscussions, symposia, and every other manner of disclosure, transfer or exchange ofinformation, whether written or oral. The term includes communications and statementswhich are face-to-face and those which are transmitted by media such as intercom,telephone, television, radio, mail, modem or electronic mail.
e. Concerning means relating to, referring to, describing, evidencing, constituting,comprising, identifying, commenting on, reflecting, indicating, analyzing, sharing orpertaining to in any way.
Case 1-18-45284-nhl Doc 48-4 Filed 09/26/18 Entered 09/26/18 15:50:21
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f. Debtors means (collectively, singularly or in any combination) Blue Gold Equities LLC,Central Avenue Market LLC, Amsterdam Avenue Market LLC, Wilmot Road Market,LLC, Seasons Express Inwood LLC, Seasons Lakewood, LLC, Seasons Maryland LLC,Seasons Clifton LLC, Seasons Cleveland LLC, Lawrence Supermarket LLC, Upper WestSide Supermarket LLC, and Seasons Corporate LLC, whether before or after theybecame debtors in bankruptcy cases.
g. Document is defined to be synonymous in meaning and equal in scope to the usage of theterm “ documents or electronically stored information” in Fed. R. Civ. P. 34(a)(1)(A). Adraft or non-identical copy is a separate document within the meaning of this term.
h. Proposed DIP means debtor-in-possession financing offered by SKNY LLC to theDebtors, including the Debtor-In-Possession Loan and Guaranty Agreement among theDebtors and SKNY LLC filed in the E.D.N.Y. Bankruptcy Court on September 16, 2018.
i. SKNY means SKNY LLC, and any of its affiliates, subsidiaries, divisions, parentcorporations, controlling shareholders, or predecessors or successors in interest, and anyand all officers, directors, employees, consultants, advisors, attorneys, accountants,appraisers or other agents, and/or anyone acting or purporting to act on its behalf,including but not limited to Robert “Mendy” Klein and Nathan Klein.
Case 1-18-45284-nhl Doc 48-4 Filed 09/26/18 Entered 09/26/18 15:50:21
EXHIBIT E
Case 1-18-45284-nhl Doc 48-5 Filed 09/26/18 Entered 09/26/18 15:50:21
K A S O W I T Z B E N S O N T O R R E S L L P
ROBERT M. NOVICK
DIRECT DIAL: (212) 506-1758DIRECT FAX: (212) 835-5058
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 506-1700
FAX: (212) 506-1800
ATLANTAHOUSTON
LOS ANGELESMIAMI
NEWARK
SAN FRANCISCOSILICON VALLEYWASHINGTON DC
September 18, 2018
VIA EMAIL
Nathan Schwed, Esq.Zeichner Ellman & Krause LLP1211 Avenue of the AmericasNew York, New York [email protected]
Re: Discovery Requests
Dear Nathan:
On behalf of Super Sol Ltd. and L&N Consulting Group, LLC, and as a follow up to thediscussion on the record yesterday, we write to request that the Debtors agree to engage ininformal discovery on an expedited basis concerning issues raised by the Debtors’ post-petitionfinancing and asset sale motions.
At this time, and reserving all rights, we request that the Debtors produce the documentslisted on the attached Document Request, and make a Rule 30(b)(6) witness available fordeposition in advance of the October 3, 2018 hearing.
Please get back to us as soon as possible. Given the schedule and the holidays, time isof the essence.
Very truly yours,
/s/ Robert M. Novick
Robert M. Novick
Enclosure
cc. Michele L. AngellPeter JanovskyRobert GuttmanTracy L. KlestadtWilliam E. Curtin
Case 1-18-45284-nhl Doc 48-5 Filed 09/26/18 Entered 09/26/18 15:50:21
DOCUMENT REQUESTS
1. All documents concerning the Proposed DIP.
2. All documents concerning efforts to obtain alternative financing to the Proposed DIP.
3. All documents concerning or supporting the revenue assumptions set forth in the Budget,and all drafts of the Budget and communications concerning the drafts.
4. All documents concerning any debt, equity, or other investment at any time by SKNY inthe Debtors.
5. All documents reflecting payments from the Debtors to SKNY, or any other entity youbelieve to be affiliated with Robert “Mendy” Klein or his estate and controlled entities.
6. All correspondence or agreements concerning the debtors between or among the Debtors,Zvi Bloom, Mayer Gold on one hand, and SKNY, Robert “Mendy” Klein, Nathan Kleinand Mitchel Wolf, on the other.
7. All correspondence or agreements concerning the Debtors between or among Getzler,Henrich & Associates (“Getzler”) and SKNY; and all correspondence or agreementsconcerning SKNY between Getzler and the Debtors.
8. All correspondence or agreements concerning the Debtors between or among the Debtorsand:
(a) Robert “Mendy” Klein;
(b) Mitch Wolf;
(c) Nathan Klein;
(d) Greg Zilberstein;
(e) Morris Wolfson;
(f) Joseph Bistritzky;
(g) Ari Chitrick;
(h) Abraham Fruchtlander.
9. All documents concerning the APA.
10. All documents since September 1, 2017 concerning efforts to market and sell orotherwise transfer all or substantially all of the Debtors’ assets either as a whole or inparts.
11. All proposals, offers or expressions of interest since September 1, 2017 to purchase all,substantially all or parts of the Debtors assets.
Case 1-18-45284-nhl Doc 48-5 Filed 09/26/18 Entered 09/26/18 15:50:21
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12. All documents since September 1, 2017 concerning any efforts or plans to recapitalize,restructure or refinance the Debtors.
13. All documents since January 1, 2018 concerning the Debtors’ value, financial conditionand performance, including but not limited to financial statements, valuations, andprojections.
14. All documents concerning the corporate governance of the Debtors.
15. All documents concerning the membership or other equity rights and powers of SKNYwith regard to the Debtors.
16. The identity of all parties participating or investing in the Proposed DIP through SKNY.
17. The identity of all parties participating in the proposed APA through SKNY.
DEFINITIONS AND INSTRUCTIONS
As used in this Document Request, the following words shall have the definitions listed
below. Terms not defined have the meanings assigned to them, if any, by sections 101 and 102
of the Bankruptcy Code, or other applicable law or rules.
a. Any/all, and/or, singular/plural, gender: The singular includes the plural and vice versa.The use of any gender includes the masculine and feminine genders. The use of thedisjunctive “or” includes the conjunctive “and” and vice versa. The use of the word “all”shall be construed as “any and all,” the word “any” shall be construed as “any and all,”and the word “each” shall be construed as “all and each.”
b. APA means the Asset Purchase Agreement by and among Debtors and SKNY LLC datedSeptember 14, 2018.
c. Budget means the Proposed DIP Budget annexed as Exhibit B to the Proposed DIP (ECFDoc. No. 10-1 in Case No. 18-45280-nhl).
d. Communication means and includes, without limitation, statements, discussions,negotiations, conversations, speeches, meetings, remarks, questions, answers, paneldiscussions, symposia, and every other manner of disclosure, transfer or exchange ofinformation, whether written or oral. The term includes communications and statementswhich are face-to-face and those which are transmitted by media such as intercom,telephone, television, radio, mail, modem or electronic mail.
e. Concerning means relating to, referring to, describing, evidencing, constituting,comprising, identifying, commenting on, reflecting, indicating, analyzing, sharing orpertaining to in any way.
Case 1-18-45284-nhl Doc 48-5 Filed 09/26/18 Entered 09/26/18 15:50:21
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f. Debtors means (collectively, singularly or in any combination) Blue Gold Equities LLC,Central Avenue Market LLC, Amsterdam Avenue Market LLC, Wilmot Road Market,LLC, Seasons Express Inwood LLC, Seasons Lakewood, LLC, Seasons Maryland LLC,Seasons Clifton LLC, Seasons Cleveland LLC, Lawrence Supermarket LLC, Upper WestSide Supermarket LLC, and Seasons Corporate LLC, whether before or after theybecame debtors in bankruptcy cases.
g. Document is defined to be synonymous in meaning and equal in scope to the usage of theterm “documents or electronically stored information” in Fed. R. Civ. P. 34(a)(1)(A). Adraft or non-identical copy is a separate document within the meaning of this term.
h. Proposed DIP means debtor-in-possession financing offered by SKNY LLC to theDebtors, including the Debtor-In-Possession Loan and Guaranty Agreement among theDebtors and SKNY LLC filed in the E.D.N.Y. Bankruptcy Court on September 16, 2018.
i. SKNY means SKNY LLC, and any of its affiliates, subsidiaries, divisions, parentcorporations, controlling shareholders, or predecessors or successors in interest, and anyand all officers, directors, employees, consultants, advisors, attorneys, accountants,appraisers or other agents, and/or anyone acting or purporting to act on its behalf,including but not limited to Robert “Mendy” Klein and Nathan Klein.
Case 1-18-45284-nhl Doc 48-5 Filed 09/26/18 Entered 09/26/18 15:50:21