Upload
courtreads
View
1.380
Download
1
Embed Size (px)
DESCRIPTION
Citation preview
CINCINNATI/97646.3
UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK
In re:
Flat Out Crazy, LLC, et al.1,
Debtors.
Chapter 11
Case No. 13-22094 (RDD
Joint Administration Requested
AFFIDAVIT OF STEVE DELONG IN SUPPORT OF FIRST-DAY PLEADINGSAND IN ACCORDANCE WITH LOCAL BANKRUPTCY RULE 1007-2
STATE OF ILLINOIS )) ss.
COUNTY OF COOK )
I, Steve DeLong, being duly sworn, hereby depose and say:
1. I am the Interim Chief Financial Officer (“CFO”) of Flat Out Crazy, LLC
(“FOC”) and of each of the above-captioned affiliated debtors (collectively, the “Debtors”),
debtors and debtors in possession in these bankruptcy cases (the “Cases”). As an officer of the
Debtors, I am generally familiar with their day-to-day operations, businesses and financial
affairs.2
2. Debtor Stir Crazy Café West Nyack, LLC (“Stir Crazy West Nyack”) is a limited
liability company organized under the laws of the state of New York and has been so organized
for more than 180 days prior to the date on which these Cases commenced. Stir Crazy West
1 The Debtors in these cases and the last four digits of their Employer Identification Numbers are: Stir Crazy CaféWest Nyack, LLC (5828); Flat Out Crazy, LLC (0160); SCR Operations, LLC (9375); SCR Hospitality, LLC(4309); SCR Concessions, LLC (6669); Stir Crazy Restaurants, LLC (2289); Stir Crazy Café Oakbrook, LLC(2976); Stir Crazy Café Northbrook, LLC (7070); Stir Crazy Café Woodfield, LLC (1104); Stir Crazy Café GreatLakes, LLC (9634); Stir Crazy Café Boca Raton, LLC (9942); Stir Crazy Café Creve Coeur, LLC (0003); Stir CrazyCafé Legacy Village, LLC (8744); Stir Crazy Café Cantera, LLC (4842); and Stir Crazy Operations, LLC (8114).
2 I have been the Interim CFO at FOC since July, 2012. Until January 2013, I was an independent contractor forClark Schaefer Consulting (“Clark Schaefer”), who provided my services to the Debtors on a contract basis. DuringJanuary, 2013, the Debtors hired me as a full-time employee and terminated the service agreement with ClarkSchaefer.
CINCINNATI/97646.3 2
Nyack operates a Stir Crazy restaurant located at 4422 Palisades Center Drive, West Nyack, NY
10994. Debtor Stir Crazy Restaurants, LLC (“Stir Crazy Restaurants”) is the 100% owner of Stir
Crazy West Nyack. Debtor FOC is the 100% owner of Stir Crazy Restaurants. All of the other
Debtors are 100% owned, either directly or indirectly, by FOC, Stir Crazy Restaurants, or both
FOC and Stir Crazy Restaurants.3
3. On January 25, 2013 (the “Petition Date”), Stir Crazy West Nyack, Stir Crazy
Restaurants, FOC and all of the other Debtors filed voluntary petitions for relief (the “Petitions”)
under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy
Code”) in the United States Bankruptcy Court for the Southern District of New York, White
Plains Division (the “Bankruptcy Court”).
4. In order to minimize disruption to the Debtors’ businesses as a result of the Cases,
maintain and maximize the value of the Debtors’ estates, and establish procedures for the
administration of the Cases, the Debtors have, contemporaneously herewith, requested certain
“first-day” relief by filing various motions and applications with the Bankruptcy Court
(collectively, the “First-Day Pleadings”).
5. I submit this affidavit (this “Affidavit”) (a) in support of (i) the Petitions and
(ii) the First-Day Pleadings; and (b) to assist the Bankruptcy Court and other interested parties in
understanding the circumstances that resulted in the commencement of the Cases. All facts set
forth in this Affidavit are based upon my personal knowledge, my discussions with other
members of the Debtors’ officers and current senior management, my review of relevant
documents, or my opinion based upon experience, knowledge, and information concerning the
operation of the Debtors and the industry in which they operate. While I have made every
3 An organization chart depicting the ownership structure of all of the Debtors is attached hereto as Exhibit A.
CINCINNATI/97646.3 3
reasonable effort to ensure that the information contained herein is accurate and complete based
upon information that was available at the time of preparation, the subsequent receipt of
information may result in material changes to financial data and other information contained
herein. If called to testify, I would testify competently to the facts set forth in this Affidavit. I
am authorized to submit this Affidavit on behalf of the Debtors.
BACKGROUND AND HISTORY
The Business of the Debtors
6. As of the Petition Date, the Debtors operate 26 restaurants, split among two
Asian-inspired chains: (i) Flat Top Grill (“Flat Top”), which currently has 15 locations; (ii) Stir
Crazy Fresh Asian Grill (“Stir Crazy” and, together with Flat Top, the “Restaurants”), which
currently has 11 locations.4 As of the end of their last payroll period on January 16, 2013, the
Debtors employed approximately 1,200 people, the majority of whom were employees in the
Restaurants or in Director of Operations positions and 14 of whom were located at the Debtors’
corporate headquarters in downtown Chicago. During January, 2013, immediately prior to the
Petition Date, the Debtors closed (a) 3 Stir Crazy restaurants located in Greenwood, Indiana;
Indianapolis, Indiana; and Warrenville, Illinois; (b) 3 Flat Top restaurants located in
Birmingham, Alabama; Rochester Hills, Michigan; and Wauwatosa, Wisconsin; and (c) the sold
SC Asian restaurant located in San Francisco, California.
7. Flat Top is a full-service fast-casual create-your-own stir-fry concept that
combines the comforts of a full-service restaurant with an interactive dining experience. The
first Flat Top opened in Chicago in 1995 with a vision to bring fresh, Asian-style cooking to the
4 The Debtors also operated a single-location Asian fast-casual restaurant (“SC Asian”), which the Debtors closedimmediately prior to the Petition Date.
CINCINNATI/97646.3 4
United States. Diners at Flat Top pay a value-oriented price, entitling them to take a trip through
“The Fresh Food Line” to create a unique dish.
8. Stir Crazy is a full-service casual Asian restaurant offering the flavors of Chinese,
Japanese, Thai and Vietnamese food. Like Flat Top, the first Stir Crazy also opened in suburban
Chicago in 1995. Stir Crazy prepares everything from scratch daily. The focal point of each Stir
Crazy is an open-kitchen that allows diners to watch skilled chefs use woks to prepare
ingredients chosen by diners selecting the “Market Bar” menu option. Its menu also offers more
than 50 other dishes ranging from traditional Chinese favorites to innovative specialties from
across Asia.
9. SC Asian was a single-location, full-service fast-casual restaurant where guests
order and pay for Asian cuisine at the counter and then sit down to be served food and drinks by
service staff who take additional orders tableside. SC Asian opened its first and only location in
November 2011 inside Macy’s flagship department store in San Francisco, California.5
10. By 1999, Stir Crazy had grown into a four-restaurant chain, with 3 locations in
suburban Chicago and one location in suburban Detroit. Over the next 5 years, Stir Crazy more
than doubled its number of locations, opening stores in south Florida; suburban Chicago;
suburban St. Louis, Missouri; the outskirts of New York City; and suburban Cleveland, Ohio.
Most of these Restaurants were located in regional malls or lifestyle centers, with the others
located in free-standing buildings.
11. In 2006, The Walnut Group (“Walnut Group”), a private equity firm located in
Cincinnati, Ohio, and certain of its affiliates formed Stir Crazy Partners, LLC, which then
acquired Stir Crazy Restaurants and all of its subsidiaries (the “Stir Crazy Acquisition”). At the
5 As noted above, this location was closed in January 2013.
CINCINNATI/97646.3 5
time of the Stir Crazy Acquisition, Stir Crazy operated 9 locations. During 2007 and 2008, Stir
Crazy opened 5 new locations, bringing the total Stir Crazy locations to 14 by the end of 2008.
12. FOC was formed in 2009 to acquire the Flat Top chain and merge it with Stir
Crazy. On August 19, 2009, FOC acquired a 100% interest in Stir Crazy Restaurants and its
subsidiaries from Stir Crazy Partners, LLC. On the same day, FOC also acquired certain assets
and liabilities of Happy Valley Corporation, formerly the owner of Flat Top (collectively, these
transactions are referred to herein as the “Flat Top Acquisition”). At the time of the Flat Top
Acquisition, Flat Top operated 13 Restaurants. Following the Flat Top Acquisition, there were
27 total Restaurants under the control of FOC and its subsidiaries.
Financial Results and Distress
13. Subsequent to the Flat Top Acquisition, the Debtors continued to grow by adding
new Restaurants. At their peak in early 2012, the Debtors operated 37 total Restaurants – 18 Stir
Crazy locations, 18 Flat Top locations and the SC Asian location. During 2012, the Debtors’ net
sales peaked at approximately $59.0 million, representing an increase of approximately $2.4
million over 2011 net sales and approximately $6.7 million over 2010 net sales. Despite the
growth trend in Restaurant sales, the company as a whole was not profitable.
14. The extended lull in the U.S. economy, unsuccessful new Restaurant openings
and unprofitable menu changes led to poorer-than-expected results, particularly in 2011 and
2012. During 2012, the Debtors sustained a preliminary unaudited net loss of approximately
$11.5 million. The Debtors also sustained net losses of approximately $12.2 million in 2011 and
$3.6 million in 2010.
15. The mounting losses have put a significant strain on the Debtors’ cash flow,
which in turn has stressed their relationships with lenders, landlords, vendors and other parties in
CINCINNATI/97646.3 6
interest. Over the past several months, the Debtors have explored numerous restructuring
alternatives, including but not limited to, Restaurant performance improvements, capital raises,
asset transactions, closing unprofitable Restaurants, and others. Members of the board of
directors of FOC (the “Board”) and senior management of the Debtors have been in constant
contact regarding these efforts and they have regularly met to develop a business plan that will
help ensure the long-term viability of the Debtors. Pursuant to these efforts, the Board replaced
several members of the Debtors’ senior management team during 2012, bringing in William Van
Epps as CEO and myself to replace the prior CFO who resigned. Mr. Van Epps has more than
40 years of foodservice experience. Mr. Van Epps was previously President, USA, Papa John’s
International, Inc., responsible for the company’s domestic franchise and company restaurant
operations, restaurant development, franchising, marketing, R&D, and quality management.
Prior to joining Papa John’s, Van Epps served for two years as President of the International
Division of Yorkshire Global Restaurants (Long John Silver’s and A&W Restaurants); six years
with AFC Enterprises, including President of its International Division (Churchs, Popeye’s,
Cinnabon and Seattle Coffee Co.) and seven years with PepsiCo International (Pizza Hut). I am
a certified public accountant in the state of Ohio and I have more than 30 years of financial
management experience in industry with both public and private companies. I began my career
in the Dayton, Ohio offices of Deloitte. Until January 2013, I was an independent contractor of
the Debtors through the firm of Clark Schaefer Consulting, who provided my services to the
Debtors on a contract basis. During January, 2013, the Debtors hired me as a full-time employee
and terminated the service agreement with Clark Schaefer.
16. Additionally, as described below, among their First-Day Pleadings, the Debtors
are seeking to retain William H. Henrich and Mark Samson from the advisory firm of Getzler
CINCINNATI/97646.3 7
Henrich & Associates LLC (“Getzler Henrich”) as their Co-Chief Restructuring Officers in the
Cases. Messrs. Henrich and Samson and Getzler Henrich have been working with the Debtors
since December to provide advice and analysis in connection with a restructuring.
17. The Debtors believe that they have the right management team to fix the
businesses, provide necessary leadership to guide them through the Cases, and emerge from the
Cases as stronger entities with a viable long-term future.
The Debtors’ Capital Structure: Long-Term Debt
18. Debtor FOC, as Borrower (the “Borrower”), and U.S. Bank National Association
(“U.S. Bank”), as Lender, are parties to that certain Loan Agreement dated as of April 21, 2010
(as amended from time to time, the “Senior Prepetition Loan Agreement”), pursuant to which
FOC entered into a 3-year revolving credit facility (the “Senior Prepetition Facility”) with the
ability to borrow funds and issue letters of credit in an aggregate amount of up to $3 million.
The loan is evidenced by that certain Revolving Credit Note in the face amount of $3,000,000
dated as of April 21, 2010 (the “Senior Prepetition Note”). The Senior Prepetition Loan
Agreement, the Senior Prepetition Note, and all agreements and documents entered into and/or
executed in connection therewith (including, without limitation, a Guaranty, a Security
Agreement by the Borrower, a Security Agreement by the Guarantors, and a Patent, Trademark
and License Security Agreement), each dated as of April 21, 2010, are referred to herein as the
“Senior Prepetition Loan Documents.”
19. The Borrower’s obligations under the Senior Prepetition Facility (the “Senior
Prepetition Obligations”) are guaranteed by each of the other Debtors (the “Prepetition
Guarantors”) and are secured by first priority senior liens on and security interests in
substantially all of the assets of the Debtors (the “Prepetition Senior Collateral”), subject to
CINCINNATI/97646.3 8
certain exceptions.6 The Pre-Petition Senior Collateral does not include certain specified
equipment (the “Vogen Equipment”) that is the subject of separate financing provided by Vogen
Funding, L.P. (“Vogen”) (an affiliate of CapX Partners) pursuant to that certain Master Lease
Agreement dated as of December 14, 2007 and various subsequent lease supplements
(collectively, the “Vogen Equipment Financing Agreement”).
20. The Debtors and U.S. Bank have amended the Senior Prepetition Loan
Documents from time to time. The Third Amendment to the Senior Prepetition Loan Agreement
(the “Third Amendment”), executed on June 28, 2011, increased the maximum borrowings under
the facility to $6 million and removed many financial covenants, leaving only a fixed charge
coverage ratio and a maximum consolidated total leverage ratio. Pursuant to the Third
Amendment, the maturity date of the Senior Prepetition Facility was also extended to June 28,
2014.
21. Payments on the Senior Prepetition Facility are interest only, due monthly in
arrears, and based on LIBOR plus 2.00% plus the applicable LIBOR margin. As of January 18,
2013, the outstanding principal amount of loans under the Senior Prepetition Facility totaled
approximately $5.9 million. As discussed below, on January 18, 2013 U.S. Bank sold and
assigned all of its rights, title, and interest with respect to the Senior Prepetition Facility (the
“HillStreet Assignment”) to the Debtors’ second lien lender, The HillStreet Fund IV, L.P.
(“HillStreet”), and HillStreet agreed to reduce the principal amount of the Senior Prepetition
Facility.
6 Nothing contained herein is intended to admit, or waive any right to contest, the validity, enforceability, perfectionor other attributes concerning any liens, claims, interests or rights of any party. The Debtors and their estatesreserve the right to contest the validity, enforceability, perfection and any other attributes of any such liens, claims,interests or rights..
CINCINNATI/97646.3 9
22. The Debtors also have outstanding under the Senior Prepetition Facility an
Irrevocable, Unconditional Standby Letter of Credit No. SLCLSTL07512 (the “Letter of Credit”)
which was issued by U.S. Bank in favor of 315 W. North Ave., L.P., one of the Debtors’
landlords, which, to the best of the Debtors’ knowledge, was undrawn as of the Petition Date.
The Letter of Credit was originally issued in the amount of $75,000 (the “L/C Amount”).
According to its terms, the L/C Amount would automatically decrease in increments of $25,000
on each of January 1, 2012, April 1, 2012, and June 30, 2012. On June 28, 2012, two days
before the L/C Amount (which was then in the reduced amount of $25,000 due to prior
automatic reductions) was scheduled to reduce to zero dollars, the Letter of Credit was amended
to provide: (1) the expiration date was extended from June 30, 2012 to June 30, 2013, and (2) the
then available L/C Amount was increased by $20,000 to a new balance of $45,000. The
amendment did not alter the automatic reduction schedule and, thus, on June 30, 2012, the L/C
Amount was automatically reduced to $20,000.
23. Concurrently with entering into the Senior Prepetition Facility with U.S. Bank,
the Borrower entered into a certain Loan and Security Agreement dated as of April 21, 2010 with
HillStreet (the “Junior Prepetition Loan Agreement”), pursuant to which the Borrower obtained a
$5 million seven-year term loan (the “Junior Prepetition Term Loan”) maturing on April 21,
2017. The loan is evidenced by a promissory note in the face amount of $5,000,000 dated as of
April 21, 2010 (the “Junior Prepetition Note”). The Junior Prepetition Loan Agreement, the
Junior Prepetition Note, and all agreements and documents entered into and/or executed in
connection therewith are referred to herein as the “Junior Prepetition Loan Documents.”
24. The Borrower’s obligations under the Junior Prepetition Term Loan (the “Junior
Prepetition Obligations”) are guaranteed by each of the Prepetition Guarantors and are secured
CINCINNATI/97646.3 10
by second priority liens on and security interests in substantially all of the assets of the Debtors
(the “Prepetition Junior Collateral” and together with the Prepetition Senior Collateral, the
“Prepetition Collateral”), subject to certain exceptions. The Pre-Petition Junior Collateral does
not include the Vogen Equipment.
25. The Junior Prepetition Term Loan accrues interest at 16%, of which 12% is
payable monthly, in arrears, and 4% is deferred and payable on the maturity date of the loan. The
principal of the Junior Prepetition Term Loan is payable in full on April 21, 2017. Amendment
No. 1 to the Junior Prepetition Term Loan was executed concurrently with the Third Amendment
to the Senior Prepetition Loan Agreement on June 28, 2011. Amendment No. 1 was issued to
match the new covenants on the Senior Prepetition Facility. The Junior Prepetition Term Loan
was amended two other times, on February 21, 2012 in connection with the Debtors’ entry into
the First Bridge Loan (as defined below) and on August 31, 2012 in connection with the
Debtors’ entry into the Second Bridge Loan (as defined below). The Junior Prepetition Term
Loan is contractually subordinated to the Senior Prepetition Facility. There are various
subordination agreements among the Debtors, U.S. Bank and HillStreet that govern the relative
rights and interests of the parties.
26. The interest rate on the Junior Prepetition Term Loan was amended by a
forbearance agreement entered into in September 2012, which expired on January 15, 2013. An
extra 3% was added to the annual interest rate by this agreement. Also, additional interest of
0.5% per month was added. As of the Petition Date, the outstanding balance of the Junior
Prepetition Term Loan, including principal and accrued interest was approximately $6 million.
27. In order to address cash shortfalls, on February 21, 2012, the Debtors borrowed
$1.36 million on a junior, unsecured basis from a group of lenders (the “First Bridge Lenders”),
CINCINNATI/97646.3 11
pursuant to a Bridge Loan Agreement (the “First Bridge Loan”). The First Bridge Loan was
evidenced by a series of 15.0% promissory notes executed by FOC in favor of the First Bridge
Lenders. The First Bridge Loan was fully drawn. These notes became due and payable upon
demand six months after the date of their execution. The First Bridge Lenders are primarily
investors in Walnut Group.
28. On August 31, 2012, again in order to attempt to stem cash shortfalls, the Debtors
borrowed $1.705 million on a junior, unsecured basis from a group of lenders (the “Second
Bridge Lenders”), pursuant to a Bridge Loan Agreement dated August 31, 2012 and an Amended
and Restated Bridge Loan Agreement dated August 31, 2012 (collectively, the “Second Bridge
Loan” and, together with the First Bridge Loan, the “Bridge Loans”). The Second Bridge Loan
was evidenced by a series of 15.0% promissory notes executed by FOC in favor of the Second
Bridge Lenders. The Second Bridge Loan was fully drawn. The Second Bridge Lenders are
primarily investors in Walnut Group, and there is substantial overlap between the members of
the First Bridge Lenders and the Second Bridge Lenders. These notes are due and payable upon
demand any time after December 31, 2013. As of the Petition Date, the total principal amount of
the Bridge Loans was $3.065 million.
29. The Bridge Loans are contractually subordinated in priority to the Senior
Prepetition Facility and the Junior Prepetition Term Loan.
30. As a result of continuing operating losses, the Debtors have been unable to remain
in compliance with the financial covenants arising under substantially all of their debt
agreements. The Debtors’ are in default of the Senior Prepetition Loan Documents and the
Junior Prepetition Loan Documents. Since fiscal 2011, a total of approximately $10.9 million of
long-term debt was subject to accelerated maturity as a result of covenant defaults. As a result,
CINCINNATI/97646.3 12
the total amount of the long-term debt has been classified as a current liability in the Debtors’
consolidated balance sheets as long-term debt in default since the consolidated balance sheet
dated December 28, 2011. Despite the covenant defaults, the Debtors have continued to make
scheduled payments of interest on the Senior Prepetition Facility. The Debtors stopped making
interest payments on the Junior Prepetition Term Loan on or about July 1, 2012.
31. On January 18, 2013, U.S. Bank sold and assigned all of its right and interest in
the Senior Prepetition Facility and the related loan documents to HillStreet (the “Assignment”).
Also on January 18, 2013, immediately upon closing of the Assignment, HillStreet and FOC
entered into that certain Sixth Amendment to Loan Agreement (the “Sixth Amendment”) by
which, among other things, HillStreet agreed to reduce the maximum principal amount of loans
under the Senior Prepetition Loan Agreement to $1,250,000 and HillStreet committed to extend
additional loans under the Senior Prepetition Facility up to $250,000. Thus, as of the Petition
Date, HillStreet holds all of the secured debt of the Debtors which totaled approximately $6.25
million in principal amount, after the agreed upon principal reduction under the Sixth
Amendment.
The Debtors’ Capital Structure: Equity
32. FOC is a Delaware limited liability company that is privately held by investors
holding common and preferred equity securities in several classes. None of the equity securities
of any of the Debtors is publicly traded.
33. FOC facilitated its merger with Flat Top and provided working capital for growth
with the issuance of Series C Participating Preferred Membership Units (“Preferred Units”).
During Fiscal 2009, FOC issued 385,044 shares of Preferred Units for proceeds of approximately
$3.9 million. The Preferred Units were offered with a 7% distribution rate and additional
CINCINNATI/97646.3 13
warrants. The warrants may be exercised at the earlier of one (1) year from the date of issuance
or ten (10) days prior to an Initial Public Offering at an exercise price of $0.01 per share. As of
the Petition Date, the warrants have not been exercised.
34. Series A Preferred Units were issued to Happy Valley Corporation and Series A
Common Units were issued to the shareholders of Happy Valley Corporation in exchange for
substantially all of the assets and liabilities that became FOC. In 2010, certain Happy Valley
Corporation shareholders exchanged their interest in Happy Valley Corporation for a direct
interest in FOC by exchanging stock in Happy Valley Corporation for 302,214 shares of Series A
Preferred Units and 302,214 shares of Series A Common Units, held by Happy Valley
Corporation. As of the Petition Date, 801,166 Series A Preferred Units and 801,166 Series A
Common Units were issued and outstanding, respectively. The Series A Common Units do not
have a par value.
35. Series B Preferred Units and Series B Common Units were issued to Stir Crazy
Partners, LLC in exchange for a 100% interest in Stir Crazy Restaurants, LLC. As of the Petition
Date, 1,599,239 Series B Preferred Units and 1,599,239 Series B Common Units were issued and
outstanding, respectively. The Series B Common Units do not have a par value.
36. Common Units entitle the holder to vote equal to its Percentage Interest held.
Series A and B Common Units have an Interest in Profits only, whereas the Series C Common
Units have an interest in Capital and Profits. The Common Units do not have a stated value. As
of the Petition Date, there were 2,400,405 Common Units outstanding, excluding Series C
common warrants.
37. Additionally, in connection with the Junior Prepetition Term Loan, FOC issued
293,000 Series D Preferred Unit detachable warrants to HillStreet. The warrants entitle
CINCINNATI/97646.3 14
HillStreet to purchase Series D Preferred Units equal to 5% of FOC at an exercise price of
$0.0001 per unit. The warrants have a ten-year expiration. The warrants are exercisable at any
time during the ten year period. The warrants have a put option in year 7, or upon sale or merger
that entitle HillStreet to redeem the warrants for cash for an amount as defined in the Junior
Prepetition Loan Documents.
Trade Debt
38. The Debtors’ trade debt consists of, among other things, amounts owed to
maintenance vendors who repair and maintain HVAC, grease traps, range hoods, and
refrigeration units in the Restaurants, food suppliers, utilities, and suppliers of uniforms, plates,
silverware, napkins and other nonperishables used in the Debtors’ Restaurants. The majority of
the Debtors’ vendors are paid on negotiated terms, which have historically ranged from 30 to 60
days from the date of delivery. Currently, many of the Debtors’ vendors have stated terms of 30
days or less or COD, but the Debtors have stretched many vendors well-beyond 30 days because
of their cash situation. As of the Petition Date, the Debtors estimate that approximately $5
million is outstanding to their vendors, much of which relates to goods and services provided to
the Debtors in the 20 days prior to the Petition Date.
Lease Obligations
39. All of the Restaurants are located on leased properties. The Debtors estimate that
they will have spent approximately $6.0 million on real property lease expenses during the 2012
fiscal year and that as of the Petition Date, their aggregate total outstanding real property lease
obligations are nearly $1.5 million. The Debtors are in default under many of their leases due to
late or non-payment and certain landlords have commenced remedial action to enforce the leases.
CINCINNATI/97646.3 15
None of these landlord actions has resulted in the termination of leases under which the Debtors
are operating Restaurants as of the Petition Date.
40. In the ordinary course of business, the Debtors also finance the majority of the
equipment in their Restaurants in accordance with the terms of the Vogen Equipment Financing
Agreement with Vogen. As of the Petition Date, the aggregate total amount outstanding under
the Vogen Equipment Financing Agreement was approximately $3.9 million. The Debtors have
undertaken an analysis of the Vogen Equipment Financing Agreement and have reached a
preliminary conclusion that the obligations are in the nature of a secured financing and not in the
nature of a true lease. The Debtors reserve their rights with respect to this issue.
Restructuring Efforts and Events Leading to Bankruptcy
41. In the weeks and months leading up to the Petition Date, due to poor operating
results and to improve cash flow, the Debtors closed 7 Stir Crazy locations and 3 Flat Top
locations.7 As of the Petition Date, the Debtors operated 27 total Restaurants.
42. Most of the Flat Top restaurants are located in and around Chicago, with several
located elsewhere in Illinois, Indiana, Michigan, and Wisconsin. In the weeks leading up to the
Petition Date, the Debtors closed 3 Flat Top restaurants located in Alabama, Michigan, and
Wisconsin due to poor operating results.
43. Stir Crazy restaurants are located in Florida, Illinois, Michigan, Missouri, New
York, Ohio, and Wisconsin. In the weeks leading up to the Petition Date, the Debtors closed 3
Stir Crazy sites located in Illinois and Indiana due to poor operating results. During 2012, the
Debtors closed 4 other Stir Crazy restaurants located in Georgia, Minnesota, and Texas.
7 The 7 closed Stir Crazy restaurants were located in Atlanta, Georgia; Greenwood, Indiana; Indianapolis, Indiana;Warrenville, Illinois; Bloomington, Minnesota; The Woodlands, Texas; and Southlake, Texas. The 3 closed FlatTop restaurants were located in Birmingham, Alabama; Rochester Hills, Michigan; and Wauwatosa, Wisconsin.
CINCINNATI/97646.3 16
44. Throughout 2012, the Debtors engaged in various efforts to restructure their
operations and debt, as well as pursue a variety of sale and financing transactions. In that regard,
the Debtors hired various brokers and investment bankers to pursue these transactions. None of
these efforts resulted in a transaction. Among the investment bankers retained by the Debtors in
2012 was J.H. Chapman Group, LLC (“Chapman”), a Chicago based investment banking firm.
Chapman has substantial restaurant and foodservice expertise and has made substantial efforts to
identify a potential buyer for the Flat Top restaurant business. As described in greater detail
below, the Debtors intend to seek approval of the Bankruptcy Court to conduct a sale process
and auction for the Flat Top restaurant business and related assets.
45. In the fourth quarter of 2012, the Debtors hired Squire Sanders (US) LLP as their
restructuring attorneys and Getzler Henrich as their financial advisors. As described in greater
detail below, both firms are highly-qualified advisors of distressed entities, who possess
restructuring skills and experience that is appropriate and needed during the Cases. Since early
December 2012, the Debtors attorneys and financial advisors have been generally advising the
Debtors in connection with their distressed situation; negotiating with lenders, other creditors
and parties in interest; developing budgets and financial projections necessary to obtain
additional financing; preparing the filings necessary to commence the Cases; and performing
other tasks at the Debtors’ request.
46. The Debtors are facing a severe liquidity shortfall and were not able to obtain
debtor in possession financing on reasonable terms prior the Petition Date. The inability of the
Debtors to obtain DIP financing prior to the Petition Date is due in large part to the actions of
HillStreet. As described above, HillStreet is the holder of the first and second lien debt to the
Debtors. HillStreet, who provided second lien financing to the Debtors in April, 2010, acquired
CINCINNATI/97646.3 17
the first lien debt from U.S. Bank pursuant to the HillStreet Assignment on January 18, 2013 and
immediately entered into a loan amendment under which the principal amount of the first lien
debt was reduced from approximately $6 million to $1.25 million.
47. In connection with the Debtors’ acknowledgment of the HillStreet Assignment,
which was required by U.S. Bank as a condition to closing, HillStreet provided specific oral
assurances to the Debtors on January 17, 2013 that it would agree (1) to write down the principal
amount of the first lien debt to $1.25 million, (2) to advance an additional $250,000 to the
Debtors pre-petition and (3) to provide adequate debtor in possession financing for a consensual
chapter 11 filing on certain terms specifically discussed by the parties. On the basis of such
assurances, the Debtors ceased their efforts to seek alternative financing and focused all of their
attention and resources on documenting debtor in possession financing with HillStreet.
48. Unfortunately, while HillStreet agreed to write down the first lien debt and fund
the additional pre-petition loan, HillStreet failed to live up to its assurances on providing debtor
in possession financing on the agreed terms. For example, after committing to provide $1.75
million in financing ($250,000 pre-petition and $1.5 million in debtor in possession financing),
HillStreet reneged and demanded a loan amount reduction of $600,000. Similarly, after
committing to provide financing both before and after the completion of a section 363 sale
process, HillStreet reneged and refused to provide any financing post-sale.
49. Despite herculean efforts over the course of the last week by the Debtors to
overcome numerous new and unreasonable conditions to financing imposed by HillStreet, the
Debtors have not been able to reach an agreement with HillStreet on reasonable terms that would
allow the Debtors to operate in chapter 11 and pursue its reorganization. The timing of
CINCINNATI/97646.3 18
HillStreet’s actions8, coupled with the severe liquidity crisis facing the Debtors, has necessitated
that the Debtors commence these Cases without debtor in possession financing. However, the
Debtors are able to operate for the initial five week period of the Cases on use of cash collateral
and without new financing.
50. The Debtors require relief in the form of a “breathing spell” from their obligations
to creditors and an opportunity to reorganize. Accordingly, the Debtors filed the Cases on the
Petition Date in an attempt to achieve such relief. Another reason for filing the Cases was to
facilitate the sale of certain assets to potential purchasers whom the Debtors expect will require
the protections of the Bankruptcy Code in order to enter into transactions with the Debtors.
Additionally, the Debtors view the Cases as an opportunity to achieve a capital structure that will
be more easily supported by the Debtors’ now-smaller enterprise. These are the primary reasons
that the Debtors commenced the Cases.
FACTS IN SUPPORT OF FIRST-DAY PLEADINGS
51. Concurrently with the filing of the Petitions initiating the Case, the Debtors also
filed a number of First-Day Pleadings. The Debtors anticipate that the Bankruptcy Court will
conduct a hearing soon after the commencement of the Case (the “First-Day Hearing”) at which
the Court will hear and consider the First-Day Pleadings. The Debtor also anticipates that the
Bankruptcy Court may consider the remainder of the First-Day Pleadings at a later time. Those
8 Until mid-December 2012, HillStreet continually had a designated director on the board of Debtor Flat Out Crazy,LLC and, thus, has had intimate knowledge of and involvement with virtually all the Debtors’ restructuring efforts.The HillStreet Director resigned on or about December 17, 2012. Subsequently, on January 12, 2013, HillStreetdesignated its principal, Christian Meininger, as the replacement HillStreet Director. Mr. Meininger was theprimary HillStreet representative negotiating with the Debtors concerning providing debtor in possession financing.While he was a director, Mr. Meininger specifically provided the assurances of HillStreet that are described above ata meeting on January 17, 2013 and on which the Debtors relied. Later on January 17, 2013, Mr. Meininger resignedfrom the Board presumably because of the conflict represented by HillStreet’s agreement to provide debtor inpossession financing.
CINCINNATI/97646.3 19
First-Day Pleadings that the Debtor anticipates will be heard at the First-Day Hearing are
described below.9
52. The relief sought in the First-Day Pleadings is intended to: (a) allow the Debtors
to minimize disruption to its business to the extent necessary and appropriate to maximize the
value of the Debtors’ estates and (b) minimize potential adverse consequences that might
otherwise result from the commencement of the Case. More specifically, the First-Day
Pleadings seek relief allowing the Debtors to (i) obtain post-petition financing; (ii) facilitate a
possible sale of the Flat Top restaurants to an outside party; (iii) rebuild the trust of vendors,
landlords and other creditors in order to allow the Debtors to operate their businesses with as
little interruption as possible; and (iv) begin certain procedures that will provide for the efficient
administration of the Cases.
53. I have reviewed each of the First-Day Pleadings, including the exhibits thereto,
and I believe that the relief sought in each of the First-Day Pleadings is tailored to meet the goals
described above and, ultimately, will be integral to the Debtors’ collective ability to preserve and
maximize the value of their estates.
54. I also believe that it is critical for the First-Day Pleadings to be heard as soon as
possible. If the First-Day Pleadings are not heard on an expedited basis, the Debtors may be
unable to fulfill their obligations to its creditors, regulators, the Non-Debtor Subsidiaries, and
other constituents. Under such circumstances, I believe that the Debtor will not be able to
operate. Such a stoppage could negatively impact the Debtor and the Non-Debtor Subsidiaries,
specifically including the Bank, which could create widespread injury to the Debtor’s estate, its
creditors and the Non-Debtor Subsidiaries. Accordingly, the expedited review of the First-Day
9 Capitalized terms used in the descriptions of the First-Day Pleadings and not otherwise defined herein have themeanings given in the applicable First-Day Pleadings.
CINCINNATI/97646.3 20
Pleadings is important to the continuing viability of the Debtor and the Non-Debtor Subsidiaries
and therefore I believe it to be in the best interests of all interested parties.
55. Several of the First-Day Pleadings request authority to pay certain prepetition
claims of the Debtors. Rule 6003 of the Federal Rules of Bankruptcy Procedure (the
“Bankruptcy Rules”) provides that, “[e]xcept to the extent that relief is necessary to avoid
immediate and irreparable harm, the court shall not, within 21 days after filing of the petition,
issue an order…” authorizing the payment of prepetition claims. In respect of this rule, the
Debtors have narrowly-tailored all First-Day Pleadings so that they are only seeking to pay
prepetition claims in instances where the failure to pay such claims would result in immediate
and irreparable harm.
Use of Cash Collateral and Case Administration Motions
a. Use of Cash Collateral
56. The Debtors filed a motion seeking authority to use cash collateral under
section 363(b) of the Bankruptcy Code (the “Cash Collateral Motion”) for a period of five weeks
through the week ending March 3, 2013 (the “Interim Period”). Absent granting the Debtors use
of cash collateral on the terms provided herein, the Debtors are unable to operate their businesses
and likely have no other reasonable alternative but to liquidate. It is beyond dispute that the best
way to maximize the value of the Debtors’ estates for the benefit of all stakeholders is to
continue to operate their restaurants on a “business as usual” basis. If the Debtors are not
permitted to continue to operate in chapter 11, there would be a resulting loss of employment for
the Debtors’ approximately 1,200 employees and the likely inability to provide any meaningful
recovery to their creditors.10
10 The Debtors’ assets consist principally of equipment (most of which is leased), real estate leases, food and otherinventory. If the Debtors are forced to liquidate, the value of their assets is estimated to be less than $750,000.
CINCINNATI/97646.3 21
57. Based on the Debtors’ cash collateral budget (a copy of which is attached to the
Debtors’ Cash Collateral Motion), the Debtors will have sufficient cash available from ordinary
operations to conduct their business and pay their operating expenses for five weeks. During this
period the Debtors have a reasonable expectation of signing an asset purchase agreement with a
stalking horse bidder to acquire the Flat Top Grill restaurant assets11 and obtaining debtor in
possession financing in an amount and on terms sufficient to complete a section 363 auction
process, subject to the approval of the Court, and a reorganization of the remaining business.
Pursuing this plan will maximize the value of the Debtors’ estates.
58. As stated above, the Debtors were unable to obtain debtor in possession financing
prior to the Petition Date due the actions of HillStreet, who after agreeing to provide such
financing reneged on such agreement just days before the intended commencement of the Cases.
The Debtors’ cash collateral budget demonstrates their ability to operate without any financing
during the first five weeks of the Cases. During this period, the Debtors expect that they will
have generated cash receipts totaling approximately $5.0 million and will pay expenses in the
amount of approximately $5.0 million. Additional details of the cash budget are contained in the
Cash Collateral Motion.
59. Ample cause exists to authorize the Debtors to use cash collateral in accordance
with their cash collateral budget and on the terms requested herein. The Debtors will provide
adequate protection to HillStreet by granting HillStreet replacement liens on all of the Debtors’
11 On January 19, 2013, the Debtors signed a non-binding letter of intent with a potential buyer for the Flat Top Grillrestaurant assets for a purchase price that exceeds the amount of the Debtor’s secured obligations to HillStreet. Thebuyer is fully engaged in conducting due diligence and the parties expect to begin negotiating the terms of an assetpurchase agreement shortly with the expectation that an agreement can be reached within a few weeks. Theagreement would provide for the buyer to serve as a stalking horse in a customary, albeit expedited, section 363 saleprocess. The Debtors intend to file a motion for authority to conduct such a sale process on or about January 31,2013 and intend to establish a timeline for sale procedures that will accommodate the anticipated timing by whichthe Debtors hope to execute an agreement with the buyer to serve as a stalking horse, subject to the approval of theCourt.
CINCINNATI/97646.3 22
property against which HillStreet has a valid, perfected, enforceable lien and security interest as
of the Petition Date. Moreover, the Debtors do not expect the value of their assets or the
business to decline in value during the period in which the Debtors are authorized to use cash
collateral. The Debtors submit that HillStreet will not be prejudiced by the relief requested
herein. To the contrary, as the Debtors’ senior secured creditor, HillStreet will benefit the most
from the Debtors’ efforts to maintain and enhance the value of their assets. This is even more so
once the Debtors are able to reach an agreement on an asset purchase agreement for the sale of
the Flat Top Grill assets.
60. In sum, the Debtors believe that, with the opportunity to continue their business
operating normally in chapter 11, they will be able to obtain adequate financing to complete a
section 363 auction process and a reorganization of the remaining business. Without this
opportunity, which hinges on the Court’s authorization to use cash collateral, the Debtors will be
unable to maximize the value of their assets and provide recoveries to their stakeholders.
b. Expedited Hearings on the First-Day Pleadings
61. Given the importance of the relief sought in the First-Day Pleadings to the
Debtors’ ability to preserve the value of their estates as they seek to reorganize, the Debtors have
filed a motion seeking entry of an order scheduling an expedited hearing on the First-Day
Pleadings.
c. Joint Administration
62. There are fifteen affiliated Debtors in the Cases. To ease the administrative
burden on the Debtors and their professionals and to prevent unnecessary duplication of work
related to matters that apply to the Debtors collectively, the Debtors have requested that the
Bankruptcy Court enter an order authorizing and directing (a) the consolidation and joint
administration of the Cases for procedural purposes only pursuant to Bankruptcy Rule 1015(b);
CINCINNATI/97646.3 23
(b) the use of single case docket and Bankruptcy Rule 2002 notice list in the Cases; (c) the use of
a consolidated case caption; and (d) that the Debtors be allowed to file Monthly Operating
Reports on a consolidated basis. I believe that joint administration will greatly benefit the
Debtors, the Bankruptcy Court, the Office of the Clerk, the U.S. Trustee and all other interested
parties in the Cases. Joint administration will simplify all aspects of the administration of the
Cases and result in substantial cost savings to the Debtors and other parties in interest.
d. Continuance of Gift Card Program
63. Prior to the Petition Date, the Debtors sold, in the ordinary course of business,
pre-paid gift cards (the “Gift Cards”) for use at any of the Restaurants. The Gift Cards are an
important tool used by the Debtors to generate revenue and build customer loyalty. When
customers purchased the Gift Cards, they had every expectation that the Gift Cards would be
redeemable. Customers typically redeem approximately $10,000 worth of Gift Cards each week.
To avoid alienating existing customers and irreparably damaging the Debtors’ reputation in the
competitive restaurant market, it is essential that the Debtors be authorized to continue to honor
Gift Cards, including those sold before the Petition Date, without interruption. Accordingly, the
Debtors have filed a motion seeking authority to continue their Gift Card program in the ordinary
course of business.
e. Wages and Benefits
64. In aggregate, the Debtors employed approximately 1,200 people as of the end of
their last payroll period on January 16, 2013 (the “Employees”), all of whom are non-union
employees. The Employees assist in critical aspects of running the business. At the Debtors’
restaurants, the Employees include chefs and other food preparers, servers, bartenders, hosts and
hostesses, dishwashers and store managers. The Employees also include area managers and
executives and staff located at the Debtors’ corporate headquarters in Chicago. The Employees’
CINCINNATI/97646.3 24
knowledge, expertise, and experience are essential to maintaining the Debtors’ businesses as a
going concern during these Cases.
65. Employees are the lifeblood of any restaurant business and the Debtors’
Employees in the field perform a variety of critical tasks, including preparing and serving food,
interacting with customers, ordering food and supplies, cleaning dishes and the restaurant
premises, supervising other employees and other tasks. In addition, the Debtors employ a
headquarters staff of approximately 14 persons who provide corporate functions such as
accounting and finance, marketing, human resources and other tasks. The Employees’ skills and
their knowledge and understanding of the Debtors’ operations are essential to the effective
operation and restructuring of the Debtors’ businesses. Without the continued services of the
Employees, an effective restructuring of the Debtors will not be possible.
66. The Debtors have filed a motion seeking authority, on an expedited basis, to pay
certain prepetition wages, benefits, reimbursement amounts, payroll taxes, and related costs and
to transfer certain amounts related to the same (the “Wage and Benefit Motion”). If prepetition
wage, compensation, benefit and reimbursement amounts are not received by the Employees in
the ordinary course, they will suffer extreme personal hardship and in many cases will be unable
to pay their basic living expenses. Such a result obviously would destroy Employee morale and
result in unmanageable Employee turnover, causing immediate and pervasive damage to the
Debtors’ ongoing business operations. Any significant deterioration in Employee morale at this
time will substantially and adversely affect the Debtors and their ability to reorganize, thereby
resulting in immediate and irreparable harm to the Debtors and their estates.
67. Accordingly, by the Wage and Benefit Motion, the Debtors are seeking an order
authorizing them, in their sole discretion, to pay (a) prepetition employee wages, salaries,
CINCINNATI/97646.3 25
overtime, vacation pay, incentive compensation, and related items (the “Prepetition Employee
Compensation”); (b) prepetition reimbursable business expenses incurred by employees;
(c) prepetition employee payroll deductions and withholdings; (d) prepetition payroll taxes;
(e) prepetition contributions to, and benefits under, employee benefit plans (the “Employee
Benefits”); (f) all costs and expenses incident to the foregoing; and (g) granting certain related
relief. This relief is essential to maintain employee morale and productivity, thereby preventing
unnecessary and harmful disruption in the operation of the Debtors’ business as they endeavor to
pursue successful reorganization in chapter 11.
68. With one exception, the Debtors do not believe that the amount of Prepetition
Employee Compensation plus Employee Benefits to be paid to or on account of any particular
Employee will exceed the sum of $11,725 allowable as a priority claim under sections 507(a)(4)
or 507(a)(5) of the Bankruptcy Code.12
69. Prior to the Petition Date, in the ordinary course of business, the Debtors’
reimbursed the Employees for certain expenses incurred within the scope of their employment
and on behalf of the Debtors, including auto mileage, travel, lodging, meals or other necessary
and appropriate expenses (the “Prepetition Reimbursable Expenses”). Most of the Prepetition
Reimbursable Expenses are incurred by employees on corporate credit cards issued by American
Express. While the Debtors normally pay any Prepetition Reimbursable Expenses incurred on
the corporate cards directly to American Express, unpaid balances will result in personal liability
for the individual Employees. Because the Debtors filed the Petitions in the middle of an
American Express billing cycle, certain of the Employees have not yet been reimbursed for
12 As discussed in greater detail in the Wage and Benefit Motion, the Debtors have identified one non-executivemanagement employee who is owed compensation plus benefits of approximately $20,800, which exceeds theallowed priority claim amount of $11,725 imposed under section 507(a). In connection with the other relief soughtin the Wage and Benefit Motion, the Debtors are seeking authority to pay this employee the full prepetition amountthat he is owed.
CINCINNATI/97646.3 26
Prepetition Reimbursable Expenses previously advanced on behalf of the Debtors and no
American Express balances have been paid by the Debtors for the most recent monthly billing
cycle. These expenses were incurred by the Employees in the performance of their duties and
should be reimbursed to them. The Debtors pay, on average, approximately $80,000 in respect
of Prepetition Reimbursable Expenses per month.
70. The Debtors estimate that the amount of untransferred prepetition employee
obligations including Prepetition Employee Compensation (i.e., the gross payroll amount before
deducting withholdings) as of the Petition Date is approximately $425,000. The Debtors seek
authority to pay and transfer this full amount.
71. The Debtors also seek to pay in the ordinary course any outstanding prepetition
amounts that are owed to their payroll processor, Automatic Data Processing, Inc. (“ADP”) in
order to avoid any disruption to the critical payroll function. As of the Petition Date, ADP was
owed less than $3,000 on account of prepetition services.
72. I believe that if the Bankruptcy Court does not approve on an expedited basis any
of the relief sought by the Debtors in connection with the Wage and Benefit Motion, the
Debtors’ and their estates will suffer immediate and irreparable harm.
f. Cash Management System
73. The Debtors have established a series of bank accounts comprising an integrated
and centralized cash management system (the “Cash Management System”) through which the
Debtors’ funds are collected, managed, and disbursed in the ordinary course of business. I
believe that continuance of the Cash Management System without interruption is essential to the
Debtors’ efforts to reorganize in the Cases. Accordingly, the Debtors have filed a motion
seeking authority, on an expedited basis, to continue utilizing the Cash Management System in
the ordinary course of business and seeking related relief (the “Cash Management Motion”).
CINCINNATI/97646.3 27
74. The Cash Management System utilizes fifteen bank accounts (the “Bank
Accounts”), twelve of which are with U.S. Bank, the Debtors’ former13 senior secured lender
(the “U.S. Bank Accounts”). Where U.S. Bank does not maintain branches in close proximity to
the Debtors’ restaurant locations, the Debtors established accounts at other banks. Two such
accounts were established with JPMorgan Chase and one with Bank of America.
75. The cornerstone of the Cash Management System is the Debtors’ concentration
account at U.S. Bank (the “Concentration Account”), through which all of the Debtors’
collective funds flow. Virtually all deposits that are made into the Cash Management System are
daily deposits of cash and credit card revenue generated from each of the Debtors’ various
restaurant locations. Most of a Restaurant’s cash deposits are held in the Restaurant’s safe until
picked up by armored car service, typically weekly. Cash is deposited into the Concentration
Account the day following armored car pick up. Other cash deposits are made into the
JPMorgan and BofA Accounts and then transferred (usually on a weekly basis) by ACH into the
Concentration Account.
76. The Debtors’ credit card revenue deposits are made separately from the cash
deposits into three separate deposit accounts at U.S. Bank. Each of these accounts is a zero
balance account which funds are swept daily into the Concentration Account.
77. Although the Debtors are separate legal entities, their businesses and affairs have
historically been operated and managed as a single business operation through FOC.14 Indeed,
while profit and loss statements are able to be generated for individual store locations, the
Debtors keep a single set of books and records for the business operation as a whole. As such,
13 As indicated above, prior to the Petition Date, U.S. Bank’s note pursuant to the Senior Prepetition Facility wasacquired by HillStreet on January 18, 2013.
14 The Debtors reserve all rights with respect to the potential substantive consolidation of the Debtors’ estates, andnothing herein is intended to be an admission or waiver of any rights or arguments with respect to the same.
CINCINNATI/97646.3 28
the funds received from each restaurant location are deposited into the Concentration Account
without accounting for the particular Debtor entity that generated the funds and without
recording intercompany credits and balances. In the same vein, the Debtors do not record
intercompany loans or transfers.
78. Similarly, most disbursements and expense payments are made by FOC from the
Concentration Account without regard to the particular restaurant for which an expense was
incurred. Such disbursements include loan and lease payments, payroll wires to Automatic Data
Processing (“ADP”) (the Debtors’ third party payroll provider), and various ACH transfers
(including for 401(k) payments and various tax payments).
79. In the ordinary course of its business, the Debtors use certain checks and other
business forms. The alteration of the Debtors’ checks and business forms would be unnecessary
and unduly burdensome. To avoid disruption of the Cash Management System and unnecessary
expense, the Debtors also request that they not be required to include the legend “D.I.P.” and the
corresponding bankruptcy case number on any business forms or checks. Otherwise, the estates
will be required to bear an expense, which the Debtors respectfully submit is unwarranted.
80. I believe that, under the circumstances, the maintenance of the Cash Management
System in substantially the same form as it existed prior to the Petition Date is in the best
interests of the Debtors’ estates and their creditors.
g. Extension of Time to File Statements and Schedules
81. The Debtors were compelled to file these Cases under exigent circumstances and
while under significant liquidity constraints. Leading up to the commencement of the Cases, the
Debtors’ first priority was to ensure a smooth transition into chapter 11 with minimal disruption
to their business operations. To this end, the Debtors dedicated their limited staff and resources
to negotiating with lenders, evaluating restructuring alternatives, developing strategies to
CINCINNATI/97646.3 29
maximize value and successfully reorganize its business, and assisting with the preparation of
critical first day motions.
82. Additionally, the Debtors’ operations are complex, encompassing fifteen separate
legal entities. Completing the Schedules and Statements for each Debtor will require the
collection, review and assembly of information from books, records, and documents relating to
myriad claims, assets, and contracts. This information is voluminous and located in numerous
locations. Although the Debtors have sufficient staff on hand to maintain their ordinary business
operations under normal circumstances, they are understaffed for purposes of having their
officers and management divert their attention and efforts away from ordinary business
operations and transitioning into chapter 11 with minimal disruption to focus on compiling their
respective schedules of assets and liabilities and statements of financial affairs (the “Schedules
and Statements”).
83. The Debtors will endeavor to complete the Schedules and Statements as
expeditiously as possible under the circumstances. However, they anticipate that they will not be
able to do so within 14 days of the Petition Date, as required under the Bankruptcy Code.
Accordingly, the Debtors filed a motion asking that they be granted an additional 30 days to do
so (for a total of 44 days from the Petition Date), while reserving their rights to request further
extensions if necessary or appropriate under the circumstances. I believe that the size, scope and
complexity of the Cases and the volume of material that must be compiled and reviewed by the
Debtors’ limited staff to complete the Schedules and Statements for each of the Debtors during
the hectic early days of these Cases provide ample “cause” justifying the requested extension.
CINCINNATI/97646.3 30
Vendor Matters
h. PACA Claims
84. The Debtors use a significant amount of fresh produce in the operation of the
Restaurants. The Debtors have examined their vendor records and determined that a certain
portion of the goods the Debtors purchased before the Petition Date, but had not yet paid for may
qualify as “perishable agricultural commodity[ies]” under the Perishable Agricultural
Commodities Act of 1930 (“PACA”). PACA provides various protections to fresh fruit and
vegetable sellers, including establishing a statutory constructive trust consisting of a buyer’s
entire inventory of food or other derivatives of perishable agricultural commodities, the products
derived therefrom and the proceeds related to any sale of the commodities or products. It is my
understanding that any such funds related to a trust created pursuant to PACA are preserved as a
non-segregated floating trust (the “PACA Trust”) that may be commingled with non-trust assets
and that such funds are not property of the Debtors’ estates.
85. The Debtors have identified at least 20 potential parties (the “PACA Claimants”),
who have provided the Debtors with written notice of their intent to preserve the benefits of the
PACA Trust. These PACA Claimants were owed approximately $395,000 in pre-petition claims
potentially subject to PACA (the “PACA Claims”) on account of produce delivered to the
Debtors prior to the Petition Date. As a result, the Debtors believe that certain vendors are likely
to file notices under PACA based on the filing of these Cases.
86. Accordingly, the Debtors have filed a motion (the “PACA Motion”) seeking
authority to: (a) establish procedures for the reconciliation and disposition of PACA Claims and
(b) satisfy valid PACA claims, recognizing that, absent such relief, such claims would be
satisfied in any event through a more costly and contentious process. Because the funds held
pursuant to PACA are not property of the Debtors’ estate until suppliers of goods covered by
CINCINNATI/97646.3 31
PACA are paid, payments to the PACA Claimants in respect of the PACA Claims will not
reduce estate assets. I believe that the relief sought in the PACA Motion is necessary to the
Debtors’ efforts to operate their businesses in chapter 11, and that payments made on account of
valid PACA Claims will benefit the Debtors and all parties in interest in the Cases by
(i) allowing the Debtors to continue purchasing and receiving fresh produce and other products
for use in the Restaurants; and (ii) avoiding potential disruption to the Debtors’ business
operations.
i. Adequate Assurance of Utility Payments
87. In the normal course of their business, the Debtors use electricity, gas, water,
sewer, telephone and other utility services for which they pay directly and which is provided by
approximately 50 utility companies. Continued and uninterrupted utility service is essential to
the Debtors’ ability to sustain their food service operations during these Cases, and any
interruption of utility service would severely disrupt the Debtors’ business operations and their
restructuring efforts, and jeopardize the Debtors’ ability to preserve the value of the estates.
88. I believe that the Debtors’ ability to preserve the value of the estates will be
irreparably damaged if the utility companies currently providing services, or that will provide
services during the Cases (collectively, the “Utility Companies”) do not continue to provide
these services.
89. Historically the Debtors have made prompt and complete payments with respect
to the Utility Companies before the Petition Date. Several Utility Companies are holding pre-
petition security deposits.
90. Even though some outstanding arrearages may exist with respect to some of the
Utility Companies, I have been advised that any Utility Company seeking a security deposit (or
an additional security deposit) or seeking to terminate services would be doing so as an
CINCINNATI/97646.3 32
automatic reaction to a filing for relief under the Bankruptcy Code. The Debtors have and will
continue to have sufficient funds to make timely payments to the Utility Companies for all post-
petition utility service.
91. Additionally, in order to avoid the irreparable harm to the Debtors’ estates that
would result from Utility Companies discontinuing their services, the Debtors have filed a
motion (the “Utility Motion”) seeking immediate entry of an interim order: (a) prohibiting Utility
Companies from altering, refusing, or discontinuing services to the Debtors on account of the
filing of the Cases, any pre-petition amounts outstanding, or on account of any perceived
inadequacy of the Debtors’ proposed adequate assurance, pending entry of the final order (the
“Final Order”) granting the relief sought in the Utility Motion on a final basis; (b) determining
that the Utility Companies have received adequate assurance of payment for future utility
services on the terms provided in the Utility Motion, under which Utility Companies may request
additional or different adequate assurance; (c) establishing procedures for Utility Companies that
seek to opt out of the Debtors’ proposed adequate assurance procedures; (d) determining that the
Debtors are not required to provide any additional adequate assurance, beyond what is proposed
in the Utility Motion, pending entry of the Final Order; and (e) setting a final hearing regarding
the Utility Motion for the entry of the Final Order.
j. Trust Fund and Other Taxes
92. In the ordinary course of operating their businesses, the Debtors collect and/or
incur income taxes, sales taxes, use taxes, franchise taxes and fees, personal property taxes and
other taxes, assessments, fees and similar charges (collectively, the “Taxes and Fees”). The
Debtors remit the Taxes and Fees to various federal, state and local taxing, licensing and other
governmental authorities (collectively, the “Authorities”). The Debtors pay the Taxes and Fees
CINCINNATI/97646.3 33
weekly, monthly, quarterly, annually or biennially to the respective Authorities, in accordance
with any applicable laws and regulations.
93. The Debtors believe that many of the Taxes and Fees collected prepetition are not
property of the Debtors’ estates as they constitute “trust fund” taxes, and must for that reason be
turned over to the Authorities. The failure to pay the Taxes and Fees could also result in
Authorities bringing personal liability actions against directors, officers and other employees or
taking actions that might interfere with the Debtors’ successful reorganization. Any such actions
would certainly distract key personnel from the Debtors’ reorganization efforts at a critical time in
the process and negatively impact these Cases. In any event, even if certain Taxes and Fees are
not actually the property of the Authorities, they may give rise to priority claims.
94. Accordingly, the Debtors have filed a motion for entry of an order authorizing,
but not directing, them to pay certain Taxes and Fees to the Authorities, and authorizing, but not
directing, financial institutions to receive, process, honor, and pay all related checks and
electronic payment requests, to the extent the Debtors have sufficient funds with such financial
institutions.
k. Lease Rejection Motion
95. In an effort to improve profitability and maximize the value of their estates, the
Debtors have undertaken an extensive analysis of their businesses and closed a number of
Restaurants prior to the Petition Date. Accordingly, the Debtors have filed a motion (the “Lease
Rejection Motion”) seeking authority to reject certain of their unexpired real property leases,
effective as of the Petition Date.
96. Using their business judgment, and upon careful evaluation of all of their
Restaurants, the Debtors have determined that none of the leases identified in the Lease
Rejection Motion are necessary or valuable to the Debtors’ estates. I am advised that each of the
CINCINNATI/97646.3 34
leases identified in the Lease Rejection Motion is an “unexpired lease” within the meaning of
section 365 of the Bankruptcy Code, capable of being rejected by the Debtors. However, to the
extent that any of these leases already has expired or been terminated, it is included in the Lease
Rejection Motion out of an abundance of caution and the Debtors reserve all of their rights to
object to any rejection damage claims related to such lease on any grounds, including but not
limited to a party’s failure to mitigate damages.
Motions and Applications Relating to Professionals
l. Appointment of Kurtzman Carson Consultants, LLC as Claims, Noticing andAdministrative Agent
97. The Debtors recognize that the large number of creditors and other parties in
interest involved in their chapter 11 cases may impose heavy administrative and other burdens
upon the Court and the Clerk’s Office. To relieve the Court and the Clerk’s Office of these
burdens, and in accordance with the Local Bankruptcy Rules, the Debtors will seek the entry of
separate orders appointing KCC as (a) the Debtors’ claims and noticing agent in the Cases and
(b) the Debtors’ administrative agent in these Cases. KCC may, among other things: (a) prepare
and serve all notices required in the Cases, including notice of the commencement of the Cases
and the initial meeting of creditors under section 341 of the Bankruptcy Code; (b) receive all
claims and maintain the official claims register; (c) assist in preparing, filing, and maintaining
the Debtors’ official Schedules and Statements; (d) assist with the mailing and tabulation of
ballots in connection with any vote to accept or reject any plan or plans proposed in the Cases.
The Debtors obtained and reviewed engagement proposals from three court approved notice and
claims agents, and selected KCC based on their capability and experience and the cost of their
proposal, and have otherwise complied with the Bankruptcy Court’s Protocol for the
Employment of Claims and Noticing Agents under 28 U.S.C. § 156(c). I believe that the
CINCINNATI/97646.3 35
appointment of KCC to perform the functions above will facilitate the efficient administration of
the Case.
m. Other Professional Retention Applications
98. The retention of certain chapter 11 professionals is essential to the Debtors’
efforts in the Cases to preserve value for its estate. Accordingly, the Debtors have sought or will
seek to retain various professionals in the Cases. These professionals include: (a) Squire Sanders
(US) LLP (“Squire Sanders”), as their bankruptcy counsel; (b) Getzler Henrich as their financial
advisor and William H. Henrich and Mark Samson from Getzler Henrich as their Co-Chief
Restructuring Officers in the Cases; and (c) J.H. Chapman Group, L.L.C, as their investment
bankers. I believe that (i) the foregoing professionals are well qualified to provide the services
contemplated by their various retention applications, (ii) the services to be provided by the
foregoing professionals are necessary for the success of the Cases, and (iii) the foregoing
professionals will coordinate their services to avoid any duplication of effort. The Debtors may
find it necessary to seek to retain additional professionals as the Cases progress.
INFORMATION REQUIRED BY LOCAL BANKRUPTCY RULE 1007-2
99. I am informed that Local Bankruptcy Rule 1007-2 requires that certain
information about the Debtors be provided in this Affidavit. Various information satisfying this
rule, including Local Bankruptcy Rule-1007-2(a)(1), is set forth in the text above. The
remaining required information is provided in the attached schedules, as follows:
Schedule 1 The holders of the Debtors’ 30 largest unsecured claims, excludingclaims of insiders and information regarding such claims
Schedule 2 The holders of the Debtors’ three largest secured claimsand information regarding such claims
Schedule 3 A summary of the Debtors’ assets and liabilities, in unauditedconsolidated balance sheet format, as of November 28, 2012.
CINCINNATI/97646.3 36
CONCLUSION
100. I respectfully request that all of the relief requested in the First-Day Pleadings be
granted along with such other and further relief as is just.
Schedule 4 All of the Debtors’ property in the possession or custody of anycustodian, public officer, mortgagee, pledgee, assignee of rentsor secured creditor, or agent for any such entity.
Schedule 5 A list of the premises owned, leased or held under otherarrangement from which the Debtors operate their businesses.
Schedule 6 The location of the Debtors’ substantial assets; the location of theirbooks and records and the nature, location and value of any assetsheld by the Debtors outside the territorial limits of the United States.
Schedule 7 A list of the actions or proceedings that are pending or threatened,against the Debtors or their property where a judgment against theDebtors or a seizure of their property is imminent.
Schedule 8 A list of the names of the individuals who comprise the Debtors’existing senior management team, their tenure with the Debtors anda brief summary of their relevant responsibilities and experience.
Schedule 9 Additional information required by Local Bankruptcy Rule 1007-2(b).
CINCINNATI/97646.3
Exhibit AOrganization Chart
The Hillstreet Fund IV, L.P.
5%
53.37% 14.89%
SCR Operations, LLC
100%
SCR Hospitality, LLC
SCR Concessions, LLC
100% 100%
100% 100%
100% 100%
100% 100%
100% 100%
* Percentages vary based on preferences and distribution waterfall as detailed in the Operating Agreement.
** Current and new Stir Crazy stores since Walnut's acquisition of Stir Crazy Partners, LLC
Happy Valley Corporation
Stir Crazy Café
Cantera, LLC Stir Crazy Operations, LLC **
Stir Crazy Café Stir Crazy CaféCreve Coeur, LLC Legacy Village, LLC
Stir Crazy Café Stir Crazy Café
Boca Raton, LLC West Nyack, LLC
Stir Crazy Café Stir Crazy Café
Woodfield, LLC Great Lakes, LLC
Stir Crazy Café Stir Crazy Café
Oakbrook, LLC Northbrook, LLC
100%100%
Stir Crazy Restaurants, LLC100%
Shareholders
26.74%
Flat Out Crazy, LLC
Series C Investors&Stir Crazy Partners, LLC
Flat Out Crazy Restaurant GroupOwnership Structure
CINCINNATI/97646.3
Schedule 1
30 Largest Unsecured Creditors
Pursuant to Local Bankruptcy Rule 1007-2(a)(4), the list below contains information withrespect to each of the holders of the Debtors’ 30 largest unsecured claims, excluding insiders, ona consolidated basis.
(1)
Name of creditor and complete mailingaddress including zip code
(2)
Name, telephone number and completemailing address, including zip code, ofemployee, agent, or department ofcreditor familiar with claim who maybe contacted
(3)
Nature of claim (tradedebt, bank loan,government contract,etc.)
(4)
Indicate if claim iscontingent,unliquidated,disputed, orsubject to setoff
(5)
Amount of claim[if secured, alsostate value ofsecurity]
AD Pembroke GardensAttn: PBPEM01BP.O. Box 11407Birmingham, AL 35246-1730
AD Pembroke GardensAttn: PBPEM01BP.O. Box 11407Birmingham, AL 35246-1730
Landlord 72,688.70
ALSCO2641 S LeavittChicago, IL 60608
ALSCO2641 S LeavittChicago, IL 60608
Trade Vendor 76,278.88
B In It, LLCDave Blumenfeld300 Robbins LaneSyosett, NY 11791
B In It, LLCDave Blumenfeld300 Robbins LaneSyosett, NY 11791
Bridge Lender 500,000.00
Bernard F. Master340 Tucker DriveWorthington, OH 43085
Bernard F. Master340 Tucker DriveWorthington, OH 43085
Bridge Lender 100,000.00
C & H Trading Co.315 Hubbard CirclePlano, IL 60545
C & H Trading Co.315 Hubbard CirclePlano, IL 60545
Trade Vendor 99,461.60
Coconut Point Town CenterP.O. Box 643902Pittsburgh, PA 15264-3902
Coconut Point Town CenterP.O. Box 643902Pittsburgh, PA 15264-3902
Landlord 72,993.28
Cornerstone Retail FundC/O Altus Properties10560 Old Olive St. Rd.Saint Louis, MO 63141
Cornerstone Retail FundC/O Altus Properties10560 Old Olive St. Rd.Saint Louis, MO 63141
Landlord 84,909.29
Ecolab Food Safety Specialties24198 Network PlaceChicago, IL 60673-1241
Ecolab Food Safety Specialties24198 Network PlaceChicago, IL 60673-1241
Trade Vendor 116,629.79
Edward Don & CompanyGerri McCaskill--Credit Repres2500 S. HarlemNorth Riverside, IL 60546
Edward Don & CompanyGerri McCaskill--Credit Repres2500 S. HarlemNorth Riverside, IL 60546
Trade Vendor 319,324.82
EKLECCO NEWCO LLCM&T BankP.O. Box 8000 Dept 535Buffalo, NY 14267
EKLECCO NEWCO LLCM&T BankP.O. Box 8000 Dept 535Buffalo, NY 14267
Trade Vendor 63,346.57
Get Fresh Produce1441 Brewster Creek Blvd.Bartlett, IL 60103
Get Fresh Produce1441 Brewster Creek Blvd.Bartlett, IL 60103
Trade Vendor 165,426.07
CINCINNATI/97646.3
(1)
Name of creditor and complete mailingaddress including zip code
(2)
Name, telephone number and completemailing address, including zip code, ofemployee, agent, or department ofcreditor familiar with claim who maybe contacted
(3)
Nature of claim (tradedebt, bank loan,government contract,etc.)
(4)
Indicate if claim iscontingent,unliquidated,disputed, orsubject to setoff
(5)
Amount of claim[if secured, alsostate value ofsecurity]
Greenwood Park Mall7695 Reliable ParkwayChicago, IL 60686-0076
Greenwood Park Mall (SimonProperties)7695 Reliable ParkwayChicago, IL 60686-0076
Landlord 117,963.77
Jerry L. Ruyan9468 Montgomery Rd.Cincinnati, OH 45242
Jerry L. Ruyan9468 Montgomery Rd.Cincinnati, OH 45242
Bridge Lender 300,000.00
JLA Equipment Distributors990 Harbor Lake Dr.Safety Harbor, FL 34695
JLA Equipment Distributors990 Harbor Lake Dr.Safety Harbor, FL 34695
Trade Vendor 100,000.00
Keating Muething & Klekamp PllOne East Fourth StreetSuite 1400Cincinnati, OH 45202-3752
Keating Muething & Klekamp PllOne East Fourth StreetSuite 1400Cincinnati, OH 45202-3752
Trade Vendor 56,462.55
Legacy Village Investors25333 Cedar Road Suite 303Cleveland, OH 44124
Legacy Village Investors25333 Cedar Road Suite 303Cleveland, OH 44124
Landlord 72,892.98
Macy's Retail Holdings Inc7 West 7th Street 17th FloorCincinnati, OH 45202
Macy's Retail Holdings Inc7 West 7th Street 17th FloorCincinnati, OH 45202
Trade Vendor 118,097.71
Marc Salkovitz11 Twillingate laneSudbury, MA 01776
Marc Salkovitz11 Twillingate laneSudbury, MA 01776
Bridge Lender 100,000.00
Megaplex FourC/O Entertainment PropertiesP.O. Box 870631Kansas City, MO 64187-0631
Megaplex FourC/O Entertainment PropertiesP.O. Box 870631Kansas City, MO 64187-0631
Landlord 69,156.78
Michael Chasnoff4901 Hunt Rd., #200Cincinnati, OH 45242
Michael Chasnoff4901 Hunt Rd., #200Cincinnati, OH 45242
Bridge Lender 100,000.00
Mission Press, Inc.P.O. Box 16741Chicago, IL 60616-0741
Mission Press, Inc.P.O. Box 16741Chicago, IL 60616-0741
Trade Vendor 123,777.34
National Chef Supply3601 N. Dixie Highway, Bay #20Boca Raton, FL 33431
National Chef Supply3601 N. Dixie Highway, Bay #20Boca Raton, FL 33431
Trade Vendor 77,336.23
Rachel RoseTrust 33 Katonah Ave.Katonah, NY 10536
Rachel RoseTrust 33 Katonah Ave.Katonah, NY 10536
Bridge Lender 100,000.00
Simon Property GroupCastleton Square LLC1359 Momentum PlaceChicago, IL 60689-5311
Simon Property GroupCastleton Square LLC1359 Momentum PlaceChicago, IL 60689-5311
Landlord 116,728.15
Swanson, Martin & Bell, LLP330 N. Wabash #3300Chicago, IL 60611
Swanson, Martin & Bell, LLP330 N. Wabash #3300Chicago, IL 60611
Trade Vendor 85,941.71
SyscoAttn Jim Beck1390 Enclave Pkwy A306Houston, TX 77077
SyscoAttn Jim Beck1390 Enclave Pkwy A306Houston, TX 77077
Trade Vendor 1,274,448.60
CINCINNATI/97646.3
(1)
Name of creditor and complete mailingaddress including zip code
(2)
Name, telephone number and completemailing address, including zip code, ofemployee, agent, or department ofcreditor familiar with claim who maybe contacted
(3)
Nature of claim (tradedebt, bank loan,government contract,etc.)
(4)
Indicate if claim iscontingent,unliquidated,disputed, orsubject to setoff
(5)
Amount of claim[if secured, alsostate value ofsecurity]
The Lawrence Blaustein Trust603 N. Main St.Chargrin Falls, OH 44022
The Lawrence Blaustein Trust603 N. Main St.Chargrin Falls, OH 44022
Bridge Lender 100,000.00
Towne Center at Boca RatonNewark Post OfficeP.O. Box 35470Newark, NJ 07193
Towne Center at Boca RatonNewark Post OfficeP.O. Box 35470Newark, NJ 07193
Landlord 75,150.88
Westcoast EstatesNorthbrook Court4015 Paysphere CircleChicago, IL 60674
Westcoast EstatesNorthbrook Court4015 Paysphere CircleChicago, IL 60674
Landlord 164,845.79
Woodfield AssociatesDepartment 55401P.O. Box 67000Detroit, MI 48267-0554
Woodfield AssociatesDepartment 55401P.O. Box 67000Detroit, MI 48267-0554
Landlord 74,863.56
CINCINNATI/97646.3
Schedule 2
Largest Secured Creditors
Pursuant to Local Bankruptcy Rule 1007-2(a)(5), the list below contains information withrespect to each of the holders of the Debtors’ 3 largest secured claims on a consolidated basis.
Creditor Address
PrincipalAmount of
Claim Type of Collateral Disputed15
The HillStreet FundIV, L.P.,
807 Elm St.Cincinnati, OH45202
$1,250,000 Purported first priority lien onsubstantially all of the Debtors’assets, other than certain specifiedequipment that is the subject ofseparate financing by VogenFunding, L.P.
Yes
The HillStreet FundIV, L.P.
807 Elm St.Cincinnati, OH45202
$5,000,000 Purported second priority lien onsubstantially all of the Debtors’assets, other than certainspecified equipment that is thesubject of separate financing byVogen Funding, L.P.
Yes
Vogen Funding, L.P. 10 S. Wacker Dr.,Suite 1840Chicago, IL 60606
unknownPurported first priority lien oncertain specified equipment.
Yes
15 The Debtors reserve all rights to dispute the amounts owed to any secured creditors, and the validity, perfection,enforceability and priority of the liens and security interests securing the claims of such creditors.
CINCINNATI/97646.3
Schedule 3
Summary of Assets and Liabilities
Pursuant to Local Bankruptcy Rule 1007-2(a)(6), attached hereto is a summary of theDebtors’ assets and liabilities in the form of an unaudited consolidated balance sheet as ofNovember 28, 2012.16
FLAT OUT CRAZY, LLC CONSOLIDATED BALANCESHEET
(IN THOUSANDS)
Unaudited
November 28, December 28,
2012 2011
ASSETS
Current assets:
Cash and cash equivalents 142$ 2,393$
Receivables 1,013 1,249
Inventory 466 503
Prepaid expenses 555 448
Deferred taxasset - -
Total current assets 2,176 4,593
Property and equipment:
Furniture, fixtures and equipment 10,110 9,854
Leasehold improvements 27,203 27,077
Construction in progress 87 51
Total property and equipment 37,400 36,982
Less accumulated depreciation 15,482 10,910
Property and equipment, net 21,918 26,072
Other assets:
Other assets 468 435
Def. Financing Fees 1,156 1,535
Deposits 374 420
Tradename 1,937 2,002
Goodwill and other intangibles - -
Total other assets 3,935 4,392
Total assets 28,029$ 35,057$
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities
Accounts payable 4,410$ 5,006$
Accrued payroll and related 667 745
Short-term debt 10,915 10,885
Interest in kind 449 193
Other accrued expenses 3,248 2,666
Short term loan 3,015 -
Capital leases 3,589 3,095
Total current liabilities 26,293 22,590
Deferred rent 8,765 8,880
Leasehold Interest 1,520 2,067
Warrants Liability 145 145
Other Liabilities 771 181
Total liabilities 37,494 33,863
Members' Capital
Series A Preferred Units 8,758 8,758
Series B Preferred Units 4,296 4,296
Series C Preferred Units 5,372 5,219
Retained earnings (deficit) (27,891) (17,079)
Total members' capital (9,465) 1,194
Total liabilities and stockholders' equity 28,029$ 35,057$
16 Due to the timing of the filing of the Cases, the next most recent balance sheet, dated January 2, 2013, was notavailable as of the Petition Date.
CINCINNATI/97646.3
Schedule 4
Debtors’ Property in the Possession of Others
Pursuant to Local Bankruptcy Rule 1007-2(a)(8), the Debtors disclose below the locationof any of the Debtors’ property in the possession or custody of any custodian, public officer,mortgagee, pledgee, assignee of rents, or secured creditor, or agent for any such entity.
The Debtors have personal property and/or restaurant equipment in all of their leasedlocations listed on Schedule 5 below. In addition to property located at leased locations, theDebtors have some property located at closed Restaurant locations, particularly including theMall of America, 306 South Ave., Bloomington, Minnesota 55425. Additionally, the Debtorshave some Restaurant equipment warehoused in a facility owned by Johnson-Lancaster andAssociates.
CINCINNATI/97646.3
Schedule 5
Premises Where the Debtors Operate Their Businesses
Pursuant to Local Bankruptcy Rule 1007-2(a)(9), below is a list of the premises owned,leased, or held under other arrangement from which the Debtors operate their businesses.
Name Address Type of Interest Description of UseHeadquarters 303 West Erie, 6th Fl
Chicago, IL 60654Leased Corporate
Oakbrook Court 105 Oakbrook CenterOakbrook, IL 60523
Leased Stir Crazy
Northbrook Court 1186 Northbrook CourtNorthbrook, IL 60062
Leased Stir Crazy
Woodfield Mall 5 Woodfield MallSchaumburg, IL 60173
Leased Stir Crazy
Great Lakes Crossing 4248 Baldwin Road#615Auburn Hills, MI 48326
Leased Stir Crazy
Boca Raton 6000 Glades Road#1015Boca Raton, FL 33431
Leased Stir Crazy
Palisades Center 4422 Palisades Center DriveWest Nyack, NY 10994
Leased Stir Crazy
Creve Coeur 10598 Old Olive St. Rd.Creve Coeur, MO 63141
Leased Stir Crazy
Legacy Village 25385 Cedar RoadLyndhurst, OH 44124
Leased Stir Crazy
Cantera 28252 Diehl RoadWarrenville, IL 60555
Leased Stir Crazy
Pembroke Gardens 14571 SW 5th StreetPembroke Pines, FL 33027
Leased Stir Crazy
Greenwood Park 1251 US Highway 31 NorthSuite p-210Greenwood, IN 46142
Leased Stir Crazy
Castleton Square 6020 East 82nd StreetIndianapolis, IN 46250
Leased Stir Crazy
Coconut Point 23106 Fashion DriveEstero, FL 33928
Leased Stir Crazy
Brookfield Square 15795 W. BluemoundBrookfield, WI 53005
Leased Stir Crazy
Macy’s Union Square 170 O’Farrell StreetSan Francisco, CA 94102
Leased SC Asian
North Avenue 319 W. North AvenueChicago, IL 60610
Leased Flat Top Grill
CINCINNATI/97646.3
Name Address Type of Interest Description of UseChurch Street 707 Church Street
Evanston, IL 60201Leased Flat Top Grill
Washington Blvd 1000 W. Washington Blvd.Chicago, IL 60607
Leased Flat Top Grill
Southport Avenue 3200 N. Southport AvenueChicago, IL 60657
Leased Flat Top Grill
Lake Street 726 W. Lake StreetOak Park, IL 60301
Leased Flat Top Grill
Jefferson Pointe 4150 W. Jefferson Blvd.#K-1Fort Wayne, IN 46804
Leased Flat Top Grill
Grand Prairie 5201 W. War Memorial DriveSuite 1200Peoria, IL 61615
Leased Flat Top Grill
College Hills 307 Veterans ParkwaySuite 500Normal, IL 61761
Leased Flat Top Grill
Hilldale Mall 538 N. Midvale Blvd.Madison, WI 53705
Leased Flat Top Grill
6th Street 607 South 6th StreetChampaign, IL 61820
Leased Flat Top Grill
Yorktown Center 305 Yorktown CenterLombard, IL 60148
Leased Flat Top Grill
Washington Street 218 South Washington StreetNaperville, IL 60540
Leased Flat Top Grill
Sullivan Center 30 S. WabashChicago, IL 60603
Leased Flat Top Grill
Mayfair Place 2751 N. Mayfair RoadWauwatosa, WI 53222
Leased Flat Top Grill
Huron Village 3275 Washtenaw AvenueAnn Arbor, MI 48104
Leased Flat Top Grill
University Park 6501 N. Grape RoadMishawaka, IN 46545
Leased Flat Top Grill
The Summit 250 Summit Blvd.Suite 100Birmingham, AL 35243
Leased Flat Top Grill
Rochester Hills 176 North Adams RoadRochester Hills, MI 48309
Leased Flat Top Grill
CINCINNATI/97646.3
Schedule 6
Location of Substantial Assets
Pursuant to Local Bankruptcy Rule 1007-2(a)(10), below describes the locations of theDebtors’ substantial assets, the location of their books and records, and the nature, location, andvalue of any assets held by the Debtors outside the territorial limits of the United States.
Location of the Debtors’ Substantial Assets:
The Debtors maintain 15 domestic bank accounts at various institutions, as describedabove. The Debtors' domestic locations (including their headquarters and all Restaurantlocations) are identified in Schedule 5 above. The Debtors have assets in every location fromwhich they operate their businesses.
Location of the Debtors’ Books and Records:
The majority of the Debtors’ books and records are located at its corporate headquartersat 303 West Erie, 6th Floor, Chicago, Illinois 60654. Additional books and records are located atthe Restaurant locations listed in Schedule 5 above. The Debtors also utilize an outside vendorin the Chicago area, Iron Mountain, to store some archived books and records at 333 S Swift Rd.Addison, IL 60101.
CINCINNATI/97646.3
Schedule 7
Proceedings Against the Debtors
In accordance with Local Bankruptcy Rule 1007-2(a)(11), the Debtors are aware of thefollowing actions or proceeding(s), pending or threatened, against the Debtors or their propertywhere a judgment against the Debtors or a seizure of its property may be imminent.
Debtor PropertyNondebtor
Party StatusFlat Out Crazy E-176 N. Adams,
Rochester Hills, MIVORH Assoc. Received summons for past
due rent on 1/16/13.Hearing scheduled for2/1/13.
Flat Out Crazy RestaurantEquipment locatedin storage atwarehouse ofNondebtor Party
Johnson-Lancaster andAssociates,Inc.
Received notice for unpaidwarehouse costs on 1/15/13.Warehouse owner notifiedDebtors of its intent toliquidate stored property ifnot paid by 1/29/13.
In addition to the proceeding(s) identified above, the Debtors are parties to several activeactions or proceedings against them where a judgment or the seizure of property is not imminent.Those actions or proceedings are not described here.
The Debtors have received numerous default notices threatening action, particularly fromtheir landlords. The table below describes notices the Debtors have received from landlordsthreatening action and the status of such threatened actions.
Debtor PropertyNondebtor
Party StatusSCR Concessions
FOC as Guarantor
The SummitShopping Center,Birmingham, AL
Bayer RetailCompany
Received Notice of DefaultTerminate possessionAccelerate rent on 1/18/13.
Stir Crazy Operations Castleton SquareMall
SimonProperties
Received 10 day notice tocure defaults on 1/14/13.
Flat Out Crazy Hilldale ShoppingCenter,Madison, WI
HilldaleShoppingCenter
Received 30 day Notice toCure on 1/11/13.
Flat Out Crazy 607 S. 6th St.,Champaign, IL
JSM Mgmt Received 10 Day Notice on1/22/13.
CINCINNATI/97646.3
Debtor PropertyNondebtor
Party StatusStir Crazy Operations Coconut Point,
23106 FashionDrive, Room W19,Estero, FL
CoconutPoint TownCenter
Simon Prop.
Received 10 Day Notice on1/14/13.
Flat Out Crazy E-176 N. Adams,Rochester Hills, MI
VORHAssoc.
Received summons for pastdue rent on 1/16/13.Hearing scheduled for2/1/13.
Flat Out Crazy 3200 N. Southport JasperRealty
Received letter threateninglawsuit for unpaid rent on1/17/13.
Stir Crazy Operations Greenwood ParkMall
SimonProperties
Received 10 Day Notice on1/14/13.
Flat Out Crazy Hamilton TownCenter
SimonProperties
Received 10 Day Notice on1/14/13.
Flat Out Crazy Jefferson PointeShopping Center
IMIJeffersonPointe
Received Notice of Defaulton 1/21/13.
Stir Crazy Café –Legacy Village LLC
Legacy VillageShopping Center,35385 Cedar Rd.,Lyndhurst, OH
LegacyVillageInvestors
Received 3 Day Notice on1/9/13.
Stir Crazy Café –Legacy Village LLC
Legacy VillageShopping Center,35385 Cedar Rd.,Lyndhurst, OH
LegacyVillageInvestors
Received 10 day Notice toCure on 1/11/13.
Stir Crazy Café –Legacy Village LLC
Legacy VillageShopping Center,35385 Cedar Rd.,Lyndhurst, OH
LegacyVillageInvestors
Received 10 day Notice toCure on 12/21/12.
Flat Out Crazy One Mayfair Place,2711-2767 N.Mayfair Rd,Wauwatosa, WI
MidlandMgmt.
Received Notice of Defaulton 1/4/13.
Flat Out Crazy 218 S. WashingtonSt., Naperville, IL
Genco 3 Received Notice of Defaulton 1/17/13.
Stir Crazy Town Center atBoca Raton
Simon Prop. Received 10 day Notice ofDefault on 12/15/12.
CINCINNATI/97646.3
Debtor PropertyNondebtor
Party StatusStir Crazy Greenwood Park
MallSimon Prop. Received Notices of Default
on 11/15/12 (10 days) and12/5/12 (30 days).
Stir Crazy Castleton Square CastletonSquare
Simon Prop.
Received Notice of Defaulton 11/5/12.
Flat Out Crazy University ParkMall
UniversityPark Mall
SimonProperties
Received 10 Day Notice ofDefault on 1/24/13.
Flat Out Crazy White Oaks Mall Mall atWhite Oaks
Simon
Received Notice to Curedefault (related to failure tosubmit tenant’s plans) on11/5/12.
Flat Out Crazy Summit,Birmingham, AL
Summit
Simon
Received 10 day Notice ofDefault on 1/9/13.
Stir Crazy Woodfield Woodfield Mall WoodfieldMall
Simon
Received 10 day Notice toVacate on 1/14/13.
Stir Crazy
Flat Out Crazy
Waukesha PlatowEnterprise(contractor)
BonstoresRealty One(landlord)
Received 30 day Notice ofConstruction Lien on 1/8/13.
Flat Out Crazy Shops onButterfield,Lombard, IL
YTCButterfieldOwner
Received 5 day Notice ofDefault on 1/17/13.
CINCINNATI/97646.3
Schedule 8
Debtors’ Senior Management Team
Pursuant to Local Bankruptcy Rule 1007-2(a)(12), below is a list of the names of theindividuals who comprise the debtor's existing senior management, their tenure with the debtor,and a brief summary of their relevant responsibilities and experience.
Name & Position Summary of Responsibilities and ExperienceFrederic Mayerson,Chairman of Flat OutCrazy, LLC
As Chairman, Mr. Mayerson is responsible for the developmentand oversight of the Debtors long-term strategic plans, overseesthe capital needs of the business and regularly interfaces withDebtors’ management team, who run the day-to-day operationsof the businesses.
Mr. Mayerson has been Chairman of Flat Out Crazy since itsinception in 2009 and has been Chairman of Stir CrazyRestaurants since 2006.
In addition to his responsibilities as Chairman of the Debtors,Mr. Mayerson is also is the Chairman and Managing GeneralPartner of The Walnut Group, a diversified private equityinvestment company that is a major equity owner of theDebtors.
Mr. Mayerson’s previous restaurant experience includesinvolvement in the co-founding and development of Chi Chi'sMexican Restaurants and Pinons, a fine dining establishment inAspen, Colorado.
William Van Epps, ChiefExecutive Officer
Mr. Van Epps joined the Debtors as their CEO in June 2012. Inthis role, he develops and executes the long-term businessstrategies of the Debtors, oversees the budgeting and planningnecessary to support those strategies, and acts as the executivein charge of the day-to-day operations of the businesses.
Prior to his tenure with the Debtors, Mr. Van Epps was ChiefExecutive Officer of Agile Pursuits Franchising Inc., a newdivision of Procter and Gamble, which included the creation,development and expansion of new retail service modelsutilizing P&G brands worldwide. He also previously worked asPresident, USA, Papa John's International, Inc., withresponsibilities for the company's domestic franchise andcompany restaurant operations, restaurant development,franchising, marketing, R&D, and quality management.
Mr. Van Epps has also worked for Yorkshire GlobalRestaurants, AFC Enterprises, and PepsiCo International. Intotal, Mr. Van Epps has more than 40 years of foodserviceexperience, including 31 years in the international arena.
CINCINNATI/97646.3
Steve DeLong, ChiefFinancial Officer
Mr. DeLong joined the Debtors in July 2012. As CFO, Mr.DeLong is primarily responsible for budgeting and financialplanning, managing the Debtors’ capital structure, overseeingfinancial reporting functions and other duties related to thefinancial management of the Debtors.
Mr. DeLong is a certified public accountant in the state of Ohiowith more than 30 years of financial management experience inindustry with both public and private companies. He began hiscareer in the Dayton, Ohio offices of Deloitte.
Until January 2013, Mr. DeLong was an independent contractorof Clark Schaefer, who provided his services to the Debtors ona contract basis. During January, 2013, the Debtors hired Mr.DeLong as a full-time employee and terminated the serviceagreement with Clark Schaefer.
CINCINNATI/97646.3
Schedule 9
Additional Information
The Debtors intend to continue to operate their businesses. Accordingly, as required byLocal Bankruptcy Rule 1007-2(b)(1), the Debtors hereby estimate that the amount of theirweekly payroll to employees (exclusive of officers, directors, stockholders, and partners) for the5 week period following the filing of the chapter 11 petition will be approximately $1,845,500.17
In accordance with Local Bankruptcy Rule 1007-2(b)(2), the Debtors hereby disclose that theyestimate the amount paid and proposed to be paid for services for the 5-week period followingthe filing of the chapter 11 petition to officers, stockholders, and directors will be approximately$176,900. The Debtors do not anticipate paying any amounts to financial or business consultantsretained in the Cases until after the first 5 weeks of the case because such advisors will berequired to have their fees and expenses reviewed by the United States Trustee and other partiesin interest.
Furthermore, in accordance with Local Bankruptcy Rule 1007-2(b)(3), below is aschedule for the 5-week period following the filing of the chapter 11 petition, of estimated cashreceipts and disbursements, net cash gain or loss, obligations and receivables expected to accruebut remain unpaid, other than professional fees, and any other information relevant to anunderstanding of the foregoing. The amounts set forth below could change substantially if anyof the assumptions prove incorrect. For additional detail, please consult the exhibits to theDebtors' motion to approve their use of cash collateral.
Cash Receipts $5.0 million
Cash Disbursements (Operating and Non-Operating Disbursements)
$5.0 million
Net Cash Gain (Loss) $0.0 million
Estimated Unpaid Postpetition ObligationsOther Than Professional Fees18
$400,000
Estimated Unpaid Postpetition Receivables N/A19
17 The Debtors use 5-week numbers here instead of the 30 days stated in LBR 1007-2 in order to maintainconsistency with other estimates provided throughout the First-Day Pleadings, which utilize the 5-week budgetprovided in connection with the Cash Collateral Motion.
18 Includes an estimate of $75,000 of trade payables, plus one week of wages and benefit expenses.
19 The Debtors’ revenue is overwhelmingly generated in the form of cash or credit card payments. As a result, theDebtors generally have little to no accounts receivable.