Case GLT Doc 14 Filed 05/16/17 Entered 05/16/17 02:42:26 Desc Main Document Page 1 of 17

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1 Document Page 1 of 17 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 THE DEBTORS TO MAINTAIN AND ADMINISTER THEIR EXISTING CUSTOMER PROGRAMS AND HONOR CERTAIN PREPETITION OBLIGATIONS RELATED THERETO 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 2 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 17 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 maintain and administer their customer-related programs (collectively, the Customer Programs as described herein and honor certain prepetition obligations related thereto; and (b granting related relief. The Debtors estimate that, as of the Petition Date, there is approximately $2.37 million outstanding on account of Customer Programs. Pursuant to the Interim Order, the Debtors seek interim relief to pay an aggregate amount not to exceed $1.745 million in connection with the Customer Programs that may come due prior to the Final Hearing. 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. 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 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 17 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. 6. 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 3

4 Document Page 4 of 17 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 and be 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. Description of Customer Programs 4 8. The Debtors have historically provided certain incentives, discounts, and accommodations to their customers to attract and maintain positive customer relationships. The Customer Programs promote customer satisfaction and inure to the goodwill of the Debtors business and the value of their brand. Accordingly, maintaining the goodwill of their customers is important to the Debtors ongoing operations in these chapter 11 cases, and is necessary to maximize value for the benefit of all of the Debtors stakeholders. Therefore, by this Motion, the Debtors seek authority to pay the following aggregate amounts on account of the Customer Programs: Customer Program Interim Final Amount Amount Gift Card Program $25,000 $50,000 ruebucks Program $400,000 $600,000 Promotional Programs $500,000 $900,000 Credit Cards & Payment Processors $820,000 $820,000 Total $1,745,000 $2,370,000 4 Although this Motion is intended to be comprehensive, the Debtors may have inadvertently omitted some Customer Programs. The Debtors request relief with respect to all Customer Programs, regardless of whether such Customer Program is specifically identified herein. 4

5 Document Page 5 of 17 I. The Refund and Exchange Program 5 9. The Debtors seek to honor their refund and exchange program (the Refund and Exchange Program which allows their customers to return, exchange, or receive credit for merchandise that is returned in its original condition within 30 days of purchase. If merchandise is returned with the receipt/packing slip, the merchandise is refunded for the full purchase amount in the form of the original purchase method of payment (a Refund. For merchandise returned without a receipt/packing slip, a merchandise credit card (the Merchandise Credit Card is issued for the current selling price of the merchandise, or alternatively the merchandise can be exchanged for other merchandise at the current selling price. If the amount of a return is less than $5.00, a Merchandise Credit Card is not issued and instead a cash refund is awarded. 10. Programs like the Refund and Exchange Program are common in the retail industry and similar programs are used by the Debtors competitors. Thus, the Debtors customers have a ready selection of alternative retailers willing to meet customers needs and take their business away from the Debtors. As such, the Refund and Exchange Program is critical to maintaining the goodwill of the Debtors customer base and the Debtors competitiveness within their industry. Without the Refund and Exchange Program, potential customers may be unwilling to shop at the Debtors stores at all, which would lead to a decline in revenues, the ultimate cost of which would be borne by the Debtors estates and, by extension, their creditors and other parties-in-interest. 11. Under the Refund and Exchange Program, only 1% of the Debtors merchandise was returned to the Debtors in March By this Motion, the Debtors seek authorization to, in a manner consistent with their past practices, subject to the DIP Order, the DIP Documents, the 5 The Refund and Exchange Program described below does not apply to merchandise sold in connection with the Debtors ongoing store closing sales. All sales of any such merchandise are final. 5

6 Document Page 6 of 17 DIP Budget, and the DIP Claims: (a honor outstanding obligations under the Refund and Exchange Program that accrued prior to the Petition Date; and (b maintain the Refund and Exchange Program or some variation thereof after the Petition Date in the ordinary course of business. II. The Gift Card Program 12. The Debtors maintain a program pursuant to which their customers can purchase physical, pre-paid, non-expiring gift cards in various denominations (the Gift Card Program. Online, through the Debtors e-commerce site, gift cards can be purchased in denominations of $5.00 in amounts varying between $20.00 and $250.00, and in stores, gift cards can be purchased in any amount between $5.00 and $ (collectively, the Gift Cards. Gift Cards can then be redeemed either in stores or online for merchandise. 13. On average, the Debtors pay Stored Value Solutions ( SVS approximately $24,000 per month to process and administer the Gift Card Program. As of the Petition Date, the Debtors estimate that they owe approximately $50,000 to SVS on account of the administration fees associated with the Gift Card Program (the Gift Card Program Fees, of which that amount, $25,000 will come due within the Interim Period. 14. The Debtors estimate that as of the Petition Date, approximately $6.6 million 6 in issued Gift Cards are outstanding. 7 By this Motion, the Debtors seek authorization to, in a manner consistent with their past practices, subject to the DIP Order, the DIP Documents, the DIP Budget, and the DIP Claims: (a pay the Gift Card Program Fees in the ordinary course; (b honor all Gift Cards purchased by or issued to customers prior to the Petition Date; and (c 6 7 The gross amount of Gift Cards outstanding is $15.1 million, however, the amount that is actually reflected on the Debtors books and records is $6.6 million as a result of annual breakage, i.e., Gift Cards unused by customers. This amount includes outstanding Merchandise Credit Card balances. 6

7 Document Page 7 of 17 maintain the Gift Card Program in the ordinary course after the Petition Date; provided, that the Debtors may, in their discretion, modify or terminate the Gift Card Program upon reasonable notice, provided further, that in the event the Debtors determine to alter or terminate the Gift Card Program, the Debtors will provide reasonable notice of any such modification to or termination of the Gift Card Program by posting notices at registers in each of their retail locations, on the case website maintained by the Debtors proposed claims and noticing agent, Kurtzman Carson Consultants LLC, on the Debtors e-commerce website and through the Debtors social media channels. III. ruebucks Program 15. The Debtors conduct special earning and redemption promotions (the ruebucks Program online and in stores during peak shopping seasons. The ruebucks Program allows the Debtors to capitalize on seasonal inventory shopping and market to a larger shopping base than in off-peak times. Under the ruebucks Program, when a shopper spends at least $40.00 on rue21 merchandise, the shopper will earn a coupon, or a ruebuck for $20.00 off their next $40.00 purchase. Any ruebucks issued prepetition were redeemed by April 30, 2017, and the next ruebucks Program is scheduled to begin on May 24, 2017 ahead of the critical back to school season. The earning period for the upcoming ruebucks Program will end on June 20, 2017, and any ruebucks earned during this period must be redeemed between June 21, 2017 and June 25, Accordingly, as of the Petition Date, no ruebucks are outstanding. 16. For fiscal year 2016, the Debtors estimate that the ruebucks Program generated approximately $23.3 million in net eligible sales. ruebucks are a staple of the rue-brand and customers have come to rely on, and look forward to, this program. As of the Petition Date, the Debtors owe approximately $600,000 on account of ruebucks administrative fees (the ruebucks Fees, of which that amount, $400,000 will come due within the Interim Period. By this 7

8 Document Page 8 of 17 Motion, the Debtors seek authorization to, in a manner consistent with their past practices, subject to the DIP Order, the DIP Documents, the DIP Budget, and the DIP Claims: (a continue paying the ruebucks Fees in the ordinary course of their business, in a manner consistent with their past practices; and (b maintain the ruebucks Program in the ordinary course after the Petition Date. IV. Promotional Programs 17. In addition to the ruebucks Program, in the ordinary course of business, the Debtors have established certain promotional programs designed to generate revenues across the rue21 enterprise (collectively, the Promotional Programs. The Promotional Programs consist of seasonal and item specific sales and coupons that can be used to purchase merchandise at the Debtors retail stores or online on the Debtors website. Advertisements for the Promotional Programs are distributed in stores and through The Promotional Programs are an important part of the Debtors marketing strategy, as they engender goodwill for the brand, target captive customers or customers that would otherwise be unlikely to purchase the Debtors merchandise, help the Debtors to liquidate merchandise that is near the end of its seasonal life, and generate revenue by encouraging sales at the Debtors store locations. For fiscal year 2016, the Promotional Programs significantly helped generate the Debtors approximate $1.1 billion in sales. As of the Petition Date, the Debtors owe approximately $900,000 on account of administrative fees associated with the Promotional Programs (the Promotional Programs Fees, of which that amount, $500,000 will come due within the Interim Period. By this Motion, the Debtors seek authorization to, in a manner consistent with their past practices, subject to the DIP Order, the DIP Documents, the DIP Budget, and the DIP Claims: (a continue paying the Promotional Programs Fees in the ordinary course of their business, in a manner consistent with their past practices; and (b continue these 8

9 Document Page 9 of 17 profitable Promotional Programs in the ordinary course of business, consistent with past practices. V. Credit Cards and Other Payment Processors 19. In addition to cash, Gift Cards, and Merchandise Credit Cards, the Debtors accept the following methods of payment from customers: (a Visa, MasterCard, Discover, and American Express credit cards; (b PayPal; (c Visa Checkout; and (d ATM/Debit Cards with a Visa or MasterCard logo (the Non-Cash Payments. To process Non-Cash Payments, the Debtors are party to certain agreements (the Payment Processing Agreements with certain payment processors (the Payment Processing Companies. Pursuant to the Payment Processing Agreements, the Debtors generally receive the net customer sales less any standard chargebacks, returns, and interchange fees charged. Generally, the interchange fees are set off from the funds that are remitted to the Debtors on account of the Non-Cash Payments on a daily basis, however, the Debtors pay processing fees on a monthly basis to Vantiv, Inc. ( Vantiv and Discover (collectively, the Processing Fees. The standard interchange and processing rates charged by each Payment Processing Company vary, but are in the range of 1.27% to 3.05% per sale transaction. 20. When customers either return merchandise to the Debtors following a purchase made by Non-Cash Payment or dispute charges with a Payment Processing Company, the Debtors may be obligated to refund a Payment Processing Company the purchase price of the returned or disputed merchandise, subject to certain adjustments (collectively, Chargebacks, and together with the Processing Fees and interchange rates, the Processing Obligations. Generally, Chargebacks are satisfied by netting the amount charged against pending payments owed by a Payment Processing Company to the Debtors. Due to the automated nature of the Processing Obligations, it is possible that certain Processing Obligations incurred by the Debtors 9

10 Document Page 10 of 17 immediately prior to the Petition Date may not have been fully set off against the payments received by the Debtors prior to the Petition Date. 21. The Debtors continued acceptance of Non-Cash Payments is essential to the operation of the Debtors business because the majority of the Debtors sales are made using Non-Cash Payments. Declining to accept Non-Cash Payments would have a severe negative effect on the Debtors ongoing operations, the cost of which would be incurred by their estates and, by extension, their creditors and all parties in interest. On average, the Debtors pay Vantiv approximately $600,000 per month in Processing Fees. As of the Petition Date, the Debtors estimate that they owe approximately $800,000 to Vantiv on account of Processing Fees, all of which will come due within the Interim Period. Additionally, the Debtors believe they owe approximately $20,000 in Processing Fees to Discover, all of which will become due within the Interim Period. To avoid disrupting these vital payment processing services, the Debtors seek authority, subject to the DIP Order, the DIP Documents, the DIP Budget, and the DIP Claims, to continue paying the Processing Obligations in the ordinary course of their business pursuant to the terms of the Payment Agreements, and request that the Bankruptcy Court authorize the Payment Processing Companies to continue to set off the Processing Obligations against amounts remitted to the Debtors, whether arising before or after the Petition Date, in a manner consistent with past practices. Basis for Relief VI. Continuing to Honor Customer Programs in the Ordinary Course Is Warranted Under Sections 105(a and 363(b of the Bankruptcy Code 22. 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., 10

11 Document Page 11 of 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 pre-petition 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, 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. 23. 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; see also James A. Phillips, Inc., 29 B.R. at 397 (relying upon section 363 as a basis to allow a contractor to pay the prepetition claims of suppliers that were potential lien claimants. Indeed, courts have recognized that there are instances when a debtor s fiduciary duty can only be fulfilled by the pre-plan satisfaction of a prepetition claim. CoServ, 273 B.R. at In addition, courts 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 when essential to the continued operation of a debtor s business. 11

12 Document Page 12 of The United States Court of Appeals for the Third Circuit recognized the necessity of payment doctrine in In re Lehigh & New England 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. Transp. Co., 467 F.2d 100, 102 n.1 (3d Cir (recognizing 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 its pre-reorganization claims have been paid ; In re Just for Feet, Inc., 242 B.R. 821, (Bankr. D. Del (noting that, in the Third Circuit, debtors may pay prepetition claims that are essential to continued operation of business; In re Columbia Gas Sys., Inc., 171 B.R. 189, (Bankr. D. Del (same. 26. Accordingly, the Bankruptcy Court has authority to authorize the Debtors to continue the Customer Programs, and pay prepetition claims arising thereunder, pursuant to sections 363(b and 105(a of the Bankruptcy Code. Continuing to administer the Customer Programs without interruption during the pendency of these chapter 11 cases is critical to preserve the value of the Debtors assets by, most importantly, preserving customer goodwill and market share. This value will inure to the benefit of the Debtors estates and their creditors. 27. Where retaining the loyalty and patronage of customers is critical to successful chapter 11 cases, courts in this circuit and elsewhere have granted relief similar to that requested herein. See, e.g., In re Payless Holdings LLC, No (KAS (Bankr. E.D. Mo. Apr. 4, 2017; In re BCBG Max Azria Global Holdings, LLC, No (SCC (Bankr. S.D.N.Y. Feb. 28, 2017; In re Energy Future Holdings Corp., No (CSS (Bankr. D. Del. June 12

13 Document Page 13 of 17 4, 2014; In re GSE Envtl., Inc., No (MFW (Bankr. D. Del. May 30, 2014 (same; In re Dolan Co., No (BLS (Bankr. D. Del. Mar. 25, 2014; In re Sorenson Commcn s, Inc., No (BLS (Bankr. D. Del. Mar. 4, 2014; In re Dex One Corp., No (KG (Bankr. D. Del. Mar. 19, 2013; In re Neb. Book Co., Inc., No (PJW (Bankr. D. Del. July 25, 2011; In re Appleseed s Intermediate Holdings LLC, No (KG (Bankr. D. Del. Jan 20, 2011; and In re Constar Int l Inc., No (CSS (Bankr. D. Del. Jan 13, Accordingly, given the substantial benefit conferred on the Debtors estates by the Customer Programs, the Debtors respectfully request the authority to continue their Customer Programs and honor prepetition commitments related thereto. Processing of Checks and Electronic Fund Transfers Should Be Authorized 29. 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 in respect to the Customer Programs. 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 8 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. 13

14 Document Page 14 of 17 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 30. 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 continue the Customer Programs and satisfy prepetition obligations related thereto, up to an interim cap of $1.745 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. 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 31. 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 32. 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 party-in-interest s rights to dispute any particular claim on any grounds; (c a 14

15 Document Page 15 of 17 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 party-in-interest s rights 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 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. Motion Practice 33. 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 34. 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; and 15

16 Document Page 16 of 17 (l 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 35. No prior request for the relief sought in this Motion has been made to this or any other court. [Remainder of page intentionally left blank] 16

17 Document Page 17 of 17 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

18 Case GLT Doc 14-1 Filed 05/16/17 Entered 05/16/17 02:42:26 Desc Proposed Order Page 1 of 6 EXHIBIT A Proposed Interim Order

19 Case GLT Doc 14-1 Filed 05/16/17 Entered 05/16/17 02:42:26 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 THE DEBTORS TO MAINTAIN AND ADMINISTER THEIR EXISTING CUSTOMER PROGRAMS AND HONOR CERTAIN PREPETITION OBLIGATIONS RELATED THERETO AND (II GRANTING RELATED RELIEF Upon the motion (the Motion 2 of the above-captioned debtors and debtors-inpossession (collectively, the Debtors for entry of an interim order (this Interim Order : (a authorizing the Debtors to maintain and administer the Customer Programs and honor certain prepetition obligations related thereto; and (b 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(b; and this Court having found that it may enter a final 1 2 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.

20 Case GLT Doc 14-1 Filed 05/16/17 Entered 05/16/17 02:42:26 Desc Proposed Order Page 3 of 6 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 continue to administer the Customer Programs currently in effect, and honor obligations related to the Customer Programs, in an aggregate amount not to exceed $1.745 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 take or proposed to be taken hereunder, the terms of the DIP Order shall control. 2

21 Case GLT Doc 14-1 Filed 05/16/17 Entered 05/16/17 02:42:26 Desc Proposed Order Page 4 of 6 3. The Debtors are authorized, but not directed, subject to the DIP Order, the DIP Documents, the DIP Budget, and the DIP Claims, to renew, amend, supplement, or extend Customer Programs to the extent that the Debtors determine, in their discretion, that such action is in the best interest of their estates. 4. 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 3

22 Case GLT Doc 14-1 Filed 05/16/17 Entered 05/16/17 02:42:26 Desc Proposed Order Page 5 of 6 entry of a final order on the Motion are timely received, this Court may enter such final order without need for the Final Hearing. 5. Notwithstanding the relief granted in this Interim Order and any actions taken 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. 6. 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 Debtors 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. 4

23 Case GLT Doc 14-1 Filed 05/16/17 Entered 05/16/17 02:42:26 Desc Proposed Order Page 6 of 6 7. 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 Customer Programs. 8. Nothing contained in the Motion or this Interim Order is intended or should be construed to create an administrative priority claim. 9. The contents of the Motion satisfy the requirements of Bankruptcy Rule 6003(b. 10. 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. 11. Notwithstanding Bankruptcy Rule 6004(h, the terms and conditions of this Interim Order are immediately effective and enforceable upon its entry. 12. The Debtors are authorized to take all actions necessary to effectuate the relief granted in this Interim Order in accordance with the Motion. 13. 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

24 Case GLT Doc 14-2 Filed 05/16/17 Entered 05/16/17 02:42:26 Desc Proposed Order Page 1 of 5 EXHIBIT B Proposed Final Order

25 Case GLT Doc 14-2 Filed 05/16/17 Entered 05/16/17 02:42:26 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 THE DEBTORS TO MAINTAIN AND ADMINISTER THEIR EXISTING CUSTOMER PROGRAMS AND HONOR CERTAIN PREPETITION OBLIGATIONS RELATED THERETO 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 maintain and administer the Customer Programs and honor certain prepetition obligations related thereto; and (b 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(b; and this Court having found that it may enter a final 1 2 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.

26 Case GLT Doc 14-2 Filed 05/16/17 Entered 05/16/17 02:42:26 Desc Proposed Order Page 3 of 5 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 a final 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 continue to administer the Customer Programs currently in effect, and honor obligations related to the Customer Programs, in an aggregate amount not to exceed $2.37 million, on a final basis, absent further order of this Court. To the extent that there is any inconsistency between the terms of the DIP Order and any action take or proposed to be take hereunder, the terms of the DIP Order shall control. 2

27 Case GLT Doc 14-2 Filed 05/16/17 Entered 05/16/17 02:42:26 Desc Proposed Order Page 4 of 5 3. The Debtors are authorized but not directed, subject to the DIP Order, the DIP Documents, the DIP Budget, and the DIP Claims, to renew, amend, supplement, or extend Customer Programs to the extent that the Debtors determine, in their discretion, that such action is in the best interest of their estates. 4. 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. 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 3

28 Case GLT Doc 14-2 Filed 05/16/17 Entered 05/16/17 02:42:26 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. 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 connection with any Customer Programs. 7. Nothing contained in the Motion or this Final Order is intended or should be construed to create an administrative priority claim. 8. The contents of the Motion satisfy the requirements of Bankruptcy Rule 6003(b. 9. 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. 10. Notwithstanding Bankruptcy Rule 6004(h, the terms and conditions of this Final Order are immediately effective and enforceable upon its entry. 11. The Debtors are authorized to take all actions necessary to effectuate the relief granted in this Final Order in accordance with the Motion. 12. 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:, 2017 UNITED STATES BANKRUPTCY JUDGE 4