lucy f. kweskin pro hac vice pending) matthew a. skrzynski

Lucy F. Kweskin Matthew A. Skrzynski PROSKAUER ROSE LLP Eleven Times Square New York, New York 10036 Telephone: (212) 969-3000 Facsimile: (212) 969-2900 Peter J. Young (pro hac vice pending) PROSKAUER ROSE LLP 2029 Century Park East, Suite 2400 Los Angeles, CA 90067-3010 Telephone: (310) 557-2900 Facsimile: (310) 557-2193

Jeff J. Marwil (pro hac vice pending) Brooke H. Blackwell (pro hac vice pending) PROSKAUER ROSE LLP 70 West Madison, Suite 3800 Chicago, IL 60602 Telephone: (312) 962-3550 Facsimile: (312) 962-3551

Proposed Attorneys for Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re

CENTURY 21 DEPARTMENT STORES LLC, et al.,

Debtors.1

Chapter 11

Case No. 20-12097 (SCC)

(Joint Administration Requested)

MOTION OF DEBTORS FOR INTERIM AND FINAL ORDERS (A)(1) CONFIRMING, ON AN INTERIM BASIS, THAT

THE STORE CLOSING AGREEMENT IS OPERATIVE AND EFFECTIVE AND (2) AUTHORIZING, ON A FINAL BASIS, THE DEBTORS TO ASSUME THE STORE CLOSING AGREEMENT, (B) AUTHORIZING AND APPROVING STORE

CLOSING SALES FREE AND CLEAR OF ALL LIENS, CLAIMS, AND ENCUMBRANCES, (C) APPROVING DISPUTE RESOLUTION PROCEDURES, (D) AUTHORIZING CUSTOMARY BONUSES TO EMPLOYEES OF CLOSING

STORES, AND (E) APPROVING THE DEBTORS’ STORE CLOSING PLAN

1 The Debtors in these chapter 11 cases (the “Chapter 11 Cases”), along with the last four digits of each Debtor’s federal tax identification number, as applicable, are Century 21 Department Stores LLC (4073), L.I. 2000, Inc. (9619), C21 Department Stores Holdings LLC (8952), Giftco 21 LLC (0347), Century 21 Fulton LLC (4536), C21 Philadelphia LLC (2106), Century 21 Department Stores of New Jersey, L.L.C. (1705), Century 21 Gardens of Jersey, LLC (9882), C21 Sawgrass Blue, LLC (8286), C21 GA Blue LLC (5776), and Century Paramus Realty LLC (5033). The Debtors’ principal place of business is: 22 Cortlandt Street, 5th Floor, New York, NY 10007.

20-12097-scc Doc 4 Filed 09/10/20 Entered 09/10/20 11:47:42 Main Document Pg 1 of 34

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TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE:

Century 21 Department Stores LLC 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”):

Background

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

this Court a voluntary case under chapter 11 of title 11 of the United States Code (the “Bankruptcy

Code”). The Debtors are authorized to continue to operate their business and manage their

properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.

No trustee, examiner, or statutory committee of creditors has been appointed in these Chapter 11

Cases.

2. 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”).

3. Additional information regarding the Debtors’ business, capital structure,

and the circumstances leading to the commencement of these Chapter 11 Cases is set forth in the

Declaration of Norman R. Veit Jr. Pursuant to Rule 1007-2 of the Local Bankruptcy Rules for the

Southern District of New York, sworn to on the date hereof (the “Veit Declaration”),2 and the

Debtors’ Memorandum in Support of Chapter 11 Filings, each filed with the Court

contemporaneously herewith and incorporated by reference herein.

2 Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Veit Declaration.


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Jurisdiction

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

§§ 157 and 1334, and the Amended Standing Order of Reference M-431, dated January 31, 2012

(Preska, C.J.). This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue is proper before

the Court pursuant to 28 U.S.C. §§ 1408 and 1409.

5. The Debtors confirm their consent, pursuant to Rule 7008 of the Bankruptcy

Rules, to the entry of a final order by the Bankruptcy Court in connection with this Motion to the

extent that it is later determined that the Bankruptcy Court, absent consent of the parties, cannot

enter final orders or judgments in connection herewith consistent with Article III of the United

States Constitution.

Relief Requested

6. By this Motion, pursuant to sections 105(a), 363, 365, and 554 of the

Bankruptcy Code, and Rules 6003, 6004, and 6007 of the Bankruptcy Rules, the Debtors request

entry of an interim order, substantially in the form annexed hereto as Exhibit A (the “Interim

Order”), and a final order, substantially in the form annexed hereto as Exhibit B (the “Final

Order” and, together with the Interim Order, the “Proposed Orders”), (a)(1) authorizing, upon

entry of the Final Order, the Debtors to assume3 the agreement dated as of September 1, 2020, by

and among Hilco Merchant Resources, LLC (together with Gordon Brothers Retail Partners, LLC,

the “Consultant”),4 on the one hand, and the Debtors, on the other, a copy of which is attached

3 Pursuant to this Motion, the Debtors seek entry of the Interim Order confirming that the Store Closing Agreement (as defined below) is operative and effective, and entry of the Final Order granting the Debtors authority to assume the Store Closing Agreement. 4 Pursuant to Section N of the Store Closing Agreement, Hilco Merchant Resources, LLC (“HMR”) was authorized to syndicate this transaction with a third party upon notice to the Debtors. In accordance with the Store Closing Agreement, after notice to the Debtors, HMR syndicated the transaction with Gordon Brothers Retail Partners, LLC (“GBRP”).


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hereto as Exhibit C (as amended, modified, or restated as of the date hereof, and together with all

exhibits thereto, the “Store Closing Agreement”) and (2) confirming, upon entry of the Interim

Order, that the Store Closing Agreement is operative and effective until the Court considers the

relief requested by the Motion on a final basis, (b) authorizing the Debtors to continue to conduct

store closing sales (collectively, the “Closing Sales”) at the store locations listed on Exhibit A to

the Store Closing Agreement (the “Closing Stores”) and, if requested by the Debtors, through the

Debtors’ e-commerce platform, in accordance with the proposed sale guidelines (the “Sale

Guidelines”) attached hereto as Exhibit D, with such sales to be free and clear of all liens, claims,

encumbrances, and interests (collectively, the “Encumbrances”), (c) approving the proposed

dispute resolution procedures described herein to resolve any disputes with governmental units

regarding certain applicable non-bankruptcy laws that regulate liquidation and similar-themed

sales, (d) authorizing customary bonuses to non-insider Closing Store employees who remain

employed for the duration of the applicable Closing Sale (collectively, the “Store Closing

Bonuses”), and (e) approving the Debtors’ strategic plan in connection with the closure of each of

their retail locations by giving effect to the above-referenced documents and implementing the

above-referenced procedures (the “Store Closing Plan”).

Engagement of the Consultant and the Closing Sales

7. As noted in the Veit Declaration, the Debtors reached out to two nationally-

recognized liquidation firms so that such parties could provide proposals for the liquidation of the

Debtors’ inventory (as defined in the Store Closing Agreement, the “Merchandise”) and the

Debtors’ furniture, fixtures, and equipment (collectively, the “FF&E”5 and, together with the

5 For the avoidance of doubt, the FF&E includes furniture, fixtures, and equipment (including owned furnishings, trade fixtures, equipment and improvements to real property) owned by the Debtors wherever those items


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Merchandise, the “Store Assets”). The Debtors provided the liquidation firms with access to a

data room with all of the relevant information necessary to build a liquidation model and for the

liquidation firms to evaluate the potential transaction. The Debtors obtained two proposals from

liquidators.

8. After evaluating the proposals, providing each of the liquidation firms with

the opportunity to submit their best and final proposals and consulting with the Prepetition Agent,

the Debtors determined that the bid submitted by the Consultant was in the best interests of the

Debtors and their estates. The Debtors made this determination after considering numerous

factors, including, but not limited to, (a) the Consultant’s prior experience handling the liquidation

of various similar retailers, (b) the amount and experience of supervisors designated by the

Consultant to handle the project, (c) potential upside that could be realized under a “fee” based

structure,6 (d) the ability of the Consultant to supplement the Debtors’ inventory with additional

goods procured by the Consultant (referred to in the Store Closing Agreement as the “Additional

Agent Goods”), and (e) overall economics.

9. In short, the Debtors determined that entering into the Store Closing

Agreement and commencing Closing Sales immediately was essential to ensure that the liquidation

of the Store Assets is managed efficiently and effectively.

10. The Debtors negotiated the terms and conditions of the Store Closing

Agreement in good faith and at arms’ length, and entered into the Store Closing Agreement on

may be located, including, for example, the Debtors’ corporate offices, distribution centers, warehouses, and the Closing Stores. 6 A “fee” based structure generally provides for a commission or fee to the liquidation firm in exchange for assisting with the sale of particular asset(s) in addition to reimbursing the liquidation firm for its out-of-pocket expenses. The “fee” based structure allows the company to retain a majority of the dollars realized for the asset(s) since the liquidation firms do not risk their own capital and also gives the Debtors the maximum amount of flexibility in the process.


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September 1, 2020. In order to avoid, among other potential negative outcomes, a disorganized

“self-liquidation” scenario, i.e., a scenario in which more desirable items sell faster than items with

a slower turnover, the Closing Sales began on September 3, 2020, immediately following entry

into the Store Closing Agreement.

11. The Debtors anticipate moving expediently so to maximize overall recovery

for the estates while minimizing the Debtors’ liabilities, with each of the Closing Sales to be

completed as soon as possible and, in all cases, in no longer than three months.

A. Store Closing Agreement

12. The material terms of the Store Closing Agreement are summarized in the

table below:

TERM STORE CLOSING AGREEMENT7

Services Provided by the Consultant

(i) Provide qualified supervisors (the “Supervisors”) engaged by the Consultant to oversee the management of the Stores.

(ii) Determine appropriate point-of-sale and external advertising for the Stores, approved in advance by the Debtors.

(iii) Determine appropriate discounts of Merchandise, staffing levels for the Stores, approved in advance by the Debtors, and appropriate bonus and incentive programs, if any, for the Stores’ employees, approved in advance by the Debtors.

(iv) Oversee display of Merchandise for the Stores. (v) To the extent that information is available, evaluate sales of

Merchandise by category and sales reporting and monitor expenses. (vi) Maintain the confidentiality of all proprietary or non-public

information regarding the Debtors in accordance with the provisions of the confidentiality agreement signed by the Consultant and the Debtors.

7 Capitalized terms used in the summary of the Store Closing Agreement, but not otherwise defined herein, shall have the meanings ascribed to such terms in the Store Closing Agreement. To the extent there is any conflict between this summary and the Store Closing Agreement, the Store Closing Agreement shall govern in all respects.


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(vii) Assist the Debtors in connection with managing and controlling loss prevention and employee relations matters.

(viii) Implement HMR’s CareerFlex program for the Debtors’ Store-level and other employees.

(ix) Recommend allocations and balancing of Merchandise between and among the Stores to maximize the overall recovery, including (where necessary or appropriate) collapsing Stores.

(x) Provide such other related services deemed necessary or appropriate by the Debtors (in consultation with the Prepetition Agent) and the Consultant.

Sale Term The term “Sale Term” with respect to each Closing Store commenced on September 3, 2020 (the “Sale Commencement Date”) and shall end with respect to each respective Closing Store no later than November 30, 2020 (the “Sale Termination Date”); provided, however, that the Consultant and the Debtors, upon notice to and in consultation with the Prepetition Agent, may mutually agree in writing to extend or terminate the Closing Sales at any Closing Store prior to the Sale Termination Date. To the extent that the Closings Sale as it pertains to a particular Closing Store is delayed or interrupted because it is required to be closed due to the issuance of an order, rule, or regulation by a federal, state or local government agency related to COVID-19, (i) the Sale Termination Date as to the affected Closing Store shall be extended by the time period for which the Closing Sale was delayed or interrupted, and/or (ii) the Debtors and Consultant may mutually agree on the transfer of the Merchandise in the affected Closing Store to another Closing Store.

Vacating Stores Upon the conclusion of the Sale Term at each Closing Store, the Consultant shall leave such Closing Store in broom clean condition and in accordance with the lease requirements for such premises; provided, however, the Debtors shall bear all costs and expenses associated with surrendering the premises in accordance with the lease requirements for such premises according to a budget mutually agreed to between the Consultant and the Debtors, upon notice to and in consultation with the Prepetition Agent, subject to the Consultant’s right pursuant to Section I of the Store Closing Agreement to abandon at the Closing Stores, the distribution centers, warehouses, and corporate offices any unsold FF&E, upon prior notice to and written consent of the Debtors and consultation with the Prepetition Agent.


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Expenses of the Consultant

All expenses incident to the conduct of the Closing Sale and the operation of the Closing Stores during the Sale Term (including, without limitation, all Closing Store-level and corporate expenses associated with the Sale) shall be in accordance with the Expense Budget and borne by the Debtors.

The Advance On September 4, 2020, the Debtors provided an advance payment in the amount of $525,000 for costs and expenses delineated in the Expense Budget (the “Advance”), which shall be held by the Consultant and applied to any unpaid obligation owing by the Debtors to the Consultant under the Store Closing Agreement. Any portion of the Advance not used to pay amounts explicitly contemplated by the Store Closing Agreement shall be returned to the Debtors within three days following the Final Reconciliation (as described in the Store Closing Agreement).

Compensation for the Consultant

The Debtors shall pay the Consultant a fee weekly equal to one percent (1.0%) of Gross Proceeds (the “Tier 1 Fee”). In addition to the “Tier 1 Fee,” the Consultant may also earn a “Tier 2 Fee” and “Tier 3 Fee” (together with the Tier 1 Fee, the “Merchandise Fee”) equal to the aggregate sum of the percentages shown in the following table, based upon the following thresholds of Net Recovery Percentage (i.e., in each case, as calculated back to first dollar): Net Recovery Percentage Merchandise Fee Less than 90.0% 1.0% Tier 1 Fee is the total Merchandise

Fee Greater than or equal to 90.0% but less than 94.0%

1.0% Tier 1 Fee 0.25% Tier 2 Fee Total Merchandise Fee of 1.25%

Equal to or greater than 94.0%

1.0% Tier 1 Fee 0.25% Tier 2 Fee 0.50% Tier 3 Fee Total Merchandise Fee of 1.75%

To the extent (i) the Sale Term is changed – longer or shorter – and/or (ii) the Merchandise included in the Sale is materially greater or less than the files provided to Agent during due diligence, the Net Recovery Percentages and ranges shall be adjusted in accordance with updated models mutually acceptable to the Debtors and the Consultant. In addition, the Consultant shall be paid a fee equal to the Merchandise Fee on account, and from the sales, of Consigned Goods, which fee shall be paid at the same times as the Merchandise Fee associated with the sale of Merchandise is paid.


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With respect to the FF&E, the Consultant shall have the right to sell such FF&E during the Sale Term on a commission basis equal to 15% of the Gross Proceeds of the sale of the FF&E (“FF&E Commission”).

Additional Agent Goods

The Consultant may supplement the Merchandise in the Closing Sales at the Closing Stores with additional goods procured by the Consultant, which may include goods provided to the Consultant on consignment, which are of like kind, and no lesser quality to the Merchandise in the Closing Sales at the Closing Stores. The Consultant shall pay to the Debtors an amount equal to 5% of the gross proceeds (excluding only Sale Taxes) from the sale of the Additional Agent Goods (the “Additional Agent Goods Fee”), in aggregate amount of not less than $1 million (the “Guaranteed Amount”).

Insurance; Risk of Loss

(i) The Debtors shall maintain throughout the Sale Term, liability insurance policies (including, without limitation, products liability (to the extent currently provided), comprehensive public liability insurance and auto liability insurance) covering injuries to persons and property in or in connection with the Stores, and shall cause the Consultant to be named an additional insured with respect to all such policies.

(ii) At the Consultant’s request, the Debtors shall provide the Consultant with a certificate or certificates evidencing the insurance coverage required under the Store Closing Agreement and that the Consultant is an additional insured thereunder. In addition, the Debtors will maintain throughout the Sale Term, in such amounts as it currently has in effect, worker’s compensation insurance in compliance with all statutory requirements.

Indemnification by the Consultant

The Consultant shall indemnify and hold the Debtors and its consultants, members, managers, partners, officers, directors, employees, attorneys, advisors, representatives, lenders, potential coinvestors, principals, and affiliates (other than the Consultant or the Consultant Indemnified Parties) (collectively, the “Debtors’ Indemnified Parties”) harmless from and against all liabilities, claims, demands, damages, costs and expenses (including reasonable attorneys’ fees) arising from or related to: (i) the willful or negligent acts or omissions of Consultant or the

Consultant Indemnified Parties; (ii) the material breach of any provision of the Store Closing

Agreement by the Consultant, after the Consultant has received


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notice of the asserted breach and the Consultant fails to promptly cure the same to the extent the breach is curable;

(iii) any liability or other claims made by Consultant Indemnified Parties or any other person (excluding Debtors’ Indemnified Parties) against a Debtors’ Indemnified Party arising out of or related to the Consultant’s conduct of the Closing Sales, except claims arising from the Debtors’ negligence, willful misconduct, or unlawful behavior;

(iv) any harassment, discrimination or violation of any laws or regulations or any other unlawful, tortuous or otherwise actionable treatment of Debtors’ Indemnified Parties, or the Debtors' customers by the Consultant or any of the Consultant Indemnified Parties;

(v) any claims made by any party engaged by the Consultant as an employee, agent, representative or independent contractor arising out of such engagement; and/or

(vi) any product liability, consumer protection, or similar claims regarding Additional Agent Goods.

Indemnification by Debtors

The Debtors shall indemnify, defend, and hold the Consultant and its consultants, members, managers, partners, officers, directors, employees, attorneys, advisors, representatives, lenders, potential co-investors, principals, affiliates, and Supervisors (collectively, “Consultant Indemnified Parties”) harmless from and against all liabilities, claims, demands, damages, costs and expenses (including reasonable attorneys’ fees) arising from or related to: (i) the willful or negligent acts or omissions of the Debtors or the

Debtors’ Indemnified Parties; (ii) the material breach of any provision of the Store Closing

Agreement by the Debtors, after the Debtors have received notice of the asserted breach and the Debtors fail to promptly cure the same to the extent the breach is curable;

(iii) any liability or other claims, including, without limitation, product liability claims, asserted by customers, any Store employees (under a collective bargaining agreement or otherwise), or any other person (excluding the Consultant Indemnified Parties) against the Consultant or a Consultant Indemnified Party, except claims arising from the Consultant’s negligence, willful misconduct or unlawful behavior;


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(iv) any harassment, discrimination or violation of any laws or regulations or any other unlawful, tortuous or otherwise actionable treatment of the Consultant Indemnified Parties or the Debtors’ customers by the Debtors or the Debtors’ Indemnified Parties; and/or

(v) the Debtors’ failure to pay over to the appropriate taxing authority any taxes required to be paid by the Debtors during the Sale Term in accordance with applicable law.

B. Closing Sales According to Sale Guidelines; Assumption of Store Closing Agreement

13. The Sale Guidelines provide, among other things, that: (a) all sales of Store

Assets will be deemed free and clear of all Encumbrances; (b) Merchandise will be sold with the

benefit of various marketing techniques and price mark-downs to promote efficient liquidation;

and (c) certain Store Assets that cannot be promptly liquidated may be abandoned if and when the

Debtors determine, in their business judgment, with notice to, and in consultation with the

Prepetition Agent, that retaining, storing, or removing such assets would result in unnecessary

expense with little or no benefit to the estates.

C. Dispute Resolution Procedures Relating to Liquidation Laws

14. Certain Closing Stores may be subject to (a) liquidation laws, which

include, but are not limited to, various federal, state, and local statutes, ordinances, rules, and

licensing requirements directed at regulating “going out of business,” “store closing,” “sale on

everything,” “everything must go,” “liquidation sale,” or similar themed sales, (b) bulk sale laws,

laws restricting safe, professional, and non-deceptive customary advertising such as signs, banners,

posting of signage, and use of sign-walkers in connection with the sale, including ordinances

establishing license or permit requirements, waiting periods, time limits, or (c) bulk sale

restrictions that would otherwise apply solely to the sale of the Store Assets (collectively, the


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“Liquidation Laws”). While many such Liquidation Laws do not apply to court-ordered sales,

some Liquidation Laws may not expressly carve-out court-ordered sales.

15. To the extent that the Closing Sales of Store Assets are subject to any

Liquidation Laws, the Debtors propose that the following resolution procedures (the “Resolution

Procedures”) shall apply:

(a) Provided that the Closing Sales are conducted in accordance with the terms of the Interim Order or the Final Order, as applicable, the Store Closing Agreement and the Sale Guidelines (as may be modified by Side Letter Agreements), and in light of the provisions in the laws of many Governmental Units (as defined in the Bankruptcy Code) that exempt court-ordered sales from their provisions, the Debtors and the Consultant will be presumed to be in compliance with any Liquidation Laws and are authorized to conduct the Closing Sales in accordance with the terms of the Interim Order or the Final Order, as applicable, the Store Closing Agreement and the Sale Guidelines (as may be modified by Side Letter Agreements) without the necessity of further showing compliance with any such Liquidation Laws.

(b) Within two (2) business days after entry of the Interim Order, the Debtors will serve by email, facsimile, or first-class mail, copies of the Motion and the as-entered Interim Order, on the following: (i) the landlords for the Closing Stores (the “Landlords”); (ii) the Attorney General’s office for each state in which the Closing Sales are being held; (iii) the county consumer protection agency or similar agency for each county in which the Closing Sales are being held; and (iv) the division of consumer protection for each state in which the Closing Sales are being held (collectively, the “Dispute Notice Parties”). Within two (2) business days after entry of the Final Order, the Debtors will likewise serve the Dispute Notice Parties with a copy of the as-entered Final Order.

(c) To the extent that there is a dispute arising from or relating to the Closing Sales, the Interim Order, or the proposed Final Order, as applicable, the Store Closing Agreement, or the Sale Guidelines, which dispute relates to any Liquidation Laws (a “Reserved Dispute”), the Court shall retain exclusive jurisdiction to resolve the Reserved Dispute. Any time within ten (10) days following entry of the Interim Order any Governmental Unit may assert that a Reserved Dispute exists by sending a notice (the “Dispute Notice”) explaining the nature of the dispute to: (i) Proskauer Rose LLP,


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Eleven Times Square, New York, New York 10036 (Attn: Lucy F. Kweskin, Esq.); Proskauer Rose LLP, 70 West Madison, Suite 3800, Chicago, Illinois 60602 (Attn: Jeff J. Marwil, Esq.); Proskauer Rose LLP, 2029 Century Park East, Suite 2400, Los Angeles, California 90067-3010 (Attn: Peter J. Young, Esq.), (ii) counsel to any statutorily appointed committee, (iii) the United States Trustee for Region 2 (the “U.S. Trustee”), U.S. Federal Office Building, 201 Varick Street, Suite 1006, New York, New York 10014, (iv) any affected Landlord, (v) counsel to the Prepetition Agent, Morgan Lewis & Bockius LLP, One Federal Street, Boston, MA 02110, (Attn: Julia Frost-Davies); Morgan Lewis & Bockius LLP, 2049 Century Park East, Los Angeles, CA 90067 (Attn: David Riley, Esq.) and (vi) Troutman Pepper Hamilton Sanders LLP, 1313 Market Street, Suite 5100, P.O. Box 1709, Wilmington, Delaware 19899-1709, Attn: Douglas D. Herrmann, Esq. and Marcy McLaughlin Smith, Esq. ([email protected] and [email protected]).

(d) If the Debtors, the Consultant, and the Governmental Unit are unable to resolve the Reserved Dispute within fourteen (14) days after service of the Dispute Notice, the Governmental Unit may file a motion with the Court requesting that the Court resolve the Reserved Dispute (a “Dispute Resolution Motion”).

(e) In the event that a Dispute Resolution Motion is filed, nothing in the Interim Order or the Final Order, as applicable, shall preclude the Debtors or any other interested party from asserting (i) that the provisions of any Liquidation Laws are preempted by the Bankruptcy Code or (ii) that neither the terms of the Interim Order or the Final Order nor the conduct of the Debtors or the Consultant pursuant to the Interim Order or the Final Order violates such Liquidation Laws. Filing a Dispute Resolution Motion as set forth herein shall not be deemed to affect the finality of the Interim Order or the Final Order or to limit or interfere with the Debtors’ or the Consultant’s ability to conduct or to continue to conduct the Closing Sales pursuant to the Interim Order or the Final Order, absent further order of the Court. Upon the entry of the Interim Order or the Final Order, as applicable, the Court grants authority for the Debtors and the Consultant to conduct the Closing Sales pursuant to the terms of the Interim Order or the Final Order, as applicable, the Store Closing Agreement, and the Sale Guidelines and to take all actions reasonably related thereto or arising in connection therewith. The Governmental Unit will be entitled to assert any jurisdictional, procedural, or substantive arguments it wishes with respect to the requirements of its Liquidation Laws or the lack of any preemption of such Liquidation Laws by the Bankruptcy Code. Nothing in the


mailto:[email protected]

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Interim Order or the Final Order will constitute a ruling with respect to any issues to be raised in any Dispute Resolution Motion.

(f) If, at any time, a dispute arises between the Debtors or the Consultant and a Governmental Unit as to whether a particular law is a Liquidation Law, and subject to any provisions contained in the Interim Order or the Final Order related to the Liquidation Laws, then any party to that dispute may utilize the provisions of subparagraphs (c) and (d) above by serving a notice to the other party and proceeding thereunder in accordance with those subparagraphs. Any determination with respect to whether a particular law is a Liquidation Law shall be made de novo.

D. Fast Pay Laws

16. Many states in which the Debtors operate have laws and regulations that

require the Debtors to pay an employee substantially contemporaneously with his or her

termination (the “Fast Pay Laws” and, together with the Liquidation Sale Laws, the “Applicable

State Laws”). These laws often require payment to occur immediately or within a period of only

a few days from the date such employee is terminated.

17. The nature of the Closing Sales contemplated by this Motion will result

ultimately in each of the Store-level employees being terminated during the Closing Sales. To be

clear, the Debtors intend to pay their terminated employees as expeditiously as possible and under

normal payment procedures. However, the Debtors’ payroll systems will simply be practically

unlikely to process the payroll information associated with these terminations in a manner that will

be compliant with the Fast Pay Laws. Under ordinary circumstances, the Debtors’ payroll

department is able to coordinate delivery of final checks to coincide with an employee’s final day

of work where required by state law. This process requires the Debtors’ payroll department to

calculate individual termination payments, prepare each termination payment check, obtain

authorization for each such check, and then prepare each such check for mailing. Given the

number of employees who will be terminated during the Closing Sales, this process could easily


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take several days, making compliance with the Fast Pay Laws burdensome to the Debtors’ estates,

if not impossible.

E. Return and Exchange Policies

18. Consistent with industry practice and to accommodate customers’ needs,

the Debtors maintain liberal return, exchange, and store credit policies with respect to both in-store

and online purchases (collectively, the “Return and Exchange Policies”). For example,

Century21.com provides for a forty-five-day return policy from the order date. Similarly, the in-

store return policy is forty-five days from the date of purchase with exceptions for certain items

that have a shorter return policy. As a result of the COVID-19 pandemic, the Debtors have allowed

customers to return items purchased since February 4, 2020, and to return items purchased thirty

days after store reopening.

19. In order to maintain the goodwill of their customers, many of whom will

likely purchase items during the Closing Sales, the Debtors propose to slightly amend their Return

and Exchange Policies so to allow the Debtors to permit returns and exchanges for items purchased

prior to September 10, 2020, until the earlier of (a) the applicable policy under the Return and

Exchange Policies and (b) October 10, 2020 (the “Modified Return Policy”).

20. The Debtors do not intend to apply the Modified Return Policy to any

merchandise sold in accordance with the Closing Sales described herein, all of which will be

conducted on a final basis.

F. Customer Programs

Gift Cards

21. The Debtors maintained a program (the “Gift Card Program”) through

which their customers could purchase physical, non-expiring gift cards in various denominations


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(the “Gift Cards”). The Debtors historically sold the Gift Cards in their retail stores and through

their website. On occasion, the Debtors also sold and distributed Gift Cards in connection with

sales promotions, other special events or to members of their C21STATUS loyalty program

described below. All of the Debtors’ Gift Cards were redeemable in-store or online.

22. As of the Petition Date, the Debtors have suspended the issuance of new

Gift Cards and notified third-party vendors to cease selling the Gift Cards through other retailers

and to pull any unsold Gift Cards from the shelves. By this Motion, the Debtors propose to

continue honoring all outstanding Gift Cards through October 10, 2020, after which Gift Cards

will be deemed to have no value.

Loyalty Program

23. The Debtors operated a customer loyalty program, “C21STATUS,”

whereby customers who signed up for “loyalty” accounts could accrue reward points for each

dollar spent towards award certificates. The Debtors also have “C21STATUS” branded credit

cards with respect to which credit cardholders would accrue reward points for all purchases made

on the credit cards. However, as of the Petition Date, the Debtors have discontinued the

C21STATUS program and are no longer honoring reward points or any other benefits accrued

thereunder. Accordingly, the Debtors do not seek authority to continue the C21STATUS program

on a postpetition basis or to compensate loyalty members for benefits accrued prepetition.

24. The credit cards are issued by Comenity Capital Bank (“Comenity”), which

bears all credit risks associated with the cards. While the primary purpose of offering the credit

cards is to increase customer loyalty and drive sales, the Debtors also receive credit card revenue

through a program agreement with Comenity, which provides the Debtors with certain financial

benefits.


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Coupons and Sale Promotions

25. The Debtors occasionally maintained a coupon redemption program

pursuant to which they distributed and honored their own coupons (the “Coupons”). Further, in

the ordinary course of business, the Debtors conducted sales promotions, either online or at

selected stores (the “Sales Promotions”), which included “buy one get one free” programs, cash

off future purchases, seasonal discounts, online promotions and discount codes, and free shipping

promotions. Although the Debtors do not believe that any unexpired Coupons or Sales Promotions

are in circulation or pending, as of the Petition Date, the Debtors nonetheless do not intend to

honor Coupons or Sales Promotions in light of discounts that will apply to the Closing Sales.

G. Store Closing Bonus Plan

26. Through this Motion, the Debtors are requesting the authority, but not the

obligation, subject to the terms of the Cash Collateral Order (as defined below) and associated

budget, to pay Store Closing Bonuses (the “Store Closing Bonus Plan”) to Store-level non-insider

employees, who remain in the employ of the Debtors during the Closing Sales. The Debtors

believe that the Store Closing Bonus Plan will motivate employees during the Closing Sales and

will enable the Debtors to retain those employees necessary to successfully complete the Closing

Sales. Payments under the Store Closing Bonus Plan, if any, are to be made exclusively to non-

insiders and on the condition of employment through the date on which the respective employee’s

Store closes.

27. The amount of the Store Closing Bonuses offered under the Store Closing

Bonus Plan will vary depending upon a number of factors, including the employee’s position with

the Debtors and the duration of his or her employment.


18

28. The total aggregate cost of the Store Closing Bonus Plan will not be more

than $1,013,000, assuming 100% of the eligible employees remain employed through the duration

of the Closing Sales at each Closing Store.

29. Providing such non-insider bonus benefits is critical to ensuring that key

employees that will be affected by the reduction in the Debtors’ workforce due to the Store

Closings will continue to provide critical services to the Debtors during the ongoing Store Closing

process. For the avoidance of doubt, the Debtors do not propose to make any payment on account

of Store Closing Bonuses to any insiders.

30. In order to ensure a successful Store Closing and Closing Sale process and

maximize revenues for the benefit of the Debtors’ estates, the Store Closing Bonuses incentivize

store management to provide uninterrupted leadership during this challenging period, and tie

payment to maintaining employment with the Debtors through the conclusion of the Closing Sales.

Accordingly, the Debtors respectfully submit that the Store Closing Bonus Plan is in the best

interests of their estates.

Relief Requested

31. By this Motion, the Debtors seek the entry of the Proposed Orders

approving the Store Closing Plan and the Debtors’ continued efforts in accordance therewith,

including (a)(1) approving and authorizing, upon entry of the Final Order, the Debtors’ assumption

of the Store Closing Agreement and (2) confirming, upon entry of the Interim Order, that the Store

Closing Agreement is operative and effective until the Court considers the relief requested by the

Motion on a final basis, (b) approving the Sale Guidelines, (c) authorizing the Closing Sales in

accordance with the Sale Guidelines, (d) authorizing Store Closing Bonuses to non-insider Closing

Store employees who remain employed for the duration of the applicable Closing Sale, and


19

(e) approving the Resolution Procedures related to any Liquidation Laws. The Debtors further

request that the Court (x) set a deadline for filing objections to this Motion and entry of the Final

Order, (y) set a final hearing on the Motion, and (z) enter the Final Order on this Motion in

connection with such final hearing.

The Relief Requested Should Be Granted

A. Assumption of the Store Closing Agreement (Upon Entry of the Final Order) Is Warranted Under Section 365 of the Bankruptcy Code.

32. Section 365(a) of the Bankruptcy Code provides that a debtor, “subject to

the court’s approval, may assume or reject any executory contract or unexpired lease.” 11 U.S.C.

§ 365(a). A debtor’s determination to assume or reject an executory contract is governed by the

“business judgment” standard.8 In applying the “business judgment” standard, courts show

substantial deference to the debtor’s decision to assume or reject.9 “The business judgment rule

‘is a presumption that in making a business decision the directors of a corporation acted on an

informed basis, in good faith and in the honest belief that the action taken was in the best interests

of the company.’”10 The business judgment rule applies in chapter 11 cases.11

8 See, e.g., In re Hawker Beechcraft, Inc., 486 B.R. 264 (Bankr. S.D.N.Y. 2013) (holding chapter 11 debtor did not have to show anything more than ordinary business judgment in order for bankruptcy court to uphold its decision to reject executory contracts). 9 See, e.g., In re Genco Shipping & Trading Ltd., 509 B.R. 455, 462-63 (Bankr. S.D.N.Y. 2014) (A court will normally approve the assumption of an executory contract “upon a showing that the debtor's decision to take such action will benefit the debtor’s estate and is an exercise of sound business judgment” … and generally not second-guess a debtor’s business judgment regarding whether the assumption or rejection of a contract will benefit the debtor’s estate.) (quoting In re MF Global Holdings Ltd., 466 B.R. 239, 242 (Bankr. S.D.N.Y. 2012)); see also Summit Land Co. v. Allen (In re Summit Land Co.), 13 B.R. 310, 315 (Bankr. D. Utah 1981) (absent extraordinary circumstances, court approval of a debtor’s decision to assume or reject executory contracts “should be granted as a matter of course”).

10 Official Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.), 147 B.R. 650, 656 (S.D.N.Y. 1992). 11 See id. at 656; see also In re Genco Shipping & Trading Ltd, 509 B.R. at 464 (citing In re Integrated Res., Inc., 147 B.R. at 656) (applying the business judgment rule in chapter 11); Comm. of Asbestos-Related Litigants and/or Creditors v. Johns-Manville Corp. (In re Johns-Manville Corp.), 60 B.R. 612, 615-16 (Bankr. S.D.N.Y. 1986) (“[T]he Code favors the continued operation of a business by a debtor and a presumption of reasonableness attaches to a debtor’s management decisions.”).


20

33. Here, the Debtors have satisfied the “business judgment” standard and have

a sound business reason for seeking to assume the Store Closing Agreement and perform their

obligations thereunder, which will include the reimbursement of prepetition and postpetition

expenses and the payment of prepetition and postpetition obligations arising under the Store

Closing Agreement, and continue the Closing Sales, which commenced prepetition, with the

Consultant’s assistance in accordance with the Sale Guidelines. As described in the Veit

Declaration, the Debtors filed these Chapter 11 Cases to liquidate their assets and maximize

distributions to their creditors. The Closing Sales further both of these goals: with the cooperation

of their employees and the services of the Consultant, the Debtors will be able to liquidate Store

Assets at the Closing Stores so that the Debtors can exit the Closing Stores quickly and efficiently,

thereby monetizing their assets and eliminating related expenses.

34. The Closing Sales are a significant component of the Debtors’ efforts to

maximize value because these Closing Sales enable the Debtors to sell Store Assets at the Closing

Stores in a manner that is designed to maximize efficiency and increase overall profitability.

Allowing the Closing Sales – which commenced prepetition – to proceed in accordance with the

Sale Guidelines will allow the Debtors to most efficiently and quickly monetize the Store Assets

in a uniform and orderly process with the assistance of an experienced consultant.

35. Assumption of the Store Closing Agreement will allow the Debtors to

engage the Consultant, on a postpetition basis, to manage the Closing Sales at the Closing Stores.

The Consultant is experienced in facilitating processes such as the Closing Sales and will help the

Debtors maximize their recovery on the Store Assets located at all Closing Stores for the benefit

of the Debtors’ estates and their creditors.


21

36. Given the complexity of the Closing Sales across various states and given

the multitude of stores, the Consultant will provide invaluable strategic, managerial, and

accounting services, allowing the Debtors to focus their efforts on other key aspects of their chapter

11 efforts. Therefore, efficient and effective liquidation sales and procedures, as contemplated by

the Sale Guidelines, and the services to be provided by the Consultant will allow the Debtors to

more quickly vacate those locations and avoid the accrual of unnecessary administrative expenses.

37. On the other hand, if the Debtors do not assume the Store Closing

Agreement and their obligations thereunder, the Debtors’ estates will suffer significant and

irreparable harm because they will likely lose the benefit of the Consultant’s momentum initiated

prior to the Petition Date. As a result, the Debtors and their advisors will likely need to suspend

the Closing Sales, which would then require the Debtors to devote substantial time and effort

preparing for and managing the Closing Sales internally, or to once again seek bids from other

advisors who could prepare for and run the Closing Sales, a process the Debtors have already

undertaken prior to the Petition Date in connection with the selection of Consultant and

commencement of the Closing Sales. Ultimately, such disruption and delay would materially

increase the Debtors’ administrative expenses and overall losses, without any associated benefits

of such delays to their estates.

38. For the reasons stated above, the Debtors submit that they have exercised

their reasonable business judgment in seeking to assume the Store Closing Agreement and thereby

engaging and enabling the Consultant to proceed with the Closing Sales at the Closing Stores. As

such, there is sufficient business justification for the assumption of the Store Closing Agreement

and, on interim basis, the entry of an order that confirms that the Store Closing Agreement is

operative and effective.


22

B. Continuing the Closing Sales Pursuant to the Sale Guidelines, Including Modification of the Debtors’ Prepetition Customer Programs and Implementation of the Store Closing Bonus Plan, Is Authorized Pursuant to Sections 105(a) and 363(b) of the Bankruptcy Code.

39. Section 105(a) of the Bankruptcy Code provides, in relevant part, that “[t]he

court may 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). Section 363(b) of the Bankruptcy Code permits a

debtor to use, sell, or lease, estate property “other than in the ordinary course of business” after

notice and a hearing. 11 U.S.C. § 363(b)(1). Courts have authorized relief under section 363(b)

where a debtor demonstrated a sound business justification for such relief.12

40. As noted above, once a debtor has articulated a valid business justification,

the court accords great deference to such judgment, even in the context of chapter 11 cases.13 The

benefit of the business judgment rule is equally applicable in the context of sales under section

363.14

41. As discussed in the preceding section, the Debtors have determined, in the

sound exercise of their business judgment, that continuing the Closing Sales at the Closing Stores

on and after the Petition Date, or as soon thereafter as possible, is essential to their efforts to

minimize administrative expenses and liquidate assets at the Closing Stores as efficiently and

12 See Comm. of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1071 (2d Cir. 1983) (“The rule we adopt requires that a judge determining a § 363(b) application expressly find from the evidence presented before him at the hearing a good business reason to grant such an application.”); In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1985) (“[T]he debtor must articulate some business justification, other than mere appeasement of major creditors.”). 13 See In re Integrated Res., Inc., 147 B.R. at 656; In re Johns-Manville Corp., 60 B.R. at 615-16. 14 See, e.g., In re Genco Shipping & Trading Ltd., 509 B.R. at 464 (quoting In re Global Crossing Ltd., 295 B.R. 726, 743 (Bankr. S.D.N.Y. 2003) (“The standard used for judicial approval of the use of estate property outside of the ordinary course of business is also the business judgment of the debtor.”); Fulton State Bank v. Schipper (In re Schipper), 933 F.2d 513, 515 (7th Cir. 1991) (“[D]ebtor in possession can sell property of the estate outside the ordinary course of business if . . . he has an ‘articulated business justification.’”); Stephens Indus., Inc. v. McClung, 789 F.2d 386, 390 (6th Cir. 1986) (authorizing sale of debtor’s assets pursuant to section 363 “when a sound business purpose dictates such action”) (citation omitted).


23

quickly as possible. The Sale Guidelines, including the modification of the Debtors’ prepetition

customer programs to comport with the Closing Sales process, will allow the Debtors to move

forward with a uniform and orderly process of monetizing the Store Assets at the Closing Stores.

Along with the aid and efforts of an experienced consultant to maximize value and efficiency, the

Debtors anticipate that the Closing Sales will take less than three months to complete. Without

the Sale Guidelines, the Debtors are unlikely to be able to liquidate such assets as effectively and

efficiently, which will be to the detriment of all interested parties.

42. Implementation of the Store Closing Bonus Plan is also a sound exercise of

the Debtors’ business judgment, in the best interests of the Debtors and all their estates’

stakeholders and justified by the facts and circumstances of these Chapter 11 Cases.15 The store

employees – along with their skills, knowledge, and hard work – are more critical now than ever.

Through their commitment and performance, they can ensure that the Debtors continue to

maximize stakeholder value in a challenging economic environment and at a time when those

employees’ positions will soon be terminated.

15 Section 503(c)(3) of the Bankruptcy Code generally prohibits certain transfers made to officers, managers, consultants, and others that are not justified by the facts and circumstances of the case. See 11 U.S.C. § 503(c)(3). Though section 503(c)(3) is not applicable here because this Motion does not seek authorization to pay Store Closing Bonuses to insiders, if it did apply, the Store Closing Bonus Plan would be well within the “facts and circumstances” test articulated therein. Importantly, section 503(c)(3)’s “facts and circumstances” justification test “creates a standard no different than the business judgment standard under section 363(b) [of the Bankruptcy Code].” In re Borders Grp., Inc., 453 B.R. 459, 473 (Bankr. S.D.N.Y. 2011); see also In re Global Home Prods., LLC, 369 B.R. 778, 783 (Bankr. D. Del. 2007) (“If [the key employee retention program is] intended to incentivize management, the analysis utilizes the more liberal business judgment review under § 363.”); In re Nobex Corp., No. 05-20050 (MFW), 2006 WL 4063024, at *3 (Bankr. D. Del. Jan. 19, 2006) (concluding that the standard under section 503(c)(3) of the Bankruptcy Code reiterates the business judgment standard). For the reasons discussed above, a possible loss of the employees would disrupt the Debtors’ ability to effectively close their Stores and maximize value for the benefit of all stakeholders. Because implementation of the Store Closing Bonus Plan will incentivize store level employees to enhance the value of the Debtors’ estates, the Store Closing Bonus Plan is justified by the facts and circumstances of these Chapter 11 Cases and is a sound exercise of the Debtors’ business judgment. See, e.g., In re Mesa Air Grp., Inc., No. 10-10018 (MG), 2010 WL 3810899, *4 (Bankr. S.D.N.Y. Sept. 24, 2010) (holding that bonus payments are “‘justified by the facts and circumstances of the case’ under section 503(c)(3) [where] they are within the ‘sound business judgment’ of the Debtors”) (citation omitted).


24

43. The total cost of the Store Closing Bonus Plan is reasonable in light of the

total revenue projected from the Sales and competitive market practice and involves compensation

structures often used in other restructuring situations to incentivize employees to continue optimal

performance despite the added stress inherent in the chapter 11 process.

44. The Store Closing Bonus Plan is comparable to employee incentive and

retention plans regularly paid in other “store closing” and similar-themed sales. As in those other

instances, some aspects of the Store Closing Bonus Plan will be devised and implemented with the

input of the Consultant (as set forth in the Store Closing Agreement) based upon its view of

maximizing the sale process and recoveries for creditors. As such, courts have approved incentive

payments similar to those completed in the Store Closing Bonus Plan. See, e.g., In re Pier 1

Imports, Inc., No. 20-30805 (KRH) (Bankr. E.D. Va. Mar. 17, 2020) (authorizing store closing

retention bonus program on a final basis); In re Toys “R” Us, Inc., No. 17-34665 (KLP) (Bankr.

E.D. Va. Feb. 6, 2018) (same); In re rue21, inc., No. 17-22045 (GLT) (Bankr. W.D. Pa. June 12,

2017) (same); In re Payless Holdings LLC, No. 17-42267 (KAS) (Bankr. E.D. Mo. May 9, 2017)

(same); In re Golfsmith Int’l Holdings, Inc., No. 16-12033 (LSS) (Bankr. D. Del. Oct. 13, 2016)

(same).

45. Accordingly, the Debtors submit that they have a compelling business

justification for seeking approval to continue the Closing Sales, including modification of the their

prepetition customer programs to comport with the Closing Sales process and implementation of

the Store Closing Bonus Plan, pursuant to section 363(b) and in accordance with the Sale

Guidelines.


25

C. Sale of the Store Assets Free and Clear of Liens, Claims, and Encumbrances Is Authorized Under Section 363 of the Bankruptcy Code.

46. A debtor in possession may sell property under section 363(b) and section

363(f) of the Bankruptcy Code “free and clear of any interest in such property of an entity other

than the estate” if any one of the following conditions is satisfied:

(1) applicable non-bankruptcy law permits sale of such property free and clear of such interest;

(2) such entity consents;

(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;

(4) such interest is in bona fide dispute; or

(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.

11 U.S.C. § 363(f).

47. Although the term “any interest” is not defined in the Bankruptcy Code,

courts have permitted a “broader definition that encompasses other obligations that may flow from

ownership of the property.”16 The scope of section 363(f) is not limited to in rem interests in a

debtor’s assets.17 A debtor may therefore sell its assets under section 363(f) free and clear of

successor liability that otherwise would have arisen under federal statute.18

48. The Debtors request approval to sell the Store Assets on a final “as is” basis,

free and clear of any Encumbrances in accordance with section 363(f) of the Bankruptcy Code.

The Debtors anticipate that they will be able to satisfy one or more of the conditions set forth in

section 363(f) in connection with any Encumbrance a party may assert against the Store Assets.

16 In re Motors Liquidation Co., 829 F.3d 135, 155 (2d Cir. 2016), quoting 3 Collier on Bankruptcy ¶ 363.06[1]. 17 Id. (citing In re Leckie Smokeless Coal Co., 99 F.3d 573, 581-82 (4th Cir. 1996)). 18 Id. at 156.


26

Furthermore, the Debtors propose that any such liens, claims, and encumbrances be transferred

and attach to the Debtors’ share of the proceeds of the Closing Sales, as applicable, with the same

force, effect, and priority as such liens currently have on the Store Assets, and subject to the same

rights, claims, defenses, and objections, if any, of all parties with respect thereto.

D. Waiver of Contractual Restrictions in Leases Restricting the Closing Sales Is Authorized and Appropriate.

49. The Debtors recognize that the Closing Sales and the Sale Guidelines may

be inconsistent with certain contractual restrictions contained in leases, subleases, agreements,

licenses, reciprocal easement agreements, recorded documents, or other obligations applicable to

certain Closing Stores. However, the Debtors request that the Court override or invalidate any

contractual restrictions that may impair the Debtors’ ability to conduct the Closing Sales at the

Closing Stores.

50. Store closing or liquidation sales have become a routine aspect of chapter

11 cases involving retail debtors. Such sales are consistently approved by courts despite provisions

in various contractual and recorded documents that seek and purport to prohibit or restrict such

sales.19 Here, for the reasons discussed in this Motion and the Veit Declaration, the Debtors

believe that the Closing Sales are an essential and critical component of the Debtors’ strategy to

maximize value for the benefit of the Debtors’ estates, creditors, and parties in interest.

Accordingly, the Debtors respectfully request that the Court waive the applicability of, or deem

19 See In re R.H. Macy & Co., 170 B.R. 69, 77 (Bankr. S.D.N.Y. 1994) (restrictive lease provision is unenforceable against debtor seeking to conduct going-out-of-business sale “because it conflicts with the Debtor’s fiduciary duty to maximize estate assets”); In re Ames Dep’t Stores, Inc., 136 B.R. 357, 359 (Bankr. S.D.N.Y. 1992) (“[T]o enforce the anti-[going out-of-business] sale clause of the Lease would contravene overriding federal policy requiring Debtor to maximize estate assets by imposing additional constraints never envisioned by Congress.”); In re Tobago Bay Trading Co., 112 B.R. 463, 467 (Bankr. N.D. Ga. 1990) (clause in lease prohibiting going-out-of-business sales is unenforceable).


27

unenforceable, any contractual restrictions with respect to any Closing Stores that could otherwise

inhibit the Debtors’ ability to conduct the Closing Sales.

E. Exemption from Liquidation Laws Imposing Restrictions on the Closing Sales Is Warranted and Appropriate.

51. To the extent that any Liquidation Laws purport to prohibit, restrict, or

otherwise interfere with the Closing Sales at any Closing Stores, the Debtors request that the Court

deem such Liquidation Laws to be waived with respect to the Closing Sales, which are under the

supervision of the Court. The Debtors request that the Court retain exclusive jurisdiction to resolve

any Reserved Disputes, and that the Court resolve any Dispute Resolution Motions at the next

scheduled omnibus hearing.

52. The Debtors recognize that various Liquidation Laws, including, but not

limited to, state and local rules, laws, ordinances, and regulations that relate to permitting,

licensing, bonding, waiting periods, time limits, bulk sale restrictions, and other related laws

governing the conduct of store closing, liquidation, or other inventory clearance sales, may exist

in certain states in which the Closing Stores are located. Such Liquidation Laws often provide that

court-ordered liquidation sales are exempt from compliance therewith.

53. In the event, however, that a Liquidation Law does not expressly waive

compliance therewith of a court-supervised bankruptcy sale, the Debtors submit that such

Liquidation Law should be deemed to be waived to the extent that it conflicts with section 363 of

the Bankruptcy Code. Here, the Closing Sales are already subject to the Court’s supervision.20

Therefore, the Court is able to supervise the Closing Sales and such supervision adequately

protects the public interest and the Debtors’ creditors. Moreover, section 363 of the Bankruptcy

20 See 28 U.S.C. § 1334.


28

Code requires the Debtors to operate their businesses in a way that maximizes recoveries for

creditors, but compliance with Liquidation Laws could constrain the Debtors’ ability to marshal

and maximize assets for the benefit of creditors. The Closing Sales are a legitimate method by

which the Debtors can maximize returns from the sale of the Store Assets for the benefit of their

estates, their creditors, and their stakeholders, in accordance with the obligations under section 363

of the Bankruptcy Code.

54. Therefore, to the extent that any Liquidation Laws purport to interfere with

the Closing Sales, the Debtors seek authority to nevertheless proceed with the Closing Sales

without the necessity of, and the delay associated with, complying with such Liquidation Laws

(except health and safety laws), which would otherwise require the Debtors to obtain various state

licenses or permits, observe state and local waiting periods or time limits, or satisfy any additional

requirements with respect to advertising or conducting the Closing Sales, or transferring

merchandise among the Debtors’ various stores and distribution centers. Specifically, the Debtors

submit that such Liquidation Laws should be deemed inapplicable given the Court’s supervision

of the Closing Sales. The Debtors further request that no other person or entity, including (but not

limited to) any Governmental Unit, including any federal, state, or local agency, department, or

governmental authority, or any lessor be allowed to take any action to prevent, interfere with, or

otherwise hinder the conduct of the Closing Sales, including the advertisement and promotion of

the Closing Sales, as contemplated in the Store Closing Agreement and in accordance with the

Sale Guidelines.

55. The Debtors propose that, to the extent that any Governmental Unit seeks

to dispute a Closing Sale at a Closing Store on the basis of one or more Liquidation Laws, such


29

party may serve a Reserve Dispute Notice on the Debtors, in accordance with the Resolution

Procedures described in this Motion and set forth in the Interim Order and the Final Order.

56. Accordingly, the Debtors submit that they have a compelling business

justification for seeking approval of the (a) exemption from the Liquidation Laws, (b) Resolution

Procedures, and (c) relief from Fast Pay Laws.

F. Abandonment of Certain Property in Connection with the Closing Sales and in Accordance with the Sale Guidelines Is Warranted Under Section 554 of the Bankruptcy Code.

57. Section 554 of the Bankruptcy Code provides that after notice and a hearing,

a debtor “may abandon any property of the estate that is burdensome to the estate or that is of

inconsequential value and benefit to the estate.”21 Here, in accordance with the Sale Guidelines

and with the aid of the Consultant, the Debtors will make every reasonable effort to sell all Store

Assets at the Closing Stores as quickly and efficiently as possible for the purpose of monetizing

such assets and vacating the Closing Stores as soon as possible. As noted above, the Debtors are

seeking to liquidate Merchandise and FF&E located at each of the Closing Stores or elsewhere, in

consultation with the Consultant. However, during the course of the Closing Sales, the Debtors

may determine that the costs associated with the continued storage and sale efforts respecting

FF&E is likely to exceed the projected proceeds that could be realized from the sale thereof, or

that certain FF&E may have low prospects for resale. In such event, any remaining FF&E would

likely impose a financial burden on the estates, in the form of storage and removal costs, but are

unlikely to provide much, if any, value in return to the estates (such remaining FF&E, the

“Remaining Property”).

21 11 U.S.C. § 554(a); see also Bryson v. Bank of New York, 584 F. Supp. 1306, 1316 (S.D.N.Y. 1984) (citing Hanover Ins. Co. v. Tyco Indus., Inc., 500 F.2d 654, 657 (3d Cir. 1974)) (“‘[A] trustee may abandon his claim to any asset which he deems to be less valuable than the cost of recovering it.’”).


30

58. To maximize the value of the Debtors’ assets and to minimize unnecessary

costs to the estates, the Debtors respectfully request authority to designate any property located at

the Closing Stores as Remaining Property and to abandon such Remaining Property located at any

of the Closing Stores without incurring liability to any person or entity. Before designating any

assets as Remaining Property or abandoning any Remaining Property at any Closing Store, the

Debtors will have determined in the exercise of their sound business judgment that such Remaining

Property to be abandoned by the Debtors is either (a) burdensome to the estates because removal

and storage costs for the Remaining Property are likely to exceed any net proceeds therefrom or

(b) of inconsequential value and benefit to the estates.

59. The Debtors will use all commercially reasonable efforts to remove, or

cause to be removed, any confidential or personal identifying information (which alone or in

conjunction with other information identifies an individual, including, but not limited to, an

individual’s name, social security number, date of birth, government-issued identification number,

account number, and credit or debit card number) in any of the Debtors’ hardware, software,

computers, or cash registers or similar equipment that constitute any FF&E or any Remaining

Property before any such property is sold or abandoned.

60. Accordingly, the Debtors respectfully request Court authority to designate

and thereafter abandon Remaining Property if they determine that the benefits of retaining such

property for storage or resale are greater than the costs of such retention

G. Appointment of a Consumer Privacy Ombudsman Is Not Required by Sections 332 and 363(b)(1) of the Bankruptcy Code.

61. Section 363(b)(1) of the Bankruptcy Code provides that a debtor may not

sell or lease personally identifiable information unless such sale or lease is consistent with its

policies or upon appointment of a consumer privacy ombudsman (a “CPO”) pursuant to section


31

332 of the Bankruptcy Code. Section 332 requires the appointment of a CPO no less than seven

(7) days in advance of a hearing on a sale under section 363(b)(1) so that such CPO can assist the

Court in its consideration of a “proposed sale or lease of personally identifiable information under

section 363(b).”

62. Here, pursuant to the Store Closing Agreement, the Consultant will not be

purchasing any assets from the Debtors, much less personally identifiable information from the

Debtors (e.g., customer lists). The Debtors also do not intend to sell any personally identifiable

information in the course of the Closing Sales, and indeed, intend to scrub all Store Assets to

ensure that no confidential and personally identifiable information is transferred in connection with

the sale of any such assets.

63. Accordingly, the Debtors submit that the appointment of a CPO is not

necessary in connection with the Closing Sales.22

The Debtors Have Satisfied Bankruptcy Rule 6003(b)

64. Pursuant to Bankruptcy Rule 6003(b), any motion seeking to use property

of the estate pursuant to section 363 of the Bankruptcy Code within twenty-one (21) days of the

Petition Date requires the Debtors to demonstrate that such relief “is necessary to avoid immediate

and irreparable harm.” There is no question that the Debtors’ failure to continue conducting the

Closing Sales would result in immediate and irreparable harm to the Debtors’ estates. Given that

the sales began prepetition and are well underway, any unnecessary delay and expense will

severely disrupt the Debtors’ efforts in these Chapter 11 Cases and decrease the recovery to the

Debtors’ estates from the Closing Sales. Accordingly, the Debtors submit that the relief requested

22 To the extent it is determined that the appointment of a CPO may be necessary or advisable in connection with any other proposed sale of the Debtors’ assets in these Chapter 11 Cases, the Debtors will work cooperatively with the U.S. Trustee in connection therewith.


32

herein is necessary to avoid immediate and irreparable harm, and, therefore, Bankruptcy Rule 6003

is satisfied.

Bankruptcy Rules 6004(a) and (h)

65. 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 fourteen (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 Veit 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 fourteen (14) day stay imposed by

Bankruptcy Rule 6004(h), to the extent such notice requirements and such stay apply.

Notice

66. Notice of this Motion has been provided to (i) the United States Trustee for

Region 2; (ii) the holders of the Debtors’ thirty (30) largest unsecured creditors on a consolidated

basis; (iii) the United States Attorney’s Office for the Southern District of New York; (iv) counsel

to the Prepetition Agent, Julia Frost-Davies ([email protected]) and David

Riley ([email protected]); (v) the Landlords; (vi) sublessees, licensees, or

concessionaires of the Debtors and consignors and bailors of Consigned Goods; (vii) the Internal

Revenue Service; (viii) all parties known to the Debtors who hold any liens, security interests or

other interests in the Debtors’ assets; (ix) the applicable Governmental Units; and (x) any party

that has requested notice pursuant to Bankruptcy Rule 2002 (collectively, the “Notice Parties”).


33

No Prior Request

67. No prior request for the relief sought herein has been made by the Debtors

to this or any other court.

[Remainder of page intentionally left blank]


34

Conclusion

WHEREFORE the Debtors respectfully request entry of the Proposed Orders and

such other and further relief as the Court may deem just and appropriate.

Dated: September 10, 2020 New York, New York

Respectfully submitted,

/s/ Lucy F. Kweskin

Lucy F. Kweskin Matthew A. Skrzynski PROSKAUER ROSE LLP Eleven Times Square New York, New York 10036 Telephone: (212) 969-3000 Facsimile: (212) 969-2900 Email: [email protected] Email: [email protected] -and- Jeff J. Marwil (pro hac vice pending) Brooke H. Blackwell (pro hac vice pending) PROSKAUER ROSE LLP 70 West Madison, Suite 3800 Chicago, IL 60602-4342 Telephone: (312) 962-3550 Facsimile: (312) 962-3551 Email: [email protected] Email: [email protected] -and-

Peter J. Young (pro hac vice pending) PROSKAUER ROSE LLP 2029 Century Park East, Suite 2400 Los Angeles, CA 90067 Telephone: (310) 557-2900 Facsimile: (310) 577-2193 Email: [email protected]

Proposed Attorneys for Debtors and Debtors in Possession


Exhibit A

Proposed Interim Order

20-12097-scc Doc 4-1 Filed 09/10/20 Entered 09/10/20 11:47:42 Exhibit A Pg1 of 29





Debtors.1

Chapter 11

Case No. 20-12097 (SCC)


INTERIM ORDER (A) CONFIRMING, ON AN INTERIM

BASIS, THAT THE STORE CLOSING AGREEMENT IS OPERATIVE AND EFFECTIVE; (B) AUTHORIZING AND APPROVING STORE CLOSING SALES

FREE AND CLEAR OF ALL LIENS, CLAIMS, AND ENCUMBRANCES, (C) APPROVING DISPUTE RESOLUTION PROCEDURES,

(D) AUTHORIZING CUSTOMARY BONUSES TO EMPLOYEES OF CLOSING STORES, AND (E) APPROVING THE DEBTORS’ STORE CLOSING PLAN



2

Upon the motion (the “Motion”)2 of Century 21 Department Stores LLC and its

debtor affiliates, as debtors and debtors in possession in the above-captioned Chapter 11 Cases

(collectively, the “Debtors”), pursuant to sections 105(a), 363, 365, and 554 of the Bankruptcy

Code and Bankruptcy Rules 6003, 6004, and 6007, for an order (a)(1) confirming, on an interim

basis, that the Store Closing Agreement is operative and effective and (2) authorizing, on a final

basis, the Debtors to assume the Store Closing Agreement, (b) authorizing and approving Store

Closing Sales free and clear of all liens, claims, and encumbrances, (c) approving dispute

resolution procedures, (d) authorizing customary bonuses to non-insider Closing Store employees

who remain employed for the duration of the applicable Store Closing, and (e) approving the Store

Closing plan, 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 and 1334, and the

Amended Standing Order of Reference M-431, dated January 31, 2012 (Preska, C.J.); 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 the 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; and such notice

having been adequate and appropriate under the circumstances, and it appearing that no other or

further notice need be provided; and the Court having reviewed the Motion; and the Court having

held a hearing to consider the relief requested in the Motion on an interim basis (the “Hearing”);

and upon the Veit Declaration, filed contemporaneously with the Motion; and the record of the

Hearing; 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

2 Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Motion.


3

Motion is necessary to avoid immediate and irreparable harm to the Debtors and their estates as

contemplated by Bankruptcy Rule 6003, and is in the best interests of the Debtors, their estates,

creditors, and all parties in interest; and upon all of the proceedings had before the Court and after

due deliberation and sufficient cause appearing therefor,

FOUND, CONCLUDED, AND DETERMINED that:3

A. The Debtors have advanced sound business reasons for the authorization of

the Store Closing Agreement on an interim basis as set forth in the Motion and at the hearing, and

the Debtors’ operation under the Store Closing Agreement is a reasonable exercise of the Debtors’

business judgment and is in the best interest of the Debtors and their estates.

B. The Store Closing Agreement was negotiated, proposed, and entered into

without collusion, in good faith, and from arm’s length bargaining positions.

C. The Sale Guidelines, as described in the Motion and attached as Exhibit 1

hereto, are reasonable and will maximize the returns on the Store Assets and Consigned Goods for

the benefit of the Debtors’ estates and creditors.

D. The Closing Sales, in accordance with the Sale Guidelines and with the assistance

of the Consultant, will provide an efficient means for the Debtors to liquidate and dispose of the

Store Assets and Consigned Goods as quickly and effectively as possible, and are in the best

interest of the Debtors’ estates.

E. The Resolution Procedures are fair and reasonable and comply with

applicable law.

3 The findings and conclusions set forth herein constitute this Court’s findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. To the extent any of the following findings of fact constitute conclusions of law, they are adopted as such. To the extent that any of the following conclusions of law constitute findings of fact, they are adopted as such.


4

F. The Debtors have represented that, pursuant to the Motion, they are not

seeking to either sell or lease personally identifiable information during the course of the Closing

Sales at the Closing Stores; provided, however, that the Consultant will be authorized to distribute

emails and promotional materials to the Debtors’ customers consistent with the Debtors’ existing

policies on the use of consumer information.

G. The Debtors and the Consultant may sell the Store Assets and Consigned Goods

free and clear of all liens, claims, and encumbrances as provided for herein because, in each case,

one or more of the standards set forth in section 363(f)(1)-(5) of the Bankruptcy Code has been

satisfied. Those holders of any such liens, claims, and encumbrances who did not object, or who

withdrew their objections, to the entry of this Interim Order are deemed to have consented thereto

pursuant to section 363(f)(2) of the Bankruptcy Code. Those holders of any such liens, claims,

and encumbrances who did object fall within one or more of the other subsections of section 363(f)

and are adequately protected by having such liens, claims, and encumbrances attaching to the

Debtors’ share of proceeds from the sale of the applicable Store Assets and Consigned Goods with

the same validity and priority and to the same extent and amount that any such liens, claims, and

encumbrances had with respect to such Store Assets and Consigned Goods.

H. The relief set forth herein is necessary to avoid immediate and irreparable

harm to the Debtors and their estates, and the Debtors have demonstrated good, sufficient, and

sound business purposes and justifications for the relief approved herein.

I. The entry of this Interim Order is in the best interest of the Debtors and their

estates, creditors, and all other parties in interest herein.

IT IS HEREBY ORDERED THAT

1. The Motion is granted on an interim basis to the extent set forth herein.


5

2. The Debtors and the Consultant are authorized and empowered to take all

actions necessary or appropriate to implement the relief granted in this Interim Order. The failure

to specifically include any particular provision of the Store Closing Agreement in this Interim

Order shall not diminish or impair the effectiveness of such provisions, it being the intent of this

Court that the Store Closing Agreement and all of its provisions, payments, and transactions, be

and hereby are authorized and approved as and to the extent provided for in this Interim Order. To

the extent that there is any conflict between this Interim Order, the Sale Guidelines, and the Store

Closing Agreement, the terms of this Interim Order shall control over all other documents (subject

to paragraph 34 of this Interim Order), and the Sale Guidelines (as modified by any Side Letter

Agreement (as that term is defined in paragraph 34 of this Interim Order) entered into by and

between the Consultant and a Landlord of a Closing Store) shall control over the Store Closing

Agreement.

A. Operation and Effectiveness of the Store Closing Agreement

3. The Store Closing Agreement, a copy of which is attached to this Interim

Order as Exhibit 2, is operative and effective on an interim basis. The Debtors are authorized to

act and perform in accordance with the terms of the Store Closing Agreement, including, making

payments required by the Store Closing Agreement, including fees and reimbursement of

expenses, to the Consultant on a weekly basis and pursuant to the terms governing the Final

Reconciliation (as defined in the Store Closing Agreement), in each case as set forth in more detail

in the Store Closing Agreement, without the need for any application of the Consultant or a further

order of this Court (and all such payments of fees and reimbursement of expenses shall be free and

clear of any and all liens and Encumbrances (as defined below)). The Consultant’s fees and


6

expenses shall be subject to the terms of the Store Closing Agreement, including as to any expense

budget attached thereto.

4. Notwithstanding the relief granted in this Interim Order, any payment made

by the Debtors pursuant to the authority granted herein, or authorizations contained hereunder,

shall be subject to and in compliance with any orders entered by the Court authorizing the Debtors’

use of cash collateral and any budget in connection therewith (the “Cash Collateral Order”);

provided, however, that to the extent there is any inconsistency between the Cash Collateral Order

and any action taken or proposed to be taken hereunder, the terms of the Cash Collateral Order

(including any budget in connection therewith) shall control, other than as explicitly set forth in

paragraphs 3 and 16 of this Interim Order; provided, further, that the Cash Collateral Order shall

neither cap nor reduce (nor be deemed to cap nor reduce) amounts due to the Consultant under the

Store Closing Agreement other than any such cap or reduction resulting from the Debtors’ required

general compliance (subject to permitted variances and waivers) with the Budget (as defined in

the Cash Collateral Order); provided, further, that, to the extent the Debtors do not comply with

the payment obligations under the Store Closing Agreement, nothing in this Interim Order, the

Cash Collateral Order or any other order of the Court shall limit any of the Consultant’s rights to

(a) initiate the termination process and, if elected, terminate the agreement for nonpayment, in

each case in accordance with and pursuant to Section K of the Store Closing Agreement, and/or

(b) file an administrative claim for any amounts owed to Consultant under the Store Closing

Agreement, all of the foregoing without further order of the Court; provided, further, that if the

Store Closing Agreement is terminated by Consultant for the non-payment of fees due and owing

pursuant to the Store Closing Agreement, the Guaranteed Amount shall no longer be due and

payable.


7

5. Notwithstanding any provision of this Interim Order, nothing shall prevent

or be construed to prevent the Consultant (individually, as part of a joint venture, or otherwise) or

any of its affiliates from providing additional services to or bidding on the Debtors’ assets not

subject to the Store Closing Agreement the (“Additional Assets”) pursuant to a consulting

agreement, agency agreement, or otherwise. The Consultant (individually, as part of a joint

venture, or otherwise) or any of its affiliates are hereby authorized to bid on, guarantee, or

otherwise acquire such Additional Assets, or offer to provide additional services, notwithstanding

anything to the contrary in the Bankruptcy Code or other applicable law, provided that such

guarantee, transaction, or acquisition is approved by separate order of this Court.

B. Authority to Engage in the Closing Sales at the Closing Stores

6. The Debtors and the Consultant are authorized, on an interim basis pending

the Final Hearing, pursuant to section 105(a) and section 363(b)(1) of the Bankruptcy Code, to

immediately continue and conduct the Closing Sales at the Closing Stores in accordance with this

Interim Order, the Sale Guidelines, the Store Closing Agreement, and any Side Letter Agreement.

As part of the Closing Sales, the Debtors and the Consultant are authorized to sell Consigned

Goods. Subject to the restrictions set forth in this Interim Order and the Sale Guidelines, the

Debtors and the Consultant are authorized to take any and all actions as may be necessary or

desirable to implement the Store Closing Agreement and the Closing Sales; and each of the

transactions contemplated by the Store Closing Agreement, and any actions taken by the Debtors

and the Consultant necessary or desirable to implement the Store Closing Agreement or the

Closing Sales prior to the date of this Interim Order, are approved and ratified.

7. The Sale Guidelines are approved on an interim basis.


8

8. The Debtors are authorized to discontinue operations at the Closing Stores

in accordance with this Interim Order and the Sale Guidelines.

9. If the Debtors request, in addition to conducting the Closing Sales at the

Closing Stores, the Consultant will also conduct the Closing Sales through the Debtors’ e-

commerce platform and all relief set forth herein related to authorization to conduct the Closing

Sales at the Closing Stores will also authorize the Debtors and Consultant to conduct the Closing

Sales through the Debtors’ e-commerce platform.

10. All entities that are presently in possession of some or all of the Store Assets

or Consigned Goods in which the Debtors hold an interest that are or may be subject to the Store

Closing Agreement or this Interim Order hereby are directed to surrender possession of such Store

Assets or Consigned Goods to the Debtors or the Consultant.

11. Except as provided herein, neither the Debtors nor the Consultant nor any

of their officers, employees, or agents shall be required to obtain the approval of any third party,

including (without limitation) any governmental unit (as defined in section 101(27) of the

Bankruptcy Code) or any Landlord, to conduct the Closing Sales at the Closing Stores and to take

any related actions authorized herein.

12. With respect to reasonable and documented costs and expenses incurred by

the Consultant pursuant to the Store Closing Agreement and fees due to the Consultant on account

of services provided from the Petition Date through the date of entry of this Interim Order, the

Consultant shall be entitled to and shall receive reimbursement of such reasonable and documented

costs and expenses incurred and fees earned pursuant to the Store Closing Agreement within seven

business days of entry of this Interim Order.


9

13. The Consultant is authorized to supplement the Merchandise in the Closing

Sales with additional goods procured by the Consultant (which may include goods provided to the

Consultant on consignment) which are of like kind, and no lesser quality, to the Merchandise in

the Closing Sales at the Closing Stores (the “Additional Agent Goods”). The Additional Agent

Goods shall be purchased by the Consultant as part of the Closing Sales and delivered to the Stores

at the Consultant’s sole expense (including as to labor, freight, and insurance relative to shipping

such Additional Agent Goods to the Stores). Sales of Additional Agent Goods shall be run through

the Debtors’ cash register systems; provided, however, that the Consultant shall mark the

Additional Agent Goods using either a “dummy” SKU or department number or in such other

manner so as to distinguish the sale of Additional Agent Goods from the sale of Merchandise. The

Consultant and Debtors shall cooperate to ensure that the Additional Agent Goods are marked in

such a way that a reasonable consumer could identify the Additional Agent Goods from the

Merchandise.

14. The Consultant shall pay to Debtors an amount equal to five percent (5.0%)

of the gross proceeds (excluding only Sale Taxes) from the sale of Additional Agent Goods (the

“Additional Agent Goods Fee”). The Consultant shall retain all remaining amounts from the sale

of the Additional Agent Goods. The Consultant guarantees that the Additional Agent Good’s Fee

payable to the Debtors shall be not less than $1,000,000 (the “Guaranteed Amount”) on account

of the sale of the Additional Agent Goods, which Guaranteed Amount shall be paid by the

Consultant through payment of the Additional Agent Goods Fee in connection with each weekly

sale reconciliation with respect to sales of Additional Agent Goods sold by the Consultant during

each then prior week (or at such other mutually agreed upon time) and, to the extent the Guaranteed


10

Amount is not paid by the time of the Final Reconciliation, the difference between the amount then

paid and the Guaranteed Amount shall be paid by the Consultant as part of the Final Reconciliation.

15. All transactions relating to the Additional Agent Goods are, shall be

construed as, and are acknowledged by the Debtors to be, a true consignment from Consultant to

the Debtors under Article 9 of the Uniform Commercial Code (the “UCC”) and not a consignment

for security purposes. At all times and for all purposes, the Additional Agent Goods and their

proceeds shall be the exclusive property of the Consultant, except as set forth herein, and no other

person or entity (including, without limitation, the Debtors, or any third person claiming a security

interest in the Debtors’ property, including any of the Debtors’ secured lenders) shall have any

claim against any of the Additional Agent Goods or the proceeds thereof. The Additional Agent

Goods shall at all times remain subject to the exclusive control of the Consultant. The Debtors

shall, at Consultant’s sole cost and expense, insure Additional Agent Goods and, if required,

promptly file any proofs of loss with regard thereto.

16. The Consultant is hereby granted a first-priority security interest and lien

upon (a) the Additional Agent Goods and (b) the Consultant’s portion of the Additional Agent

Goods proceeds, which security interest shall be deemed perfected without the requirement of

filing UCC financing statements or providing notifications to any prior secured parties (provided

that the Consultant is hereby authorized to deliver any notices and file any financing statements

and amendments thereof under the applicable UCC identifying the Consultant’s interest in the

Additional Agent Goods (and any proceeds thereof) as consigned goods thereunder and the

Debtors as the consignee therefor, and the Consultant’s security interest in such Additional Agent

Goods and the Consultant’s portion of the Additional Agent Goods proceeds). As part of each

weekly reconciliation, the Debtors shall turnover all proceeds from the sale of Additional Agent


11

Goods to the Consultant, net of any fee payable to the Debtors pursuant to the Store Closing

Agreement.

17. Notwithstanding anything to the contrary in the Store Closing Agreement,

the Debtors and their estates shall not indemnify the Consultant for any damages arising primarily

out of the Consultant’s fraud, willful misconduct, or gross negligence.

C. Conducting the Closing Sales at the Closing Stores

18. All newspapers and other advertising media in which the Closing Sales may

be advertised and all Landlords of the Closing Stores are directed to accept this Interim Order as

binding authority authorizing the Debtors and the Consultant to conduct the Closing Sales and the

sale of the Store Assets and Consigned Goods pursuant to the Store Closing Agreement and the

Sale Guidelines, including, without limitation, to conduct and advertise the sale of the Store Assets

and Consigned Goods in the manner contemplated by and in accordance with this Interim Order,

the Sale Guidelines, the Store Closing Agreement, and any Side Letter Agreement.

19. The Debtors and the Consultant are hereby authorized to take such actions

as may be necessary and appropriate to implement the Store Closing Agreement and,

notwithstanding any applicable non-bankruptcy laws, to conduct the Closing Sales without the

need for a further order of this Court as provided in this Interim Order, the Store Closing

Agreement, or the Sale Guidelines, as may be modified by a Side Letter Agreement, including, but

not limited to, advertising the sale as a “going out of business,” “store closing,” “sale on

everything,” “everything must go,” “liquidation sale,” or similar themed sale through the posting

of signs (including the use of exterior banners at non-enclosed mall closing locations, and at

enclosed mall closing locations to the extent the applicable closing location entrance does not

require entry into the enclosed mall common area), use of sign walkers, and street signage.


12

20. Except as expressly provided in the Store Closing Agreement or this Interim

Order, the sale of the Store Assets, Consigned Goods and Additional Agent Goods shall be

conducted by the Debtors and the Consultant notwithstanding any restrictive provision of any

lease, sublease, license, reciprocal easement agreement, restrictive covenant, or other agreement

relative to occupancy affecting or purporting to restrict the conduct of the Closing Sales (including

the sale of the Store Assets, Consigned Goods and Additional Agent Goods), the necessity of

obtaining any third party consents, the abandonment of assets, or “going dark” provisions, and

such provisions shall not be enforceable in conjunction with the Closing Sales. Breach of any such

provisions in these Chapter 11 Cases in conjunction with the Closing Sales shall not constitute a

default under a lease or provide a basis to terminate the lease; provided that the Closing Sales are

conducted in accordance with the terms of this Interim Order, any Side Letter Agreement, and the

Sale Guidelines.

21. Notwithstanding anything herein to the contrary, and in view of the

importance of the use of sign-walkers, banners, and other advertising to the sale of the Store Assets

and Consigned Goods, to the extent that, prior to the Final Hearing, disputes arise during the course

of such sale regarding laws regulating the use of sign-walkers, banners, or other advertising, and

the Debtors and the Consultant are unable to resolve the matter with the disputing party

consensually, any party may request a telephonic hearing with this Court pursuant to these

provisions. Such hearing will, to the extent practicable, be scheduled initially no later than the

earlier of (a) the Final Hearing and (b) within four (4) business days of such request. Until such a

hearing, no party shall interfere with the Closing Sales’ conduct in accordance with this Interim

Order. This scheduling shall not be deemed to preclude additional hearings for the presentation of

evidence or arguments as necessary.


13

22. Except as provided in this Interim Order, the Sale Guidelines, or any Side

Letter Agreement, and except with respect to any Governmental Unit (as to which the Resolution

Procedures shall apply), no person or entity, including, but not limited to, any Landlord, licensor,

property owner, property manager, service provider, utility provider, or creditor, shall take any

action to directly or indirectly prevent, interfere with, or otherwise hinder the Closing Sales or the

sale of the Store Assets, Consigned Goods and Additional Agent Goods, or the advertising and

promotion (including the posting of signs and exterior banners or the use of sign walkers) of the

Closing Sales, and all such parties and persons of every nature and description, including, but not

limited to, any Landlord, licensor, property owner, property manager, service provider, utility, and

creditor, as well as all those acting for or on behalf of such parties, are prohibited and enjoined

from (a) interfering in any way with, obstructing, or otherwise impeding the conduct of the Closing

Sales or (b) instituting any action or proceeding in any court (other than this Court) or

administrative body seeking an order or judgment against, among others, the Debtors, the

Consultant, or the Landlords at the Closing Stores that might in any way directly or indirectly

obstruct or otherwise interfere with or adversely affect the conduct of the Closing Sales or other

liquidation sales at the Closing Stores or seek to recover damages for breach(es) of covenants or

provisions in any lease, sublease, license, or contract based upon any relief authorized herein.

23. In accordance with and subject to the terms and conditions of the Store

Closing Agreement, the Consultant shall have the right to use the Closing Stores and all related

Closing Store services, all FF&E (as defined in the Store Closing Agreement), and other assets of

the Debtors for the purpose of conducting the Closing Sales free of any interference from any

entity or person, subject to compliance with the Sale Guidelines and this Interim Order.


14

24. The Consultant shall permit returns and exchanges for items purchased prior

to September 10, 2020, until the earlier of (a) the applicable policy under the Return and Exchange

Policies and (b) October 10, 2020.

25. The Consultant will honor the Debtors’ Gift Cards through October 10,

2020.

26. The Debtors are authorized, but not directed, to make payments, subject to

the terms of the Cash Collateral Order and associated budget, under the Store Closing Bonus Plan,

as may be amended and modified from time to time.

27. All sales of Store Assets, Consigned Goods and Additional Agent Goods

shall be by cash, the Debtors’ validly-issued gift certificates and Gift Cards (subject to the

limitation in paragraph 25 herein), merchandise credit, debit card, or credit card and, at the

Debtors’ discretion, by check or otherwise in accordance with the Debtors’ policies (but, for the

avoidance of doubt, will not include the Debtors’ member or customer appreciation points,

rewards, coupons, and other similar programs).

28. All sales of all Store Assets, Consigned Goods and Additional Agent Goods

shall be “as is” and final. Conspicuous signs stating that “all sales are final” and “as is” will be

posted at the cash register areas at all Closing Stores.

29. The Debtors remain responsible for the payment of any and all sales taxes

and the Consultant shall not be liable for sales taxes except as expressly provided in the Store

Closing Agreement. The Debtors are directed to remit all taxes accruing from the Closing Sales

to the applicable Governmental Units as and when due, provided that in the case of a bona fide

dispute, the Debtors are only directed to pay such taxes upon the resolution of the dispute, if and

to the extent that the dispute is decided in favor of the applicable Governmental Unit. For the


15

avoidance of doubt, sales taxes collected and held in trust by the Debtors shall not be used to pay

any creditor or any other party, other than the applicable Governmental Unit for which the sales

taxes are collected. The Consultant shall collect, remit to the Debtors, and account for sales taxes

as and to the extent provided in the Store Closing Agreement. This Interim Order does not enjoin,

suspend, or restrain the assessment, levy, or collection of any tax under state or federal law and

does not constitute a declaratory judgment with respect to any party’s liability for taxes under state

or federal law.

30. Pursuant to section 363(f) of the Bankruptcy Code, the Consultant, on

behalf of the Debtors, is authorized to sell all Store Assets and Consigned Goods pursuant to the

Store Closing Agreement and in accordance with the Sale Guidelines and any Side Letter

Agreement. All sales of Store Assets and Consigned Goods, whether by the Consultant or the

Debtors, shall be free and clear of any and all liens, claims, encumbrances, and other interests;

provided, however, that any liens, claims, encumbrances, and other interests shall attach to the

Debtors’ share of the proceeds of the sale of applicable Store Assets and Consigned Goods with

the same validity and priority and to the same extent and in the same amount that any such liens,

claims, encumbrances, defenses (including, without limitation, rights of setoff and recoupment)

and interests, including, without limitation, security interests of whatever kind or nature,

mortgages, conditional sales or title retention agreements, pledges, deeds of trust, hypothecations,

liens, encumbrances, assignments, preferences, debts, easements, charges, suits, licenses, options,

rights-of-recovery, judgments, orders and decrees of any court or foreign or domestic

governmental entity, taxes (including foreign, state, and local taxes), licenses, covenants,

restrictions, indentures, instruments, leases, options, off-sets, claims for reimbursement,

contribution, indemnity or exoneration, successor, product, environmental, tax, labor, ERISA,


16

CERCLA, alter ego, and/or other liabilities, causes of action, contract rights, and claims, to the

fullest extent of the law, in each case, of any kind or nature (including, without limitation, all

“claims” as defined in section 101(5) of the Bankruptcy Code), known or unknown, whether pre-

petition or post-petition, secured or unsecured, choate or inchoate, filed or unfiled, scheduled or

unscheduled, perfected or unperfected, liquidated or unliquidated, noticed or unnoticed, recorded

or unrecorded, contingent or non-contingent, material or non-material, statutory or non-statutory,

matured or unmatured, legal or equitable (collectively, “Encumbrances”); as provided for herein

because in each case, one or more of the standards set forth in section 363(f)(1)–(5) has been

satisfied; provided, however, that any such Encumbrances shall attach to the Debtors’ share of the

applicable proceeds of the sale of the Store Assets and Consigned Goods with the same validity,

in the amount, with the same priority as, and to the same extent that any such Encumbrances

attached to the Store Assets and Consigned Goods prior to such sale, subject to any claims and

defenses that any party may possess with respect thereto. Payment of fees and expenses to the

Consultant in accordance with this Interim Order and the Store Closing Agreement shall be free

and clear of any Encumbrances.

31. The Debtors and the Consultant are authorized and empowered to transfer

Store Assets and Consigned Goods among the Closing Stores. The Consultant is authorized to sell

or, with notice to and in consultation with the Prepetition Agent, abandon the Debtors’ FF&E, in

accordance with the terms of the Store Closing Agreement and the Sale Guidelines, including, but

not limited to, Closing Store signage. Any abandoned FF&E left in a Closing Store, distribution

center, warehouse or corporate office after the later of the date the lease is rejected or the date the

Debtors vacate the premises shall be deemed abandoned, and such landlord is authorized to dispose

of the abandoned FF&E without further notice and without any liability to any individual or entity


17

that may claim an interest in such property. The automatic stay is modified to the extent necessary

to allow such dispositions.

32. Neither the Sale Guidelines, Store Closing Agreement, nor this Interim

Order authorize the Debtors to transfer or sell to the Consultant or any other party the personal

identifying information (which means information which alone or in conjunction with other

information identifies an individual, including but not limited to an individual’s first name (or

initial) and last name, physical address, electronic address, telephone number, social security

number, date of birth, government-issued identification number, account number and credit or

debit card number (“PII”) of any customers unless such sale or transfer is permitted by the

Debtors’ privacy policy and state, provincial or federal privacy and/or identity theft prevention

laws and rules (collectively, the “Applicable Privacy Laws”). The foregoing shall not limit the

Consultant’s use of the Debtors’ customer lists and mailing lists solely for purposes of advertising

and promoting the Sales.

33. The Debtors shall use commercially reasonable efforts to remove or cause

to be removed any confidential and/or PII in any of the Debtors’ hardware, software, computers

or cash registers or similar equipment which are to be sold or abandoned so as to render the PII

unreadable or undecipherable. At the conclusion of the Sales, the Consultant shall provide the

Debtors with written verification that the Consultant has not removed, copied, or transferred any

customer PII and that any records containing PII were shredded, erased or otherwise modified to

render the PII unreadable or undecipherable.

34. The Consultant and the Landlord of each Closing Store are authorized to

enter into a side letter agreement (a “Side Letter Agreement”) between themselves to modify the

Sale Guidelines with respect to a Closing Store and to govern the conduct of the Closing Sales at


18

the applicable Closing Store without further order of the Court, and such Side Letter Agreements

shall be binding as among the Consultant and any Landlord; provided that nothing in such Side

Letter Agreements affects the provisions of paragraphs 21, 35, and 36 of this Interim Order. In

the event of a conflict between the Sale Guidelines and this Interim Order with respect to a Closing

Store that is subject to a Side Letter Agreement, the terms of such Side Letter Agreement shall

control.

D. Resolution Procedures for Disputes Regarding Liquidation Laws

35. Nothing in this Interim Order, the Store Closing Agreement, or the Sale

Guidelines releases, nullifies, or enjoins the enforcement of any liability to a Governmental Unit

under environmental laws or regulations (or any associated liabilities for penalties, damages, cost

recovery, or injunctive relief) to which any entity would be subject as the owner, lessor, lessee, or

operator of the property after the date of entry of this Interim Order. Nothing contained in this

Interim Order, the Store Closing Agreement, or the Sale Guidelines shall in any way: (a) diminish

the obligation of any entity to comply with environmental laws; or (b) diminish the obligations of

the Debtors to comply with environmental laws consistent with their rights and obligations as

debtor in possession under the Bankruptcy Code. Except as otherwise set forth herein, the Closing

Sales shall not be exempt from laws of general applicability, including, without limitation, public

health and safety, criminal, tax, labor, employment, environmental, antitrust, fair competition,

traffic, and consumer protection laws, including consumer laws regulating deceptive practices and

false advertising, consumer protection, the sale of gift certificates, layaway programs, return of

goods, express or implied warranties of goods, and “weights and measures” regulation and

monitoring (collectively, “General Laws”). Nothing in this Interim Order, the Store Closing

Agreement, or the Sale Guidelines shall alter or affect obligations to comply with all applicable


19

federal safety laws and regulations. Nothing in this Interim Order shall be deemed to bar any

Governmental Unit (as such term is defined in section 101(47) of the Bankruptcy Code) from

enforcing General Laws, in the applicable non-bankruptcy forum, subject to the Debtors’ rights to

assert in that forum or before this Court that any such laws are not in fact General Laws or that

such enforcement is impermissible under the Bankruptcy Code or this Interim Order.

Notwithstanding any other provision in this Interim Order, no party waives any rights to argue any

position with respect to whether the conduct was in compliance with this Interim Order or any

applicable law, or that enforcement of such applicable law is preempted by the Bankruptcy Code.

Nothing in this Interim Order shall be deemed to have made any rulings on any such issues.

36. To the extent that the Closing Sales of Store Assets, Consigned Goods

and/or Additional Agent Goods are subject to any Liquidation Laws, including federal, state, or

local laws, statutes, ordinances, rules, regulations or licensing requirements directed at regulating

“going out of business,” “store closing,” similar inventory liquidation sales, or bulk sale laws, laws

restricting safe, professional, and non-deceptive, customary advertising such as signs, banners,

posting of signage, and use of sign-walkers in connection with the Closing Sales and including

ordinances establishing license or permit requirements, waiting periods, time limits, or bulk sale

restrictions that would otherwise apply to the Closing Sales, the Resolution Procedures in this

section shall apply:

a. Provided that the Closing Sales are conducted in accordance with the terms of this Interim Order or the Final Order, as applicable, the Store Closing Agreement and the Sale Guidelines (as may be modified by Side Letter Agreements), and in light of the provisions in the laws of many Governmental Units (as defined in the Bankruptcy Code) that exempt court-ordered sales from their provisions, the Debtors and the Consultant will be presumed to be in compliance with any Liquidation Laws and are authorized to conduct the Closing Sales in accordance with the terms of this Interim Order or the Final Order, as applicable, the Store Closing Agreement and the Sale Guidelines (as may be modified by Side Letter Agreements)


20

without the necessity of further showing compliance with any such Liquidation Laws.

b. Within two (2) business days after entry of this Interim Order, the Debtors will serve by email, facsimile, or first-class mail, copies of the Motion and the as-entered Interim Order, on the following: (i) the Landlords; (ii) the Attorney General’s office for each state in which the Closing Sales are being held; (iii) the county consumer protection agency or similar agency for each county in which the Closing Sales are being held; and (iv) the division of consumer protection for each state in which the Closing Sales are being held (collectively, the “Dispute Notice Parties”). Within two (2) business days after entry of the Final Order, the Debtors will likewise serve the Dispute Notice Parties with a copy of the Final Order.

c. To the extent that there is a dispute arising from or relating to the Closing Sales, this Interim Order, or the proposed Final Order, as applicable, the Store Closing Agreement, or the Sale Guidelines, which dispute relates to any Liquidation Laws (a “Reserved Dispute”), the Court shall retain exclusive jurisdiction to resolve the Reserved Dispute. Any time within ten (10) days following entry of this Interim Order, any Governmental Unit may assert that a Reserved Dispute exists by sending a notice (the “Dispute Notice”) explaining the nature of the dispute to: (i) Proskauer Rose LLP, Eleven Times Square, New York, New York 10036 (Attn: Lucy F. Kweskin, Esq.); Proskauer Rose LLP, 70 West Madison, Suite 3800, Chicago, Illinois 60602 (Attn: Jeff J. Marwil, Esq.); Proskauer Rose LLP, 2029 Century Park East, Suite 2400, Los Angeles, California 90067-3010 (Attn: Peter J. Young, Esq.), (ii) counsel to any statutorily appointed committee, (iii) the United States Trustee for Region 2 (the “U.S. Trustee”), U.S. Federal Office Building, 201 Varick Street, Suite 1006, New York, NY 10014, (iv) any affected Landlord, (v) counsel to the Prepetition Agent, Morgan Lewis & Bockius LLP, One Federal Street, Boston, MA 02110, (Attn: Julia Frost-Davies); Morgan Lewis & Bockius LLP, 2049 Century Park East, Los Angeles, CA 90067 (Attn: David Riley, Esq.), and (vi) Troutman Pepper Hamilton Sanders LLP, 1313 Market Street, Suite 5100, P.O. Box 1709, Wilmington, Delaware 19899-1709, Attn: Douglas D. Herrmann, Esq. and Marcy McLaughlin Smith, Esq. ([email protected] and [email protected]).

d. If the Debtors, the Consultant, and the Governmental Unit are unable to resolve the Reserved Dispute within fourteen (14) days after service of the Dispute Notice, the Governmental Unit may file a motion with the Court requesting that the Court resolve the Reserved Dispute (a “Dispute Resolution Motion”).

e. In the event that a Dispute Resolution Motion is filed, nothing in this Interim Order or the Final Order, as applicable, shall preclude the Debtors or any other interested party from asserting (i) that the provisions of any



21

Liquidation Laws are preempted by the Bankruptcy Code or (ii) that neither the terms of this Interim Order or the Final Order nor the conduct of the Debtors or the Consultant pursuant to this Interim Order or the Final Order violates such Liquidation Laws. Filing a Dispute Resolution Motion as set forth herein shall not be deemed to affect the finality of this Interim Order or the Final Order or to limit or interfere with the Debtors’ or the Consultant’s ability to conduct or to continue to conduct the Closing Sales pursuant to this Interim Order or the Final Order, absent further order of the Court. Upon the entry of this Interim Order or the Final Order, as applicable, the Court grants authority for the Debtors and the Consultant to conduct the Closing Sales pursuant to the terms of this Interim Order or the Final Order, as applicable, the Store Closing Agreement, and the Sale Guidelines and to take all actions reasonably related thereto or arising in connection therewith. The Governmental Unit will be entitled to assert any jurisdictional, procedural, or substantive arguments it wishes with respect to the requirements of its Liquidation Laws or the lack of any preemption of such Liquidation Laws by the Bankruptcy Code. Nothing in this Interim Order or the Final Order will constitute a ruling with respect to any issues to be raised in any Dispute Resolution Motion.

f. If, at any time, a dispute arises between the Debtors or the Consultant and a Governmental Unit as to whether a particular law is a Liquidation Law, and subject to any provisions contained in this Interim Order or the Final Order related to the Liquidation Laws, then any party to that dispute may utilize the provisions of subparagraphs (c) and (d) above by serving a notice to the other party and proceeding thereunder in accordance with those subparagraphs. Any determination with respect to whether a particular law is a Liquidation Law shall be made de novo.

37. Subject to paragraphs 35 and 36 above, each and every federal, state, or

local agency, departmental unit, or governmental unit with regulatory authority over the Closing

Sales, and all newspapers and other advertising media in which the Closing Sales are advertised,

shall consider this Interim Order as binding authority that no further approval, license, or permit

of any Governmental Unit shall be required, nor shall the Debtors or the Consultant be required to

post any bond, to conduct the Closing Sales.

E. Miscellaneous

38. This Interim Order and the terms and provisions of the Store Closing

Agreement shall be binding on all of the Debtors’ creditors (whether known or unknown), the


22

Debtors, the Consultant, and their respective affiliates, successors, and assigns, and any affected

third parties including, but not limited to, all persons asserting an interest in the Store Assets or

Consigned Goods, notwithstanding any subsequent appointment of any trustee, party, entity, or

other fiduciary under any section of the Bankruptcy Code with respect to the forgoing parties, and

as to such trustee, party, entity, or other fiduciary, such terms and provisions likewise shall be

binding. The provisions of this Interim Order and the terms and provisions of the Store Closing

Agreement, and any actions taken pursuant hereto or thereto shall survive the entry of any order

that may be entered confirming or consummating any plan(s) of the Debtors or converting the

Debtors’ cases from chapter 11 to chapter 7, and the terms and provisions of the Store Closing

Agreement, as well as the rights and interests granted pursuant to this Interim Order and the Store

Closing Agreement, shall continue in these or any superseding cases and shall be binding upon the

Debtors, the Consultant, and their respective successors and permitted assigns, including any

trustee or other fiduciary hereafter appointed as a legal representative of the Debtors under chapter

7 or chapter 11 of the Bankruptcy Code. Any trustee appointed in these Chapter 11 Cases shall be

and hereby is authorized, but not required, to operate the business of the Debtors to the fullest

extent necessary to permit compliance with the terms of this Interim Order and the Store Closing

Agreement, and Consultant and the trustee shall be and hereby are authorized to perform under the

Store Closing Agreement upon the appointment of the trustee without the need for further order of

this Court.

39. No later than five (5) business days prior to the Final Hearing, the

Consultant shall file a declaration disclosing connections to the Debtors, their creditors, and other

parties in interest in these Chapter 11 Cases.


23

40. On a confidential basis and for professionals’ “eyes only” and upon the

written (including email) request of the U.S. Trustee, the Prepetition Agent, or the official

committee of unsecured creditors, if any, the Debtors shall provide such requesting party, if any,

with copies of periodic reports concerning the Closing Sales that are prepared by the Debtors, their

professionals, or the Consultant, provided that the foregoing shall not require the Debtors, their

professionals, or the Consultant to prepare or undertake to prepare any additional or new reporting

not otherwise being prepared by the Debtors, their professionals, or the Consultant in connection

with the Closing Sales.

41. The Debtors are authorized and permitted to transfer to the Consultant

personal information in the Debtors’ custody and control solely for the purposes of assisting with

and conducting the Closing Sales and only to the extent necessary for such purposes, provided that

the Consultant uses commercially reasonably efforts to remove such personal information from

the FF&E prior to the abandonment of the same.

42. The Debtors shall not be liable for any claims against the Consultant, other

than as expressly provided for in the Store Closing Agreement. The Consultant shall act solely as

an independent consultant to the Debtors and shall not be liable for any claims against the Debtors

other than as expressly provided in the Store Closing Agreement (including the Consultant’s

indemnity obligations thereunder) or the Sale Guidelines, with the exception of acts of gross

negligence or willful misconduct and, for greater certainty, the Consultant shall not be deemed to

be an employer, or a joint or successor employer or a related or common employer or payor within

the meaning of any legislation governing employment or labor standards or pension benefits or

health and safety or other statute, regulation or rule of law or equity for any purpose whatsoever,

and shall not incur any successor liability whatsoever.


24

43. To the extent that the Debtors are subject to any state “fast pay” laws in

connection with the Closing Sales, the Debtors shall be presumed to be in compliance with such

laws to the extent, in applicable states, such payroll payments are made by the later of: (a) the

Debtors’ next regularly scheduled payroll and (b) seven (7) calendar days following the

termination date of the relevant employee, and in all such cases consistent with, and subject to,

any previous orders of this Court regarding payment of same.

44. Except with respect to the Store Closing Agreement, nothing in this Interim

Order or the Motion shall be deemed to constitute a postpetition assumption of any agreement

under section 365 of the Bankruptcy Code.

45. The Store Closing Agreement and related documents may be modified,

amended, or supplemented by the parties thereto in accordance with the terms thereof without

further order of this Court.

46. The Debtors are authorized to issue postpetition checks, or to effect

postpetition fund transfer requests, in replacement of any checks or fund transfer requests in

respect of payments made in accordance with this Interim Order that are dishonored or rejected.

47. In accordance with this Interim Order (or any other order of this Court),

each of the financial institutions at which the Debtors maintain their accounts relating to the

payment of any obligations described in the Motion are authorized and directed to (a) receive,

process, honor, and pay all checks presented for payment and to honor all fund 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 this Court, whether such checks, drafts, wires, or


25

transfers are dated prior to, on, or subsequent to the Petition Date, without any duty to inquire

otherwise, and without liability for the following the Debtors’ instructions.

48. Except as relates to the Consultant under the terms of the Store Closing

Agreement, notwithstanding the relief granted herein and any actions taken hereunder, nothing

contained herein shall create, nor is intended to create, any rights in favor of, or enhance the status

of any claim held by, any person.

49. The requirements set forth in Bankruptcy Rule 6003(b) are satisfied.

50. The requirements of Bankruptcy Rule 6007(a) are waived, to the extent

applicable to the relief provided for herein.

51. Notice of the Motion as provided therein shall be deemed good and

sufficient and the requirements of Bankruptcy Rule 6004(a) and the Local Rules are satisfied by

such notice.

52. Notwithstanding Bankruptcy Rule 6004(h), the terms and conditions of this

Interim Order shall be immediately effective and enforceable upon its entry.

53. This Court shall retain exclusive jurisdiction with regard to all issues or

disputes arising from or relating to the implementation, interpretation, or enforcement of this

Interim Order or the Store Closing Agreement, including, but not limited to, any claim or issue

relating to any efforts by any party or person to prohibit, restrict, or in any way limit the Closing

Sales in accordance with the Sale Guidelines, or any other disputes related to the Closing Sales.

No parties or person shall take any action against the Debtors, the Consultant, the Closing Sales,

or any Landlord, as applicable, until this Court has resolved such dispute. This Court shall hear

the request of such parties or persons with respect to any such disputes on an expedited basis, as

may be appropriate under the circumstances.


26

54. The Final Hearing shall be held on ______ , 2020, at _______ (Prevailing

Eastern Time) and any objections or responses to the Motion shall be in writing, filed with the

Court, and served upon (a) proposed attorneys for the Debtors, Proskauer Rose LLP, Eleven Times

Square, New York, New York 10036 (Attn: Lucy F. Kweskin, Esq.); Proskauer Rose LLP, 70

West Madison, Suite 3800, Chicago, Illinois 60602 (Attn: Jeff J. Marwil, Esq.); Proskauer Rose

LLP 2029 Century Park East, Suite 2400, Los Angeles, California 90067-3010 (Attn: Peter J.

Young, Esq.), (b) any duly appointed official committee of unsecured creditors (the

“Committee”), (c) the United States Trustee for Region 2 (the “U.S. Trustee”) U.S. Federal

Office Building, 201 Varick Street, Suite 1006, New York, NY 10014, (d) counsel to the

Prepetition Agent, Morgan Lewis & Bockius LLP, One Federal Street, Boston, MA 02110, (Attn:

Julia Frost-Davies); Morgan Lewis & Bockius LLP, 2049 Century Park East, Los Angeles, CA

90067, (Attn: David Riley, Esq.), and (e) counsel to the Consultant, Troutman Pepper Hamilton

Sanders LLP, 1313 Market Street, Suite 5100, P.O. Box 1709, Wilmington, Delaware 19899-1709

(Attn: Douglas D. Herrmann, Esq. and Marcy McLaughlin Smith, Esq.)

([email protected] and [email protected]), so as to be actually

received on or prior to 4:00 p.m. (Prevailing Eastern Time) on ___________________ 2020.

Dated: ________________, 2020

New York, New York

HONORABLE SHELLEY C. CHAPMAN UNITED STATES BANKRUPTCY JUDGE



Exhibit 1

Sale Guidelines

(To be attached to as-entered order)


Exhibit 2

Store Closing Agreement



Exhibit B

Proposed Final Order

20-12097-scc Doc 4-2 Filed 09/10/20 Entered 09/10/20 11:47:42 Exhibit B Pg1 of 28





Debtors.1

Chapter 11

Case No. 20-12097 (SCC)


FINAL ORDER (A) AUTHORIZING THE DEBTORS TO ASSUME

THE STORE CLOSING AGREEMENT, (B) AUTHORIZING AND APPROVING STORE CLOSING SALES FREE AND CLEAR OF ALL LIENS, CLAIMS, AND

ENCUMBRANCES, (C) APPROVING DISPUTE RESOLUTION PROCEDURES, (D) AUTHORIZING CUSTOMARY BONUSES TO EMPLOYEES OF CLOSING

STORES, AND (E) APPROVING THE DEBTORS’ STORE CLOSING PLAN



2

Upon the motion (the “Motion”)2 of Century 21 Department Stores LLC and its

debtor affiliates, as debtors and debtors in possession in the above-captioned Chapter 11 Cases

(collectively, the “Debtors”), pursuant to sections 105(a), 363, 365, and 554 of the Bankruptcy

Code and Bankruptcy Rules 6003, 6004, and 6007, for an order (a)(1) confirming, on an interim

basis, that the Store Closing Agreement is operative and effective and (2) authorizing, on a final

basis, the Debtors to assume the Store Closing Agreement, (b) authorizing and approving Store

Closing Sales free and clear of all liens, claims, and encumbrances, (c) approving dispute

resolution procedures, (d) authorizing customary bonuses to non-insider Closing Store employees

who remain employed for the duration of the applicable Store Closing, and (e) approving the Store

Closing plan, 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 and 1334, and the

Amended Standing Order of Reference M-431, dated January 31, 2012 (Preska, C.J.); 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 the 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; and such notice

having been adequate and appropriate under the circumstances, and it appearing that no other or

further notice need be provided; and the Court having reviewed the Motion; and the Court having

held a hearing to consider the relief requested in the Motion on an interim basis (the “Interim

Hearing”); and the Court having entered an order granting the relief requested in the motion on

an interim basis (ECF No. __) (the “Interim Order”); and the Court having held a hearing to

consider the relief requested in the Motion on final basis (the “Final Hearing”); and upon the Veit

2 Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Motion.


3

Declaration, filed contemporaneously with the Motion, and the Consultant’s declarations (ECF

Nos. ___ and ___); and the Final Hearing having been held to consider the relief requested in the

Motion on a final basis; and the upon the record at the Interim Hearing and the Final Hearing; 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 in the

best interests of the Debtors, their estates, creditors, and all parties in interest; and upon all of the

proceedings had before the Court and after due deliberation and sufficient cause appearing

therefor,

FOUND, CONCLUDED, AND DETERMINED that:3

A. The Debtors have advanced sound business reasons for assumption of the

Store Closing Agreement as set forth in the Motion and at the hearing, and assumption of the Store

Closing Agreement is a reasonable exercise of the Debtors’ business judgment and is in the best

interest of the Debtors and their estates.

B. The Store Closing Agreement was negotiated, proposed, and entered into

without collusion, in good faith, and from arm’s length bargaining positions.

C. The Sale Guidelines, as described in the Motion and attached as Exhibit 1

hereto, are reasonable and will maximize the returns on the Store Assets and Consigned Goods for

the benefit of the Debtors’ estates and creditors.

D. The Closing Sales, in accordance with the Sale Guidelines and with the

assistance of the Consultant, will provide an efficient means for the Debtors to liquidate and

3 The findings and conclusions set forth herein constitute this Court’s findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. To the extent any of the following findings of fact constitute conclusions of law, they are adopted as such. To the extent that any of the following conclusions of law constitute findings of fact, they are adopted as such.


4

dispose of the Store Assets and Consigned Goods as quickly and effectively as possible, and are

in the best interest of the Debtors’ estates.

E. The Resolution Procedures are fair and reasonable, and comply with

applicable law.

F. The Debtors have represented that, pursuant to the Motion, they are not

seeking to either sell or lease personally identifiable information during the course of the Closing

Sales at the Closing Stores; provided, however, that the Consultant will be authorized to distribute

emails and promotional materials to the Debtors’ customers consistent with the Debtors’ existing

policies on the use of consumer information.

G. The Debtors and the Consultant may sell the Store Assets and Consigned

Goods free and clear of all liens, claims, and encumbrances as provided for herein because, in each

case, one or more of the standards set forth in section 363(f)(1)-(5) of the Bankruptcy Code has

been satisfied. Those holders of any such liens, claims, and encumbrances who did not object, or

who withdrew their objections, to the entry of this Final Order are deemed to have consented

thereto pursuant to section 363(f)(2) of the Bankruptcy Code. Those holders of any such liens,

claims, and encumbrances who did object fall within one or more of the other subsections of

section 363(f) and are adequately protected by having such liens, claims, and encumbrances

attaching to the Debtors’ share of proceeds from the sale of the applicable Store Assets and

Consigned Goods with the same validity and priority and to the same extent and amount that any

such liens, claims, and encumbrances had with respect to such Store Assets and Consigned Goods.

H. The Debtors have demonstrated good, sufficient, and sound business

purposes and justifications for the relief approved herein.


5

I. The entry of this Final Order is in the best interest of the Debtors and their

estates, creditors, and all other parties in interest herein.

IT IS HEREBY ORDERED THAT

1. The Motion is granted on a final basis to the extent set forth herein.

2. The Debtors and the Consultant are authorized and empowered to take all

actions necessary or appropriate to implement the relief granted in this Final Order. The failure to

specifically include any particular provision of the Store Closing Agreement in this Final Order

shall not diminish or impair the effectiveness of such provisions, it being the intent of this Court

that the Store Closing Agreement and all of its provisions, payments, and transactions, be and

hereby are authorized and approved as and to the extent provided for in this Final Order. To the

extent that there is any conflict between this Final Order, the Sale Guidelines, and the Store Closing

Agreement, the terms of this Final Order shall control over all other documents (subject to

Paragraph 34 of this Final Order), and the Sale Guidelines (as modified by any Side Letter

Agreement (as that term is defined in Paragraph 34 of this Final Order) entered into by and between

the Consultant and a Landlord of a Closing Store) shall control over the Store Closing Agreement.

A. Assumption of the Store Closing Agreement by the Debtors

3. The Store Closing Agreement, a copy of which is attached to this Final

Order as Exhibit 2, is hereby assumed pursuant to section 365 of the Bankruptcy Code. The

Debtors are authorized to act and perform in accordance with the terms of the Store Closing

Agreement, including, making payments required by the Store Closing Agreement, including fees

and reimbursement of expenses, to the Consultant on a weekly basis and pursuant to the terms

governing the Final Reconciliation (as defined in the Store Closing Agreement), in each case as

set forth in more detail in the Store Closing Agreement, without the need for any application of


6

the Consultant or a further order of this Court (and all such payments of fees and reimbursement

of expenses shall be free and clear of any and all liens and Encumbrances (as defined below)). The

Consultant’s fees and expenses shall be subject to the terms of the Store Closing Agreement,

including as to any expense budget attached thereto.

4. Notwithstanding the relief granted in this Final Order, any payment made

by the Debtors pursuant to the authority granted herein, or authorizations contained hereunder,

shall be subject to and in compliance with any orders entered by the Court authorizing the Debtors’

use of cash collateral and any budget in connection therewith (the “Cash Collateral Order”);

provided, however, that to the extent there is any inconsistency between the Cash Collateral Order

and any action taken or proposed to be taken hereunder, the terms of the Cash Collateral Order

(including any budget in connection therewith) shall control, other than as explicitly set forth in

paragraphs 3 and 16 of this Final Order; provided, further, that the Cash Collateral Order shall

neither cap nor reduce (nor be deemed to cap nor reduce) amounts due to the Consultant under the

Store Closing Agreement other than any such cap or reduction resulting from the Debtors’ required

general compliance (subject to permitted variances and waivers) with the Budget (as defined in

the Cash Collateral Order); provided, further, that, to the extent the Debtors do not comply with

the payment obligations under the Store Closing Agreement, nothing in this Final Order, the Cash

Collateral Order or any other order of the Court shall limit any of the Consultant’s rights to (a)

initiate the termination process and, if elected, terminate the agreement for nonpayment, in each

case in accordance with and pursuant to Section K of the Store Closing Agreement, and/or (b) file

an administrative claim for any amounts owed to Consultant under the Store Closing Agreement,

all of the foregoing without further order of the Court; provided, further, that if the Store Closing


7

Agreement is terminated by Consultant for the non-payment of fees due and owing pursuant to the

Store Closing Agreement, the Guaranteed Amount shall no longer be due and payable.

5. Notwithstanding any provision of this Final Order, nothing shall prevent or

be construed to prevent the Consultant (individually, as part of a joint venture, or otherwise) or

any of its affiliates from providing additional services to or bidding on the Debtors’ assets not

subject to the Store Closing Agreement (“Additional Assets”) pursuant to a consulting agreement,

agency agreement, or otherwise. The Consultant (individually, as part of a joint venture, or

otherwise) or any of its affiliates are hereby authorized to bid on, guarantee or otherwise acquire

such Additional Assets, or offer to provide additional services, notwithstanding anything to the

contrary in the Bankruptcy Code or other applicable law, provided that such guarantee, transaction,

or acquisition is approved by separate order of this Court.

B. Authority to Engage in the Closing Sales at the Closing Stores

6. The Debtors and the Consultant are authorized, pursuant to section 105(a)

and section 363(b)(1) of the Bankruptcy Code, to continue to conduct the Closing Sales at the

Closing Stores in accordance with this Final Order, the Sale Guidelines, the Store Closing

Agreement, and any Side Letter Agreement. As part of the Closing Sales, the Debtors and

Consultant are authorized to sell Consigned Goods. Subject to the restrictions set forth in this

Final Order and the Sale Guidelines, the Debtors and the Consultant are authorized to take any and

all actions as may be necessary or desirable to implement the Store Closing Agreement and the

Closing Sales; and each of the transactions contemplated by the Store Closing Agreement, and any

actions taken by the Debtors and the Consultant necessary or desirable to implement the Store

Closing Agreement or the Closing Sales prior to the date of this Final Order, are approved and

ratified.


8

7. The Sale Guidelines are approved.

8. The Debtors are authorized to discontinue operations at the Closing Stores

in accordance with this Final Order and the Sale Guidelines.

9. If the Debtors request, in addition to conducting the Closing Sales at the

Closing Stores, the Consultant will also conduct the Closing Sales through the Debtors’ e-

commerce platform and all relief set forth herein related to authorization to conduct the Closing

Sales at the Closing Stores will also authorize the Debtors and Consultant to conduct the Closing

Sales through the Debtors’ e-commerce platform.

10. All entities that are presently in possession of some or all of the Store Assets

or Consigned Goods in which the Debtors hold an interest that are or may be subject to the Store

Closing Agreement or this Final Order hereby are directed to surrender possession of such Store

Assets or Consigned Goods to the Debtors or the Consultant.

11. Except as provided herein, neither the Debtors nor the Consultant nor any

of their officers, employees, or agents shall be required to obtain the approval of any third party,

including (without limitation) any governmental unit (as defined in section 101(27) of the

Bankruptcy Code) or any Landlord, to conduct the Closing Sales at the Closing Stores and to take

any related actions authorized herein.

12. With respect to reasonable and documented costs and expenses incurred by

the Consultant pursuant to the Store Closing Agreement and fees due to the Consultant on account

of services provided from the Petition Date through the date of entry of this Final Order, the

Consultant shall be entitled to and shall receive reimbursement of such reasonable and documented

costs and expenses incurred and fees earned pursuant to the Store Closing Agreement within seven

business days of entry of this Final Order.


9

13. The Consultant is authorized to supplement the Merchandise in the Closing

Sales with additional goods procured by the Consultant (which may include goods provided to the

Consultant on consignment) which are of like kind, and no lesser quality, to the Merchandise in

the Closing Sales at the Closing Stores (the “Additional Agent Goods”). The Additional Agent

Goods shall be purchased by the Consultant as part of the Closing Sales and delivered to the

Closing Stores at the Consultant’s sole expense (including as to labor, freight, and insurance

relative to shipping such Additional Agent Goods to the Stores). Sales of Additional Agent Goods

shall be run through the Debtors’ cash register systems; provided, however, that the Consultant

shall mark the Additional Agent Goods using either a “dummy” SKU or department number or in

such other manner so as to distinguish the sale of Additional Agent Goods from the sale of

Merchandise. The Consultant and Debtors shall cooperate to ensure that the Additional Agent

Goods are marked in such a way that a reasonable consumer could identify the Additional Agent

Goods from the Merchandise.

14. The Consultant shall pay to Debtors an amount equal to five percent (5.0%)

of the gross proceeds (excluding only Sale Taxes) from the sale of Additional Agent Goods (the

“Additional Agent Goods Fee”). The Consultant shall retain all remaining amounts from the sale

of the Additional Agent Goods. The Consultant guarantees that the Additional Agent Good’s Fee

payable to the Debtors shall be not less than $1,000,000 (the “Guaranteed Amount”) on account

of the sale of the Additional Agent Goods, which Guaranteed Amount shall be paid by the

Consultant through payment of the Additional Agent Goods Fee in connection with each weekly

sale reconciliation with respect to sales of Additional Agent Goods sold by the Consultant during

each then prior week (or at such other mutually agreed upon time) and, to the extent the Guaranteed


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Amount is not paid by the time of the Final Reconciliation, the difference between the amount then

paid and the Guaranteed Amount shall be paid by the Consultant as part of the Final Reconciliation.

15. All transactions relating to the Additional Agent Goods are, shall be

construed as, and are acknowledged by the Debtors to be, a true consignment from Consultant to

the Debtors under Article 9 of the Uniform Commercial Code (the “UCC”) and not a consignment

for security purposes. At all times and for all purposes, the Additional Agent Goods and their

proceeds shall be the exclusive property of the Consultant, except as set forth herein, and no other

person or entity (including, without limitation, the Debtors, or any third person claiming a security

interest in the Debtors’ property, including any of the Debtors’ secured lenders) shall have any

claim against any of the Additional Agent Goods or the proceeds thereof. The Additional Agent

Goods shall at all times remain subject to the exclusive control of the Consultant. The Debtors

shall, at Consultant’s sole cost and expense, insure Additional Agent Goods and, if required,

promptly file any proofs of loss with regard thereto.

16. The Consultant is hereby granted a first-priority security interest and lien

upon (a) the Additional Agent Goods and (b) the Consultant’s portion of the Additional Agent

Goods proceeds, which security interest shall be deemed perfected without the requirement of

filing UCC financing statements or providing notifications to any prior secured parties (provided

that the Consultant is hereby authorized to deliver any notices and file any financing statements

and amendments thereof under the applicable UCC identifying the Consultant’s interest in the

Additional Agent Goods (and any proceeds thereof) as consigned goods thereunder and the

Debtors as the consignee therefor, and the Consultant’s security interest in such Additional Agent

Goods and the Consultant’s portion of the Additional Agent Goods proceeds). As part of each

weekly reconciliation, the Debtors shall turnover all proceeds from the sale of Additional Agent


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Goods to the Consultant, net of any fee payable to the Debtors pursuant to the Sore Closing

Agreement.

17. Notwithstanding anything to the contrary in the Store Closing Agreement,

the Debtors and their estates shall not indemnify the Consultant for any damages arising primarily

out of the Consultant’s fraud, willful misconduct, or gross negligence

C. Conducting the Closing Sales at the Closing Stores

18. All newspapers and other advertising media in which the Closing Sales may

be advertised and all Landlords of the Closing Stores are directed to accept this Final Order as

binding authority authorizing the Debtors and the Consultant to conduct the Closing Sales and the

sale of the Store Assets and Consigned Goods pursuant to the Store Closing Agreement and the

Sale Guidelines, including, without limitation, to conduct and advertise the sale of the Store Assets

and Consigned Goods in the manner contemplated by and in accordance with this Final Order, the

Sale Guidelines, the Store Closing Agreement, and any Side Letter Agreement.

19. The Debtors and the Consultant are hereby authorized to take such actions

as may be necessary and appropriate to implement the Store Closing Agreement and,

notwithstanding any applicable non-bankruptcy laws, to conduct the Closing Sales without the

need for a further order of this Court as provided in this Final Order, the Store Closing Agreement,

or the Sale Guidelines, as may be modified by a Side Letter Agreement, including, but not limited

to, advertising the sale as a “going out of business,” “store closing,” “sale on everything,”

“everything must go,” “liquidation sale,” or similar themed sale through the posting of signs

(including the use of exterior banners at non-enclosed mall closing locations, and at enclosed mall

closing locations to the extent the applicable closing location entrance does not require entry into

the enclosed mall common area), use of sign walkers, and street signage.


12

20. Except as expressly provided in the Store Closing Agreement or this Final

Order, the sale of the Store Assets, Consigned Goods and Additional Agent Goods shall be

conducted by the Debtors and the Consultant notwithstanding any restrictive provision of any

lease, sublease, license, reciprocal easement agreement, restrictive covenant, or other agreement

relative to occupancy affecting or purporting to restrict the conduct of the Closing Sales (including

the sale of the Store Assets, Consigned Goods and Additional Agent Goods), the necessity of

obtaining any third party consents, the abandonment of assets, or “going dark” provisions, and

such provisions shall not be enforceable in conjunction with the Closing Sales. Breach of any such

provisions in these Chapter 11 Cases in conjunction with the Closing Sales shall not constitute a

default under a lease or provide a basis to terminate the lease; provided that the Closing Sales are

conducted in accordance with the terms of this Final Order, any Side Letter Agreement, and the

Sale Guidelines.

21. Notwithstanding anything herein to the contrary, and in view of the

importance of the use of sign-walkers, banners, and other advertising to the sale of the Store Assets

and Consigned Goods, to the extent that disputes arise during the course of such sale regarding

laws regulating the use of sign-walkers, banners, or other advertising, and the Debtors and the

Consultant are unable to resolve the matter with the disputing party consensually, any party may

request a telephonic hearing with this Court pursuant to these provisions. Such hearing will, to the

extent practicable, be scheduled initially no later than the earlier of (a) the next regularly scheduled

omnibus hearing and (b) within four (4) business days of such request. Until such a hearing, no

party shall interfere with the Closing Sales’ conduct in accordance with this Final Order. This

scheduling shall not be deemed to preclude additional hearings for the presentation of evidence or

arguments as necessary.


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22. Except as provided in this Final Order, the Sale Guidelines, or any Side

Letter Agreement, and except with respect to any Governmental Unit (as to which the Resolution

Procedures shall apply), no person or entity, including, but not limited to, any Landlord, licensor,

property owner, property manager, service provider, utility provider, or creditor, shall take any

action to directly or indirectly prevent, interfere with, or otherwise hinder the Closing Sales or the

sale of the Store Assets, Consigned Goods and Additional Agent Goods, or the advertising and

promotion (including the posting of signs and exterior banners or the use of sign walkers) of the

Closing Sales, and all such parties and persons of every nature and description, including, but not

limited to, any Landlord, licensor, property owner, property manager, service provider, utility, and

creditor, as well as all those acting for or on behalf of such parties, are prohibited and enjoined

from (a) interfering in any way with, obstructing, or otherwise impeding the conduct of the Closing

Sales or (b) instituting any action or proceeding in any court (other than this Court) or

administrative body seeking an order or judgment against, among others, the Debtors, the

Consultant, or the Landlords at the Closing Stores that might in any way directly or indirectly

obstruct or otherwise interfere with or adversely affect the conduct of the Closing Sales or other

liquidation sales at the Closing Stores or seek to recover damages for breach(es) of covenants or

provisions in any lease, sublease, license, or contract based upon any relief authorized herein.

23. In accordance with and subject to the terms and conditions of the Store

Closing Agreement, the Consultant shall have the right to use the Closing Stores and all related

Closing Store services, all FF&E (as defined in the Store Closing Agreement), and other assets of

the Debtors for the purpose of conducting the Closing Sales free of any interference from any

entity or person, subject to compliance with the Sale Guidelines and this Final Order.


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24. The Consultant shall permit returns and exchanges for items purchased prior

to September 10, 2020, until the earlier of (a) the applicable policy under the Return and Exchange

Policies and (b) October 10, 2020.

25. The Consultant will honor the Debtors’ Gift Cards through October 10,

2020.

26. The Debtors are authorized, but not directed, to make payments, subject to

the terms of the Cash Collateral Order (as defined below) and associated budget, under the Store

Closing Bonus Plan, as may be amended and modified from time to time.

27. All sales of Store Assets, Consigned Goods and Additional Agent Goods

shall be by cash, the Debtors’ validly-issued gift certificates and Gift Cards (subject to the

limitation in paragraph 25 herein), merchandise credit, debit card, or credit card and, at the

Debtors’ discretion, by check or otherwise in accordance with the Debtors’ policies (but, for the

avoidance of doubt, will not include the Debtors’ member or customer appreciation points,

rewards, coupons, and other similar programs).

28. All sales of all Store Assets, Consigned Goods and Additional Agent Goods

shall be “as is” and final. Conspicuous signs stating that “all sales are final” and “as is” will be

posted at the cash register areas at all Closing Stores.

29. The Debtors remain responsible for the payment of any and all sales taxes

and the Consultant shall not be liable for sales taxes except as expressly provided in the Store

Closing Agreement. The Debtors are directed to remit all taxes accruing from the Closing Sales

to the applicable Governmental Units as and when due, provided that in the case of a bona fide

dispute, the Debtors are only directed to pay such taxes upon the resolution of the dispute, if and

to the extent that the dispute is decided in favor of the applicable Governmental Unit. For the


15

avoidance of doubt, sales taxes collected and held in trust by the Debtors shall not be used to pay

any creditor or any other party, other than the applicable Governmental Unit for which the sales

taxes are collected. The Consultant shall collect, remit to the Debtors, and account for sales taxes

as and to the extent provided in the Store Closing Agreement. This Final Order does not enjoin,

suspend, or restrain the assessment, levy, or collection of any tax under state or federal law and

does not constitute a declaratory judgment with respect to any party’s liability for taxes under state

or federal law.

30. Pursuant to section 363(f) of the Bankruptcy Code, the Consultant, on

behalf of the Debtors, is authorized to sell all Store Assets and Consigned Goods pursuant to the

Store Closing Agreement and in accordance with the Sale Guidelines and any Side Letter

Agreement. All sales of Store Assets and Consigned Goods, whether by the Consultant or the

Debtors, shall be free and clear of any and all liens, claims, encumbrances, and other interests;

provided, however, that any liens, claims, encumbrances, and other interests shall attach to the

Debtors’ share of the proceeds of the sale of applicable Store Assets and Consigned Goods with

the same validity and priority and to the same extent and in the same amount that any such liens,

claims, encumbrances, defenses (including, without limitation, rights of setoff and recoupment)

and interests, including, without limitation, security interests of whatever kind or nature,

mortgages, conditional sales or title retention agreements, pledges, deeds of trust, hypothecations,

liens, encumbrances, assignments, preferences, debts, easements, charges, suits, licenses, options,

rights-of-recovery, judgments, orders and decrees of any court or foreign or domestic

governmental entity, taxes (including foreign, state, and local taxes), licenses, covenants,

restrictions, indentures, instruments, leases, options, off-sets, claims for reimbursement,

contribution, indemnity or exoneration, successor, product, environmental, tax, labor, ERISA,


16

CERCLA, alter ego, and/or other liabilities, causes of action, contract rights, and claims, to the

fullest extent of the law, in each case, of any kind or nature (including, without limitation, all

“claims” as defined in section 101(5) of the Bankruptcy Code), known or unknown, whether pre-

petition or post-petition, secured or unsecured, choate or inchoate, filed or unfiled, scheduled or

unscheduled, perfected or unperfected, liquidated or unliquidated, noticed or unnoticed, recorded

or unrecorded, contingent or non-contingent, material or non-material, statutory or non-statutory,

matured or unmatured, legal or equitable (collectively, “Encumbrances”); as provided for herein

because in each case, one or more of the standards set forth in section 363(f)(1)–(5) has been

satisfied; provided, however, that any such Encumbrances shall attach to the Debtors’ share of the

applicable proceeds of the sale of the Store Assets and Consigned Goods with the same validity,

in the amount, with the same priority as, and to the same extent that any such Encumbrances

attached to the Store Assets and Consigned Goods prior to such sale, subject to any claims and

defenses that any party may possess with respect thereto. Payment of fees and expenses to the

Consultant in accordance with this Final Order and the Store Closing Agreement shall be free and

clear of any Encumbrances.

31. The Debtors and the Consultant are authorized and empowered to transfer

Store Assets and Consigned Goods among the Closing Stores. The Consultant is authorized to sell

or, with notice to and in consultation with the Prepetition Agent, abandon the Debtors’ FF&E, in

accordance with the terms of the Store Closing Agreement and the Sale Guidelines, including, but

not limited to, Closing Store signage. Any abandoned FF&E left in a Closing Store, distribution

center, warehouse or corporate office after the later of the date the lease is rejected or the date the

Debtors vacate the premises shall be deemed abandoned, and such landlord is authorized to dispose

of the abandoned FF&E without further notice and without any liability to any individual or entity


17

that may claim an interest in such property. The automatic stay is modified to the extent necessary

to allow such dispositions.

32. Neither the Sale Guidelines, Store Closing Agreement, nor this Final Order

authorize the Debtors to transfer or sell to the Consultant or any other party the personal identifying

information (which means information which alone or in conjunction with other information

identifies an individual, including but not limited to an individual’s first name (or initial) and last

name, physical address, electronic address, telephone number, social security number, date of

birth, government-issued identification number, account number and credit or debit card number

(“PII”) of any customers unless such sale or transfer is permitted by the Debtors’ privacy policy

and state, provincial or federal privacy and/or identity theft prevention laws and rules (collectively,

the “Applicable Privacy Laws”). The foregoing shall not limit the Consultant’s use of the

Debtors’ customer lists and mailing lists solely for purposes of advertising and promoting the

Sales.

33. The Debtors shall use commercially reasonable efforts to remove or cause

to be removed any confidential and/or PII in any of the Debtors’ hardware, software, computers

or cash registers or similar equipment which are to be sold or abandoned so as to render the PII

unreadable or undecipherable. At the conclusion of the Sales, the Consultant shall provide the

Debtors with written verification that the Consultant has not removed, copied, or transferred any

customer PII and that any records containing PII were shredded, erased or otherwise modified to

render the PII unreadable or undecipherable

34. The Consultant and the Landlord of each Closing Store are authorized to

enter into a side letter agreement (a “Side Letter Agreement”) between themselves to modify the

Sale Guidelines with respect to a Closing Store and to govern the conduct of the Closing Sales at


18

the applicable Closing Store without further order of the Court, and such Side Letter Agreements

shall be binding as among the Consultant and any Landlord; provided that nothing in such Side

Letter Agreements affects the provisions of paragraphs 21, 35 and 36 of this Final Order. In the

event of a conflict between the Sale Guidelines and this Final Order with respect to a Closing Store

that is subject to a Side Letter Agreement, the terms of such Side Letter Agreement shall control.

D. Resolution Procedures for Disputes Regarding Liquidation Laws

35. Nothing in this Final Order, the Store Closing Agreement, or the Sale

Guidelines releases, nullifies, or enjoins the enforcement of any liability to a Governmental Unit

under environmental laws or regulations (or any associated liabilities for penalties, damages, cost

recovery, or injunctive relief) to which any entity would be subject as the owner, lessor, lessee, or

operator of the property after the date of entry of this Final Order. Nothing contained in this Final

Order, the Store Closing Agreement, or the Sale Guidelines shall in any way: (a) diminish the

obligation of any entity to comply with environmental laws; or (b) diminish the obligations of the

Debtors to comply with environmental laws consistent with their rights and obligations as debtor

in possession under the Bankruptcy Code. Except as otherwise set forth herein, the Closing Sales

shall not be exempt from laws of general applicability, including, without limitation, public health

and safety, criminal, tax, labor, employment, environmental, antitrust, fair competition, traffic, and

consumer protection laws, including consumer laws regulating deceptive practices and false

advertising, consumer protection, the sale of gift certificates, layaway programs, return of goods,

express or implied warranties of goods, and “weights and measures” regulation and monitoring

(collectively, “General Laws”). Nothing in this Final Order, the Store Closing Agreement, or the

Sale Guidelines shall alter or affect obligations to comply with all applicable federal safety laws

and regulations. Nothing in this Final Order shall be deemed to bar any Governmental Unit (as


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such term is defined in section 101(47) of the Bankruptcy Code) from enforcing General Laws, in

the applicable non-bankruptcy forum, subject to the Debtors’ rights to assert in that forum or before

this Court that any such laws are not in fact General Laws or that such enforcement is

impermissible under the Bankruptcy Code or this Final Order. Notwithstanding any other

provision in this Final Order, no party waives any rights to argue any position with respect to

whether the conduct was in compliance with this Final Order or any applicable law, or that

enforcement of such applicable law is preempted by the Bankruptcy Code. Nothing in this Final

Order shall be deemed to have made any rulings on any such issues.

36. To the extent that the Closing Sales of Store Assets, Consigned Goods

and/or Additional Agent Goods are subject to any Liquidation Laws, including federal, state, or

local laws, statutes, ordinances, rules, regulations or licensing requirements directed at regulating

“going out of business,” “store closing,” similar inventory liquidation sales, or bulk sale laws, laws

restricting safe, professional, and non-deceptive, customary advertising such as signs, banners,

posting of signage, and use of sign-walkers in connection with the Closing Sales and including

ordinances establishing license or permit requirements, waiting periods, time limits, or bulk sale

restrictions that would otherwise apply to the Closing Sales, the Resolution Procedures in this

section shall apply:

a. Provided that the Closing Sales are conducted in accordance with the terms of this Final Order, the Store Closing Agreement and the Sale Guidelines (as may be modified by Side Letter Agreements), and in light of the provisions in the laws of many Governmental Units (as defined in the Bankruptcy Code) that exempt court-ordered sales from their provisions, the Debtors and the Consultant will be presumed to be in compliance with any Liquidation Laws and are authorized to conduct the Closing Sales in accordance with the terms of this Final Order, the Store Closing Agreement and the Sale Guidelines (as may be modified by Side Letter Agreements) without the necessity of further showing compliance with any such Liquidation Laws.


20

b. Within two (2) business days after entry of the Final Order, the Debtors will serve by email, facsimile, or first-class mail, copies of the Final Order on the following: (i) the Landlords; (ii) the Attorney General’s office for each state in which the Closing Sales are being held; (iii) the county consumer protection agency or similar agency for each county in which the Closing Sales are being held; and (iv) the division of consumer protection for each state in which the Closing Sales are being held (collectively, the “Dispute Notice Parties”).

c. To the extent that there is a dispute arising from or relating to the Closing Sales, the Interim Order, or this Final Order, as applicable, the Store Closing Agreement, or the Sale Guidelines, which dispute relates to any Liquidation Laws (a “Reserved Dispute”), the Court shall retain exclusive jurisdiction to resolve the Reserved Dispute. If a governmental unit filed a Dispute Notice (as defined in the Interim Order) within ten (10) days of service of the Interim Order and sent such Dispute Notice to the Dispute Notice Parties as required by the Interim Order, and the Debtors, the Consultant, and the Governmental Unit are unable to resolve the Reserved Dispute within fourteen (14) days after service of the Dispute Notice, the Governmental Unit may file a motion with the Court requesting that the Court resolve the Reserved Dispute (a “Dispute Resolution Motion”).

d. In the event that a Dispute Resolution Motion is filed, nothing in the Interim Order or this Final Order, as applicable, shall preclude the Debtors or any other interested party from asserting (i) that the provisions of any Liquidation Laws are preempted by the Bankruptcy Code or (ii) that neither the terms of the Interim Order or this Final Order, as applicable, nor the conduct of the Debtors or the Consultant pursuant to the Interim Order or this Final Order, as applicable, violates such Liquidation Laws. Filing a Dispute Resolution Motion as set forth herein shall not be deemed to affect the finality of the Interim Order or this Final Order or to limit or interfere with the Debtors’ or the Consultant’s ability to conduct or to continue to conduct the Closing Sales pursuant to the Interim Order or this Final Order, absent further order of the Court. Upon the entry of the Interim Order or this Final Order, as applicable, the Court grants authority for the Debtors and the Consultant to conduct the Closing Sales pursuant to the terms of the Interim Order or this Final Order, as applicable, the Store Closing Agreement, and the Sale Guidelines and to take all actions reasonably related thereto or arising in connection therewith. The Governmental Unit will be entitled to assert any jurisdictional, procedural, or substantive arguments it wishes with respect to the requirements of its Liquidation Laws or the lack of any preemption of such Liquidation Laws by the Bankruptcy Code. Nothing in the Interim Order or this Final Order will constitute a ruling with respect to any issues to be raised in any Dispute Resolution Motion.


21

e. If, at any time, a dispute arises between the Debtors or the Consultant and a Governmental Unit as to whether a particular law is a Liquidation Law, and subject to any provisions contained in the Interim Order or this Final Order related to the Liquidation Laws, then any party to that dispute may utilize the provisions of subparagraphs (c) and (d) above by serving a notice to the other party and proceeding thereunder in accordance with those subparagraphs. Any determination with respect to whether a particular law is a Liquidation Law shall be made de novo.

37. Subject to paragraphs 35 and 36 above, each and every federal, state, or

local agency, departmental unit, or governmental unit with regulatory authority over the Closing

Sales, and all newspapers and other advertising media in which the Closing Sales are advertised,

shall consider this Final Order as binding authority that no further approval, license, or permit of

any Governmental Unit shall be required, nor shall the Debtors or the Consultant be required to

post any bond, to conduct the Closing Sales.

E. Miscellaneous

38. This Final Order and the terms and provisions of the Store Closing

Agreement shall be binding on all of the Debtors’ creditors (whether known or unknown), the

Debtors, the Consultant, and their respective affiliates, successors, and assigns, and any affected

third parties including, but not limited to, all persons asserting an interest in the Store Assets or

Consigned Goods, notwithstanding any subsequent appointment of any trustee, party, entity, or

other fiduciary under any section of the Bankruptcy Code with respect to the forgoing parties, and

as to such trustee, party, entity, or other fiduciary, such terms and provisions likewise shall be

binding. The provisions of this Final Order and the terms and provisions of the Store Closing

Agreement, and any actions taken pursuant hereto or thereto shall survive the entry of any order

that may be entered confirming or consummating any plan(s) of the Debtors or converting the

Debtors’ cases from chapter 11 to chapter 7, and the terms and provisions of the Store Closing

Agreement, as well as the rights and interests granted pursuant to this Final Order and the Store


22

Closing Agreement, shall continue in these or any superseding cases and shall be binding upon the

Debtors, the Consultant, and their respective successors and permitted assigns, including any

trustee or other fiduciary hereafter appointed as a legal representative of the Debtors under chapter

7 or chapter 11 of the Bankruptcy Code. Any trustee appointed in these Chapter 11 Cases shall be

and hereby is authorized, but not required, to operate the business of the Debtors to the fullest

extent necessary to permit compliance with the terms of this Final Order and the Store Closing

Agreement, and Consultant and the trustee shall be and hereby are authorized to perform under the

Store Closing Agreement upon the appointment of the trustee without the need for further order of

this Court.

39. On a confidential basis and for professionals’ “eyes only” and upon the

written (including email) request of the U.S. Trustee, the Prepetition Agent, or the official

committee of unsecured creditors, if any, the Debtors shall provide such requesting party, if any,

with copies of periodic reports concerning the Closing Sales that are prepared by the Debtors, their

professionals, or the Consultant, provided that the foregoing shall not require the Debtors, their

professionals, or the Consultant to prepare or undertake to prepare any additional or new reporting

not otherwise being prepared by the Debtors, their professionals, or the Consultant in connection

with the Closing Sales.

40. The Debtors are authorized and permitted to transfer to the Consultant

personal information in the Debtors’ custody and control solely for the purposes of assisting with

and conducting the Closing Sales and only to the extent necessary for such purposes, provided that

the Consultant uses commercially reasonably efforts to remove such personal information from

the FF&E prior to the abandonment of the same.


23

41. The Debtors shall not be liable for any claims against the Consultant, other

than as expressly provided for in the Store Closing Agreement. The Consultant shall act solely as

an independent consultant to the Debtors and shall not be liable for any claims against the Debtors

other than as expressly provided in the Store Closing Agreement (including the Consultant’s

indemnity obligations thereunder) or the Sale Guidelines, with the exception of acts of gross

negligence or willful misconduct and, for greater certainty, the Consultant shall not be deemed to

be an employer, or a joint or successor employer or a related or common employer or payor within

the meaning of any legislation governing employment or labor standards or pension benefits or

health and safety or other statute, regulation or rule of law or equity for any purpose whatsoever,

and shall not incur any successor liability whatsoever.

42. To the extent that the Debtors are subject to any state “fast pay” laws in

connection with the Closing Sales, the Debtors shall be presumed to be in compliance with such

laws to the extent, in applicable states, such payroll payments are made by the later of: (a) the

Debtors’ next regularly scheduled payroll and (b) seven (7) calendar days following the

termination date of the relevant employee, and in all such cases consistent with, and subject to,

any previous orders of this Court regarding payment of same.

43. Except with respect to the Store Closing Agreement, nothing in this Final

Order or the Motion shall be deemed to constitute a postpetition assumption of any agreement

under section 365 of the Bankruptcy Code.

44. The Store Closing Agreement and related documents may be modified,

amended, or supplemented by the parties thereto in accordance with the terms thereof without

further order of this Court.


24

45. The Debtors are authorized to issue postpetition checks, or to effect

postpetition fund transfer requests, in replacement of any checks or fund transfer requests in

respect of payments made in accordance with this Final Order that are dishonored or rejected.

46. In accordance with this Final Order (or any other order of this Court), each

of the financial institutions at which the Debtors maintain their accounts relating to the payment

of any obligations described in the Motion are authorized and directed to (a) receive, process,

honor, and pay all checks presented for payment and to honor all fund 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 this Court, whether such checks, drafts, wires, or transfers are dated prior

to, on, or subsequent to the Petition Date, without any duty to inquire otherwise, and without

liability for the following the Debtors’ instructions.

47. Except as relates to the Consultant under the terms of the Store Closing

Agreement, notwithstanding the relief granted herein and any actions taken hereunder, nothing

contained herein shall create, nor is intended to create, any rights in favor of, or enhance the status

of any claim held by, any person.

48. The requirements of Bankruptcy Rule 6007(a) are waived, to the extent

applicable to the relief provided for herein.

49. Notice of the Motion as provided therein shall be deemed good and

sufficient and the requirements of Bankruptcy Rule 6004(a) and the Local Rules are satisfied by

such notice.


25

50. Notwithstanding Bankruptcy Rule 6004(h), the terms and conditions of this

Final Order shall be immediately effective and enforceable upon its entry.

51. This Court shall retain exclusive jurisdiction with regard to all issues or

disputes arising from or relating to the implementation, interpretation, or enforcement of this Final

Order or the Store Closing Agreement, including, but not limited to, any claim or issue relating to

any efforts by any party or person to prohibit, restrict, or in any way limit the Closing Sales in

accordance with the Sale Guidelines, or any other disputes related to the Closing Sales. No parties

or person shall take any action against the Debtors, the Consultant, the Closing Sales, or any

Landlord, as applicable, until this Court has resolved such dispute. This Court shall hear the

request of such parties or persons with respect to any such disputes on an expedited basis, as may

be appropriate under the circumstances.

Dated: ________________, 2020

New York, New York

HONORABLE SHELLEY C. CHAPMAN UNITED STATES BANKRUPTCY JUDGE


Exhibit 1

Sale Guidelines



Exhibit 2




Exhibit C


20-12097-scc Doc 4-3 Filed 09/10/20 Entered 09/10/20 11:47:42 Exhibit C Pg1 of 19

September 1, 2020 VIA EMAIL Raymond Gindi Chief Executive Officer Century 21 Department Stores, LLC 22 Cortlandt Street New York, NY 10007 [email protected] Re: Letter Agreement Governing Inventory Disposition Dear Sir/Madam: By executing below, this letter shall serve as an agreement (“Agreement”) between Hilco Merchant Resources, LLC, on the one hand ( “Agent” or a “Party”), and Century 21 Department Stores, LLC and its affiliated loan parties identified on Schedule 1 attached hereto, on the other hand (“Merchant” or a “Party” and together with the Agent, the “Parties”), under which Agent shall act as the exclusive agent for the purpose of conducting a sale of certain Merchandise (as defined below) at the Merchant’s stores set forth on Exhibit A (each a “Store” and collectively, the “Stores”) and through Merchant’s e-commerce platform through a “Store Closing”, “Everything Must Go”, “Everything on Sale”, “Going out of Business” (provided the Merchant and Lender Agent consent in writing), or similar themed sale (the “Sale”). A. Merchandise

For purposes hereof, “Merchandise” shall mean all goods, saleable in the ordinary course, located in the Stores, distribution centers, and/or warehouses or in transit to or from the forgoing as of the Sale Commencement Date (defined below). “Merchandise” does not mean and shall not include: (1) owned furnishings, trade fixtures, equipment and improvements to real property that are located in the Stores, the distribution centers, warehouses and corporate offices (collectively, “FF&E”); (2) any Additional Agent Goods (as defined below), (3) damaged or defective merchandise that cannot be sold and [(4) goods that belong to consignors, sublessees, licensees or concessionaires of Merchant (with respect to (4), “Consigned Goods”). B. Sale Term For each Store, the Sale shall commence no later than September 2, 2020 (the “Sale Commencement Date”) and conclude no later than November 30, 2020 (the “Sale Termination Date”); provided, however, that the Parties (with the written consent of Lender Agent (as defined below)) may mutually agree in writing to extend or terminate the Sale at any Store prior to the Sale Termination Date, and/or to start on an earlier Sale Commencement Date. The Merchant, Lender Agent, and Agent shall mutually agree on the date on which Sale signage in the Stores shall be installed. The period between the Sale Commencement Date and the Sale Termination Date shall be referred to as the “Sale Term.” At the conclusion of the Sale, Agent shall surrender the premises


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for each Store to Merchant in broom clean condition and in accordance with the lease requirements for such premises; provided, however, Merchant shall bear all costs and expenses associated with surrendering the premises in accordance with the lease requirements for such premises according to a budget mutually agreed to between the Agent and Merchant (with the written consent of Lender Agent). To the extent that the Sale as it pertains to a particular Store is delayed or interrupted because it is required to be closed due to the issuance of an order, rule, or regulation by a federal, state or local government agency related to COVID-19, (i) the Sale Termination Date as to the affected Store shall be extended by the time period for which the Sale was delayed or interrupted, and/or (ii) the Merchant and Agent may mutually agree on the transfer of the Merchandise in the affected Store to another Store. At the conclusion of the Sale at each Store, Agent shall photographically document the condition of each such Store and contemporaneously provide copies of the photographs by electronic means to Merchant. Such photographs shall refer with specificity to each Store by number, name, and/or location. C. Project Management (i) Agent’s Undertakings During the Sale Term, Agent shall, in collaboration with Merchant, (a) provide qualified supervisors (the “Supervisors”) engaged by Agent to oversee the management of the Stores; (b) determine appropriate point-of-sale and external advertising for the Stores, approved in advance by Merchant; (c) determine appropriate discounts of Merchandise, staffing levels for the Stores, approved in advance by Merchant, and appropriate bonus and incentive programs, if any, for the Stores’ employees, approved in advance by Merchant; (d) oversee display of Merchandise for the Stores; (e) to the extent that information is available, evaluate sales of Merchandise by category and sales reporting and monitor expenses; (f) maintain the confidentiality of all proprietary or non-public information regarding Merchant in accordance with the provisions of the confidentiality agreement signed by the Parties; (g) assist Merchant in connection with managing and controlling loss prevention and employee relations matters; (h) determine the necessity for obtaining any applicable permits and governmental approvals to conduct the Sale, including working with Merchant to obtain each in a timely and orderly fashion and preparing or causing to be prepared all forms necessary to assist in Merchant’s securing any applicable permits and governmental approvals necessary to conduct the Sale, the costs and expenses of which shall be paid by Merchant and shall be in addition to the costs and expenses set forth on the Expense Budget; (i) implement Agent’s affiliate CareerFlex program for Merchant’s Store level and other employees; (j) recommend allocations and balancing of Merchandise between and among the Stores to maximize the overall recovery, including (where necessary or appropriate) collapsing Stores; and (k) provide such other related services deemed necessary or appropriate by Merchant (in consultation with the Lender Agent) and Agent.

The Parties expressly acknowledge and agree that Merchant shall have no liability to the Supervisors for wages, benefits, severance pay, termination pay, vacation pay, pay in lieu of notice of termination or any other liability arising from Agent’s hiring or engagement of the Supervisors, and the Supervisors shall not be considered employees of Merchant.

Notwithstanding anything to the contrary herein, (a) Agent is authorized to provide confidential information to JPMorgan Chase Bank, N.A., as Administrative Agent (“Lender Agent”), its advisors, and the Lenders under the Merchant’s existing asset-based credit facility


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(“Lenders”), (b) the Merchant hereby authorizes Agent to communicate with Lender Agent (and its advisors) and the Lenders regarding the Sale and the other matters described herein and to participate in discussions and update calls with Lender Agent and the Lenders, and authorizes Agent to provide to Lender Agent and the Lenders with copies of reports and other information or materials prepared or reviewed by Agent as Lender Agent or the Lenders may reasonably request from time to time, and (c) Lender Agent and the Lenders are intended third party beneficiaries of the provisions in this paragraph and the other provisions of this Agreement that reference a consent, agreement or approval of Lender Agent, and no such provisions shall be amended or otherwise modified or waived without the written consent of Lender Agent. (ii) Merchant’s Undertakings

During the Sale Term, Merchant shall (a) be the employer of the Stores’ employees, other than the Supervisors; (b) pay all taxes, costs, expenses, accounts payable, and other liabilities relating to the Stores, the Stores’ employees and other representatives of Merchant; (c) prepare and process all tax forms and other documentation; (d) collect all sales taxes and pay them to the appropriate taxing authorities for the Stores; (e) use reasonable efforts to cause Merchant’s employees to cooperate with Agent and the Supervisors; (f) execute all agreements determined by the Merchant and Agent to be necessary or desirable for the operation of the Stores during the Sale; (g) arrange for the ordinary maintenance of all point-of-sale equipment required for the Stores; (h) apply for and obtain, with Agent’s assistance and support, all applicable permits and authorizations (including landlord approvals and consents) for the Sale; (i) assist Agent with implementing the CareerFlex program for Merchant’s Store level and other employees; and (j) ensure that Agent has quiet use and enjoyment of the Stores for the Sale Term in order to perform its obligations under this Agreement.

Merchant shall provide throughout the Sale Term central administrative services necessary for the Sale, including (without limitation) customary POS administration, sales audit, cash reconciliation, accounting, and payroll processing, all at no cost to Agent.

Merchant shall be responsible for providing direction to and supplies for the Stores in order to comply with federal, state and local COVID-19 related health and safety requirements, and Agent will assist with the implementation of such requirements at the Stores; provided, however, that Agent shall not be responsible for the payment of nor liable for any fine, injury, death, or damage caused by or related to COVID-19. Agent’s supervisors will provide their own personal protective equipment (“PPE”) at no additional cost to Merchant. To the extent that temporary labor do not source and provide their own PPE, Agent will provide Merchant with Agent’s cost (without lift or mark-up) for PPE and, if requested by Merchant, Agent will procure such PPE, and Merchant agrees to reimburse Agent for the costs associated therewith (in addition to amounts reflected in Exhibit B).

The Parties expressly acknowledge and agree that Agent shall have no liability to Merchant’s employees for wages, benefits, severance pay, termination pay, vacation pay, pay in lieu of notice of termination or any other liability arising from Merchant’s employment, hiring or retention of its employees, and such employees shall not be considered employees of Agent.


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D. The Sale All sales of Merchandise shall be made on behalf of Merchant. Agent does not have, nor shall it have, any right, title or interest in the Merchandise. All sales of Merchandise shall be by cash, gift card, gift certificate, merchandise credit, debit card, or credit card and, at Merchant’s discretion, by check or otherwise in accordance with Merchant’s policies, and shall be “final” with no returns accepted or allowed, unless otherwise directed by Merchant. E. Agent Fee and Expenses in Connection with the Sale As used in this Agreement, the following terms shall have the following meanings:

(i) “Cost Value” shall mean the cost of each item of Merchandise, as reflected in the Merchant’s books, records, and files provided to Agent during due diligence.

(ii) “Gross Proceeds” shall mean the sum of the gross proceeds of all sales of Merchandise

made through the Stores or the e-commerce platform during the Sale Term, net only of sales taxes.

(iii) “Net Recovery Percentage” shall mean (A)(1) the Gross Proceeds, calculated using the

“gross rings” method, less (2) the aggregate actual (x) costs of Store-level payroll (consisting of salaries and bonuses, incentives, and benefits), (y) other Store-level operating expenses (consisting of occupancy, e-commerce shipping, e-commerce creative, bank and credit card fees, and other Store expenses), and (z) liquidation expenses (consisting of costs and expenses set forth on the Expense Budget), in each case which arise during the Sale Term and are attributable to the Sale, divided by (B) the Cost Value of the Merchandise sold, calculated using the “gross rings” method, and the result of such equation expressed as a percentage. The Net Recovery Percentage (and the amounts contemplated by sections (1) and (2) of this paragraph) shall be calculated in a manner consistent with the files provided by Agent during due diligence. For the avoidance of doubt, the Merchandise Fee shall not be included in determining or calculating the Net Recovery Percentage.

In consideration of its services hereunder, Merchant shall pay Agent a fee weekly equal to one percent (1.0%) of Gross Proceeds (the “Tier 1 Fee”). In addition to the “Tier 1 Fee”, Agent may also earn a “Tier 2 Fee” and “Tier 3 Fee” (together with the Tier 1 Fee, the “Merchandise Fee”) equal to the aggregate sum of the percentages shown in the following table, based upon the following thresholds of Net Recovery Percentage1 (e.g., in each case, as calculated back to first dollar):

1 To the extent (i) the Sale Term is changed – longer or shorter – and/or (ii) the Merchandise included in the Sale is materially greater or less than the files provided to Agent during due diligence, the Net Recovery Percentages and ranges shall be adjusted in accordance with updated models mutually acceptable to the Merchant and Agent.


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Net Recovery Percentage

Merchandise Fee

Less than 90.0% 1.0% Tier 1 Fee is the total Merchandise Fee Greater than or equal to 90.0% but less than 94.0%

1.0% Tier 1 Fee 0.25% Tier 2 Fee Total Merchandise Fee of 1.25%

Equal to or greater than 94.0%

1.0% Tier 1 Fee 0.25% Tier 2 Fee 0.50% Tier 3 Fee Total Merchandise Fee of 1.75%

The definitive Net Recovery Percentage shall be determined in connection with the Final

Reconciliation, and once determined, the parties (as part of the Final Reconciliation) shall determine the actual amount of any applicable Tier 2 Fees and Tier 3 Fees due and payable to Agent. Merchant shall pay Agent’s definitive Tier 2 Fees and Tier 3 Fees in connection with the Final Reconciliation. In addition to the above, Agent shall be paid a fee equal to the Merchandise Fee on account of and from the sales of sales of Consigned Goods, which fee shall be paid at the same times as the Merchandise Fee associated with the sale of Merchandise is paid.

Merchant shall be responsible for all expenses of the Sale, including (without limitation) all Store level operating expenses, all costs and expenses related to Merchant’s other retail store operations, and Agent’s other reasonable, documented out of pocket expenses. To control expenses of the Sale, Merchant and Agent have established an aggregate budget (the “Expense Budget”) of certain delineated expenses, including (without limitation) payment of the costs of supervision (including (without limitation) Supervisors’ wages, fees, travel, and deferred compensation) and advertising costs (including signage and the shipping, freight, and sales tax related thereto where applicable). The Expense Budget for the Sale is attached hereto as Exhibit B. The Expense Budget may only be modified by mutual agreement of Agent, Merchant and the Lender Agent. The costs of supervision set forth on Exhibits C include, among other things, industry standard deferred compensation. Notwithstanding anything to the contrary contained in this Agreement, Merchant shall not be responsible or obligated to pay Agent’s costs that have not been included, or provided for, in the Expense Budget, as the same may be amended in accordance with this Agreement All accounting matters (including, without limitation, all fees, expenses, or other amounts reimbursable or payable to Agent) shall be reconciled on every Wednesday for the prior week and shall be paid within seven (7) days after each such weekly reconciliation. The Parties shall complete a final reconciliation and settlement of all amounts payable to Agent and contemplated by this Agreement (including, without limitation, Expense Budget items, and fees earned hereunder) no later than forty five (45) days following the Sale Termination Date for the last Store.

Upon execution of this Agreement, the Merchant shall pay by wire transfer to the Agent an advance payment of costs and expenses delineated in the Expense Budget of $525,000 (the “Sale Expense Advance”). Other than with respect to the costs of Agent’s signage (which shall be offset against the Sale Expense Advance), the Sale Expense Advance shall be held by Agent until the Final Reconciliation (and Merchant shall not apply the balance of the Sale Expense Advance to, or otherwise offset any portion of the balance of the Sale Expense Advance against, any weekly reimbursement, payment of fees, or other amount owing to Agent under this Agreement prior to the


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Final Reconciliation). Without limiting any of Agent’s other rights, Agent may apply the Sale Expense Advance to any unpaid obligation owing by Merchant to Agent under this Agreement. Any portion of the Sale Expense Advance not used to pay amounts explicitly contemplated by this Agreement shall be returned to the Merchant within three days following the Final Reconciliation. F. Indemnification

(i) Merchant’s Indemnification

Merchant shall indemnify, defend, and hold Agent and its consultants, members, managers, partners, officers, directors, employees, attorneys, advisors, representatives, lenders, potential co-investors, principals, affiliates, and Supervisors (collectively, “Agent Indemnified Parties”) harmless from and against all liabilities, claims, demands, damages, costs and expenses (including reasonable attorneys’ fees) arising from or related to: (a) the willful or negligent acts or omissions of Merchant or the Merchant Indemnified Parties (as defined below); (b) the material breach of any provision of this Agreement by Merchant, after Merchant has received notice of the asserted breach and Merchant fails to promptly cure the same to the extent the breach is curable; (c) any liability or other claims, including, without limitation, product liability claims, asserted by customers, any Store employees (under a collective bargaining agreement or otherwise), or any other person (excluding Agent Indemnified Parties) against Agent or an Agent Indemnified Party, except claims arising from Agent’s negligence, willful misconduct or unlawful behavior; (d) any harassment, discrimination or violation of any laws or regulations or any other unlawful, tortuous or otherwise actionable treatment of Agent’s Indemnified Parties or Merchant’s customers by Merchant or Merchant’s Indemnified Parties; and (e) Merchant’s failure to pay over to the appropriate taxing authority any taxes required to be paid by Merchant during the Sale Term in accordance with applicable law.

(ii) Agent’s Indemnification

Agent shall indemnify, defend and hold Merchant and its consultants, members, managers, partners, officers, directors, employees, attorneys, advisors, representatives, lenders, potential co-investors, principals, and affiliates (other than the Agent or the Agent Indemnified Parties) (collectively, “Merchant Indemnified Parties”) harmless from and against all liabilities, claims, demands, damages, costs and expenses (including reasonable attorneys’ fees) arising from or related to (a) the willful or negligent acts or omissions of Agent or the Agent Indemnified Parties; (b) ) the material breach of any provision of this Agreement by Agent, after Agent has received notice of the asserted breach and Agent fails to promptly cure the same to the extent the breach is curable; (c) any liability or other claims made by Agent’s Indemnified Parties or any other person (excluding Merchant Indemnified Parties) against a Merchant Indemnified Party arising out of or related to Agent’s conduct of the Sale, except claims arising from Merchant’s negligence, willful misconduct, or unlawful behavior; (d) any harassment, discrimination or violation of any laws or regulations or any other unlawful, tortuous or otherwise actionable treatment of Merchant Indemnified Parties, or Merchant’s customers by Agent or any of the Agent Indemnified Parties; (e) any claims made by any party engaged by Agent as an employee, agent, representative or independent contractor arising out of such engagement; and (f) any product liability, consumer protection, or similar claims regarding Additional Agent Goods.


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G. Insurance

(i) Merchant’s Insurance Obligations Merchant shall maintain throughout the Sale Term, liability insurance policies (including, without limitation, products liability (to the extent currently provided), comprehensive public liability insurance and auto liability insurance) covering injuries to persons and property in or in connection with the Stores, and shall cause Agent to be named an additional insured with respect to all such policies. At Agent’s request, Merchant shall provide Agent with a certificate or certificates evidencing the insurance coverage required hereunder and that Agent is an additional insured thereunder. In addition, Merchant shall maintain throughout the Sale Term, in such amounts as it currently has in effect, workers compensation insurance in compliance with all statutory requirements.

(ii) Agent’s Insurance Obligations As an expense of the Sale, Agent shall maintain throughout the Sale Term, liability insurance policies (including, without limitation, products liability/completed operations, contractual liability, comprehensive public liability and auto liability insurance) on an occurrence basis in an amount of at least two million dollars ($2,000,000) and an aggregate basis of at least five million dollars ($5,000,000) covering injuries to persons and property in or in connection with Agent’s provision of services at the Stores. Agent shall name Merchant as an additional insured and loss payee under such policy, and upon execution of this Agreement provide Merchant with a certificate or certificates evidencing the insurance coverage required hereunder. In addition, Agent shall maintain throughout the Sale Term, workers compensation insurance compliance with all statutory requirements. Further, should Agent employ or engage third parties to perform any of Agent’s undertakings with regard to this Agreement, Agent will ensure that such third parties are covered by Agent’s insurance or maintain all of the same insurance as Agent is required to maintain pursuant to this paragraph and name Merchant as an additional insured and loss payee under the policy for each such insurance. H. Representations, Warranties, Covenants and Agreements (i) Merchant warrants, represents, covenants and agrees that (a) Merchant is a company duly organized, validly existing and in good standing under the laws of its state of organization, with full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and maintains its principal executive office at the address set forth herein, (b) the execution, delivery and performance of this Agreement has been duly authorized by all necessary actions of Merchant and this Agreement constitutes a valid and binding obligation of Merchant enforceable against Merchant in accordance with its terms and conditions, and the consent of no other entity or person is required for Merchant to fully perform all of its obligations herein, (c) all ticketing of Merchandise at the Stores has been and will be done in accordance with Merchant’s customary ticketing practices; (d) all normal course hard markdowns on the Merchandise have been, and will be, taken consistent with customary Merchant’s practices, and (e) the Stores will be operated in the ordinary course of business in all respects, other than those expressly agreed to by Merchant and Agent.


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(ii) Agent warrants, represents, covenants and agrees that (a) Agent is a company duly organized, validly existing and in good standing under the laws of its state of organization, with full power and authority to execute and deliver this Agreement and to perform the Agent’s obligations hereunder, and maintains its principal executive office at the addresses set forth herein, (b) the execution, delivery and performance of this Agreement has been duly authorized by all necessary actions of Agent and this Agreement constitutes a valid and binding obligation of Agent enforceable against Agent in accordance with its terms and conditions, and the consent of no other entity or person is required for Agent to fully perform all of its obligations herein, (c) Agent shall comply with and act in accordance with any and all applicable state and local laws, rules, and regulations, and other legal obligations of all governmental authorities, (d) no non-emergency repairs or maintenance in the Stores will be conducted without Merchant’s prior written consent, and (e) Agent will not take any disciplinary action against any employee of Merchant. I. Furniture, Fixtures and Equipment Agent shall sell the FF&E in the Stores, the distribution centers, warehouses and corporate offices. Merchant shall be responsible for all reasonable costs and expenses incurred by Agent in connection with the sale of FF&E, which costs and expenses shall be incurred pursuant to a budget or budgets to be established from time to time by mutual agreement of the Parties. Agent shall have the right to abandon at the Stores, the distribution centers, warehouses and corporate offices any unsold FF&E upon prior notice to (and written consent of) Merchant and Lender Agent.

In consideration for providing the services set forth in this section I, Agent shall be entitled to a commission from the sale of the FF&E equal to fifteen percent (15.0%) of the Gross Proceeds of the sale of the FF&E.

Agent shall remit to Merchant all Gross Proceeds from the sale of FF&E. During each weekly reconciliation described in section E above, Agent’s FF&E fee shall be calculated, and Agent’s calculated FF&E fee and all FF&E costs and expenses then incurred shall paid within seven (7) days after each such weekly reconciliation. J. Additional Agent Goods Agent shall have the right, at Agent’s sole cost and expense, to supplement the Merchandise in the Sale at the Stores with additional goods procured by Agent, which may include goods provided to Agent on consignment, which are of like kind, and no lesser quality to the Merchandise in the Sale at the Stores (“Additional Agent Goods”). The Additional Agent Goods shall be purchased by Agent as part of the Sale, and delivered to the Stores at Agent’s sole expense (including as to labor, freight and insurance relative to shipping such Additional Agent Goods to the Stores). Sales of Additional Agent Goods shall be run through Merchant’s cash register systems; provided, however, that Agent shall mark the Additional Agent Goods using either a “dummy” SKU or department number, or in such other manner so as to distinguish the sale of Additional Agent Goods from the sale of Merchandise. Agent and Merchant shall also cooperate so as to ensure that the Additional Agent Goods are marked in such a way that a reasonable consumer could identify the Additional Agent Goods as non-Merchant goods. Further, Merchant agrees to use reasonable efforts based upon its then-existing technologies and staffing capabilities to expeditiously create SKUs and other information technology related items necessary or appropriate to track the sale of the Additional Agent Goods and the proceeds thereof.


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Agent shall pay to Merchant an amount equal to five percent (5.0%) percent of the gross proceeds (excluding only Sale Taxes) from the sale of the Additional Agent Goods (the “Additional Agent Goods Fee”), and Agent shall retain all remaining amounts from the sale of the Additional Agent Goods, which amounts shall be wired to the Agent no less than weekly. Agent hereby guarantees that the Additional Agent Good’s Fee payable to Merchant shall be not less than $1,000,000 (the “Guaranteed Amount”) on account of the sale of the Additional Agent Goods, which Guaranteed Amount shall be paid by Agent through payment of the Additional Agent Goods Fee in connection with each weekly sale reconciliation with respect to sales of Additional Agent Goods sold by Agent during each then prior week (or at such other mutually agreed upon time) and, to the extent the Guaranteed Amount is not paid by the time of the Final Reconciliation, the difference between the amount then paid and the Guaranteed Amount shall be paid by Agent as part of the Final Reconciliation. Agent and Merchant intend that the transactions relating to the Additional Agent Goods are, and shall be construed as, a true consignment from Agent to Merchant in all respects and not a consignment for security purposes. Subject solely to Agent’s obligations to pay to Merchant the Additional Agent Goods Fee, at all times and for all purposes the Additional Agent Goods and their proceeds shall be the exclusive property of Agent, and no other person or entity shall have any claim against any of the Additional Agent Goods or their proceeds. The Additional Agent Goods shall at all times remain subject to the exclusive control of Agent. Merchant shall, at Agent’s sole cost and expense, insure the Additional Agent Goods and, if required, promptly file any proofs of loss with regard to same with Merchant’s insurers. Agent shall be responsible for payment of any deductible under any such insurance in the event of any casualty affecting the Additional Agent Goods. Merchant acknowledges, and, to the extent applicable, the Approval Order shall provide, that the Additional Agent Goods shall be consigned to Merchant as a true consignment under Article 9 of the Code. Agent is hereby granted a first priority security interest in and lien upon (i) the Additional Agent Goods and (ii) Agent’s portion of the Additional Agent Goods proceeds, and Agent is hereby authorized to file UCC financing statements and provide notifications to any prior secured parties; provided, however, in the event the Merchant files a Bankruptcy Case, the Approval Order shall also provide that the security interest granted to Agent hereunder shall be deemed perfected pursuant to the Approval Order without the requirement of filing UCC financing statements or providing notifications to any prior secured parties (provided that Agent is hereby authorized to deliver all required notices and file all necessary financing statements and amendments thereof under the applicable UCC identifying Agent’s interest in the Additional Agent Goods as consigned goods thereunder and the Merchant as the consignee therefor, and Agent’s security interest in and lien upon such Additional Agent Goods and Agent’s portion of the Additional Agent Goods proceeds).


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K. Termination The following shall constitute “Termination Events” hereunder:

(a) Merchant’s or Agent’s failure to perform any of their respective material obligations hereunder, which failure shall continue uncured seven (7) days after receipt of written notice thereof to the defaulting Party;

(b) Any representation or warranty made by Merchant or Agent is untrue in any material

respect as of the date made or at any time and throughout the Sale Term; or If a Termination Event occurs, the non-defaulting Party (in the case of an event of default) may, in its discretion, elect to terminate this Agreement by providing seven (7) business days’ written notice thereof to the other Party and, in the case of an event of default, in addition to terminating this Agreement, pursue any and all rights and remedies and damages resulting from such default. If this Agreement is terminated, Merchant shall be obligated to pay Agent all amounts due under this Agreement through and including the termination date. L. Notices All notices, certificates, approvals, and payments provided for herein shall be sent by fax, email or by recognized overnight delivery service as follows: (a) To Merchant: at the address listed above; (b) To Agent: c/o Hilco Merchant Resources, LLC, One Northbrook Place, 5 Revere Drive, Suite 206, Northbrook, IL 60062, Fax: 847- 849-0859, Attn: Ian S. Fredericks; or (c) such other address as may be designated in writing by Merchant or Agent, in each case with a copy sent via email to the Lender Agent at JPMorgan Chase Bank, N.A., 4 New York Plz, Floor 17, New York, NY 10004, Attention: Bonnie David; email: [email protected] and Morgan, Lewis & Bockius LLP, One Federal Street, Boston, MA 02110, Attention: Marc Leduc; email: [email protected]. For the avoidance of doubt, any reference to written consent in this Agreement may be satisfied by providing consent by email. M. Independent Consultant Agent’s relationship to Merchant is that of an independent contractor without the capacity to bind Merchant in any respect. No employer/employee, principal/agent, joint venture or other such relationship is created by this Agreement. Merchant shall have no control over the hours that Agent or its employees or assistants or the Supervisors work or the means or manner in which the services that will be provided are performed and Agent is not authorized to enter into any contracts or agreements on behalf of Merchant or to otherwise create any obligations of Merchant to third parties, unless authorized in writing to do so by Merchant. N. Non-Assignment

Neither this Agreement nor any of the rights hereunder may be transferred or assigned by either Party without the prior written consent of the other Party, provided that Agent may syndicate this transaction with the third party Agent previously provided notice thereof to Merchant. No modification, amendment or waiver of any of the provisions contained in this Agreement, or any future representation, promise or condition in connection with the subject matter of this Agreement,




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shall be binding upon any Party to this Agreement unless made in writing and signed by a duly authorized representative or agent of such Party. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, legal representatives, successors and permitted assigns. O. Severability If any term or provision of this Agreement, as applied to either Party or any circumstance, for any reason shall be declared by a court of competent jurisdiction to be invalid, illegal, unenforceable, inoperative or otherwise ineffective, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. If the surviving portions of the Agreement fail to retain the essential understanding of the Parties, the Agreement may be terminated by mutual consent of the Parties. P Governing Law, Venue, Jurisdiction and Jury Waiver

This Agreement, and its validity, construction and effect, shall be governed by and enforced in accordance with the internal laws of the State of New York (without reference to the conflicts of laws provisions therein). Merchant and Agent waive their respective rights to trial by jury of any cause of action, claim, counterclaim or cross-complaint in any action, proceeding and/or hearing brought by either Agent against Merchant or Merchant against Agent on any matter whatsoever arising out of, or in any way connected with, this Agreement, the relationship between Merchant and Agent, any claim of injury or damage or the enforcement of any remedy under any law, statute or regulation, emergency or otherwise, now or hereafter in effect. Q. Entire Agreement This Agreement, together with all additional schedules and exhibits attached hereto, constitutes a single, integrated written contract expressing the entire agreement of the Parties concerning the subject matter hereof. No covenants, agreements, representations or warranties of any kind whatsoever have been made by any Party except as specifically set forth in this Agreement. All prior agreements, discussions and negotiations are entirely superseded by this Agreement. R. Execution This Agreement may be executed simultaneously in counterparts (including by means of electronic mail, facsimile or portable document format (pdf) signature pages), any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same instrument. This Agreement, and any amendments hereto, to the extent signed and delivered by means of electronic mail, a facsimile machine or electronic transmission in portable document format (pdf), shall be treated in all manner and respects as an original thereof and shall be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person.


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S. Bankruptcy If Merchant commences a case under Chapter 11 of title 11, United States Code (the “Bankruptcy Code”), with a bankruptcy court (the “Bankruptcy Court”), Merchant shall promptly file a motion to assume this Agreement under section 365 of the Bankruptcy Code, and utilize its commercially reasonable efforts to ensure that such motion is approved by an order (the “Approval Order”) that provides, among other things, as follows: (i) the payment of all fees and reimbursement of expenses hereunder to Agent is approved without further order of the court and shall be free and clear of all liens, claims and encumbrances; (ii) [reserved], (iii) [reserved], (iv) all such payments of fees and reimbursement of expenses shall be made on a weekly basis without further order of the Bankruptcy Court and otherwise in accordance with this Agreement; (v) approval of the transaction contemplated hereby; (vi) authorizing the Sale without the necessity of complying with state and local rules, laws, ordinances and regulations, including, without limitation, permitting and licensing requirements, that could otherwise govern the Sale; (vii) authorizing the Sale notwithstanding restrictions in leases, reciprocal easement agreements or other contracts that purport to restrict the Sale or the necessity of obtaining any third party consents; (viii) approval of the sale of Additional Agent Goods in accordance with the terms and conditions hereof; (ix) authorizing Merchant to take all further actions as are necessary or appropriate to carry out the terms and conditions of this Agreement; and (x) other terms and conditions substantially similar to orders recently entered in other large chapter 11 retail cases. In such event, any legal action, suit or proceeding arising in connection with this Agreement shall be submitted to the exclusive jurisdiction of the Bankruptcy Court having jurisdiction over Merchant, and each Party hereby waives any defenses or objections based on lack of jurisdiction, improper venue, and/or forum non conveniens. From and after entry of the Approval Order, Agent shall conduct the Sale in accordance with the terms of the Approval Order in all material respects.

* * *


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If this Agreement is acceptable to you, kindly execute a copy in the space provided, and return a countersigned version to the undersigned. Thank you again for this opportunity – we look forward to working with you. Very truly yours,

HILCO MERCHANT RESOURCES, LLC ___________________________________ By: Ian S. Fredericks Its: EVP

AGREED AND ACCEPTED as of the 3rd day of September, 2020: CENTURY 21 DEPARTMENT STORES LLC By: Its: L.I. 2000, INC. By: Its: CENTURY 21 DEPARTMENT STORES OF NEW JERSEY, L.L.C. By: Its:


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C21 GA BLUE LLC By: Its: C21 SAWGRASS BLUE, LLC By: Its: CENTURY 21 GARDENS OF JERSEY, LLC By: Its: CENTURY PARAMUS REALTY, LLC By: Its: C21 DEPARTMENT STORES HOLDINGS LLC By: Its:


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GIFTCO 21 LLC By: Its: CENTURY 21 FULTON LLC By: Its: C21 PHILADELPHIA LLC By: Its:


Schedule 1

[Affiliated Loan Parties]

1. L.I. 2000, Inc. 2. Century 21 Department Stores of New Jersey, L.L.C. 3. C21 GA Blue LLC 4. C21 Sawgrass Blue, LLC 5. Century 21 Gardens Of Jersey, LLC 6. Century Paramus Realty, LLC 7. C21 Department Stores Holdings LLC 8. Giftco 21 LLC 9. Century 21 Fulton LLC 10. C21 Philadelphia LLC


Store # Name Address Selling

Sq. Ft.

7 Sawgrass 12801 West Sunrise Blvd, Sunrise, FL 33323 50,208

10 New York 22 Cortlandt Street, New York, NY 10007 113,832

18 Lincoln Square 1972 Broadway, New York, NY 10023 31,890

20 Bay Ridge 472 86th Street, Brooklyn, NY 11209 76,396

26 City Point 445 Albee Square, Brooklyn, NY 11201 40,873

30 Westbury 1085 Old Country Road, Westbury, NY 11590 90,653

36 Green Acres 1127 Green Acres Mall, Valley Stream, NY 11581 43,747

40 Morristown 1 North Park Place, Morristown, NJ 07960 60,019

48 Jersey Gardens 651 Kapkowski Road, Elizabeth, NJ 07201 19,922

50 Paramus 200 Bergen Town Center, Paramus, NJ 07652 80,839

52 Cross Country 750 Central Park Ave, Yonkers, NY 10704 43,469

60 Rego Park 61‐35 Junction Blvd, Rego Park, NY 11374 76,185

76 Philadelphia 821 Market St, Philadelphia, PA 19107 51,035

13 59,928

Century 21Exhibit A

Store List

Century 21_08

8/21/2020 9:46 AM

20-12097-scc Doc 4-3 F

iled 09/10/20 Entered 09/10/20 11:47:42 E

xhibit C P

g18 of 19

Advertising

Media 867,500

Signs (2) 135,400

Sign Walkers 132,398

Subtotal Advertising 1,135,298

Supervision

Fees / Wages / Expenses (3) 941,846

Subtotal Supervision 941,846

Miscellaneous /Legal (4) 50,000

Total Expenses 2,127,143

Notes:1.

2.

3.

4.

Includes Deferred Compensation and Insurance.

Any legal expenses associated with issues raised by or disputes with landlords,

including (without limitation) negotiations in respect of landlord side letters,

shall be in addition to and not part of the budgeted legal expenses.

Century 21Exhibit B

Expense Budget (1)

This Expense Budget contemplates a sale term of September, 10, 2020 through

November 30, 2020. The Expense Budget remains subject to modification in

the event that this term is extended, or as otherwise agreed to by the parties.

Includes Sales Tax.

Hilco Merchant Resources, LLC 9/2/2020


Exhibit D

Sale Guidelines

20-12097-scc Doc 4-4 Filed 09/10/20 Entered 09/10/20 11:47:42 Exhibit D Pg1 of 5





Debtors.1

Chapter 11

Case No. 20-12097 (SCC)


SALE GUIDELINES2

1. The Closing Sales shall be conducted so that the Closing Stores will remain open no longer than during the normal hours of operation maintained at each Closing Store by Century

1 The Debtors in these chapter 11 cases (the “Chapter 11 Cases”), along with the last four digits of each Debtor’s federal tax identification number, as applicable, are Century 21 Department Stores LLC (4073), L.I. 2000, Inc. (9619), C21 Department Stores Holdings LLC (8952), Giftco 21 LLC (0347), Century 21 Fulton LLC (4536), C21 Philadelphia LLC (2106), Century 21 Department Stores of New Jersey, L.L.C. (1705), Century 21 Gardens of Jersey, LLC (9882), C21 Sawgrass Blue, LLC (8286), C21 GA Blue LLC (5776), and Century Paramus Realty LLC (5033). The Debtors’ principal place of business is: 22 Cortlandt Street, 5th Floor, New York, NY 10007. 2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Motion of Debtors for Interim and Final Orders (A)(1) Confirming, on an Interim Basis, that the Store Closing Agreement Is Operative and Effective and (2) Authorizing, on a Final Basis, the Debtors to Assume the Store Closing Agreement, (B) Authorizing and Approving Store Closing Sales Free and Clear of All Liens, Claims, and Encumbrances, (C) Approving Dispute Resolution Procedures, and (D) Approving the Debtors’ Store Closing Plan, filed contemporaneously herewith.


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21 Department Stores LLC or an affiliate thereof (“Century 21”) prior to the filing of their bankruptcy petitions.

2. The Closing Sales shall be conducted in accordance with applicable state and local “Blue Laws,” where applicable, so that no Closing Sale shall be conducted on Sunday unless Century 21 had been operating such Closing Store on a Sunday prior to the commencement of the Closing Sales.

3. On “shopping center” property, the Consultant shall not distribute handbills, leaflets, or other written materials to customers outside of any Closing Stores’ premises, unless permitted by the lease or if distribution is customary in the “shopping center” in which such Closing Store is located; provided, however, that the Consultant may solicit customers in the Closing Stores themselves. On “shopping center” property, the Consultant shall not use any flashing lights or amplified sound to advertise the Closing Sales or solicit customers, except as permitted under the applicable lease or agreed to by the landlord.

4. At the conclusion of the Closing Sales, the Consultant shall, subject to the Store Closing Agreement, vacate the Closing Stores in broom clean condition; provided, however, that the Consultant may abandon any Remaining Property, including any Closing Store signage or furniture, fixtures, and equipment (including, but not limited to, machinery, rolling stock, office equipment, and personal property, and conveyor systems and racking) (as defined in the Store Closing Agreement, “FF&E”) not sold in the Closing Sales (whether located at a Closing Store, the distribution centers, warehouses, or corporate offices), at the conclusion of the Closing Sales, without cost or liability of any kind to the Consultant. Any abandoned FF&E or other Remaining Property left in a Closing Store after a lease is rejected shall be deemed abandoned by Century 21 with the landlord having a right to dispose of the same as the landlord chooses without any liability whatsoever on the part of the landlord to any party and without waiver of any damage claims against Century 21.

5. The Consultant and Century 21 may advertise each Closing Sale as a “going out of business,” “store closing,” “sale on everything,” “everything must go,” “liquidation sale,” or similar themed sale. The Consultant and Century 21 may also have “countdown to closing” signs prominently displayed in a manner consistent with these Sale Guidelines. All signs, banners, ads, and other advertising collateral, promotions, and campaigns will be approved by Century 21 in accordance with these Sale Guidelines and the Store Closing Agreement.

6. The Consultant shall be permitted to utilize sign walkers, display, window, hanging signs, and interior banners in connection with the Closing Sales; provided, however, that such sign walkers, display, window, hanging signs, and interior banners shall be professionally produced and hung in a professional manner. Century 21 and the Consultant shall not use neon or day-glo on its sign walkers, display, window, hanging signs, or interior banners if prohibited by the applicable lease or applicable law. Furthermore, with respect to enclosed mall locations, no exterior signs or signs in common areas of a mall shall be used unless otherwise expressly permitted in these Sale Guidelines. In addition, Century 21 and the Consultant shall be permitted to utilize exterior banners at (a) non-enclosed mall Closing Stores and (b) enclosed mall Closing Stores to the extent the entrance to the applicable Closing Store does not require entry into the enclosed mall common area; provided, however, that such banners shall be located or hung so as


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to make clear that the Closing Sales are being conducted only at the affected Closing Store, and shall not be wider than the storefront of the Closing Store. In addition, Century 21 and the Consultant shall be permitted to utilize sign walkers in a safe and professional manner and in accordance with the terms of the Interim Order or the Final Order, as applicable. Nothing contained in these Sale Guidelines shall be construed to create or impose upon Century 21 or the Consultant any additional restrictions not contained in the applicable lease agreement.

7. Conspicuous signs shall be posted in the cash register areas of each of the affected Closing Stores to effect that “all sales are final.”

8. Except with respect to the hanging of exterior banners, the Consultant shall not make any alterations to the storefront or exterior walls of any Closing Stores, except as authorized by the applicable lease.

9. The Consultant shall not make any alterations to interior or exterior Closing Store lighting, except as authorized by the applicable lease. No property of the landlord of a Closing Store shall be removed or sold during the Closing Sales. The hanging of exterior banners or in-Closing Store signage and banners shall not constitute an alteration to a Closing Store.

10. The Consultant shall keep Closing Store premises clean and orderly consistent with present practices.

11. Subject to the provisions of the Store Closing Agreement, the Consultant shall have the right to use and sell all FF&E. The Consultant may advertise the sale of the FF&E in a manner consistent with these guidelines. The purchasers of any FF&E sold during the Closing Sales shall be permitted to remove the FF&E through the delivery entrances, services areas, or alternative shipping areas at any time, or through other areas after applicable business hours, provided, however, that the foregoing shall not apply to de minimis FF&E sales made whereby the item can be carried out of the Closing Store in a shopping bag or shopping cart. For the avoidance of doubt, as of the Sale Termination Date, the Consultant and Century 21 may, in consultation with the Prepetition Agent, abandon, in place and without further responsibility, any FF&E or Other Remaining Property located at a Closing Store.

12. At the conclusion of the Closing Sales at each Closing Store, pending assumption or rejection of the applicable lease, the landlord of the Closing Store shall have reasonable access to the Closing Store’s premises as set forth in the applicable lease. Century 21, the Consultant, and their agents and representatives shall continue to have access to the Closing Stores as provided for in the Store Closing Agreement.

13. The rights of landlords against Century 21 for any damages to a Closing Store shall be reserved in accordance with the provisions of the applicable lease.

14. If and to the extent that the landlord of any Closing Store affected hereby contends that Century 21 or the Consultant is in breach of or default under these Sale Guidelines, such landlord shall email or deliver written notice by overnight delivery to Century 21 and the Consultant as follows:


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If to Century 21:

(a) Century 21 Department Stores LLC, 22 Cortlandt Street, 5th Floor, New York, New York 10007, Attn: Norman R. Veit Jr. and Brian Cashman ([email protected], [email protected]); and

(b) Proskauer Rose LLP, Eleven Times Square, New York, New York 10036, Attn: Lucy F. Kweskin, Esq. ([email protected]); Proskauer Rose LLP, 70 West Madison, Suite 3800, Chicago, Illinois 60602, Attn: Jeff J. Marwil, Esq. ([email protected]); Proskauer Rose LLP, 2029 Century Park East, Suite 2400, Los Angeles, California 90067-3010, Attn: Peter J. Young, Esq. ([email protected]).

If to the Consultant: (a) Hilco Merchant Resources, LLC, 5 Revere Drive, Suite 206, Northbrook, Illinois

60062, Attn: Ian Fredericks and Sarah Baker ([email protected], [email protected]).

With copies to the Consultant’s counsel (which shall not constitute notice): (b) Troutman Pepper Hamilton Sanders LLP, 1313 Market Street, Suite 5100, P.O.

Box. 1709, Wilmington, Delaware 19899-1709, Attn: Douglas Herrmann, Esq. and Marcy McLaughlin Smith, Esq. ([email protected], [email protected]).

With copies to counsel for the Prepetition Agent (which shall not constitute notice):

Morgan Lewis & Bockius LLP, One Federal Street, Boston, MA 02110, Attn: Julia Frost-Davies ([email protected]); Morgan Lewis & Bockius LLP, 2049 Century Park East, Los Angeles, CA 90067, Attn: David Riley, Esq. ([email protected]).



lucy f. kweskin pro hac vice pending) matthew a. skrzynski

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