Hearing Date and Time: May 23, 2011 at 10:00 a.m.

ET Objection Deadline: May 19, 2011 at 4:00 p.m. ET

KATTEN MUCHIN ROSENMAN LLP Thomas J. Leanse Dustin P. Branch 2029 Century Park East, Suite 2600 Los Angeles, California 90067 Telephone: (310) 788-4400 Facsimile: (310) 788-4471 -andAdrienne W. Blankley 575 Madison Ave New York, New York 10022 Telephone: (212) 940-8800 Facsimile: (212) 940-8776 Attorneys for The Macerich Company UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ----------------------------------------------------- x : In re: : : METROPARK USA, INC., : : Debtors. : : ----------------------------------------------------- x

Chapter 11 Case No. 11-22866 (RDD)

LIMITED OBJECTION OF THE MACERICH COMPANY AND TSLV, LLC TO THE MOTION OF THE DEBTOR FOR ORDER (A) SETTING (1) DATE TO CONDUCT AUCTION OF DEBTOR'S INTEREST IN CERTAIN REAL PROPERTY LEASES AND INTELLECTUAL PROPERTY, AND (2) SALE HEARING DATE; (B) APPROVING BIDDING PROCEDURES AND TERMS OF AUCTION; (C) ESTABLISHING CURE AMOUNTS; (D) AUTHORIZING DEBTOR TO ENTER INTO LEASE TERMINATION AGREEMENTS; (E) APPROVING AND AUTHORIZING SALE OF LEASES AND INTELLECTUAL PROPERTY TO HIGHEST OR OTHERWISE BEST BIDDER FREE AND CLEAR OF ALL LIENS, INTERESTS, CLAIMS AND ENCUMBRANCES PURSUANT TO 363 OF THE BANKRUPTCY CODE; (F) WAIVING THE REQUIREMENTS OF RULE 6004 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE AND LOCAL BANKRUPTCY RULE 6004-1 AND (G) GRANTING RELATED RELIEF The Macerich Company and TSLV, LLC (the Landlords) hereby file this limited objection (the Objection) to the Motion Of The Debtor For Order (A) Setting (1) Date To Conduct Auction Of Debtor's Interest In Certain Real Property Leases And Intellectual Property,

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And (2) Sale Hearing Date; (B) Approving Bidding Procedures And Terms Of Auction; (C) Establishing Cure Amounts; (D) Authorizing Debtor To Enter Into Lease Termination Agreements; (E) Approving And Authorizing Sale Of Leases And Intellectual Property To Highest Or Otherwise Best Bidder Free And Clear Of All Liens, Interests, Claims And Encumbrances Pursuant To 363 Of The Bankruptcy Code; (F) Waiving The Requirements Of Rule 6004 Of The Federal Rules Of Bankruptcy Procedure And Local Bankruptcy Rule 6004-1 And (G) Granting Related Relief (the Sale Motion),1 and respectfully represent as follows: I. BACKGROUND FACTS 1. Metrocenter USA, Inc. (the Debtor), filed its voluntary petition for relief under

Chapter 11 of Title 11 of the United States Code on May 2, 2011. The Debtor has continued to operate its business and manage its properties as debtor-in-possession pursuant to 11 U.S.C. 1107(a) and 1108.2 2. The Debtor leases retail space (the Premises) from the Landlord pursuant to

unexpired leases of nonresidential real property (individually, a Lease, and collectively, the Leases) at the shopping center locations (the Centers) set forth in detail in Schedule A hereto. 3. Each Lease is a lease of real property in a shopping center as that term is used

in Section 365(b)(3). See In re Joshua Slocum, Ltd., 922 F.2d 1081, 1086-1087 (3d Cir. 1990). 4. On May 12, 2011, the Debtor filed the Sale Motion, which seeks authority to

conduct an auction of the Debtor's assets, including the Leases, and schedule a final sale hearing to approve any proposed sale of the Debtor's assets on an extremely expedited basis. As proposed, the bid procedures and auction and sale process deny essential protections afforded to

Terms not otherwise defined herein shall have the meanings ascribed to them in the Sale Motion and accompanying documents. Unless otherwise specified, all statutory references to Section are to 11 U.S.C. 101 et seq. (the Bankruptcy Code).

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Landlords through principles of due process, the Bankruptcy Code, and under the negotiated terms of the Leases themselves. II. A. i. . ARGUMENT OBJECTION TO AUCTION SCHEDULE AND SALE MOTION The proposed auction timetable and sale approval denies Landlords due process. 5. 6. The Sale Motion proposes for the following schedule: May 19, 2011 Deadline to object to cure amounts3 and bid procedures. May 23, 2011 Hearing to approve bid and auction procedures. May 25, 2011 Bid deadline. May 26, 2011 Auction. May 27, 2011 Sale and adequate assurance objection deadline. May 31, 2011 Sale Hearing. The timetable proposed by the Debtor does not provide the Landlord with

sufficient time to assess adequate assurance of future performance information to make an informed decision as to any successful bidder that prevails at the Auction (much less to file any meaningful objection). 7. To the extent there is not a consensual assignee the proposed auction and sale

schedule is unduly burdensome to Landlords, unnecessarily short, inconsistent with Section 365, and denies Landlords due process. Fundamental concepts of due process require that notice must be reasonably calculated to apprise interested parties of the pendency of an action and to afford them an opportunity to present objections. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). See also Sullivan v. Barnett, 139 F.3d 158, 171 (3rd Cir. 1998) (due process requires notice and a meaningful opportunity to be heard). 8. The Sale Motion does not provide any justifiable basis for such expedited

procedures, which effectively increase expenses to Landlords and deprive them of their statutory

By agreement of the Landlords and the Debtor, the deadline for the Landlords to object to cure amounts has been extended beyond May 19, 2011. Therefore, the Landlords will file their objection to the proposed cure amounts separately from this Objection.

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right to obtain and review adequate assurance of future performance information prior to the deadline to object to a proposed assignee and sale hearing date. 9. The Sale Motion provides that the Debtor will provide Landlords with

information "relevant" to the assignee's ability to provide adequate assurance of future performance subsequent to the conclusion of the auction on May 26, 2011. See Sale Motion at 21. While Landlords are not confident this will result in their receiving information that satisfies Section 365(b), the timing will likely result in Landlords receiving whatever information is provided less than 24 hours prior to the proposed objection deadline. Landlords need this information far enough in advance of any objection deadline to conduct a meaningful analysis of such information and assess the bona fides of any party that seeks an assignment of the Leases at the sale hearing. Therefore, the Landlords require at least seven (7) days to review and assess any proposed assignee and the adequate assurance of future performance information (as set forth below), prior to any deadline to object the assumption and assignment of any Lease.4 10. In order to satisfy the adequate assurance of future performance burden discussed

below, the Debtor and any successful bidder will need to provide, at a minimum, the following information: (i) (ii) (iii) (iv) the specific name of the proposed bidder, the proposed tenant that will act as the assignee, and the proposed name under which the assignee intends to operate the store; the potential assignees intended use for the space; audited financial statements and annual reports for the past three (3) years, including all supplements or amendments thereto; cash flow projections for the proposed assignee, the proposed assignees most recent business plan, all cash flow projection for the Lease subject to the assignment request, and any financial projections, calculations and/or proformas prepared in contemplation of purchasing the Leases;

If the Landlords do not have sufficient information (or time) to make a determination as to a proposed assignee, or if the proposed assignee is unacceptable, the Landlords will need to object to the proposed sale and prepare for a contested evidentiary hearing. In preparation of such evidentiary hearing, the Landlords will need to conduct expedited discovery, arrange for expert testimony, and file supplemental objections based upon the information gleaned from whatever information is actually produced by the Debtor, the Stalking Horse, or any other successful bidder. This process cannot be accomplished on Debtor's proposed schedule. This schedule serves only to limit the Landlords ability to fully assess any successful bidder, or to contest the assumption and assignment of the Leases in a prepared and informed manner.

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(v) (vi) 11.

all documents and other evidence of the potential assignees retail experience and experience operating in-line stores in a shopping center; and a contact person for the proposed assignee that Landlord may directly contact in connection with the adequate assurance of future performance. The above constitutes a non-exclusive list of the minimum information the

Landlords will need to assess any potential assignee, and the Debtor cannot carry its burden under Section 365 without providing this information. Landlords reserve the right to request further information that they deem necessary to make an informed decision as to the ability of a potential assignee to satisfy the requirements of Section 365. ii. Section 365(b) burdens the Debtor with making an affirmative showing of adequate assurance of future performance. 12. The Debtor may not assume and assign the Leases absent its demonstration of

adequate assurance of future performance under the Leases by the proposed assignee. See 11 U.S.C. 365(b)(1)(C); see also 11 U.S.C. 365(f)(2). The provision of adequate assurance of future performance is an affirmative duty of the Debtor, and the Debtor bears the ultimate burden of persuasion as to issues under Section 365. See In re Rachels Industries, Inc., 109 B.R. 797, 802 (Bankr. W.D. Tenn. 1990); see also Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1309 (5th Cir. 1985). 13. Courts require a specific factual showing through competent evidence to

determine whether adequate assurance of future performance has been provided. See e.g., Matter of Haute Cuisine, Inc., 58 B.R. 390 (Bankr. M.D. Fla. 1986) (even though experts presented cash flow projections, the court found that insufficient documentary evidence had been presented); In re Bygaph, Inc., 56 B.R. 596 (Bankr. S.D.N.Y. 1986) (court granted motion to assume and assign based on assignees capital contribution, personal financial resources, and expressed willingness to devote sufficient funding which gave new restaurant a strong likelihood of succeeding, coupled with assignees experience as an owner/operator of a successful restaurant and his familys planned involvement in the day-to-day management). Without the opportunity to

review and analyze adequate assurance of future performance information, the Congressional protections that Landlords are entitled to under Section 365 are rendered meaningless.

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iii.

The Landlords are entitled to heightened adequate assurance under Section 365(b)(3). 14. In this case, the Leases are shopping center leases and, as such, the Bankruptcy

Code requires more than the basic adequate assurance of future performance of the Leases under Section 365(b)(1)(C). In re Sun TV and Appliances, Inc., 234 B.R. 356, 359 (Bankr. D. Del. 1999). The heightened adequate assurance requirements that Section 365(b)(3) conveys on the Debtor include the following: the source of rent and that the financial condition and operating performance of the proposed assignee and its guarantors, if any, must be similar to the financial condition and operating performance of the debtor and its guarantor(s), if any, as of the time the debtor became the lessee. See 11 U.S.C. 365(b)(3)(A); that any percentage rent due under the lease will not decline substantially. See 11 U.S.C. 365(b)(3)(B); that assumption and assignment of the lease is subject to all provisions thereof, including (but not limited to) provisions such as a radius, location, use, or exclusivity provision, and will not breach of any such provision in any other lease, financing agreement, or master agreement relating to such shopping center. See 11 U.S.C. 365(b)(3)(C); and that assumption and assignment of the lease will not disrupt the tenant mix or balance in the shopping center. See 11 U.S.C. 365(b)(3)(D). This Court must determine that the Debtor has satisfied the adequate assurance of

15.

future performance requirements in connection with an assumption and assignment under Section 365(f)(2)(B). Sun TV and Appliances, Inc., 234 B.R. at 370. And, in connection with the heightened adequate assurance requirement for shopping center leases, courts do require a specific factual showing through competent evidence to determine whether the Debtor has provided adequate assurance of future performance. Matter of Haute Cuisine, Inc., 58 B.R. at 394. 16. At this time, the Landlords have no information with respect to any potential

assignee, and as a result, no information concerning any assignee's structure, capitalization, principals or experience in the industry. If the proposed assignee entity itself does not possess such experience or capitalization, the Landlords will require such assignee to provide some type of credit enhancement, such as: (i) a guaranty of future performance from a financially capable parent entity; (ii) a letter or credit; or (iii) a cash security deposit. Landlords require that an

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existing entity with acceptable financing guaranty the performance of any newly-formed company that seeks an assignment of the Leases. In addition, pursuant to Section 365(l), the Landlords may require a security deposit or letter of credit as security for the performance of the assignees obligations under the Leases in the event that the assignee fails to perform on a goingforward basis. This is a reasonable condition of demonstrating adequate assurance of future performance where the Debtor is seeking approval of an assignee with no operating history. 17. In summation, the Landlords object to any attempt to approve the assumption and

assignment of the Leases at the proposed sale hearing under the proposed schedule, absent a consensual deal with the affected Landlord. Unless there is no objection to the proposed

assumption and assignment, to the extent that any hearing goes forward under the proposed schedule proposed, such hearing should serve only as a status conference to set expedited discovery, a briefing schedule, and a further evidentiary hearing for any landlord that contests the proposed assumption and assignment of their leases. Landlords reserve all rights to object to the sufficiency of the adequate assurance information provided in support of any proposed assignee. iv. Any assumption and assignment must comply with the terms of the Leases. 18. Through the BAPCPA5 amendments, Section 365(f)(1) is amended to make sure

that all of the provisions of Section 365(b) are adhered to and that 365(f) of the code does not override Section 365(b). Floor Statement of Senator Orrin Hatch, 151 Cong. Rec. S. 2459, 2461-62 (daily ed. March 10, 2005). In explaining the change to Section 365(f)(1), Senator Hatch stated: The bill helps clarify that an owner should be able to retain control over the mix of retail uses in a shopping center. When an owner enters into a use clause with a retail tenant forbidding assignments of the lease for a use different than that specified in the lease, that clause should be honored. Congress has so intended already, but bankruptcy judges have sometimes ignored the law. 151 Cong. Rec. S. 2459, 2461 (daily ed. March 10, 2005).

On October 17, 2005, the Bankruptcy Abuse Prevention And Consumer Protection Act of 2005 (the BAPCPA) went into effect, clarifying, inter alia, the protections that Landlord is entitled to under 11 U.S.C. 365.

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19.

The changes embodied in the BAPCPA specifically preserve a landlords right to

enforce use and other lease provisions. Again, Senator Hatchs remarks in the Congressional Record clarify the intent behind Section 365(b) and 365(f): A shopping center operator. . . must be given broad leeway to determine the mix of retail tenants it leases to. Congress decided that use or similar restrictions in a retail lease, which the retailer cannot evade under nonbankruptcy law, should not be evaded in bankruptcy. It is my understanding that some bankruptcy judges have not followed this mandate. Under another provisions of the Code, Section 365(f), a number of bankruptcy judges have misconstrued the Code and allowed the assignment of a lease even though terms of the lease are not being followed. 151 Cong. Rec. S. 2459, 2461-62 (daily ed. March 10, 2005). 20. As set forth above, bankruptcy courts must strictly enforce the use and other

provisions in the Leases. This intent is echoed by comments from the House of Representatives, and the legislative history leaves no doubt that such provisions must be strictly enforced: Section 404(b) amends 365(f)(1) to assure that 365(f) does not override any part of 365(b). Thus, 404(b) makes a trustees [debtor-in-possessions] authority to assign an executory contract or unexpired lease subject not only to 365(c), but also to 365(b), which is given full effect. Therefore, for example, assumption or assignment of a lease of real property in a shopping center must be subject to the provisions of the lease, such as use clauses. (Emphasis added) H.R. Rep. No. 109-31, pt. 1, at 87, reprinted in 2005 U.S. Code Cong. & Admin. News 153. 21. The BAPCPA clarified Section 365 to reflect the Congressional intent that

Section 365(f)(1) not be used by debtors to avoid lease provisions. The language of Section 365(f), and any such ability to assume and assign the Leases, is subject to the protections provided by Section 365(b)(1) and (3). It does not modify Section 365(b). Therefore, any assignment must remain subject to all provisions of the Leases, including those provisions concerning use, radius, exclusivity, tenant mix and balance, etc. 22. The revisions to Section 365 make it clear that the Debtor cannot use Section

365(f) to render lease provisions unenforceable. While such provisions may indirectly limit the assignment of the Leases, Section 365(b) specifically protects these provisions. 23. Provisions governing use, radius and the permitted conduct upon the Premises,

therefore, are not anti-assignment provisions and are not rendered unenforceable by Section

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365(f). These are negotiated provisions that legitimately seek to preserve the Landlords control over shopping center environments. Section 365(b)(3) no longer permits even insubstantial breaches of provisions such as use, radius, location or exclusivity. These critical lease terms are enforceable under Section 365(b), and this Court should deny any attempted assignment that fails to comply with such provisions. v. Any sale must not be free and clear of obligations to pay all charges due under the Leases, including unbilled year-end adjustments and reconciliations. 24. The Sale Motion seeks authority for the sale the leases free and clear of liens,

claims and encumbrances. See Sale Motion at 24 - 29. The Landlords object to any sale free and clear of the Debtors obligations to satisfy unbilled taxes, reconciliations, percentage rent, or other year-end adjustments or unbilled charges that may have accrued under the Leases prior to the assignment of the Leases, but which have not yet been billed. The Debtor continues to be responsible for all such unbilled charges as they come due under the Leases, and the Debtor or any proposed assignee must continue to satisfy all charges due under the Leases, including charges which have not yet been billed, reconciled and/or adjusted from pre-petition (or even post-petition) periods. Any assumption and assignment of the Leases cannot cut off the

Landlords right to recover unbilled charges that have accrued, or are accruing, under the Leases. 25. Therefore, the Sale Motion, any sale order, and any assignment must specify that

these charges will survive the assumption and assignment of any of the Leases. It should be clear that any assignee will inherit the responsibility for all unbilled charges that may come due under the Leases. B. OBJECTION TO THE DESIGNATION OF THE LEASES 26. The Sale Motion and Bidding Procedures contemplate that a successful bidder

may continue to operate the Leases without immediately deciding which Leases it will seek to have assumed and assign to it (the Designation Rights). To the extent that any successful bidder is permitted to operate the Debtor's stores under Designation Rights for some period of

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time, such party must comply with all terms of the Leases during its exercise of such Designation Rights in all respects. 27. In addition, any successful bidder must be responsible for all lease obligations

that arise during any exercise of Designation Rights with respect to the Leases. C. THE PROPOSED WAIVER OF FEDERAL RULE OF BANKRUPTCY PROCEDURE 6004 AND 6006 IS IMPROPER. 28. Unless a consensual deal exists, the Landlords object to the waiver of

requirements of Federal Rule of Bankruptcy Procedure (Rule) 6004(h) and 6006(d). In light of the lack of information that Landlords have with respect to any potential sale of the Leases, this request is especially inappropriate. Any order approving the Sale Motion, therefore, should not include a prospective waiver of Rules 6004(h) or 6006(d). These subsections were specifically added to the Bankruptcy Rules to protect the rights of the objecting parties, and thus eliminate the rush to the courthouse to obtain stay orders by those parties adversely affected by entry of orders under Sections 363 or 365. Moreover, such an order is inappropriate in connection with an order approving bid procedures. Landlords should not have their appellate rights

compromised by an advance waiver of these protections, particularly since the Debtor has failed to establish any cause for such a waiver, and particularly where the Landlords have such a negligible amount of time between the auction and the hearing to approve any proposed sale. D. RESERVATION OF RIGHTS TO RAISE FURTHER OBJECTIONS. 29. In light of the objections raised above, the Landlords reserve all rights with

respect to the relief requested in the Sale Motion, including but not limited to: (i) raise additional objections at this, or any further, hearing; (ii) to object to the assumption and assignment of the Leases for any reason; to raise all objections to the adequacy of adequate assurance of future performance information, when provided; (iii) object to any attempt by any successful bidder to designate any of the Leases for assignment to a third party; (iv) to object to any form of sale order; and (v) require any proposed assumption and assignment to comply with all lease terms.

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E.

JOINDER IN OBJECTIONS RAISED BY OTHER LANDLORDS. 30. To the extent consistent with the objections expressed herein, Landlords also join

in the objections of other shopping center lessors to the Debtor's proposed relief. III. CONCLUSION Unless there is no objection to the proposed assignee, the Debtor's proposed auction and sale schedule does not provide Landlords the opportunity to avail themselves of the protections Congress endowed them with under Section 365. The Landlords did not create Debtor's

financial maladies, and should not bear the consequences of this bankruptcy through loss of their legal or contractual rights. The Court should modify any final auction and sale procedures and order to incorporate the objections raised above, and grant such further relief as the Court deems proper. Dated: May 19, 2011 KATTEN MUCHIN ROSENMAN LLP Attorneys for The Macerich Company and TSLV, LLC By:___/s/ Adrienne W. Blankley_______________ Thomas J. Leanse Dustin P. Branch 2029 Century Park East, Suite 2600 Los Angeles, California 90067 Phone: (310) 788-4400 FAX: (310) 788-4471 Adrienne W. Blankley 575 Madison Ave New York, New York 10022 Phone: (212) 940-8800 FAX: (212) 940-8776

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SCHEDULE A The Macerich Company Store No. 45 Store No. 20 Store No. 9 Store No. 14 Store No. 46 Store No. 71 Store No. 13 Store No. 27 Danbury Mall Freehold Raceway Mall Fresno Fashion Fair Los Cerritos Scottsdale Fashion Square Tysons Corner Town Square
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Danbury, CT Freehold, NJ Fresno, CA Cerritos, CA Scottsdale, CA McLean, VA Tigard, OR Las Vegas, NY

Washington Square

The Debtor filed a notice to reject the Tysons Corner lease, effective May 18, 2011, and the keys were surrendered to that Landlord on such date. As a result, the Tysons Corner Lease is rejected, and the Landlord has taken possession and control of the Premises. Therefore, the Tysons Corner Lease is no longer part of the Debtor's estate and is not subject to any attempt to sale or assume and assign leases. The Landlord has commenced marketing efforts with respect to this location, and is in the process of re-tenanting this location. The Tysons Corner Lease is included in the Sale Motion and Cure Schedule, so the Landlord includes it in this Objection out of an abundance of caution to protect its rights. The Tysons Corner Lease, however, should be removed from the Sale Motion. In addition, the Debtor also filed a notice of rejection for The Oaks lease in Thousand Oaks, California., with an effective date of rejection of May 17, 2011. The keys for The Oaks Premises have also been returned to the Landlord. This location was not included in the Sale Motion, or in the Cure Schedule. This Lease is also rejected and not subject to further sale or assumption and assignment.

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