MI PUEBLO SAN JOSE, INC.,

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1 0 Heinz Binder (SBN 0) Robert G. Harris (SBN ) Roya Shakoori (SBN ) BINDER & MALTER, LLP Park Avenue Santa Clara, CA 00 Tel: (0) -00 Fax: (0) - heinz@bindermalter.com rob@bindermalter.com roya@bindermalter.com Attorneys for Debtor and Debtor-in-Possession MI PUEBLO SAN JOSE, INC. UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION In re MI PUEBLO SAN JOSE, INC., Debtor. Case No. --ASW Chapter NO HEARING REQUESTED 0 EX PARTE APPLICATION FOR ORDER SHORTENING TIME AND LIMITING NOTICE ON DEBTOR S MOTION FOR ORDER: (I) AUTHORIZING DEBTOR IN POSSESSION TO OBTAIN POSTPETITION FINANCING PURSUANT TO U.S.C. 0,,,, AND ; (II) GRANTING LIENS, SECURITY INTERESTS, AND SUPERPRIORITY CLAIMS; (III) AUTHORIZING USE OF CASH COLLATERAL; (IV) MODIFYING THE AUTOMATIC STAY; (V) SCHEDULING A FINAL HEARING; (VI) PROVIDING WELLS FARGO BANK A RELEASE; AND (VII) GRANTING RELATED RELIEF Debtor and Debtor in Possession herein Mi Pueblo San Jose, Inc. ( Mi Pueblo or Debtor ), hereby moves the Court for an order shortening time ( Application ), setting a hearing on February, 0 at : p.m., on the above-referenced motion (the Motion ), the prompt determination of which is essential to the success of this Chapter case. The Debtor requests that the hearing held in this case be set for the same date and time as the hearing requested on shortened time on a related DIP financing motion (the Cha Cha Motion ) in the related bankruptcy case, Cha Cha Enterprises, LLC ( Cha Cha ), Case No. - EX PARTE APPLICATION FOR ORDER SHORTENING TIME -- Case: - Doc# Filed: 0// Entered: 0// 0:00: Page of

2 0 0. This Application is made pursuant to Federal Rule of Bankruptcy Procedure 00(c) and Bankruptcy Local Rule for the United States District Court for the Northern District of California ( Bankruptcy Local Rule ) 00-. In support of the Application, the Debtor respectfully represents the following: GENERAL BACKGROUND. On July, 0, Mi Pueblo filed a voluntary petition for relief under chapter of title of the United States Code (the Bankruptcy Code ). Mi Pueblo is authorized to operate its business as debtor-in-possession pursuant to sections 0 and 0 of the Bankruptcy Code.. Mi Pueblo was started in when Juvenal Chávez opened his first,000 square foot store called Country Time Meats. Over the following years, Mr. Chávez has built the first store into a chain of supermarkets serving the Hispanic community. Mi Pueblo is a California Corporation. % of Mi Pueblo s equity and all of the membership interests of Cha Cha are owned by the family living trust of Juvenal and Maria Chavez as well as the Chavez three sons, Juvenal Jr., Enrique and Edgar.. Mi Pueblo operates twenty-one grocery stores throughout the Bay Area, Central Coast, and Central Valley in leased premises. In addition, Juvenal Chavez is the CEO/Director of Mi Pueblo; Maria Chavez is the Director/VP of Finance for Mi Pueblo; Juvenal Chavez, Jr. is the Public Affairs Manager of Mi Pueblo; Enrique Chavez is the Operations Analyst for Mi Pueblo; and Edgar Chavez is an analyst for Mi Pueblo.. Cha Cha owns three large properties in Mountain View, Salinas and Watsonville and one parking lot in Oakland which Cha Cha leases to Mi Pueblo. Mi Pueblo operates three grocery stores on these properties ( Owned Properties ). Cha Cha leases from third parties seven additional properties in Hayward, Milpitas, Oakland, San Jose and Vallejo, which Cha Cha then subleases to Mi Pueblo ( Leased Properties ). Mi Pueblo operates five grocery stores and a warehouse/distribution center on these properties. Cha Cha also owns part of a shopping plaza located at Story Road in San Jose which it leases to unrelated third parties as well as to Mi The facts set forth in this Application are supported by the Declaration of Juvenal Chavez filed in support of the above-referenced Motion. APPLICATION FOR ORDER SHORTENING TIME -- Case: - Doc# Filed: 0// Entered: 0// 0:00: Page of

3 0 0 Pueblo for Mi Pueblo s administrative offices ( Shopping Plaza ). In addition, Cha Cha owns two single family residences which Cha Cha leases on a month to month basis. Cha Cha also owns an unimproved parcel of land in San Jose. In addition to the rental of real property, Cha Cha also operates check cashing and other services in the twenty-one Mi Pueblo stores.. Mi Pueblo filed a chapter bankruptcy case due in large part to the Bank declaring non-monetary defaults of certain Mi Pueblo loans, which loans are guaranteed by Cha Cha. These acts also are the precipitating factor for Cha Cha s bankruptcy filing.. Mi Pueblo earns its income from operations. Substantially all of Cha Cha s income derives from rent from Mi Pueblo, as well as Cha Cha s business operations in Mi Pueblo s twenty-one grocery stores. The formulation of Cha Cha s plan of reorganization depends upon Mi Pueblo s future business operations.. By this Motion (and the related Cha Cha Motion), Mi Pueblo and Cha Cha are seeking authority to enter into a debtor in possession financing transaction with the DIP Lenders, in which the DIP Lenders will lend approximately $,000,000 to Mi Pueblo and Cha Cha in two facilities as follows: Mi Pueblo facility in the amount of approximately $. million ( Facility ); Cha Cha facility in the amount of approximately $. million ( Facility ) (collectively, Facility and Facility are referred to as the DIP Loan ). Cha Cha will grant the DIP Lenders a perfected first priority security interest in all of its assets to secure Facility and Mi Pueblo will grant the DIP Lender a first priority on all of its assets as well as a super priority administrative claim, with the exception of cash deposited with Wells Fargo Bank to collateralize renewed letters of credit, against which it shall hold a second priority lien. In addition, Cha Cha will guarantee the repayment of Facility, which guaranty will be secured by a first priority perfected security interest in all of Cha Cha s assets and be a super priority administrative claim; provided, however, DIP Lender shall use its reasonable best efforts to realize upon the Mi Pueblo Collateral with respect to the DIP Loan (Facility ) in order to satisfy the DIP Loan Obligations under the DIP Loan (Facility ) prior to realizing upon the Cha Cha Collateral under the guaranty from Cha Cha. A true and correct copy of the Debtor-in-Possession Term Loan/Lender Sponsored Transaction Term Sheet dated February, 0, which contains the material terms of the DIP APPLICATION FOR ORDER SHORTENING TIME -- Case: - Doc# Filed: 0// Entered: 0// 0:00: Page of

4 0 0 Loan, is attached to the Motion as Exhibit ( DIP Loan Term Sheet ).. The proposed DIP Loan is the first step in an overall restructuring to provide funding for the continued operation of Mi Pueblo and for the ultimate reorganization and exit from bankruptcy by both Mi Pueblo and Cha Cha. The DIP Loan is part of package that is expected to lead to an agreement on exit financing to Mi Pueblo and Cha Cha as part of an overall exit/reorganization strategy for both debtors.. An immediate and critical need exists for Mi Pueblo to obtain funds in order to continue the operations of its businesses, which directly affects Cha Cha s ability to continue the operation of its own business. Without such funds, Mi Pueblo will not be able to, among other things, pay its payroll, pay other direct operating expenses, or obtain goods and services needed to carry on its businesses in a manner that will avoid irreparable harm to, among other entities, Mi Pueblo s estate, creditors, vendors, suppliers, customers, and employees. 0. In its Motion, Mi Pueblo requests an order approving the use of property of the estate other than in the ordinary course of business, approving the Debtor s incurring of debt, and approving the settlement of the Wells Fargo claims. Specifically, Mi Pueblo requests an order () Authorizing Mi Pueblo to enter into the DIP Loan transaction with the DIP Lenders in accordance with the terms in the DIP Loan Term Sheet and the proposed Interim and Final Orders, and to take all actions necessary to consummate the DIP Loan, () Authorizing and approving Cha Cha to grant priming liens on all of its current and future property as collateral and super priority claims in connection with the proposed debtor in possession financing, () Authorizing Mi Pueblo to make payment to Wells Fargo Bank, N.A. on the Mi Pueblo Bank Debt in exchange for a release to enable Mi Pueblo to grant first priority liens to the DIP Lenders to secure the DIP Loan in accordance with the DIP Loan Term Sheet and providing a release in exchange for discounted payoff, () Authorizing and approving the use of cash collateral, () Approving modification of the automatic stay to the extent necessary to implement and enforce the terms and provisions of the debtor in possession financing, and () Setting a final hearing on the Motion. As stated above, Cha Cha has filed the Cha Cha Motion, a companion motion in its chapter case to approve the Cha Cha component of the proposed financing. APPLICATION FOR ORDER SHORTENING TIME -- Case: - Doc# Filed: 0// Entered: 0// 0:00: Page of

5 0 0 REASONS WHY A HEARING ON SHORTENED TIME IS NEEDED. This Motion (and the related Cha Cha Motion) requests approval of immediate funding that is critical to the continued operation of Mi Pueblo s business. As discussed above, the proposed DIP Loan is the first step in an overall restructuring to provide funding for the continued operation of Mi Pueblo and for the ultimate reorganization and exit from bankruptcy by both Mi Pueblo and Cha Cha. The DIP Loan is part of a package that is expected to lead to an agreement on exit financing to Mi Pueblo and Cha Cha as part of an overall exit/reorganization strategy for both debtors.. The DIP Loan will allow Mi Pueblo to remain in business as it works toward confirming a plan of reorganization. The continuation of Mi Pueblo s business translates into continuing income for Cha Cha through rents and other business operations, while Cha Cha also works toward confirming its own plan. By contrast, if the DIP Loan is not approved and Mi Pueblo ceases to operate its business, Cha Cha will lose much of its current income stream and its ability to successfully reorganize will be significantly affected. Similarly, there will be no DIP Loan if Cha Cha and its collateral are not made a part of the proposed borrowing.. Therefore, it is critical that approval of the Motion and related Cha Cha Motion be obtained in a timely manner, to enable the Debtor s business income and operations to continue and to maximize recovery for the benefit of creditors.. Based on the foregoing, and based on the discussions made in open court at the January, 0 hearing in which the Court indicated that it would hear this Motion, the Debtor respectfully requests the Court to shorten time to allow the Motion to be heard as soon as possible, specifically, on February, 0 at : p.m. The Debtors request that opposition be filed in writing by February, 0, not later than :00 p.m. Pacific time. WHEREFORE, the Debtor requests the Court to shorten the time required for notice of the Motion as provided herein, set the hearing on the Motion as requested above, and to grant such other relief as is just and appropriate in the circumstances. /// /// APPLICATION FOR ORDER SHORTENING TIME -- Case: - Doc# Filed: 0// Entered: 0// 0:00: Page of

6 Dated: February, 0 BINDER & MALTER, LLP By:/s/ Robert G. Harris ROBERT G. HARRIS Attorneys for Mi Pueblo San Jose, Inc. 0 0 APPLICATION FOR ORDER SHORTENING TIME -- Case: - Doc# Filed: 0// Entered: 0// 0:00: Page of

7 0 Heinz Binder (SBN 0) Robert G. Harris (SBN ) Roya Shakoori (SBN ) BINDER & MALTER, LLP Park Avenue Santa Clara, CA 00 Tel: (0) -00 Fax: (0) - heinz@bindermalter.com rob@bindermalter.com roya@bindermalter.com Attorneys for Debtor and Debtor-in-Possession MI PUEBLO SAN JOSE, INC. UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION In re MI PUEBLO SAN JOSE, INC., Debtor. Case No. --ASW Chapter NO HEARING REQUESTED 0 DECLARATION OF COUNSEL IN SUPPORT OF EX PARTE APPLICATION FOR ORDER SHORTENING TIME ON DEBTOR S MOTION FOR ORDER: (I) AUTHORIZING DEBTOR IN POSSESSION TO OBTAIN POSTPETITION FINANCING AND PROVIDING GUARANTY PURSUANT TO U.S.C. 0,,,, AND ; (II) GRANTING LIENS, SECURITY INTERESTS, AND SUPER PRIORITY CLAIMS; (III) AUTHORIZING USE OF CASH COLLATERAL; (IV) MODIFYING THE AUTOMATIC STAY; (V) SCHEDULING A FINAL HEARING; (VI) PROVIDING WELLS FARGO BANK A RELEASE; AND (VII) GRANTING RELATED RELIEF I, Robert G. Harris, know the following matters to be true of my own, personal knowledge and, if called as a witness, could and would testify competently thereto:. I am a member of the State Bar of California in good standing and am admitted to practice before this Court. I am counsel for debtor and debtor in possession Mi Pueblo San Jose, Inc. ( Mi Pueblo ). I am submitting this declaration in support of the above-referenced DECLARATION OF COUNSEL -- Case: - Doc# - Filed: 0// Entered: 0// 0:00: Page of

8 0 0 application for shortened time.. I declare as follows as required by BLR 00-(c): a. Reasons for Particular Shortening of Time Requested. An immediate and critical need exists for Mi Pueblo to obtain funds in order to continue the operations of its businesses, which directly affects Cha Cha s ability to continue the operation of its own business. Without such funds, Mi Pueblo will not be able to, among other things, pay its payroll, pay other direct operating expenses, or obtain goods and services needed to carry on its businesses in a manner that will avoid irreparable harm to, among other entities, Mi Pueblo s estate, creditors, vendors, suppliers, customers, and employees. b. Previous Time Modifications Related to the Subject of the Request. No request for shortened time has been made with respect to debtor in possession loan from the current lender, much less the proposed discounted pay off of secured creditor Wells Fargo Bank, N.A. or the release proposed for it. c. The Effect of the Requested Time Modification on the Schedule For the Case. The main Chapter case s schedule is not materially impacted by the filing except that shortened time will prevent this case from shifting to liquidation because operations will continue and negotiations over exit financing with VPC will continue. d. Stipulation or Lack Thereof. I contacted attorney for secured claimant Wells Fargo Bank, N.A. (the Bank ) Robert Kaplan, on February, 0, on behalf of both Mi Pueblo and Cha Cha. In a telephone call, we discussed shortened time for a hearing on the DEBTOR S MOTION FOR ORDER: (I) Authorizing Debtor In Possession To Obtain Post petition Financing And Providing Guaranty Pursuant To U.S.C. 0,,,, And ; (II) Granting Liens, Security Interests, And Super Priority Claims; (III) Authorizing Use Of Cash Collateral; (IV) Modifying The Automatic Stay; DECLARATION OF COUNSEL -- Case: - Doc# - Filed: 0// Entered: 0// 0:00: Page of

9 0 (V) Scheduling A Final Hearing; (VI) Providing Wells Fargo Bank A Release; And (VII) Granting Related Relief (the Motion ). Mr. Kaplan indicated that he did not oppose shortened time for a hearing on the Motion on February, 0, at : p.m. and asked that any opposition be filed and served before the close of business on the preceding day. On February, 0, and again on February, 0, I spoke with Eric Goldberg, counsel for the Official Unsecured Creditors Committee (the OCC ). I explained to him that Mi Pueblo and Cha Cha were seeking to proceed with debtor in possession financing on shortened time and the proposed terms thereof. Mr. Goldberg indicated that he could only agree to shortened time if he had until the morning of the hearing to file a written response. After conferring with the Bank s counsel, I concluded that it would be impossible to formulate any response if the OCC s response arrived while parties were traveling to the hearing and sent him an indicating that Mi Pueblo and Cha Cha had to have any reply by the end of February th. On February, 0, Mr. Goldberg agreed the schedule proposed so long as he receives Mi Pueblo s and Cha Cha s filings by p.m. on February, 0. I declare under penalty of perjury of the laws of the United States that the foregoing is true and correct. Executed this th day of February, 0, at Santa Clara, California. 0 /s/ ROBERT G. HARRIS ROBERT G. HARRIS DECLARATION OF COUNSEL -- Case: - Doc# - Filed: 0// Entered: 0// 0:00: Page of