Case Doc 6 Filed 07/29/18 Page 1 of 20 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE : : : : : :

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1 Case Doc 6 Filed 07/29/18 Page 1 of 20 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re HERITAGE HOME GROUP LLC, et al., Debtors. 1 Chapter 11 Case No ( ) (Joint Administration Requested) x DEBTORS MOTION FOR ENTRY OF ORDER, PURSUANT TO SECTIONS 105(a), 362, 363(b), 503(b)(1), 1107(a), AND 1108 OF THE BANKRUPTCY CODEAND BANKRUPTCY RULES 6003 AND 6004 (A) AUTHORIZING DEBTORS TO CONTINUE (I) CUSTOMER PROGRAMS AND PRACTICES AND (II) CERTAIN PREPETITION CREDIT CARD OBLIGATIONS IN THE ORDINARY COURSE OF BUSINESS; AND (B) AUTHORIZING FINANCIAL INSTITUTIONS TO HONOR AND PROCESS CHECKS AND TRANSFERS RELATED TO SUCH OBLIGATIONS The above-captioned debtors and debtors in possession (collectively, the Debtors ) submit this motion (the Motion ) for entry of an order, substantially in the form attached hereto as Exhibit A, pursuant to sections 105(a), 362, 363(b), 503(b)(1), 1107(a), and 1108 of title 11 of the United States Code, 11 U.S.C (the Bankruptcy Code ), and Rules 6003 and 6004 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) authorizing (a) the Debtors (i) to continue customer programs and policies (the Customer Programs ) and (ii) to honor their obligations under the Credit Card Agreements (as defined herein) and pay the Credit Card Obligations (as defined herein), including any Credit Card Fees (as defined herein), in the ordinary course of business; and (b) financial institutions (the Banks ) to honor and process prepetition checks and transfers in connection with to the Customer Programs. In support of this Motion, the Debtors respectfully represent as follows 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s tax identification number, as applicable, are Heritage Home Group LLC (9506); HH Global II B.V. (0165); HH Group Holdings US, Inc. (7206); HHG Real Property LLC (3221); and HHG Global Designs LLC (1150). The Debtors corporate headquarters is located at 1925 Eastchester Drive, High Point, North Carolina

2 Case Doc 6 Filed 07/29/18 Page 2 of 20 JURISDICTION AND VENUE 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated as of February 29, This is a core proceeding pursuant to 28 U.S.C. 157(b)(2), and pursuant to Local Rule (f), the Debtors consent to the entry of a final order by the Court in connection with this Motion to the extent it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. 2. Venue in this District is proper pursuant to 28 U.S.C and The statutory and legal predicates for the relief sought herein are sections 105(a), 363(b), 507(a)(8), 541, 1107(a), and 1108 of the Bankruptcy Code and Bankruptcy Rules 6003 and BACKGROUND I. General Background 4. On the date hereof (the Petition Date ), the Debtors commenced voluntary cases under chapter 11 of the Bankruptcy Code. The Debtors 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 request for the appointment of a trustee or examiner has been made in these chapter 11 cases and no official committee has been appointed or designated. 5. The Debtors have requested that these chapter 11 cases be consolidated for procedural purposes only and jointly administered pursuant to Bankruptcy Rule 1015(b). 6. Information regarding the Debtors business, capital structure, and the circumstances leading to these chapter 11 cases is set forth in the Declaration of Robert D. 2

3 Case Doc 6 Filed 07/29/18 Page 3 of 20 Albergotti in Support of Chapter 11 Petitions and First-Day Motions (the First Day Declaration ), filed contemporaneously herewith and incorporated herein by reference. II. The Debtors Prepetition Customer Programs 7. Prior to the commencement of these chapter 11 cases, in the ordinary course of business and as is customary in the retail home furnishings industry, the Debtors instituted and engaged in certain activities to develop and sustain a positive reputation and relationship with direct customers and retailers who purchased and sold the Debtors products. To that end, the Debtors implemented the Customer Programs designed to ensure customer satisfaction, meet competitive pressures, develop and sustain direct customer and retailer relationships and loyalty, and generate goodwill for the Debtors and their products and services. 8. The Customer Programs are essential to ensure the smooth functioning of the Debtors business. The Debtors believe that they must promptly assure direct customers and retailers of their continued ability to satisfy prepetition and postpetition obligations under the Customer Programs to maintain their valuable customer base, and myriad other important benefits derived therefrom, following the commencement of these chapter 11 cases. Any inability of the Debtors promptly to honor these obligations would be disastrous to the survival of the Debtors as a going concern because of the resulting destruction of goodwill and loss of customer patronage. A. Customer Deposits 9. Among the Customer Programs is a customer deposit program (the Customer Deposit Program ), which enables customers to pay amounts toward the purchase of furniture to reserve furniture items, with the remainder of the purchase price being due at a later date. As of the Petition Date, the Debtors have received deposit amounts for 3

4 Case Doc 6 Filed 07/29/18 Page 4 of 20 furniture purchases and have reserved furniture items corresponding to such purchases, but the customers involved have not remitted the remaining purchase price to complete the sale. The Debtors seek the authority, in their discretion, to continue to honor obligations under the Customer Deposit Program in the ordinary course of business, whether arising prepetition or postpetition, consistent with past practices. B. Prepaid Freight Program 10. The Debtors operate a prepaid freight program through which the Debtors accept pre-payment of applicable freight charges for customer purchases (the Prepaid Freight Program ). Under the Prepaid Freight Program, the Debtors include applicable freight charges on customer invoices along with the cost of the purchased products. The Debtors utilize the Prepaid Freight Program for purchases of products associated with their Thomasville, Henredon, Hickory Chair, and Pearson brand of furniture. The Debtors submit that the Prepaid Freight Program is beneficial to customers and allows them the convenience of remitting payment with respect to a single invoice. The Debtors seek the authority, in their discretion, to continue to honor obligations under the Prepaid Freight Program, whether arising prepetition or postpetition, in the ordinary course of business consistent with past practices. C. Private Label Credit Card 11. The Debtors also offer a private label credit card (the HHG Credit Card and holders thereof, HHG Cardholders ), which is available to direct customers for transactions in the Debtors stores and online. The HHG Credit Card is issued and administered by Synchrony Bank ( Synchrony ) pursuant to an agreement between the Debtors and Synchrony. Customer purchases made with an HHG Credit Card may be subject to certain promotional terms, including, among other things, deferred or reduced interest rates if repayment is made 4

5 Case Doc 6 Filed 07/29/18 Page 5 of 20 within a specified time period. Under their agreement with Synchrony, the Debtors pay approximately $25,000 in monthly and transactional fees to Synchrony. Such fees are paid by the Debtors through Synchrony s netting them against the daily transaction settlements paid by Synchrony to the Debtors. The HHG Credit Card is an essential program for the development and maintenance of direct customer relationships. The Debtors seek the authority, in their discretion, to continue to honor obligations with respect to the HHG Credit Card in the ordinary course of business, whether arising prepetition or postpetition, consistent with past practices. D. Returns 12. The Debtors offer a return policy, which enables retail purchasers and direct-customer purchasers to return items in exchange for a remittance of the purchase price or for credit that may be used toward other purchases (the Return Program ). As of the Petition Date, the Debtors had issued credits to customers in response to product returns, which credits have not yet been redeemed. The Debtors seek the authority, in their discretion, to continue to honor obligations under the Return Program in the ordinary course of business, whether arising prepetition or postpetition, consistent with past practices. E. Warranties and Recalls 13. As a manufacturer of furniture products for sale or sale by retailers, the Debtors provide product warranties to direct customer purchasers (the Warranties ). In some cases, the Warranties are provided by written policies; in other cases, they are imposed as a matter of law. The Debtors offer written Warranties on behalf of their Broyhill, Drexel Heritage, and Thomasville lines of furniture. If the Debtors failed to honor the Warranties, potential consequences of breaching the Warranties could include customer product liability claims, damage claims, and product recalls initiated by government regulators. The Debtors seek the 5

6 Case Doc 6 Filed 07/29/18 Page 6 of 20 authority, in their discretion, to continue to honor the Warranties in the ordinary course of business, whether arising prepetition or postpetition, consistent with past practices. 14. In addition, in the ordinary course of their business the Debtors may deem it necessary or prudent to issue a product recall (a Recall ), or may be required to do so by a government agency, if, for example, a design or safety defect is discovered in one of the Debtors products. Prior to the Debtors acquisition of the Lane business in 2013, 2 a Recall was commenced in 1996 with respect to certain cedar chests manufactured by Lane and Virginia Maid between 1912 and 1987 that had defective latches. The Debtors typically satisfy any obligations with respect to this Recall by providing a replacement lock. The Debtors seek the authority, in their discretion, to continue to implement any Recalls, as may be required or deemed necessary, in the ordinary course of business, and to honor any obligations in connection therewith whether arising prepetition or postpetition, consistent with past practices. F. Customer Allowances 15. Similarly, the Debtors maintain a customer allowances program, which issues certain credits to customers in the event that the customer purchases defective merchandise (the Customer Allowances ). Under the Customer Allowances program, a customer may receive credits for future product purchases or for the actual shipped product if the instant defect was found and credited before the customer s invoice was paid. Under the Customer Allowances program, a customer also may receive a specific amount credited as an incentive for the customer to keep the defective product rather than order a replacement; alternatively, a customer may receive a credit in the amount of the cost of repairs to correct the defect. In addition, a dealer may receive credits when the dealer deducts an amount from its bill 2 The Debtors subsequently sold the Lane business in December 2017 and retain no economic interest in the Lane business. 6

7 Case Doc 6 Filed 07/29/18 Page 7 of 20 due to product defects. The Debtors accounting departments will reserve this deduction under the Customer Allowances program. The Debtors seek the authority, in their discretion, to continue to honor obligations under the Customer Allowances in the ordinary course of business, whether arising prepetition or postpetition, consistent with past practices. I. Dealer Incentives 16. In the ordinary course of the Debtors manufacturing business and trade with retailers, the Debtors compensate their retail customers for, among other things, certain industry-standard marketing activities designed to boost sales of the Debtors products in the competitive retail marketplace (collectively, the Dealer Incentives ). The Dealer Incentives include, among other things, development funds, which accrue certain percentages of purchases depending upon purchase size to incentivize retailers to purchase more of the Debtors products (the Development Funds ). To access the Development Funds, retailers must gain pre-approval from the Debtors and commit to using the Development Funds for certain purposes, such as new product launches, temporary price reductions to direct customers, advertising, and point-ofpurchase advertisements and displays. The Dealer Incentives also include certain co-operative agreements, which provide assistance to retailers for advertising the Debtors products (the Coop Agreements ). Under the Co-op Agreements a dealer may receive monthly or quarterly credit memo s based on dealers purchases from the Debtors, which dealers can use to reduce amounts owed to the Debtors. The Dealer Incentives also include returns, allowances, and freight agreements (the RAF Agreements ). Typically, under an RAF Agreement, credits may be issued for defective merchandise to certain dealers once per month in lieu of processing multiple credits on an individual basis. 7

8 Case Doc 6 Filed 07/29/18 Page 8 of The Dealer Incentives are necessary to promote sales of the Debtors products at other retail locations, and the Debtors seek the authority, in their discretion, to continue to honor obligations under the Dealer Incentives in the ordinary course of business, whether arising prepetition or postpetition, consistent with past practices. J. Other Promotions 18. The Debtors also run other promotions throughout the year, including advertised sales, issuing promotional codes for online purchases, sweepstakes programs, seasonal discounts, and special discounts to large-volume purchasers. The Debtors seek the authority, in their discretion, to continue to administer and honor these other promotions in the ordinary course of business, consistent with past practices. II. The Debtors Payment Processors 19. Many of the Debtors sales are paid with credit or debit cards. To facilitate such transactions, the Debtors entered into certain agreements with credit card companies and processors (collectively, the Credit Card Agreements ), including agreements with (i) American Express, (ii) Synchrony, and (iii) Worldpay. The Credit Card Agreements enable the Debtors to accept credit and debit card purchases, subject to customer refunds, returns, exchanges, substitutions, price adjustments (including sale price adjustments to billing in certain circumstances), and other credit balances. 20. Under the terms of the Credit Card Agreements, the Debtors are required to pay credit card companies and issuing banks various fees for their services (collectively, the Credit Card Fees ). During fiscal year 2017, the Debtors paid approximately $1,900,000 in Credit Card Fees. The Debtors request authority to continue to pay the Credit Card Fees in the ordinary course of their business to avoid disrupting these vital credit card processing services. 8

9 Case Doc 6 Filed 07/29/18 Page 9 of 20 As of the Petition Date, the Debtors estimate that approximately $260,000 in prepetition Credit Card Fees have accrued but remain unpaid to credit card companies and processors. 21. When customers return merchandise to the Debtors after a credit card purchase, or dispute the charges with their credit card issuer, the Debtors may be obligated to refund to the credit card issuer the purchase price of the returned or disputed merchandise, subject to certain adjustments (collectively, Chargebacks and, together with the Credit Card Fees, the Credit Card Obligations ). Generally, Chargebacks are satisfied by netting the amount charged back against pending payments owed by credit card issuers and processors to the Debtors under the Credit Card Agreements (the Credit Card Processor Payments ). 22. It is possible that certain Chargebacks incurred by the Debtors immediately prior to the Petition Date may not have been fully netted out against the Credit Card Processor Payments received by the Debtors prior to the Petition Date. Moreover, although the Debtors believe that Chargebacks arising after the Petition Date are postpetition obligations of the Debtors, it may be argued that such Chargebacks nevertheless are prepetition obligations where the merchandise returned or disputed was purchased from the Debtors prior to the Petition Date. In such circumstances, to the extent that the netting of the parties obligations would not constitute recoupment, the Debtors seek the Court s approval to allow credit card companies and processors, including American Express, Synchrony, Worldpay and its agent, United TranzActions, to setoff Chargebacks against Credit Card Processor Payments pursuant to section 362(d) of the Bankruptcy Code. 23. The Debtors ability to honor and process credit and debit card transactions is absolutely essential to the Debtors ability to sell their merchandise and maintain customer loyalty. Without this ability, the Debtors would lose their main source of revenue for 9

10 Case Doc 6 Filed 07/29/18 Page 10 of 20 sales transactions in the ordinary course of business. The Debtors seek the authority, in their discretion, to continue to honor obligations under the Credit Card Agreements in the ordinary course of business, whether arising prepetition or postpetition, consistent with past practices. American Express, Synchrony, Worldpay and its agent, United TranzActions, and any other credit card companies and processors that provide services to the Debtors should continue to perform under the Credit Card Agreements. The Debtors request that the Court provide that no new or extraordinary offsets will be imposed (including, without limitation, Chargebacks), and that the relationships with American Express, Synchrony, Worldpay and its agent, United TranzActions, and any other credit card companies and processors that provide services to the Debtors be handled using the same procedures and bases as in the past. RELIEF REQUESTED 24. By this Motion, the Debtors seek entry of an order authorizing (a) the Debtors (i) to maintain and administer the Customer Programs and to honor prepetition obligations related thereto in the ordinary course of business and in a manner consistent with past practice and (ii) to honor their obligations under the Credit Card Agreements and pay the Credit Card Obligations, including any Credit Card Fees; and (b) Banks to honor and process prepetition checks and transfers in respect of the Customer Programs. BASIS FOR RELIEF REQUESTED 25. Sections 1107(a) and 1108 of the Bankruptcy Code authorize a debtor in possession to operate its business. Further, section 363(c) of the Bankruptcy Code authorizes a debtor in possession operating its business pursuant to section 1108 of the Bankruptcy Code to use property of the estate in the ordinary course of business without notice or a hearing. 26. Additionally, pursuant to section 503(b)(1) of the Bankruptcy Code, a debtor may incur, and the court, after notice and a hearing, shall allow as administrative 10

11 Case Doc 6 Filed 07/29/18 Page 11 of 20 expenses, among other things, the actual, necessary costs and expenses of preserving the estate. The Court also may authorize continuation of the Customer Programs under section 363(b) of the Bankruptcy Code. This section provides, in relevant part, that [t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate. Under this section, a court may authorize a debtor to pay certain prepetition claims. See In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989) (authorizing payment of prepetition claims where the debtors articulate some business justification, other than the mere appeasement of major creditors ); see also In re James A. Phillips, Inc., 29 B.R. 391, 397 (S.D.N.Y. 1983) (authorizing, pursuant to section 363, a contractor to pay prepetition claims of some suppliers who were potential lien claimants, because the payments were necessary for the general contractors to release funds owed to the debtors). As discussed herein, the importance of the Debtors direct customers and retailers to the Debtors business operations cannot be overstated. As a result, the relief requested herein is necessary to maintain the value of the Debtors estates for the benefit of all creditors and, therefore, should be granted. Accordingly, the Debtors submit that the use of estate funds to continue the Customer Programs and to honor the Credit Card Obligations is permitted by sections 503(b)(1) and 363(b) of the Bankruptcy Code as necessary costs of preserving their estates. Honoring the Customer Programs and Credit Card Obligations will enable the Debtors to maintain valuable relationships and strengthen the Debtors business and sales. 27. Further, section 105(a) of the Bankruptcy Code authorizes the Court to issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code]. A bankruptcy court s use of its equitable powers to authorize the payment of prepetition debt when such payment is needed to facilitate the rehabilitation of the 11

12 Case Doc 6 Filed 07/29/18 Page 12 of 20 debtor is not a novel concept. In re Ionosphere Clubs, Inc., 98 B.R. at 175. Under section 105(a), the Court can permit pre-plan payment of a prepetition obligation when essential to the continued operation of the debtor. In re NVR L.P., 147 B.R. 126, 127 (Bankr. E.D. Va. 1992); see also In re Just for Feet, Inc., 242 B.R. 821, 825 (D. Del. 1999) (finding that debtor must show that payment of prepetition claims is critical to debtor s restructuring to invoke necessity of payment doctrine). The Debtors submit that maintenance of the Customer Programs and honoring of the Credit Card Obligations are critical to their restructuring efforts and, therefore, should be approved under section 105(a) of the Bankruptcy Code. 28. Section 507(a)(7) of the Bankruptcy Code establishes a priority for unsecured claims of individuals, to the extent of $2,850 for each such individual, arising from the deposit, before the commencement of the case, of money in connection with the purchase, lease, or rental of property, or the purchase of services, for the personal, family, or household use of such individuals, that were not delivered or provided. The Debtors submit that deposits made pursuant to the Customer Deposit Program issued prepetition may give rise to priority claims under section 507(a)(7) of the Bankruptcy Code. In re WW Warehouse, Inc., 313 B.R. 588 (Bankr. D. Del. 2004) (finding that gift certificate holders are entitled to priority status under section 507(a)(7)). 29. Finally, as described by one court, prepetition customer claims clearly meet the requirements for postpetition payment because without satisfaction of prepetition customer claims, a debtor s goodwill and its going concern value will be destroyed. In re CoServ, L.L.C., 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002). Authorizing the Debtors to honor prepetition commitments under the Customer Programs will benefit the Debtors, their estates, 12

13 Case Doc 6 Filed 07/29/18 Page 13 of 20 and their creditors by allowing the Debtors operations to continue without interruption during the pendency of these chapter 11 cases. 30. The Debtors request for relief in this Motion is appropriate under the standards set forth herein. Most, if not all, of the Customer Programs are standard practice in the retail home furnishings industry. The Debtors seek to continue the Customer Programs and Credit Card Agreements without interruption during the pendency of these chapter 11 cases, which will inure to the benefit of all creditors and other parties in interest. By contrast, if the Debtors do not honor their Customer Programs and Credit Card Obligations in the ordinary course of business, the Debtors will be significantly less competitive in an already competitive and difficult economic environment. This undoubtedly will lead to a loss of customers and diminution in the value of the Debtors businesses. Indeed, such actions would be tantamount to encouraging customers to initiate business relationships with competitors. The failure to honor the Customer Programs and the Credit Card Obligations inevitably will erode hard-earned trust and customer and retailer loyalty, which, in turn, will harm the Debtors estates. AUTHORIZATION FOR BANKS 31. The Debtors request that the Court authorize and direct the Banks on which checks are drawn or electronic fund transfer requests are made with respect to the Customer Programs and the Credit Card Agreements to receive, process, honor, and pay, to the extent of funds on deposit, any and all such checks or electronic transfers, whether such checks or transfers were issued before or after the Petition Date, upon the receipt by each such bank of notice of such authorization without further order of the Court. 32. Further, the Debtors also request that the Court authorize and direct the Banks to rely on the representations of the Debtors as to which checks are issued and authorized to be paid in accordance with any order approving the relief requested in this Motion without any 13

14 Case Doc 6 Filed 07/29/18 Page 14 of 20 duty of further inquiry and without liability for following the Debtors instructions. Given, the necessity of paying amounts with respect to the Customer Programs and Credit Card Agreements, the Debtors respectfully submit that this relief is necessary and warranted. THE REQUIREMENTS OF BANKRUPTCY RULE 6003 ARE SATISFIED 33. Bankruptcy Rule 6003 empowers a court to grant relief within the first 21 days after the Petition Date to the extent that relief is necessary to avoid immediate and irreparable harm. The Debtors submit that the facts described herein demonstrate that the relief requested in this Motion is necessary to avoid immediate and irreparable harm to the Debtors business operations and the value of the Debtors estates, and that Bankruptcy Rule 6003 has been satisfied to permit such payments. WAIVER OF BANKRUPTCY RULES 6004(a) AND (h) 34. To implement the foregoing successfully, the Debtors seek a waiver of the notice requirements under Bankruptcy Rule 6004(a) and the 14 day stay of an order authorizing the use, sale, or lease of property under Bankruptcy Rule 6004(h). RESERVATION OF RIGHTS 35. Nothing contained herein is intended or should be construed as an admission of the validity of any claim against the Debtors, a waiver of the Debtors rights to dispute any claim, or an approval or assumption of any agreement, contract, or lease under section 365 of the Bankruptcy Code. The Debtors expressly reserve their rights to contest any invoice or claim related to the relief requested herein in accordance with applicable law. NOTICE 36. Notice of this Motion will be provided to (i) the Office of the United States Trustee for the District of Delaware; (ii) PNC Bank, National Association, in its capacity as Pre-Petition Agent and DIP Agent; (iii) KPS Special Situations Fund III (A), L.P., in its 14

15 Case Doc 6 Filed 07/29/18 Page 15 of 20 capacity as Pre-Petition Term Agent; (iv) the parties included on the Debtors consolidated list of thirty (30) largest unsecured creditors, as filed with the Debtors chapter 11 petitions; (v) the Banks; and (vi) those parties who have filed formal requests for notice in these chapter 11 cases pursuant to Bankruptcy Rule Notice of this Motion and any order entered hereon will be served in accordance with Local Rule (m). WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form attached hereto as Exhibit A, granting the relief requested herein and such other and further relief as the Court may deem just and proper. Dated July 29, 2018 Wilmington, Delaware YOUNG CONAWAY STARGATT & TAYLOR, LLP /s/ Jaime Luton Chapman Pauline K. Morgan (No. 3650) Kenneth J. Enos (No. 4544) Jaime Luton Chapman (No. 4936) Ashley E. Jacobs (No. 5635) Shane M. Reil (No. 6195) Rodney Square 1000 North King Street Wilmington, Delaware Telephone (302) Facsimile (302) Proposed Counsel to the Debtors and Debtors in Possession 15

16 Case Doc 6 Filed 07/29/18 Page 16 of 20 EXHIBIT A Proposed Order

17 Case Doc 6 Filed 07/29/18 Page 17 of 20 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re HERITAGE HOME GROUP LLC, et al., Debtors. 1 Chapter 11 Case No ( ) Jointly Administered RE Docket No x ORDER, PURSUANT TO SECTIONS 105(a), 362, 363(b), 503(b)(1), 1107(a), AND 1108 OF THE BANKRUPTCY CODE AND BANKRUPTCY RULES 6003 AND 6004 (A) AUTHORIZING DEBTORS TO CONTINUE (I) CUSTOMER PROGRAMS AND PRACTICES AND (II) CERTAIN PREPETITION CREDIT CARD OBLIGATIONS IN THE ORDINARY COURSE OF BUSINESS; AND (B) AUTHORIZING FINANCIAL INSTITUTIONS TO HONOR AND PROCESS CHECKS AND TRANSFERS RELATED TO SUCH OBLIGATIONS Upon the motion (the Motion ) 2 of the Debtors for entry of an order, pursuant to sections 105(a), 362, 363(b), 503(b)(1), 1107(a), and 1108 of title 11 of the Bankruptcy Code and Bankruptcy Rules 6003 and 6004, authorizing (a) the Debtors (i) to maintain and administer the Customer Programs and to honor prepetition obligations related thereto in the ordinary course of business and in a manner consistent with past practice and (ii) to honor their obligations under the Credit Card Agreements and pay the Credit Card Obligations, including any Credit Card Fees; and (b) the Banks to honor and process prepetition checks and electronic fund transfers in connection with to the Customer Programs, as more fully described in the Motion; and this Court having found and determined that the relief sought in the Motion is necessary to avoid immediate and irreparable harm to the Debtors and their estates, as 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s tax identification number, as applicable, are Heritage Home Group LLC (9506); HH Global II B.V. (0165); HH Group Holdings US, Inc. (7206); HHG Real Property LLC (3221); and HHG Global Designs LLC (1150). The Debtors corporate headquarters is located at 1925 Eastchester Drive, High Point, North Carolina Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Motion.

18 Case Doc 6 Filed 07/29/18 Page 18 of 20 contemplated by Bankruptcy Rule 6003; and upon consideration of the First Day Declaration; and it appearing that the relief requested is in the best interests of the Debtors estates, their creditors, and other parties in interest; and this 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 from the United States District Court for the District of Delaware dated as of February 29, 2012; and consideration of the Motion and the relief requested therein being a core proceeding pursuant to 28 U.S.C. 157(b); and venue being proper before this Court pursuant to 28 U.S.C and 1409; and it appearing that this Court may enter a final order consistent with Article III of the United States Constitution; and due and proper notice of the Motion having been provided under the particular circumstances, and it appearing that no other or further notice need be provided; and after due deliberation and sufficient cause appearing therefor, it is hereby ORDERED THAT 1. The Motion is GRANTED as set forth herein. 2. The Debtors are authorized, but not directed, (i) to maintain and administer, in the ordinary course of business and in a manner consistent with past practice, the Customer Programs and to pay any prepetition amounts outstanding thereunder and (ii) to honor their obligations under the Credit Card Agreements and pay the Credit Card Obligations, including the Credit Card Fees. 3. American Express, Synchrony, Worldpay and its agent United TranzActions, and any other credit card companies or processors providing services to the Debtors are authorized and directed to perform their services as such have normally and customarily been performed prior to the Petition Date, provided, however, that there are no new or extraordinary offsets or reserves. 2

19 Case Doc 6 Filed 07/29/18 Page 19 of Pursuant to section 362(d) of the Bankruptcy Code, to the extent that credit card companies or processors have any claims for the Credit Card Obligations under the Credit Card Agreements, the credit card companies or processors are authorized to net or setoff the Credit Card Obligations against the Credit Card Processor Payments. 5. Nothing in this Order or the Motion shall be construed as prejudicing any rights the Debtors may have to dispute or contest the amount of or basis for any claims asserted against the Debtors arising in connection with the Customer Programs or the Credit Card Agreements or as an admission as to the validity or priority of any claim against the Debtors. 6. Nothing in the Motion or this Order shall be deemed or construed as an approval of an assumption or rejection of any contract pursuant to section 365 of the Bankruptcy Code and all such rights are reserved. 7. Any party receiving payment from the Debtors is authorized to rely upon the representations of the Debtors as to which payments are authorized by this Order. The Banks on which checks were drawn or electronic payment requests made in payment of the obligations approved herein are authorized and directed to receive, process, honor, and pay all such checks and electronic payment requests when presented for payment if the Debtors have sufficient standing in their credit with such Bank. 8. Each Bank is authorized, but not directed, to rely on the Debtors representations with respect to whether any check or other transfer drawn or issued by the Debtors prior to the Petition Date should be honored pursuant to this Order, and the Banks shall not have any liability to any party for relying on such representations by the Debtors as provided for herein, and shall not be liable to any party on account of (i) following the Debtors representations, instructions, or presentations as to any order of this Court (without any duty of 3

20 Case Doc 6 Filed 07/29/18 Page 20 of 20 further inquiry), (ii) honoring of any prepetition checks, drafts, wires, or automated clearing house transfer in a good-faith belief or upon a representation by the Debtors that this Court has authorized such prepetition check, draft, wire, or automated clearing house transfer, or (iii) an innocent mistake made despite implementation of reasonable handling procedures. 9. The requirements set forth in Bankruptcy Rule 6003(b) have been satisfied by the contents of the Motion or otherwise deemed waived. 10. Notice of the Motion as provided therein shall be deemed good and sufficient notice, and the requirements of Bankruptcy Rule 6004(a) have been satisfied by such notice or otherwise deemed waived. 11. Notwithstanding Bankruptcy Rule 6004(h), the terms and conditions of this Order shall be immediately effective and enforceable upon its entry. 12. The Debtors are authorized to take all actions necessary to effectuate the relief granted pursuant to this Order in accordance with the Motion. 13. This Court retains jurisdiction with respect to all matters arising from or related to the implementation of this Order. Dated, 2018 Wilmington, Delaware United States Bankruptcy Judge 4