WEIL, GOTSHAL & MANGES LLP 

Ray C. Schrock, P.C. (pro hac vice admission pending) 

Ryan Preston Dahl (pro hac vice admission pending) 

Candace M. Arthur (pro hac vice admission pending) 

Daniel Gwen (pro hac vice admission pending) 

767 Fifth Avenue 

New York, New York 10153 

Telephone: (212) 310-8000 

Facsimile: (212) 310-8007

HUNTON ANDREWS KURTH LLP 

Tyler P. Brown (VSB No. 28072) 

Henry P. (Toby) Long, III (VSB No. 75134) 

Nathan Kramer (VSB No. 87720) 

Riverfront Plaza, East Tower 

951 East Byrd Street 

Richmond, Virginia 23219 

Telephone: (804) 788-8200 

Facsimile: (804) 788-8218

Proposed Attorneys for Debtors and Debtors in Possession

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF VIRGINIA 

RICHMOND DIVISION 

------------------------------------------------------------ x 

 : 

In re : Chapter 11 

: 

CHINOS HOLDINGS, INC., et al., : Case No. 20–________ 

 : 

 Debtors.1 : (Joint Administration Requested) 

 : 

------------------------------------------------------------ x 

 

MOTION OF DEBTORS FOR ENTRY OF 

INTERIM AND FINAL ORDERS (I) AUTHORIZING DEBTORS 

TO (A) PAY PREPETITION WAGES, SALARIES, REIMBURSABLE 

EXPENSES, AND OTHER OBLIGATIONS ON ACCOUNT OF COMPENSATION 

AND BENEFITS PROGRAMS AND (B) CONTINUE COMPENSATION 

AND BENEFITS PROGRAMS, AND (II) GRANTING RELATED RELIEF 

 

1

 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification 

number, as applicable, are Chinos Holdings, Inc. (3834); Chinos Intermediate Holdings A, Inc. (3301); Chinos 

Intermediate, Inc. (3871); Chinos Intermediate Holdings B, Inc. (3244); J. Crew Group, Inc. (4486); J. Crew 

Operating Corp. (0930); Grace Holmes, Inc. (1409); H.F.D. No. 55, Inc. (9438); J. Crew Inc. (6360); J. Crew 

International, Inc. (2712); J. Crew Virginia, Inc. (5626); Madewell Inc. (8609); J. Crew Brand Holdings, LLC 

(7625); J. Crew Brand Intermediate, LLC (3860); J. Crew Brand, LLC (1647); J. Crew Brand Corp. (1616); J. 

Crew Domestic Brand, LLC (8962); and J. Crew International Brand, LLC (7471). The Debtors’ corporate 

headquarters and service address is 225 Liberty St., New York, NY 10281. 

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Chinos Holdings, Inc. and its debtor affiliates, as debtors and debtors in possession 

in the above-captioned chapter 11 cases (collectively, the “Debtors”), respectfully represent as 

follows in support of this motion (the “Motion”):2

Relief Requested 

1. By this Motion, pursuant to sections 105(a), 363, and 507(a) of title 11 of 

the United States Code (the “Bankruptcy Code”), the Debtors request entry of interim and final 

orders (i) authorizing, but not directing, the Debtors to (a) pay and honor certain prepetition claims 

and obligations in the ordinary course of business, in the exercise of their sole discretion, relating 

to the business practices, programs, and policies for their employees, non-employee directors, and 

supplemental workforce, including, among other things, prepetition wages, salaries, reimbursable 

expenses, and other obligations on account of the Compensation and Benefits Programs (as defined 

herein) and (b) continue to administer the Compensation and Benefits Programs, and (ii) granting 

related relief. The Debtors are not seeking interim relief with respect to their Non-Insider 

Severance Program, and such relief will be sought at the final hearing on this Motion. 

2. The Debtors further request that the Court (a) authorize all applicable 

financial institutions (collectively, the “Banks”) to receive, process, honor, and pay all checks 

presented for payment and electronic payment requests relating to the foregoing to the extent 

directed by the Debtors in accordance with this Motion and to the extent the Debtors have sufficient 

funds on deposit in their accounts with such Bank, whether such checks were presented or 

electronic requests were submitted before or after the date hereof, and (b) authorize all Banks to 

rely on the Debtors’ designation of any particular check or electronic payment request as 

 

2

 The facts and circumstances supporting the relief requested herein are set forth in the First Day Declaration (as 

defined herein) filed contemporaneously herewith. Capitalized terms used but not defined herein shall have the 

respective meanings ascribed to such terms in the First Day Declaration. 

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appropriate pursuant to this Motion, without any duty of further inquiry, and without liability for 

following the Debtors’ instructions. 

3. A proposed form of order granting the relief requested herein on an interim 

basis is annexed hereto as Exhibit A (the “Proposed Interim Order”), and a proposed form of 

order granting the relief requested herein on a final basis is annexed hereto as Exhibit B (the 

“Proposed Final Order” and together with the Proposed Interim Order, the “Proposed Orders”). 

Jurisdiction 

4. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 

§ 157(b) and 1334, and the Standing Order of Reference from the United States District Court for 

the Eastern District of Virginia, dated July 10, 1984. This proceeding is core pursuant to 28 U.S.C. 

§ 157(b) and may be determined by the Court. Venue is proper before this Court pursuant to 28 

U.S.C. §§ 1408 and 1409. 

Background 

5. On the date hereof (the “Petition Date”), the Debtors each commenced with 

this Court a voluntary case under chapter 11 of the Bankruptcy Code. The Debtors are authorized 

to continue operating their businesses and managing their properties as debtors in possession 

pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory 

committee has been appointed in these chapter 11 cases. 

6. Contemporaneously herewith, the Debtors have filed a motion requesting 

joint administration of their chapter 11 cases pursuant to Rule 1015(b) of the Federal Rules of 

Bankruptcy Procedure (the “Bankruptcy Rules”) and Rule 1015-1 of the Local Rules of the 

United States Bankruptcy Court for the Eastern District of Virginia (the “Local Bankruptcy 

Rules”). 

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7. Additional information regarding the Debtors’ businesses, capital structure, 

and the circumstances leading to the commencement of these chapter 11 cases is set forth in the 

Declaration of Michael J. Nicholson in Support of Debtors’ Chapter 11 Petitions and First Day 

Relief (the “First Day Declaration”), filed contemporaneously herewith and incorporated herein 

by reference. 

The Debtors’ Workforce 

8. As discussed in the First Day Declaration, the Debtors are facing the 

unprecedented health and economic impact of the COVID-19 global pandemic. As the state of 

emergency continues, the Debtors have and continue to implement various cash conservation and 

liquidity enhancing measures to preserve enterprise value until the crisis abates. In particular, the 

Debtors initiated a variety of temporary employee-related measures to ensure public health and 

safety and manage the impact of the crisis until business stabilizes, including closing all retail store 

locations, furloughing Employees (as defined below), reducing certain Employee hours, and 

decreasing the salary of certain field, distribution, and corporate Employees. Unequivocally, the 

Debtors’ Workforce (as defined below) has been materially adversely impacted by the pandemic, 

and they have collectively sacrificed to ensure the Debtors are in a position to meaningfully 

weather the pandemic and successfully restructure during these chapter 11 cases. The Debtors are 

seeking the relief requested in this Motion to ensure they can resume, at the appropriate time, their 

Compensation and Benefit Programs historically in place and honor their obligations to their 

Workforce – the people that have created value for all stakeholders and made the Company’s 

iconic brand a household name. 

9. The Debtors’ Workforce performs a wide variety of critical functions, 

including sales, marketing, design, research and development, quality control, vendor negotiations, 

manufacturing, information technology, administrative, compliance, legal, finance, and 

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management-related tasks. Prior to the Petition Date and before the furlough program that began 

on April 1, 2020 and continues on an as needed basis (the “Furlough Program”),3 the Debtors 

employed approximately 13,000 individuals, approximately 4,000 of whom were employed on a 

full-time basis, and approximately 9,000 of whom were employed on a part-time basis 

(collectively, the “Employees”).4 Approximately 11,500 Employees were paid on an hourly basis, 

and approximately 1,500 Employees were paid a salary. None of the Debtors’ Employees are 

party to a collective bargaining agreements or other similar labor agreements. 

10. The Debtors also utilize the services of temporary workers sourced from 

various staffing agencies (the “Staffing Agencies”) to service their distribution facilities, fulfill 

various short-term roles in the corporate office, and provide additional assistance in their stores 

during peak seasons (the “Temporary Workforce”). The Temporary Workforce is employed on 

an as needed basis and, depending on the season and business needs, may vary in size at a given 

time. As of the Petition Date, and given the increased e-commerce demands and need for 

fulfillment through the Virginia distribution facility, the Temporary Workforce is currently 

operating at levels similar to those seen during peak seasons. 

11. In addition to the Temporary Workforce, the Debtors also employ 

independent contractors throughout the entire organization to perform various services, including, 

without limitation, graphic design, information technology systems management, merchandising, 

 

3

 Under the Furlough Program, the Debtors have placed approximately 11,000 Employees on temporary, unpaid 

furlough. As of the Petition Date, the Debtors have approximately 2,000 active full-time Employees. At the 

appropriate time, the Debtors intend to rehire a sufficient number of Employees, up to the levels in place prior to 

the Furlough Program, which would include rehiring furloughed Employees and/or new employees to the extent 

necessary. Accordingly, this Motion describes the Compensation and Benefit Programs applicable to the Debtors’ 

Employees prior to the Furlough Program. 

4

 The Debtors’ foreign entities provide compensation and benefits programs to Employees in those countries. The 

Debtors do not seek authority to use funds from any Debtor entity to administer any foreign compensation or 

benefit program. 

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procurement, material design, e-commerce, facilities, human resources, and creative marketing 

(the “Independent Workforce”). The terms of the employment, including payment, of the 

Independent Workforce is determined on an individual basis between the Debtors and the 

independent contractor (or the agency such contractor is employed with). The Independent 

Workforce and Temporary Workforce (collectively, the “Supplemental Workforce” and, 

together with the Employees, the Debtors’ “Workforce”) are a critical complement to the work 

performed by the Debtors’ Employees and in many instances create key components of the 

Debtors’ operational infrastructure. 

12. The Debtors are cognizant that the only way to manage a seamless transition 

to normal operations when the government restrictions and public health concerns caused by the 

COVID-19 pandemic subside is to rely on their existing Workforce and those furloughed 

Employees that remain ready and willing to resume working for the Debtors. The Debtors’ 

Workforce includes highly trained individuals who possess invaluable institutional knowledge of 

the Debtors’ business and key relationships with the Debtors’ customers and vendors. The 

Debtors’ failure to honor their obligations to their dedicated Workforce could result in attrition 

during a highly volatile time, upend the Debtors’ reorganization efforts, and jeopardize their 

business as a going concern. By this motion, the Debtors are seeking the authority to retain their 

current Workforce, continue to pay the Staffing Agencies, hire new and/or rehire furloughed 

Employees, in their discretion, and continue the Compensation and Benefits Programs upon which 

the Debtors’ Workforce relies, both as currently in place and – at the appropriate time – as was in 

place before the Debtors took action to conserve liquidity in response to the COVID-19 pandemic. 

Compensation and Benefits Programs 

13. As with similarly situated companies, the Debtors maintain various 

compensation and benefits programs on behalf of their Workforce (each as defined herein and, 

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collectively, the “Compensation and Benefits Programs”), including: (a) Compensation 

Obligations; (b) Employee Incentive Programs; (c) Employee Benefits Programs, and (d) the NonInsider Severance Program (each as defined herein). In addition to the direct costs of the various 

Compensation and Benefits Programs, the Debtors also incur and pay various administrative fees 

and premiums (each an “Administration Fee”) in connection therewith. 

14. As summarized in the following chart and described in further detail below, 

the Debtors estimate that, as of the Petition Date, they owe approximately $7.67 million on account 

of the Compensation and Benefits Programs, $5.87 million of which will become due and payable 

during the period between the Petition Date and the final hearing on the Motion (the “Interim 

Period”): 

Compensation and Benefits Program Interim Amounts Final Amounts 

(Inclusive of 

Interim Amounts) 

Compensation Obligations $2.02 million $3.82 million 

Employee Incentive Programs $0.15 million $0.15 million 

Employee Benefits Programs $3.70 million $3.70 million

Non-Insider Severance Program $0 $0 

Total Compensation and Benefit Obligations $5.87 million $7.67 million 

15. The Debtors believe that none of their current Employees are owed any 

prepetition amounts in excess of the $13,650 cap imposed by sections 507(a)(4) and 507(a)(5) of 

the Bankruptcy Code. Nevertheless, for the avoidance of doubt, the Debtors do not seek authority 

in this motion to pay any Employee prepetition amounts in excess of $the statutory caps. 

A. Compensation Obligations 

(i) Employee Compensation 

16. The Debtors pay Employees’ wages, salaries, and other compensation 

(excluding reimbursable Business-Related Expenses and Paid Time Off (each as defined herein)), 

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on a weekly, bi-weekly, monthly, or less frequent basis (collectively, the “Employee 

Compensation”). The Debtors’ full-time Employees are paid on a bi-weekly basis, which 

accounts for amounts owed for the preceding two weeks. Employees that the Debtors employ on 

an hourly basis are paid weekly, one week in arrears. Prior to the Furlough Program, the Debtors’ 

monthly gross payroll totals were approximately $30.5 million, including Deductions (defined 

below). 

17. The Debtors’ current obligations on account of Employee Compensation 

are significantly lower than average due to the Furlough Program,5

 and the salary reductions the 

Debtors made to Employees, effective as of March 29, 2020, in response to the current market 

instability caused by COVID-19. As of the Petition Date, the Debtors do not owe any amounts on 

account of unpaid Employee Compensation for salaried Employees. With respect to unpaid 

Employee Compensation earned by hourly Employees prior to the Petition Date, the Debtors 

estimate that, as of the Petition Date, the Debtors owe approximately $920,000, all of which will 

become due and payable during the Interim Period. Amounts due on account of unpaid Employee 

Compensation for hourly Employees reflect one week of accrued amounts due to such Employees 

and no Employee is owed Employee Compensation in an amount exceeding the $13,650 cap 

imposed by sections 507(a)(4) of the Bankruptcy Code. The Debtors request the authority to pay 

outstanding prepetition Employee Compensation due to Employees and to continue to pay 

Employee Compensation in the ordinary course of business, including, at the Debtors’ sole 

discretion, at the levels in place before the March 2020 salary reductions and Furlough Program. 

 

5

 Though not currently on the Debtor’s payroll, furloughed Employees are eligible to collect unemployment 

benefits and certain economic relief under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES 

Act”). 

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(ii) Supplemental Workforce Compensation 

18. To compensate the Supplemental Workforce, the Debtors either pay 

members of the Supplemental Workforce directly or pay Staffing Agencies, which then make 

payments to the Supplemental Workforce on the Debtors’ behalf (the “Supplemental Workforce 

Compensation”). The Debtors remit compensation for the Supplemental Workforce as part of 

their regular accounts payable processes, with the frequency of payment varying depending on the 

individual contract or which of the Staffing Agencies manages the Supplemental Workforce. 

19. It is critical that the Debtors are able to continue honoring their obligations 

with respect to the Supplemental Workforce Compensation. Staying current with respect to the 

Supplemental Workforce Compensation will help minimize unnecessary disruption to the Debtors’ 

business at a critical time. The Debtors rely on the Supplemental Workforce to perform many 

tasks that have allowed the Debtors to continue generating revenue despite the temporary closure 

of their retail locations, such as maintaining the information technology infrastructure and staffing 

the distribution centers that service all of the Debtors’ e-commerce customers. The work 

performed by the Supplemental Workforce is essential to the Debtors’ ongoing ability to create 

revenue. Failure to make timely payments on account of the Supplemental Workforce 

Compensation has the potential to cause deleterious effects on the Debtors’ business at all times, 

but especially during this unstable time where they are facing extraordinary external challenges. 

20. On average, the Debtors generally pay approximately $27 million in 

aggregate Supplemental Workforce Compensation each year. As of the Petition Date, the Debtors 

estimate that they owe approximately $2.9 million in Supplemental Workforce Compensation, 

approximately $1.1 million of which will come due and payable during the Interim Period. The 

Debtors do not seek authority to compensate any individual member of the Supplemental 

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Workforce for prepetition services in excess of the statutory cap of $13,650 imposed by section 

507(a)(4) of the Bankruptcy Code. 

21. Accordingly, the Debtors request the authority to continue to retain the 

Supplemental Workforce in the ordinary course of business and consistent with past practices, and 

to continue to honor the Supplemental Workforce Compensation. 

(iii) Director Compensation 

22. Certain of the Debtors maintain boards of directors (or boards of managers, 

as applicable) that include non-Employee independent directors (each, a “Director”). The 

Directors currently receive compensation that generally includes, without limitation, an annual 

retainer, paid on a quarterly basis in cash, amounts on account of serving as a member of a 

committee or chairperson, expense reimbursement for out of pocket expenses, such as outside 

counsel fees, and “per diem” or supplemental compensation for specific activities/service 

(collectively, the “Director Compensation” and, together with the Employee Compensation 

Obligations and Supplemental Workforce Compensation, the “Compensation Obligations”). 

Generally, Directors seek reimbursement of their respective Business-Related Expenses (as 

defined below) incurred in connection with their service on the Debtors’ board of directors by 

submitting receipts to the Debtors’ Chief Financial Officer and, upon review and approval, the 

reimbursement request is funded through the Debtors’ accounts payable system. In some 

instances, Director Compensation related to outside counsel fees is paid directly to outside counsel 

pursuant to a separate engagement agreement with the Debtors. As of the Petition Date, the 

Debtors do not believe they owe any amounts on account of Director Compensation. Although 

the Debtors believe they are authorized to pay any postpetition Director Compensation in the 

ordinary course, out of an abundance of caution the Debtors seek authority to continue to pay 

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Director Compensation, including any outstanding prepetition amounts, on a postpetition basis in 

the ordinary course of business and consistent with their prepetition practices. 

(iv) Payroll Processing Fees 

23. The Debtors utilize Automatic Data Processor, Inc. (“ADP”) to administer 

payroll and several other employee-related benefits programs. Specifically, ADP provides, among 

other things, the Debtors’ payroll processing system and ensures proper tax and benefits 

withholdings are made. The Debtors pay ADP an Administration Fee averaging approximately 

$85,500 (the “Payroll Processing Fees”) per month and such amounts are prepaid in advance. As 

of the Petition Date, the Debtors believe that they do not owe ADP any Payroll Processing Fees. 

Nevertheless, continued payment of the Payroll Processing Fees is important in ensuring the 

smooth functioning of the Debtors’ payroll system. Thus, out of the abundance of caution, the 

Debtors seek authority to pay any Payroll Processing Fees (whether or not related to the prepetition 

period), as they come due in the ordinary course of business. 

(v) Withholding Obligations 

24. Historically, during applicable pay periods, the Debtors deduct certain 

amounts from Employees’ paychecks, including garnishments, levies, child support and related 

fees, 401(k) contributions, and pre-tax contributions to certain of the Employee Benefit Programs 

(as defined herein) (collectively, the “Deductions”). The Debtors transfer the amounts comprising 

such Deductions to various designated third-party recipients. The Debtors deduct an aggregate 

amount of approximately $750,000 on a bi-weekly basis from Employees (other than 

Supplemental Workforce) in Deductions, and such amounts are subsequently remitted by the 

Debtors to the appropriate third-party recipients. As of the Petition Date, Debtors have not 

forwarded to the appropriate third-party recipients approximately $750,000 in Deductions already 

withheld from their prepetition Employee payroll. 

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25. The Debtors also are required by law to withhold amounts from an 

Employee’s gross pay related to federal, state, and local income taxes, Social Security, and 

Medicare taxes for remittance to the appropriate federal, state, or local taxing authorities 

(collectively, the “Withholdings”). The Debtors must then match the Withholdings from their 

own funds and pay, based upon a percentage of gross payroll, additional amounts for state and 

federal unemployment insurance (collectively, the “Employer Payroll Tax” and, together with 

the Withholdings, the “Payroll Taxes”). Typically, the Payroll Taxes, which are not included in 

the outstanding unpaid Employee Compensation amounts set forth above, total approximately 

$2.55 million per payroll for Employees paid on a bi-weekly basis and approximately $950,000 

for Employees paid on a weekly basis. Due to the decreased number of active Employees, the 

Debtors owe approximately $250,000 in Payroll Taxes as of the Petition Date, $180,000 of which 

will become due during the Interim Period. 

26. In response to the COVID-19 pandemic, the Federal Government of the 

United States enacted relief under the CARES Act to allow businesses to defer paying the 

employer portion of contributions under Federal Insurance Contributions Act (“FICA Tax”) on 

account of the social security tax and Medicare tax imposed on Employee earnings. In furtherance 

of the Debtors’ liquidity preservation efforts, the Debtors have elected to defer payment of their 

FICA Tax contributions. 

27. As of the Petition Date, the Debtors estimate that the aggregate amount of 

accrued but unremitted Deductions and Payroll Taxes (together, the “Withholding Obligations”) 

is approximately $1 million, $930,000 of which will come due during the Interim Period. By this 

Motion, the Debtors seek authority to forward to the appropriate third-party recipients, consistent 

with their historical practice, any unremitted Withholding Obligations and to continue to honor the 

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Withholding Obligations in the ordinary course of business on a postpetition basis (whether or not 

related to the prepetition period and, to the extent applicable, in the case of the employer portion 

of FICA Tax contributions, when their FICA Tax deferral period ceases).6

(vi) Business-Related Expenses 

28. In the ordinary course of business, the Debtors provide certain Employees 

with allowances to cover the costs associated with owning or leasing a vehicle (the “Automotive 

Allowance Program”). Allowances under the Automotive Allowance Program are disbursed to 

Employees in fixed amounts and are paid through the Debtors’ payroll system. As of the Petition 

Date, fewer than ten Employees participate in the Automotive Allowance Program. The Debtors 

estimate that the average annual cost of the Automotive Allowance Program is approximately 

$43,200. As of the Petition Date, the Debtors estimate that they do not owe any prepetition 

amounts on account of the Automotive Allowance Program. 

29. Additionally, the Debtors provide Directors and certain Employees 

reimbursements for reasonable and customary expenses incurred in the scope of their employment, 

including but not limited to business-related travel, business office expenses, business phone calls, 

postage, parking, taxis, and tolls (collectively, the “Business-Related Expenses”). Generally, 

Employees directly pay for their respective Business-Related Expenses with a corporate credit 

card issued by American Express in their name and guaranteed by the Debtors (the “Amex Credit 

Cards”). The Debtors provide Amex Credit Cards to Employees with average monthly BusinessRelated Expenses in excess of $500. To the extent an Employee is issued an Amex Credit Card, 

 

6

 Contemporaneously herewith, the Debtors have sought authority, but not direction, to pay certain prepetition 

taxes, assessments, fees, and other charges in the ordinary course of business pursuant to the Motion of Debtors 

for Entry of Interim and Final Orders (I) Authorizing Debtors To Pay Certain Prepetition Tax Obligations, and 

(II) Granting Related Relief (the “Taxes Motion”). The Debtors do not seek relief in this Motion to pay 

prepetition claims that may be covered by the relief sought in the Taxes Motion. 

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it is the Debtors’ policy that all Business-Related Expenses must be charged to the card. Over 500 

Employees have been issued Amex Credit Cards. Those Employees who incur Business-Related 

Expenses in amounts that do not meet the average monthly spend to qualify for an Amex Credit 

Card may also seek reimbursement from the Debtors for qualified expenses. 

30. Employees are reimbursed for the costs associated with paying for qualified 

Business-Related Expenses by submitting requests for reimbursement through the Debtors’ 

reimbursement software provider, Concur Technologies, Inc., a third-party expense consolidator, 

in accordance with the Debtors travel and expense policy. Employees seek reimbursement of their 

respective Business-Related Expenses by submitting receipts to the Debtors’ accounting 

department and, upon review and approval, the reimbursement request is funded through the 

Debtors’ accounts payable system. Business-Related Expenses are typically reimbursed within a 

few days after the expense report or qualifying receipt is approved. 

31. Continuing to reimburse Business-Related Expenses is an important benefit 

provided to the Debtors’ Employees and their Directors, who are incurring expenses for the benefit 

of the Debtors’ enterprise. The Debtors’ failure to honor their obligations under the BusinessRelated Expenses reimbursement program may result in, among other negative impacts, 

Employees being held liable for underlying purchases charged for Business-Related Expenses. 

32. As of the Petition Date, the Debtors believe that all Business-Related 

Expenses have not yet been processed and, in some cases, Employees and Directors may not have 

submitted Business-Related Expenses in time to be processed prior to the Petition Date. Based on 

historical averages, and not accounting for the temporary reductions in Workforce, the Debtors 

estimate a monthly expenditure of approximately $450,000 on account of prepetition BusinessRelated Expenses. The Debtors seek authority, but not the direction, to pay all prepetition amounts 

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owed with respect to the Business-Related Expenses in the ordinary course of business during the 

chapter 11 cases, including all prepetition amounts accrued and outstanding under the Amex Credit 

Cards, and to continue the Amex Credit Card program, as needed, in the ordinary course. 

33. Additionally, in the ordinary course of business, the Debtors pay certain 

expenses incurred by Employees who are required to relocate in connection with their employment 

(the “Relocation Expenses”). The majority of Relocation Expenses are directly billed to the 

Debtors by Cornerstone Relocation Group, the Debtors’ relocation provider. The Relocation 

Expenses include, but are not limited to, costs associated with the acquisition of rented or 

purchased homes, a de minimis Administration Fee paid to Cornerstone Relocation Group for 

services, the transportation of household goods, and temporary living accommodations. On an 

average annual basis, the Debtors spend approximately $1 million on account of Relocation 

Expenses. As of the Petition Date, the Debtors estimate that they owe approximately $70,000 on 

account of Relocation Expenses, approximately all of which will become due and payable during 

the Interim Period. The Debtors seek authority, but not direction, to pay all prepetition amounts 

owed with respect to the Relocation Expenses in the ordinary course of business, including paying 

any Administration Fees related thereto. 

B. Employee Incentive Programs 

34. The Debtors develop and implement certain incentive programs to motivate 

and reward certain of their Employees (collectively, the “Employee Incentive Programs”).7

 The 

 

7

 The relief sought in this Motion with respect to the Employee Incentive Programs does not include the payment 

of any obligations to any “insider” (as that term is defined in section 101(31) of the Bankruptcy Code, an 

“Insider”). For the avoidance of doubt, certain Insiders are also eligible to participate in certain Employee 

Incentive Programs; however, the Debtors are not seeking authority in this Motion to honor any obligations to 

Insiders under any Employee Incentive Programs. The Debtors reserve all rights with respect to the classification 

of any Employee as “Insider” and “non-Insider” and to file a separate motion seeking relief from the Court to 

honor any existing bonus obligations to Insiders or to implement a new postpetition incentive program for such 

Employees. 

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Debtors believe that the Employee Incentive Programs are integral to the Debtors’ business 

operations because they generally align Employees’ interests with those of the Debtors by linking 

payments under the Employee Incentive Programs to the overall performance and efficiency of the 

Debtors’ operations. Further, the Debtors believe that certain Employees who are eligible for 

awards under the Employee Incentive Programs view such awards as an integral part of their 

overall compensation and rely on such awards to pay their living expenses and support their 

families. 

35. Primarily due to store closures, many of the customary Employee Incentive 

Programs are suspended. As of the Petition Date, no amounts are due to Employees on account of 

the LTIP Awards and/or Contract Awards (each as defined below). However, subject to the 

satisfaction of certain conditions, the Debtors may owe approximately $1.8 million on account of 

outstanding obligations under the Employee Incentive Programs related solely to LTIP Awards 

and up to approximately $2 million on account of Contract Awards, although authority to make 

such payments is not being sought in this Motion. Through this Motion, the Debtors seek 

authority, but not direction, to pay any outstanding amounts under the Employee Incentive 

Programs (other than LTIP Awards and Contract Awards) to non-Insider Employees and to 

continue the Employee Incentive Programs, if and when the Debtors determine it is appropriate in 

their sole discretion, in the ordinary course of business on a postpetition basis. The Employee 

Incentive Programs include: 

(i) Annual Incentive Programs 

36. The Debtors maintain an annual incentive program (the “AIP”) designed to 

reward Employees for their individual contributions to the Debtors’ annual operating performance 

based upon the achievement of pre-established performance standards in a given fiscal year. The 

operating and performance metrics, including EBITDA targets, are typically developed and 

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approved by the compensation committee of the Debtors’ board of directors (the “Compensation 

Committee”) in the first quarter of each fiscal year. Payments made to qualifying Employees 

under the AIP (the “AIP Awards”) are based on individual employee performance evaluated at 

the end of the fiscal year, coupled with various metrics established by the Compensation 

Committee to determine the bonus pool. AIP Awards for a given fiscal year are paid at the 

beginning of the following fiscal year. The Debtors are current on all payments due under the AIP 

for fiscal year 2019 and are not seeking authority to pay AIP Awards at this time, but reserve the 

right to seek payment of AIP Awards in the future through a separate motion. 

37. Additionally, certain corporate level Employees participate in the Debtors’ 

long-term incentive program (the “LTIP Awards”) and/or are party to individual contractual 

arrangements pursuant to which they receive a cash incentive award (the “Contract Awards”) 

based on a variety of factors, including the need to retain the Employee, the individual Employee’s 

performance, division performance, overall company performance, or other important corporate 

milestones that generate meaningful value to the entire enterprise. The Debtors believe that, as of 

the Petition Date, no amounts are currently due to Employees on account of the LTIP Awards 

and/or Contract Awards. The Debtors are not seeking authority in this Motion to continue the 

LTIP Awards program or to make payments on account of Contract Awards, but are reserving 

their right to do so at a later date. 

(ii) Field Incentive Programs 

38. Assistant managers, associate managers, district managers, and store 

directors (each, a “Field Manager”) are eligible to participate in incentive programs that are tied 

to the achievement of certain thresholds, such as gross sales, customer enrollment in customer 

rewards or credit programs, and the achievement of a certain number of payroll hours (the “Field 

Incentive Program”). To be eligible to receive payment under the Field Incentive Program, a 

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Field Manager must be employed by the Debtors on the program payout date and reach target sale 

goals as defined by the Debtors’ teams responsible for analyzing finances and/or operations (the 

“Finance/Operations Teams”). In a given bonus period, Field Managers are eligible to earn 

awards (the “Field Incentive Awards”) between 5% and 10% of their combined monthly gross 

earnings, composed of base pay, commissions, Paid Time Off (as defined below), and overtime 

(collectively, the “Gross Earnings”). 

39. Field Incentive Awards are calculated on a monthly basis by the 

Finance/Operations Teams, and Employees are paid Field Incentive Awards in the second biweekly paycheck following the close of the applicable monthly period. In certain instances, the 

Debtors may receive inquiries from Employees who believe they were entitled to receive an award 

but, due to administrative updates and pending reconciliations, were not paid such awards in full 

(the “Omitted Incentive Awards”). As of the Petition Date, primarily due to the temporary store 

closures and the Furlough Program, the Debtors estimate that they do not owe any amounts on 

account of accrued but unpaid Field Incentive Awards and Omitted Incentive Awards. The 

Debtors believe the Field Incentive Awards are ordinary course transactions that do not require 

Court approval; however, out of abundance of caution, the Debtors seek authority to continue the 

Field Incentive Programs on a postpetition basis and honor the related obligations. 

(iii) SPH Incentive Program 

40. Certain store-level Employees responsible for selling merchandise are 

eligible to participate in a bonus program tied to their hourly sales (the “SPH Incentive 

Program”). Performance metrics under the SPH Incentive Program are calculated by dividing 

that Employee’s net sales in a given time period by hours worked in the same time period, 

excluding certain designated time (“SPH Goals”). Qualifying Employees who exceed individual 

SPH Goals are eligible to receive a percentage of their Gross Earnings (the “SPH Awards”) 

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depending on the monetary amount of sales per hour and total sales in the given year. SPH Goals 

are communicated to eligible Employees by their Store Director at the start of a bonus period and 

are set at a store-by-store level by the Finance/Operations Teams. SPH Goals are based on the 

performance or needs of both a particular location and the Debtors at large. Accordingly, SPH 

Goals are subject to change each performance period. 

41. SPH Awards are calculated on a monthly basis by the Finance/Operation 

Teams and paid in the second bi-weekly paycheck following the close of the applicable monthly 

bonus period. Following a payout date, however, the Debtors may receive inquiries from 

Employees on account of Omitted Incentive Awards. 

42. As of the Petition Date, similarly due to the temporary store closures and 

the Furlough Program, the Debtors estimate that they do not owe any amounts on account of 

accrued but unpaid SPH Awards and Omitted Incentive Awards. The Debtors believe the SPH 

Awards are ordinary course transactions that do not require Court approval; however, out of 

abundance of caution, the Debtors seek authority to continue the SPH Awards on a postpetition 

basis and honor the related obligations. 

(iv) Store and Distribution Center Incentive Programs 

43. In addition to the AIP, Field Incentive Programs, and SPH Incentive 

Program, the Debtors have, from time to time, granted awards on an ad hoc basis to store level 

Employees (the “Store Incentive Programs”). Under the Store Incentive Programs, store-level 

Employees may receive incentives to promote the sale of certain merchandise, to reward individual 

or team efforts, or to encourage collegial interaction among Employees. The Debtors believe that 

such Store Incentive Programs are an important method of rotating inventory and maintaining 

Employee morale with a relatively de minimis cost. In 2019, the aggregate cost of the Store 

Incentive Programs was approximately $600,000. In addition, from time to time, the Debtors have 

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also granted perks and additional incentives on an ad hoc basis to distribution center Employees 

(the “DC Incentive Programs”). Under the DC Incentive Programs, distribution center 

Employees may receive incentives to promote attendance and productivity, and to also reward 

individual or team efforts. The Debtors believe that such DC Incentive Programs are vital to 

maintaining e-commerce channel fulfillment at crucial peak times. In 2019, the aggregate cost of 

the DC Incentive Program was approximately $1 million. 

44. The Debtors believe they owe approximately $152,000 in accrued but 

unpaid amounts on account of the DC Incentive Programs and do not owe any unpaid amounts on 

account of the Store Incentive Programs. The Debtors further believe that awards issued pursuant 

to the Store Incentive Programs and DC Incentive Programs are ordinary course transactions that 

do not require Court approval; however, out of an abundance of caution, the Debtors seek authority 

to continue both programs on a postpetition basis and to honor the related obligations (whether or 

not related to the prepetition period), as they come due in the ordinary course of business. 

C. Employee Benefit Programs 

45. In the ordinary course of business, the Debtors maintain various 

employment benefit plans and policies, including, without limitation, a medical plan, a dental plan, 

a vision plan, consumer choice health savings and flexible spending accounts, life insurance, 

accidental death and dismemberment insurance, short and long term disability insurance, statutory 

disability benefit programs, homeowners insurance, critical illness insurance, hospital indemnity 

insurance, accident insurance, legal assistance, identity theft protection, a work-life employee 

assistance program, severance programs, vacation and other paid time off policies, Employee 

discount programs, and other Employee programs (collectively, the “Employee Benefit 

Programs”). The Employee Benefit Programs are generally available to active, full-time 

Employees and other Employees determined by the Debtors, such as certain furloughed 

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Employees, and does not include the Supplemental Workforce (collectively, the “Eligible 

Employees”).8

46. The Debtors believe that continuing to honor their obligations under the 

Employee Benefits Programs, particularly those related to healthcare, reflect their dedication to 

their Employees, underscores the high value they place on their Employee’s welfare, and is 

essential to maintain the viability of the Workforce on a go-forward basis. After careful 

consideration of their current situation, including the evolving economic landscape in light of the 

COVID-19 pandemic, the Debtors modified certain aspects of the Employee Benefits Program. 

For example, among others, the Debtors have suspended telemedicine copay obligations for 

Employees during the COVID-19 pandemic and have extended coverage for COVID-19 related 

testing. 

47. The Debtors seek authority, in the exercise of their discretion, to pay 

prepetition claims (if applicable), to honor obligations, and to continue programs, in the ordinary 

course of business and consistent with past practice, relating to the Employee Benefits Programs, 

subject to the Debtors’ rights, if any, to modify or discontinue any Employee Benefit Programs to 

reduce applicable costs or the benefits provided thereunder. 

48. The estimated potential outstanding prepetition obligations owed by the 

Debtors on account of the Employee Benefit Programs as of the Petition Date are summarized in 

the chart below: 

 

8

 The Debtors’ foreign affiliates maintain their own benefits programs to supplement any state-provided benefits. 

Such programs are administered at the local level and do not require any cash outlay from the Debtors. 

Accordingly, the Debtors are not seeking authority to fund costs associated with any benefits plans for non-Debtor 

foreign affiliates or foreign Employees. 

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Employee Benefit Obligations Interim Amount Final Amount 

(inclusive of Interim 

Amount) 

Health Benefits Plans9 $2,806,000 $2,806,000 

Medical Plans $2,650,000 $2,650,000 

Vision Plans $23,000 $23,000 

Dental Plans $133,000 $133,000 

Consumer Choice Health Accounts 

(HSA and FSA) $40,000 $40,000 

Welfare and Benefits Programs $143,000 $143,000 

Life and AD&D Insurance $50,000 $50,000 

Short Term Disability Benefits $52,000 $52,000 

Long Term Disability Benefits $26,000 $26,000 

Miscellaneous Assistance Programs $15,000 $15,000 

401(k) Savings Plan $710,000 $710,000 

Paid Leave $0 $0 

Total Employee 

Benefit Obligations 

$3,699,000 $3,699,000

(i) Health Benefits Plans 

49. Eligible Employees may participate in a number of health and welfare 

programs, including Medical Plans, Vision Plans, and Dental Plans (each as defined herein and, 

collectively, the “Health Benefits Plans”). The Debtors also subsidize or continue to provide 

health benefits to certain current and former Employees, including benefits provided under the 

 

9

 The amounts due under the Health Benefits Plans include both estimated outstanding claims and Administration 

Fees. 

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Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Eligible Employees who 

have been furloughed are currently still eligible to participate in the Health Benefits Plans. 

50. The Health Benefits Plans are, for the most part, self-insured by the Debtors, 

but administered through preferred provider organizations that offer to Employees and their 

families improved benefits when using a doctor, dentist, or other healthcare provider within a 

network of preferred providers (the “Health Benefits Providers”). In the ordinary course of 

business, the Debtors pay an Administration Fee to the Health Benefits Providers for the 

administrative services the Health Benefits Providers provide to Employees who subscribe to the 

Health Benefits Plans. 

51. Under the Health Benefit Plans, the Health Benefits Providers pay the 

covered Employee’s healthcare costs directly to the healthcare provider (other than any required 

deductible or similar payment) and then seek reimbursement from the Debtors (the “Health 

Benefits Claims”). Employees and Health Benefits Providers submit Health Benefits Claims on 

a rolling basis after incurring the relevant medical expenses. Health Benefits Claims can vary 

daily with respect to Medical Plans (as defined below), monthly with respect to Vision Plans, or 

every 90 days with respect to Dental Plans. Accordingly, the Debtors are unable to ascertain with 

certainty the prepetition amounts due and outstanding on account of the Health Benefits Claims. 

On average, the Debtors spend approximately $2.15 million per month on Health Benefits Claims,

with high variability depending on the number, timeliness, and type of Health Benefits Claims 

submitted. 

52. Medical, Prescription, Vision, and Dental Plans. The Debtors offer medical 

and prescription drug benefit programs (the “Medical Plans”) to Eligible Employees. The 

Medical Plans are self-insured by the Debtors. Approximately 3,000 Employees are enrolled in 

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the Medical Plans. Anthem, Inc. (“Anthem”), which is part of the Blue Cross Blue Shield 

Association, and Aetna Inc. (“Aetna”) are the primary administrators of the medical benefit 

programs, with prescription drug benefits provided by CVS Caremark. The total cost of the 

Medical Plans is approximately $2.65 million per month, including an Administration Fee. 

53. Eligible Employees may participate in vision insurance plans (the “Vision 

Plans”), administered by VSP Vision Care. Approximately 2,500 Employees are enrolled in the 

Vision Plans. The total cost of the Vision Plans is approximately $23,000 per month including an 

Administration fee, which is partially covered by premiums paid by Eligible Employees. 

54. Similarly, the Debtors offer Eligible Employees the option to participate in 

dental insurance plans (the “Dental Plans”), which Dental Plans are administered by Anthem. 

The Administration Fee for the Dental Plans is separate from Anthem’s Administration Fee under 

the Medical Plan. The total cost of the Dental Plans is approximately $133,000 per month, which 

is predominantly covered by premiums paid by Eligible Employees. 

55. Under COBRA, Eligible Employees who are terminated, and covered 

family members who become ineligible for coverage due to divorce or age, have the right to 

continue health benefits for a limited period of time and under certain circumstances. COBRA 

benefits are provided as required by law. As of the Petition Date, approximately 50 of the Debtors’ 

former Employees or covered family members are receiving claim payments on account of their 

participation in COBRA. The Debtors’ COBRA program is administered by WageWorks Inc. 

(“WageWorks”). Terminated Employees utilizing COBRA benefits pay premiums directly to 

WageWorks, which are remitted to the Debtors in connection with and allocated to the Debtors’ 

applicable Health Benefits Plan. In exchange for administration of the Debtors’ COBRA program, 

WageWorks charges an annual Administration Fee in the amount of approximately $21,700. As 

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of the Petition Date, the Debtors do not owe any amounts to WageWorks on account of the 

Administration Fee. 

56. The Debtors maintain a stop-loss policy through Voya Financial to protect 

themselves against exposure to large Health Benefits Claims. Under the stop-loss policy, if the 

Debtors pay a Health Benefits Claim in excess of $300,000 for a single event, the Debtors can 

make a claim against the stop-loss policy for the amount of the Health Benefits Claim in excess of 

$300,000. The Debtors pay approximately $125,000 per month in premiums to maintain this stoploss policy, all of which will become due during the Interim Period.10 

57. The Debtors seek authority to pay Health Benefits Claims for unreimbursed 

amounts the Health Benefits Providers already paid to the healthcare providers, amounts for 

medical services provided to Eligible Employees but not yet paid by the Health Benefits Providers, 

and any outstanding Administration Fees and stop-loss policy premium. The Debtors seek 

authority to continue to pay Health Benefits Claims, Administration Fees, and stop loss premiums 

as they come due in the ordinary course of business.

(ii) Consumer Choice Health Accounts 

58. Eligible Employees under certain consumer choice Medical Plans may 

enroll in certain flexible spending accounts (an “FSA”) and/or a health savings account (an 

“HSA”, and together with the FSA, the “Consumer Choice Health Accounts”), each 

administered by WageWorks. Under the terms of the FSA and HSA, during the annual enrollment 

 

10 Contemporaneously herewith, the Debtors have sought authority, but not direction, to pay certain prepetition 

claims held by claimants under the Debtors’ workers’ compensation insurance policies pursuant to the Motion of 

Debtors for Entry of Interim and Final Orders (I) Authorizing Debtors to (A) Continue Their Insurance Policies, 

and (B) Pay All Obligations with Respect Thereto, and (II) Granting Related Relief (the “Insurance Motion”). 

By this Motion, the Debtors do not seek authority to pay prepetition claims that may be covered by the relief 

sought in the Insurance Motion. The stop-loss policy is not included in the Insurance Motion, and accordingly 

the Debtors seek authority in this Motion to continue the policy and honor their obligations thereunder. 

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period, Eligible Employees may choose to designate a portion of their pre-tax wages or salary 

towards an FSA and/or HSA up to the maximum amount permitted by the Internal Revenue 

Service (the “IRS”), which they can then use for eligible health care expenses. The Debtors 

contribute between $500 and $1000 to HSAs per Employee per year depending on coverage 

selection. Additionally, Employees have access to an FSA specifically for dependent care. 

Currently, approximately 525 Employees contribute to an FSA and approximately 300 Employees 

contribute to an HSA. 

59. The Debtors remit approximately $90,000 per month to WageWorks on 

account of the Consumer Choice Health Accounts, including amounts deducted from Employee 

pay checks, employer contributions, and Administration Fees. As of the Petition Date, the Debtors 

estimate that are responsible for remitting approximately $40,000 related to the Consumer Choice 

Health Accounts, all of which will become due during the Interim Period. The Debtors seek 

authority to continue to pay these fees as they come due in the ordinary course of business. 

(iii) Welfare and Benefit Programs 

60. The chart below outlines the available welfare benefit programs 

(collectively, the “Welfare and Benefits Programs”) available to Eligible Employees, including 

those programs the Debtors pay directly and voluntary programs the Debtors fund through payroll 

deductions from participating Eligible Employees: 

Type of Benefit Health Benefits Provider Provided by Debtors/ 

Voluntary 

Basic Life Insurance Hartford Life and Accident 

Insurance Company (“Hartford”) 

Benefit Provided by Debtors 

Basic AD&D Insurance Hartford Benefit Provided by Debtors 

Dependent Life Insurance Hartford Voluntary Benefit 

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Type of Benefit Health Benefits Provider Provided by Debtors/ 

Voluntary 

Supplemental Life Insurance Hartford Voluntary Benefit 

Short Term Disability Benefits Prudential Financial, Inc. 

(“Prudential”) 

Benefit Provided by Debtors 

Basic Long Term Disability 

Benefits Prudential Benefit Provided by Debtors 

Supplemental Long-Term 

Disability Benefits Prudential Voluntary Benefit 

Automobile Insurance Metlife, Inc. (“Metlife”) Voluntary Benefit 

Homeowners Insurance Metlife Voluntary Benefit 

Critical Illness Insurance Metlife Voluntary Benefit 

Hospital Indemnity Insurance Metlife Voluntary Benefit 

Accident Insurance Metlife Voluntary Benefit 

MetLaw Hyatt Legal Voluntary Benefit 

Identity Theft Protection InfoArmor Voluntary Benefit 

Employee Assistance Program ComPsych Benefit Provided by Debtors 

Smoking Cessation Program Quit for Life Benefit Provided by Debtors 

Employee Assistance Program ComPsych Benefit Provided by Debtors 

Weight Loss Program WW International, Inc. (“Weight 

Watchers”) 

Benefit Provided by Debtors 

61. Life and AD&D Insurance. The Debtors provide life and accidental death 

and dismemberment insurance coverage to Eligible Employees (the “Basic Life and AD&D 

Insurance”) at no cost to Eligible Employees through Hartford. The Basic Life and AD&D 

Insurance provides coverage of up to $500,000 in the event of an Employee’s death or 

dismemberment. Additionally, current Eligible Employees may elect to self-purchase life 

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insurance on an after-tax basis for spouses and children up to age 26 (the “Dependent Life 

Insurance”) and/or supplemental life insurance to provide up to $500,000 in additional coverage 

(the “Supplemental Life Insurance,” and together with the Basic Life and AD&D Insurance and 

the Dependent Life Insurance, the “Life and AD&D Insurance Programs”) through Hartford. 

62. The total cost to the Debtors of the Life and AD&D Insurance Programs is 

approximately $50,000 each month, including Administration Fees. As of the Petition Date, the 

Debtors estimate that they owe $50,000 on account of the Life and AD&D Insurance Programs, 

all of which will become due during the Interim Period. The Debtors seek authority to continue 

to pay outstanding amounts under the Life and AD&D Insurance Programs as they come due in 

the ordinary course of business. 

63. Short Term Disability Benefits. The Debtors provide Eligible Employees 

with short-term disability benefits (the “Short-Term Disability Benefits”). Eligible Employees 

are entitled to, among other things, continuation of 70% of their weekly earnings for up to twentysix (26) weeks in the event of a short-term medical disability due to an illness, injury, or pregnancyrelated condition. The Short-Term Disability Benefits are administered by Prudential. Currently, 

approximately 150 Employees receive Short-Term Disability Benefits. 

64. In the twelve months prior to the Petition Date, the Debtors paid 

approximately $52,000 per month with respect to Short-Term Disability Benefits, plus 

Administration Fees. As of the Petition Date, the Debtors estimate that they owe $52,000 on 

account of Short-Term Disability Benefits, all of which will become due during the Interim Period. 

The Debtors seek authority to continue to pay outstanding amounts under Short-Term Disability 

Benefits as they come due in the ordinary course of business. 

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65. Long Term Disability Benefits. The Debtors provide Eligible Employees 

with basic long-term disability insurance plans (the “Basic LTD Benefits”), and Employees may 

purchase additional and supplemental long-term disability coverage (the “Supplemental LTD 

Benefits,” and together with the Basic LTD Benefits, the “Long-Term Disability Benefits”). The 

Basic LTD Benefits offered by the Debtors replace 60% of an Eligible Employee’s annual base 

annual salary, up to $1,000 per month. The Supplemental LTD Benefits provide an additional 

60% of an Eligible Employee’s annual salary up $15,000 per month. The Long-Term Disability 

Benefits are administered by Prudential. 

66. Currently, approximately 35 Employees receive Long-Term Disability 

Benefits. In 2019, the Debtors paid approximately $310,000 with respect to the Long-Term 

Disability Benefits, including Administration Fees. As of the Petition Date, the Debtors estimate 

that they owe $26,000 on account of the Long-Term Disability Benefits, all of which will become 

due during the Interim Period. The Debtors seek authority to continue to pay outstanding amounts 

under the Long-Term Disability Benefits as they come due in the ordinary course of business. 

67. The Debtors pay Prudential approximately $895,000 annually, including 

Administration Fees, to administer the Short-Term Disability Benefits and the Long-Term 

Disability Benefits, approximately $78,000 of which will become due during the Interim Period. 

The Debtors seek authority to pay the Administration Fees related to the Short-Term Disability 

Benefits and the Long-Term Disability Benefits as they become due. 

68. Miscellaneous Assistance Programs. The Debtors make available a variety 

of other benefits designed to assist Eligible Employees in managing health, work, and family issues 

(the “Miscellaneous Assistance Programs”). For example, if an Eligible Employee elects to 

purchase automobile insurance, homeowners insurance, critical illness insurance, hospital 

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indemnity insurance, or accident insurance from Metlife, professional legal services through Hyatt 

Legal, or identity theft protection through InfoArmor, the Employee is eligible for a group discount 

by virtue of employment through the Debtors. Furloughed Employees who were previously 

enrolled in such programs continue to receive the discounted group rate. Additionally, the Debtors 

fund a work-life employee assistance program administered by ComPsych Corporation to address 

a wide variety of personal and work concerns, which includes multiple in-person and telephonic 

sessions with counselors. The Debtors also offer certain Eligible Employees weight loss and 

tobacco cessation programs. Various other Miscellaneous Assistance Programs include, but are 

not limited to, a personal nurse advocate service, a behavioral health support services line, a 

diabetes support program, and a legal assistance program. 

69. The majority of the Miscellaneous Assistance Programs are Employee 

funded. The Debtors deduct Employee allocations on a per pay period basis and remit payment to 

the various service providers.11 Accordingly, the Debtors seek authority to continue such programs 

out of an abundance of caution. For the Miscellaneous Assistance Programs funded by the 

Debtors, namely the work-life assistance program, the weight loss program, and the tobacco 

cessation program, the Debtors estimate they have spent approximately $7,500 per month prior to 

the Petition Date. As of the Petition Date, the Debtors estimate that they owe $15,000 on account 

of payments, deductions, and Administration Fees related to the Miscellaneous Assistance 

Programs, all of which will become due during the Interim Period. The Debtors seek authority to 

continue all Miscellaneous Assistance Programs, to continue deducting and remitting payment to 

various service providers on account of the Miscellaneous Assistance Programs, and to pay 

outstanding amounts as they come due in the ordinary course of business. 

 

11 Such withholdings included in the above discussion and definition of Deductions. 

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(iv) 401(k) Retirement Plan

70. The Debtors offer Eligible Employees the opportunity to participate in a 

401(k) plan (the “401(k) Plan”). Eligible Employees who participate in the 401(k) Plan can make 

payroll contributions to their 401(k) accounts up to the maximum amount permitted by the IRS. 

There are approximately 13,200 eligible participants (which includes some former employees), 

some with current account balances in the 401(k) Plan; approximately 2,850 Employees are active 

participants. 

71. Each Eligible Employee’s 401(k) contributions are deducted automatically 

from his or her paychecks.

12 The Debtors match an Eligible Employee’s 401(k) contributions up 

to an annual maximum of $11,400 per Eligible Employee (the “401(k) Contributions”). 

Generally, the 401(k) Contributions are made by the Debtors on a bi-weekly basis. In 2019, the 

Debtors spent approximately $5,100,000 on account of 401(k) Contributions. As of the Petition 

Date, the Debtors estimate that they owe approximately $110,000 with respect to outstanding 

401(k) Contributions. 

72. The 401(k) Plan is administered by Fidelity Investments. The 401(k) Plan 

is administered by Fidelity Investments. Additionally, Westminster Consulting LLC provides 

investment consulting advice as a third-party fiduciary for the 401(k) Plan. As of the Petition Date, 

the Debtors estimate that they owe $710,000 on account of the 401(k) Plan, including 

Administration Fees, all of which will become due during the Interim Period. The Debtors seek 

authority to continue the 401(k) Plan and to pay outstanding amounts thereunder as they come due 

in the ordinary course of business. 

 

12 Such withholdings included in the above discussion and definition of Deductions. 

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(v) Paid Leave 

73. The Debtors maintain a policy for providing Eligible Employees paid leave 

in the form of paid time off (“Paid Time Off”) and certain other paid leave (collectively, the “Paid 

Leave”). In the ordinary course of business, the Debtors provide Paid Time Off to Eligible 

Employees, which may be used for any reason. Eligible Employees are advanced a certain amount 

of Paid Time Off at the beginning of each year13 and, typically, any unused portion does not carry 

over to the subsequent year, nor are Employees eligible to receive cash payouts for unused Paid 

Time Off, except in instances where the Debtors are required pursuant to applicable state laws.14 

74. In addition, the Debtors provide certain other forms of Paid Leave, many of 

which are required by law, including paid holidays throughout the year for certain Employees, 

statutory sick leave, workers’ compensation leave, parental leave, bereavement leave, jury or court 

attendance, and time spent voting. 

75. The Debtors anticipate that their Employees will utilize any accrued Paid 

Leave in the ordinary course of business, which will not create any material cash flow requirements 

beyond the Debtors’ regular payroll obligations. By this Motion, the Debtors seek authority, but 

not direction, to pay any “cash out” amounts due with respect to earned but unused Paid Time Off 

as required by law and to continue providing the Paid Leave in the ordinary course of business. 

 

13 Employees hired later in the year receive a pro rata allotment of Paid Time Off. 

14 For instance, under California law, the Company is required to cash out accrued Paid Time Off, including for 

furloughed Employees. Further, to the extent state law requires the Debtors to permit an Employee to carry-over 

accrued Paid Time Off to a subsequent year, in the subsequent year the Debtors will offset the amount of Paid 

Time Off typically advanced so as to ensure no Employee receives preferential treatment purely on due to 

geographic location. 

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D. Non-Insider Severance Program 

76. In the ordinary course of business, the Debtors maintain a written severance 

program for the benefit of certain Employees terminated in specified circumstances, including 

performance-related termination or job elimination (the “Non-Insider Severance Program”).15 

77. Generally, the Non-Insider Severance Program provides that an Employee 

is eligible for severance if, among other things, such Employee is not a party to a separate written 

agreement that provides for severance, the Debtors enter into a separation agreement with the 

Employee providing for such benefits, and the Employee is not otherwise required to receive such 

benefits pursuant to state or local law requirements.16 The Debtors have historically provided 

Employees with a severance payment in an amount based on the Employee’s length of service 

with the Debtors and job level. Specifically, the Non-Insider Severance Program provides that 

certain Employees, upon termination, are eligible to receive severance payments equal to a certain 

number of weeks, reimbursements for premium payments made under COBRA for the 

continuation of healthcare services, and outplacement assistance (the “Non-Insider Severance 

Benefits”). The Non-Insider Severance Program may be modified, amended, suspended, 

canceled, or terminated by Debtors, in their sole discretion and to the maximum extend allowed 

by law, including with respect to the severance payment guidelines and any Non-Insider Severance 

 

15 Notwithstanding the use of the defined term “Non-Insider Severance Program”, the Debtors’ prepetition severance 

program is applicable to “Insiders” so long as such Employee is otherwise eligible under the terms of the program. 

For the avoidance of doubt, the relief sought in this Motion with respect to the Non-Insider Severance Program 

does not include the payment of any severance obligations that may be due to an Insider. The Debtors reserve all 

rights with respect to the classification of any Employee as “Insider” and “non-Insider” and to file a separate 

motion seeking relief from the Court to honor any pre- or postpetition severance obligations to Insiders. 

16 Full-time Employees regularly based outside of the United States are also excluded from receiving severance 

under the Non-Insider Severance Program, unless otherwise agreed to by the Debtors in writing. This exclusion 

applies to all such Employees who are entitled to severance pay under the laws of any foreign jurisdiction and 

also to those Associates regularly based abroad who are not eligible under foreign severance or similar pay laws. 

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Benefit that would otherwise be payable. Non-Insider Severance Benefits also terminate in 

specified situations, including upon the date an Employee is employed by a new employer. 

78. The Debtors’ ability to continue the Non-Insider Severance Program is 

critical to maintaining positive Employee morale and loyalty. Increased instability in the Debtors’ 

Workforce will only undermine the Debtors’ ability to strengthen their financial and operational 

foundation, generate growth, and position themselves for long-term success. As a condition to 

receiving Non-Insider Severance Benefits, the Debtors typically require that each terminated 

Employee release all potential claims against the Debtors. The Debtors believe that the NonInsider Severance Program meaningfully reduces the time and expense that the Debtors otherwise 

would spend defending against the assertion of claims by terminated Employees. 

79. By this Motion, the Debtors are solely seeking authority, but not direction, 

to continue the Non-Insider Severance Program for current eligible non-Insider Employees, and to 

honor any postpetition obligations that may arise to provide Non-Insider Severance Benefits to 

such Employees if terminated postpetition. The Debtors are not requesting authority through this 

Motion to and will not make any payments that fall outside the limitations of section 503(c) of the 

Bankruptcy Code, to the extent applicable. 

Relief Requested Should Be Granted 

A. Payment of Obligations on Account of Compensation and Benefits Programs Is 

Warranted Under Sections 363(b)(1) and 105(a) of the Bankruptcy Code and 

Doctrine of Necessity 

80. The Court may authorize a debtor to pay certain prepetition obligations 

pursuant to section 363(b) of the Bankruptcy Code. 11 U.S.C. § 363(b)(1). Section 363(b) 

provides, in pertinent part, that “[t]he [debtor], after notice and a hearing, may use, sell, or lease, 

other than in the ordinary course of business, property of the estate.” To approve the use of assets 

outside the ordinary course of business, courts require only that the debtor show that a sound 

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business purpose justifies such actions. In re W.A. Mallory Co., 214 B.R. 834, 836 (Bankr. E.D. 

Va. 1997) (“This Court follows the ‘sound business purpose’ test when examining § 363(b) sales.”) 

(citing In re WBQ P’ship, 189 B.R. 97, 102 (Bankr. E.D. Va. 1995)). Courts in this and other 

districts have consistently been reluctant to interfere with corporate decisions “unless it is shown 

that the bankrupt’s decision was one taken in bad faith or in gross abuse of the bankrupt’s retained 

business discretion.” Lubrizol Enters., Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043, 

1047 (4th Cir. 1985). 

81. In addition, the Court has the authority, pursuant to its equitable powers 

under section 105(a) of the Bankruptcy Code, to authorize the relief requested herein because such 

relief is necessary for the Debtors to carry out their fiduciary duties under section 1107(a) of the 

Bankruptcy Code. Section 1107(a) of the Bankruptcy Code “contains an implied duty of the 

debtor-in-possession” to “protect and preserve the estate, including an operating business’ goingconcern value,” on behalf of the debtor’s creditors and other parties in interest. 

11 U.S.C. § 1107(a); see In re CEI Roofing, Inc., 315 B.R. 50, 59 (Bankr. N.D. Tex. 2004); see 

also In re Penick Pharm., Inc., 227 B.R. 229, 232–33 (Bankr. S.D.N.Y. 1998) (“[U]pon filing its 

petition, the Debtor became debtor in possession and, through its management . . . was burdened 

with the duties and responsibilities of a bankruptcy trustee.”). 

82. Section 105(a) of the Bankruptcy Code empowers bankruptcy courts to 

“issue any order, process, or judgment that is necessary or appropriate to carry out the provisions 

of this title.” 11 U.S.C. § 105(a); see In re United Am., Inc., 327 B.R. 776, 781 (Bankr. E.D. Va. 

2005) (acknowledging payment of select prepetition unsecured claims is a necessary deviation 

from equal treatment of creditors because “otherwise there will be no reorganization and no 

creditor will have an opportunity to recoup any part of its prepetition claim”); In re Synteen Tech., 

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Inc., 2000 WL 33709667, at *2 (Bankr. D. S.C. Apr. 14, 2000) (allowing the payment of 

prepetition obligation upon a showing of a compelling business justification); In re NVR L.P., 147 

B.R. 126, 127 (Bankr. E.D. Va. 1992) (“Under [section 105(a)] the court can permit pre-plan 

payment of a pre-petition obligation when essential to the continued operation of the debtor.”); In 

re Lehigh & New Eng. Ry. Co., 657 F.2d 570, 581 (3d Cir. 1981) (holding that if a prepetition 

claim “is essential to the continued operation of the . . . [business] during reorganization, payment 

may be authorized even if it is made out of [the] corpus”); Dudley v. Mealey, 147 F.2d 268, 271 

(2d Cir. 1945) (extending doctrine for payment of prepetition claims beyond railroad 

reorganization cases), cert. denied 325 U.S. 873 (1945). This “doctrine of necessity” thus provides 

that the Court can exercise its equitable power to allow payment of prepetition claims. 

83. Furthermore, in a long line of well-established decisions, courts in this 

district consistently granted similar relief to that requested in this Motion in previous chapter 11 

cases. See, e.g., In re Pier 1 Imports, Inc., No. 20-30805 (KRH), [Docket No. 348] (Bankr. E.D. 

Va. Mar. 13, 2020); In re Toys “R” Us, Inc., No. 17-34665 (KLP), [Docket No. 703] (Bankr. E.D. 

Va. Oct. 24, 2017); In re Gymboree Group, Inc., No. 17-32986 (KLP), [Docket No. 376] (Bankr. E.D. 

Va. July 11, 2017); In re Penn Virginia Corporation, No. 16-32395 (KLP), [Docket No. 251] (Bankr. 

E.D. Va. June 9, 2016); In re Alpha Natural Res., Inc., No. 15-33896 (KRH), [Docket No. 356] (Bankr. 

E.D. Va. Sep. 3, 2015); In re Patriot Coal Corp., No. 15-32450 (KLP), [Docket No. 243] (Bankr. E.D. 

Va. June 14, 2015); In re James River Coal Co., No. 14-31848 (KRH), [Docket No. 211] (Bankr. E.D. 

Va. May 7, 2014).

84. Authorizing the Debtors to pay prepetition amounts related to the 

Compensation and Benefits Programs is in the best interests of the Debtors, their estates, and their 

economic stakeholders. Employees are essential to the Debtors’ revenue generating capacity both 

at this critical time and in the normal course of operations, and it is imperative for the Debtors to 

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maintain a workforce that will drive enterprise value. The loss of valuable Employees, who are 

the lifeblood of the Debtors’ operations, would deplete the Debtors’ Workforce and thereby hinder 

the Debtors’ ability to meet customer demands. Such an outcome would diminish stakeholder 

confidence in the Debtors’ ability to successfully carry out their chapter 11 strategy and to continue 

operating as a going-concern. Failure to satisfy the prepetition obligations in connection with the 

Compensation and Benefits Programs will exhaust Employee morale and loyalty at a time of 

already perceived uncertainty. Employees will be exposed to significant financial difficulties and 

other distractions if the Debtors are not permitted to honor their obligations in connection with the 

Compensation and Benefits Programs. 

85. Furthermore, if the Court does not authorize the Debtors to honor their 

various obligations under the Employee Benefit Programs, Employees will not receive appropriate 

coverage and, thus, may become obligated to pay certain healthcare-related claims in cases where 

the Debtors have not paid the respective providers. The loss of such coverage, particularly during 

a global healthcare crisis, will result in considerable anxiety for Employees at a time when the 

Employees are most in need and when the Debtors need such remaining Employees to perform at 

peak efficiency. 

86. Finally, payment of the Payroll Processing Fees and the other 

Administration Fees in connection with the Compensation and Benefits Programs also is 

necessary. Without the continued services of ADP, the Health Benefits Providers, and the 

administrators of the Welfare and Benefits Programs, among others, the Debtors will be unable to 

continue to honor their obligations to Employees in an efficient and cost-effective manner and 

maintain their employee base, both of which are critical to the smooth functioning of the Debtors’ 

operations. 

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87. Accordingly, the relief requested by this Motion represents a sound exercise 

of the Debtors’ business judgment, is necessary to avoid immediate and irreparable harm to the 

Debtors’ estates, and is justified under sections 363(b) and 105(a) of the Bankruptcy Code. 

B. Payment of Employee Obligations Would Not Prejudice Parties in Interest 

88. Moreover, the Debtors believe that the vast majority of the prepetition 

obligations under the Compensation and Benefits Programs are entitled to priority treatment under 

Bankruptcy Code sections 507(a)(4) (establishing priority treatment for, among others, wages, 

salaries, commissions, and severance) and 507(a)(5) (establishing priority treatment for 

contributions to employee benefit plans). As priority claims, the obligations under the 

Compensation and Benefits Program are entitled to payment in full before any general unsecured 

claims asserted against the Debtors can be satisfied. Accordingly, making the payments covered 

by these sections of the Bankruptcy Code only will alter the timing, and not the priority, of their 

payment and should not prejudice the rights of general unsecured creditors or other parties in 

interest. 

C. Payment of Certain Obligations in Connection with the Compensation and Benefits 

Programs Is Required by Law 

89. The Debtors seek authority to remit the Withholding Obligations to the 

appropriate third parties. These amounts principally represent Employee earnings that 

governments, judicial authorities, and Employees themselves have designated for deduction from 

their paychecks. Indeed, certain Deductions, including contributions to the Employee Benefit 

Programs and child support and alimony payments, are not property of the Debtors’ estates because 

they have been withheld from Employees’ paychecks on another party’s behalf. See 11 U.S.C. 

§ 541(b) (“Property in which the debtor holds, as of the commencement of the case, only legal title 

and not an equitable interest . . . becomes property of the estate . . . only to the extent of the debtor’s 

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legal title to such property, but not to the extent of any equitable interest in such property that the 

debtor does not hold”); see also In re Dameron, 155 F.3d 718, 722 (4th Cir. 1998) (finding that a 

Debtor acting merely as an intermediary does not own an equitable interest in property sufficient 

to constitute property of the estate). Further, federal and state laws require the Debtors and their 

officers to make certain tax payments that have been withheld from their Employees’ paychecks. 

See 26 U.S.C. § 6672, 7501(a); see also City of Farrell v. Sharon Steel Corp., 41 F.3d 92, 95–97 

(3d Cir. 1994) (finding that a state law requiring a corporate debtor to withhold city income tax 

from its employees’ wages created a trust relationship between debtor and the city for payment of 

withheld income taxes); DuCharmes & Co., Inc. v. Michigan (In re DuCharmes & Co.), 852 F.2d 

194, 196 (6th Cir. 1988) (noting that individual officers of a company may be held personally 

liable for failure to pay trust fund taxes). Because the Deductions and Payroll Taxes are not 

property of the Debtors’ estates, the Debtors request that the Court authorize them to transmit the 

Deductions and Payroll Taxes to the proper parties in the ordinary course of business. 

D. Continuation of the Employee Incentive Programs and the Non-Insider Severance 

Program Does Not Implicate Section 503(c) of the Bankruptcy Code 

90. By this Motion, the Debtors seek authority to continue the Employee 

Incentive Programs and Non-Insider Severance Program to the extent requested herein and to 

honor obligations that arise after the Petition Date exclusively for non-Insider Employees. 

91. Out of an abundance of caution and in an effort to provide comfort to the 

Employees given the uncertainty attendant to a company operating in chapter 11, the Debtors 

request authority to continue the Non-Insider Severance Program with respect to non-Insider 

Employees terminated postpetition in the ordinary course of business. 

92. Neither the Employee Incentive Programs nor the Non-Insider Severance 

Program implicate sections 503(c)(1) or 503(c)(2) of the Bankruptcy Code because no payments 

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thereunder will be made to any Insider. See 11 U.S.C. § 503(c)(1)–(2). Compensation plans 

commenced within the ordinary course of business that do not implicate section 503(c)(1) are 

governed by the business judgment standard of section 363 of the Bankruptcy Code. See In re 

Nellson Nutraceutical, Inc., 369 B.R. 787, 801 (Bankr. D. Del. 2007). Additionally, the Employee 

Incentive Programs and the Non-Insider Severance Program do not implicate section 503(c)(3) of 

the Bankruptcy Code because they were commenced within the ordinary course of the Debtors’ 

business. Cf. 11 U.S.C. § 503(c)(3) (prohibiting certain payments “outside of the ordinary course 

of business”). 

93. If section 503(c) of the Bankruptcy Code is not implicated, the Court may 

grant the requested relief if it finds that the Employee Incentive Programs and the Non-Insider 

Severance Program satisfy the requirements of section 363(b) of the Bankruptcy Code. See In re 

Mesa Air Group, Inc., Ch. 11 Case No. 10-10018 (MG), 2010 WL 3810899, at *3 (Bankr. 

S.D.N.Y. Sept. 24, 2010) (noting that compensation plans commenced within the ordinary course 

of business are governed by section 363 of the Bankruptcy Code, not section 503(c)). 

94. Courts in this jurisdiction have permitted debtors to maintain their 

prepetition employee incentive programs during the pendency of chapter 11 cases, and also have 

permitted debtors to continue existing severance programs and pay severance obligations that 

become due in the ordinary course to non-Insider employees who are terminated postpetition. See, 

e.g., In re Pier 1 Imports, Inc., No. 20-30805 (KRH), [Docket No. 348] (Bankr. E.D. Va. Mar. 13, 

2020); In re Gymboree Group, Inc., No. 17-32986 (KLP), [Docket No. 376] (Bankr. E.D. Va. July 

11, 2017); In re Toys “R” Us, Inc., No. 17-34665 (KLP), [Docket No. 703] (Bankr. E.D. Va. Oct. 

24, 2017). 

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95. As discussed herein, the Debtors have substantial business justification for 

continuing the Employee Incentive Programs and the Non-Insider Severance Program in the 

ordinary course of business, including (i) maintaining Employee morale, (ii) disincentivizing 

Employees to pursue other employment opportunities, and (iii) reassuring Employees that the 

Debtors intend to honor their obligations to Employees—both during and after their tenure with 

the Debtors. Certain store-level Employees who are eligible for awards under the Employee 

Incentive Programs view such awards as an integral part of their overall compensation and rely on 

such awards to pay their living expenses and support their families. Additionally, failure to honor 

the Non-Insider Severance Program will likely render the Debtors unable to incentivize certain 

Employees to continue employment with the Debtors during the chapter 11 cases. Immediate and 

unpredictable attrition could significantly impact the Debtors’ ability to successfully reorganize. 

The Debtors believe that the costs associated with the Employee Incentive Programs and NonInsider Severance Program, to the extent any are incurred postpetition, would greatly outweigh the 

potential negative consequences of failing to do so, including the hiring of replacement employees 

on a short-term, temporary basis, or accepting diminished proceeds due to an accelerated inventory 

liquidation. 

96. For the reasons stated, continuation of the Employee Incentive Programs 

and the Non-Insider Severance Program—like all of the relief sought in this Motion—is critical 

and necessary to assuage Employee fears and motivate them to achieve the Debtors’ chapter 11 

objectives. Accordingly, the requested relief should be approved. 

E. Cause Exists to Authorize Debtors’ Financial Institutions to Honor Checks and 

Electronic Fund Transfers 

97. The Debtors anticipate having sufficient funds to pay the amounts due on 

account of the Compensation and Benefits Programs in the ordinary course of business using 

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expected cash flows from ongoing business operations and, subject to Court approval, cash 

collateral and proceeds from postpetition financing. In addition, under the Debtors’ existing cash 

management system, the Debtors can identify readily whether checks or wire transfer requests are 

payments authorized by the relief requested in this Motion. Accordingly, the Debtors believe that 

checks or wire transfer requests, other than those relating to authorized payments, will not be 

honored inadvertently and that the Court should authorize the Banks, when requested by the 

Debtors, to receive, process, honor and pay any and all checks or wire transfer requests in respect 

of the relief requested herein, to the extent that the Debtors have sufficient funds on deposit in their 

accounts with such Banks, and such Banks may rely on the representations of the Debtors without 

any duty of further inquiry and without liability for following the Debtors’ instructions. 

Debtors Have Satisfied Bankruptcy Rule 6003(b) 

98. Bankruptcy Rule 6003(b) provides that, to the extent relief is necessary to 

avoid immediate and irreparable harm, a bankruptcy court may issue an order granting “a motion 

to use, sell, lease, or otherwise incur an obligation regarding property of the estate, including a 

motion to pay all or part of a claim that arose before the filing of the petition” before 21 days after 

filing of the petition. Fed. R. Bankr. P. 6003(b). For the reasons described above and in the First 

Day Declaration, the relief requested is necessary for the Debtors to operate their businesses in the 

ordinary course and maximize the value of their estates for the benefit of all stakeholders. 

Specifically, the Debtors’ failure to honor their obligations in connection with the Compensation 

and Benefits Programs would cause severe personal hardship to the Debtors’ Workforce and likely 

would result in attrition at a time when the Debtors need their Workforce to perform at peak 

efficiency. Accordingly, the Debtors believe that the relief requested herein is necessary to avoid 

immediate and irreparable harm, and, therefore, Bankruptcy Rule 6003 is satisfied. 

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Bankruptcy Rules 6004(a) and (h) 

99. To implement the foregoing successfully, the Debtors request that the Court 

find that notice of the Motion is adequate under Bankruptcy Rule 6004(a) under the circumstances, 

and waive the 14-day stay of an order authorizing the use, sale, or lease of property under 

Bankruptcy Rule 6004(h). As explained above and in the First Day Declaration, the relief 

requested herein is necessary to avoid immediate and irreparable harm to the Debtors. 

Accordingly, ample cause exists to justify finding that the notice requirements under Bankruptcy 

Rule 6004(a) have been satisfied and to grant a waiver of the 14 day stay imposed by Bankruptcy 

Rule 6004(h), to the extent such notice requirements and such stay apply. 

Waiver of Separate Memorandum of Points and Authorities 

100. The Debtors respectfully request that the Court regard any argument and 

citations set forth herein as a written memorandum of facts, reasons, and authorities that has been 

combined with the relief requested herein, as permitted by Local Bankruptcy Rule 9013-1(G)(1). 

Alternatively, the Debtors respectfully request that the Court waive any requirement set forth in 

Local Bankruptcy Rule 9013-1(G)(1) that this Motion be accompanied by such a written 

memorandum. 

Reservation of Rights 

101. Nothing contained herein is intended or shall be construed as (a) an 

admission as to the validity of any claim against the Debtors; (b) a waiver of the Debtors’ or any 

appropriate party in interest’s rights to dispute the amount of, basis for, or validity of any claim 

against the Debtors; (c) a waiver of any claims or causes of action which may exist against any 

creditor or interest holder; or (d) an approval, assumption, adoption, or rejection of any agreement, 

contract, lease, program, or policy between the Debtors and any third party under section 365 of 

the Bankruptcy Code. Likewise, if the Court grants the relief sought herein, any payment made 

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pursuant to the Court’s order is not intended to be and should not be construed as an admission to 

the validity of any claim or a waiver of the Debtors’ rights to dispute such claim subsequently. 

Notice 

102. Notice of this Motion will be provided to (a) the Office of the United States 

Trustee for the Eastern District of Virginia; (b) the holders of the 30 largest unsecured claims 

against the Debtors on a consolidated basis; (c) counsel to the DIP Agent; (d) counsel to the 

Prepetition ABL Agent; (e) counsel to the Prepetition Term Loan Agent; (f) counsel to the IPCo 

Notes Trustees; (g) counsel to the Ad Hoc Committee; (h) counsel to the Sponsors; (i) the Internal 

Revenue Service; (j) the United States Attorney’s Office for the Eastern District of Virginia; 

(k) the Securities and Exchange Commission; (l) ADP; (m) third-party providers of Employee 

Benefit Programs; (n) former Employees currently receiving Non-Insider Severance Benefits; and 

(o) any other party that has requested service pursuant to Bankruptcy Rule 2002 as of the time of 

service (collectively, the “Notice Parties”). The Debtors believe that no further notice is required 

under the circumstances. 

No Prior Request 

103. No previous request for the relief sought herein has been made by the 

Debtors to this or any other court 

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WHEREFORE the Debtors respectfully request entry of the Proposed Orders

granting the relief requested herein and such other and further relief as the Court may deem just 

and appropriate. 

Dated: May 4, 2020 

 Richmond, Virginia 

/s/ Henry P. (Toby) Long, III 

HUNTON ANDREWS KURTH LLP 

Tyler P. Brown (VSB No. 28072) 

Henry P. (Toby) Long, III (VSB No. 75134) 

Nathan Kramer (VSB No. 87720) 

Riverfront Plaza, East Tower 

951 East Byrd Street 

Richmond, Virginia 23219 

Telephone: (804) 788-8200 

Facsimile: (804) 788-8218

- and - 

WEIL, GOTSHAL & MANGES LLP 

Ray C. Schrock, P.C. (pro hac vice admission pending) 

Ryan Preston Dahl (pro hac vice admission pending) 

Candace M. Arthur (pro hac vice admission pending) 

Daniel Gwen (pro hac vice admission pending) 

767 Fifth Avenue 

New York, New York 10153 

Telephone: (212) 310-8000 

Facsimile: (212) 310-8007 

Proposed Attorneys for Debtors 

and Debtors in Possession 

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Exhibit A 

Proposed Interim Order

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WEIL, GOTSHAL & MANGES LLP 

Ray C. Schrock, P.C. (pro hac vice admission pending) 

Ryan Preston Dahl (pro hac vice admission pending) 

Candace M. Arthur (pro hac vice admission pending) 

Daniel Gwen (pro hac vice admission pending) 

767 Fifth Avenue 

New York, New York 10153 

Telephone: (212) 310-8000 

Facsimile: (212) 310-8007

HUNTON ANDREWS KURTH LLP 

Tyler P. Brown (VSB No. 28072) 

Henry P. (Toby) Long, III (VSB No. 75134) 

Nathan Kramer (VSB No. 87720) 

Riverfront Plaza, East Tower 

951 East Byrd Street 

Richmond, Virginia 23219 

Telephone: (804) 788-8200 

Facsimile: (804) 788-8218

Proposed Attorneys for Debtors and Debtors in Possession

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF VIRGINIA 

RICHMOND DIVISION 

------------------------------------------------------------ x 

 : 

In re : Chapter 11 

: 

CHINOS HOLDINGS, INC., et al., : Case No. 20–________ 

 : 

 Debtors.1

 : (Jointly Administered) 

 : 

------------------------------------------------------------ x 

 

INTERIM ORDER (I) AUTHORIZING DEBTORS TO 

(A) PAY PREPETITION WAGES, SALARIES, REIMBURSABLE 

EXPENSES, AND OTHER OBLIGATIONS ON ACCOUNT OF COMPENSATION 

AND BENEFITS PROGRAMS AND (B) CONTINUE COMPENSATION 

AND BENEFITS PROGRAMS, AND (II) GRANTING RELATED RELIEF 

Upon the motion (the “Motion”)2 of Chinos Holdings, Inc. and its affiliated debtors 

in the above-captioned chapter 11 cases, as debtors and debtors in possession (collectively, the 

 

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification 

number, as applicable, are Chinos Holdings, Inc. (3834); Chinos Intermediate Holdings A, Inc. (3301); Chinos 

Intermediate, Inc. (3871); Chinos Intermediate Holdings B, Inc. (3244); J. Crew Group, Inc. (4486); J. Crew 

Operating Corp. (0930); Grace Holmes, Inc. (1409); H.F.D. No. 55, Inc. (9438); J. Crew Inc. (6360); J. Crew 

International, Inc. (2712); J. Crew Virginia, Inc. (5626); Madewell Inc. (8609); J. Crew Brand Holdings, LLC 

(7625); J. Crew Brand Intermediate, LLC (3860); J. Crew Brand, LLC (1647); J. Crew Brand Corp. (1616); J. 

Crew Domestic Brand, LLC (8962); and J. Crew International Brand, LLC (7471). The Debtors’ corporate 

headquarters and service address is 225 Liberty St., New York, NY 10281. 

2 Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to such terms in 

the Motion.

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“Debtors”), pursuant to sections 105(a), 363(b) and 507 of the Bankruptcy Code and Bankruptcy 

Rules 6003 and 6004, for entry of interim and final orders (i) authorizing, but not directing, the 

Debtors to (a) pay and honor certain prepetition claims and obligations in the ordinary course of 

business, in the exercise of their sole discretion, relating to, the business practices, programs, and 

policies for their Employees, Supplemental Workforce, and Directors, including, among other 

things, Compensation Obligations, Payroll Processing Fees, Business Related Expenses, 

Employee Incentive Programs, Employee Benefit Programs, and other obligations on account of 

the Compensation and Benefits Programs and (b) continue to administer the Compensation and 

Benefits Programs, and (ii) granting related relief, all as more fully set forth in the Motion; and the 

Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 

U.S.C. §§ 157(a)–(b) and 1334; and the Standing Order of Reference from the United States 

District Court for the Eastern District of Virginia, dated July 10, 1984; and consideration of the 

Motion and the requested relief being a core proceeding pursuant to 28 U.S.C. § 157(b); and venue 

being proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409; and due and proper notice 

of the Motion having been provided to the Notice Parties under the circumstances, and it appearing 

that no other or further notice need be provided; and this Court having held a hearing to consider 

the relief requested in the Motion; and upon the First Day Declaration and the record of the hearing 

on the Motion on an interim basis; and all objections to the relief requested in the Motion on an 

interim basis having been withdrawn, resolved, or overruled; and the Court having determined that 

the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; 

and it appearing that the relief requested in the Motion is necessary to avoid immediate and 

irreparable harm to the Debtors and their estates as contemplated by Bankruptcy Rule 6003 of the 

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Federal Rules of Bankruptcy Procedure; and after due deliberation and sufficient cause appearing 

therefor,

IT IS HEREBY ORDERED THAT: 

1. The Motion is granted on an interim basis to the extent set forth herein. 

2. The Debtors are authorized, but not directed, pursuant to sections 105(a), 

363(b), and 507(a) of the Bankruptcy Code, to pay and honor all prepetition obligations associated 

with the Compensation and Benefits Programs, including (a) Compensation Obligations; 

(b) Payroll Processing Fees; (c) Withholding Obligations; (d) Business-Related Expenses; 

(e) Employee Incentive Programs; (f) Health Benefits Plans; (g) Consumer Choice Health 

Accounts, (h) Welfare and Benefits Programs, including the various insurance, disability, and 

miscellaneous employee assistance programs, (i) 401(k) Plans; (j) Paid Leave; and (k) 

Administration Fees, and to continue programs and maintain funding in the ordinary course of 

business; provided that, no payment for wages, salaries, or commissions, and sick leave earned by 

an individual Employee shall exceed $13,650, other than by permission of this Court; and 

provided, further, that subject to entry of the Final Order, the Debtors shall not honor or make any 

payment on account of obligations related to the Non-Insider Severance Program. 

3. Nothing contained in the Motion or this Interim Order shall be deemed as 

authorizing or approving (a) any payments or transfers that violate section 503(c) of the 

Bankruptcy Code or (b) the Debtors to cash out unpaid vacation upon termination of an Employee, 

unless applicable non-bankruptcy law requires such payment. 

4. The Debtors are authorized, but not directed, to modify or discontinue any 

Compensation and Benefits Program to reduce or eliminate program expenses or the benefits 

provided thereunder, at any time, in their sole discretion without prior Court approval to the extent 

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 5 

permitted by the applicable agreement or law. 

5. The Debtors are further authorized, but not directed, to discontinue the 

Furlough Program, hire new and/or rehire furloughed Employees, reinstate salary levels, and 

otherwise continue any of the Compensation and Benefits Programs at the levels that were in place 

before the Furlough Program and other temporary measures taken by the Debtors in response to 

the COVID-19 pandemic. 

6. The Debtors and any applicable third parties are authorized to continue to 

allocate and distribute Withholding Obligations to the appropriate third-party recipients or taxing 

authorities in accordance with the Debtors’ stated policies and prepetition practices. 

7. Each of the Banks at which the Debtors maintain their accounts relating to 

the payment of obligations on account of the Compensation and Benefits Programs are authorized 

to (a) receive, process, honor, and pay all checks presented for payment and to honor all funds 

transfer requests made by the Debtors related thereto, to the extent that sufficient funds are on 

deposit in those accounts and (b) accept and rely on all representations made by the Debtors with 

respect to which checks, drafts, wires, or automated clearing house transfers should be honored or 

dishonored in accordance with this or any other order of the Court, whether such checks, drafts, 

wires, or transfers are dated before, on, or after the Petition Date, without any duty to inquire 

otherwise.

8. The Debtors are authorized, but not directed, to issue new postpetition 

checks, or effect new electronic funds transfers, on account of obligations in connection with the 

Compensation and Benefits Programs as set forth herein, and to replace any prepetition checks or 

electronic fund transfer requests that may be lost, dishonored, or rejected as a result of the 

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 6 

commencement of the Debtors’ chapter 11 cases with respect to any prepetition amounts that are 

authorized to be paid under this Interim Order.

9. Nothing contained in the Motion or this Interim Order, nor any payment 

made pursuant to the authority granted by this Interim Order, is intended to be or shall be construed 

as (a) an admission as to the validity of any claim against the Debtors; (b) an agreement or 

obligation to pay any claims; (c) a waiver of the Debtors’ or any appropriate party in interest’s 

rights to dispute the amount of, basis for, or validity of any claim against the Debtors; (d) a waiver 

of any claims or causes of action which may exist against any creditor or interest holder; or (e) an 

approval, assumption, adoption, or rejection of any agreement, contract, lease, program, or policy 

between the Debtors and any third party under section 365 of the Bankruptcy Code. 

10. Notwithstanding anything to the contrary contained in the Motion or this 

Interim Order, any payment to be made and any relief or authorization granted hereunder shall not 

be inconsistent with, and shall be subject to, the requirements imposed on the Debtors in any orders 

entered by this Court authorizing the Debtors to obtain debtor-in-possession financing and 

authorizing the use of cash collateral (any such order, a “DIP Order”). To the extent that there 

may be any inconsistency between the terms of this Interim Order and the terms of any DIP Order, 

the terms of the DIP Order will govern.

11. Nothing in the Motion or this Interim Order shall be deemed to authorize 

the Debtors to accelerate any payments not otherwise due prior to the date of the hearing to 

consider entry of an order granting the relief requested in the Motion on a final basis. 

12. Notwithstanding entry of this Interim Order, nothing herein shall create, nor 

is intended to create, any rights in favor of or enhance the status of any claim held by, any party.

13. The requirements of Bankruptcy Rule 6003(b) have been satisfied.

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 7 

14. Under the circumstances of these chapter 11 cases, notice of the Motion is 

adequate under Bankruptcy Rule 6004(a) and the Local Bankruptcy Rules.

15. Notwithstanding Bankruptcy Rule 6004(h), this Interim Order shall be 

immediately effective and enforceable upon its entry.

16. The requirement under Local Bankruptcy Rule 9013-1(G) to file a 

memorandum of law in connection with the Motion is waived to the extent necessary.

17. A hearing to consider entry of an order granting the relief requested in the 

Motion on a final basis shall be held on ____________, 2020, at _____ (Eastern Time) (the “Final 

Hearing”) and any objections or responses to the Motion shall be in writing, filed with the Court, 

and served by no later than 4:00 p.m. (Eastern Time) on ________, 2020 (the “Objection 

Deadline”) on the following: 

a. proposed counsel for the Debtors: Weil, Gotshal & Manges LLP, 767 Fifth 

Avenue, New York, New York 10153 (Attn: Ray C. Schrock, P.C. 

(ray.schrock@weil.com), Ryan Preston Dahl, Esq. (ryan.dahl@weil.com), 

Candace M. Arthur, Esq. (candace.arthur@weil.com), and Daniel Gwen, 

Esq. (daniel.gwen@weil.com)); 

b. proposed co-counsel for the Debtors: Hunton Andrews Kurth LLP, 

Riverfront Plaza, East Tower, 951 East Byrd Street, Richmond, Virginia 

23219 (Attn: Tyler P. Brown, Esq. (tpbrown@HuntonAK.com), Henry P. 

(Toby) Long, III, Esq. (hlong@HuntonAK.com), and Nathan Kramer, Esq. 

(nkramer@HuntonAK.com)); 

c. counsel to the DIP Agent: Seward & Kissel LLP, One Battery Park Plaza, 

New York, New York 10004 (Attn: Gregg S. Bateman, Esq. 

(bateman@sewkis.com); and 

d. the U.S. Trustee: 701 East Broad Street, Suite 4304, Richmond, VA 23219 

(Attn: Kenneth N. Whitehurst, III (USTPRegion4.RH.ECF@usdoj.gov)). 

18. If no objections or responses are timely filed and served as set forth herein, 

the Debtors shall, on or after the Objection Deadline, submit to the Court a final order substantially 

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 8 

in the form of the Final Order attached to the Motion, which Final Order may be entered with no 

further notice or need for the Final Hearing. 

19. The Debtors are authorized to take all action necessary to effectuate the 

relief granted in this Interim Order.

20. The Court shall retain jurisdiction to hear and determine all matters arising 

from or related to the implementation, interpretation, or enforcement of this Interim Order.

Dated: ________________, 2020 

 Richmond, Virginia UNITED STATES BANKRUPTCY JUDGE

 

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 9 

WE ASK FOR THIS: 

/s/ Henry P. (Toby) Long, III 

HUNTON ANDREWS KURTH LLP 

Tyler P. Brown (VSB No. 28072) 

Henry P. (Toby) Long, III (VSB No. 75134) 

Nathan Kramer (VSB No. 87720) 

Riverfront Plaza, East Tower 

951 East Byrd Street 

Richmond, VA 23219 

Tel: (804) 788-8200 

Fax: (804) 788-8218 

-andWEIL, GOTSHAL & MANGES LLP 

Ray C. Schrock, P.C. (pro hac vice admission pending) 

Ryan Preston Dahl (pro hac vice admission pending) 

Candace M. Arthur (pro hac vice admission pending) 

Daniel Gwen (pro hac vice admission pending) 

767 Fifth Avenue 

New York, New York 10153 

Telephone: (212) 310-8000 

Facsimile: (212) 310-8007 

Proposed Attorneys for Debtors 

and Debtors in Possession

CERTIFICATION OF ENDORSEMENT 

UNDER LOCAL BANKRUPTCY RULE 9022-1(C)

I hereby certify that the foregoing proposed order has been endorsed by or served 

upon all necessary parties. 

/s/ Henry P. (Toby) Long, III 

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Exhibit B 

Proposed Final Order 

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WEIL, GOTSHAL & MANGES LLP 

Ray C. Schrock, P.C. (pro hac vice admission pending) 

Ryan Preston Dahl (pro hac vice admission pending) 

Candace M. Arthur (pro hac vice admission pending) 

Daniel Gwen (pro hac vice admission pending) 

767 Fifth Avenue 

New York, New York 10153 

Telephone: (212) 310-8000 

Facsimile: (212) 310-8007

HUNTON ANDREWS KURTH LLP 

Tyler P. Brown (VSB No. 28072) 

Henry P. (Toby) Long, III (VSB No. 75134) 

Nathan Kramer (VSB No. 87720) 

Riverfront Plaza, East Tower 

951 East Byrd Street 

Richmond, Virginia 23219 

Telephone: (804) 788-8200 

Facsimile: (804) 788-8218

Proposed Attorneys for Debtors and Debtors in Possession

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF VIRGINIA 

RICHMOND DIVISION 

------------------------------------------------------------ x 

 : 

In re : Chapter 11 

: 

CHINOS HOLDINGS, INC., et al., : Case No. 20–________ 

 : 

 Debtors. 1 : (Jointly Administered) 

 : 

------------------------------------------------------------ x 

FINAL ORDER (I) AUTHORIZING DEBTORS TO 

(A) PAY PREPETITION WAGES, SALARIES, REIMBURSABLE 

EXPENSES, AND OTHER OBLIGATIONS ON ACCOUNT OF COMPENSATION 

AND BENEFITS PROGRAMS AND (B) CONTINUE COMPENSATION 

AND BENEFITS PROGRAMS, AND (II) GRANTING RELATED RELIEF 

Upon the motion (the “Motion”)2 of Chinos Holdings, Inc. and its affiliated debtors 

in the above-captioned chapter 11 cases, as debtors and debtors in possession (collectively, the 

 

1

 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification 

number, as applicable, are Chinos Holdings, Inc. (3834); Chinos Intermediate Holdings A, Inc. (3301); Chinos 

Intermediate, Inc. (3871); Chinos Intermediate Holdings B, Inc. (3244); J. Crew Group, Inc. (4486); J. Crew 

Operating Corp. (0930); Grace Holmes, Inc. (1409); H.F.D. No. 55, Inc. (9438); J. Crew Inc. (6360); J. Crew 

International, Inc. (2712); J. Crew Virginia, Inc. (5626); Madewell Inc. (8609); J. Crew Brand Holdings, LLC 

(7625); J. Crew Brand Intermediate, LLC (3860); J. Crew Brand, LLC (1647); J. Crew Brand Corp. (1616); J. 

Crew Domestic Brand, LLC (8962); and J. Crew International Brand, LLC (7471). The Debtors’ corporate 

headquarters and service address is 225 Liberty St., New York, NY 10281. 

2 Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to such terms in 

the Motion.

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2 

“Debtors”), pursuant to sections 105(a), 363(b) and 507 of the Bankruptcy Code and Bankruptcy 

Rules 6003 and 6004, for entry of interim and final orders (i) authorizing, but not directing, the 

Debtors to (a) pay and honor certain prepetition claims and obligations in the ordinary course of 

business, in the exercise of their sole discretion, relating to, the business practices, programs, and 

policies for their Employees, Supplemental Workforce, and Directors, including, among other 

things, Compensation Obligations, Payroll Processing Fees, Business Related Expenses, 

Employee Incentive Programs, Employee Benefit Programs, and the Non-Insider Severance 

Program, and other obligations on account of the Compensation and Benefits Programs and 

(b) continue to administer the Compensation and Benefits Programs, and (ii) granting related 

relief, all as more fully set forth in the Motion; and the Court having jurisdiction to consider the 

Motion and the relief requested therein pursuant to 28 U.S.C. §§ 157(a)–(b) and 1334; and the 

Standing Order of Reference from the United States District Court for the Eastern District of 

Virginia, dated July 10, 1984; and consideration of the Motion and the requested relief being a 

core proceeding pursuant to 28 U.S.C. § 157(b); and venue being proper before this Court pursuant 

to 28 U.S.C. §§ 1408 and 1409; and due and proper notice of the Motion having been provided to 

the Notice Parties under the circumstances, and it appearing that no other or further notice need be 

provided; and this Court having held one or more hearing(s) to consider the relief requested in the 

Motion; and upon the First Day Declaration and the record of the hearing(s) on the Motion; and 

all objections to the relief requested in the Motion having been withdrawn, resolved, or overruled; 

and the Court having determined that the legal and factual bases set forth in the Motion establish 

just cause for the relief granted herein; and after due deliberation and sufficient cause appearing 

therefor,

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3 

IT IS HEREBY ORDERED THAT: 

1. The Motion is granted on a final basis to the extent set forth herein. 

2. The Debtors are authorized, but not directed, pursuant to sections 105(a), 

363(b), and 507(a) of the Bankruptcy Code, to pay and honor all prepetition obligations associated 

with the Compensation and Benefits Programs, including (a) Compensation Obligations; 

(b) Payroll Pressing Fees; (c) Withholding Obligations; (d) Business-Related Expenses; 

(e) Employee Incentive Programs; (f) Health Benefits Plans; (g) Consumer Choice Health 

Accounts, (h) Welfare and Benefits Programs, including the various insurance, disability, and 

miscellaneous employee assistance programs, (i) 401(k) Plans; (j) Paid Leave; (k) the Non-Insider 

Severance Program; and (l) Administration Fees, and to continue programs and maintain funding 

in the ordinary course of business; provided that, no payment for wages, salaries, or commissions, 

and sick leave earned by an individual Employee shall exceed $13,650, other than by permission 

of this Court. 

3. Nothing contained in the Motion or this Interim Order shall be deemed as 

authorizing or approving (a) any payments or transfers that violate section 503(c) of the 

Bankruptcy Code or (b) the Debtors to cash out unpaid vacation upon termination of an Employee, 

unless applicable non-bankruptcy law requires such payment. 

4. The Debtors are authorized, but not directed, to modify or discontinue any 

Compensation and Benefits Program to reduce or eliminate program expenses or the benefits 

provided thereunder, at any time, in their sole discretion without prior Court approval to the extent 

permitted by the applicable agreement or law. 

5. The Debtors are further authorized, but not directed, to discontinue the 

Furlough Program, hire new and/or rehire furloughed Employees, reinstate salary levels, and 

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4 

otherwise continue any of the Compensation and Benefits Programs at the levels that were in place 

before the Furlough Program and other temporary measures taken by the Debtors in response to 

the COVID-19 pandemic. 

6. The Debtors and any applicable third parties are authorized to continue to 

allocate and distribute Withholding Obligations to the appropriate third-party recipients or taxing 

authorities in accordance with the Debtors’ stated policies and prepetition practices. 

7. Each of the Banks at which the Debtors maintain their accounts relating to 

the payment of obligations on account of the Compensation and Benefits Programs are authorized 

to (a) receive, process, honor, and pay all checks presented for payment and to honor all funds 

transfer requests made by the Debtors related thereto, to the extent that sufficient funds are on 

deposit in those accounts and (b) accept and rely on all representations made by the Debtors with 

respect to which checks, drafts, wires, or automated clearing house transfers should be honored or 

dishonored in accordance with this or any other order of the Court, whether such checks, drafts, 

wires, or transfers are dated before, on, or after the Petition Date, without any duty to inquire 

otherwise.

8. The Debtors are authorized, but not directed, to issue new postpetition 

checks, or effect new electronic funds transfers, on account of obligations in connection with the 

Compensation and Benefits Programs as set forth herein, and to replace any prepetition checks or 

electronic fund transfer requests that may be lost, dishonored, or rejected as a result of the 

commencement of the Debtors’ chapter 11 cases with respect to any prepetition amounts that are 

authorized to be paid under this Final Order.

9. Nothing contained in the Motion or this Final Order, nor any payment made 

pursuant to the authority granted by this Final Order, is intended to be or shall be construed as 

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5 

(a) an admission as to the validity of any claim against the Debtors; (b) an agreement or obligation 

to pay any claims; (c) a waiver of the Debtors’ or any appropriate party in interest’s rights to 

dispute the amount of, basis for, or validity of any claim against the Debtors; (d) a waiver of any 

claims or causes of action which may exist against any creditor or interest holder; or (e) an 

approval, assumption, adoption, or rejection of any agreement, contract, lease, program, or policy 

between the Debtors and any third party under section 365 of the Bankruptcy Code. 

10. Notwithstanding anything to the contrary contained in the Motion or this 

Final Order, any payment to be made and any relief or authorization granted hereunder shall not 

be inconsistent with, and shall be subject to, the requirements imposed on the Debtors in any orders 

entered by this Court authorizing the Debtors to obtain debtor-in-possession financing and 

authorizing the use of cash collateral (any such order, a “DIP Order”). To the extent that there 

may be any inconsistency between the terms of this Final Order and the terms of any DIP Order, 

the terms of the DIP Order will govern. 

11. Notwithstanding entry of this Final Order, nothing herein shall create, nor 

is intended to create, any rights in favor of or enhance the status of any claim held by, any party.

12. Under the circumstances of these chapter 11 cases, notice of the Motion is 

adequate under Bankruptcy Rule 6004(a) and the Local Bankruptcy Rules.

13. Notwithstanding Bankruptcy Rule 6004(h), this Final Order shall be 

immediately effective and enforceable upon its entry.

14. The requirement under Local Bankruptcy Rule 9013-1(G) to file a 

memorandum of law in connection with the Motion is waived to the extent necessary. 

15. The Debtors are authorized to take all action necessary to effectuate the 

relief granted in this Final Order.

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6 

16. The Court shall retain jurisdiction to hear and determine all matters arising 

from or related to the implementation, interpretation, or enforcement of this Final Order.

Dated: ________________, 2020 

 Richmond, Virginia UNITED STATES BANKRUPTCY JUDGE 

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WE ASK FOR THIS: 

/s/ Henry P. (Toby) Long, III 

HUNTON ANDREWS KURTH LLP 

Tyler P. Brown (VSB No. 28072) 

Henry P. (Toby) Long, III (VSB No. 75134) 

Nathan Kramer (VSB No. 87720) 

Riverfront Plaza, East Tower 

951 East Byrd Street 

Richmond, VA 23219 

Tel: (804) 788-8200 

Fax: (804) 788-8218 

-andWEIL, GOTSHAL & MANGES LLP 

Ray C. Schrock, P.C. (pro hac vice admission pending) 

Ryan Preston Dahl (pro hac vice admission pending) 

Candace M. Arthur (pro hac vice admission pending) 

Daniel Gwen (pro hac vice admission pending) 

767 Fifth Avenue 

New York, New York 10153 

Telephone: (212) 310-8000 

Facsimile: (212) 310-8007 

Proposed Attorneys for Debtors 

and Debtors in Possession

CERTIFICATION OF ENDORSEMENT 

UNDER LOCAL BANKRUPTCY RULE 9022-1(C)

I hereby certify that the foregoing proposed order has been endorsed by or served 

upon all necessary parties. 

/s/ Henry P. (Toby) Long, III 

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