Case CSS Doc 56 Filed 04/06/18 Page 1 of 10 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE. Chapter 11

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1 Case CSS Doc 56 Filed 04/06/18 Page 1 of 10 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE In re CANDI CONTROLS, INC., Debtor. Chapter 11 Case No (CSS) DEBTOR S APPLICATION TO EMPLOY PERKINS COIE LLP AS COUNSEL FOR DEBTOR-IN-POSSESSION NUNC PRO TUNC TO THE RELIEF DATE Candi Controls, Inc., debtor-in-possession in this Chapter 11 case (the Debtor ), respectfully applies to the Court for authorization to employ Perkins Coie LLP as the Debtor s bankruptcy counsel in this Chapter 11 case nunc pro tunc to March 27, In support of this application, the Debtor submits the contemporaneously-filed Verified Statement of Jordan A. Kroop in Support of Debtor s Application to Employ Perkins Coie LLP as Counsel for Debtor-In-Possession Nunc Pro Tunc to the Relief Date (the Kroop Statement ). BACKGROUND Jurisdiction and Venue 1. On March 23, 2018 (the Petition Date ), CGM Partners, LLC, Howard Elias, and Kelly Yang Living Trust filed an involuntary petition in this Court under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. 101 et seq. (the Bankruptcy Code ) against the Debtor. The Debtor filed its Certificate of Counsel Regarding Proposed Order for Relief in Involuntary Case on March 23, The Court entered the Chapter 11 order for relief on March 27, 2018 (the Relief Date ). The Debtor now operates its business and manages its assets as a debtor-in-possession under Bankruptcy Code 1107 and This Court has jurisdiction over this Chapter 11 case under 28 U.S.C. 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware dated February 29, This is a core proceeding under 28 U.S.C. { }

2 Case CSS Doc 56 Filed 04/06/18 Page 2 of (b)(2). Under Rule (f) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the Local Rules ), the Debtor consents to the Court s entry of a final order on this Motion to the extent it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments in connection with this Motion consistent with Article III of the United States constitution. Venue is proper in this district under 28 U.S.C and The statutory bases for the relief this Motion seeks are Bankruptcy Code 105(a), 363(b), and 507(a)(4) and (5) and Bankruptcy Rules 6003 and No official committees have been appointed in this case. No party has requested the appointment of a trustee or an examiner. PERKINS COIE S QUALIFICATIONS 5. Perkins Coie is well-suited to serve as the Debtor s general bankruptcy counsel in this case. With over 1,000 attorneys in 19 offices across the United States and Asia, Perkins Coie has broad-based practice groups with expertise in all areas of law that may be significant in this case including, for example, bankruptcy and restructuring, corporate mergers, acquisitions, and finance, regulatory, real estate, and commercial litigation. Perkins Coie possesses nationally-recognized expertise in bankruptcy matters, having been actively involved in several significant recent Chapter 11 cases representing debtors-in-possession including, among many others, those in which Jordan Kroop, Perkins Coie s lead bankruptcy lawyer in this proposed engagement, has assumed the lead role. 6. Perkins Coie has obtained a detailed familiarity with the Debtor s business, capital structure, and financial affairs. Jordan Kroop began advising the Debtor in January 2018, when the Debtor began exploring alternatives for a restructuring, recapitalization, or other strategy to address its worsening financial condition. Since then, Jordan Kroop has helped the Debtor s management analyze its operational needs, its liquidity crisis, and its legal and financial options. When it became clear that a Chapter 11 filing was in the best interests of the Debtor and its creditors, the Debtor engaged Perkins Coie to serve as general bankruptcy { } 2

3 Case CSS Doc 56 Filed 04/06/18 Page 3 of 10 counsel in connection with the planning and implementation of a voluntary Chapter 11 case, which was preceded by the involuntary petition that ultimately resulted in the entry of a the Chapter 11 order for relief noted above. Perkins Coie has the necessary background to deal effectively with the full range of potential legal issues and problems that may arise in the context of this Chapter 11 case. 7. Perkins Coie believes it has assembled a highly qualified team of attorneys to serve the Debtor during this Chapter 11 case. Jordan Kroop is a partner in Perkins Coie s Bankruptcy and Restructuring group and will lead the representation of the Debtor in this case. He has more than 23 years experience in reorganization cases representing business debtors, lenders, creditors committees, and acquirers in locally- and regionally-focused cases and in cases of national scope. SERVICES TO BE RENDERED 8. The Debtor proposes to employ Perkins Coie to render the following services in this Chapter 11 case: a. advise the Debtor with respect to its powers and duties as debtor-in-possession in the continued management and operation of its business and property; b. attend meetings and negotiate with representatives of creditors and other parties in interest and advising and consulting on the conduct of this Chapter 11 case, including all the legal and administrative requirements of operating in Chapter 11; c. assist the Debtor with the preparation of its Schedules of Assets and Liabilities and Statement of Financial Affairs; d. advise the Debtor in connection with any contemplated sales of assets or business combinations, formulate and implement appropriate procedures with respect to the closing of any such transactions, and counsel the Debtor in connection with such transactions; e. advise the Debtor in connection with any post-petition financing arrangements and negotiating and drafting related documents, providing advice and counsel with respect to prepetition financing agreements and their possible restructuring; { } 3

4 Case CSS Doc 56 Filed 04/06/18 Page 4 of 10 f. advise the Debtor on matters relating to the assumption, rejection, or assignment of unexpired leases and executory contracts; g. advise the Debtor with respect to legal issues arising in or relating to the Debtor s ordinary course of business including attendance at senior management meetings and meetings with the Debtor s board of directors; h. take all necessary action to protect and preserve the Debtor s estate, including the prosecution of actions on its behalf, the defense of any actions commenced against it, negotiations concerning all litigation in which the Debtor is involved, and objecting to claims filed against the Debtor s estate; i. prepare, on the Debtor s behalf, all motions, applications, answers, orders, reports, and papers necessary to the administration of the estate; j. negotiate and prepare on the Debtor s behalf, if necessary and advisable under the circumstances, a Chapter 11 plan, related disclosure statement, and all related agreements and documents and taking any necessary action on the Debtor s to obtain confirmation of that plan; k. attend meetings with creditors and other third parties and participate in negotiations with respect to the above matters; l. appear and advance the Debtor s interests before this Court, any appellate courts, and the US Trustee; and m. perform all other necessary legal services and provide all other necessary legal advice to the Debtor in connection with this Chapter 11 case. 9. Perkins Coie has stated its willingness to act as Debtor s general bankruptcy counsel in this Chapter 11 case and to render the services described above. Perkins Coie will be associating with The Rosner Law Group as local co-counsel in Wilmington for the purposes of this Chapter 11 case and will at all times endeavor to avoid any duplication of effort. { } 4

5 Case CSS Doc 56 Filed 04/06/18 Page 5 of 10 DISINTERESTEDNESS 10. To the best of the Debtor s knowledge, information, and belief, based on and other than as set forth in the Kroop Statement: a. Perkins Coie does not hold or represent an interest adverse to the Debtor s estate and is a disinterested person, as that term is defined in Bankruptcy Code 101(14) and modified by 1107(b), with respect to the matters for which Perkins Coie is to be employed; b. No Perkins Coie partner, counsel, or associate has any connection with the Debtor, its creditors, its estate, any United States District Judge or United States Bankruptcy Judge for the District of Delaware, the United States Trustee for Region 3 or any person employed in the Wilmington, Delaware office of the United States Trustee, or any other party in interest, or their respective attorneys and accountants; c. The disclosure made by Perkins Coie in the Kroop Statement (regarding connections with the Debtor, its creditors, any other parties in interest in this case, their respective attorneys and accountants, any United States District Judge or United States Bankruptcy Judge for the District of Delaware, the United States Trustee for Region 3 or any person employed in the Wilmington, Delaware office of the United States Trustee) satisfies the requirements of Bankruptcy Rule COMPENSATION 11. On January 18, 2018, in accordance with Perkins Coie s engagement agreement with the Debtor, Perkins Coie requested and received from the Debtor an advance payment in the amount of $10,000 (the First Advance ) to compensate Perkins Coie for its fees and expenses to be incurred in advising the Debtor and its board regarding possible restructuring alternatives. Between the date of the First Advance and February 28, 2018, Perkins Coie provided services to the Debtor and incurred fees of approximately $4, (which did not exceed the First Advance). On February 28, 2018, in accordance with Perkins Coie s revised engagement agreement with the Debtor that contemplated the need for a formal Chapter 11 { } 5

6 Case CSS Doc 56 Filed 04/06/18 Page 6 of 10 proceeding, Perkins Coie requested and received from the Debtor an advance payment in the amount of $50,000 (the Second Advance ) to compensate Perkins Coie for its fees and expenses to be incurred in advising the Debtor through the anticipated commencement of a Chapter 11 case. Perkins Coie agreed to provide all services in preparation of a Chapter 11 proceeding up to the point of a voluntary filing for fees not to exceed the amount of the Second Advance and any remaining amount of the First Advance (together, the Total Advance ). Perkins Coie s services in connection with the preparation for this Chapter 11 case were confined to the month of March Fees and expenses associated with those services totaled, on a time and materials basis, more than the Total Advance but Perkins Coie agreed when it received the Second Advance that its compensation would be limited to the Total Advance and that it would waive any entitlement to amounts incurred prepetition (or more precisely in this case, pre-relief Date) in excess of the Total Advance. 12. Accordingly, Perkins Coie has been compensated for all known fees and reimbursed for all known expenses incurred before the Relief Date. (The filing fee paid to this Court on the Petition Date was paid by the petitioning creditors.) None of the Total Advance remains unapplied as of the Relief Date. 13. Within one year before the Petition Date, Perkins Coie received $60, on account of its prepetition services to the Debtor. 14. Perkins Coie will provide the Debtor with periodic (no less than monthly) invoices for services rendered and disbursements incurred. During the course of this Chapter 11 case, the issuance of periodic invoices will constitute requests for interim payment against the total reasonable fees and reimbursable expenses to be determined and paid only in accordance with orders of the Court. 15. Perkins Coie s fees are based on its customary hourly rates, which are periodically adjusted in accordance with Perkins Coie s policy. Based on the engagement agreement, Perkins Coie and the Debtor have agreed that Perkins Coie s bundled rate structure will apply to this case and, therefore, Perkins Coie will not be seeking to be separately { } 6

7 Case CSS Doc 56 Filed 04/06/18 Page 7 of 10 compensated for certain staff, clerical, and resource charges. Presently, Perkins Coie s hourly rates range between approximately $300 to $1,100 for lawyers, and $125 to $350 for paralegals. In consideration of the needs of this case, Jordan Kroop s hourly rate for 2018 in this case is $657. These hourly rates are subject to periodic increases in the normal course of Perkins Coie s business, usually as of January 1, and sometimes to respond to changes in the prevailing legal market. 16. Consistent with its policy with respect to its other clients, Perkins Coie will charge the Debtor for certain out-of-pocket disbursements incurred in the rendition of services. Perkins Coie does not intend to request reimbursement of normal overhead expenses or any expenses associated with items such as telephone charges, photocopying, or computer-based research. Perkins Coie does intend to seek reimbursement for reasonable, necessary travel expenses, meals, Federal Express, witness fees and other costs related to trials and hearings, and other incidental expenses reimbursable within the guidelines promulgated by the Executive Office of the US Trustee. 17. Perkins Coie intends to maintain detailed, contemporaneous time records (in sixminute increments) and to apply to the Court for allowance of compensation for professional services rendered and reimbursement of charges and disbursements incurred in this Chapter 11 case in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and the orders of this Court. Perkins Coie will seek compensation for the services of each attorney and paralegal acting on the Debtor s behalf at the then-current rate charged for such services in a non-bankruptcy matter. 18. Perkins Coie has agreed to accept the compensation the Court allows on the basis of: (i) professional time spent; (ii) rates charged; (iii) the necessity of the services performed to the administration of the estate; (iv) the reasonableness of the time within which the services were performed in relation to the results achieved; and (v) the complexity, importance, and nature of the problems, issues, or tasks addressed. { } 7

8 Case CSS Doc 56 Filed 04/06/18 Page 8 of No agreement or understanding in any form or guise exists between Perkins Coie and any other person for a division of compensation for services rendered in or in connection with this case, and no such division of compensation prohibited by Bankruptcy Code 504 will be made, except among partners of Perkins Coie. Other than as set forth above, no arrangement is proposed between the Debtor and Perkins Coie for compensation to be paid in this Chapter 11 case. 20. The Debtor believes that Perkins Coie is well-qualified to represent the Debtor effectively and efficiently in this Chapter 11 case. Perkins Coie s resources, capabilities, and experience in advising the Debtor are crucial to a successful case outcome. As such, the Debtor believes that employing Perkins Coie is in the best interests of the Debtor, its estate, its creditors, and all parties-in-interest. RELIEF REQUESTED 21. By this Application, the Debtor seeks to employ Perkins Coie as its general bankruptcy counsel and respectfully requests entry of an order under Bankruptcy Code 327(a) and 329, and Bankruptcy Rules 2014(a), 2016, and 6003, substantially in the form attached to this application as Exhibit A, authorizing the Debtor to employ Perkins Coie as its counsel effective as of the Relief Date. 22. Bankruptcy Code 327(a) provides that a debtor-in-possession, subject to Court approval: may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the [debtor-inpossession] in carrying out the [debtor-in-possession s] duties under this title. 23. The relief sought in this application is justified and appropriate under Bankruptcy Code 327(a). It is well recognized in this district and others that a business entity must be { } 8

9 Case CSS Doc 56 Filed 04/06/18 Page 9 of 10 represented by counsel to appear in court. 1 Accordingly, the Debtor is technically unable to proceed in this Chapter 11 case without this Court s approval of Perkins Coie as its counsel. The Debtor would be unable to seek the essential relief needed in the earliest stages of this case because the Debtor is a business entity that cannot appear without counsel. 24. Even beyond the first days of this case, the Debtor needs Perkins Coie s advice in stabilizing business operations, negotiating with key creditor constitutions, and utilizing the tools available in Chapter 11 to reorganize the Debtor s financial affairs and maximize the value and operational continuity of the Debtor s business. Failure to have all of Perkins Coie s resources readily and immediately available would jeopardize the ultimate outcome of this Chapter 11 case. 25. Bankruptcy Rule 6003 was revised as of December 1, As revised, the Court may not, within 21 days after filing of the petition, issue an order granting an application under Bankruptcy Rule 2014 unless necessary to avoid immediate and irreparable harm. Rule 6003 limits the timing of the entry of certain orders, but does not prevent the Court from making such an order retroactively effective as of the Petition Date. If the Court does not regard the entry of an order granting this application as necessary to avoid immediate and irreparable harm, making that order retroactive to the Relief Date complies with Bankruptcy Rule See, e.g., Rowland v. California Men s Colony, 506 U.S. 194, , (1993); Palazzo v. Gulf Oil Corp., 764 F.2d 1381, 1385 (11th Cir. 1985); see also In re K.M.A., Inc., 652 F.2d 398, 399 (5th Cir. 1981). { } 9

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11 Case CSS Doc 56-1 Filed 04/06/18 Page 1 of 3 EXHIBIT A Proposed Form of Order { }

12 Case CSS Doc 56-1 Filed 04/06/18 Page 2 of 3 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: CANDI CONTROLS, INC., 1 Debtor. : : : : : : Chapter 11 Case No (CSS) Re: D.I. ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF PERKINS COIE LLP Upon consideration of the Debtor s Application to Employ Perkins Coie LLP as Counsel for Debtor-in-Possession Nunc Pro Tunc to the Relief Date (the Application ), pursuant to 327(a) of the Bankruptcy Code 2 and Bankruptcy Rule 2014(a) and Local Rule ; and upon consideration of the Verified Statement of Jordan Kroop, wherein the relationships between Perkins Coie LLP and various creditors of the Debtor and parties in interest in this Chapter 11 Case, if any, are disclosed; and wherein it is represented that Perkins Coie LLP neither holds nor represents any interest materially adverse to the Debtor; and upon the record of this Chapter 11 Case; and the Court having found that Perkins Coie LLP is a disinterested person, as referenced in Bankruptcy Code 327(a) and as defined in Bankruptcy Code 101(14), as modified by 1107(b); and the Court having jurisdiction to consider the Application and the relief requested therein in accordance with 28 U.S.C. 157 and 1334; and it appearing that the retention of Perkins Coie LLP is in the best interest of the Debtor s estate and its creditors; and it appearing that notice of the Application was adequate and proper under the circumstances of this case, and it appearing 1 The last four digits of the Debtor's federal tax identification number are The Debtor's principal place of business is located at th Street, Third Floor, Oakland, CA Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Application. { }

13 Case CSS Doc 56-1 Filed 04/06/18 Page 3 of 3 that no further notice of the Application is required; and the Court having found that good and sufficient cause exists for granting the Application; it is hereby ORDERED, that the Application is granted; and it is further ORDERED, that the Debtor is authorized, pursuant to 327(a) of the Bankruptcy Code and Bankruptcy Rule 2014(a) and Local Rule , to employ and retain Perkins Coie LLP as counsel to the Debtor in this Chapter 11 Case upon the terms and conditions set forth in the Application; and it is further ORDERED, that Perkins Coie LLP s retention shall be effective nunc pro tunc to the Order for Relief; and it is further ORDERED, that all compensation to Perkins Coie LLP for services rendered to the Debtor, and reimbursement of expenses incurred in connection therewith, shall be pursuant to periodic applications to be submitted to and approved by this Court during the pendency of this case, in accordance with Bankruptcy Code 327, 330 and 331, such Bankruptcy Rules and Local Rules of this Court as may then be applicable, and any orders of this Court governing such matters; and it is further ORDERED, that this Court shall retain jurisdiction over all matters arising from or related to the interpretation and implementation of this Order. Dated: April, 2018 Wilmington, Delaware United States Bankruptcy Judge { }