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EXHIBIT 10.15(a)
TRADE FINANCING AGREEMENT TERM SHEET
This term sheet with respect to the principle terms of a Trade Financing
Agreement is entered into this 22nd day of July, 1997, subject only to approval
by the United States Bankruptcy Court for the Central District of California
(the "Bankruptcy Court") in Case No. LA 97-27988-VZ (the "Bankruptcy Case"), by
and among Barry's Jewelers. Inc. ("Barry's" or the "Debtor"), the Official
Committee of Unsecured Creditors appointed in the Bankruptcy Case (the
"Creditors' Committee") the Official Committee of Bondholders appointed in the
Bankruptcy Case (the "Bondholder Committee"), and BankBoston, N.A. f/k/a The
First National Bank of Boston (the "Collateral Agent"), Xxxxxxx National Life
Insurance Company, Sanwa Business Credit Corporation and The CIT Group/Business
Credit, Inc. (collectively, the "Bank Group"). Barry's, the Creditors'
Committee, the Bondholder Committee, the Collateral Agent and the Bank Group are
collectively referred to herein as the "Parties."
1. A vendor return program will be open to all of Barry's
prepetition Jewelry vendors. In order to participate in the program, each
participating vendor must execute a Trade Financing Agreement (the "Trade
Financing Agreement") and agree to provide, on the terms set forth herein,
revolving credit for merchandise purchases to Barry's on 90-day terms ("Credit
Merchandise") in an amount equal to two and one-half times the value (as
determined pursuant to Paragraph 2(b) below and hereinafter referred to as
"Value") of the prepetition merchandise to be returned to the participating
vendor (the "Minimum Credit Commitment").
2. Barry's will return to each participating vendor prepetition
merchandise with a Value equal to 75% (or such lesser amount as specified by the
vendor) of the relevant vendor's prepetition claim against Barry's based upon
the provision of prepetition merchandise (the "Prepetition Claim") up to an
aggregate maximum Prepetition Claim amount of $10.55 million (e.g.. the Value of
the prepetition merchandise returned shall not exceed $7.912.500) (the "Maximum
Return Amount").
a. On or before September 30, 1997, returns shall equal no more
than thirty-seven and one-half percent (37.5%) of any particular
participating vendor's Prepetition Claim. No further returns shall be
made until a minimum of thirty (30) days following the bar date
established for filing proofs of claim in the Bankruptcy Case (the "Bar
Date"), which Bar Date shall be no later than October 31, 1997.
Following the Bar Date, if the claims of merchandise vendors exceed
S10.55 million. Barry's shall not return merchandise to any vendor which
exceeds such vendor's pro-rata share of the Maximum Return Amount based
on the face amount of the Prepetition Claims filed and deemed filed by
merchandise vendors. To the extent that the aggregate claims of
merchandise vendors on account of Prepetition Claims subsequently are
reduced. Barry's will return additional merchandise to the vendors, on a
pro-rata basis, up to the Maximum Return Amount.
b. For purposes of the vendor return program, the prepetition
merchandise shall be valued, in accordance with Bankruptcy Code section
546(g), based solely on the purchase price set forth in the prepetition
invoice for such prepetition merchandise, subject to
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verification by Barry's as to accuracy. Barry's will use reasonable and
good faith efforts, in cooperation with the vendor, to identify the
prepetition Invoice pursuant to which the vendor shipped the
merchandise. Should Barry's be unable, despite such reasonable and good
faith efforts, to match the vendor's goods with the vendor's invoices,
the vendor will then nonetheless be required to accept the goods under
the return program, so long as such goods are of the same Category and
to reduce its Prepetition Claim accordingly. The Categories shall be:
(1) Diamond Merchandise; (2) Watches; (3) Gold Merchandise; (4) Colored
Stone Merchandise; and (5) Miscellaneous. Barry's may select the
prepetition merchandise to be returned in its sole and absolute
discretion subject to the requirement that the Value of prepetition
merchandise returned does not exceed the Maximum Return Amount; the
prepetition merchandise to be returned shall not include merchandise
obtained by Xxxxx s on consignment or memo.
3. The prepetition merchandise returned to a vendor shall be
credited dollar-for-dollar against and shall offset the vendor's Prepetition
Claim. Under any plan of reorganization, the return of the prepetition
merchandise shall not be treated as an early "distribution" or xxxx "dividend"
to the vendor on account of the vendor' Prepetition Claim, but rather, the
amount of the vendor's claim entitled to distributions or dividends under such a
plan shall be the amount remaining after the credit and offset of such claim for
the Value of the prepetition merchandise returned.
4. Upon execution of a Trade Financing Agreement with a prepetition
vendor, Barry's shall promptly provide the vendor with an inventory of
approximately fifty percent (50%) of the prepetition merchandise to be returned
to the vendor. Subject to paragraph 2 (including the, Maximum Return Amount)
Barry's shall return the prepetition merchandise to participating vendors no
later than (a) on or prior to September 30, 1997, one week after Barry's receipt
of merchandise with an aggregate Value of $5.54 million (1.4 times the Value of
the prepetition merchandise to be returned prior to September 30, 1997); and (b)
on or after October 1, 1997 and prior to November 30, 1997, one week after
Barry's receipt of merchandise with a Value which when added to the Value of
merchandise received prior to September 30, will equal or exceed $9.9 million.
Barry's must (and is required to) purchase and have received at least $5.54
million of merchandise on or before September 30, 1997 and an aggregate total of
$9.9 million by November 30, 1997.
5. The Collateral Agent shall have liens upon the Credit Merchandise
to the same extent and with the same priority and validity as the liens on the
prepetition merchandise returned hereunder.
6 . Barry's and the vendor will cooperate with each other in
conducting a joint review and reconciliation of Barry's prepetition accounts
payable to the vendor, with a view to determining and agreeing upon the exact
amount of the Prepetition Claim. Pending agreement on the amount of the
Prepetition Claim, solely for purposes of determining the maximum amount of
prepetition merchandise that may be returned initially and credited against the
vendor's Prepetition Claim, Barry's records shall be determinative. If Barry's
and the participating vendor have not reconciled the vendor's Prepetition Claim
before September 1, 1997, the participating vendor may ask the Court to resolve
the dispute. The Collateral Agent, the Bank Group and the Bondholder Committee
shall be deemed parties-in-interest in this reconciliation proceeding before the
Court. If the Court determines that the Prepetition Claim is greater than that
asserted by Barry's, Barry's
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will return additional prepetition merchandise to the vendor as set forth herein
(subject, of course, to the vendor complying with the terms of the Trade
Financing Agreement and to the Maximum Return Amount limitations set forth in
paragraph 2).
7. The Minimum Credit Commitment will continue for one (1) year from
the execution by the vendor of a Trade Financing Agreement but shall terminate
earlier if there is an Event of Default (as defined below) under this Term Sheet
or as set forth herein. Upon an Event of Default under this Term Sheet other
than as set forth in paragraph 8(d) below. all post-petition payables for
merchandise (i) consigned and sold or (ii) shipped on credit pursuant to this
Term Sheet shall be immediately due and payable, and subject to the Amended Cash
Collateral Stipulation, the Trade Subordination and the Trade Trust (1) shall be
paid and (2) all merchandise ordered but not yet received by Barry's shall be
paid for C.O.D.
8. Unless waived in writing by the Creditors' Committee in its sole
discretion, each of the following shall constitute an "Event of Default" under
this Term Sheet and the Trade Financing Agreements:
a. With respect to all participating vendors, default in the
payment or performance of any of Barry's obligations or agreements under
Trade Financing Agreements with participating vendors with Prepetition
Claims totaling in excess of $2 million, which continues for more than
ten (10) business days after such vendors or the Creditors' Committee
gives Barry's written notice thereof, or
b. With respect to all participating vendors, any representation
or warranty made by Barry's in any certificate, statement or agreement,
including but not limited to any of such furnished in connection with
the Trade Financing Agreement to the Committee or participating vendors
with Prepetition Claims totaling in excess of $2 million, should prove
to be false or misleading in any material respect; or
C. An order of the Bankruptcy Court is entered (i) prohibiting
Barry's us, of cash and cash proceeds constituting cash collateral in
an amount sufficient to meet its obligations under Trade Financing
Agreements prior to the confirmation of a plan of reorganization; or
(ii) if the Amended Cash Collateral Stipulation is approved, if at any
time the use of cash collateral is subsequently restricted in a manner
which renders Barry's unable to timely pay its obligations under Trade
Financing Agreements; or (iii) appointing a chapter 11 trustee in the
Chapter 11 Case; or (iv) converting the Chapter 11 Case to a chapter 7;
or (v) dismissing the Chapter 11 Case. The Amended Cash Collateral
Stipulation shall be deemed to provide sufficient cash to satisfy
Barry's obligations under Trade Financing Agreements and shall not
therefore be a basis for a default under clause (i) or (ii) above so
long as it remains in effect in the form agreed to by the Parties.
d. A plan of reorganization is confirmed and becomes effective
which does not provide for (i) all post-petition trade payables to be
paid in full on or before the later of the effective date of the plan or
the date such trade payables become due and payable unless a
participating vendor agrees to a less favorable treatment in its sole
discretion, (ii) all prepetition memo merchandise still in the Debtor's
possession to be paid for in full or
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returned subject to the provisions of paragraph 17 below unless a
participating vendor agrees to a less favorable treatment in its sole
discretion; (iii) the Trade Trust and Subordination to be maintained in
accordance with paragraph 13 hereof; and (iv) satisfying any of Barry's
obligations to return merchandise hereunder which remain unperformed at
confirmation; or
e. The occurrence of a material adverse event that materially
impairs Barry's performance under the Trade Financing Agreements.
The Creditors' Committee (on behalf of participating vendors) shall
be deemed to be the sole beneficiary of the Trade Trust (as hereinafter defined)
which, if there is an Event of Default, shall, after giving the Debtor, the
Collateral Agent, the Bank Group and Bondholder Committee written notice of
default and a ten (10) business day opportunity to cure or obtain injunctive
relief or a judicial determination that an Event of Default has not occurred, be
immediately distributed to participating vendors on a pro-rata basis, based on
participating vendors' claims under Trade Financing Agreements, without further
order of the Court.
9. The following shall constitute an Event of Default under a Trade
Financing Agreement but not under this Term Sheet:
a. With respect to any particular vendor's obligations under its
Trade Financing Agreement, default in the payment or performance of any
of Barry's obligations or agreements under the Trade Financing Agreement
which continues for more than ten (10) business days after the vendor
gives Barry's written notice thereof; or
b. With respect to any particular vendor's obligations under its
Trade Financing Agreement, any representation or warranty made by
Barry's in any certificate, statement or agreement, including but not
limited to any of such furnished in connection with the Trade Financing
Agreement, should prove to be false or misleading in any material
respect.
10. Any material breach of a Trade Financing Agreement by a vendor
which remains uncured for ten (10) business days after the vendor's receipt of
written notice of such alleged material breach, shall result in the vendor
forfeiting all rights and protections under its Trade Financing Agreement.
Barry's agrees to promptly provide written notice of any material breach.
11. Unless waived in writing by the Creditors' Committee in its sole
discretion, any material breach of this Term Sheet by Barry's or the occurrence
of an Event of Default which, in either case, remains uncured for ten (10)
business days after Barry's receipt of written notice of such breach or Event of
Default under this Term Sheet, shall entitle participating vendors to retain all
benefits hereunder but be relieved of any and all further obligations to provide
Barry's with merchandise. Any material breach of a Trade Financing Agreement or
Event of Default under a particular vendor's Trade Financing Agreement which, in
either case, remains uncured for ten (10) business days after Barry's receipt of
written notice of such breach or Event of Default under the particular vendor's
Trade Financing Agreement, shall entitle such vendor to retain all benefits
hereunder but be relieved of any and all further obligations to provide Barry's
with merchandise. All Parties agree to promptly provide written notice of a
material breach or Event of Default.
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12. Each participating vendor must accept orders from Barry's for
the purchase of any goods offered by the vendor for sale to retailers at the
same prices offered by the vendor to the vendor's other mall-based customers of
a similar size ("Similar Customers"), and all shipments must be upon the
industry's normal and customary delivery schedules for the particular type of
merchandise. Any and all Credit Merchandise shall be delivered and accepted
pursuant to written policies and procedures reasonably adopted by Barry's and
reasonably approved by the vendor. Each vendor must accept from Barry's
returns of any and all Credit Merchandise on terms no less favorable than the
vendor extends to Similar Customers.
13.
a. The members of the Bondholder Committee hereby subordinate
four million dollars ($4 million) of the members' allegedly secured
claims to post-petition trade payables relating to the purchase by the
Debtor of Credit Merchandise or to post-petition payables arising out of
the sale of goods consigned by any consignor participating in the
program set forth in the second sentence of paragraph 17 (the "Trade
Subordination") (without prejudice to their rights to seek to adjust any
recovery of the bondholders from the Debtor or their interest in the
collateral (whether through a plan or otherwise) to ensure that in the
event the Trade Subordination is ever enforced, the bondholders will
share the burden of such subordination on a pro-rata basis). The Trade
Subordination is irrevocable and indefeasible.
b. The Debtor agrees to fund promptly upon entry of an order
approving the Amended Cash Collateral Stipulation on a final basis two
million dollars ($2 million) into a trust for the sole benefit of the
Creditors' Committee on behalf of participating vendors hereunder (the
"Trade Trust"). The Debtor may not fund more than $2 million into the
Trade Trust. The Bank Group and the Collateral Agent shall subordinate
their security interests and the replacement liens granted to them under
the Amended Stipulation to the interest granted herein to the vendors in
the Trade Trust. The Trade Trust shall be placed in an interest-bearing
account in a bank that is not affiliated with the Bank Group in the name
of the Creditors' Counting in trust for trade vendors. The Creditors'
Committee, with the cooperation of Barry's, shall have the sole
responsibility for administering the Trade Trust, and neither the Bank
Group nor the Bondholders shall have any such responsibility.
Notwithstanding any other provision of this Agreement, if the Amended
Cash Collateral Stipulation is terminated pursuant to paragraph 17
thereof, the funds in the Trade Trust shall be applied as set forth in
paragraph 18 of the Amended Cash Collateral Stipulation and any funds
remaining shall be immediately returned to the Debtor.
c. If the Trade Trust is eliminated or reduced, the members of
the Bondholders' Committee hereby indefeasibly and irrevocably
subordinate to post-petition trade payables relating to the purchase by
the Debtor of Credit Merchandise or to post-petition payables arising
out of the sale of goods consigned by any consignor participating in the
program set forth in the second sentence of paragraph 17, an additional
amount equal to two million dollars ($2 million) minus any amounts
previously paid to vendors from the
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Trade Trust; provided that the aggregate Trade Subordination shall not
exceed six million dollars ($6 million).
On the Wednesday following the Debtor's funding of the Trade Trust,
the Debtor shall provide the Parties with a borrowing base certificate,
reflecting that, on the date the Trade Trust was funded, the borrowing base had
not been exceeded, and a certificate from the Chief Financial Officer attesting
that there were, to the best of his knowledge, on the date the Trade Trust was
funded, no existing defaults under the Amended Cash Collateral Stipulation.
Within 2 business days after receipt of these certificates, the Collateral Agent
must give the other Parties written notice of any objection to the funding of
the Trade Trust or be forever barred from raising any such objection as to the
Trade Trust, the Creditors' Committee or participating vendors. Thereafter,
subject only to the last sentence of 13(b), the Parties agree that the Trade
Trust will not be subject to challenge even if the Amended Cash Collateral
Stipulation is terminated and shall be maintained solely for the Creditors'
Committee for the benefit of participating vendors. Subject to the Amended Cash
Collateral Stipulation, the Trade Trust and Trade Subordination, all Credit
Merchandise payables arising from goods shipped prior to December 31, 1997 must
be paid in full by the earlier of February 28, 1998 or ninety (90) days
following receipt by Barry's of the invoice for the merchandise in question. On
disbursement (following an Event of Default), the Trade Trust shall first be
disbursed pro-rata to participating vendors based upon the amount of credit such
vendors have outstanding under Trade Financing Agreements. Any funds remaining
following payment in full of all trade payables generated from Credit
Merchandise shall be distributed on a pro-rata basis to vendors who remain owed
post-petition trade payables as a result of memo merchandise sold pursuant to
paragraph 17 hereof. The Trade Trust shall be returned to the Debtor after the
Debtor has paid all trade payables outstanding at the time all Trade Financing
Agreements have either expired or terminated.
14. The participating vendors will receive a superpriority
administrative claim pursuant to Bankruptcy Code Section 364(c)(1) for all
unpaid post-petition trade payables in excess of $6 million subordinate only to
any superpriority administrative claim of the Collateral Agent for a failure of
adequate protection by use of cash collateral.
15. Barry's will offer participation in the Trade Financing
Agreement to every prepetition merchandise vendor and to every vendor from whom
Barry's wishes to order asset merchandise post-petition; provided that vendors
who do not have Prepetition Claims do not receive returns of prepetition
merchandise.
16. Barry's will not use the provisions of Bankruptcy Code section
1129, or any other section of the Bankruptcy Code, to alter its obligations
under the Trade Financing Agreement unless any such alteration is agreed to by
the vendor in its sole discretion. The effectiveness of a plan of reorganization
shall constitute a termination of a Trade Financing Agreement, and all
outstanding payables hereunder shall be paid as set forth in paragraph 8(d)
hereof unless the vendor agrees otherwise. Nothing herein shall constitute an
express or implied obligation by the Bank Group or the members of the
Bondholders' Committee to fund the payments required for a plan to become
effective, including, but not limited to the trade payables referenced in this
paragraph 16.
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17. Barry's will agree to a global UCC filing to cover consigned
goods provided to Barry's post-petition. If a prepetition consignor agrees that
Barry's may sell consigned goods provided to Barry's prepetition, Barry's will
pay the consignor on 30-day terms as the goods are sold; provided however, that
Barry's must sell the prepetition consigned goods for an average of no less than
50% off the retail price for such goods. On or before February 28, 1998, Barry's
may return up to (but not more than) $500,000 at cost of unsold prepetition memo
inventory to vendors and prior to May 1, 1998, Barry's may return up to (but not
more than) an additional $200,000 at cost of prepetition memo merchandise to
vendors (in both cases based upon the price of the goods as set forth in the
prepetition memo for such goods), provided however that to participate under
this paragraph 17, such prepetition memo vendor must have agreed to provide
Barry's with new memo merchandise under the post-petition consignment agreement
equal to or greater than one and one-half times the amount of prepetition memo
inventory returned, and memo vendors in the aggregate must in fact have provided
to Barry's in excess of one hundred-fifty percent (150%) of the prepetition memo
inventory in new memo merchandise. No party shall challenge any payments or
returns made under and in accordance with this paragraph. The Bank Group has no
responsibility for any proration hereunder.
18. This Agreement may be executed in counterparts, each of which
shall constitute an original, and all of which taken together shall be the
Agreement of the signatories. This Agreement will be deemed executed upon
receipt by the Debtor of a faxed or telecopied signature.
19. The Bondholder Committee shall promptly obtain signatures of
each of its members reaffirming the Term Sheet and specifically the Trade
Subordination.
20. This Term Sheet shall be binding upon the Debtor, the Creditors'
Committee, the Collateral Agent, the Bank Group, each member of the Bondholders'
Committee, participating vendors, and each of their respective successors and
assigns and shall inure to the benefit of the Debtor, the Creditors' Committee,
the Collateral Agent, the Bank Group, the Bondholder Committee, participating
vendors, and each of their respective successors and assigns.
21. The Debtor shall move promptly for Court approval of this Term
Sheet, and all Parties hereto shall support, and use their best efforts to
obtain, expeditious entry of an order approving this Term Sheet.
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Agreed to subject only to Bankruptcy Court approval.
Barry's Jewelers. Inc.
By: /s/ XXXXXX X. XXXXXXXXX
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Name: Xxxxxx X. Xxxxxxxxx
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Its: President
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Official Committee of Bondholders
By: /s/ X. XXXXXXXX
-----------------------------------------
Name: X. Xxxxxxxx
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Its: Counsel
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Official Committee of Unsecured Creditors
By: /s/ XXXXXX XXXXXXXXXX
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Name: Xxxxxx Xxxxxxxxxx
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Its: Counsel
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BankBoston. N.A.
f/k/a The First National Bank of Boston
Individually and as Collateral Agent
By: /s/ XXXXXX XXXXXXX
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Name: Xxxxxx Xxxxxxx
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Its: Vice President
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Xxxxxxx National Life Insurance Company
By PPM America, Attorney-in-fact
By: /s/ XXXX XXXXX
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Name: Xxxx Xxxxx
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Its: Vice President
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Sanwa Business Credit Corporation
By: /s/ XXXX X. XXXXX
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Name: Xxxx X. Xxxxx
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Its: Vice President
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CIT Business Credit, Inc.
By: /s/ XXXXX CONBEENEY
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Name: Xxxxx Conbeeney
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Its: Vice President
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XXXXXX XXXXXX XXXXXXXXXX XXXXX
XXXXXXX XXXXXXXX XX XXXXXXXXXX
In re Xxxx Xx. XX 00-00000 VZ
Chapter 11
BARRY'S JEWELERS, INC., a
California corporation; et NOTICE OF ENTRY OF JUDGMENT OR
al., ORDER AND CERTIFICATE OF
MAILING
Debtor
TO: THOSE PARTIES LISTED ON EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN
BY REFERENCE.
You are hereby notified, pursuant to Bankruptcy Rules 7005 and 9022, and
Local Bankruptcy Rule 116(l)(a)(iv), that a judgment* or order entitled ORDER
APPROVING "TRADE FINANCING AGREEMENT TERM SHEET" AND AUTHORIZING (A) DEBTOR'S
ENTRY INTO TRADE FINANCING AGREEMENTS; (B) RETURN OF PREPETITION MERCHANDISE
FREE AND CLEAR OF LIENS AND CLAIMS PURSUANT TO BANKRUPTCY CODE SECTION 546(G);
(C) MAINTENANCE OF TRADE TRUST; AND (D) GRANTING OF SUPERPRIORITY ADMINISTRATIVE
CLAIMS PURSUANT TO TRADE FINANCING AGREEMENTS was entered on .
I hereby certify that I mailed a copy of this notice and a true copy of
the Order or judgment to the above-named persons on_____________________.
DATED: XXX X. XXXXXXX
CLERK OF COURT
By
---------------------------------
Deputy Clerk
If a judgment is by default, then a copy of the judgment must be
attached to this notice.
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Xxxxx Xxxxxx, Esq. Xxxxxxx X. Xxxxxx, Esq. Xxxxxxx Xxxx
Office of the United States Trustee Xxxxxxx Xxxxxxxx & Xxxxx Professional Stroock & Stroock & Xxxxx
000 Xxxxx Xxxxxxxx Xxxxxx Corporation 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Suite 800 0000 Xxxxxxxx Xxxxxxxxx Xxx Xxxxxxx, XX 00000-0000
Los Angeles, XX 00000 Xxxxx 000
Xxx Xxxxxxx, XX 00000
Xxxxxx Xxxxxxxx Xxxxxx Xxxxxxxxxx, Esq. Xx. Xxxxxxx Xxxxxx-Rape, Esq.
Pachulski, Stang, Xxxxx & Xxxxx Xxxxxxx & Xxxxx, LLP Xxxxxxx & Xxxxx
10100 Santa Xxxxxx Boulevard 000 Xxxxx Xxxxxxxx Xxxxxx 0000 Xxxx Xxxxxx
Xxxxx 0000 Xxxxx 0000 Xxxxx 0000
Xxx Xxxxxxx, XX 90067 Xxx Xxxxxxx, XX 00000 Xxxxxx, XX 00000
