Case GLT Doc 13 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Main Document Page 1 of 15

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1 Document Page 1 of 15 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA In re: rue21, inc., et al., 1 Case No (GLT Debtors. Chapter 11 (Joint Administration Requested rue21, inc., et al., Movants, v. No Respondent. Respondent. DEBTORS EMERGENCY MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (I AUTHORIZING DEBTORS TO PAY CERTAIN PREPETITION CLAIMS OF LIEN CLAIMANTS AND 503(B(9 CLAIMANTS AND (II GRANTING RELATED RELIEF rue21, inc. and its debtor affiliates, as debtors and debtors in possession in the above-captioned chapter 11 cases (collectively, the Debtors, 2 respectfully state the following: 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: rue21, inc. (1645; Rhodes Holdco, Inc. (6922; r services llc (9425; and rue services corporation (0396. The location of the Debtors service address is: 800 Commonwealth Drive, Warrendale, Pennsylvania A detailed description of the Debtors and their business, and the facts and circumstances supporting this Motion and the Debtors chapter 11 cases, is set forth in greater detail in the Declaration of Todd M. Lenhart, Acting Chief Financial Officer and Senior Vice President of Accounting of rue21, inc., in Support of Chapter 11 Petitions and First Day Motions (the First Day Declaration, filed contemporaneously with the Debtors voluntary petitions for relief filed under chapter 11 of title 11 of the United States Code, 11 U.S.C (the Bankruptcy Code, on May 15, 2017 (the Petition Date. The First Day Declaration is fully incorporated herein by reference. KE

2 Document Page 2 of 15 Relief Requested 3 1. By this motion (this Motion, the Debtors seek entry of interim and final orders, substantially in the forms attached hereto as Exhibit A and Exhibit B (respectively, the Interim Order and the Final Order subject to (x any order approving the Debtors use of cash collateral and/or any postpetition financing facilities (the DIP Order the documentation in respect of any such postpetition financing facilities and/or use of cash collateral (the DIP Documents, the budget governing any such postpetition financing and/or use of cash collateral (the DIP Budget and (y any and all claims, liens, security interests, and priorities granted in connection with such postpetition financing facilities and/or use of cash collateral (the DIP Claims : (a authorizing the Debtors to pay up to $3.5 million, on an interim basis, and up to $4.0 million, on a final basis, absent further order of the Bankruptcy Court, on account of prepetition claims held by certain shippers and warehousemen (the Lien Claimants whose prepetition claims shall be defined as the Lien Charges ; (b authorizing the Debtors to pay up to $12.2 million, on a final basis, absent further order of the Bankruptcy Court, on account of certain prepetition claims held by section 503(b(9 claimants (the 503(b(9 Claimants whose prepetition 503(b(9 claims shall be defined as the 503(b(9 Claims ; and (c granting related relief. The Debtors estimate that, as of the Petition Date, there is approximately $4.0 million outstanding on account of the Lien Charges and approximately $12.2 million outstanding on account of the 503(b(9 Claims. In addition, the Debtors request that the Bankruptcy Court schedule a final hearing within approximately 25 days of the commencement of these chapter 11 cases to consider approval of this Motion on a final basis. 3 Capitalized terms used and not defined have the meanings given to such terms elsewhere in this Motion or in the First Day Declaration, as applicable. 2

3 Document Page 3 of 15 Jurisdiction and Venue 2. The United States Bankruptcy Court for the Western District of Pennsylvania (the Bankruptcy Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b. The Debtors confirm their consent, pursuant to rule 7008 of the Federal Rules of Bankruptcy Procedure (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. 3. Venue is proper pursuant to 28 U.S.C and The bases for the relief sought herein are sections 105(a and 363(b of the Bankruptcy Code, Bankruptcy Rule 6003, and rule of the Local Bankruptcy Rules of the United States Bankruptcy Court for the Western District of Pennsylvania (the W.PA.LBR. Background 5. rue21, inc. ( rue21 is a specialty fashion retailer of girls and guys apparel and accessories. As of the Petition Date, the Debtors had approximately 1,179 stores in various strip centers, regional malls, and outlet centers throughout the contiguous 48 states. The Debtors have various core rue21 brands in girls apparel (rue21, intimate apparel (true, girls accessories (etc!, girls cosmetics (ruebeauté, guys apparel and accessories (Carbon, girls plus-size apparel (rue+, and girls swimwear (ruebleu. These rue21 brands focus on Fashion Meets Value providing quality, yet affordable, young adult clothing. The Debtors sell their merchandise to customers in the contiguous United States through their online store as well as in typical brick and mortar locations. The Debtors are headquartered in Warrendale, Pennsylvania and have one distribution center located in Weirton, West Virginia. 3

4 Document Page 4 of On the date hereof, each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtors are operating their business and managing 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 committees have been appointed or designated. 7. The Debtors have submitted various first day motions that seek to stabilize the Debtors business operations and allow the Debtors to commence these chapter 11 cases in the best position possible to maximize the value of their estates. The Debtors have also requested that the Bankruptcy Court designate the chapter 11 cases as complex cases pursuant to W.PA.LBR , and to jointly administer them pursuant to Bankruptcy Rule 1015(b. 4 The Debtors Supply Chain 8. The Debtors business depends on the uninterrupted flow of inventory and other goods through its supply chain and distribution network, including the purchase, importation, storage, and shipment of the Debtors merchandise and other personal property (the Merchandise. The Debtors contract with vendors to design, manufacture, and supply the Merchandise. All finalized Merchandise that the Debtors order from their vendors is shipped by the vendors to a third-party logistics company, Pacific Logistics Corp. ( PLC. PLC ships the Merchandise to the Debtors distribution center in West Virginia (the Distribution Center. All Merchandise sold in the Debtors brick and mortar stores is shipped from the Distribution Center to the rue21 stores via FedEx. All Merchandise sold online through the Company s e-commerce platform is shipped by PLC to an Ohio warehouse operated by TradeGlobal LLC 4 A description of the Debtors business, the reasons for commencing these chapter 11 cases, the relief sought from the Bankruptcy Court to allow for a smooth transition into chapter 11, and the facts and circumstances supporting this Motion are set forth in the First Day Declaration, filed contemporaneously herewith. 4

5 Document Page 5 of 15 ( TradeGlobal. 5 TradeGlobal currently fulfills the Debtors online orders and ships Merchandise directly to rue21 s online customers via United Parcel Service, Inc. The Lien Claimants 9. The flow of merchandise from the Debtors vendors and ultimately to stock the Debtors brick and mortar stores or fulfill orders placed with the Debtors e-commerce provider hinges on the services provided by, among others, various warehousemen, freight forwarders, and common carriers (collectively, the Lien Claimants. The Debtors vendors generally ship the Merchandise to PLC on a delivery duty paid ( DDP basis. Under these DDP arrangements, the vendor pays to ship the Merchandise; however, title to the Merchandise and goods does not pass to the Debtors until it arrives at the Distribution Center. Under this type of arrangement, the Lien Claimants may refuse to release Merchandise or other goods for shipment if they are not paid current. 10. Under certain non-bankruptcy laws, the Lien Claimants may be able to assert liens on the goods in their possession to secure payment of the Lien Charges. 6 In the event the Lien Charges remain unpaid, the Lien Claimants may attempt to assert such possessory liens, and may refuse to deliver or release goods in their possession until their claims are satisfied and their liens redeemed. The Lien Claimants possession (and retention of the Debtors goods and supplies would disrupt the Debtors operations and affect the Debtors ability to efficiently administer these chapter 11 cases. The cost of such disruption to the Debtors estates would 5 The Debtors have entered into a contract to transition e-commerce fulfillment services from TradeGlobal to Radial Inc. ( Radial. The Debtors currently intend to assume that contract and, beginning in July 2017, it is expected that online order fulfillment will take place in Radial s Walton, Kentucky warehouse. 6 For example, section of the Uniform Commercial Code provides, in pertinent part, that [a] carrier has a lien on the goods covered by a bill of lading or on the proceeds thereof in its possession for charges after the date of the carrier s receipt of the goods for storage or transportation, including demurrage and terminal charges, and for expenses necessary for preservation of the goods incident to their transportation or reasonably incurred in their sale pursuant to law. See U.C.C (a (

6 Document Page 6 of 15 likely be greater than the applicable Lien Charges. Further, pursuant to section 363(e of the Bankruptcy Code, the Lien Claimants may be entitled to adequate protection against any diminution in value of any valid possessory lien, which would drain estate assets. 11. Accordingly, the Debtors seek authority, but not direction, to pay and discharge, on a case-by-case basis, the Lien Charges in an aggregate amount up to $3.5 million on an interim basis and up to $4.0 million on a final basis, subject to the DIP Order, the DIP Documents, the DIP Budget, and the DIP Claims. For the avoidance of doubt, the Debtors seek authority to pay only those amounts that they determine are necessary or appropriate to: (a obtain release of critical or valuable goods; (b maintain a reliable, efficient, and smooth distribution system; and (c induce the Lien Claimants to continue to carry goods and make timely delivery. The Debtors intend to pay prepetition Lien Charges only if they believe, in their business judgment, that the benefits to their estates from making such payments will exceed the costs that their estates would incur by bringing an action to compel the turnover of such goods and the delay associated with such actions. The 503(b(9 Claimants 12. The Debtors may have received certain inventory, goods, or materials from vendors within the 20-day period immediately preceding the Petition Date. Such goods are entitled to administrative expense priority status in accordance with section 503(b(9 of the Bankruptcy Code. In addition, because each of the 503(b(9 Claimants provides goods that the Debtors use in their operations, such vendors may seek to assert statutory liens on the Debtors interests in the goods. 13. Many of the Debtors relationships with the 503(b(9 Claimants are not governed by long-term contracts. Rather, the Debtors obtain inventory, goods, or other materials from such claimants on an order-by-order basis. As a result, a 503(b(9 Claimant may refuse to 6

7 Document Page 7 of 15 supply new orders without payment of its prepetition claims. Such refusal could negatively affect the Debtors estates as the Debtors business is dependent on the steady flow of inventory to stock their stores. 14. Accordingly, the Debtors request authority, but not direction, to pay those undisputed claims arising from the value of such goods received by the Debtors within the 20 days immediately preceding the Petition Date that were sold to the Debtors in the ordinary course of business (each, a 503(b(9 Claim in an aggregate amount up to $12.2 million on a final basis subject to the DIP Order, the DIP Documents, the DIP Budget, and the DIP Claims. The Debtors seek authority to pay only those amounts that they determine are necessary or appropriate to: (a obtain critical or valuable goods; (b maintain a reliable, efficient, and smooth distribution system; and (c induce the 503(b(9 Claimants to continue to provide goods. The Debtors intend to pay prepetition 503(b(9 Claims only if they believe, in their business judgment, that the benefits to their estates from making such payments will exceed the costs to their estates. Basis for Relief 15. Courts generally acknowledge that it is appropriate to authorize the payment of prepetition obligations where necessary to protect and preserve the estate. See, e.g., In re CoServ, L.L.C., 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002; see also In re Just for Feet, Inc., 242 B.R. 821, 826 (D. Del (finding that payment of prepetition claims to certain trade vendors was essential to the survival of the debtor during the chapter 11 reorganization ; In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y ( The ability of a Bankruptcy Court to authorize the payment of prepetition debt when such payment is needed to facilitate the rehabilitation of the debtor is not a novel concept. ; Armstrong World Indus., Inc. v. James A. Phillips, Inc., (In re James A. Phillips, Inc., 29 B.R. 391, 398 (S.D.N.Y In so doing, 7

8 Document Page 8 of 15 these courts acknowledge that several legal theories rooted in sections 105(a and 363(b of the Bankruptcy Code support the payment of prepetition claims as provided herein. 16. Pursuant to section 363(b of the Bankruptcy Code, courts may authorize payment of prepetition obligations where a sound business purpose exists for doing so. See Ionosphere Clubs, 98 B.R. at 175 (noting that section 363(b provides broad flexibility to authorize a debtor to honor prepetition claims where supported by an appropriate business justification. Indeed, courts have recognized that there are instances when a debtor s fiduciary duty can only be fulfilled by the preplan satisfaction of a prepetition claim. CoServ, 273 B.R. at In addition, the Bankruptcy Court may authorize payment of prepetition claims in appropriate circumstances based on section 105(a of the Bankruptcy Code. Section 105(a codifies the Bankruptcy Court s inherent equitable powers to issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. Under section 105(a, courts may authorize pre-plan payments of prepetition obligations if essential to the continued operation of a debtor s business. See Just for Feet, 242 B.R. at 825. Specifically, the Bankruptcy Court may use its power under section 105(a of the Bankruptcy Code to authorize payment of prepetition obligations pursuant to the necessity of payment rule (also referred to as the doctrine of necessity. Ionosphere Clubs, 98 B.R. at Indeed, the United States Court of Appeals for the Third Circuit recognized the necessity of payment doctrine in In re Lehigh & New Eng. Ry. Co., 657 F.2d 570, 581 (3d Cir The Third Circuit held that a court could authorize the payment of prepetition claims if such payment was essential to the continued operation of the debtor. Id. (stating courts may authorize payment of prepetition claims when there is the possibility that the creditor will employ an immediate economic sanction, failing such payment ; see also In re Penn Cent. 8

9 Document Page 9 of 15 Transp. Co., 467 F.2d 100, 102 n.1 (3d Cir (holding necessity of payment doctrine permits immediate payment of claims of creditors where those creditors will not supply services or material essential to the conduct of the business until their pre-reorganization claims have been paid ; Just for Feet, 242 B.R. at (noting that, in the Third Circuit, debtors may pay prepetition claims that are essential to continued operation of business. 19. Whereas here, debtors have shown that the payment of prepetition claims is critical to maximize the value of their estates, courts in this district and circuit have routinely authorized payments to lien claimants and section 503(b(9 claimants. See, e.g., In re ACR Management, L.L.C., No (MBM (Bankr. W.D. Pa. June 6, 2004 (authorizing debtors to pay prepetition shipping charges and lien claimant claims; In re Magnum Hunter Resources Corp., No (KG (Bankr. D. Del. Nov. 11, 2016 (authorizing payment of section 503(b(9 claims. 7 I. The Bankruptcy Court Should Authorize the Payment of the Lien Charges Pursuant to Sections 363(b and 105(a 20. As noted above, Lien Claimants may be entitled under applicable non-bankruptcy law to assert certain possessory liens on the Debtors goods or equipment in their possession (notwithstanding the automatic stay under section 362 of the Bankruptcy Code in an attempt to secure payment of their prepetition claim. Under section 362(b(3 of the Bankruptcy Code, the act of perfecting such liens, to the extent consistent with section 546(b of the Bankruptcy Code, is expressly excluded from the automatic stay. 8 As a result, the Debtors anticipate that certain of the Lien Claimants may assert or perfect liens, simply refuse to turn over goods in their 7 Because of the voluminous nature of the orders cited herein, such orders have not been attached to this Motion. Copies of these orders are available upon request of the Debtors proposed counsel. 8 See 11 U.S.C. 546(b(1(A (providing that a debtor s lien avoidance powers are subject to any generally applicable law that... permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of perfection. 9

10 Document Page 10 of 15 possession, or stop performing their ongoing obligations. Even absent a valid lien, to the extent certain Lien Claimants have possession of the Debtors inbound inventory or outbound products, mere possession or retention would disrupt the Debtors operations. 21. Paying the Lien Charges to the extent required to continue operations in the ordinary course, is an exercise of the Debtors sound business judgment and necessary to the Debtors continued operation in these chapter 11 cases. The Lien Charges should not impair unsecured creditor recoveries in these chapter 11 cases. All creditors will benefit from the seamless transition of the Debtors operations into bankruptcy and the ultimate delivery and sale of inventory in the Debtors stores and through the Debtors e-commerce channel. 22. For these reasons, courts in this district and circuit have granted similar relief in similar circumstances. See, e.g., In re ACR Management, L.L.C., No (MBM (Bankr. W.D. Pa. June 6, 2004 (authorizing debtors to pay prepetition shipping charges and lien claimant claims; In re APP Winddown, LLC (f/k/a American Apparel, LLC, No (BLS (Bankr. D. Del. Nov. 15, 2016 (authorizing payments to shippers and warehousemen; In re Pac. Sunwear of Calif., Inc., No (LSS (Bankr. D. Del. Apr. 8, 2016 (same; In re Sports Authority Holdings, Inc., No (MFW (Bankr. D. Del. Mar. 29, 2016 (same; In re Horsehead Holding Corp., No (CSS (Bankr. D. Del. Feb. 3, 2016 (same; In re Quiksilver, Inc., No (BLS (Bankr. D. Del. Sept. 10, 2015 (same. 10

11 Document Page 11 of 15 II. The Bankruptcy Court Should Authorize the Payment of the 503(b(9 Claims 23. Section 503(b(9 provides administrative priority for the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which goods have been sold to the debtor in the ordinary course of such debtor s business. These claims must be paid in full for the Debtors to confirm a chapter 11 plan. See 11 U.S.C. 1129(a(9(A. Consequently, payment of such claims now only provides such parties with what they would be entitled to receive under a chapter 11 plan. 24. Paying the Lien Charges is an exercise of the Debtors sound business judgment and necessary to the Debtors continued operation in these chapter 11 cases. Moreover, the timing of such payments also lies squarely within the Bankruptcy Court s discretion. See, e.g., In re Global Home Prods., LLC, No (KG, 2006 WL , at *3 (Bankr. D. Del. Dec. 21, 2006 (agreeing with parties that the timing of the payment of that administrative expense claim is left to the discretion of the [Bankruptcy] Court. The Debtors ongoing ability to obtain inventory and other goods as provided herein is key to their survival and necessary to preserve the value of their estates. Absent payment of the 503(b(9 Claims at the outset of these chapter 11 cases which merely accelerates the timing of payment and not the ultimate treatment of such claims the Debtors could be denied access to the inventory and other goods necessary to maintain the Debtors business operations and maximize the value of the Debtors estates. 25. For these reasons, courts in this circuit regularly authorize the payment of claims arising under section 503(b(9 of the Bankruptcy Code in the ordinary course of business. See, e.g., In re Aspect Software Parent, Inc., No (MFW (Bankr. D. Del. April 1, 2016 (authorizing the payment of section 503(b(9 claims; In re Emerald Oil, Inc., No (KG (Bankr. D. Del. April 19, 2016; (same; In re Horsehead Holding Corp., 11

12 Document Page 12 of 15 No (CSS (Bankr. D. Del. Feb. 2, 2016 (same; In re Magnum Hunter Resources Corp., No (KG (Bankr. D. Del. Nov. 11, 2016 (same. Processing of Checks and Electronic Fund Transfers Should Be Authorized 26. The Debtors have sufficient funds to pay the amounts described in this Motion in the ordinary course of business by virtue of expected cash flows from ongoing business operations, anticipated debtor-in-possession financing, and anticipated access to cash collateral. In addition, under the Debtors existing cash management system, the Debtors can readily identify checks or wire transfer requests as relating to an authorized payment. Accordingly, the Debtors believe that checks or wire transfer requests, other than those relating to authorized payments, will not be honored inadvertently. Therefore, the Debtors respectfully request that the Bankruptcy Court authorize and direct all applicable financial institutions, when requested by the Debtors, to receive, process, honor, and pay any and all checks or wire transfer requests in respect of the relief requested in this Motion, provided that sufficient funds are on deposit and standing in the Debtors credit in the applicable bank accounts to cover such payments. The Requirements of Bankruptcy Rule 6003 are Satisfied 27. 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. For the reasons discussed above, authorizing the Debtors to pay the Lien Charges accrued prior to the Petition Date, up to an interim cap of $3.5 million, and granting the other relief requested herein is essential to the Debtors ability to smoothly transition their operations into these chapter 11 cases and maintain the value of their estates postpetition. Failure to receive such authorization and other relief during the first 21 days of these chapter 11 cases would severely disrupt the Debtors ability to maintain their estates at this critical juncture. 12

13 Document Page 13 of 15 Accordingly, the Debtors submit that they have satisfied the immediate and irreparable harm standard of Bankruptcy Rule 6003 to support granting the relief requested herein. Waiver of Bankruptcy Rule 6004(a and 6004(h 28. To implement the foregoing successfully, the Debtors request that the Bankruptcy Court enter an order providing that notice of the relief requested herein satisfies Bankruptcy Rule 6004(a and that the Debtors have established cause to exclude such relief from the 14-day stay period under Bankruptcy Rule 6004(h. Reservation of Rights 29. Nothing contained in this Motion or any actions taken by the Debtors pursuant to relief granted in the Interim Order or the Final Order is intended or should be construed as: (a an admission as to the validity of any particular claim against a Debtor entity; (b a waiver of the Debtors or any other party-in-interest s rights to dispute any particular claim on any grounds; (c a promise or requirement to pay any particular claim; (d an implication or admission that any particular claim is of a type specified or defined in this Motion; (e a request or authorization to assume any agreement, contract, or lease pursuant to section 365 of the Bankruptcy Code; (f a waiver or limitation of the Debtors or any other party-in-interest s rights under the Bankruptcy Code or any other applicable law; or (g a concession by the Debtors or any other party-ininterest that any liens (contractual, common law, statutory, or otherwise satisfied pursuant to this Motion are valid, and the Debtors and all parties-in-interest expressly reserve their rights to contest the extent, validity, or perfection or seek avoidance of all such liens. If the Bankruptcy Court grants the relief sought herein, any payment made pursuant to the Bankruptcy Court s order is not intended and should not be construed as an admission as to the validity of any particular claim or a waiver of the Debtors or any party-in-interest s rights to subsequently dispute such claim. 13

14 Document Page 14 of 15 Motion Practice 30. This Motion is accompanied by a proposed Interim Order and a proposed Final Order attached hereto as Exhibit A and Exhibit B, respectively. Accordingly, the Debtors submit that this Motion satisfies W.PA.LBR (a and Notice 31. The Debtors will provide notice of this Motion to: (a the Office of the United States Trustee for the Western District of Pennsylvania (the U.S. Trustee ; (b the holders of the 50 largest unsecured claims against the Debtors (on a consolidated basis; (c counsel to the ABL Agent and the DIP ABL Agent; (d counsel to the Term Loan Agent and the DIP Term Loan Agent; (e counsel to the Indenture Trustee; (f counsel to Apax Partners, L.P.; (g counsel to any appointed statutory committee; (h the United States Attorney s Office for the Western District of Pennsylvania; (i the Internal Revenue Service; (j the office of the attorneys general for the states in which the Debtors operate; (k the Securities and Exchange Commission; (l the Lien Claimants; (m the 503(b(9 Claimants; and (n any party that has requested notice pursuant to Bankruptcy Rule The Debtors submit that, in light of the nature of the relief requested, no other or further notice need be given. No Prior Request No prior request for the relief sought in this Motion has been made to this or any other court. 14

15 Document Page 15 of 15 WHEREFORE, the Debtors respectfully request that the Bankruptcy Court enter the Interim Order and the Final Order granting the relief requested herein and such other relief as the Bankruptcy Court deems appropriate under the circumstances. Dated: May 15, 2017 Jonathan S. Henes, P.C. (pro hac vice admission pending Nicole L. Greenblatt, P.C. (pro hac vice admission pending Robert A. Britton (pro hac vice admission pending George Klidonas (pro hac vice admission pending KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, New York Telephone: ( Facsimile: ( /s/ Eric A. Schaffer Eric A. Schaffer (PA I.D. #30797 Jared S. Roach (PA I.D. # REED SMITH LLP 225 Fifth Avenue Pittsburgh, Pennsylvania Telephone: ( Facsimile: ( Proposed Local Counsel to the Debtors and Debtors in Possession Proposed Counsel to the Debtors and Debtors in Possession

16 Case GLT Doc 13-1 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 1 of 6 EXHIBIT A Proposed Interim Order

17 Case GLT Doc 13-1 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 2 of 6 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA In re: rue21, inc., et al., 1 Case No (GLT Debtors. Chapter 11 (Joint Administration Requested rue21, inc., et al., Related to Document No. Movants, v. No Respondent. Respondent. INTERIM ORDER (I AUTHORIZING, BUT NOT DIRECTING, DEBTORS TO PAY CERTAIN PREPETITION CLAIMS OF LIEN CLAIMANTS AND 503(B(9 CLAIMANTS AND (II GRANTING RELATED RELIEF Upon the motion (the Motion 2 of the above-captioned debtors and debtors in possession (collectively, the Debtors for entry of an interim order (this Interim Order (a authorizing the Debtors to pay up to $3.5 million on account of prepetition claims held by certain shippers and warehousemen (the Lien Claimants whose prepetition claims shall be defined as the Lien Charges ; (b granting related relief, and (c scheduling a final hearing to consider approval of the Motion on a final basis; all as more fully set forth in the Motion; and upon the First Day Declaration; and this Court having jurisdiction over this matter pursuant to 28 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: rue21, inc. (1645; Rhodes Holdco, Inc. (6922; r services llc (9425; and rue services corporation (0396. The location of the Debtors service address is: 800 Commonwealth Drive, Warrendale, Pennsylvania Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Motion.

18 Case GLT Doc 13-1 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 3 of 6 U.S.C. 157 and 1334; and this Court having found that this is a core proceeding pursuant to 28 U.S.C. 157(b; and this Court having found that it may enter a final order consistent with Article III of the United States Constitution; and this Court having found that venue of this proceeding and the Motion in this district is proper pursuant to 28 U.S.C and 1409; and this Court having found that the Debtors notice of the Motion and opportunity for a hearing on the Motion were appropriate under the circumstances and that no other notice need be provided; and this Court having reviewed the Motion and having heard the statements in support of the relief requested therein at a hearing before this Court (the Hearing ; and this Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before this Court; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. The Motion is granted on an interim basis as set forth herein. 2. Subject to: (x any order approving the Debtors use of cash collateral and/or any postpetition financing facilities (the DIP Order the documentation in respect of any such postpetition financing facilities and/or use of cash collateral (the DIP Documents, the budget governing any such postpetition financing and/or use of cash collateral (the DIP Budget ; and (y any and all claims, liens, security interests and priorities granted in connection with such postpetition financing facilities and/or use of cash collateral (the DIP Claims, the Debtors are authorized, but not directed, in the reasonable exercise of their business judgment, to pay all or part of, and discharge, on a case-by-case basis, the Lien Charges in an aggregate amount not to exceed $3.5 million, on an interim basis, absent further order of this Court. To the extent there is any inconsistency between the terms of the DIP Order and any action taken or proposed to be 2

19 Case GLT Doc 13-1 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 4 of 6 taken hereunder, the terms of the DIP Order shall control. 3. The final hearing (the Final Hearing on the Motion shall be held on, 2017, at :.m., prevailing Eastern Time. Any objections or responses to entry of a final order on the Motion shall be filed on or before 4:00 p.m., prevailing Eastern Time, on, 2017, and shall be served on: (a the Debtors, rue21, inc., 800 Commonwealth Drive, Warrendale, Pennsylvania 15086, Attn: Benjamin R. Gross; (b proposed counsel to the Debtors, Kirkland & Ellis LLP, 601 Lexington Ave., New York, New York 10022, Attn: Jonathan S. Henes, Nicole L. Greenblatt, Robert A. Britton, and George Klidonas; (c proposed local counsel to the Debtors, Reed Smith LLP, 225 Fifth Avenue, Pittsburgh, Pennsylvania 15222, Attn: Eric A. Schaffer and Jared S. Roach; (d counsel to any statutory committee appointed in these cases; (e counsel to the ABL Agent and the DIP ABL Agent, Morgan Lewis & Bockius LLP, One Federal Street, Boston, Massachusetts 02110, Attn: Julia Frost-Davies and Amelia C. Joiner, and Buchanan Ingersoll & Rooney PC, One Oxford Centre, 301 Grant Street, 20th Floor, Pittsburgh, Pennsylvania , Attn: James D. Newell and Timothy Palmer; (f counsel to the Term Loan Agent and the DIP Term Loan Agent, Jones Day, 250 Vesey Street, New York, New York 10281, Attn: Scott J. Greenberg and Michael J. Cohen; (g counsel to Apax Partners, L.P., Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017, Attn: Elisha D. Graff, Nicholas Baker, and Jonathan E. Endean; and (h the Office of The United States Trustee, U.S. Federal Office Building, Liberty Center, 1001 Liberty Ave., Suite 970, Pittsburgh, Pennsylvania 15222, Attn: Heather Sprague. In the event no objections to entry of a final order on the Motion are timely received, this Court may enter such final order without need for the Final Hearing. 4. Notwithstanding the relief granted in this Interim Order and any actions taken 3

20 Case GLT Doc 13-1 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 5 of 6 pursuant to such relief, nothing in this Interim Order shall be deemed: (a an admission as to the validity of any prepetition claim against a Debtor entity; (b a waiver of the Debtors or any party-in-interest s right to dispute any prepetition claim on any grounds; (c a promise or requirement to pay any prepetition claim; (d an implication or admission that any particular claim is of a type specified or defined in this Interim Order or the Motion; (e a request or authorization to assume any prepetition agreement, contract, or lease pursuant to section 365 of the Bankruptcy Code; (f a waiver or limitation of the Debtors rights or the rights of any other person under the Bankruptcy Code or any other applicable law; or (g a concession by the Debtors or any party-in-interest that any liens (contractual, common law, statutory, or otherwise satisfied pursuant to the Motion are valid, and the Debtors and all parties-in-interest expressly reserve their rights to contest the extent, validity, or perfection or seek avoidance of all such liens. 5. The banks and financial institutions on which checks were drawn or electronic payment requests made in payment of the prepetition obligations approved herein are authorized and directed to receive, process, honor, and pay all such checks and electronic payment requests when presented for payment, provided that sufficient funds are on deposit and standing in the Debtor s credit in the applicable bank accounts to cover such payments, and all such banks and financial institutions are authorized to rely on the Debtors designation of any particular check or electronic payment request as approved by this Interim Order, without any duty of further inquiry and without liability for following the Debtors instructions. 6. The Debtors are authorized to issue postpetition checks, or to effect postpetition fund transfer requests, in replacement of any checks or fund transfer requests that are dishonored as a consequence of these chapter 11 cases with respect to prepetition amounts owed in 4

21 Case GLT Doc 13-1 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 6 of 6 connection with any Lien Charges. 7. The contents of the Motion satisfy the requirements of Bankruptcy Rule 6003(b. 8. Notice of the Motion as provided therein is deemed good and sufficient notice of such Motion and the requirements of Bankruptcy Rule 6004(a and the local rules of this Court are satisfied by such notice. 9. Notwithstanding Bankruptcy Rule 6004(h, the terms and conditions of this Interim Order are immediately effective and enforceable upon its entry. 10. The Debtors are authorized to take all actions necessary to effectuate the relief granted in this Interim Order in accordance with the Motion. 11. This Court retains jurisdiction with respect to all matters arising from or related to the implementation, interpretation, and enforcement of this Interim Order. Pittsburgh, Pennsylvania Dated: May, 2017 UNITED STATES BANKRUPTCY JUDGE 5

22 Case GLT Doc 13-2 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 1 of 5 EXHIBIT B Proposed Final Order

23 Case GLT Doc 13-2 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 2 of 5 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA In re: rue21, inc., et al., 1 Case No (GLT Debtors. Chapter 11 (Joint Administration Requested rue21, inc., et al., Related to Document No. Movants, v. No Respondent. Respondent. FINAL ORDER (I AUTHORIZING, BUT NOT DIRECTING, DEBTORS TO PAY CERTAIN PREPETITION CLAIMS OF LIEN CLAIMANTS AND 503(B(9 CLAIMANTS AND (II GRANTING RELATED RELIEF Upon the motion (the Motion 2 of the above-captioned debtors and debtors in possession (collectively, the Debtors for entry of a final order (this Final Order (a authorizing the Debtors to pay up to $4.0 million on account of prepetition claims held by certain shippers and warehousemen (the Lien Claimants whose prepetition claims shall be defined as the Lien Charges ; (b authorizing the Debtors to pay up to $12.2 million on account of certain prepetition claims held by section 503(b(9 claimants (the 503(b(9 Claimants whose prepetition claims shall be defined as the 503(b(9 Claims ; and 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: rue21, inc. (1645; Rhodes Holdco, Inc. (6922; r services llc (9425; and rue services corporation (0396. The location of the Debtors service address is: 800 Commonwealth Drive, Warrendale, Pennsylvania Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Motion.

24 Case GLT Doc 13-2 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 3 of 5 (c granting related relief; all as more fully set forth in the Motion; and upon the First Day Declaration; and this Court having jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and this Court having found that this is a core proceeding pursuant to 28 U.S.C. 157; and this Court having found that it may enter a final order consistent with Article III of the United States Constitution; and this Court having found that venue of this proceeding and the Motion in this district is proper pursuant to 28 U.S.C and 1409; and this Court having found that the Debtors notice of the Motion and opportunity for a hearing on the Motion were appropriate under the circumstances and that no other notice need be provided; and this Court having reviewed the Motion and having heard the statements in support of the relief requested therein at a hearing before this Court (the Hearing ; and this Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before this Court; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. The Motion is granted as set forth herein on a final basis. 2. Subject to: (x any order approving the Debtors use of cash collateral and/or any postpetition financing facilities (the DIP Order the documentation in respect of any such postpetition financing facilities and/or use of cash collateral (the DIP Documents, the budget governing any such postpetition financing and/or use of cash collateral (the DIP Budget ; and (y any and all claims, liens, security interests and priorities granted in connection with such postpetition financing facilities and/or use of cash collateral (the DIP Claims, the Debtors are authorized, but not directed, in the reasonable exercise of their business judgment, to pay all or part of, and discharge, on a case-by-case basis: (a the Lien Charges in an aggregate amount not 2

25 Case GLT Doc 13-2 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 4 of 5 to exceed $4.0 million, absent further order of this Court; and (b the 503(b(9 Claims in an aggregate amount not to exceed $12.2 million, absent further order of this Court. To the extent there is any inconsistency between the terms of the DIP Order and any action taken or proposed to be taken hereunder, the terms of the DIP Order shall control. 3. Notwithstanding the relief granted in this Final Order and any actions taken pursuant to such relief, nothing in this Final Order shall be deemed: (a an admission as to the validity of any prepetition claim against a Debtor entity; (b a waiver of the Debtors or any party-in-interest s right to dispute any prepetition claim on any grounds; (c a promise or requirement to pay any prepetition claim; (d an implication or admission that any particular claim is of a type specified or defined in this Final Order or the Motion; (e a request or authorization to assume any prepetition agreement, contract, or lease pursuant to section 365 of the Bankruptcy Code; (f a waiver or limitation of the Debtors rights or the rights of any other person under the Bankruptcy Code or any other applicable law; or (g a concession by the Debtors or any party-in-interest that any liens (contractual, common law, statutory, or otherwise satisfied pursuant to the Motion are valid, and the Debtors and all parties-in-interest expressly reserve their rights to contest the extent, validity, or perfection or seek avoidance of all such liens. 4. The banks and financial institutions on which checks were drawn or electronic payment requests made in payment of the prepetition obligations approved herein are authorized and directed to receive, process, honor, and pay all such checks and electronic payment requests when presented for payment, provided that sufficient funds are on deposit and standing in the Debtor s credit in the applicable bank accounts to cover such payments, and all such banks and financial institutions are authorized to rely on the Debtors designation of any particular check or 3

26 Case GLT Doc 13-2 Filed 05/16/17 Entered 05/16/17 02:37:11 Desc Proposed Order Page 5 of 5 electronic payment request as approved by this Final Order without any duty of further inquiry and without liability for following the Debtors instructions. 5. The Debtors are authorized to issue postpetition checks, or to effect postpetition fund transfer requests, in replacement of any checks or fund transfer requests that are dishonored as a consequence of these chapter 11 cases with respect to prepetition amounts owed in connection with any Lien Charges or 503(b(9 Claims. 6. The contents of the Motion satisfy the requirements of Bankruptcy Rule 6003(b. 7. Notice of the Motion as provided therein is deemed good and sufficient notice of such Motion and the requirements of Bankruptcy Rule 6004(a and the local rules of this Court are satisfied by such notice. 8. Notwithstanding Bankruptcy Rule 6004(h, the terms and conditions of this Final Order are immediately effective and enforceable upon its entry. 9. The Debtors are authorized to take all actions necessary to effectuate the relief granted in this Final Order in accordance with the Motion. 10. This Court retains jurisdiction with respect to all matters arising from or related to the implementation, interpretation, and enforcement of this Final Order. Pittsburgh, Pennsylvania Dated: May, 2017 UNITED STATES BANKRUPTCY JUDGE 4