IN THE UNITED STATES BANKRUPTCY COURT FOR THE … · offerings, including technical support...

IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

) In re: ) Chapter 11 ) IQOR HOLDINGS INC., et al.,1 ) Case No. 20-34500 (DRJ) ) Debtors. ) (Joint Administration Requested) ) (Emergency Hearing Requested)

DEBTORS’ EMERGENCY MOTION

FOR ENTRY OF AN ORDER (I) AUTHORIZING THE DEBTORS TO (A) PAY PREPETITION WAGES, SALARIES, OTHER

COMPENSATION, AND REIMBURSABLE EXPENSES AND (B) CONTINUE EMPLOYEE BENEFITS PROGRAMS, AND (II) GRANTING RELATED RELIEF

EMERGENCY RELIEF HAS BEEN REQUESTED. A HEARING WILL BE CONDUCTED ON THIS MATTER ON SEPTEMBER 11, 2020, AT 10:30 A.M. (CENTRAL TIME) AT THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS, 515 RUSK, HOUSTON, TX 77002. IF YOU OBJECT TO THE RELIEF REQUESTED OR YOU BELIEVE THAT EMERGENCY CONSIDERATION IS NOT WARRANTED, YOU MUST EITHER APPEAR AT THE HEARING OR FILE A WRITTEN RESPONSE PRIOR TO THE HEARING. OTHERWISE, THE COURT MAY TREAT THE PLEADING AS UNOPPOSED AND GRANT THE RELIEF REQUESTED.

RELIEF IS REQUESTED NOT LATER THAN SEPTEMBER 11, 2020.

PLEASE NOTE THAT ON MARCH 24, 2020, THROUGH THE ENTRY OF GENERAL ORDER 2020-10, THE COURT INVOKED THE PROTOCOL FOR EMERGENCY PUBLIC HEALTH OR SAFETY CONDITIONS.

IT IS ANTICIPATED THAT ALL PERSONS WILL APPEAR TELEPHONICALLY AND ALSO MAY APPEAR VIA VIDEO AT THIS HEARING.

AUDIO COMMUNICATION WILL BE BY USE OF THE COURT’S DIAL-IN FACILITY. YOU MAY ACCESS THE FACILITY AT (832) 917-1510. YOU WILL BE RESPONSIBLE FOR YOUR OWN LONG-DISTANCE CHARGES. ONCE CONNECTED, YOU WILL BE ASKED TO ENTER THE CONFERENCE ROOM NUMBER. JUDGE JONES’S CONFERENCE ROOM NUMBER IS 205691.

YOU MAY VIEW VIDEO VIA GOTOMEETING. TO USE GOTOMEETING, THE COURT RECOMMENDS THAT YOU DOWNLOAD THE FREE GOTOMEETING APPLICATION. TO CONNECT, YOU SHOULD ENTER THE MEETING CODE “JUDGEJONES” IN THE GOTOMEETING APP OR CLICK THE LINK ON JUDGE JONES’S HOME PAGE ON THE SOUTHERN DISTRICT OF TEXAS WEBSITE. ONCE CONNECTED, CLICK THE SETTINGS ICON IN THE UPPER RIGHT CORNER AND ENTER YOUR NAME UNDER THE PERSONAL INFORMATION SETTING.

HEARING APPEARANCES MUST BE MADE ELECTRONICALLY IN ADVANCE OF THE HEARING. TO MAKE YOUR ELECTRONIC APPEARANCE, GO TO THE SOUTHERN DISTRICT OF TEXAS WEBSITE AND SELECT “BANKRUPTCY COURT” FROM THE TOP MENU. SELECT “JUDGES’ PROCEDURES,” THEN “VIEW HOME PAGE” FOR JUDGE JONES. UNDER

1 A complete list of each of the Debtors in these chapter 11 cases may be obtained on the website of the Debtors’

proposed claims and noticing agent at https://omniagentsolutions.com/iqor. The location of the Debtors’ service address is: 200 Central Avenue, 7th Floor, St. Petersburg, Florida 33701.

Case 20-34500 Document 27 Filed in TXSB on 09/10/20 of 33

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“ELECTRONIC APPEARANCE” SELECT “CLICK HERE TO SUBMIT ELECTRONIC APPEARANCE”. SELECT THE CASE NAME, COMPLETE THE REQUIRED FIELDS AND CLICK “SUBMIT” TO COMPLETE YOUR APPEARANCE.

The above-captioned debtors and debtors in possession (collectively, the “Debtors”) state

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

Relief Requested

1. The Debtors seek entry of an order, substantially in the attached form

(the “Order”), (a) authorizing, but not directing, the Debtors to (i) pay prepetition wages, salaries,

other compensation, reimbursable expenses, and non-insider severance obligations, and

(ii) continue employee benefits programs in the ordinary course, including payment of certain

prepetition obligations related thereto, and (b) granting related relief.

Jurisdiction and Venue

2. The United States Bankruptcy Court for the Southern District of Texas

(the “Court”) has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. This matter is a core

proceeding within the meaning of 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 Court.

3. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

4. The bases for the relief requested herein are sections 105(a), 363(b), and 507(a) of

title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”), Bankruptcy

2 The facts and circumstances supporting this Motion are set forth in the Declaration of David A. Kaminsky, Chief

Financial Officer of iQor Holdings Inc., in Support of Debtors’ Chapter 11 Petitions and First Day Motions (the “First Day Declaration”), filed contemporaneously with this Motion and incorporated by reference herein. Capitalized terms used but not immediately defined have the meanings given to them elsewhere in this Motion or in the First Day Declaration, as applicable.


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Rules 6003 and 6004, and rule 9013-1 of the Bankruptcy Local Rules for the Southern District of

Texas (the “Bankruptcy Local Rules”).

Background

5. The Debtors (together with their non-Debtor affiliates, the “Company”) comprise a

multinational business process outsourcing company that provides a range of intelligent customer

support and outsourcing services to some of the world’s largest brands. The Company’s operations

consist of two primary business segments—the customer care/call center business and the product

support business. The Company’s call center business provides customers with multiple service

offerings, including technical support solutions, omnichannel customer experience solutions,

analytical enabled customer retention solutions and revenue generation support services. The

Company’s product support business provides customers with technical services and supply chain

solutions, including repair services, quality assurance, kitting and packing, asset recovery and

recycling services, supply chain management, and service parts logistics. The Company is

headquartered in St. Petersburg, Florida, but its operations are extensive and span across North

America, Europe, and Asia. The Company operates more than 40 call centers in eight countries

and prior to the COVID-19 pandemic, employed approximately 40,000 people globally.

6. On the date hereof (the “Petition Date”), each Debtor filed a voluntary petition for

relief under chapter 11 of the Bankruptcy Code. The Debtors are operating their businesses and

managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the

Bankruptcy Code. Concurrently with the filing of this Motion, the Debtors filed a motion

requesting procedural consolidation and joint administration of these chapter 11 cases pursuant to

Bankruptcy Rule 1015(b). No request for the appointment of a trustee or examiner has been made

in these chapter 11 cases, and no committees have been appointed or designated.


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The Debtors’ Workforce3

7. As of the Petition Date, the Debtors employ approximately 6,610 full-time

employees (the “Employees”) and retain approximately 383 individuals via a professional

employer organization (the “PEO Employees”).4 Approximately 5,682 Employees are

compensated on an hourly basis, and approximately 928 are salaried. The PEO Employees include

individuals that are employees of American One Source, Inc. (“AOS”) but work full-time for the

Debtors. The Debtors pay AOS on a bi-weekly basis, consistent with the Debtors’ payroll

calendar for Employees. In addition to the Employees and the PEO Employees, the Debtors’

workforce also includes approximately 350 independent contractors and temporary workers

(collectively, the “Temporary Staff”) to who complete discrete projects and provide necessary

services to supplement the efforts of the Employees. The Temporary Staff work on-site at the

Debtors’ facilities and remotely pursuant to various contractual arrangements between the Debtors

and the Temporary Staff (in the case of independent contractors) or the Debtors and the staffing

agency employing the Temporary Staff (in the case of other temporary workers).

3 In addition to the Debtors’ Employees, prior to the COVID-19 pandemic, the Debtors’ non-Debtor foreign

affiliates employed approximately 31,190 employees throughout the Philippines, India, Mexico, Canada, Poland, Panama, Hong Kong, and Trinidad (collectively, the “Non-Debtor Affiliate Employees”). As described further in the Debtors’ Emergency Motion for Entry of Interim and Final Orders (I) Authorizing the Debtors to (A) Continue to Operate their Cash Management System and Maintain Existing Bank Accounts, and (B) Continue to Perform Intercompany Transactions and (II) Granting Related Relief (the “Cash Management Motion”), filed contemporaneously herewith, the Non-Debtor Affiliate Employees provide services that directly benefit the Debtors’ estates and the Debtors fund payroll and related employee obligations for certain of the Non-Debtor Affiliate Employees through ordinary course intercompany transactions (collectively, the “Non-Debtor Affiliate Obligations”). The Debtors highlight this part of the Company’s payroll process for the purpose of transparency and are not requesting authority by this Motion to continue funding the Non-Debtor Affiliate Obligations, but are requesting such relief in the Cash Management Motion.

4 As a result of the global COVID-19 pandemic and the related government-mandated “shelter-in-place” orders, the Company reduced its global workforce and instituted a furlough program that affected employees across the globe. The Company expects to restore its workforce once the public health crisis subsides.


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8. The Employees, Non-Debtor Affiliate Employees, PEO Employees, and

Temporary Staff perform a wide variety of functions, which are critical to the preservation of value

and the administration of the Debtors’ estates. The Employees, Non-Debtor Affiliate Employees,

PEO Employees, and Temporary Staff cannot be easily replaced as these individuals are intimately

familiar with the Debtors’ businesses, processes, and systems, and possess unique skills and

experience with respect to the Debtors’ operations. Without the continued, uninterrupted services

of the Employees, Non-Debtor Affiliate Employees, PEO Employees, and the Temporary Staff,

the Debtors’ business operations will be halted immediately and the administration of the estates

materially impaired. These workers will be unfairly harmed if the Debtors are not permitted to

continue paying or funding employee compensation and providing health and other benefits during

these chapter 11 cases. The relief requested in this Motion is necessary and appropriate under the

facts and circumstances of these chapter 11 cases.

Compensation and Benefits

9. The Debtors seek authority to: (a) pay and honor certain prepetition claims and

continue to honor obligations on a postpetition basis relating to, among other things, wages,

salaries, other compensation, expense reimbursement, payroll obligations and withholding of

federal and state taxes (including garnishments, Employee’s share of insurance premiums, taxes,

and other amounts withheld), payroll processing, health and welfare benefits for active Employees,

insurance programs, workers’ compensation benefits, short and long-term disability coverage, paid

time-off policies, non-insider severance, non-insider retention and bonus programs, the Debtors’

deferred compensation plan, and certain other benefits that the Debtors have historically provided

in the ordinary course (collectively, the “Compensation and Benefits”); and (b) pay all costs

incidental to the Compensation and Benefits. As of the Petition Date, the Debtors estimate the


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total amount outstanding on account of Compensation and Benefits obligations is approximately

$21.0 million.

10. Subject to the Court’s approval of the relief requested herein, the Debtors intend to

continue their prepetition Compensation and Benefits programs in the ordinary course of business

on a postpetition basis. Out of an abundance of caution, the Debtors request the right to modify,

change, and discontinue the Compensation and Benefits and to implement new programs, policies,

and benefits in the ordinary course of business during these chapter 11 cases, in the Debtors’ sole

discretion and without the need for further Court approval, subject to the Bankruptcy Code and

applicable law.

I. Compensation and Withholding Obligations.

A. Employee Wages.

11. In the ordinary course of business, the Debtors incur payroll obligations for base

wages and salaries owed to Employees (the “Wages”). Generally, Employees are paid Wages on

a bi-weekly basis. Because the Debtors pay accrued Wages one week in arrears, Employees may

be owed accrued but unpaid Wages as of the Petition Date. Wages may also be due and owing as

of the Petition Date because of, among other things, potential discrepancies between the amounts

paid and the amounts that Employees believe they should have been paid, which, upon resolution,

may reveal that additional amounts are owed to these Employees.

12. The Debtors also maintain a payroll advance program (the “Payroll Advance Program”),

under which eligible Employees may borrow up to $500 against their earned Wages per pay period.

Under the Payroll Advance Program, Employee draws are initiated, funded, and processed through

a third-party software platform provided by PayActiv, Inc. (“PayActiv”). Once an Employee draw

is initiated through PayActiv, the Debtors typically fund the draw request within one business day.

Under the Payroll Advance Program, Employees are restricted from submitting draw requests less


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than two days prior to each payroll date. To the extent that an Employee borrows against his or

her earned Wages under the Payroll Advance Program, the Debtors will deduct the aggregate

amount drawn from the Employee’s Wages for the applicable pay period.5

13. During the twelve-month period preceding the Petition Date, the Debtors paid

approximately $18.6 million per month on account of all Wages in the aggregate. As of the

Petition Date, the Debtors believe they owe approximately $1.9 million on account of Wages, net

of withholding obligations. By this Motion, the Debtors seek authority to: (a) pay all outstanding

prepetition amounts on account of Wages; (b) continue paying Wages on a postpetition basis in

the ordinary course of business consistent with their prepetition practices; and (c) continue the

Payroll Advance Program on a postpetition basis in the ordinary course of business consistent with

their prepetition practices.

B. PEO Employee Obligations.

14. In the ordinary course of business, the Debtors incur payment obligations to AOS

for the PEO Employees’ performance of critical business functions that support the Debtors’

Employees and product support business operations (the “PEO Employee Obligations”).

The Debtors pay PEO Employee Obligations on a bi-weekly basis consistent with the timing of

the Debtors’ Employee payroll obligations. The PEO Employees are not eligible to receive the

Employee Health and Welfare Benefits as the PEO Employees are provided benefits through AOS.

15. As of the Petition Date, the Debtors believe they owe approximately $201,000 in

the aggregate on account of PEO Employee Obligations. The Debtors believe the authority to

continue to pay PEO Employee Obligations owed to AOS is critical to maintain the supplemental

5 These deductions do not give rise to a withholding obligation on the part of the Debtors; rather, the Debtors retain

the deducted amounts. Thus, such amounts do not constitute Withholding Obligations and are not discussed in the “Withholding Obligations” section of this Motion.


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services provided by the PEO Employees. Accordingly, by this Motion, the Debtors seek authority

to pay all outstanding prepetition amounts owed on account of the PEO Employee Obligations and

to continue paying the PEO Employee Obligations on a postpetition basis in the ordinary course

of business consistent with their prepetition practices.

C. Temporary Staff Obligations.

16. In the ordinary course of business, the Debtors incur payment obligations to the

Temporary Staff, or to the agency employing the Temporary Staff, on account of the Temporary

Staff’s work for the Debtors (the “Temporary Staff Obligations”). The Debtors pay Temporary

Staff Obligations on a bi-weekly or monthly basis. The Temporary Staff perform critical business

functions that support the Debtors’ Employees and their business operations. The Debtors believe

the authority to continue paying Temporary Staff Obligations is critical to maintaining and

administering their estates. The Temporary Staff are not eligible to receive Employee Health and

Welfare Benefits.

17. As of the Petition Date, the Debtors believe they owe approximately $899,000 in

the aggregate on account of Temporary Staff Obligations. Payment of the Temporary Staff

Obligations is vital to the Debtors’ continued retention of the Temporary Staff, who are crucial to

the Debtors’ business operations. The Debtors seek authority to pay all outstanding prepetition

amounts owed on account of the Temporary Staff Obligations and to continue paying the

Temporary Staff Obligations on a postpetition basis in the ordinary course of business consistent

with their prepetition practices.

D. Withholding Obligations and Payroll Processing Fees.

1. Withholding Obligations.

18. Pursuant to certain federal and state laws, the Debtors are required to withhold

certain amounts from Employees’ gross pay related to federal, state, and local income taxes, as


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well as Social Security and Medicare taxes (collectively, the “Employee Payroll Taxes”) for

remittance to the appropriate federal, state, or local taxing authority. The Debtors must then match

the Employee Payroll Taxes from their own funds and pay, based on a percentage of gross payroll,

additional amounts for federal and state unemployment insurance and Social Security and

Medicare Taxes (together with the Employee Payroll Taxes, the “Payroll Taxes”). During the

twelve-month period preceding the Petition Date, the Debtors paid approximately $4.8 million per

month on account of the Payroll Taxes.

19. In the ordinary course of business, the Debtors also deduct certain amounts from

Employees’ gross pay, including (a) garnishments, alimony and child support, and other similar

deductions; and (b) certain other pre- and post-tax deductions withheld on account of certain of

the Employee Health and Welfare Benefits, such as an Employee’s share of insurance

coverage premiums, 401(k) contributions, and legally ordered or miscellaneous deductions

(collectively, the “Deductions” and, together with the Payroll Taxes, the “Withholding Obligations”).

During the twelve-month period preceding the Petition Date, the Debtors withheld approximately

$1.2 million per month on account of all Deductions.

20. As of the Petition Date, the Debtors believe that they have deducted, but not yet

remitted to the appropriate third-party payees, approximately $1.08 million in Withholding

Obligations. The Debtors believe that any amounts held by the Debtors on account of the

Withholding Obligations generally are held in trust by the Debtors and are not property of their

estates. Out of an abundance of caution, the Debtors seek authority to remit all outstanding

prepetition amounts deducted on account of the Withholding Obligations and to continue to deduct

and remit the Withholding Obligations on a postpetition basis in the ordinary course of business

consistent with their prepetition practices.


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2. Payroll Processing Fees.

21. The majority of the Wages are satisfied by direct deposit through the electronic

transfer of funds from the Debtors’ payroll department to each Employee’s bank account, with the

balance of the Employees receiving checks. The Debtors outsource this operation to ADP, LLC

(“ADP”). In particular, ADP serves as the Debtors’ payroll processing vendor and processes

certain Withholding Obligations for the Debtors’ Employees. In the ordinary course of business,

ADP processes direct deposit transfers to Employees from certain disbursement accounts funded

by the Debtors with the amount necessary to satisfy the Debtors’ electronic payroll obligations.

During the twelve-month period preceding the Petition Date, the Debtors paid ADP approximately

$70,000 per month on account of these payroll processing and administration services

(the “Payroll Processing Fees”).

22. As of the Petition Date, the Debtors estimate they owe approximately $80,000 on

account of Payroll Processing Fees. By this Motion, the Debtors seek authority to pay all

outstanding prepetition amounts owed on account of the Payroll Processing Fees and to continue

to pay the amounts associated with the Payroll Processing Fees on a postpetition basis in

the ordinary course of business consistent with their prepetition practices.

II. Reimbursable Expenses.

23. In the ordinary course of business, the Debtors reimburse the cost of certain

expenses incurred by Employees in connection with the operation of the Debtors’ businesses

(collectively, the “Reimbursable Expenses”). The Debtors reimburse Employees for qualifying

expenses incurred on their personal financial accounts in carrying out their employment

responsibilities, including, but not limited to, expenses for meals, hotels, flights, car rentals, and

mileage costs.

24. Employees who incur Reimbursable Expenses are required to submit an expense


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report with supporting documentation to the Debtors to request reimbursement for the applicable

expenses. If approved in accordance with internal policies and procedures, the Reimbursable

Expenses are then processed and audited through the Debtors’ accounts payable system and

refunded to Employees on a periodic basis. The Debtors’ inability to reimburse the Reimbursable

Expenses could impose a hardship on the Employees where such individuals incurred obligations

for the Debtors’ benefit. Employees incurred the Reimbursable Expenses as business expenses on

the Debtors’ behalf and with the understanding that such expenses would be reimbursed.

25. As of the Petition Date, the Debtors estimate that they owe approximately $15,000

on account of accrued but unpaid Reimbursable Expenses. Additionally, although the Debtors

request that reimbursement requests be submitted promptly, sometimes submission delays occur.

Employees may therefore submit reimbursement requests for prepetition Reimbursable Expenses

after the Petition Date. The Debtors seek authority to pay all outstanding prepetition amounts

owed on account of the Reimbursable Expenses and to continue paying the Reimbursable

Expenses on a postpetition basis in the ordinary course of business consistent with their prepetition

practices.6

III. Non-Insider Retention and Bonus Programs.7

A. Non-Insider Key Employee Retention Program.

26. Prior to the Petition Date, the Debtors implemented a retention program for

6 Separately, the Debtors maintain 43 corporate purchasing cards with American Express (the “P-Cards”), which

authorized Employees use to charge expenses to (a) procure goods and services used by the Debtors; (b) pay for business-related travel (predominantly hotels and rental cars); and (c) otherwise cover certain departmental-based expenses. Use of the P-Cards, however, does not give rise to Reimbursable Expenses; rather, the Debtors directly pay P-Card invoices. Pursuant to the Cash Management Motion, filed contemporaneously herewith, the Debtors seek authority to pay any prepetition or postpetition amounts incurred in connection with use of the P-Cards on a postpetition basis in the ordinary course of business. Accordingly, the Debtors are not seeking any additional relief with respect to the P-Cards through this Motion.

7 The relief sought in this Motion with respect to the KERP and the Non-Insider Bonus Programs does not include the payment of any obligation to an “Insider” (as that term is defined in section 101(31) of the Bankruptcy Code).


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35 non-insider Employees (the “KERP”). Under the KERP, the Debtors award additional

compensation to Employees participating in the program, with each such Employee eligible to

receive payments on a quarterly basis if the Employee remains employed by the Debtors upon

certain specified dates, or if the Employee incurred a Qualifying Termination (as that term is

defined in the participating Employee’s KERP agreement). As of the Petition Date, the Debtors

do not believe they owe any amounts on account of the KERP. To safeguard employee morale

during these chapter 11 cases, the Debtors seek authority to honor all obligations under the KERP

during these chapter 11 cases.

B. Non-Insider Bonus Programs.

27. The Debtors provide a variety of bonus and incentive programs to their non-insider

Employees based on monthly, quarterly, or annual goals. These plans include: (a) a sales

management incentive plan; (b) monthly, quarterly and annual agent bonus plans; (c) monthly,

quarterly and annual operations bonus plans; (d) product business profit sharing plans; (e) sales

commissions; (f) client incentive plans initiated by the Debtors’ clients and for which the clients

reimburse the Debtors; (g) staff incentive plans developed by the Debtors; and (h) sign-on and

retention bonuses (collectively, the “Non-Insider Bonus Programs”). The Non-Insider Bonus

Programs are an integral part of the compensation that the Employees expect to receive in

exchange for their service to the Debtors. The Debtors believe that the authority to continue to

maintain the Non-Insider Bonus Programs and pay all obligations thereunder is critical to

maintaining Employee morale and to avoid disruption to its workforce.

28. As of the Petition Date, the Debtors believe they owe approximately $1.16 million

on account of Non-Insider Bonus Programs. By this Motion, the Debtors seek authority to

maintain the Non-Insider Bonus Programs, pay all outstanding prepetition amounts on account of

Non-Insider Bonus Programs, and to continue paying amounts under the Non-Insider Bonus


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Programs on a postpetition basis in the ordinary course of business consistent with their prepetition

practices.

IV. Employee Health and Welfare Benefits.

29. The Debtors offer their full-time Employees who have been employed for thirty

consecutive days (“Eligible Employees”) the ability to participate in a number of health, insurance,

and benefits programs, including, among other programs, medical and prescription, dental, vision,

and hospital indemnity coverage plans, life and accident insurance, disability insurance, critical

illness insurance, savings and spending account programs, and health benefits programs for certain

former employees (collectively, the “Employee Health and Welfare Benefits”). Failure to

continue the Employee Health and Welfare Benefits, particularly in the midst of the current

COVID-19 pandemic, could cause Employees to experience severe hardship and make it difficult

for the Debtors to retain their workforce. The Debtors believe they are authorized to continue the

Employee Health and Welfare Benefits in the ordinary course; however, out of an abundance of

caution the Debtors seek authority to continue the Employee Health and Welfare Benefits on a

postpetition basis in the ordinary course of business (including paying any prepetition amounts

that may be outstanding), consistent with their prepetition practices. The Debtors will not seek to

pay any outstanding Employee Health and Welfare Benefits or fees related thereto in advance of

the date they come due.

A. Health Benefits.

30. The Debtors offer certain former employees and Eligible Employees the

opportunity to participate in a variety of health benefit plans, including self-insured medical and

prescription coverage plans and dental plans, and third-party insured vision plans

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

Benefits to certain former Employees after their termination, retirement, or disability leave,


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including (without limitation) benefits provided under the Consolidated Omnibus Budget

Reconciliation Act of 1985 (“COBRA”). The Health Benefits are customary for similarly-sized

companies, and Employees and their dependents have come to rely on the Health Benefits.

Without the Health Benefits, current and former Employees would be forced to either forego health

benefit coverage completely or obtain potentially expensive out-of-pocket insurance coverage,

which would likely adversely affect Employee morale and retention. The Debtors seek authority

to pay or remit all outstanding prepetition amounts incurred on account of the Health Benefits and

to continue paying the Health Benefits on a postpetition basis in the ordinary course of business

consistent with their prepetition practice.

1. Medical and Dental Plans.

31. As of the Petition Date, the Debtors estimate that they owe approximately

$7.6 million in the aggregate on account of accrued but unpaid Medical Plan claims, UHC

Administrative Fees, and Stop-Loss Insurance premiums related to the Medical Plans and Dental

Plans. By this Motion, the Debtors seek authority to (a) pay all outstanding prepetition amounts

owed on account of the Medical Plans and the Dental Plans (including UHC Administrative Fees

and Stop-Loss Insurance premiums); and (b) continue honoring their obligations on account of the

Medical Plans and the Dental Plans (including UHC Administrative Fees and Stop-Loss Insurance

premiums) on a postpetition basis in the ordinary course of business consistent with their

prepetition practices.


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a. Medical Plans.

32. The Debtors offer medical and prescription drug coverage to Eligible Employees

through three plans (collectively, the “Medical Plans”), two of which include health savings

account options. The Medical Plans provide coverage for, among other medical costs, outpatient

and inpatient services, preventative care, and prescription drugs. The Medical Plans are

self-insured by the Debtors; however, the Debtors have contracted with United HealthCare

Services, Inc. (“UHC”) to administer the Medical Plans. Participants in the Medical Plans pay

monthly premiums between approximately $108 and $1,600 depending on the level of coverage

selected under their chosen Medical Plan.

33. As of the Petition Date, the Debtors maintain a $846,000 deposit with UHC to fund

claims made under the Medical Plans (such deposit, the “Medical Claims Deposit”). In the

ordinary course of business, UHC draws on the Medical Claims Deposit to fund claims made under

the Medical Plans. The Debtors replenish the Medical Claims Deposit on a weekly basis to

maintain a $846,000 balance. The Debtors pay, on average, $2.5 million in the aggregate per

month to provide the medical benefits under the Medical Plans. The Debtors’ monthly payments

increase throughout the calendar year as Employees reach their deductible thresholds.

34. The Debtors’ obligations related to medical claims incurred prior the Petition Date

is unknown due to the lag between the time healthcare providers submit claims to UHC

and the time UHC processes these claims. The Debtors account for this uncertainty by

calculating an amount for incurred-but-not-recorded obligations based on prior experience

(the “IBNR Obligations”). As of the Petition Date, the Debtors estimate the IBNR Obligations to

total approximately $6.7 million in the aggregate.

35. The Debtors pay UHC monthly administration fees based on the number of

employees participating in the Medical Plans (the “UHC Administrative Fees”). The Debtors rely


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on UHC to process claims and ensure that the medical claims comply with the Medical Plans and

that the claimants are timely paid. The Debtors pay approximately $49,000 per month to UHC on

account of UHC Administrative Fees. As of the Petition Date, the Debtors owe approximately

$65,000 on account of UHC Administrative Fees.

36. In conjunction with the Medical Plans, the Debtors have purchased stop-loss

insurance through ReliaStar Life Insurance Company (“Voya”), which provides additional

protection against large claims made by Employees under the Medical Plans

(the “Stop-Loss Insurance”). Stop-Loss Insurance is an integral part of the Debtors’ management

of the risk of the self-insured Medical Plans and loss of the coverage would subject the Debtors to

undue risk. The Debtors pay approximately $108,000 per month to Voya in premiums for

Stop-Loss Insurance. As of the Petition Date, the Debtors owe approximately $144,000 on account

of Stop-Loss Insurance premiums.

b. Dental Plans

37. In addition to the Medical Plans, the Debtors offer Eligible Employees dental

coverage through two preferred provider option plans (collectively, the “Dental Plans”). The

Dental Plans are self-insured by the Debtors and administered by UHC. Participants in the Dental

Plans pay monthly premiums between approximately $17 and $74 depending on the level of

chosen coverage. In the ordinary course of business, the Debtors fund claims made under the

Dental Plans on a weekly basis. The Debtors pay approximately $100,000 per month to provide

the dental benefits under the Dental Plans. As of the Petition Date, the Debtors owe approximately

$125,000 on account of dental claims (including incurred-but-not-reported claims) made under the

Dental Plans.

2. Vision Plans.

38. The Debtors offer Eligible Employees vision coverage through two plans


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(collectively, the “Vision Plans”) fully insured by UHC. Participants in the Vision Plans pay

monthly premiums between approximately $4 and $14 depending on the level of chosen coverage.

In the ordinary course of business, the Debtors deduct the cost of the Vision Plan premiums from

the Employees’ Wages and remit such amounts directly to UHC.

39. Any amounts deducted by the Debtors but not yet remitted to UHC on account of

the Vision Plans have been included as Withholding Obligations. Out of an abundance of caution,

the Debtors seek authority to remit all outstanding prepetition amounts incurred on account of the

Vision Plans and to continue honoring their obligations under the Vision Plans on a postpetition

basis in the ordinary course of business consistent with their prepetition practices.

B. Life Insurance, AD&D, and Disability Coverage.

40. The Debtors offer the following insurance coverage to all Eligible Employees:

a. basic life insurance, in an amount calculated based on Employee seniority, paid entirely by the Debtors;

b. basic accidental death and dismemberment (“AD&D”) insurance, in an amount calculated based on Employee seniority, paid entirely by the Debtors;

c. short-and long-term disability insurance, paid entirely by the Debtors; and

d. supplemental life and AD&D insurance, in amount up to five times the Employee’s salary, paid entirely by the Employee.

41. These benefits (collectively, the “Life and Disability Coverage Benefits”) are

administered by Lincoln National Corporation. The average annual cost to the Debtors of

providing the Life and Disability Coverage Benefits is approximately $750,000, excluding

voluntary coverage products.


on account of accrued but unpaid premiums related to the Life and Disability Coverage Benefits.

By this Motion, the Debtors seek authority to pay all outstanding prepetition amounts owed on


18

account of the Life and Disability Coverage Benefits and to continue honoring their obligations

under the Life and Disability Coverage Benefits on a postpetition basis in the ordinary course of

business consistent with their prepetition practices.8

C. Accident, Critical Illness, and Hospital Indemnity Coverage.

43. The Debtors offer Eligible Employees the option to participate in accident

insurance coverage, critical illness insurance coverage, and hospital indemnity coverage programs

(the “ACIHI Coverage Programs”), paid entirely by the Employee. The ACIHI Coverage

Programs are provided and administered by Voya. Approximately 2,348 participants are enrolled

in the various ACIHI Coverage Programs and eligible Employees may enroll their legal spouse

and dependent children in their respective ACIHI Coverage Program(s).

44. In the ordinary course of business, the Debtors deduct the cost of the premiums for

the ACIHI Coverage Programs from the Employees’ Wages and remit such amounts directly to

Voya. Any amounts deducted by the Debtors but not yet remitted to Voya on account of the ACIHI

Coverage Programs have been included as Withholding Obligations. Out of an abundance of

caution, the Debtors seek authority to remit all outstanding prepetition amounts incurred on

account of the ACIHI Coverage Programs and to continue honoring their obligations under the

ACIHI Coverage Programs on a postpetition basis in the ordinary course of business consistent

with their prepetition practices.

8 Any amounts deducted by the Debtors but not yet remitted to Lincoln National Corporation on account of the

supplemental life and AD&D insurance have been included as Withholding Obligations. Out of an abundance of caution, the Debtors seek authority to remit all outstanding prepetition amounts incurred on account of the supplemental life and AD&D insurance and to continue honoring their obligations under the Life and Disability Coverage Benefits on a postpetition basis in the ordinary course of business consistent with their prepetition practices.


19

D. Workers’ Compensation and Other Insurance Programs.9

45. In the ordinary course of business, the Debtors maintain workers’ compensation

insurance for their respective Employees at the statutorily required level for each state in which

the Debtors have Employees (collectively, the “Workers’ Compensation Program”). The Debtors

maintain a workers’ compensation policy with Sentry Insurance as part of the Workers’

Compensation Program (the “Workers’ Compensation Insurance Policy”).

46. The Debtors must continue claim assessment, determination, adjudication, and

payment pursuant to the Workers’ Compensation Program, without regard to whether such

liabilities are outstanding before the Petition Date, to ensure that the Debtors comply with

applicable workers’ compensation laws and requirements. There are currently 25 active open

claims under the Workers’ Compensation Program.

47. As of the Petition Date, the Debtors estimate they owe approximately $2.05 million

on account of prepetition claims under the Workers’ Compensation Program. By this Motion, the

Debtors seek authority to (a) lift the automatic stay to permit Employees to proceed with their

claims under the Workers’ Compensation Program in the appropriate judicial or administrative

forum, (b) pay all outstanding prepetition amounts owed on account of the Workers’

Compensation Program, and (c) maintain the Workers’ Compensation Program and continue to

honor their obligations thereunder on a postpetition basis in the ordinary course of business

consistent with their prepetition practices.

9 In addition to the Workers’ Compensation Insurance Policy described herein, the Debtors maintain numerous

insurance policies. These policies are described, and relief is requested with respect to such policies, in the Debtors’ Emergency Motion for Entry of an Order (I) Authorizing the Debtors to (A) Continue Insurance Coverage Entered Into Prepetition and Satisfy Prepetition Obligations Related Thereto, (B) Renew, Amend, Supplement, Extend, or Purchase Insurance Policies, and (C) Continue the Surety Bond Program, and (II) Granting Related Relief, filed contemporaneously herewith and incorporated herein by reference.


20

V. Paid Time Off Benefits.

48. In the ordinary course of business, the Debtors provide paid time off to certain

eligible Employees as a benefit (the “Paid Time Off Benefits”). The Paid Time Off Benefits

provide eligible Employees with the flexibility to plan for vacation, personal and family illness,

doctors’ appointments, and other activities. When an Employee elects to use Paid Time Off

Benefits, that Employee is paid his or her regular hourly or salaried rate. Paid Time Off Benefits

generally accrue at specified rates up to a maximum amount based on the applicable state limit, if

any. Accruals of Paid Time Off Benefits, however, are not a current cash payment obligation.

49. Over the past 12 months, the Debtors paid approximately $1.05 million

in the aggregate in Paid Time Off Benefits. As of the Petition Date, the Debtors estimate that

approximately $700,000 in Paid Time Off Benefits have accrued. By this Motion, the Debtors

seek authority, but not direction, to pay any “cash out” amounts required under applicable law with

respect to earned but unused Paid Time Off Benefits and to continue Paid Time Off Benefits on a

postpetition basis in the ordinary course of business consistent with their prepetition practices.

VI. Deferred Compensation Plan.

50. The Debtors maintain a non-qualified deferred compensation plan for the benefit

of certain Employees and former employees (the “Deferred Compensation Plan”). The Deferred

Compensation Plan provides certain participating Employees with the opportunity to defer

payment of certain earned compensation amounts, thereby deferring the associated income tax

obligations until a future date. The Deferred Compensation Plan is administered by Newport Group,

Inc., and Reliance Trust Company holds a portion of each participating Employee’s compensation

(the “Deferred Compensation Assets”) in a “rabbi trust” for future disbursement upon the

Employee’s direction. There are approximately 107 participants in the Deferred Compensation

Plan, approximately 87 of which are current Employees.


21

51. The Deferred Compensation Assets total approximately $5.3 million and are

subject to substantial restrictions, including, without limitation, that in the event of the Debtors’

insolvency, the trustee must preserve such assets for the benefit of the Debtors’ general

creditors. In the absence of these restrictions, eligible Employees would have been required to

include the amount of any contributions to the rabbi trust on their behalf (as well as any interest or

other earnings accrued on such contributed amounts) in their gross taxable income in the year in

which the contributions were made and/or the interest was accrued. See McAllister v. Resolution

Trust Corp., 201 F.3d 570, 572-73, 575 (5th Cir. 2000). Certain of the participants in the Deferred

Compensation Plan have substantial plan balances (i.e., approximately one quarter of the

Participants have a plan balance of approximately $50,000 or more).

52. The Debtors’ failure to honor their Deferred Compensation Plan obligations could

result in a severe strain on the Debtors’ relationship with their Employees and may jeopardize the

Debtors’ ability to conduct business as usual during these chapter 11 cases. Increased instability

in the Debtors’ workforce will only undermine the Debtors’ ability to strengthen their financial

and operational foundation, to generate growth, and to be positioned for long-term success. By this

Motion, the Debtors seek authority to maintain the Deferred Compensation Plan and to honor their

obligations under the Deferred Compensation Plan in the ordinary course of business on a

postpetition basis.

VII. Non-Insider Severance.

53. The Debtors maintain a severance program in the ordinary course of business for

certain of their non-insider Employees (the “Non-Insider Severance Program”). Pursuant to the

Non-Insider Severance Program, certain former employees may receive bi-weekly payment(s)

after their employment is terminated based on the Employee’s salary, job level, or their time of


22

service with the Debtors prior to termination.10

54. The Debtors believe the Non-Insider Severance Program has been critical to

maintaining Employee morale, loyalty, and stability, and paying the obligations related to the

Non-Insider Severance Program is vital to their businesses. The Debtors’ failure to honor their

Non-Insider Severance Program obligations and continue the Non-Insider Severance Program

postpetition could result in a severe strain on the Debtors’ relationship with their Employees, and

may jeopardize the Debtors’ ability to conduct business as usual during these chapter 11 cases.

Increased instability in the Debtors’ workforce will only undermine the Debtors’ ability to

strengthen their financial and operational foundation, to generate growth, and to be positioned for

long-term success.


in accrued but unpaid obligations under the Non-Insider Severance Program. By this Motion, the

Debtors seek authority, but not direction: (a) to satisfy any accrued but unpaid prepetition

obligations on account of the Non-Insider Severance Program; (b) to continue the Non-Insider

Severance Program with regard to any former employees participating in the Non-Insider

10 In addition to the Non-Insider Severance Program, the Company also maintains a severance program in the

ordinary course of business for certain non-Insider Non-Debtor Affiliate Employees, including, among others, employees of iQor Global Services de Mexico S.A. de C.V. (“iQor Mexico” and, such non-Insider severance program, the “Non-Insider Foreign Severance Program”). Pursuant to the Non-Insider Foreign Severance Program, certain Non-Debtor Affiliate Employees may receive a payment following termination of their employment based on, among other things, statutory severance requirements, their salary, job level, and their time of service with the Company prior to termination. As set forth in the Cash Management Motion, in order to facilitate the Company’s global funding needs, Debtor iQor US Inc. routinely transfers funds to various bank accounts maintained by certain of the Debtors’ foreign non-Debtor affiliates, including iQor Mexico. Absent these intercompany transactions, these foreign non-Debtor affiliates would be unable to satisfy their ordinary course operating expenses, including obligations owed to Non-Debtor Affiliate Employees, as the intercompany transactions account for these entities’ sole source of revenue and operating cash. The Non-Insider Foreign Severance Program is critical to maintaining morale and stability among iQor Mexico’s workforce, and paying the obligations related to the Non-Insider Foreign Severance Program is vital to the Company’s businesses. As of the Petition Date, the Company estimates that approximately $1,200,000 in Non-Insider Foreign Severance Program obligations have accrued. As noted above, the Debtors highlight these non-Debtor employee obligations for the purpose of transparency and are not requesting authority by this Motion to continue funding the Non-Insider Foreign Severance Program, but are requesting such relief in the Cash Management Motion.


23

Severance Program; and (c) to continue the Non-Insider Severance Program for all eligible

Employees on a postpetition basis in the ordinary course of business consistent with their

prepetition practices. For the avoidance of doubt, the Debtors do not request authorization to

continue the Non-Insider Severance Program with regard to any Insider.

Basis for Relief

I. Sufficient Cause Exists to Authorize the Debtors to Honor the Compensation and Benefits.

A. Certain Compensation and Benefits Are Entitled to Priority Treatment.

56. Sections 507(a)(4) and 507(a)(5) of the Bankruptcy Code entitle certain of the

Compensation and Benefits owed to the Employees to priority treatment. As priority claims, the

Debtors are required to pay these claims in full to confirm a chapter 11 plan. See 11 U.S.C.

§ 1129(a)(9)(b) (requiring payment of certain allowed unsecured claims for: (a) wages, salaries,

or commissions, including sick leave pay earned by an individual; and (b) contributions to an

employee benefit plan). Thus, granting the relief sought herein should only affect the timing of

certain payments to the Employees, and should not negatively affect recoveries for general

unsecured creditors. Indeed, the Debtors submit that payment of the Compensation and Benefits

at this time enhances value for the benefit of all interested parties. See In re Equalnet Commc’ns

Corp., 258 B.R. 368, 370 (Bankr. S.D. Tex. 2000) (“The need to pay [employee wage] claims in

an ordinary course of business time frame is simple common sense. Employees are more likely to

stay in place and to refrain from actions which could be detrimental to the case and/or the estate if

their pay and benefits remain intact and uninterrupted.”).

B. Payment of Certain Compensation and Benefits Is Required by Law.

57. The Debtors seek authority to pay the applicable Withholding Obligations to the

appropriate third-party entities. These amounts principally represent Employee earnings that


24

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

Employees’ paychecks. Indeed, certain Withholding Obligations are not property of the Debtors’

estates because the Debtors have withheld such amounts from the Employees’ paychecks on

another party’s behalf. See 11 U.S.C. §§ 541(b)(1), (d); see also In re Equalnet Commc’ns,

258 B.R. at 370 (noting that, for tax obligations where funds are held by the debtor in trust, “the

legal right to payment of such claims at any time appears irrefutable”) (citing In re Al Copeland

Enter., Inc., 991 F.2d 233 (5th Cir. 1993)).

58. Further, federal and state laws require the Debtors to withhold certain tax payments

from the Employees’ paychecks and to pay such amounts to the appropriate taxing authority.

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

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

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

withheld income taxes). Because the Withholding Obligations may not be property of the Debtors’

estates, the Debtors request that the Court authorize them to transmit the Withholding Obligations

on account of the Employees to the proper parties in the ordinary course of business.

59. Similarly, state laws require the Debtors to maintain the Workers’ Compensation

Program. If the Debtors fail to maintain the Workers’ Compensation Program, state laws may

prohibit the Debtors from operating in those states. Payment of all Workers’ Compensation

Program amounts is therefore crucial to the Debtors’ continued operations and the success of the

Debtors’ ongoing chapter 11 process.

II. Payment of the Compensation and Benefits Is Proper Pursuant to Section 363(b) of the Bankruptcy Code.

60. Courts in the Fifth Circuit have recognized that it is appropriate to authorize the

payment of prepetition obligations where necessary to protect and preserve the estate, including


25

an operating business’s going-concern value. See, e.g., In re CoServ, L.L.C., 273 B.R. 487, 497

(Bankr. N.D. Tex. 2002) (authorizing payment of certain prepetition claims pursuant to “doctrine

of necessity”); Equalnet Commc’ns, 258 B.R. at 369–70 (business transactions critical to the

survival of the business of the debtor are exceptions to the general rule of nonpayment of

prepetition claims prior to plan confirmation); see also In re Ionosphere Clubs, Inc., 98 B.R. 174,

175 (Bankr. S.D.N.Y. 1989) (“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.”); In re James A. Phillips, Inc., 29 B.R. 391, 398 (S.D.N.Y. 1983). In doing so,

these courts acknowledge that several legal theories rooted in sections 105(a), 363(b), and 1107(a)

of the Bankruptcy Code support the payment of prepetition claims as provided herein.

61. Section 363(b) of the Bankruptcy Code permits a debtor, subject to court approval,

to pay 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). In addition,

under section 1107(a) of the Bankruptcy Code, a debtor in possession has, among other things, the

“implied duty of the debtor-in-possession to ‘protect and preserve the estate, including an

operating business’ going-concern value.’” In re CEI Roofing, Inc., 315 B.R. 50, 59 (Bankr. N.D.

Tex. 2004) (quoting CoServ, 273 B.R. at 497). Moreover, under section 105(a) of the Bankruptcy

Code, “the Court may issue any order, process, or judgment that is necessary or appropriate to

carry out the provisions of the Bankruptcy Code.” 11 U.S.C. § 105(a); CoServ, 273 B.R. at 497

(finding that sections 105 and 1107 of the Bankruptcy Code provide the authority for a debtor-in-

possession to pay prepetition claims); CEI Roofing, 315 B.R. at 60 (finding that “[b]ecause

Congress has specifically provided that prepetition wage claims up to a certain amount per claim


26

be elevated to priority status under § 503(1)(3)” the court’s job is easier when it considers approval

of such prepetition claims); In re Mirant Corp., 296 B.R. 427, 429 (Bankr. N.D. Tex. 2003)

(noting that non-payment of prepetition claims may seriously damage a debtor’s business). The

above-referenced sections of the Bankruptcy Code therefore authorize the postpetition payment of

prepetition claims when the payments are critical to preserving the going-concern value of the

debtor’s estate, as is the case here. See, e.g., CoServ, 273 B.R. at 497 (“[I]t is only logical that the

bankruptcy court be able to use [s]ection 105(a) of the [Bankruptcy] Code to authorize satisfaction

of the pre-petition claim in aid of preservation or enhancement of the estate.”).

62. The Debtors submit that the relief requested herein is warranted under this authority

and the facts of these chapter 11 cases. Paying prepetition compensation, benefits, and similar

obligations will benefit the Debtors’ estates and their creditors by allowing the Debtors’ business

operations to continue without interruption. Although the PEO Employee Obligations and certain

Temporary Staff Obligations are paid to third-party staffing agencies that then remit payment to

the applicable workers, that payment is vital to the continued engagement of the PEO Employees

and the Temporary Staff, who are critical to the Debtors’ business operations.

63. Without the relief requested herein, Employees, Non-Debtor Affiliate Employees,

PEO Employees, or Temporary Staff may seek alternative employment opportunities, perhaps with

the Debtors’ competitors. That would deplete the Debtors’ workforce, thereby hindering the

Debtors’ ability to operate their business. Additionally, significantly all of the value of the

Debtors’ business is tied to their workforce, which cannot easily be replaced without significant

efforts. The loss of valuable employees and resulting need to recruit new personnel (and the costs

attendant thereto) would be distracting at this crucial time when the Debtors need to focus on

stabilizing their business operations. Enterprise value may be materially impaired to the detriment


27

of all stakeholders in that scenario. There can be no doubt that the Debtors must do their utmost

to retain their workforce by, among other things, continuing to honor all wage, benefits, and related

obligations, including the prepetition Compensation and Benefits. Honoring prepetition and

postpetition obligations under the Non-Insider Severance Program and the Deferred Compensation

Plan is similarly important to sustain morale for the current Employees and promote their

continued retention.

64. In addition, the majority of Employees and Non-Debtor Affiliate Employees rely

exclusively on the Compensation and Benefits to satisfy their daily living expenses. Consequently,

Employees and Non-Debtor Affiliate Employees will be exposed to significant financial

difficulties if the Debtors are not permitted to honor their obligations related thereto. Failure to

satisfy these obligations will jeopardize morale and loyalty at a time when Employee and

Temporary Staff support is critical to the Debtors’ business. If the Court does not authorize the

Debtors to honor their various obligations under the benefit and insurance programs described

herein, Employees will not receive health coverage and, thus, may be obligated to pay certain

healthcare claims that the Debtors have not satisfied. The loss of healthcare coverage will result

in considerable anxiety for Employees (and likely attrition) at a time when the Debtors need these

Employees to perform their jobs at peak efficiency. Additionally, as set forth above, Employee

attrition would cause the Debtors to incur additional expenses to find appropriate and experienced

replacements, severely disrupting the Debtors’ operations at this critical juncture.

65. The Debtors request that the Court authorize the Debtors to pay and continue the

Compensation and Benefits in the ordinary course of business and consistent with their prepetition

practices.


28

III. A Limited Waiver of the Automatic Stay for the Workers’ Compensation Program Is Appropriate in this Case.

66. Section 362(a)(1) of the Bankruptcy Code operates to stay:

[T]he commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title . . . .

67. Section 362 of the Bankruptcy Code, however, permits a debtor or other parties

in interest to request a modification or termination of the automatic stay for “cause.”

11 U.S.C. § 362(d)(1).

68. The Debtors seek authorization, under section 362(d) of the Bankruptcy Code, to

permit their Employees to proceed with their claims against the Workers’ Compensation Program

in the appropriate judicial or administrative forum. The Debtors believe that cause exists to modify

the automatic stay because staying the Employees’ workers’ compensation claims could have a

detrimental effect on the financial well-being and morale of the Employees and lead to the

departure of certain Employees who are critical at this juncture. Such departures could cause a

severe disruption in the Debtors’ business to the detriment of all stakeholders. In addition, as noted

above, if the Debtors fail to maintain the Workers’ Compensation Program, state laws may prohibit

the Debtors from operating in those states. The Debtors request a limited waiver of the automatic

stay for purposes of allowing the Debtors’ Workers’ Compensation Program to proceed.

Processing of Checks and Electronic Fund Transfers Should be Authorized

69. 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

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


29

payment in respect of the relief requested herein. The Debtors believe that checks or wire transfer

requests, other than those relating to authorized payments, will not be honored inadvertently. The

Debtors request that the 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.

Emergency Consideration

70. Pursuant to Bankruptcy Rule 6003, which empowers a court to grant relief within

the first 21 days after the commencement of a chapter 11 case “to the extent that relief is necessary

to avoid immediate and irreparable harm,” the Debtors request emergency consideration of this

Motion. The Debtors believe an immediate and orderly transition into chapter 11 is critical to the

viability of their operations and that any delay in granting the relief requested could hinder the

Debtors’ operations and cause irreparable harm. The failure to receive the requested relief during

the first 21 days of these chapter 11 cases would severely disrupt the Debtors’ operations at this

critical juncture and imperil the Debtors’ restructuring. The Debtors have satisfied the “immediate

and irreparable harm” standard of Bankruptcy Rule 6003 and request that the Court approve the

relief requested in this Motion on an emergency basis.

Waiver of Bankruptcy Rules 6004(a) and 6004(h)

71. To implement the foregoing successfully, the Debtors request that the 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 this relief from the 14-day stay period under

Bankruptcy Rule 6004(h).

Reservation of Rights

72. Nothing contained herein or any actions taken pursuant to such relief requested is

intended or shall be construed as: (a) an admission as to the amount of, basis for, or validity of


30

any claim against a Debtor entity under the Bankruptcy Code or other applicable nonbankruptcy

law; (b) a waiver of the Debtors’ or any other party in interest’s right to dispute any claim on any

grounds; (c) a promise or requirement to pay any claim; (d) an implication or admission that any

particular claim is of a type specified or defined in this Motion or any order granting the relief

requested by this Motion or a finding that any particular claim is an administrative expense claim

or other priority claim; (e) a request or authorization to assume, adopt, or reject any agreement,

contract, or lease pursuant to section 365 of the Bankruptcy Code; (f) an admission as to the

validity, priority, enforceability, or perfection of any lien on, security interest in, or other

encumbrance on property of the Debtors’ estates; (g) 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 (h) a

concession by the Debtors that any liens (contractual, common law, statutory, or otherwise) that

may be satisfied pursuant to the relief requested in this Motion are valid, and the rights of all parties

in interest are expressly reserved to contest the extent, validity, or perfection or seek avoidance of

all such liens. If the Court grants the relief sought herein, any payment made pursuant to the

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 other party in interest’s rights to subsequently

dispute the claim.

Notice

73. The Debtors will provide notice of this Motion to the following parties or their

respective counsel, as applicable: (a) the United States Trustee for the Southern District of Texas;

(b) the holders of the 30 largest unsecured claims against the Debtors (on a consolidated basis);

(c) the administrative agent under the Debtors’ prepetition priority term loan credit facility and

prepetition first lien term loan credit facility, and counsel thereto; (d) the administrative agent

under the Debtors’ second lien term loan credit facility, and counsel thereto; (e) the accounts


31

receivable facility lender, and counsel thereto; (f) counsel to the ad hoc group of term loan lenders;

(g) the United States Attorney’s Office for the Southern District of Texas; (h) the Internal Revenue

Service; (i) the attorneys general for the states in which the Debtors operate; (j) ADP; (k) Voya;

(l) UHC; and (m) any party that has requested notice pursuant to Bankruptcy Rule 2002. The

Debtors submit that, in light of the nature of the relief requested, no other or further notice need

be given.


WHEREFORE, the Debtors respectfully request that the Court enter an order granting the relief

requested in this Motion and such other and further relief as is appropriate under the circumstances.

Houston, Texas September 10, 2020 Respectfully Submitted, /s/ Matthew D. Cavenaugh JACKSON WALKER L.L.P. KIRKLAND & ELLIS LLP Matthew D. Cavenaugh (TX Bar No. 24062656) KIRKLAND & ELLIS INTERNATIONAL LLP Jennifer F. Wertz (TX Bar No. 24072822) Christopher Marcus, P.C. (pro hac vice admission pending) Genevieve M. Graham (TX Bar No. 24085340) Rachael M. Bazinski (pro hac vice admission pending) Vienna F. Anaya (TX Bar No. 24091225) 601 Lexington Avenue 1401 McKinney Street, Suite 1900 New York, New York 10022 Houston, Texas 77010 Telephone: (212) 446-4800 Telephone: (713) 752-4200 Facsimile: (212) 446-4900 Facsimile: (713) 752-4221 Email: [email protected]

Email: [email protected] [email protected]

[email protected] [email protected] [email protected]

Proposed Co-Counsel to the Debtors Proposed Co-Counsel to the Debtors and Debtors in Possession and Debtors in Possession


Certificate of Accuracy

I certify that the foregoing statements are true and accurate to the best of my knowledge. This statement is being made pursuant to Local Rule 9013-1(i).

/s/ Matthew D. Cavenaugh Matthew D. Cavenaugh

Certificate of Service

I certify that on September 10, 2020, I caused a copy of the foregoing document to be served by the Electronic Case Filing System for the United States Bankruptcy Court for the Southern District of Texas.

/s/ Matthew D. Cavenaugh Matthew D. Cavenaugh


IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

) In re: ) Chapter 11 ) IQOR HOLDINGS INC., et al.,1 ) Case No. 20-34500 (DRJ) ) Debtors. ) (Joint Administration Requested) ) ) Re: Docket No. __

ORDER (I) AUTHORIZING THE DEBTORS TO (A) PAY PREPETITION WAGES, SALARIES, OTHER

COMPENSATION, AND REIMBURSABLE EXPENSES AND (B) CONTINUE EMPLOYEE BENEFITS PROGRAMS, 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 order (this “Order”), (a) authorizing, but not directing,

the Debtors to (i) pay prepetition wages, salaries, other compensation, reimbursable employee

expenses, and non-insider severance obligations, and (ii) continue compensation and benefits

programs in the ordinary course, including payment of 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. § 1334;

and this Court having found that this is a core proceeding pursuant to 28 U.S.C. § 157(b); and that

this Court 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. §§ 1408 and 1409; and this Court having found that the relief requested in

1 A complete list of each of the Debtors in these chapter 11 cases may be obtained on the website of the Debtors’

proposed claims and noticing agent at https://omniagentsolutions.com/iqor. The location of the Debtors’ service address is: 200 Central Avenue, 7th Floor, St. Petersburg, Florida 33701.

2 Capitalized terms used but not defined herein have the meanings ascribed to them in the Motion.

Case 20-34500 Document 27-1 Filed in TXSB on 09/10/20 Page 1 of 5

2

the Motion is in the best interests of the Debtors’ estates, their creditors, and other parties in

interest; 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 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 Debtors are authorized, but not directed, to continue to administer and/or

modify, change, or discontinue the Compensation and Benefits in accordance with prepetition

practices, and to honor and pay any claims or obligations on account of the Compensation and

Benefits, irrespective of whether such obligations arose prepetition or postpetition, and without

the need for further Court approval, subject to applicable law; provided that the Debtors shall not

honor any prepetition claims or obligations on account of Compensation and Benefits to any

individual that exceed the priority amounts set forth in sections 507(a)(4) and 507(a)(5) of the

Bankruptcy Code. The Debtors provide shall provide notice to the U.S. Trustee and any statutory

committee appointed in these chapter 11 cases of any material changes or modifications to

Compensation and Benefits and any new employee compensation or benefit plans or programs.

2. For the avoidance of doubt, the Debtors are authorized to continue the Deferred

Compensation Plan in the ordinary course of business on a postpetition basis, and to honor their

prepetition and postpetition obligations under the Deferred Compensation Plan.

3. Nothing herein shall be deemed to authorize the payment of any amounts to any

“insider” pursuant to any bonus, incentive, retention, or severance plan that violate or implicate


3

section 503(c) of the Bankruptcy Code; provided that nothing in this Order shall prejudice the

Debtors’ ability to seek approval of relief pursuant to section 503(c) of the Bankruptcy Code at a

later time.

4. Pursuant to section 362(d) of the Bankruptcy Code: (a) Employees are authorized

to proceed with their workers’ compensation claims in the appropriate judicial or administrative

forum under the Workers’ Compensation Program, and the Debtors are authorized to pay all

prepetition amounts relating thereto in the ordinary course of business; and (b) the notice

requirements pursuant to Bankruptcy Rule 4001(d) with respect to clause (a) are waived.

This modification of the automatic stay pertains solely to claims under the Workers’ Compensation

Program and any such claims must be pursued in accordance with the applicable Workers’

Compensation Program. Payment on account of any recoveries obtained in connection with a

claim brought pursuant to this paragraph is limited to the terms and conditions of the applicable

Workers’ Compensation Program, including with regard to any policy limits or caps.

5. Notwithstanding the relief granted herein and any actions taken pursuant to such

relief, nothing in this Order shall be deemed: (a) an admission as to the validity of any prepetition

claim, interest, or lien against a Debtor entity; (b) a waiver of the Debtors’ or any other party in

interest’s rights to dispute any prepetition claim, interest, or lien on any grounds; (c) a promise or

requirement to pay prepetition claims; (d) a waiver of the obligation of any party in interest to file

a proof of claim; (e) an implication or admission that any particular claim, interest, or lien is of a

type specified or defined in the Motion or any order granting the relief requested by the Motion;

(f) a request or authorization to assume any prepetition agreement, contract, or lease pursuant to

section 365 of the Bankruptcy Code; (g) a waiver of the Debtors’ or any other party in interest’s

rights under the Bankruptcy Code or any other applicable law; or (h) a concession by the Debtors


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that any liens (contractual, common law, statutory, or otherwise) that may be satisfied pursuant to

the relief granted in this Order are valid, and the rights of all parties in interest are expressly

reserved 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

to receive, process, honor, and pay all such checks and electronic payment requests when presented

for payment, 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 Order.

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 the relief granted herein.

8. Notwithstanding anything to the contrary in this Order, any payment made or action

taken by any of the Debtors pursuant to the authority granted in this Order shall be subject to any

interim or final order entered by the Court approving the Debtors’ use of cash collateral and/or the

Debtors’ entry into any postpetition financing facilities or credit agreements, and any budgets in

connection therewith governing any such postpetition financing and/or use of cash collateral

(each such order, a “DIP Order”). To the extent there is any inconsistency between the terms of

the DIP Order and this Order, the terms of the DIP Order shall control.

9. The contents of the Motion satisfy the requirements of Bankruptcy Rule 6003(b).

10. Notice of the Motion as provided therein shall be deemed good and sufficient notice

of the Motion and the requirements of Bankruptcy Rule 6004(a) and the Bankruptcy Local Rules

are satisfied by such notice.


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11. Notwithstanding Bankruptcy Rule 6004(h), the terms and conditions of this 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 Order in accordance with the Motion.

13. This Court retains exclusive jurisdiction with respect to all matters arising from or

related to the implementation, interpretation, and enforcement of this Order.

Dated: __________, 2020 Houston, Texas UNITED STATES BANKRUPTCY JUDGE


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