Case KG Doc 6 Filed 10/05/15 Page 1 of 15 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE. Chapter 11

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1 Case KG Doc 6 Filed 10/05/15 Page 1 of 15 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: CITY SPORTS, INC., et al., Chapter 11 Case No. 15- ( ) Debtors. 1 (Joint Administration Requested) MOTION OF THE DEBTORS FOR ENTRY OF INTERIM AND FINAL ORDERS (I) AUTHORIZING THE CONTINUED USE OF THE DEBTORS CASH MANAGEMENT SYSTEM, EXISTING BANK ACCOUNTS AND BUSINESS FORMS, AND (II) EXTENDING THE TIME TO COMPLY WITH THE REQUIREMENTS OF SECTION 345(b) OF THE BANKRUPTCY CODE City Sports, Inc. and City Sports-DC, LLC, as debtors and debtors in possession in the above-captioned Chapter 11 cases (together, the Debtors ), hereby submit this motion (the Motion ) for entry of interim and final orders, substantially in the forms attached hereto as Exhibits A and B, respectively, (i) authorizing, but not directing, the Debtors to continue to use their existing cash management system, bank accounts and business forms, and (ii) granting the Debtors a 45-day extension to comply with the investment and deposit requirements of Section 345(b) of the Bankruptcy Code or file a motion seeking an additional extension or a waiver of the requirements of section 345(b). In support of the Motion, the Debtors rely upon and fully incorporate by reference the Declaration of Andrew W. Almquist in Support of Chapter 11 Petitions and First Day Motions (the First Day Declaration ), filed with the Court concurrently herewith. In further support of the Motion, the Debtors respectfully represent as follows: 1 The Debtors in these Chapter 11 cases, together with the last four digits of each Debtor s federal tax identification number, are as follows: City Sports, Inc.. (6205); and City Sports-DC, LLC (6205). The mailing address for the Debtors, solely for purposes of notices and communications, is: 77 N. Washington Street, Boston, MA EAST\

2 Case KG Doc 6 Filed 10/05/15 Page 2 of 15 JURISDICTION AND VENUE 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This is a core proceeding within the meaning of 28 U.S.C. 157(b). Venue is proper in this district under 28 U.S.C and The statutory bases for the relief requested herein are sections 105(a), 345(b) and 363 of title 11 of the United States Code, as amended (the Bankruptcy Code ), Rules 6003 and 6004 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and rules and of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the Local Rules ). BACKGROUND 3. On the date hereof (the Petition Date ), the Debtors commenced these bankruptcy cases (the Chapter 11 Cases ) by filing voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. The Debtors continue to manage and operate their businesses as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 4. No trustee, examiner or official committee of unsecured creditors has been appointed in these Chapter 11 Cases. Concurrently with the filing of this Motion, the Debtors filed a motion requesting joint administration of these Chapter 11 Cases. 5. The factual background regarding the Debtors, including their business operations, their capital and debt structure, and the events leading up to the filing of these Chapter 11 Cases, as well as the facts and the circumstances supporting the relief requested herein is set forth in detail in the First Day Declaration. EAST\

3 Case KG Doc 6 Filed 10/05/15 Page 3 of 15 THE DEBTORS CASH MANAGEMENT SYSTEM, BANK ACCOUNTS AND BUSINESS FORMS 6. Prior to the Petition Date, the Debtors employed a cash management system to efficiently collect, transfer, and disburse the funds generated by its business operations (the Cash Management System ). The Cash Management System facilitates the Debtors cash forecasting and reporting and enables the Debtors to monitor and record the collection and disbursement of funds and maintain control over the administration of their Bank Accounts. A chart depicting the flow of funds in the Cash Management System is attached hereto as Exhibit C. 7. City Sports, Inc. has several accounts (collectively, the Bank Accounts ) with the banks listed on Exhibit D in the ordinary course of operating their business. 2 City Sports- DC, LLC does not have any bank accounts. Corporate deposits and checks and cash from sales are deposited into the store depository accounts daily (the Depository Accounts ). The Depository Accounts have minimal or a zero balance at the end of each day as funds are swept daily into the Debtors concentration account (the Concentration Account ). Credit card funding is directly deposited into the Concentration Account. Each day, the funds in the Concentration Account are swept and applied to pay down any outstanding balance under the First Amended and Restated Credit Agreement, dated as of July 28, 2011 (as amended, the Prepetition Credit Agreement ) with Wells Fargo Bank, National Association ( Wells Fargo ) as a lender and as agent for the lenders that are from time to time parties to the Prepetition Credit Agreement (together, with Wells Fargo in its capacity as a lender, the Lenders ). 8. In order to fund payroll, operating expenses, and other disbursements, an advance is made under the Prepetition Credit Agreement to fund the Debtors operating account (the 2 The Debtors believe that the list of Bank Accounts attached as Exhibit D is complete but reserve the right to supplement such list in the event the Debtors have inadvertently omitted a Bank Account. EAST\

4 Case KG Doc 6 Filed 10/05/15 Page 4 of 15 Operating Account ). The funds in the Operating Account are then distributed to the payroll and disbursement accounts on an as needed basis for payment to third parties. ACH and wire transfers clear from the Operating Account. 9. In the ordinary course of business, the Debtors use a number checks and other business forms, including electronic forms and paper forms, preprinted letterhead and related documents (collectively, the Business Forms ). Because the Business Forms were used prepetition, they do not reference the Debtors current status as debtors in possession. Most parties that the Debtors do business with will likely be aware of the bankruptcy filing as a result of publicity surrounding these Chapter 11 cases or by the notice of commencement that will be provided to parties in interest. RELIEF REQUESTED 10. By this Motion, the Debtors request entry of interim and final orders, substantially in the forms attached hereto (i) authorizing, but not directing, the Debtors to continue to use their cash management system, existing bank accounts, and business forms, and (ii) granting the debtors a 45 day-extension to comply with the investment and deposit requirements of Section 345(b) of the Bankruptcy Code, or file a motion seeking an additional extension or waiver of the requirements of section 345(b) of the Bankruptcy Code. 11. For the reasons set forth herein, the Debtors submit that the relief requested is necessary to continue the uninterrupted operations of the Debtors business and is the best interest of the Debtors, their estates, creditors, and other parties in interest, and therefore should be granted. EAST\

5 Case KG Doc 6 Filed 10/05/15 Page 5 of 15 BASIS FOR RELIEF A. THE DEBTORS SHOULD BE GRANTED AUTHORITY TO CONTINUE USING THEIR CASH MANAGEMENT SYSTEM AND EXISTING BANK ACCOUNTS. 12. Pursuant to sections 105(a) and 363 of the Bankruptcy Code, the Debtors seek authorization to continue using in the ordinary course of business their cash management system and maintain their existing bank accounts. Moreover, pursuant to Local Rule (a), upon motion of the debtor, the Court may, without notice and hearing, permit the debtor to... use its existing bank accounts. Del. Bankr. L.R (a). 13. Cash Management System. The Debtors seek authority to continue to use their Cash Management System consistent with their prepetition business practices and procedures. The Cash Management System is an ordinary course, essential business practice of the Debtors. The Cash Management System currently in place enables the Debtors to (a) closely control and monitor corporate funds, (b) ensure cash availability, and (c) reduce administrative expenses by facilitating the efficient movement of funds. In light of the manner in which the Debtors generate and track revenues related to their operations, any disruption in the Debtors cash management procedures will hamper the Debtors efforts to preserve and enhance the value of their estates. Altering the Cash Management System may disrupt payments to key vendors and employees. Therefore, it is essential that the Debtors be permitted to continue to use their Cash Management System in accordance with their existing cash management procedures. 14. The Debtors submit that use of the Cash Management System is in the ordinary course of its business. The Debtors also seek authority to implement ordinary course changes to their Cash Management System in the event that the Debtors determine, in their reasonable business judgment, that changes in the Cash Management System would be beneficial to their operations. To the extent that use of the Cash Management System is beyond the ordinary EAST\

6 Case KG Doc 6 Filed 10/05/15 Page 6 of 15 course of the Company s business, such use is nonetheless permitted by sections 363(b)(1) and 105(a). Section 363(b)(1) of the Bankruptcy Code provides, in part, that [t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate. 11 U.S.C. 363(b)(1). Additionally, section 105(a) empowers the Court to issue any order, process, or judgment that is necessary to carry out the provisions of this title. 11 U.S.C. 105(a). 15. The Debtors respectfully submit that under the circumstances, the maintenance of the Debtors 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 creditors. Preserving a business as usual atmosphere and avoiding the unnecessary distractions that inevitably would be associated with any substantial changes to the Cash Management System will (a) facilitate the Debtors stabilization of their postpetition operations and (b) assist the Debtors in their efforts to reorganize and preserve value. 16. Further, the continued postpetition use of debtors cash management systems also has been approved as a routine matter in other bankruptcy cases in this District. See, e.g., In re Restora Healthcare Holdings, LLC, No (PJW) (Bankr. D. Del. Feb. 26, 2014) (authorizing the continued use of the Debtors pre-petition cash management system); In re Orchard Supply Hardware Store Corp., No (CSS) (Bankr. D. Del. June 18, 2013) (authorizing the debtors to continue to maintain, operate and make transfers under their cash management system); In re Rural/Metro Corp., No (KJC) (Bankr. D. Del. Aug. 6, 2013) (authorizing the debtors to continue to manage their cash pursuant to the cash management system they maintained prepetition). 3 3 The referenced orders are voluminous in nature and are not attached to this motion; however, in accordance with Local Rule , as made applicable to main cases by the Court s General Chambers Procedures, undersigned EAST\

7 Case KG Doc 6 Filed 10/05/15 Page 7 of Bank Accounts. As set forth above, the Debtors currently maintain multiple Bank Accounts in the ordinary course of their businesses. Although the Debtors maintain the Bank Accounts as part of an established cash management system, the U.S. Trustee Guidelines require that the Debtors, as debtors in possession, take certain actions with respect to their prepetition Bank Accounts in order for the U.S. Trustee to supervise the administration of the Debtors Chapter 11 Cases. As described in the U.S. Trustee Guidelines, the requirements are designed to (i) draw a clear line of demarcation between prepetition and postpetition transactions and operations, and (ii) prevent inadvertent postpetition payment of prepetition claims. The Debtors submit, however, that a waiver of certain requirements is warranted in these Chapter 11 Cases. 18. In order to ensure that the Debtors vendors continue to provide goods and services to the Debtors, it is critical that the Debtors maintain as much consistency as possible during the early stages of these cases in order to avoid serious disruption to their operations. Changing accounts could significantly and negatively impact Debtors cash flow as it takes a substantial amount of time to open new accounts. 19. Thus, to minimize disruption to the Debtors business while in bankruptcy, the Debtors hereby request that they be permitted to continue to use their Bank Accounts with the same account numbers. Absent this relief, the UST Guidelines would require the Debtors to close all of their prepetition Bank Accounts and open new accounts, which will disrupt the Debtors ability to receive funds from various payors and disrupt the Debtors relationships with critical customers and suppliers, all of whom are accustomed to working with the current Cash Management System. Allowing the Debtors to continue to use their prepetition Bank Accounts will assist the Debtors in accomplishing a smooth transition to operating in chapter 11. counsel has copies of each order and will make them available to the Court or to any party that requests them. Additionally, the Orders are available on the Court s CM/ECF PACER site. EAST\

8 Case KG Doc 6 Filed 10/05/15 Page 8 of Both the Concentration Account (where most of the Debtors cash is held) and the Operating Account (from which funds are disbursed to the various accounts of the Debtors on an as needed basis) are with Wells Fargo Bank, N.A. ( Wells Fargo ), a financially stable banking institution with FDIC insurance. To protect against the unauthorized payment of prepetition obligations, the Debtors represent that if they are authorized to continue to use the Bank Accounts, they will not pay, and Wells Fargo will be directed not to pay, any debts incurred before the Petition Date, other than as authorized by this Court. In the event there are funds currently in an account at a Bank other than Wells Fargo, the Debtors will direct such Bank not to pay any debts incurred before the Petition Date, other than as authorized by this Court. 21. Authority to continue the use of bank accounts has been granted in other chapter 11 cases. See, e.g., In re Restora Healthcare Holdings, LLC, No (PJW) (Bankr. D. Del. Feb. 26, 2014) (authorizing debtors to continue using all of their prepetition bank accounts under the same account numbers); In re Real Mex Restaurants, Inc., No (BLS) (Bankr. D. Del. Oct. 5, 2011) (same); In re Orchard Supply Hardware Store Corp., No (CSS) (Bankr. D. Del. June 18, 2013) (authorizing the debtors to continue to maintain, operate and make transfers under their cash management system) In addition, the Debtors request authority to open and close bank accounts. The Debtors request that the Bank and any other bank be authorized to honor the Debtors requests to open or close any bank accounts; provided, however, any new account that the Debtors open will be with a bank that is organized under the laws of the United States of America or any state therein, and that is insured by the FDIC (any such bank, together with those listed on Exhibit D, 4 The referenced orders are voluminous in nature and are not attached to this Motion; however, in light of the requirements of Local Rule (a)(vii), undersigned counsel has retained copies of each order, and will make them available to the Court or to any party that requests them. EAST\

9 Case KG Doc 6 Filed 10/05/15 Page 9 of 15 the Banks ). Additionally, the Debtors will provide the U.S. Trustee with notice of any new accounts that are opened. 23. Further, the Debtors request that the Banks be permitted to debit the Debtors accounts in the ordinary course of business without the need for further order of this Court for: (a) all checks drawn on the Bank Accounts which are cashed at the Bank s counters or exchanged for cashier s checks by the payees thereof prior to the Petition Date; and (b) all undisputed prepetition amounts outstanding as of the date hereof, if any, owed to the Banks as service charges for the maintenance of the Debtors Cash Management System. The Debtors further request that the Banks be restrained from honoring any check, draft, wire, or electronic funds transfer presented, issued, or drawn on the Bank Accounts on account of a prepetition claim unless (a) authorized in an order of this Court; (b) not otherwise prohibited by a stop payment request received by the Banks from the Debtors; and (c) supported by sufficient funds in the Bank Account in question. 24. Both as part of this Motion and in other motions that have been concurrently filed, the Debtors are requesting authority to pay, in their sole discretion, certain prepetition obligations. With respect to certain of this debt, the Debtors issued checks prior to the Petition Date that have yet to clear the banking system. In other instances, the Debtors will create the relevant check once the Court enters an order permitting the Debtors to do so. The Debtors intend to inform the Banks which of such checks should be so honored. Therefore, the Debtors request that the Banks be authorized and directed to rely on the representations of the Debtors with respect to whether any check or other payment order drawn or issued by the Debtors prior to the Petition Date should be honored. The Debtors further request that any order entered with respect to this Motion specify that the Banks shall not have any liability to any party for relying EAST\

10 Case KG Doc 6 Filed 10/05/15 Page 10 of 15 on such representations. This relief is reasonable and appropriate because the Banks is not in a position to independently verify or audit whether a particular prepetition check may be honored in accordance with an order by the Court or otherwise. B. THE DEBTORS SHOULD BE GRANTED AUTHORITY TO MAINTAIN AND CONTINUE USING BUSINESS FORMS. 25. To minimize expenses to their estates, the Debtors request authority to use their Business Forms that were in existence immediately before the Petition Date. Given that the Business Forms were used prepetition, they do not include references to the Debtors current status as debtors in possession. As is the case with the existing Cash Management System, requiring the Debtors to change existing Business Forms would unnecessarily distract the Debtors from their efforts away from administering these Chapter 11 Cases and impose needless expenses on the estates, without any meaningful corresponding benefit. 26. Due to the nature and scope of the Debtors business operations and the large number of suppliers of goods and services with whom the Debtors deal on a regular basis, it is important that the Debtors be permitted to continue to use the Business Forms without alteration or change and without the Debtor-in-Possession designation. Otherwise, the estates will be required to bear a potentially significant expense that the Debtors believe is unwarranted. However, once the Debtors stock of preprinted checks are depleted, the Debtors will then replace them with checks containing the Debtor-in-Possession designation. 27. No party in interest would be prejudiced in any way by the Debtors continued use of its existing Business Forms. Most parties doing business with the Debtors undoubtedly will be aware of the Debtors status as debtor in possession as a result of the publicity surrounding the Debtors bankruptcy filing and the notice of commencement of these Chapter 11 Cases that has been or will soon be provided to parties in interest. EAST\

11 Case KG Doc 6 Filed 10/05/15 Page 11 of Courts in this district have consistently allowed debtors to use their prepetition checks and other forms without the debtors in possession label. See, e.g., In re Chromcraft Revington, Inc., No (KG) (Bankr. D. Del. March 9, 2015) (authorizing debtors to use their present forms, including preprinted checks, without reference to their status as debtors-inpossession, provided, however, that debtors would start imprinting the legend DIP thereon following depletion of the Debtors preprinted forms); In re Trident Microsystems, Inc., No (CSS) (Bankr. D. Del. Sept. 12, 2012) (same); In re Real Mex Restaurants, Inc., No (BLS) (Bankr. D. Del. Oct. 5, 2011) (same); In re Barnes Bay Dev. Co., No (PJW) (Bankr. D. Del. Mar. 21, 2011) (same) For these reasons, the Debtors submit that the relief requested herein is in the best interest of the Debtors, their estates, creditors, stakeholders and other parties in interest, and therefore, should be granted. C. THE COURT SHOULD ALLOW THE DEBTORS 45 DAYS TO COMPLY WITH THE INVESTMENT AND DEPOSIT REQUIREMENTS OF SECTION 345(b) OF THE BANKRUPTCY CODE. 30. Section 345 of the Bankruptcy Code authorizes deposits or investments of money of a bankruptcy estate, such as cash, in a manner that will yield the maximum reasonable net return on such money, taking into account the safety of such deposit or investment. 11 U.S.C. 345(a). For deposits or investments that are not insured or guaranteed by the United States or by a department, agency, instrumentality of the United States or backed by the full faith and credit of the United States, section 345(b) of the Bankruptcy Code provides that the estate must require from the entity with which the money is deposited or invested a bond in favor of the 5 The referenced orders are voluminous in nature and are not attached to this Motion; however, in light of the requirements of Local Rule (a)(vii), undersigned counsel has retained copies of each order, and will make them available to the Court or to any party that requests them. EAST\

12 Case KG Doc 6 Filed 10/05/15 Page 12 of 15 United States secured by the undertaking of an adequate corporate surety, unless the court for cause orders otherwise. 11 U.S.C. 345(b). 31. A court may relieve a debtor in possession of the restrictions of section 345(b) for cause. Courts have considered a number of factors in seeking to determine whether cause exists pursuant to Bankruptcy Code section 345(b). See In re Serv. Merch. Co., 240 B.R. 894, 896 (Bankr. M.D. Tenn. 1999) (identifying various factors relevant to the existence of cause, including the sophistication and size of the debtor s business, the amounts of the investments involved, bank ratings, the complexity of the case, the debtor s safeguards for the funds, the debtor s ability to reorganize in the face of failure of one or more of the financial institutions, the benefit to the debtor of a waiver of the section 345(b) requirements, the potential harm to the estate, and the reasonableness of such a waiver under the circumstances). 32. Congress has emphasized that the investment and deposit requirements of section 345 of the Bankruptcy Code may be wise in the case of a smaller debtor with limited funds that cannot afford a risky investment to be lost, [but such requirements] can work to needlessly handcuff larger, more sophisticated debtors. H.R. Rep , 103d Cong., 2d Sess. 224 (Oct. 4, 1994), reprinted in 1994 U.S.C.C.A.N. 3340, 3355; 140 Cong. Rec. H10752, H10767 (Oct. 4, 1994). Thus, Congress added the waiver clause in section 345(b) to allow the courts to approve investments other than those permitted by section 345(b) for just cause, thereby overruling In re Columbia Gas Sys., Inc., 33 F.3d 294 (3d Cir. 1994). Id. 33. While the Debtors do not believe the investment and deposit practices in Section 345 of the Bankruptcy are applicable because funds are swept by Wells Fargo on a daily basis, out of an abundance of caution, the Debtors request a 45-day extension to comply with section EAST\

13 Case KG Doc 6 Filed 10/05/15 Page 13 of (b) of the Bankruptcy Code or file a motion seeking an additional extension or waiver of the requirements of section 345(b) of the Bankruptcy Code. IMMEDIATE RELIEF IS NECESSARY TO AVOID IMMEDIATE AND IRREPARABLE HARM 34. Bankruptcy Rule 6003 provides that the relief requested in this Motion may be granted if the relief is necessary to avoid immediate and irreparable harm. Fed. R. Bankr. P The Debtors submit that for the reasons already set forth herein, the relief requested in this Motion is necessary to avoid immediate and irreparable harm to the Debtors. WAIVER OF ANY APPLICABLE STAY 35. The Debtors also request that the Court waive the stay imposed by Bankruptcy Rule 6004(h), which provides that [a]n order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the court orders otherwise. Fed. R. Bankr. P. 6004(h). As described above, the relief that the Debtors seek in this Motion is necessary for the Debtors to operate their businesses without interruption and to preserve value for their estates. Accordingly, the Debtors respectfully request that the Court waive the fourteen-day stay imposed by Bankruptcy Rule 6004(h), as the exigent nature of the relief sought herein justifies immediate relief. NOTICE 36. No trustee, examiner or official committee of unsecured creditors has been appointed in these Chapter 11 Cases. Notice of this Motion has been given to: (i) the Office of the United States Trustee for the District of Delaware; (ii) counsel to Wells Fargo Bank, NA, as the administrative agent under the Debtors prepetition credit facility; (iii) the parties included on the Debtors consolidated list of thirty (30) largest unsecured creditors; (iv) the Internal Revenue Service; and (v) the United States Attorney for the District of Delaware. As this Motion is EAST\

14 Case KG Doc 6 Filed 10/05/15 Page 14 of 15 seeking first-day relief, notice of this Motion and any order entered hereon will be served on all parties required by Local Rule (m). In light of the nature of the relief requested herein, the Debtors respectfully submit that no further notice of this Motion is required. NO PRIOR REQUEST 37. No previous request for the relief sought herein has been made to this Court or any other court. [Remainder of page left intentionally blank.] EAST\

15 Case KG Doc 6 Filed 10/05/15 Page 15 of 15 CONCLUSION WHEREFORE, the Debtors respectfully request that the Court enter interim and final orders, substantially in the forms annexed hereto, granting the relief requested in the Motion and such other and further relief as may be just and proper. Dated: October 5, 2015 Wilmington, Delaware Respectfully submitted, DLA PIPER LLP (US) /s/ Kaitlin M. Edelman Kaitlin M. Edelman (DE 5924) 1201 North Market Street, Suite 2100 Wilmington, Delaware Telephone: (302) Facsimile: (302) kaitlin.edelman@dlapiper.com -and- Gregg M. Galardi (DE 2991; NY ) Dienna Corrado (pro hac vice admission pending) DLA Piper LLP (US) 1251 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) gregg.galardi@dlapiper.com dienna.corrado@dlapiper.com Proposed Counsel to Debtors and Debtors in Possession EAST\

16 Case KG Doc 6-1 Filed 10/05/15 Page 1 of 8 EXHIBIT A Proposed Interim Order EAST\

17 Case KG Doc 6-1 Filed 10/05/15 Page 2 of 8 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: CITY SPORTS, INC., et al., Chapter 11 Case No. 15- ( ) Debtors. 1 (Joint Administration Requested) Re: Dkt. No. INTERIM ORDER (I) AUTHORIZING THE CONTINUED USE OF THE DEBTORS CASH MANAGEMENT SYSTEM, EXISTING BANK ACCOUNTS AND BUSINESS FORMS, AND (II) EXTENDING THE TIME TO COMPLY WITH THE REQUIREMENTS OF SECTION 345(b) OF THE BANKRUPTCY CODE Upon the motion (the Motion ) 2 of the Debtors for an order, pursuant to sections 105, 345 and 363 of the Bankruptcy Code, Bankruptcy Rules 6003 and 6004, and Local Rules and , (i) authorizing, but not directing, the Debtors to continue to use their cash management system, existing bank accounts, and business forms, and (ii) granting the debtors a 45 day-extension to comply with the investment and deposit requirements of Section 345(b) of the Bankruptcy Code, or file a motion seeking an additional extension or waiver of the requirements of section 345(b) of the Bankruptcy Code; all as further described in the Motion; and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 1334; and consideration of the Motion being a core proceeding pursuant to 28 U.S.C. 157(b)(2); and venue being proper in this District pursuant to 28 U.S.C. 1408; and notice of the Motion being adequate and appropriate under the particular circumstances; and a hearing having been held to consider the relief requested in the Motion (the Hearing ); and upon consideration of the First Day Declaration, the record of the Hearing and all proceedings 1 The Debtors in these Chapter 11 cases, together with the last four digits of each Debtor s federal tax identification number, are as follows: City Sports, Inc.. (6205); and City Sports-DC, LLC (6205). The mailing address for the Debtors, solely for purposes of notices and communications, is: 77 N. Washington Street, Boston, MA Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Motion. EAST\

18 Case KG Doc 6-1 Filed 10/05/15 Page 3 of 8 had before the Court; and the Court having found and determined that the relief sought in the Motion is in the best interests of the Debtors estates, their creditors and other parties in interest and that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and any objections to the requested relief having been withdrawn or overruled on the merits; and after due deliberation and sufficient cause appearing therefor, IT IS HEREBY ORDERED THAT: 1. The Motion is GRANTED on an interim basis as set forth herein. 2. The Debtors are authorized to continue to use their existing Cash Management System. In connection with the ongoing utilization of their Cash Management System, the Debtors shall continue to maintain records with respect to all transfers of cash so that all transactions may be readily ascertained, traced, and recorded properly and distinguished between prepetition and postpetition transactions. 3. The Debtors, in their discretion, are authorized, but not directed, to (i) designate, maintain, and continue to use any and all of their Bank Accounts in existence as of the Petition Date, with the same account numbers, including the accounts identified in Exhibit D to the Motion (which is Exhibit 1 annexed hereto), and need not comply with certain operating guidelines relating to bank accounts set forth in the U.S. Trustee Guidelines; (ii) close existing or open new accounts, whether or not such banks are designated depositories in this District; and (iii) treat the Bank Accounts for all purposes as accounts of the Debtors in their capacity as debtors in possession; provided, however, that the Debtors are only authorized to open new accounts (a) with a bank that is organized under the laws of the United States of America or any state therein, and that is insured by the FDIC; and (b) designated a Debtor in Possession account by the relevant bank. EAST\

19 Case KG Doc 6-1 Filed 10/05/15 Page 4 of 8 4. The relief granted in this order is extended to any new Bank Account opened by the Debtors after the date hereof. To the extent the Debtors open or close bank accounts, they shall provide notice to the United States Trustee. 5. The Debtors are authorized to continue to use their existing pre-printed checks and business forms without alteration; provided that once the Debtors existing checks have been used, the Debtors shall, when reordering checks, require the designation Debtor in Possession and the corresponding bankruptcy case number on all checks; provided further that, with respect to checks and business forms that the Debtors or their agents print themselves, the Debtors shall begin printing the Debtor in Possession legend and the bankruptcy case number, on such items within ten (10) days of the date of entry of this Order. 6. Each of the Debtor s Banks is authorized to debit the Debtor s accounts in the ordinary course of business without need for further order of this Court for: (i) all checks, items, and other payment orders drawn on the Debtor s accounts which are cashed at such Bank s counters or exchanged for cashier s checks by the payees thereof prior to the Bank s receipt of notice of filing of the Petition; (ii) all checks, automated clearing house entries, and other items deposited or credited to one of Debtor s accounts with such Bank prior to filing of the Petition which have been dishonored, reversed, or returned unpaid for any reason, together with any fees and costs in connection therewith, to the same extent the Debtor was responsible for such items prior to filing of the Petition; and (iii) all undisputed prepetition amounts outstanding as of the date hereof, if any, owed to any Bank as service charges for the maintenance of the Cash Management System. 7. Any of the Debtor s Banks may rely on the representations of the Debtor with respect to whether any check, item, or other payment order drawn or issued by the Debtor prior EAST\

20 Case KG Doc 6-1 Filed 10/05/15 Page 5 of 8 to filing of the Petition should be honored pursuant to this or any other order of this Court, and such Bank shall not have any liability to any party for relying on such representations by the Debtor as provided for herein. 8. The Debtors are hereby granted a 45-day extension from the Petition Date to comply with the deposit and investment requirements under section 345(b) of the Bankruptcy Code or file a motion for additional time to comply or a waiver of the requirements under section 345(b) of the Bankruptcy Code. 9. The Debtors shall serve a copy of this order on all of the Banks within five (5) business days of the entry of this order, or immediately upon the opening of a new bank account. 10. To the extent applicable, the Court finds and determines that the requirements of Bankruptcy Rule 6003 are satisfied and that the relief requested is necessary to avoid immediate and irreparable harm. 11. Notwithstanding Bankruptcy Rule 6004(h), this order shall be effective and enforceable immediately upon entry hereof. 12. The deadline to object is (the Objection Deadline ). 13. The final hearing to consider entry of a final order granting the relief requested in the Motion on a final basis shall be held on, 2015 at Eastern Time; and any objections to entry of such order shall be in writing, filed with the Court (with a copy to Chambers) and served upon: (i) DLA Piper LLP (US), 1251 Avenue of the Americas, 25th Floor, New York, New York , Attn: Gregg M. Galardi, Esq. and Dienna Corrado, Esq.; (ii) Office of the United States Trustee, J. Caleb Boggs Federal Building, 844 King Street, Suite 2207, Lockbox 35, Wilmington, DE 19801, Attn: Mark Kenney, Esq. and Hannah McCollum, Esq.; (iii) Riemer & Braunstein, Three Center Plaza, 6th Floor, Boston, MA 02110, Attn: David EAST\

21 Case KG Doc 6-1 Filed 10/05/15 Page 6 of 8 S. Berman, Esq.; (iv) Womble Carlyle Sandridge & Rice, LLP, 222 Delaware Avenue, Suite 1501, Wilmington, DE 19801, Attn: Steven K. Kortanek, Esq., and (v) counsel to any statutory committee appointed in these Chapter 11 Cases so that it is actually received on or before the Objection Deadline. 14. This Court shall retain jurisdiction with respect to all matters arising from or related to the implementation or interpretation of this order. Dated:, 2015 Wilmington, Delaware UNITED STATES BANKRUPTCY JUDGE EAST\

22 Case KG Doc 6-1 Filed 10/05/15 Page 7 of 8 EXHIBIT 1 TO INTERIM ORDER EAST\

23 Case KG Doc 6-1 Filed 10/05/15 Page 8 of 8 EXHIBIT D City Sports, Inc. - Bank Accounts 1 Bank Account Number Address Account Type Wells Fargo Bank, NA xxxxxx0086 PO Box San Francisco, CA Operating Wells Fargo Bank, NA xxxxxx0094 PO Box San Francisco, CA Payroll Wells Fargo Bank, NA xxxxxx0626 PO Box San Francisco, CA Control Disbursement Wells Fargo Bank, NA xxxxxx6943 PO Box San Francisco, CA Concentration Wells Fargo Bank, NA xxxxxxxxxx5891 PO Box San Francisco, CA Bank of America, NA xxxxxxxx7421 PO Box Wilmington, DE Citizens Bank, NA xxxxxx6649 PO Box 7000 Providence, RI The Harbor Bank of Maryland xxxxxx Lancaster St, Suite C Baltimore, MD J.P. Morgan Chase Bank, NA xxxxxxxx5965 PO Box San Antonio, TX TD Bank, NA xxxxxx Rte 70 East Cherry Hill, NJ City Sports-DC, LLC does not have any bank accounts. EAST\

24 Case KG Doc 6-2 Filed 10/05/15 Page 1 of 7 EXHIBIT B Proposed Final Order EAST\

25 Case KG Doc 6-2 Filed 10/05/15 Page 2 of 7 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: CITY SPORTS, INC., et al., Chapter 11 Case No. 15- ( ) Debtors. 1 (Joint Administration Requested) Re: Dkt. No. FINAL ORDER (I) AUTHORIZING THE CONTINUED USE OF THE DEBTORS CASH MANAGEMENT SYSTEM, EXISTING BANK ACCOUNTS AND BUSINESS FORMS, AND (II) EXTENDING THE TIME TO COMPLY WITH THE REQUIREMENTS OF SECTION 345(b) OF THE BANKRUPTCY CODE Upon the motion (the Motion ) 2 of the Debtors for an order, pursuant to sections 105, 345 and 363 of the Bankruptcy Code, Bankruptcy Rules 6003 and 6004, and Local Rules and , (i) authorizing, but not directing, the Debtors to continue to use their cash management system, existing bank accounts, and business forms, and (ii) granting the debtors a 45 day-extension to comply with the investment and deposit requirements of Section 345(b) of the Bankruptcy Code, or file a motion seeking an additional extension or waiver of the requirements of section 345(b) of the Bankruptcy Code; all as further described in the Motion; and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 1334; and consideration of the Motion being a core proceeding pursuant to 28 U.S.C. 157(b)(2); and venue being proper in this District pursuant to 28 U.S.C. 1408; and notice of the Motion being adequate and appropriate under the particular circumstances; and a hearing having been held to consider the relief requested in the Motion (the Hearing ); and upon consideration of the First Day Declaration, the record of the Hearing and all proceedings 1 The Debtors in these Chapter 11 cases, together with the last four digits of each Debtor s federal tax identification number, are as follows: City Sports, Inc.. (6205); and City Sports-DC, LLC (6205). The mailing address for the Debtors, solely for purposes of notices and communications, is: 77 N. Washington Street, Boston, MA Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Motion. EAST\

26 Case KG Doc 6-2 Filed 10/05/15 Page 3 of 7 had before the Court; and the Court having found and determined that the relief sought in the Motion is in the best interests of the Debtors estates, their creditors and other parties in interest and that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and any objections to the requested relief having been withdrawn or overruled on the merits; and after due deliberation and sufficient cause appearing therefor, IT IS HEREBY ORDERED THAT: 1. The Motion is GRANTED on a final basis as set forth herein. 2. The Debtors are authorized to continue to use their existing Cash Management System. In connection with the ongoing utilization of their Cash Management System, the Debtors shall continue to maintain records with respect to all transfers of cash so that all transactions may be readily ascertained, traced, and recorded properly and distinguished between prepetition and postpetition transactions. 3. The Debtors, in their discretion, are authorized, but not directed, to (i) designate, maintain, and continue to use any and all of their Bank Accounts in existence as of the Petition Date, with the same account numbers, including the accounts identified in Exhibit D annexed to the Motion (which is Exhibit 1 annexed hereto), and need not comply with certain operating guidelines relating to bank accounts set forth in the U.S. Trustee Guidelines; (ii) close existing or open new accounts, whether or not such banks are designated depositories in this District; and (iii) treat the Bank Accounts for all purposes as accounts of the Debtors in their capacity as debtors in possession; provided, however, that the Debtors are only authorized to open new accounts (a) with a bank that is organized under the laws of the United States of America or any state therein, and that is insured by the FDIC; and (b) designated a Debtor in Possession account by the relevant bank. EAST\

27 Case KG Doc 6-2 Filed 10/05/15 Page 4 of 7 4. The relief granted in this order is extended to any new Bank Account opened by the Debtors after the date hereof. To the extent the Debtors open or close bank accounts, they shall provide notice to the United States Trustee. 5. The Debtors are authorized to continue to use their existing pre-printed checks and business forms without alteration; provided that once the Debtors existing checks have been used, the Debtors shall, when reordering checks, require the designation Debtor in Possession and the corresponding bankruptcy case number on all checks; provided further that, with respect to checks and business forms that the Debtors or their agents print themselves, the Debtors shall begin printing the Debtor in Possession legend and the bankruptcy case number, on such items within ten (10) days of the date of entry of this Order. 6. Each of the Debtor s Banks is authorized to debit the Debtor s accounts in the ordinary course of business without need for further order of this Court for: (i) all checks, items, and other payment orders drawn on the Debtor s accounts which are cashed at such Bank s counters or exchanged for cashier s checks by the payees thereof prior to the Bank s receipt of notice of filing of the Petition; (ii) all checks, automated clearing house entries, and other items deposited or credited to one of Debtor s accounts with such Bank prior to filing of the Petition which have been dishonored, reversed, or returned unpaid for any reason, together with any fees and costs in connection therewith, to the same extent the Debtor was responsible for such items prior to filing of the Petition; and (iii) all undisputed prepetition amounts outstanding as of the date hereof, if any, owed to any Bank as service charges for the maintenance of the Cash Management System. 7. Any of the Debtor s Banks may rely on the representations of the Debtor with respect to whether any check, item, or other payment order drawn or issued by the Debtor prior EAST\

28 Case KG Doc 6-2 Filed 10/05/15 Page 5 of 7 to filing of the Petition should be honored pursuant to this or any other order of this Court, and such Bank shall not have any liability to any party for relying on such representations by the Debtor as provided for herein. 8. The Debtors are authorized to deposit funds in accordance with the Debtors established deposit practices and guidelines in effect as of the commencement of these cases and, to the extent that such deposit practices and guidelines are not consistent with the requirements of section 345(b) of the Bankruptcy Code. 9. The Debtors are granted a 45-day extension from the Petition Date to comply with the deposit and investment requirements under section 345(b) of the Bankruptcy Code or file a motion for additional time to comply or a waiver of the requirements under section 345(b) of the Bankruptcy Code. 10. The Debtors shall serve a copy of this order on all of the Banks within five (5) business days of the entry of this order, or immediately upon the opening of a new bank account. 11. To the extent applicable, the Court finds and determines that the requirements of Bankruptcy Rule 6003 are satisfied and that the relief requested is necessary to avoid immediate and irreparable harm. 12. Notwithstanding Bankruptcy Rule 6004(h), this order shall be effective and enforceable immediately upon entry hereof. 13. This Court shall retain jurisdiction with respect to all matters arising from or related to the implementation or interpretation of this order. Dated:, 2015 Wilmington, Delaware UNITED STATES BANKRUPTCY JUDGE EAST\

29 Case KG Doc 6-2 Filed 10/05/15 Page 6 of 7 EXHIBIT 1 TO FINAL ORDER EAST\

30 Case KG Doc 6-2 Filed 10/05/15 Page 7 of 7 EXHIBIT D City Sports, Inc. - Bank Accounts 1 Bank Account Number Address Account Type Wells Fargo Bank, NA xxxxxx0086 PO Box San Francisco, CA Operating Wells Fargo Bank, NA xxxxxx0094 PO Box San Francisco, CA Payroll Wells Fargo Bank, NA xxxxxx0626 PO Box San Francisco, CA Control Disbursement Wells Fargo Bank, NA xxxxxx6943 PO Box San Francisco, CA Concentration Wells Fargo Bank, NA xxxxxxxxxx5891 PO Box San Francisco, CA Bank of America, NA xxxxxxxx7421 PO Box Wilmington, DE Citizens Bank, NA xxxxxx6649 PO Box 7000 Providence, RI The Harbor Bank of Maryland xxxxxx Lancaster St, Suite C Baltimore, MD J.P. Morgan Chase Bank, NA xxxxxxxx5965 PO Box San Antonio, TX TD Bank, NA xxxxxx Rte 70 East Cherry Hill, NJ City Sports-DC, LLC does not have any bank accounts. EAST\

31 Case KG Doc 6-3 Filed 10/05/15 Page 1 of 1 EXHIBIT C Cash Management System Flow Chart Debtor Account Non-Debtor Account Depository Accounts Concentration Account Wells Fargo Credit Facility Operating Account Payroll Account Disbursement Account EAST\

32 Case KG Doc 6-4 Filed 10/05/15 Page 1 of 1 EXHIBIT D City Sports, Inc. - Bank Accounts 1 Bank Account Number Address Account Type Wells Fargo Bank, NA xxxxxx0086 PO Box San Francisco, CA Operating Wells Fargo Bank, NA xxxxxx0094 PO Box San Francisco, CA Payroll Wells Fargo Bank, NA xxxxxx0626 PO Box San Francisco, CA Control Disbursement Wells Fargo Bank, NA xxxxxx6943 PO Box San Francisco, CA Concentration Wells Fargo Bank, NA xxxxxxxxxx5891 PO Box San Francisco, CA Bank of America, NA xxxxxxxx7421 PO Box Wilmington, DE Citizens Bank, NA xxxxxx6649 PO Box 7000 Providence, RI The Harbor Bank of Maryland xxxxxx Lancaster St, Suite C Baltimore, MD J.P. Morgan Chase Bank, NA xxxxxxxx5965 PO Box San Antonio, TX TD Bank, NA xxxxxx Rte 70 East Cherry Hill, NJ City Sports-DC, LLC does not have any bank accounts. EAST\