Hearing Date: June 30, 2011 at 10:00 am

KELLEY DRYE & WARREN LLP James S. Carr Robert L. LeHane 101 Park Avenue New York, New York 10178 Tel: (212) 808-7800 Fax: (212) 808-7897 Counsel for Cotton On USA, Inc. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK __________________________________________ In re: ) ) Chapter 11 ) METROPARK USA, INC. ) Case No. 11-22866 (RDD) ) Debtor. ) __________________________________________) MEMORANDUM OF LAW IN SUPPORT OF ASSUMPTION AND ASSIGNMENT OF LEASES TO COTTON ON USA, INC. AND REPLY TO OBJECTIONS Cotton On USA, Inc. (Cotton On), by and through its counsel, Kelley Drye & Warren LLP, hereby files this memorandum of law and reply in support of the Notice of Assumption and Assignment of Unexpired Lease of Nonresidential Real Property (the Notice) of debtor and debtor-in-possession MetroPark USA, Inc. (Debtor) to Cotton On dated June 15, 20111 and in response to the objections (collectively, the Landlord Objections) to the proposed assumption and assignment of leases asserted by four landlords (the Objecting Landlords): (i) Objection of NorthPark Partners, LP (NorthPark) to Assumption and Assignment of Unexpired Lease of Nonresidential Real Property (the NorthPark Objection);2 (ii) Supplemental Objection by Westfield, LLC and Westfield Garden State Plaza Limited Partnership (collectively Westfield)
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Docket No. 212

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to Notice of Assumption and Assignment of Unexpired Leases of Nonresidential Real Property (the Westfield Objection);3 (iii) Objection of Aventura Mall Venture (Aventura) to Debtors Proposed Assumption and Assignment of Unexpired Lease of Nonresidential Real Property to Cotton On USA, Inc. (the Aventura Objection);4 and (iv) informal objection of Danbury Mall, LLC (Danbury Mall) to the proposed assumption and assignment of the lease to Cotton On (the Danbury Objection).5 In support of the Notice and proposed lease assignments, Cotton On respectfully states as follows: PRELIMINARY STATEMENT 1. Cotton On is a fashion forward retailer of mens and womens clothing

and accessories targeting a customer base that overlaps significantly with the Debtors customers: young adults interested in the latest fashion and music. From the perspective of a shopping center landlord, the primary differences between the Debtor and Cotton On, are that unlike the Debtor in 2008 when the leases were executed, Cotton On is well financed by a successful parent company with significant assets, has no third party debt and is part of a thriving global fashion empire more than capable of meeting the obligations due under the leases to be assigned. 2. The Landlord Objections, all based on the heightened adequate assurance

requirements set forth in section 365(b)(3) of the Bankruptcy Code that apply to shopping centers, basically fall into two categories.6 North Park and Danbury Mall request that the

2 3 4 5

Docket No. 222. Docket No. 226. Docket No. 227. The Danbury Mall Landlord requested additional financial adequate assurance and by Agreement with counsel for Cotton On, the Danbury Malls rights to object on the basis of financial adequate assurance have been extended to the hearing date. Although the burden is on each landlord to prove that the premises in question is located in a shopping center as that term is used in section 365(B)(3) of the Bankruptcy Code, Cotton On concedes this issue.

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assignment of the leases be subject to the terms of the leases and a separate landlord agreement that will amend the leases and provide details as to notice parties, any agreed changes to the use of the premises, the build out schedule and payment of the cure amount. 3. In addition to raising the same concerns, Aventura and Westfield also

assert that minimum sales requirement provisions in their respective leases that would allow the landlord to terminate the lease if sales thresholds are not met within a given year must be fully enforceable by the landlords against Cotton On, whether or not the relevant time period includes the weeks or months during which the stores were closed by the Debtor following the conclusion of the liquidation sales or will be closed to allow Cotton On to complete the alterations and build out reasonably necessary to construct and open a permanent Cotton On store. Without reasonable modifications to the relevant sales test periods, the minimum sales requirement provisions, like continuous operating covenants, are effectively unenforceable anti-assignment provisions under section 365(f)(1) of the Bankruptcy Code. 4. The Aventura Objection also asserts that an assignment of the lease from

the Debtor to Cotton On will disrupt the tenant mix and balance in Aventura Mall in violation of section 365(b)(3)(D) of the Bankruptcy Code. This argument is meritless. Cotton On will not only comply with all enforceable terms of the lease, including the use provision, but given the similarity of target customer and inventory between Cotton On and the Debtor and Cotton On and other tenants in the shopping center, the proposed lease assignment will cause no disruption of the tenant mix or balance in Aventura Mall. 5. With respect to financial adequate assurance, Cotton Ons revenue this

year is comparable with the Debtors revenue in 2008 and Cotton On is similarly operating almost 50 retail stores in the same market. Unlike the Debtor, Cotton Ons corporate parent and affiliates (collectively, the Cotton On Group) have been and continue to provide significant 3
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support for Cotton Ons expansion in the United States and currently operate over 800 stores around the world. Cotton On Groups combined total assets dwarf those of the Debtor at any time during its existence. If the Landlord Objections are not resolved prior to the hearing, Cotton On intends to submit additional confidential financial information about Cotton On and the Cotton On Group at the hearing.7 6. Cotton On met with or reached out to each of the Objecting Landlords to

attempt to resolve the issues raised in the Landlord Objections before and after the filing of the Notice. Since the filing of the Landlord Objections, Cotton On has continued to work toward amicable resolutions of the Landlord Objections. Cotton On is optimistic that the NorthPark Objection and the Danbury Objection will be resolved consensually prior to the hearing. The Westfield Objection and the Aventura Objection are still unresolved. DISCUSSION I. THE DEBTOR AND COTTON ON HAVE PROVIDED ADEQUATE ASSURANCE OF FUTURE PERFORMANCE PURSUANT TO SECTION 365(B) OF THE BANKRUPTCY CODE 7. Under Section 365(b)(1)(C) of the Bankruptcy Code, a debtor seeking to

assume a contract or unexpired lease must provide adequate assurance of future performance under such contract or lease. 11 U.S.C. 365(b)(1)(C). What constitutes adequate assurance depends on the facts and circumstances of each case, but should be given practical, pragmatic construction. See Carlisle Homes, Inc. v. Arrari (In re Carlisle Homes, Inc.), 103 B.R. 524, 538 (Bankr. D.N.J. 1989) (citation omitted).

Cotton provided any party requesting additional financial information with a confidentiality agreement and if executed provided the Landlord with financial information about The Cotton On Group. As a private company, Cotton Ons financial information is sensitive, non-public information. To protect the confidential nature of that information, Cotton On filed a motion for permission to establish procedures to maintain the confidentiality of Cotton Ons financial information which will also be heard on June 30, 2011.

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8.

Adequate assurance may be demonstrated through the proposed assignees

financial health and operational experience with similar properties. See In re Bygaph, Inc., 56 B.R. 596, 605-06 (Bankr. S.D.N.Y. 1986). Adequate assurance is not an iron-clad guarantee that the proposed assignee will ultimately succeed in the space indeed, the level of assurance required falls well short of a guarantee or promise. See In re Bon Ton Rest. & Pastry Shop, Inc., 53 B.R. 789, 803 (Bankr. N.D. Ill. 1985). 9. For shopping center leases, section 365(b)(3) provides additional

clarification regarding adequate assurance of future performance, including assurance that: (A) of the source of rent and other consideration due under such lease, and in the case of an assignment, that the financial condition and operating performance of the proposed assignee and its guarantors, if any, shall be similar to the financial condition and operating performance of the debtor and its guarantors, if any, as of the time the debtor became the lessee under the lease; (B) that any percentage rent due under such lease will not decline substantially; (C) that assumption or assignment of such lease is subject to all the provisions thereof, including (but not limited to) provisions such as a radius, location, use, or exclusivity provision, and will not breach any such provision contained in any other lease, financing agreement, or master agreement relating to such shopping center; and (D) that assumption or assignment of such lease will not disrupt any tenant mix or balance in such shopping center. 11 U.S.C. 365(b)(3). 10. Even with these additional hurdles, the Debtor and Cotton On have more

than sufficiently provided adequate assurance of future performance under the leases to be assigned to Cotton On.

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A.

Cotton Ons Financial Condition and Operating Performance Are Better Than the Debtor in 2008 11. The Debtor was formed in 2004 and quickly grew to almost 70 stores. See

Decarlation of Cynthia Harriss Pursuant to Local Bankruptcy Rule 1007-2 (the Harriss Dec.) at pg. 3 8. The Debtors best year was 2008, during which year the Debtor still experienced a loss of approximately $1.5 million. Id. at pg. 7 22-23. Since 2008, the Debtor experienced decreased sales and increasing losses, with a loss of over $16 million in fiscal 2010. Id. Also in 2008, the Debtor owed unrelated parties over $4 million dollars in long term debt. With no additional sources of financing, the Debtor ultimately filed a chapter 11 Petition on May 2, 2011. 12. In contrast to the Debtor, Cotton On has no third party debt and is well

financed by Cotton On Group which has extensive assets and the financial ability to meet the obligations due under the leases. As set forth in the Declaration of Michael Hardwick, the Chief Financial Officer of Cotton On (the Hardwick Dec. attached as Exhibit A to the Notice of Assumption and Assignment of Unexpired Lease of Nonresidential Real Property (Docket No. 212)(the Assignment Notice)), as of April 2011, Cotton On Group had consolidated assets in excess of $280 million against consolidated current liabilities of approximately $110 million. For the year ended June, 2010, Cotton On Group had consolidated revenues totaling $526 million and has projected annual sales for the year ending June 2011 of $650 million. Estimated revenues for Cotton On for fiscal year 2012 are $109 million. Hardwick Dec. at pg. 2, 5-6. 13. To the extent necessary, at the hearing Cotton On will introduce additional

confidential financial information about Cotton On and the Cotton Group that demonstrate that, Cotton On with the support of the Cotton On Group is in far better financial condition and its operating performance exceeds that of the Debtor when it became the tenant under the leases.

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14.

Section 365(b)(3)(A) of the Bankruptcy Code insures that an assignee will

be able to perform under the assigned lease, not that the assignee be the exact same company that signed the original lease. See In re Casual Male Corp., 120 B.R. 256, n.8 (Bankr. D. Mass. 1990) (The legislative history indicates that the purpose of this language was to insure that the assignee itself will not soon go into bankruptcy and will provide operating and advertising benefits to the other tenants similar to those provided by the original tenant when its lease was executed. citing 130 Cong. Rec. S889 reprinted in App. 3 Collier on Bankruptcy XX71 (15th ed. 1989)). The Court in Casual Male used a rational and functional approach when considering the issue of similarity of financial condition and operating performance. Overruling the landlords objection, the court found similarity of financial condition and operating performance with the original lessee taking into consideration the assignees experienced management team even though assignee was a new corporation with no operating history. Id. at 264-5 (emphasis added). 15. Here, even standing alone, Cotton On is of similar financial condition and

operating performance as the Debtor in 2008, the year that the Debtor became the tenant under the leases. With the added substantial assets, equity and operating history of the Cotton On Group, the Debtor and Cotton On have more than satisfied the financial adequate assurance requirements of Section 365(b)(3)(A). B. Percentage Rent Will Not Decline 16. The burden is on the landlord to demonstrate that percentage rent has been

due and paid by the Debtor before the burden shifts to the proposed assignee and Debtor to provide assurance that there will be no decline in the payment of percentage rent. See e.g., In re Rickel Home Centers, Inc., 240 B.R. 826, 836 (D. Del. 1998) (proposed assignee proffered that no percentage rent had been paid under the lease, without evidence to the contrary, landlord 7
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objection overuled). Here, on information and belief, during the past three years, the Debtor has paid no percentage rent to Westfield at Garden State Plaza or to Aventura. Thus, percentage rent due under the leases can only increase from zero, and section 365(b)(3)(B) of the Bankruptcy Code has either been satisfied or is not applicable. C. The Assignment of the Leases to Cotton On Will be Subject to all of the Terms of the Leases that Are Not Anti-Assignment Provisions. 17. Cotton On will fully comply with all relevant and enforceable provisions

and restrictions in the leases, including such provisions regarding radius, use, location and exclusivity. However, pursuant to section 365(f)(1) of the Bankruptcy Code, limited and temporary relief from certain lease provisions that would otherwise make it impossible for Cotton On to enjoy the benefits of the proposed lease assignments are necessary and consistent with the goal of maximizing the value of the debtors assets for the benefit of all creditors. Specifically, the Proposed Assignment Order contains the following provisions: The assignment of the Leases to Cotton On pursuant to this Order shall be valid and binding upon Cotton On and the Landlord notwithstanding any provisions in the Leases that, by reason of the assignment of the Leases or the release of the Debtor from liability, restrict, prohibit, conditions or limit the assignment of the Leases or the validity of the Leases following the assignment, or increase or reallocate payments under, impose any penalty, declare a default with respect to, terminate, modify, provide a right of recapture or cancel, the Lease or any right or obligation thereunder. Any such provisions shall not be enforceable to restrict condition or limit the assignment of the Leases to Cotton On pursuant to this Order, but shall thereafter be fully binding on Cotton On and continue in full force and effect upon and after an assignment of the Leases. and The assignment of the Leases, and the subsequent delivery of the Premises, to Cotton On is as is, where is and Cotton On is subject to all of the terms of the Leases; provided however that consistent with the terms of the Leases, any local ordinances and any Landlord Agreement, Cotton On may (i) erect, maintain, repair or replace interior and exterior signage at each of the Premises 8
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generally in accordance with Cotton Ons customary signage, and any requirements in the Lease generally applicable to tenants at the shopping center where the Premises are located (ii) close the Premises for such period as is reasonably necessary for the purpose of making alterations to the Premises as are reasonably necessary to construct a typical Cotton On store at the Premises, but in no event shall Cotton On remain closed for more than sixty (60) days. 18. It is well established that provisions in leases that would require the

continuous operation of a Metropark store at the premises or would prohibit Cotton On from operating under the name Cotton On or prevent it from completing reasonable construction and renovations as are necessary to build a typical Cotton On store are not enforceable to prohibit, condition or limit the assignment of a lease in under section 365(f)(1) of the Bankruptcy Code, provided the assignee must otherwise comply with the terms of the lease. 19. Similarly, any minimum sales requirement based on time period when the

store was occupied by the Debtor, the inventory liquidator, or the store was closed prior to the assignment or during Cotton Ons build out, should be reasonably modified so that the sales test period begins 30 days after Cotton On has completed the permanent construction of its new store and commenced operations. This reasonable modification will still provide the landlord with the benefit of the bargained for lease provision, but prevent an inequitable forfeiture of the lease shortly after the assignment to Cotton On. The strict enforcement of minimum sales provisions on the other hand will have the same effect as enforcing a continuous operating or go dark provision, allowing the landlord to recapture the premises based discontinued operations during the bankruptcy case or while Cotton On performs its build out.

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D.

The Assignment of the Leases to Cotton On Will Not Disrupt Tenant Mix 20. The Debtor describes itself as an apparel and accessories retailer focusing

on the 25-35 year old trendsetter. In her first day declaration, Cynthia Harriss, the Debtors CEO, describes the Debtor as follows: Metropark offers its customers a unique mix of premium quality apparel and accessories geared toward the 25-35 year old trendsetter. The Metropark retail stores provide a carefully edited inventory assortment of highly sought after brands with a strong offering from up and coming, fashion forward designers who deliver an authentic and culturally relevant mix of diverse brands to the customer. Harriss Dec. at pg. 3, 8. 21. Cotton On, similarly is a fashion forward retailer targeting a customer

base that overlaps significantly with Metroparks. Cotton On sells fashion forward apparel and accessories to men and women in their late teens and twenties. See Exhibit 1 to Hardwick Dec. Cotton On focuses on customers interested in fashion and music, providing market leading fast fashion with an amazing in store experience. Id. 22. As set forth in the Declaration of Sheril Miller, Director Of Property-USA

Of Cotton On USA, Inc., In Support Of The Assignment Of Leases To Cotton On USA, Inc. (the Miller Dec., also attached as Exhibit A to the Assignment Notice), Cotton On intends to use the leased premises for the retail sale of mens and womens apparel, footwear and related gifts and accessories. Miller Dec. at pg. 2, 5. 23. Given the extensive similarities between the Debtor and Cotton On, as

well as the similarity of Cotton On to so many of the existing tenants in each of the shopping centers, the operation of Cotton On stores in the leased premises will have no impact on the tenant mix in the affected shopping centers. Thus, the Debtor and Cotton On have satisfied Section 365(b)(3)(D) of the Bankruptcy Code. 10
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II.

THE AVENTURA AND WESTFIELD OBJECTIONS 24. Several of the objections can be resolved through simple clarifications. A

revised proposed form of Order was filed by the Debtors at Docket No. 261. The remaining objections raised by Aventura and Westfield regarding financial condition of Cotton On, tenant mix, and yearly minimum sales requirements, are without merit and should be overruled. A. Cotton On Will Assume All Tenant Obligations Going Forward 25. The Landlord Objections argue that the proposed assignment order would

allow Cotton On to take an assignment of the leases and occupy the premises without complying with the lease obligations. That is simply not the case. Cotton On will be assuming the obligations of the tenant under the leases and will comply with all enforceable provisions thereunder, including payment of rent, rent-related obligations and year-end adjustments as they come due. While Cotton On obviously must be allowed to perform a build-out and erect its signage, Cotton On must comply with the provisions of any local ordinances, generally applicable mall guidelines and the terms of the leases regarding signage, alterations and construction. Having successfully accomplished store build-outs at over 800 locations worldwide, Cotton On is confident that it will be able to work with its new landlords to consensually resolve any concerns regarding construction, alteration and signage. 26. With respect to cure amounts and attorney fees, if Cotton On and a

landlord are unable to consensually agree on the cure amount (including any attorney fees), such determination can be made by the Court. There is no reason, however, for a contested cure amount to delay the assignment of a lease to Cotton On because, pursuant to the terms of the Designation Rights Order, Cotton On will pay the full amount of the asserted cure amount to the Debtor and any undisputed cure amounts will be paid to the landlord within 2 business days after closing on the assignment of the lease. Disputed cure amounts will be held in escrow by counsel 11
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for the Debtor and paid promptly after agreement of the parties or as may be determined by the Court. 27. With respect to indemnification obligations under the leases, the revised

assignment order explicitly provides that the affected landlords may pursue the Debtors insurance, if any, with respect to any indemnification obligations that relate to the preassignment period and Cotton On will comply with all relevant provisions of the leases regarding indemnification obligations arising from and after the entry of the Order approving the assignment of the lease. B. Financial Adequate Assurance Information Regarding Cotton On and the Cotton On Group Has Been Provided 28. Westfield and Aventura argue that they have not been provided with

adequate assurance or sufficient financial information regarding Cotton On and the Cotton On Group. Counsel for Cotton On reached out to these landlords and will provide them with financial information regarding Cotton On and the Cotton On Group, subject to execution of a reasonable confidentiality agreement. Providing such information subject to a confidentiality agreement is customary, particularly where the proposed assignee is a privately-held entity. Indeed, the sealing of such sensitive commercial information that could provide an advantage to a competitor is explicitly authorized by Section 107(b) of the Bankruptcy Code. C. Westfields Demand for a Security Deposit Should be Denied 29. The Westfield Objection argues that under Section 365(l) of the

Bankruptcy Code, Cotton On must provide Westfield with a security deposit of $100,000 (approximately two and one half months rent) because of the Proposed Assignees limited presence in North America, the overseas location of the Proposed Assignees parent entity, and the normal operating procedures of the Westfield Landlord. See Westfield Objection, 12, p. 5.

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30.

However, not only is Westfields assertion unsupported by any evidence

or declaration, but the request is entirely inconsistent with the existing practice between Cotton On and Westfield. Cotton On currently leases ten stores at various Westfield owned shopping centers in the United States and 159 stores at Westfield shopping centers in Australia (128 locations) and New Zealand (31 locations). None of the 169 leases between Westfield and Cotton On and its affiliates are supported by any form of security or corporate guaranty from Cotton On or Cotton On Group. As a result, Cotton On disagrees with Westfields factual assertions and believes that the Court should overrule Westfields objection and deny the request for a security deposit. D. Cotton On Will Not Disrupt the Tenant Mix at Aventura Mall 31. Aventura argues that the operation of a Cotton On store in the former

Metropark location will disrupt the tenant mix of the shopping center, and as a result Cotton cannot provide Aventura Mall with adequate assurance of future performance under the lease. In support of this argument, Aventura relies on descriptions of Cotton On as an inexpensive, family store, selling cotton sportswear for men, women and children. Aventura Objection at p. 6, 14. Aventuras claims are completely unsupported and Cotton On will present evidence at the hearing demonstrating that the operation of Cotton On at Aventura Mall is entirely consistent with, and will not disrupt the existing tenant mix in the shopping center. 32. Although Cotton On has a lower price point than Metropark and some of

its inventory is value priced cotton clothing, Cotton On is a first-class, high-quality, fashionable store as required under section 9.01(b) of the lease and will provide further evidence at the hearing to the extent necessary. In addition, a complete reading of section 9.01(b) of the Aventura lease reveals that the terms first-class, high-quality and fashionable are intended only as a description of the general quality of the merchandise, 13
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customer services, fixtures and dcor that the lessee must maintain. These terms are not intended to specify that specific brands be sold. Moreover, 9.01(b) explicitly states that the foregoing description is not intended by Lessor and will not be enforced to affect the retail selling price of Lessees merchandise or services. Thus, under the plain terms of the lease, the price of Cotton Ons merchandise is irrelevant to whether it constitutes a first-class, high-quality, fashionable store or business. Cotton On has provided evidence in the Assignment Notice and will provide additional evidence at the hearing evidence showing that its stores and merchandise are first-class, high-quality and fashionable. 33. Aventuras arguments that Cotton On will disrupt tenant mix are

unsupported and should be overruled. Cotton On sells fashionable merchandise to young men and women in largely overlapping age group, employing a fashionable, high-end store and customer service experience to attract and keep customers. E. Minimum Sales Requirements Provisions Should be Modified to Prevent Forfeiture of Leases 34. Aventura and Westfield argue that Cotton On must be subject to all

minimum sales requirements set forth in the leases, including provisions that would allow the landlord to terminate the leases and recapture the premises if certain sales requirements are not met in within certain time frames. Cotton On is not seeking wholesale invalidation of these provisions. Rather, Cotton On seeks a fair interpretation and limited adjustments of the sales test periods consistent with section 365(f)(1) of the Bankruptcy Code that will prevent the landlords from terminating the leases based on poor sales during the time period leading up to and during the Debtors bankruptcy proceeding and when the stores have been closed since the end of store closing sales.

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35.

In support of its objection, Westfield cites In re Joshua Slocum Ltd., 922

F.2d 1081 (3d Cir. 1990). In Joshua Slocum, the Bankruptcy Court and District Court both found that an annual sales clause in a lease functioned as a de facto anti-assignment provision, and both the Bankruptcy Court and District Court authorized the assignment after completely excising and permanently invalidating the minimum sales clause from the lease under section 365(f) of the Bankruptcy Code. The Third Circuit reversed the Bankruptcy Court and District Court and held that the those lower courts erred by completely excising and permanently invalidating the annual sales clause, and thus depriving the landlord of the benefit of its bargain under the lease. Westfield cites no published precedent from the Second Circuit that reaches the same conclusion.8 More importantly, Cotton Ons proposed limited modification of the minimum sales provision to avoid a forfeiture is vastly different from the wholesale excise of the lease provisions faced by the Third Circuit in Joshua Slocum. 36. In Joshua Slocum, the Third Circuit found that the minimum sales

provision in the lease was an essential bargained for provision governing rent due and the terms of the occupancy of the premises, and thus could not be permanently excised from the lease. Cotton On is not requesting that the minimum sales provisions in the Westfield lease be completely excised and permanently invalidated. Rather, Cotton On is seeking limited relief from the provisions, just as it is allowed limited relief from going-dark/continuous operation provisions in the leases that would otherwise create an incurable non-monetary default that would invalidate any proposed assignment of a lease.
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Westfield cites an unpublished opinion from the Southern District of New York, In re Ames Dept. Stores, Inc., 2005 WL 1000263, as evidence that Courts in the Second Circuit would follow Joshua Slocum and enforce the minimum sales provisions in the lease. Westfields reliance on Ames is misplaced, however, because the landlord in Ames was not attempting to leverage a minimum sales clause in the lease to effectuate a forfeiture of the lease, but rather, using an average sales provision in the lease to determine the correct cure amount in connection with the assumption and assignment of the lease. There is a critical difference between determining a cure amount and allowing a minimum sales requirement to function as a continuous operation clause making it impossible for the assignee to effectuate a meaningful assignment of the lease.

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37.

To prevent the landlord from transforming the minimum sales clause into

a continuous operations clause, Cotton On must be allowed to complete its build out and commence operations before being evaluated under the minimum sales requirements of the lease. Cotton On should not be immediately handicapped by the Debtors failure to operate or meet its sales figures pre-assignment. Adjusting the sales test periods in the Aventura and Westfield leases to allow the performance of Cotton On to be evaluated over the same time period commencing thirty (30) days after Cotton On completes its permanent build out of the respective locations and commences operations is a reasonable and equitable way of protecting both the landlords and Cotton On. CONCLUSION 38. The Debtor and Cotton On have overwhelmingly demonstrated that the

landlords have been provided with adequate assurance of Cotton Ons future performance under the Debtors leases. The proposed assignment of leases to Cotton On should be approved and any objections that have not been resolved or withdrawn, overruled. WHEREFORE, Cotton On respectfully requests that this Court enter an order overruling the objections, approving the Debtors request to assume and assign the leases to Cotton On, and granting such other and further relief as the Court deems just and proper. Dated: New York, New York June 29, 2011 KELLEY DRYE & WARREN LLP By: /s/ Robert L. LeHane James S. Carr Robert L. LeHane 101 Park Avenue New York, New York 10178 Tel: (212) 808-7800 Fax: (212) 808-7897 Counsel for Cotton On USA, Inc. 16
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