10000014380

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, 39TH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: (310) 407-4000
LEE R. BOGDANOFF (State Bar No. 119542) JONATHAN S. SHENSON (State Bar No. 184250) DAVID M. GUESS (State Bar No. 238241) KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 Avenue of the Stars, 39th Floor Los Angeles, CA 90067 Telephone: (310) 407-4000 Facsimile: (310) 407-9090 Bankruptcy Counsel for Debtors and Debtors In Possession Debtors' Mailing Address 3411 N. Perris Blvd. Perris, CA 92571 National R.V. Holdings, Inc.'s Tax I.D. #XX-XXX-1079 National R.V., Inc.'s Tax I.D. #XX-XXX-5022 UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA RIVERSIDE DIVISION In re NATIONAL R.V. HOLDINGS, INC., a Delaware corporation; NATIONAL R.V., INC., a California corporation, Debtors. Case No.: Chapter 11 Jointly Administered with Case No.: 6:07-17937-PC NOTICE OF MOTION AND MOTION FOR (1) AN EXTENSION OF TIME WITHIN WHICH TO ASSUME AND ASSIGN, OR REJECT NONRESIDENTIAL REAL PROPERTY LEASES; AND (2) AUTHORITY TO REJECT NON-RESIDENTIAL REAL PROPERTY LEASES WITHOUT FURTHER NOTICE OR HEARING; MEMORANDUM OF POINTS AND AUTHORITIES; DECLARATION OF BRUCE COX CONKLIN, JR. IN SUPPORT THEREOF Date: Time: Place: Hearing February 29, 2008 10:30 a.m. Courtroom 303 U.S. Bankruptcy Court 3420 Twelfth Street Riverside, CA 92501 6:07-17941-PC
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TO THE HONORABLE PETER H. CARROLL, UNITED STATES BANKRUPTCY JUDGE; THE OFFICE OF THE UNITED STATES TRUSTEE; COUNSEL FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS; THE DEBTORS'
SECURED LENDERS; AND OTHER PARTIES ENTITLED TO NOTICE: PLEASE TAKE NOTICE that on February 29, 2008 at 10:30 a.m., or as soon thereafter as counsel may be heard, a hearing will be held before the Honorable Peter H. Carroll, United States Bankruptcy Judge, 3420 Twelfth Street (in Courtroom 303), Riverside, CA 92501, to consider entry of an order granting the relief requested in this Motion for (1) an Extension of Time Within Which to Assume and Assign, or Reject Non-Residential Real Property Leases; and (2) Authority to Reject Non-Residential Real Property Leases Without Further Notice or Hearing (the "Motion"), filed by National R.V. Holdings, Inc. and National R.V., Inc., the debtors and debtors in possession in the above-captioned cases (the "Debtors"). PLEASE TAKE FURTHER NOTICE that, by this Motion, the Debtors move the Court pursuant to Bankruptcy Code section 365(d)(4) for an order extending the time within which the Debtors can assume and assign, or reject their non-residential real property leases (the "Leases"). The Leases consist of two parcels of non-residential real property in Perris, California from which the Debtors manufacture and distribute recreational vehicles. The
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Debtors have analyzed the Leases and have determined, under the circumstances, that they
should forestall any decision to assume or reject the Leases for a brief period of time. Simply put, the Debtors require additional time (i) to market the Leases, which the Debtors believe may have value, and (ii) to complete their orderly liquidation and wind-down, which (at this point in time) requires that they remain in possession of the premises that are subject to the Leases. Accordingly, the Debtors request that the Court extend the deadline within which the Debtors may assume and assign, or reject the Leases by 90 days to July 27, 2008.
PLEASE TAKE FURTHER NOTICE that in addition, in light of the significant possibility that the Debtors ultimately may need to reject one or both of the Leases, in order to provide a mechanism that will enable the Debtors to limit the accrual of post-petition liabilities under the Leases, the Debtors further request authority, pursuant to Bankruptcy Code section
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365(a), to be able to reject one or both of the Leases, without further notice and a hearing, effective as of the date that the Debtors file with the Court and serve on their landlord, First Industrial, L.P. ("First Industrial") a notice of rejection of the particular Lease or Leases (a "Notice of Rejection"). Following the filing and service of any Notice of Rejection, the Debtors propose to promptly turnover possession of the rejected premises to First Industrial. PLEASE TAKE FURTHER NOTICE that the pertinent facts and circumstances supporting the relief requested by the Motion are set forth in the accompanying Memorandum of Points and Authorities; the accompanying Declaration of Bruce Cox Conklin, Jr., the Declaration of Thomas J. Martini in Support of First-Day Motions [Docket #18], the record in these cases, the arguments and representations of counsel, and any oral or documentary evidence presented at or prior to the time of the hearing on the Motion.
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PLEASE TAKE FURTHER NOTICE that, any opposition or objection to the Motion may be presented before or at the time of the hearing on the Motion. Any written opposition or objection to the relief requested the Motion must: (i) be filed with the Clerk of the United States Bankruptcy Court no later than the time of the hearing, with a courtesy copy delivered to chambers; and (ii) be served personally, served by fax or served by e-mail by no later than the time of the hearing to the following persons: (a) the Debtors' bankruptcy counsel at the following address: Klee, Tuchin, Bogdanoff & Stern LLP Attn: David M. Guess, Esq. 1999 Avenue of the Stars, 39th Floor Los Angeles, CA 90067 Telephone: (310) 407-4000 Facsimile: (310) 407-9090 (b) the Office of the United States Trustee at the following address: Office of the U.S. Trustee Attn: Timothy J. Farris, Esq. 3685 Main St., Suite 300 Riverside, CA 92501 Telephone: (951) 276-6977 Facsimile: (951) 276-6973
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WHEREFORE, this Court should enter an Order: (1) granting the relief sought in the
Motion in its entirety; (2) extending the time by which the Debtors may assume and assign, or reject the Leases, such that it can move the Court to either assume or reject the Leases, and each of them, anytime on or before June 27, 2008; (3) authorizing the Debtors to reject the Leases, without further notice and a hearing, subject to the proposed terms and procedures set forth herein, and (4) granting to the Debtors any other relief that may be necessary and appropriate.
DATED: February 22, 2008
/s/ David M. Guess DAVID M. GUESS, an Attorney with KLEE, TUCHIN, BOGDANOFF & STERN LLP Bankruptcy Counsel for Debtors and Debtors in Possession
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MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
National R.V. Holdings, Inc. ("NRVH") and National R.V., Inc. ("NRV"), the debtors and debtors in possession in the above-captioned cases (the "Debtors"), respectfully submit this Memorandum of Points and Authorities in support of the Motion. NRV is the lessee under two (2) adjacent, unexpired non-residential real property leases in Perris, California. NRVH is a guarantor on both of these leases. These leases (individually, a "Lease" and collectively, the "Leases") cover the real property and buildings (the "Premises") located (i) at 100 W. Sinclair St., Perris, CA, and (ii) at 3411 N. Perris Blvd., Perris, CA. By this Motion, the Debtors are requesting entry of an order, pursuant to Bankruptcy Code section 365(d)(4), extending the time within which the Debtors may assume and assign, or reject non-residential real property leases under which the Debtors are lessees by ninety (90) days, from March 29, 2008 through and including July 27, 2008. In addition, in light of the significant possibility that the Debtors ultimately may need to reject one or both of the Leases, in order to provide a mechanism that will enable the Debtors to limit the accrual of post-petition liabilities under the Leases, the Debtors further request authority, pursuant to Bankruptcy Code section 365(a), to be able to reject one or both of the Leases, without further notice and a hearing, effective as of the date that the Debtors file with the Court a Notice of Rejection of the particular Lease or Leases. Following the filing and service of any Notice of Rejection, the Debtors propose to promptly turnover possession of the rejected premises to First Industrial. As demonstrated further herein, cause exists under Bankruptcy Code section 365 to grant this extension. In addition, the Debtors submit that providing them with authority to reject their Leases, without further notice and a hearing, is in the best interest of the estates inasmuch as such authorization will provide the Debtors with an efficient and expeditious means to limit their post-petition administrative liabilities relating to the Leases.
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II. JURISDICTION
The Court has jurisdiction over the Motion pursuant to 28 U.S.C. 157 and 1334. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. The matter is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(A). The statutory predicate for the relief sought herein is Bankruptcy Code section 365(d)(4).
III. BACKGROUND FACTS A. General Background.

The Debtors commenced these cases by filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code on November 30, 2007 (the "Petition Date"). The Debtors filed these cases in order to conduct an orderly disposition of their assets, and to maximize the value of those assets for the benefit of the economic stakeholders of their estates. The Debtors' principal business is the manufacture and distribution of recreational vehicles ("RVs") throughout the United States and Canada. From their Perris, California facility (i.e., the land and buildings currently being leased to NRV pursuant to the Leases), the Debtors have designed, manufactured, and marketed some of the industry's highest quality "Class A" gas and diesel RVs across several branded product lines, including Dolphin, Pacifica, Sea Breeze, Surf Side, Tradewinds, and Tropi-Cal. As of the Petition Date, the Debtors were the ninth largest manufacturer of "Class A" motor homes in the country. The objective of these cases is to maximize value as quickly as possible. This likely will be accomplished through an orderly disposition of the Debtors' assets for the best price. The Debtors believe that value for the benefit of creditors and, with perseverance, shareholders, can be derived from primarily three sources: (a) the successful prosecution of the Kemlite Litigation; (b) the orderly sale of inventory, both finished and unfinished motor homes, parts and replacements, and other valuable items on hand; and (c) the collection of accounts receivable, general intangibles (including intellectual property) and other assets.
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B.
Current Status of the Disposition of Assets.
The Debtors have made substantial progress in these cases since the Petition Date. With respect to the Kemlite Litigation, the trial is now over. The Debtors are encouraged by how the case progressed, and eagerly await for the jury to render its verdict. Next, with respect to the sale of inventory, the Debtors, with the cooperation of the Official Committee of Unsecured Creditors (the "Committee"), have aggressively marketed their inventory have been able to enter into several agreements to sell their finished RVs for over seventy cents on the dollar. The Debtors first sold their then-completed inventory of 77 finished RVs to Dennis Dillon RV, LLC for nearly $7.5 million. After the success of this first sale, Dennis Dillon RV, LLC contracted to purchase an additional 68 finished RVs from the Debtors for approximately $6.75 million. In order to complete this massive order, the Debtors are currently in the process of building out much of their remaining raw materials and WIP (work-in progress) into finished RVs. By mid-March, the build-out should be complete. In addition, the Debtors have been successful in selling other assets as well, including their South Coast Reactive Organic Gas Emission Reduction Credits, which the Debtors were able to sell for nearly $1.6 million. The Debtors have also been able to collect literally millions of dollars worth of accounts receivable since the Petition Date. Finally, the Debtors have signed up a broker (subject to Court approval) to list their real property in Florida.
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C.
The Debtors Require Additional Time on the Premises.
In order to ensure that they continue to maximize value for these estates, however, the Debtors need more time to complete their liquidation which, at this point, requires that they remain in possession of the Premises beyond March 29, 2008 (the current deadline for them to assume or reject their leases). Specifically, the Debtors need an extension of the time by which they can assume and assign or reject the Leases, for the following two reasons: First, absent an extension of time, the Debtors will be unable to maximize value from the disposition of their remaining raw materials and FF&E (furniture, fixtures and equipment). The Debtors are executing an auction agreement with BIDITUP Auctions Worldwide, Inc. (subject to Court approval) whereby the Debtors would effectively retain BIDITUP to liquidate these
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assets.1 Through the auction agreement, no less than $1.5 million will be brought into the estates. Pursuant to the terms of the auction agreement, BIDITUP will need access to the Premises through April 2008 (at a minimum) in order to complete the liquidation of the Debtors' remaining tangible personal property assets. Consequently, access to the Premises beyond March 29, 2008 is an express condition of the auction agreement (as the minimum amount of time they need access to the Premises). Moreover, it is simply not practical or economical to move the Debtors' remaining inventory of raw materials and FF&E to an alternate location. Second, the Debtors are still investigating whether the Leases have value. The Debtors are currently in the process of retaining a real estate broker to assist them with these efforts, and anticipate that they will be filing an employment application shortly. Despite the slumping real estate market, there may very well be some level of demand for these Leases, particularly due to the Premises' custom features, such as the "paint booths". It is also worth pointing out that the Debtors also continue to entertain some level of interest from parties interested in buying the Debtors' business as a going concern (possibly through a plan). In any such going concern sale, it is likely that the prospective purchaser(s) will be interested in taking an assignment of at least one of the Leases. The Debtors anticipate that they will need time beyond March 29, 2008 to market the leaseholds. In addition to realizing any upside through an assignment of what may be under-market leases (assuming that turns out to be the case), to the extent that the Debtors are able to find an assignee for one or both of the Leases, they may also be able to limit, if not eliminate, the ability of First Industrial to draw down on $5 million of letters of credit issued by Wells Fargo Bank, N.A. ("Wells Fargo"), the Debtors' pre-petition secured lender, which effectively secure NRV's obligations under the Leases. Insofar as the letters of credit are drawn, the Debtors are
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obligated to reimburse Wells Fargo under their prepetition loan documents.
Concurrently with the filing of this Motion, the Debtors have filed a motion for approval of this auction agreement with BIDITUP.
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D.
The Leases.
NRV is a lessee under two (2) adjacent, unexpired non-residential real property leases in Perris, California. NRVH is a guarantor on both of these leases. The Debtors' headquarters and operations are housed in five buildings, covering many thousands of square feet on either side of Perris Boulevard in Perris, California. The land and property on the east side of the street (3411 N. Perris Blvd.) and the west side of the street (100 W. Sinclair St.) are each subject to separate lease agreements with First Industrial. The combined monthly base rent under these leases is $258,536.65 (exclusive of any applicable late fees, interest, attorneys' fees or other charges property due and owing under the Leases). Also, as noted above, First Industrial is holding two letters of credit in the amount of $5 million to secure the Debtors' obligations under the Leases. The Debtors are occupying these premises and using their facilities in the ordinary course of their business operations. The Debtors believe they have timely satisfied all of their post-petition rent and other obligations under the Leases. While the Debtors originally did not pay post-petition rent for the months of December and January as and when such amounts were due under the terms of the Leases, the Debtors do not believe they were required to do so. First Industrial subsequently filed a motion to compel the Debtors to pay rent for those months (the "Landlord Motion"). Fortunately, First Industrial and the Debtors were able to consensually resolve this dispute by stipulation prior to the hearing on the Landlord Motion. Following that hearing, the Court entered that certain Stipulation and Agreed Order Resolving Landlord's Motion for Entry of an Order Directing the Debtor to Comply with its Obligations to First Industrial, L.P. or in the Alternative, Directing the Surrender of the Premises and Rejection Leases [Docket #144] (the "Landlord Stipulation"). Subsequent to the entry of the Landlord Stipulation, the Debtors have satisfied all of their post-petition obligations under the Leases.
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E.
The Requested Relief.
The Debtors have until March 29, 2008 (i.e., the 120th day after the Petition Date) to assume, assume and assign or reject the Leases before they are deemed rejected pursuant to Bankruptcy Code section 365. See 11 U.S.C. 365(d)(4)(A). 8
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In light of the foregoing, the Debtors simply require additional time to decide whether and when to assume and assign or reject the Leases and, in connection therewith, request a brief extension of time to make this determination specifically, a ninety (90) day extension of time (i.e., until July 27, 2008).
In addition, in light of the significant possibility that the Debtors ultimately may need to reject one or both of the Leases, in order to provide a mechanism that will enable the Debtors to limit the accrual of post-petition liabilities under the Leases, the Debtors further request authority, pursuant to section 365(a) of the Bankruptcy Code, to be able to reject one or both of the Leases, without further notice and a hearing, effective as of the date that the Debtors file with the Court and serve a Notice of Rejection on First Industrial. Following the filing and service of any Notice of Rejection, the Debtors propose to promptly turnover possession of the rejected premises to First Industrial. For the reasons set forth below, there are good and sufficient
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grounds for granting the relief requested. IV. ARGUMENT

Bankruptcy Code section 365(a) provides debtors in possession with the power, subject to court approval, to assume or reject executory contracts or unexpired leases. 11 U.S.C. 365(a). Although debtors in possession typically may exercise that power with respect to executory contracts and leases of residential real property at any time during a chapter 11 case, see 365(d)(2), a stricter standard applies with respect to a debtor's assumption/rejection determination regarding leases of non-residential real property: (A) Subject to subparagraph (B), an unexpired lease of non-residential real property under which the debtor is the lessee shall be deemed rejected . . . if the trustee does not assume or reject the unexpired lease by the earlier of (i) the date that is 120 days after the date of the order for relief; or (ii) the date of the entry of an order confirming a plan. (B) (i) The Court may extend the period determined under subparagraph (A), prior to the extension of the 120-day period, for 90 days on the motion of the trustee or lessor for cause.
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(ii) If the court grants an extension under clause (i), the court may grant a subsequent extension only upon prior written consent of the lessor in each instance. 11 U.S.C. 365(d)(4) (emphasis added). As the emphasized language of the statute illustrates, courts may extend the 120-day period for assumption or rejection of leases of non-residential real property, for 90 days for cause. The Bankruptcy Appellate Panel for the Ninth Circuit has indicated that the factors that constitute "cause" for an extension of the section 365(d)(4) deadline include "whether the leases are the primary assets of the debtor, whether the lessor continues to receive rental payments, and whether the case is exceptionally complex and involves a large number of leases." In re Victoria Station Inc., 88 B.R. 231, 236 n.7 (B.A.P. 9th Cir. 1988), aff'd, 875 F.2d 1380 (9th Cir. 1989); also see In re Bon Ton Restaurant & Pastry Shop, Inc., 52 B.R. 850, 855 (Bankr. N.D. Ill. 1985) (observing that lessors who receive continuing monthly rent payments generally are not prejudiced by an extension of the section 365(d)(4) deadline). Other factors considered by bankruptcy courts in determining whether to extend the section 365(d)(4) time period include "[w]hether the debtor has had time to intelligently appraise its financial situation and potential value of its assets in terms of the formulation of a plan; . . . [w]hether the debtor has failed or is unable to formulate a plan when it has had more than enough time to do so; and [a]ny other factors bearing on whether the debtor has had a reasonable amount of time to decide to assume or reject the lease." In re Muir Training Techs., Inc., 120 B.R. 154, 158-59 (Bankr. S.D. Cal. 1990). Application of the above-mentioned factors
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mandates approval of the Debtors' request for an extension in this case.
First, the Debtors have not had enough time to intelligently determine the actual fair
market value of the Leases. The Debtors are still investigating whether the Leases have value and how best to dispose of these assets, and are currently in the process of retaining a real estate broker to assist them with these efforts. Moreover, as noted above, the Leases may have more value to somebody interested in purchasing the Debtors as a going concern. Second, the Leases are critical to the Debtors' continuing efforts to maximize value for their constituents. Absent an extension of time, the Debtors will be unable to maximize value
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from the disposition of their remaining raw materials and FF&E. The Debtors are executing an auction agreement with BIDITUP whereby the Debtors would effectively retain BIDITUP to liquidate these assets. Through the auction agreement, no less than $1.5 million will be brought into the estates. Pursuant to the terms of the auction agreement, BIDITUP will need access to the Premises through April 2008 (at a minimum) in order to complete the liquidation of the Debtors' remaining tangible personal property assets. Consequently, access to the Premises through April 2008 an express condition of the auction agreement (as the minimum amount of time they need access to the Premises). Moreover, it is simply not practical or economical to move the Debtors' remaining inventory of raw materials and FF&E to an alternate location.
It is important to note that First Industrial will not prejudiced by the relief sought in the Motion in any significant way. Since entry of the Landlord Stipulation, the Debtors have been timely performing all post-petition obligations under the Leases, and they fully intend to continue to do so unless and until they have assumed and assigned, or rejected the Leases. Even if First Industrial somehow were able to take issue with the Debtors' performance of their post-petition obligations, however, the reality is that the Debtors now have several million of dollars in cash in excess of what they owe their secured lender, Wells Fargo. This should give First Industrial more than ample assurance of the Debtors' ability to honor their obligations under the Leases as and when they arise. Moreover, as this Court is well aware, First Industrial is also sitting on $5 million of letters of credit, which secure the Debtors' obligations under the Leases. Accordingly, First Industrial is simply not prejudiced by the brief extension of the assumption or rejection period sought here.
By contrast, the Debtors and their creditors could suffer serious prejudice if the Debtors prematurely assume or reject the Leases. On one hand, if the Debtors were forced to assume the Leases, the obligations thereunder would become post-petition obligations of the estates and, as such, First Industrial would be entitled to administrative priority for any future claims under the Leases pursuant to Bankruptcy Code section 503(b)(7). If the Debtors subsequently find that one or more of the Leases are unsaleable, the price of the Debtors' mistake would be significant and unnecessary administrative liabilities. As such, it would be imprudent for the Debtors to
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assume the Leases until they have locked in an assignee. On the other hand, if the Debtors were forced to reject the Leases at this juncture, the Debtors might not able to fully maximize value. The rejection would likely result in a rejection damages claim by First Industrial in an amount approaching $5 million claim, which First Industrial will satisfy by drawing against the letters of credit which, in turn, would increase the amount of secured obligations the Debtors would owe to Wells Fargo under their prepetition loan agreements. Simply put, the Debtors should be permitted additional time to find an assignee in order to capitalize on any value the Leases may have and thereby also preserve the opportunity to reduce, if not eliminate, any claim that First Industrial has against these estates, particularly where, as here, the claim would paid in full despite its general unsecured priority.
V. CONCLUSION
WHEREFORE, the Debtors respectfully request that the Court enter an order (1) granting the relief sought in the Motion in its entirety; (2) extending the time by which the Debtors may assume and assign, or reject the Leases, such that it can move the Bankruptcy Court to either assume or reject the Leases, and each of them, anytime on or before June 27, 2008; (3) authorizing the Debtors to reject the Leases, and each of them, without further notice and a hearing, subject to the proposed terms and procedures set forth herein, and (4) granting to the Debtors any other relief that may be necessary and appropriate.
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DATED: February 22, 2008
/s/ David M. Guess DAVID M. GUESS, an Attorney with KLEE, TUCHIN, BOGDANOFF & STERN LLP Bankruptcy Counsel for Debtors and Debtors in Possession
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DECLARATION OF BRUCE COX CONKLIN, JR. I, Bruce Cox Conklin, Jr., declare as follows: 1. I am the Senior Managing Director of Kibel Green, Inc., the financial and
management consultant to National R.V. Holdings, Inc. and National R.V., Inc., the debtors and debtors in possession in the above-captioned chapter 11 cases (the "Debtors"). 2. I have more than 30 years of experience in the business management, operations
and turnaround industries. I specialize in full-service financial and operational consulting and interim management. I have served as Interim Chief Executive Officer and Chief Restructuring Officer for numerous companies in multiple industries, including wireless communications and construction machinery. I have also served as a consultant to executive management,
performing strategic, operational and financial reviews, developing business plans and investment analyses, and implementing business transitions. 3. In my capacity as a financial and management consultant, and in conjunction with
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the efforts of other members of the Debtors' senior management, for the past several months I have been involved with all aspects of the Debtors' affairs, including business operations, strategic planning, financial reporting, human resources, legal affairs and other management activities, including the Debtors' efforts to address their current financial difficulties. I am often on-site and am in daily contact with management. 4. Based upon all of the foregoing, I have developed an intimate familiarity with:
(a) the Debtors' business and financial history, and their current business and financial situation and (b) the financial and operational details of the Debtors' business operations. 5. Except as otherwise stated herein, if called as a witness, I could and would
competently testify to the matters set forth herein from my own personal knowledge. 6. NRV is a lessee under two (2) adjacent, unexpired non-residential real property
leases in Perris, California (the "Leases"). NRVH is a guarantor on both of these leases. The Debtors' headquarters and operations are housed in five buildings, covering many thousands of square feet on either side of Perris Boulevard in Perris, California (the "Premises"). The land and property on the east side of the street (3411 N. Perris Blvd.) and the west side of the street
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(100 W. Sinclair St.) are each subject to separate lease agreements between NRV and First Industrial, L.P. ("First Industrial"). 7. The combined monthly base rent under these leases is $258,536.65 (exclusive of
any applicable late fees, interest, attorneys' fees or other charges property due and owing under the Leases). In addition, First Industrial is holding two letters of credit issued by Wells Fargo in the amount of $5 million to secure the Debtors' obligations under the Leases. These letters of credit are secured by approximately $5.5 million in restricted cash held by Wells Fargo. 8. By all appearances, the Debtors are occupying the Premises and using their
facilities in the ordinary course of their business operations. 9. With my assistance, the Debtors have analyzed the Leases and have determined,
under the circumstances, that they should forestall any decision to assume or reject the Leases for a brief period of time. Simply put, the Debtors require additional time (i) to market the Leases, which the Debtors believe may have value, and (ii) to complete their orderly liquidation and wind-down, which (at this point in time) requires that they remain in possession of the premises that are subject to the Leases.
10. Absent an extension of time, I believe that the Debtors will be unable to maximize
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value from the disposition of their remaining raw materials and FF&E (furniture, fixtures and equipment). The Debtors are executing an auction agreement with BIDITUP Auctions
Worldwide, Inc. whereby the Debtors would effectively retain BIDITUP to liquidate these assets. Through the auction agreement, no less than $1.5 million will be brought into the estates. Pursuant to the terms of the auction agreement, BIDITUP will need access to the Premises through April 2008 (at a minimum) in order to complete the liquidation of the Debtors' remaining tangible personal property assets. Consequently, access to the Premises beyond March 29, 2008 is an express condition of the auction agreement (as the minimum amount of time they need access to the Premises). Moreover, it is simply not practical or economical to move the Debtors' remaining inventory of raw materials and FF&E to an alternate location. 11. I understand that the Debtors are still investigating whether the Leases have value,
and are currently in the process of retaining a real estate broker to assist them with these efforts.

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DATED: February 22, 2008

MEMORANDUM OF POINTS AND AUTHORITIES

III. BACKGROUND FACTS A. General Background.

Current Status of the Disposition of Assets.

The Debtors Require Additional Time on the Premises.

obligated to reimburse Wells Fargo under their prepetition loan documents.

The Requested Relief.

grounds for granting the relief requested. IV. ARGUMENT

mandates approval of the Debtors' request for an extension in this case.

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