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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re: ARCHETYPES, INC. Debtor. 1

) ) ) ) ) ) )

Chapter 11 Case No. 13-12874

DECLARATION OF THOMAS L. GALLAGHER IN SUPPORT OF CHAPTER 11 PETITION AND FIRST DAY MOTIONS I, Thomas L. Gallagher, do hereby declare: 1. I am a director of Archetypes, Inc., a Delaware Corporation, the debtor and debtor

in possession in the above-captioned bankruptcy case (the Debtor). As of November 1, 2013, I was appointed by the Debtors Board of Directors to begin serving as Interim President. I am authorized to make this declaration on the Debtors behalf. I have personal knowledge of the facts set forth in this declaration, except as to those matters stated on information and belief, and as to those matters, I believe them to be true. If called upon as a witness, I could and would competently testify as follows. 2. This declaration (the Omnibus Declaration) is filed in support of the following

motions (collectively, the First Day Motions)2 filed concurrently herewith: a. Debtors Motion For Entry Of Interim And Final Orders Pursuant To 11

U.S.C. Sections 105, 361, 362, And 364 And Rules 2002, 4001 And 9014 Of The Federal Rules Of Bankruptcy Procedure And Local Bankruptcy Rules 2002-1 And 4001-2 (1) Authorizing Incurrence By The Debtor Of Post-Petition Secured Indebtedness With Administrative

The last four digits of the Debtors federal tax identification number are 0332. The Debtors headquarters and mailing address is 1441 Broadway, 3rd Floor, Suites 3001 & 3002, New York, NY 10018. Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the referenced, corresponding First Day Motion.
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Superpriority, (2) Granting Liens, (3) Authorizing Use Of Cash Collateral By The Debtor And Providing For Adequate Protection, (4) Modifying The Automatic Stay, And (5) Scheduling A Final Hearing (the DIP Financing Motion); b. Motion For Interim and Final Orders (I) Authorizing Payment Of Pre-

Petition Wages, Compensation, Employee Benefits, Expense Reimbursement And Related Items, And The Continuation Of Certain Employment Policies In The Ordinary Course, And (II) Authorizing And Directing Applicable Banks To Honor And Pay All Checks And Payment Requests With Respect Thereto (the Employee Obligations Motion); and c. Motion For Interim and Final Orders Authorizing Debtor To Continue Use

Of Its Centralized Cash Management System, Existing Bank Accounts And Business Forms (the Cash Management Motion). 3. To familiarize the Court with the Debtor and the relief the Debtor seeks on the first

day of this Chapter 11 case, this Omnibus Declaration is organized in four (4) parts: Part I describes the Debtors business and its organizational and capital structure; Part II details the Debtors history, including some of the circumstances leading to the commencement of this Chapter 11 case, and the company debt structure; Part III outlines the Debtors chapter 11 business plan; and Part IV sets forth the relevant facts supporting each First Day Motion. Part I. The Debtor A. The Debtors Business. 4. The Debtor operates a website-based business that is hosted at

www.archetypes.com (Archetypes). Archetypes is designed to enable users/customers to identify their primary archetypes or personality types and to filter community, content and commerce according to their archetypes or personality types, based on Carl Jungs personalitydefining philosophy of archetypes. A user/customer who visits Archetypes completes a short,
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multiple choice, personality quiz. The website then reveals the users personality archetypes and provides content, community and commerce based on the characteristics of their archetype. Additionally, Archetypes allows individuals who join the site to build and develop their own online persona and identity: a unique and dynamic brand for every individual through their own content network, created through community development. 5. The Debtor has created its own content and has partnered with retail vendors to

populate content and commerce that is relevant to each Archetype category and is delivered to users/customers according to their archetypes. The Debtor also has partnered with approximately 200 companies in an affiliate program so that product from these companies is identified according to the archetype category, and any users purchase of such identified product will produce a commission fee payable to Archetypes by the vendor. The ultimate goal of Archetypes is to develop, maintain and enrich a growing global community of users/customers around a universal language, who experience a unique and unparalleled personalization of search for content, community and commerce according to the users archetypes. 6. Until early October 2013 when the Debtors deteriorating financial position

required the Debtor to reduce its workforce to eight (8) employees, the Debtor employed approximately forty (40) individuals including writers, editors and designers who generated daily content for each of the Archetype names or categories. The Debtors publishing and video production operations supplement Archetypes by contributing additional content to the website. The Debtor provides users/customers with the ability to share and post content from Archetypes to other websites, such as, for example, Facebook and LinkedIn. 7. The Debtors operations were originally overseen by a management team led

initially by Lisa Sun, the Debtors first and now former Chief Executive Officer (from August 1, 2011 to June 20, 2012), and subsequently by Michael Mendenhall and Andrew Spellman, both cofounders, who served as Co-Presidents from mid-July 2012 through November 13, 2012, when the
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Debtor's Board of Directors appointed Michael Mendenhall as Chief Executive Officer of the Debtor, and Mr. Spellman no longer served as Co-President. Mr. Mendenhall served as Chief Executive Officer from mid-November 2012 until November 1, 2013, during which time Mr. Mendenhall worked in collaboration with the Debtors co-founder and Executive Chairperson, Cristina Carlino. The Debtors Board of Directors currently consists of myself, Ms. Carlino, Mr. Bernd Beetz, Mr. Stephen Gaustad, Mr. Hamilton South, Mr. Mendenhall and Mr. Spellman. B. Corporate Organization. 8. The Debtor has four (4) wholly-owned, non-debtor holding subsidiaries: (i)

ArchetypeMe LLC, (ii) Archetypes Publishing LLC, (iii) Archetypes Brands LLC (which owns an 88% interest in non-debtor Archetypes Idolls LLC), and (iv) Archetypes Productions LLC. The Debtor also wholly owns Archetypes Genetic Management, LLC, which manages, but has no economic or beneficial interest in, certain holding companies ultimately related to Genetic Denim LLC, a denim company based in Los Angeles. The Debtors complete corporate organization is depicted on the chart attached hereto as Exhibit A and incorporated herein by this reference. C. Capital Structure. 9. The Debtor is a privately held corporation. Ms. Carlino indirectly beneficially owns

approximately 49.5 percent of the Debtors common stock. Revolate Holdings, LLC (Revolate) indirectly owns approximately 44.5 percent of the Debtors common stock. Michael Mendenhall owns one percent (1%) of the Debtors common stock.3 Lisa Sun owns the remaining approximately five percent (5%) of the Debtors common stock. While the Debtor has established an equity incentive plan for employees, none of the options granted pursuant to such plan has been exercised to date.

On November 1, 2013, Mr. Mendenhall informed the Debtors Board of Directors that he is resigning as Chief Executive Officer effective immediately prior to the filing of the Voluntary Petition on November 1, 2013, for good reason as defined in his employment agreement. Said agreement contemplates an acceleration of the vesting of his equity up to four percent (4%) of the Debtors equity interests. The Debtor is undertaking a review of this matter and will promptly amend the Debtors corporate ownership representation, if such amendment is warranted.

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Part II. The Debtors History and Debt Structure A. Company History. 10. The Debtor was incorporated as a Delaware corporation on July 14, 2011. The

original iteration of the website development was discarded in whole in July 2012, and a completely new development for the online vision of the company was commenced under Mr. Mendenhalls direction. This new initiative resulted in the current website that was officially launched in mid-September 2013. Ms. Carlino and her affiliates contributed her substantial archetypes-related intellectual property portfolio to the Debtor as a capital investment, for a 50% original founders equity stake in the company. The remaining founders equity was issued to Revolate (45%) and the initial and now former Chief Executive Officer Lisa Sun (5%), in consideration of certain in-kind contributions and/or services to the company. B. Events Leading to Commencement of Bankruptcy Case. 11. The Debtor is a pre-revenue company whose operations have been primarily funded

through several rounds of debt financings, the terms of which required the Debtor to raise subsequent equity financing into which the debt would be converted. During 2013, the Debtor has extensively marketed a potential $20 million stock equity raise to investors through the offering of Series A preferred stock. The Debtors failure to gain traction for such an offering, among other setbacks, has resulted in a liquidity crisis that has negatively impacted the Debtors operations. 12. In early 2013, CC Bridge Lender, LLC (the Bridge Lender), an affiliate of Ms.

Carlino, agreed to provide the Debtor with secured bridge loan financing (the Senior Bridge Loans) that enabled the Debtor to maintain operations through the end of October while the Debtors management and board of directors explored strategic alternatives. To induce the Bridge Lender to provide this financing, the holders of the Debtors existing secured debt agreed to subordinate their liens and claims to those granted in connection with the Senior Bridge Loans.
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The Bridge Lender also provided additional, subordinated third-lien bridge financing, including $2.3 million in loans to the Debtor for it to satisfy its ongoing obligations in the ordinary course of business. 13. Throughout 2013, the Debtor has continued to seek, but has been unable to obtain,

additional debt or equity financing. As a result, the Debtor lacks the funds to service its debt, satisfy its obligations to creditors or otherwise operate in the ordinary course of business, necessitating the commencement of this Chapter 11 proceeding. C. Debt Structure. 14. The Bridge Lender, an affiliate of Cristina Carlino, holds senior secured debt in the

aggregate principal amount of $7.325 million, representing the Senior Bridge Loans described above. The Debtor has also sold junior secured debt securities in three (3) different offerings to raise capital for its pre-revenue operations, in the aggregate amount of approximately $19 million (the Junior Secured Debt). The holders of the Junior Secured Debt are affiliates controlled by the Debtors founder, Ms. Carlino, and Revolate, who had an informal understanding that each would sponsor 50 percent of needed debt financing until the Debtor was in a position to raise more permanent equity financing. Through special purpose vehicles, each holder of Junior Secured Debt holds 50 percent of the outstanding Round A ($4 million) and Round B ($7 million) junior secured notes. With respect to the Round C ($4 million) junior secured notes, Revolate was unable to raise its 50 percent allocation. Consequently, an affiliate of Ms. Carlino made up the difference and owns 75 percent of the Round C junior secured notes while a Revolate affiliate holds 25 percent. Because Revolate was not in a position to contribute to the Companys senior secured bridge financing, it subordinated its position to induce Ms. Carlinos affiliate to do so. 15. The $7.325 million debt under the Senior Bridge Loans is secured by a first

position lien on all the assets of the Debtor, including its intellectual property. The $19 million Junior Secured Debt is secured by a second position lien on the same assets. The Debtor and the
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holders of the Junior Secured Debt are parties to a subordination agreement in favor of the Bridge Lender. Separate affiliates of Ms. Carlino, whose affiliates collectively own all of the debt under the Senior Bridge Loan and a majority of the Junior Secured Debt, serve as collateral agent for the foregoing security interests. 16. In addition to the foregoing, the Debtor has unsecured debt, including past-due

accounts payable, aggregating to almost $3.0 million. 17. The Debtors secured debt is described in greater detail on the Stipulation and

Description of Secured Debt attached hereto as Exhibit B and incorporated herein by this reference. 18. Due to the Debtors overwhelming outstanding debt and an inability to raise capital

through equity financings, the Debtor is not able to satisfy all of its outstanding liabilities. Therefore, on October 11, 2013, the Debtors Board of Directors determined that it is in the Debtors best interest to commence this Chapter 11 case and voted unanimously in favor of such action. 19. The Debtor filed its Voluntary Petition on November 1, 2013 (the Petition Date),

commencing this Chapter 11 case. Part III. The Debtors Chapter 11 Business Plan 20. In this Chapter 11 case, the Debtor plans to continue its operations so as to maintain

its going concern value and maximize the value of its assets for the benefit of creditors. In that regard, the Debtor further intends to file motions to approve bidding procedures and for approval of a sale of substantially all of the Debtors assets. The Debtor anticipates that Ms. Carlino, or an affiliated entity, as the pre-petition, senior secured lender and proposed DIP lender, will bid to purchase the Debtors assets. As such, during this bankruptcy case, the Debtor plans to continue to market and then sell its assets either to Ms. Carlino (or her affiliate) or otherwise to the
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highest bidder in an auction under the Courts supervision. To ensure that the sale process will be fair and at arms length and to maximize the potential for overbids with respect to any ultimate sale transaction, the Debtors Board of Directors has (a) voted to retain an investment banker4 to, among other things, further market the Debtors assets, and (b) appointed a selected subcommittee of independent directors to oversee the sale process. 21. As set forth in greater detail below, to finance its operations pending the sale, the

Debtor has reached an agreement with the Bridge Lender to enter into a post-petition, debtor in possession financing facility and an approved budget (as may be modified from time to time consistent with the terms of the DIP loan agreement discussed below, the Budget) thereunder. A true and correct copy of the Budget is attached hereto as Exhibit C and is incorporated herein by this reference. The Budget assumes, inter alia, that the Debtor will be authorized to pay prepetition wages and to pay and honor employee benefits as requested in the Employee Obligations Motion, and that the Debtors cash management system will remain in place. Part IV. The First Day Motions A. The DIP Financing Motion. 22. A copy of the DIP Loan Agreement, substantially in the form to be agreed on

between the DIP Lender and the Debtor, is attached as Exhibit A to the DIP Financing Motion as is incorporated herein by this reference. 23. The provisions of the DIP Loan Agreement were extensively negotiated. The DIP

Loan Agreement enables the Debtor to obtain the financing necessary to maintain its operations and pursue reorganization and maximization of value of its estate.

The Debtor will be filing a motion for authority to employ Odyssey Capital Group LLC as its investment banker, in the immediate future.

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Debtors Proposed Post-Petition Financing Arrangement i. 24. Need for Post-Petition Financing.

An immediate need exists for the Debtor to obtain funds from the proposed DIP

Facility in order to continue operations and to administer and preserve the value of its estate. The ability of the Debtor to finance its operations, preserve and maintain the value of its assets and maximize a return for all creditors requires the availability of working capital from the DIP Facility. The absence of the relief requested in the DIP Financing Motion would immediately and irreparably harm the Debtor, its estate and creditors, and the possibility for a successful sale of the Debtors assets as a going concern or otherwise. ii. 25. Background of the Post-Petition Financing Arrangement.

Prior to the Petition Date, in exploring financing options, the Debtor recognized

that the obligations owed to the Prepetition Lenders are secured by virtually all of the Debtors property. The DIP Lender is willing to extend junior post-petition financing on the terms and conditions described in the DIP Financing Motion. The Debtor concluded that the DIP Lenders proposal was desirable because, among other things, it permits the Debtor to secure necessary post-petition financing to continue operations and avoid an extended, contested hearing. iii. 26. Negotiations.

The Debtor and the DIP Lender engaged in extensive, arms-length negotiations

with respect to the terms and conditions of the DIP Loan Agreement. Importantly, the DIP Loan Agreement provides that the Debtor may draw immediately (on an interim basis) to meet its administrative and operational obligations during the early stages of the Debtors Chapter 11 case, a very critical period for preserving going concern value. 27. The Debtor and the DIP Lender have also agreed upon the Budget which projects

cash flow through January 31, 2014. The Debtor believes that the Budget is achievable and will allow it to operate and pay its post-petition obligations as they mature.
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iv. 28.

Use of Cash Collateral and Proposed Adequate Protection.

In order to address its working capital needs and fund its efforts in this Chapter 11

case, the Debtor also requires the use of Cash Collateral of the Prepetition Lenders. The use of Cash Collateral5 will provide the Debtor with the additional necessary capital with which to operate its business, pay its employees, and continue to maintain the going-concern value of its business. The DIP Facility Should Be Authorized. 29. Approval of the DIP Facility will provide the Debtor with immediate and ongoing

access to borrowing availability to pay its current and ongoing operating expenses, including postpetition wages and salaries, and vendor costs. Unless these expenses are paid, the Debtor will be forced to cease operations, which would likely (i) result in irreparable harm to their business, (ii) deplete going concern value, and (iii) jeopardize the Debtors ability to maximize value. The credit provided under the DIP Loan Agreement and the use of Cash Collateral will enable the Debtor to continue to satisfy its vendors, service its users/customers, pay its employees, and operate its business in the ordinary course and in an orderly and reasonable manner to preserve and enhance the value of its estate for the benefit of all stakeholders. The availability of credit under the DIP Loan Agreement will provide confidence to the Debtors creditors that will enable and encourage them to continue their relationships with the Debtor. Finally, the implementation of the DIP Loan Agreement will be viewed favorably by the Debtors vendors, employees, and users/customers, thereby promoting a successful resolution of this Chapter 11 case. Accordingly, the timely approval of the relief requested in the DIP Financing Motion is imperative. 30. The Debtors liquidity needs can be satisfied only if the Debtor is immediately

authorized to borrow under the DIP Facility and to use such proceeds to fund its operations. The Debtor has been unable to procure sufficient financing in the form of unsecured credit. The
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The amount of Cash Collateral is approximately $2,500.

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Debtor has not been able to obtain post-petition financing or other financial accommodations from any alternative prospective lender or group of lenders on more favorable terms and conditions than those for which approval is sought in the DIP Financing Motion. 31. Substantially all of the Debtors assets are encumbered, and the Debtor has been

unable to procure the required funding absent granting the proposed superpriority claims and liens. 32. The terms and conditions of the DIP Loan Agreement are fair and reasonable, and

were negotiated extensively by well-represented, independent parties in good faith and at armslength. The Use of Cash Collateral Should Be Approved. 33. The Debtor requires the use of Cash Collateral to fund its day-to-day operations.

Absent such relief, the Debtors business will be brought to an immediate halt, with damaging consequences for the Debtor and its estate and creditors. Interim Approval Should Be Granted. 34. The Debtor has an urgent and immediate need for cash to continue to operate.

Currently, the Debtor does not have sufficient funds with which to operate its business on an ongoing basis. Absent authorization from the Court to obtain secured credit, as requested, on an interim basis pending a final hearing on the DIP Financing Motion, the Debtor will be immediately and irreparably harmed. The availability of interim loans under the DIP Facility will provide necessary assurance to the Debtors vendors, employees, and users/customers of its ability to meet its near-term obligations. Failure to meet these obligations and to provide these assurances likely would have a long-term negative impact on the value of the Debtors business, to the detriment of all parties in interest. Furthermore, the lack of an interim facility would result in accelerated cash demands on the Debtor. Accordingly, the interim relief requested is critical to preserving and maintaining the going concern value of the Debtor.

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B.

The Employee Obligations Motion. 35. The Debtors workforce currently consists of its eight (8) full-time Employees

across commerce, technology, and business operation functions.6 Prior to the Petition Date, the Debtor, through a reduction-in-force, laid off certain employees. As of the Petition Date, the Debtor had no employment agreements with any personnel, and all employment is at will employment. 36. The Debtors workforce is critical to its business operations. Each of the Debtors

Employees is essential not only to the continued, uninterrupted operation of the Debtors business, but to effectuating the orderly administration of the Bankruptcy Case. The Debtors remaining Employees have distinct experience and expertise that are vital to the Debtors operations. Among other things, the Debtor requires its remaining Employees to execute the development, marketing and customer service functions associated with its unique product and services. Failure to meet commitments and to maintain relationships with vendors and users/customers will open the door to competitors and will eliminate growth. As a result, the Debtors business will lose its going concern value, and its assets, including its customer relations, will be harmed. The Debtors Pre-Petition Wage Obligations i. 37. Wages

The Debtor pays its Employees on bi-monthly basis, on the 15th and last day of

each month. The bi-monthly payroll for the Employees, including wages and salaries (collectively, the Wages), is estimated to be approximately $45,500. Payroll payments are made via direct deposit through electronic transfer of funds directly to the Employees or via check. 38. The Debtor utilizes TriNet, a human resources solutions provider, to process

payroll, withholdings and deductions. TriNet typically debits the Debtors main operating account

The Debtor also employs consultants on a contract basis as needed.

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in the amount of the applicable payroll, which includes a processing fee, one business day before Employees are scheduled to be paid. TriNet then issues payment directly to the Employees. 39. On October 28, 2013, the Debtor paid the Employees pre-petition Wages for the

period from October 16, 2013 to October 31, 2013. Accordingly, the Debtor believes that, as of the Petition Date, there are no accrued Wages (excluding Payroll Taxes and Deductions (each as defined below)) that remain unpaid to the Employees (the Unpaid Wages); however, out of an abundance of caution, by this Motion, the Debtor requests authority to pay any unpaid Wages which remain outstanding as of the Petition Date. In addition, the Debtor requests authority to replace any checks for pre-petition Wages that may be dishonored.7 All post-petition Employee Wages shall be paid in the ordinary course. ii. 40. Reimbursement of Pre-Petition Employee Business Expenses

Prior to the Petition Date and in the ordinary course of its business, the Debtor

directly or indirectly reimburses Employees for certain Reimbursable Expenses incurred on behalf of the Debtor in the scope of their employment. The Reimbursable Expenses are for air travel, lodging, ground transportation, travel and business meals, business entertainment, telephone, and other business-related expenses. The Debtor permits each Employee to use his or her own personal credit card for certain approved business expenses, for which the Debtor reimburses such Employee. 41. Because employees do not always submit claim forms for reimbursement

promptly, it is difficult for the Debtor to determine the exact amount of outstanding Reimbursable Expenses at any particular time or the total amount that may be owed as of the Petition Date. The Debtor believes, however, that the Reimbursable Expenses for the prepetition period total approximately $41,000.
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The Debtor believes that there no checks issued for pre-petition Wages, if any, will exceed $12,475 and no amount of Unpaid Wages will exceed $12,475. In any event, if this Motion is granted, the Debtor represents that it will not pay any Employee more than the $12,475 limit.

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42.

The Debtor requests authority to reimburse the Employees for Reimbursable

Expenses that were incurred pre-petition, including, as applicable, paying all unpaid Reimbursable Expenses that accrued pre-petition or relate to the pre-petition period. All postpetition Employee expenses shall be reimbursed in the ordinary course. iii. 43. Pre-Petition Withholdings and Deductions

The Debtor withholds from each Employee, wage amounts related to, among

other things, federal, state and local income taxes, social security and Medicare taxes (collectively, the Withheld Amounts) for remittance to the appropriate federal, state, or local taxing authorities. The Debtor then matches from its own funds social security and Medicare taxes and pays, based upon a percentage of gross payroll, additional amounts for state and federal unemployment insurance (the Employer Payroll Taxes, and together with the Withheld Amounts, the Payroll Taxes). 44. The Payroll Taxes are generally processed by TriNet and forwarded to the

appropriate federal, state, or local taxing authorities at the same time Employee payroll is administered. The Debtor pays TriNet a fee of approximately $115.00 per Employee for its payroll services per pay period. As of the Petition Date, the Debtor believes that all Payroll Taxes have been remitted to the appropriate taxing authorities or that TriNet holds funds representing such Payroll Taxes. However, out of an abundance of caution, the Debtor seeks authority, but not direction, to honor and process its pre-petition obligations with respect to the Payroll Taxes, including forwarding any unremitted Withheld Amounts to the appropriate taxing authorities. 45. During each applicable pay period, the Debtor, through TriNet, routinely deducts

certain Deductions from Employees paychecks, including, without limitation, pre-tax and aftertax deductions payable pursuant to certain of the Employee benefit plans discussed herein (such as an Employees share of health care benefits, insurance premiums, and flexible and/or health savings account contributions). As of the Petition Date, the Debtor believes that only nominal
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Deductions have not been forwarded to the appropriate third-party recipients. However, to the extent any such amounts are outstanding, the Debtor seeks authority to forward these pre-petition Deductions to the applicable third party recipients. iv. 46. Paid Time Off

In the ordinary course, the Debtor provides allotted PTO to its employees. Accrued

PTO which remains unused, expires. The Debtor believes that, as of the Petition Date, none of the Employees have any accrued PTO8 and, therefore, no Employee presently has accrued PTO which exceeds in amount $12,475.9 Employee Benefits 47. In the ordinary course of its business, the Debtor provides its Employees with

certain Employee B enefits, including, but not limited to: (a) medical and health care programs, and (b) certain insurance and other specific employee benefits, described in greater detail below. 48. If this Motion is granted, the Debtor represents that it will not pay any Employee

more than the limit permitted under applicable provisions of the Bankruptcy Code10 with respect to any Employee Benefit contribution. v. 49. Health Benefit Plans

TriNet is the single sponsor of all of the Debtors Health Benefit Plans. TriNet

partners certain carriers to offer a range of medical plans, including health, dental and vision. The Debtor pays 100% of premiums for medical, 80% of premiums for dental, and 80% of premiums for vision coverage of each Employee. Furthermore, the Debtor funds 50% of
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On October 28, 2013, the Debtor paid out accrued PTO of Employees in the aggregate amount of $25,705.

Even when combined with any pre-petition Wage Obligations, the Debtor believes that no Employee would be owed in excess of $12,475 in total value. I am informed and believe that an employee is entitled to priority to the extent of $12,475 earned within 180 days before the Petition Date for contributions to Employee Benefit plans to the extent of (i) the number of Employees covered by each such plan multiplied by $10,000; less (ii) the aggregate amount paid to the Employees for the Wage Obligations, plus the aggregate amount paid by the estate on behalf of the Employees to any other Employee Benefit plan.
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premiums for medical, 50% of premiums for dental, and 50% of premiums for vision coverage for each Employees spouse, domestic partner and dependent(s). An optional pre-tax flexible spending account is also available to Employees, at their expense, for eligible out-of-pocket health care and dependent expenses. 50. As of the Petition Date, the Debtor estimates the aggregate amount of accrued and

outstanding pre-petition obligations related to the Health Benefit Plans to be $10,000. By this Motion, the Debtor seeks authority to (a) continue to provide the Health Benefit Plans for its Employees in the ordinary course of business, and (b) continue to honor obligations under such benefit programs, including any premiums and administrative fees. vi. 51. Insurance

The Debtor, through TriNet, offers Employees basic life insurance. In addition, the

Debtor maintains workers compensation policies to provide its Employees with compensation for injuries arising from or related to their employment with the Debtor. The Debtor pays for basic life insurance coverage valued at two times earnings. In addition, the Debtor provides long-term disability insurance for qualifying disabilities. Employees also are provided the option to elect supplemental life, Accidental Death and Dismemberment and disability insurance. By this Motion, the Debtor seeks authority to (a) continue to provide the insurance benefits to its Employees in the ordinary course of business, and (b) continue to honor obligations under such benefits, including any premiums and administrative fees. vii. 52. Additional Benefits

TriNet offers the Additional Benefit Programs to the Employees, including a pre-

tax commuter benefit plan and TriNet Perks (which provides discounts for various retailers, restaurants, hotels, car rentals, and other services)

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viii.

Payment of the Employee Obligations Is Necessary and in the Best Interests of the Estate

53.

The Debtor believes that its failure to satisfy outstanding Employee Obligations

will create concern and discontent among its Employees and will adversely affect the Employees morale. Moreover, it would undermine the Debtors ability to retain its Employees. If the Debtor cannot promptly assure its Employees that their Wages will be paid, their benefits will continue and their accrued PTO will be honored, immediate and irreparable harm may result due to the Employees relocating or resigning during the Bankruptcy Case. The Debtors ability to satisfy Wage Obligations and honor Employee Benefits is integral to maintaining continuity and order to the Debtors business activities through the retention of its Employees. This is especially critical in this case because the Debtor business model requires significant product development and maintenance, including interaction with users/customers, vendors and partners. Employee dissatisfaction would quickly and negatively impact production, as well as critical business relationships. At this critical state of the case, the Debtor cannot risk a significant disruption in its operations caused by low employee morale. 54. If the Employee Obligations Motion is approved, the Debtor will not pay any

individual more than $12,475. 55. The Debtor believes that under the Budget, it will have sufficient operating cash

to satisfy its obligations to Employees, including both the pre-petition Wage Obligations and post-petition salaries, as they come due in the ordinary course of the Debtors business. Moreover, under the Budget, the Debtor will be able to honor accrued PTO and also continue other Employee Benefits for all employees up to $12,475, in the ordinary course of business. ix. Authority To Make All Payments To Third Parties Incident To Payments And Contributions

56.

The Debtor believes it is necessary to continue payment of various servicing fees

to the providers that administer the Debtors Employee Obligations. Without the continued
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services of these administrators, the Debtor will be unable to continue to honor and process its Employee Obligations in an efficient and cost-effective manner. 57. The Debtors Employees rely on wages, salaries, reimbursements and other benefits

they receive from the Debtor. If amounts owed are not paid, insurance reimbursements not made, or other benefits delayed, the Employees may suffer extensive personal hardship. The Debtor believes that in order to minimize the personal hardships its Employees will suffer if pre- petition employee-related obligations are not paid when due, and to maintain morale at this critical time, it is essential that the Debtor pay each of the Employees all compensation amounts (subject to the statutory cap) that have been earned under the Debtors pre-petition contractual obligations or practices. It is also essential that the Debtor continues with and honors its Employee Benefit plans and policies discussed in this Motion in the ordinary course of business, on an uninterrupted basis. C. The Cash Management Motion. The Debtors Cash Management System 58. In the ordinary course of business, the Debtor utilizes a cash management system

that provides established processes for the collection, management, transferring and disbursement of funds generated and used in its operations (the Cash Management System). The Bank Accounts used in connection with the Cash Management System are listed on Exhibit D hereto which is incorporated herein by this reference. In addition, the Debtor has established an account with First Republic Bank pursuant to that certain Irrevocable Standby Letter of Credit on behalf of the Debtors former landlord.11

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Only approximately $3,200 remains in such account, and the Debtor intends to close it in the immediate

future.

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59.

The Debtors Cash Management System consists of two (2) Bank Accounts12 held

by the Debtor as follows: (i) a checking account with Bank of America which serves as the Debtors Main Operating Account; and (ii) the Savings Account with Bank of America. 60. The Main Operating Account is funded by the Debtors investors and payments

from users/customers. User/customer payments are received by wire or check payment, and funds from investors are received by wire. The Main Operating Account is used to pay the Debtors operational expenses, including payroll and ordinary accounts payable obligations, in the ordinary course of the Debtors business. 61. With respect to payroll, the Companys payroll processor, TriNet, directly accesses

the Main Operating Account for all payroll and payroll tax expenses. Payroll is paid by direct deposit. 62. With respect to accounts payables, the Debtor typically pays vendors from a

company credit card with American Express controlled by its accountant, which amounts are paid from the Main Operating Account in the ordinary course of business. 63. The Savings Account is a depository account used to accrue interest and safeguard

funds not required for operational expenses. 64. The Debtor maintains detailed and accurate records of all disbursements and

transfers flowing within and outside of the Cash Management System, including all checks that are written on its accounts. The Debtors banks allow the Debtor to easily monitor its Bank Account balances and activity, generate reports, hold and release checks, stop payments, transfer funds and send wires.

For avoidance of doubt, the Cash Management Motion includes the Bank Account at First Republic Bank although it is not part of the Debtors Cash Management System.

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The Debtors Business Forms 65. In the ordinary course of business, the Debtor uses several varieties of Business

Forms. To minimize the expense to the estate and to avoid any confusion with users/customers, employees, and third parties, the Debtor respectfully requests that the Court authorize the Debtor to continue to use all Business Forms, including without limitation, checks, letterhead, customer forms, purchase orders, contracts, and invoices, as such forms were used by the Debtor immediately prior to the Petition Date, without reference to the Debtors status as debtor in possession. The Debtors Continued Use of its Cash Management System and Business Forms Is in the Best Interests of the Debtor and Its Estate. 66. In light of, among other things: (a) the Debtors limited access to funds and

resources; (b) the Debtors exceedingly minimal revenue generation; (c) the Debtors goal to expeditiously conduct a sale of its assets; (d) the need to preserve the value of the business to maximize value for the sale; and (e) the fact that disruption of the Debtors business, including its Cash Management System, would burden and prejudice the estate, the Debtor submits that its business judgment and the equities favor preserving the Cash Management System during the Bankruptcy Case. 67. The Debtors Cash Management System is a significant aspect of the Debtors

ordinary course business practices. The Debtors Bank Accounts are part of the Cash Management System that ensures the Debtors ability to monitor and control all of its cash receipts and disbursements efficiently. During the pendency of its Bankruptcy Case, the Debtor intends to fund operations from existing cash and post-petition payments and funding, all of which will run through the Cash Management System. 68. If the Court approves the DIP Financing Motion, upon receipt of the DIP Funds

from the DIP Lender, the Debtor, in consultation with the UST, will (a) open a new DIP account at
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a bank satisfactory to the UST which will serve as the Debtors new main operating account within the Cash Management System and deposit the DIP Funds therein, and (b) close the Main Operating Account and move all funds from such account into the DIP Account. Accordingly, the Main Operating Account will remain open only for a limited period within the first weeks of the case, until such time as the Debtor can obtain Court authority for approval of the DIP loan, establish the DIP Account, and receive and deposit the DIP Funds. 69. If the Debtor is required to close all existing Bank Accounts and terminate the Cash

Management System immediately, the Debtor would need to expend resources and time to establish the requisite number of new bank accounts in an expedient manner and to establish a new cash management system to fulfill its business requirements. The disruption to the ordinary financial affairs of the Debtor would be prejudicial to the Debtors estate. 70. Furthermore, because the Debtor is a pre-revenue company, its taxes are minimal.

Its payroll taxes are processed by TriNet directly from the Main Operating Account. Accordingly, the Debtor believes that being required to open a new, segregated bank account solely for payment of taxes is an unnecessary burden on the Debtor with minimal benefit to the estate. 71. Under the circumstances of this case, closing existing Bank Accounts and opening

new ones at this time would result in needless costs in both time and money with no discernible benefit to the estate. For example, closing the Debtors Main Operating Account and opening another at this time will provide no benefit and only be an additional burden to the Debtor, especially in light of the fact that the Debtor, upon approval of the DIP Financing Motion, will immediately open the DIP Account which will then hold the DIP Funds. Furthermore, because payroll is funded from the Main Operating Account, closing the account may result in disruption of payments to employees. Pursuant to the Employee Wages Motion, the Debtor has requested authorization to pay employee pre-petition wages and to continue and honor employee benefits.
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To the extent that the Court grants such motion, maintenance of the Main Operating Account is critical to ensure that the Debtor is able to pay its employees in the ordinary course and maintain employee goodwill. 72. Similarly, preparing, ordering and purchasing new Business Forms will be a burden

to the Debtor with no discernible benefit to the estate. Thus, the Debtor requests authority to continue to use its current Business Forms without reference to the Debtors status as debtor in possession. Such relief will allow the Debtor to avoid the costs and delays of ordering new business forms. Upon depletion of the current stock of Business Forms, the Debtor will obtain new checks and forms that indicate its debtor in possession status. The Bank Accounts Comply With Section 345. 73. The Debtors Bank Accounts are established at Bank of America. The respective

amounts of cash in each of the Bank Accounts are nominal and well-below $100,00013. Because the amounts in each of the Bank Accounts are nominal, the Debtor submits that the risk of loss at this time is mitigated. 74. When the Debtor establishes the DIP Account, it will only do so in consultation

with the UST and will address any concerns that the UST may have. 75. If the Court grants the relief requested in the Cash Management Motion, the Debtor

will not pay any debts incurred before the Petition Date other than as authorized by this Court. 76. If the Court grants the relief requested in the Cash Management Motion, the Debtor

intends to maintain and continue to use its existing Bank Accounts in the names and with the account numbers existing immediately prior to this Bankruptcy Case, consistent with its established Cash Management System.
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As of the Petition Date, the Main Operating Account had a zero balance and approximately $27,000 was in the Savings Account.

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Pursuant to 28 U.S.C. 1746, I declare under penalty of perjury that the foregoing is true and correct. Dated: November 1, 2013 ARCHETYPES, INC. /s/ Thomas L. Gallagher Thomas L. Gallagher Director and Interim President

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