Court filing

First Day Motion (Employee Wages and Benefits) — In re KServicing Wind Down (Bankr. D. Del.)

Filed October 3, 2022 in Kservicing Bankruptcy; one of 140 filings from this case.

Record facts

Court	U.S. Bankruptcy Court for the District of Delaware
Filed	2022-10-03

U.S. Bankruptcy Court for the District of Delaware · No. 22-10951 · Doc. 10 · 2022-10-03 · Docket on CourtListener

Full text

RLF1 28018234v.1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

------------------------------------------------------------ x

In re
:
Chapter 11

KABBAGE, INC. d/b/a KSERVICING, et al., :
Case No. 22-10951 ( )

Debtors.1
:
(Joint Administration Requested)
------------------------------------------------------------ x

MOTION OF DEBTORS FOR ENTRY OF INTERIM
AND FINAL ORDERS (I) AUTHORIZING DEBTORS TO (A) PAY
PREPETITION WAGES, SALARIES, EMPLOYEE BENEFITS, AND OTHER
COMPENSATION AND (B) MAINTAIN EMPLOYEE BENEFIT PROGRAMS AND
PAY RELATED OBLIGATIONS AND (II) GRANTING RELATED RELIEF
Kabbage, Inc. d/b/a KServicing and its debtor affiliates, as debtors and debtors in
possession in the above-captioned chapter 11 cases (collectively, the “Debtors” and, together with
their non-Debtor affiliates, the “Company”), respectfully move and represent as follows in support
of this motion (this “Motion”):2
Relief Requested
1.
By this Motion, the Debtors request authority pursuant to sections 105(a),
363(b), and 507(a) of title 11 of the United States Code (the “Bankruptcy Code”) and Rules 6003
and 6004 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) but not
direction, to (a) pay Employee Compensation Obligations and Employee Benefit Obligations

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification
number, as applicable are: Kabbage, Inc. d/b/a KServicing (3937); Kabbage Canada Holdings, LLC (N/A); Kabbage
Asset Securitization LLC (N/A); Kabbage Asset Funding 2017-A LLC (4803); Kabbage Asset Funding 2019-A
LLC (8973); and Kabbage Diameter, LLC (N/A). Kabbage is a trademark of American Express used under license;
Kabbage, Inc. d/b/a KServicing is not affiliated with American Express. The Debtors’ mailing and service address
is 925B Peachtree Street NE, Suite 383, Atlanta, GA 30309.
2 The facts and circumstances supporting the relief requested herein are set forth in the First Day Declaration (as
defined below) filed contemporaneously herewith. Capitalized terms used but not defined herein shall have the
respective meanings ascribed to such terms in the First Day Declaration (as defined below).
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 1 of 37

RLF1 28018234v.1
(each as defined below) (collectively, the “Employee Obligations”), and related expenses, fees
and costs incident to the foregoing, and (b) maintain, continue to honor, and pay amounts with
respect to the Debtors’ business practices, programs, and policies for their employees as such were
in effect as of the Petition Date, and as such may be modified or supplemented from time to time
in the ordinary course of business.
2.
The Debtors further request that the Court (a) authorize all applicable
financial institutions (collectively, the “Banks”) to receive, process, honor, and pay all checks
presented for payment and electronic payment requests relating to the foregoing to the extent
directed by the Debtors in accordance with this Motion and to the extent the Debtors have sufficient
funds on deposit in their accounts with such Bank, whether such checks were presented or
electronic requests were submitted before or after the date hereof, and (b) authorize all Banks to
rely on the Debtors’ designation of any particular check or electronic payment request as
appropriate pursuant to this Motion without any duty of further inquiry, and without liability for
following the Debtors’ instructions.
3.
A proposed form of order granting the relief requested herein on an interim
basis is annexed hereto as Exhibit A (the “Proposed Interim Order”), and a proposed form of
order granting the relief requested herein on a final basis is annexed hereto as Exhibit B (the
“Proposed Final Order” and, together with the Proposed Interim Order, the “Proposed Orders”).
Jurisdiction and Venue
4.
The Court has jurisdiction to consider this matter pursuant to
28 U.S.C. §§ 157 and 1334, and the Amended Standing Order of Reference from the United States
District Court for the District of Delaware, dated February 29, 2012. This is a core proceeding
pursuant to 28 U.S.C. § 157(b). Pursuant to Rule 9013-1(f) of the Local Rules of Bankruptcy
Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 2 of 37

RLF1 28018234v.1
“Local Rules”), the Debtors consent to the entry of a final order by the Court in connection with
this Motion if it is later determined that the Court, absent consent of the parties, cannot enter final
orders or judgments consistent with Article III of the United States Constitution. Venue is proper
before the Court pursuant to 28 U.S.C. §§ 1408 and 1409.
Background
5.
On the date hereof (the “Petition Date”), the Debtors commenced with the
Court voluntary cases under the Bankruptcy Code (the “Chapter 11 Cases”). The Debtors are
authorized to continue operating their business and managing their properties as debtors in
possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner,
or statutory committee has been appointed in these Chapter 11 Cases.
6.
Contemporaneously herewith, the Debtors have filed a motion requesting
joint administration of their Chapter 11 Cases pursuant to Rule 1015(b) of the Bankruptcy Rules
and Rule 1015-1 of the Local Rules.
7.
Additional information regarding the Debtors’ business, capital structure,
and the circumstances leading to the commencement of these Chapter 11 Cases is set forth in the
Declaration of Deborah Rieger-Paganis In Support of Debtors’ Chapter 11 Petitions and First
Day Relief (the “First Day Declaration”), filed contemporaneously herewith.
Debtors’ Workforce
8.
As of the Petition Date, the Debtors collectively employ 18 full-time
employees paid on a salaried basis (the “Salaried Employees”) and 2 employees paid on an hourly
basis, 1 of which is part time (the “Hourly Employees” and, together with the Salaried Employees,
the “Employees”).3 In addition, the Debtors utilize the services of approximately 163 independent

3 Through this Motion, the Debtors do not seek authority to use funds from any Debtor entity to administer any
foreign compensation or benefit program as their non-debtor foreign affiliates are dormant entities.
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 3 of 37

RLF1 28018234v.1
contractors, 159 of which are contracted out by the Employment Vendors (as defined below) and
five (5) of which are contracted out and paid directly by the Debtors (individually a “Contractor”
and collectively, the “Contractor Workforce”). The Employees and Contractor Workforce are
critical to the success of the Debtors’ business and are responsible for ensuring, among other
things, that the Debtors’ operations continue to run smoothly, and effectively.
9.
The monetary relief sought in the Proposed Orders is discussed in further
detail below and summarized in the following chart:
Prepetition Obligations
Interim Relief Requested
Total Relief Requested
Employee Compensation
Obligations
$1,046,000
$1,066,000
Employee Benefit
Obligations
$4,800
$4,800
Total Employee
Obligations
$1,050,800
$1,070,800
Employee Compensation Obligations
10.
The Debtors’ outstanding prepetition obligations related to compensation of
Employees and Contractors (collectively, the “Employee Compensation Obligations”) are
summarized in the following chart and described in further detail below. By this Motion, the
Debtors seek authority to continue the Employee Compensation Obligations in the ordinary course
of business and to pay any prepetition obligations owed on account of the Employee Compensation
Obligations (as set forth in the Proposed Orders).
Employee Compensation
Obligations
Interim Relief Requested
Total Relief Requested
Administration Fees
$1,000
$1,000
Compensation
$35,000
$35,000
Employee Bonus Program
$0
$0
Employee Benefit
Programs
$2,000
$22,000
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 4 of 37

RLF1 28018234v.1
Employee Compensation
Obligations
Interim Relief Requested
Total Relief Requested
Employer Taxes
$3,000
$3,000
Deferred 2020 Payroll Tax
$600,000
$600,000
Reimbursement Programs
$5,000
$5,000
Contractor Workforce
Compensation
$400,000
$400,000
Total Employee
Compensation
Obligations
1,046,000
$1,066,000
A.
Employee Program Administration
11.
The Debtors utilize Insperity PEO Services, L.P. (“Insperity”) to
administer the Debtors’ payroll processing system, distribute payroll, and ensure proper tax and
benefit withholdings are made. Insperity also directs enrollment, contributions, and payment in
connection with the Employee Benefit Programs (as defined below). In exchange for these
services, the Debtors pay Insperity administration fees (the “Administration Fees”) of
approximately $6,600 each month. As of the Petition Date, the Debtors estimate owing
approximately $1,000 to Insperity on account of Administration Fees. The Debtors seek authority
to pay all such Administration Fees on a post-petition basis, as they come due in the ordinary
course of business.
B.
Unpaid Compensation
12.
In the ordinary course of business, the Debtors incur and pay salaries,
wages, and related obligations (excluding reimbursable Business Expenses and Employee Leave
Benefits, as defined below) to Employees (“Compensation”). Employees are paid in arrears on a
semimonthly basis—on the 15th and the last day of each month (each, a “Pay Day” and the period
between each Pay Day, a “Pay Period”). On average, the Debtors’ gross payroll (including
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 5 of 37

RLF1 28018234v.1
amounts paid on account of taxes and other amounts, as set forth in more detail below) is
approximately $131,000 per Pay Period.
13.
The Debtors calculate estimated payroll three (3) business days in advance
of the applicable Pay Day and on such Pay Day, Insperity directly debits the funds from the
Debtors’ main operating account for disbursement to the Employees via direct deposit (electronic
transfers of funds to the Employees’ bank accounts). Three business days prior to each Pay Day,
the Debtors estimate, based on current workload, the amount of funds that will be owed to the
Hourly Employees. To the extent the estimated amounts are insufficient, or in excess of what is
owed, the Debtors can resolve the discrepancy in the following Pay Period. Importantly, to date,
the Debtors have not had an instance where this was necessary. Nevertheless, the Debtors request
authority to make any appropriate adjustments based on any potential discrepancies between
estimated and actual Compensation of the Hourly Employees for the respective Pay Period.
14.
As of the Petition Date, the Debtors estimate owing approximately $35,000
on account of unpaid Compensation. No Employee is owed unpaid Compensation in excess of the
$15,150 cap imposed by section 507(a)(4) of the Bankruptcy Code. The Debtors seek authority to
pay all prepetition and post-petition Compensation in the ordinary course of business during the
Chapter 11 Cases.
C.
Employee Bonus Program
15.
As part of the Employee Compensation Obligations, Employees are eligible
to receive (i) annual discretionary bonuses, and (ii) referral bonuses upon referring someone who
is hired into a full-time position (the “Employee Bonus Program”). An Employee’s annual bonus
is determined based on performance, and further details regarding eligibility can be found in each
respective Employee’s offer letters. Typically, bonuses are paid annually no later than the last Pay
Period in March of the following year. In addition to specifics detailed in each applicable
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 6 of 37

RLF1 28018234v.1
Employee offer letter, Employees must be employed prior to October 1st of the target year to be
eligible to receive the bonus, and must also be employed on the day the bonus is paid without
having provided formal departure or termination notice. The amount of a referral bonus varies
based on market demand, but generally ranges from $500-$2,000, and is paid to the referring
individual in the Pay Period following the referred individual’s 60th day of employment.
16.
For the current calendar year, the KERP (as defined below) has replaced the
Employee Bonus Program for all Employees that are included in the KERP. For Employees that
are not included in the KERP, the Debtors seek authority pursuant to the Proposed Final Order to
continue the Employee Bonus Program for the current calendar year with respect to those
Employees. Additionally, the Debtors also seek authority pursuant to the Proposed Final Order to
pay any amounts under the Employee Bonus Program on a post-petition basis, as they come due
in the ordinary course of business for subsequent calendar years.4
D.
Additional Employee Benefit Programs
17.
Certain training and other benefits, including commuter benefit programs,
nutrition counseling, and pet health insurance are also offered by the Debtors, in the ordinary
course, through Insperity (the “Insperity Development Program”). The Insperity Development
Program is at no additional cost to the Debtors and is covered in the Administration Fee.
18.
As part of their employment terms, the Debtors provide a one-time training
allowance of $2,500 for certain Employees within the Debtors’ operations division. As of the

4 For the avoidance of doubt, for the current calendar year, Employees will not receive the annual bonus they are
otherwise entitled to under the Employee Bonus Program, and consideration for such amounts are instead provided
for under the KERP (as defined below). Through this Motion, the Debtors are seeking authority to pay annual bonuses
in the ordinary course for subsequent calendar years. However, the Debtors are not seeking authority to continue the
Employee Bonus Program for insiders, as defined in section 101(31) of the Bankruptcy Code section 101.
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 7 of 37

RLF1 28018234v.1
Petition Date, to the best of the Debtors’ knowledge, approximately $20,000 remains unused by
applicable Employees (the “Employee Training Program”).
19.
The Company also provides each Employee with a $60 monthly credit
towards their cell phones to compensate for business related use, which is paid as part of the
Employee Compensation (the “Cell Phone Program”). In previous years, the Debtors paid, in
the aggregate, approximately $11,000 annually to eligible Employees under the Cell Phone
Program. Further, the Company pays for office parking for the Employees each month depending
on usage directly to Lanier Parking Solutions (“Office Parking”). The cost of Office Parking
ranges depending on use; however, on average, the monthly cost to the Debtors is approximately
$1,000.
20.
As of the Petition Date, the Debtors owe approximately $2,000 of
prepetition amounts on account of the Cell Phone Program and Office Parking. The Debtors seek
authority to continue the Cell Phone Program, Employee Training Program, and Office Parking in
the ordinary course of business during the Chapter 11 Cases.
E.
Key Employee Retention Plan
21.
To retain certain key Employees, and to focus their efforts during the
Debtors’ complex wind down process, the Debtors, with input from their advisors (including an
independent compensation consultant), adopted and implemented a prepetition retention program
for 15 critical Employees, including certain Executives, in lieu of any bonus and severance for the
current calendar year (the “KERP”). The KERP was approved by the Debtors’ board of directors
following the recommendation of the Debtors’ advisors. The KERP payments total approximately
$773,000, $527,000 of which was paid in a lump sum prepetition cash payment. The remaining
$246,000 will be paid to certain non-executives in four equal installments with the first installment
having been paid on September 30, 2022, and the remaining installments to be paid on or as soon
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 8 of 37

RLF1 28018234v.1
as administratively practicable following each of: December 31, 2022, March 31, 2023, and June
30, 2023, subject to the terms of the KERP agreement, including continued employment with the
Debtors. Also to account for any special circumstances, the KERP provides for an additional
discretionary pool of $63,000 to be used for non-insiders to satisfy any retention needs. For the
avoidance of doubt, the Debtors are not seeking authority to make any payments under the KERP
pursuant to this Motion, and any such authority will be sought pursuant to separate order of the
Court.
F.
Deductions and Withholding Obligations
22.
For each applicable Pay Period, Insperity, on behalf of the Debtors, deducts
certain amounts from each Employee’s gross pay, including 401(k) contributions, and other pre-
and after-tax deductions payable pursuant to certain Employee Benefit Programs discussed
herein (collectively, the “Deductions”). In the aggregate, approximately $10,000 in payroll
Deductions are made each Pay Period.
23.
In addition to the Deductions, federal and state laws require the Debtors to
withhold amounts from each Employee’s gross pay related to federal, state, and local income taxes,
including Social Security and Medicare taxes, for remittance to the appropriate federal, state, or
local taxing authorities (collectively, the “Withholdings”). Insperity, on behalf of the Debtors,
collects the Withholdings from the Debtors’ gross payroll. The Debtors match, from their own
funds, amounts for Social Security and Medicare taxes, and pay additional amounts for federal and
state unemployment insurance based on a percentage of gross payroll (collectively, the “Employer
Payroll Taxes” and, together with the Withholdings, the “Payroll Taxes”) and remit such amount
to Insperity. Insperity, on behalf of the Debtors, then remits the Payroll Taxes to the relevant
governmental authorities. In the aggregate, the Payroll Taxes, including both the Employee and
employer portions, total approximately $48,000 per Pay Period.
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 9 of 37

RLF1 28018234v.1
24.
In 2020, the Debtors deferred Employer Payroll Taxes as permitted by the
Coronavirus Aid, Relief, and Economic Security Act. In July 2022, the Debtors received notice
from the Internal Revenue Service (the “IRS”) regarding unpaid Employer Payroll Taxes of
$301,348.03 for the period of the second financial quarter of 2020. The Debtors are currently
reviewing and reconciling whether additional funds are owed to the IRS, and based on information
received to date, $1,208,000 was paid to the IRS for deferred payroll taxes in November, 2020.
As of the Petition Date, the Debtors believe they may owe $600,000 on account of deferred
Employer Payroll Taxes. Further, as of the Petition Date, the Debtors owe approximately $3,000
on account of prepetition Employer Payroll Taxes. Pursuant to this Motion, the Debtors seek
authority to pay any outstanding and deferred prepetition Employer Payroll Taxes. The Debtors
also seek authority to pay Deductions and Payroll Taxes on a post-petition basis in the ordinary
course of business during the Chapter 11 Cases.
G.
Reimbursement Programs5
25.
In the ordinary course of business, certain Employees incur, and are
reimbursed by the Debtors for, business expenses in connection with their employment duties.
Such expenses include meal allowances, work related travel and lodging, local transportation,
professional licenses and dues, and home office setup (the “Business Expenses”). These Business
Expenses are incurred personally by the Employees and then submitted to their respective manager
via email for approval. After approval, the manager forwards the reimbursement request to the
accounts payable supervisor who audits and approves such request before reimbursing the

5 The Debtors also maintain a corporate credit card program in the ordinary course of business as further discussed in
the Motion of the Debtors for Entry of Interim and Final Orders (I) Authorizing Debtors to (A) Continue Using
Existing Cash Management System, Bank Accounts, and Business Forms, (B) Implement Changes to Cash
Management in the Ordinary Course of Business; and (II) Granting Related Relief (the “Cash Management
Motion”).
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 10 of 37

RLF1 28018234v.1
respective Employee. Employees must submit their expenses for reimbursement no later than the
end of the month following the month in which the expenses were incurred. Historically, over the
course of the current calendar year, the monthly Business Expenses have ranged from $0 to $7,200
for a monthly average of $2,000.
26.
Accordingly, while it is difficult to determine the amount of Business
Expenses outstanding at any given time, as of the Petition Date, the Debtors estimate that they may
owe a nominal amount of $5,000 on account of the Business Expenses. The Debtors seek authority
to pay all pre and post-petition Business Expense reimbursements in the ordinary course of
business during the Chapter 11 Cases.
H.
Contract Workforce Compensation
27.
In addition to their Employees, the Debtors rely significantly on their
Contractor Workforce, which includes individuals who have expertise related to the Debtors’
operations and provide services in specific areas, including: legal contract review, loan origination
and risk, and data and reporting. The Debtors contract with, and compensate, third party
employment vendors and consultants, including: Vaco LLC, RSM US LLP, Morgan Franklin
LLC, Vital Outsourcing Services, Inc., Option 1 Partners LLC, Libra Risk Management, URS
Technologies Solutions LLC, Allegis Group Holdings Inc. and Moore Colson (collectively, the
“Employment Vendors”). The Debtors remit approximately $1.4 million per month to the
Employment Vendors, and in turn the Employment Vendors compensate the Contractor
Workforce.
28.
As of the Petition Date, the Debtors estimate owing approximately
$400,000 in the aggregate to the Employment Vendors for unpaid prepetition services provided by
the Contract Workforce. The Debtors request the authority to pay this prepetition amount, and to
continue to retain and pay the Contract Workforce through the Employment Vendors in the
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 11 of 37

RLF1 28018234v.1
ordinary course of business during the Chapter 11 Cases. For avoidance of doubt, no Contractor
is owed unpaid compensation in excess of the $15,150 cap imposed by section 507(a)(4) of the
Bankruptcy Code.
Employee Benefit Programs
29.
In the ordinary course of business, the Debtors offer certain Employees
various benefit programs, including (i) paid time off (the “Employee Leave Benefits”);
(ii) medical and prescription drug benefits, vision benefits, dental benefits (the “Health Insurance
Programs”), (iii) a health savings account and flexible savings account program (“HSA/FSA
Program”), (iv) life and disability insurance and certain voluntary insurance programs (“Life
Insurance and Disability Programs”); and (v) a 401(k) plan (the “Retirement Benefit”) (each
of (i)–(v), an “Employee Benefit Program” and together the “Employee Benefit Programs”).
The Employee Benefit Programs are administered by Insperity and paid on a semimonthly basis
together with Employee Compensation. Insperity’s fees in connection with the Employee Benefit
Programs are all included in the Administration Fee. By this Motion, the Debtors seek authority
to continue the Employee Benefits Programs in the ordinary course of business, and to pay any
prepetition obligations owed on account of the Employee Benefit Programs.
30.
The estimated outstanding prepetition Employee Benefit Obligations are
summarized in the chart below.
Employee Benefit
Obligations
Interim Relief Requested
Total Relief Requested
Employee Leave Benefits
$0
$0
Health and Welfare
Benefits
$2,800
$2,800
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 12 of 37

RLF1 28018234v.1
Employee Benefit
Obligations
Interim Relief Requested
Total Relief Requested
Retirement Benefits
$2,000
$2,000
Total Employee Benefit
Obligations
$4,800
$4,800
A.
Employee Leave Benefits
31.
The Debtors provide Employee Leave Benefits, which include personal
time off, sick leave, federal and state holidays, parental leave, and unlimited vacation provided
that they obtain the requisite supervisory approvals and adhere to reasonable requests. The Debtors
incur Employee Leave Benefit obligations when Employees utilize these benefits by taking time
off. As of the Petition Date, the Debtors do not estimate owing any prepetition amounts on account
of the Employee Leave Benefits. The Debtors anticipate that their Employees will utilize any
Employee Leave Benefit in the ordinary course of business, which will not create any material
cash flow requirements beyond the Debtors’ regular payroll obligations. By this Motion, the
Debtors seek authority to pay all post-petition Employee Leave Benefits in the ordinary course of
business during the Chapter 11 Cases.
B.
Health and Welfare Benefits
32.
The Debtors offer, through Insperity, several health and welfare benefits to
eligible Employees, including (i) the Health Insurance Programs, (ii) the HSA/FSA Program,
(iii) the Life Insurance and Disability Programs, and (iv) COBRA (as defined below) (together the
“Health and Welfare Benefits”).
1.
Health Insurance Programs
33.
All Employees are eligible to participate in the Health Insurance Programs,
including the Medical Plans, the Vision Plan, and the Dental Plans (each as defined below). The
Debtors cover 100% of the cost of the premiums for the Health Insurance Programs with the
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 13 of 37

RLF1 28018234v.1
Employees. However, in the event an Employee elects to include dependents on the Health
Insurance Programs, the Employees cover a majority of the premiums, which are deducted from
such Employee’s paycheck on a pre-tax basis, with the Debtors covering the remaining balance.
34.
The Debtors offer medical and prescription drug benefit programs
(the “Medical Plans”) to Employees. The Medical Plans are provided by United Healthcare
(“United”) and Kaiser Permanente (“Kaiser”). The coverage in the Medical Plans differs
depending on the level of coverage an Employee elects to receive, and monthly health care
premiums differ depending on the Medical Plan in which an Employee is enrolled, and whether
the Employee has dependents covered by the applicable Medical Plan. The total cost of the
Medical Plans to the Debtors is approximately $15,000 per month. As of the Petition Date, the
Debtors estimate owing $2,000 on account of Medical Plan premiums. The Debtors seek authority
to pay all such Medical Plan premiums and post-petition premiums in the ordinary course of
business during the Chapter 11 Cases.
35.
The Debtors offer Employees the option to participate in a supplemental
vision insurance plan (the “Vision Plan”), which is provided by VSP Choice. The Debtors also
offer Employees the option to participate in supplemental dental insurance plans (the “Dental
Plans”) provided by United Dental. The Debtors pay the cost for each Employee participant in
the base Vision Plan and Dental Plan, and any additional coverage is at the Employee’s expense.
The total cost of the Vision Plan and Dental Plan to the Debtors is approximately $1,600 per month.
As of the Petition Date, the Debtors estimate owing $500 on account of Vision Plan and Dental
Plan premiums. The Debtors seek authority to pay all Vision Plan and Dental Plan premiums and
post-petition premiums in the ordinary course of business during the Chapter 11 Cases.
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 14 of 37

RLF1 28018234v.1
36.
In sum, the Debtors spend approximately $16,600 per month on average in
connection with the Health Insurance Programs. As of the Petition Date, the Debtors estimate
owing $2,500 on account of Health Insurance Programs. The Debtors seek authority to pay all
such Health Insurance Program obligations and post-petition obligations in the ordinary course of
business during the Chapter 11 Cases.
2.
HSA/FSA Program
37.
The Debtors also provide the opportunity for eligible Employees to enroll
in the HSA/FSA Program provided by Optum Bank. Under the terms of the HSA/FSA Program,
during the annual enrollment period, eligible Employees may choose to designate an amount of
their pre-tax wages or salary to fund their HSA/FSA, which they can then use for eligible health
care expenses incurred. The Debtors do not incur a monthly cost for administering the HSA/FSA
Program and therefore do not owe any amounts on account of the HSA/FSA Program. However,
the Debtors request authority to continue providing the HSA/FSA Program in the ordinary course
of business during the Chapter 11 Cases.
3.
Life Insurance and Disability Programs
38.
The Debtors provide combined life and accidental death and disability
insurance coverage (the “Life and AD&D Insurance”) to Employees through New York Life
Insurance Company (“NY Life”). For each Employee, the Life and AD&D Insurance provides
coverage of one times the annual earnings of the Employee’s annual salary up to $50,000 in the
event of such Employee’s death or dismemberment. The Debtors also offer Employees the
opportunity to purchase, at their own expense, supplemental Life and AD&D Insurance to cover
themselves, their spouses, and their children through NY Life. The total cost of the Life and
AD&D Insurance program to the Debtors is approximately $200 each month. As of the Petition
Date, the Debtors estimate owing $100 on account of Life and AD&D Insurance premiums. The
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 15 of 37

RLF1 28018234v.1
Debtors seek authority to pay all such Life and AD&D Insurance premiums and post-petition
premiums in the ordinary course of business during the Chapter 11 Cases.
39.
The Debtors also provide long-term and short-term disability insurance
(“LTD STD Insurance”) to Employees through NY Life, with a maximum short term benefit of
60% of weekly earnings up to $2,308 per week and a maximum long term benefit of 60% of
monthly earnings up to $10,000 per month. The Debtors also offer Employees the opportunity to
purchase, at their own expense, supplemental LTD STD Insurance to cover themselves, their
spouses, and their children. The total cost of the LTD STD Insurance to the Debtors is
approximately $1,200 each month. As of the Petition Date, the Debtors estimate owing $200 on
account of LTD STD Insurance premiums. The Debtors seek authority to pay all such LTD STD
Insurance premiums and post-petition premiums in the ordinary course of business during the
Chapter 11 Cases.
4.
COBRA
40.
Under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”),
Employees who are terminated have the right to continue to receive health benefits from their
employer for a limited period of time and under certain circumstances. COBRA benefits are
provided by the Debtors to departing Employees as required by law. As of the Petition Date, none
of the Debtors’ former Employees or covered family members are receiving claim payments on
account of their participation in COBRA. The Debtors’ COBRA program is administered by
Insperity. The monthly cost for administering the COBRA program is included in the
Administration Fee and therefore any amounts owed on account of the COBRA program are
incorporated in the Administration Fee. However, the Debtors request authority to continue
providing the COBRA program in the ordinary course of business during the Chapter 11 Cases.
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 16 of 37

RLF1 28018234v.1
C.
Retirement Benefits
41.
The Debtors maintain a defined contribution plan meeting the requirements
of section 401(k) of the Internal Revenue Code (the “401(k) Savings Plan”), which is managed
by Massachusetts Mutual Life Insurance Company for the benefit of all eligible Employees.
Approximately 11 Employees are active participants. As part of the 401(k) Savings Plan, the
Debtors match (i) 100% of an Employee’s 401(k) contributions of 3% of the Employee’s base
salary and (ii) 50% of an Employee’s 401(k) contributions of the next 2% of the Employee’s base
salary. The Debtors collect the Employee contributions through withholdings from participating
Employees’ paychecks throughout the year (these are described above as Deductions). To satisfy
the matching obligation, the Debtors make disbursements in advance of each Pay Period to
Insperity, who in turn makes payments to a trust established under the 401(k) Savings Plan. The
Debtors make, on average, approximately $5,200 in matching contributions per month. As of the
Petition Date, the Debtors estimate owing $2,000 matching contributions pursuant to the 401(k)
Savings Plan. The Debtors seek authority to pay all such matching contributions and post-petition
contributions pursuant to the 401(k) Savings Plan in the ordinary course of business during the
Chapter 11 Cases.
Relief Requested Should be Granted
A.
Payment of Employee Obligations is Warranted Under Sections 363(b) and 105(a) of
the Bankruptcy Code
42.
The Court may grant the relief requested herein pursuant to sections 363
and 105(a) of the Bankruptcy Code.
43.
A bankruptcy court may authorize a debtor to pay certain prepetition
obligations pursuant to section 363(b) of the Bankruptcy Code. Section 363(b) of the Bankruptcy
Code provides, in relevant part, that a debtor in possession, “after notice and a hearing, may use,
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 17 of 37

RLF1 28018234v.1
sell, or lease, other than in the ordinary course of business, property of the estate.” 11 U.S.C.
§ 363(b)(1). To approve the use of assets outside the ordinary course of business pursuant to
section 363(b) of the Bankruptcy Code, courts require only that the debtor “show that a sound
business purpose justifies such actions.” In re Montgomery Ward Holding Corp., 242 B.R. 147,
153 (D. Del. 1999); see also, e.g., In re Phoenix Steel Corp., 82 B.R. 334, 335–36 (Bankr. D. Del.
1987) (finding that a sale of equipment was permissible under section 363(b) of the Bankruptcy
Code because “there [wa]s a good business reason for completing the sale”). Moreover, if “the
debtor articulates a reasonable basis for its business decisions (as distinct from a decision made
arbitrarily or capriciously), courts will generally not entertain objections to the debtor’s conduct.”
In re Johns-Manville Corp., 60 B.R. 612, 616 (Bankr. S.D.N.Y. 1986); see also In re Tower Air,
Inc., 416 F.3d 229, 238 (3d Cir. 2005) (“Overcoming the presumptions of the business judgment
rule on the merits is a near-Herculean task.”).
44.
In addition, the Court has the authority, pursuant to its equitable powers
under section 105(a) of the Bankruptcy Code, to authorize the relief requested herein because such
relief is necessary for the Debtors to carry out their fiduciary duties under section 1107(a) of the
Bankruptcy Code. Section 105(a) of the Bankruptcy Code empowers bankruptcy courts to “issue
any order, process, or judgment that is necessary or appropriate to carry out the provisions of this
title.” 11 U.S.C. § 105(a); see also In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr.
S.D.N.Y. 1989) (applying section 105(a) to justify an order authorizing the payment of certain
prepetition wages, salaries, medical benefits, and business-expense claims to the debtor’s
employees). Section 1107(a) of the Bankruptcy Code “contains an implied duty of the debtor-in-
possession” to act as a fiduciary to “protect and preserve the estate, including an operating
business’ going-concern value,” on behalf of a debtor’s creditors and other parties in interest. In
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 18 of 37

RLF1 28018234v.1
re CEI Roofing, Inc., 315 B.R. 50, 59 (Bankr. N.D. Tex. 2004) (quoting In re CoServ, L.L.C., 273
B.R. 487, 497 (Bankr. N.D. Tex. 2002)); see also In re Cybergenics Corp., 226 F.3d 237, 243 (3d
Cir. 2000) (citing In re Marvel Ent. Group, Inc., 140 F.3d 463, 474 (3d Cir. 1998) (“A paramount
duty of a trustee or debtor in possession in a bankruptcy case is to act on behalf of the bankruptcy
estate, that is, for the benefit of the creditors.”)); Unofficial Comm. of Equity Holders v. McManigle
(In re Penick Pharm., Inc.), 227 B.R. 229, 232–33 (Bankr. S.D.N.Y. 1998) (“[U]pon filing its
petition, the Debtor became debtor in possession and, through its management . . . was burdened
with the duties and responsibilities of a bankruptcy trustee.”). Courts consistently have permitted
payment of prepetition obligations where necessary to preserve or enhance the value of a debtor’s
estate for the benefit of all creditors. See, e.g., In re Lehigh & New Eng. Ry. Co., 657 F.2d 570,
581 (3d Cir. 1981) (holding that “if payment of a claim which arose prior to reorganization is
essential to the continued operation of the [business] during reorganization, payment may be
authorized even if it is made out of [the] corpus”).
45.
The Court may also authorize the payment of prepetition claims in
appropriate circumstances under section 105(a) of the Bankruptcy Code and the doctrine of
necessity when such payment is essential to the continued operation of a debtor’s business. See,
e.g., In re Just for Feet, Inc., 242 B.R. 821, 824–25 (D. Del. 1999) (holding that section 105(a) of
the Bankruptcy Code provides a statutory basis for payment of prepetition claims under the
doctrine of necessity and noting that “[t]he Supreme Court, the Third Circuit and the District of
Delaware all recognize the court’s power to authorize payment of pre-petition claims when such
payment is necessary for the debtor’s survival during chapter 11”); In re Columbia Gas Sys., Inc.,
171 B.R. 189, 191–92 (Bankr. D. Del. 1994) (confirming that the doctrine of necessity is the
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 19 of 37

RLF1 28018234v.1
standard for enabling a court to authorize payment of prepetition claims prior to confirmation of a
plan of reorganization).
46.
The relief requested by this Motion represents a sound exercise of the
Debtors’ business judgment, is necessary to avoid immediate and irreparable harm to the Debtors’
estates, and is justified under sections 105(a) and 363(b) of the Bankruptcy Code. Authorizing the
Debtors to pay prepetition wages, employee benefits, and similar items will benefit the Debtors’
estates and their creditors by allowing the Debtors’ business operations to continue without
interruption. Indeed, without the relief requested herein being granted, the Debtors are at the risk
of significant Employee attrition, as the Debtors’ Employees may seek alternative opportunities,
which would put a significant strain on facilitating these Chapter 11 Cases and inhibit the Debtors’
ability to service its loan portfolio, thereby impacting current stakeholders. Further, employee
attrition would hinder the Debtors’ ability to meet borrower demands and comply with applicable
law, particularly given the Debtors’ lean staff. Employee attrition would also cause the Debtors
to incur additional expenses to find appropriate and experienced replacements, severely disrupting
the Debtors’ operations at a critical juncture and diminishing the Debtors’ ability to carry out their
chapter 11 strategy and successfully reorganize.
47.
In addition to Employee attrition, failure to satisfy certain prepetition
obligations will likely jeopardize Employee morale and loyalty at a time when Employee support
is critical to the Debtors’ business. The majority of the Debtors’ Employees rely exclusively on
their Compensation and benefits to satisfy their daily living expenses and needs. These Employees
will be exposed to significant financial difficulties and other distractions if the Debtors are not
permitted to honor their employee-related obligations. Similarly, if the Court does not authorize
the Debtors to honor their various Health Insurance Programs, many Employees will lose access
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 20 of 37

RLF1 28018234v.1
to health coverage at a time when the Debtors need their Employees to perform their jobs at peak
efficiency. The loss in morale and potential distraction of Employees worrying about paying their
bills and their healthcare costs (among other things) will harm the Debtors’ ability to operate.
48.
Similarly, the Contractor Workforce is an important component of the
Debtors’ operations and ensures the completion of key operational tasks that are critical to the
Debtors’ business. In particular, given the Debtors began winding down their operations prior to
Petition Date, they maintain a large Contractor Workforce and rely on their services to maintain
their daily operations. Any interruption to the Contractor Workforce would cause significant
additional strain on the Debtors’ already limited resources and the ability of Employees to assist
throughout the Chapter 11 Cases. Further, failure to timely pay the Contractor Workforce would
endanger the Debtors’ prospects of a value maximizing transaction and would cause widespread
negative effects throughout the Debtors’ business.
B.
Payment of Employee Obligations Would Not Prejudice Parties in Interest
49.
The Debtors believe that the vast majority of the prepetition Employee
Obligations constitute priority claims under sections 507(a)(4) or (5) of the Bankruptcy Code. As
priority claims, the Employee Obligations are entitled to payment in full before any general
unsecured claims asserted against the Debtors can be satisfied. Thus, the relief requested largely
affects only the timing of the payment of the priority prepetition Employee Obligations, and should
not prejudice the rights of general unsecured creditors or other parties in interest.
C.
Payment of Certain Employee Obligations Is Required by Law
50.
The Debtors also seek authority to remit certain Deductions and Payroll
Taxes to the appropriate entities. These amounts principally represent Employee earnings that
governments, Employees, and judicial authorities have designated for deduction from Employees’
paychecks. Indeed, certain Deductions, including contributions to the Employee Benefit
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 21 of 37

RLF1 28018234v.1
Programs, and Withholdings are not property of the Debtors’ estates because they have been
withheld from Employees’ paychecks on another party’s behalf. See 11 U.S.C. § 541(b);
see Begier v. IRS, 496 U.S. 53, 66–67 (1990) (concluding that withholding taxes are property held
by a debtor in trust for another and are therefore not property of debtor’s estate). Further, federal
and state laws require the Debtors and their officers to make certain tax payments that have been
withheld from their Employees’ paychecks. See 26 U.S.C. §§ 6672 and 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); DuCharmes & Co., Inc. v.
State of Mich. (In re DuCharmes & Co.), 852 F.2d 194, 196 (6th Cir. 1988) (noting that individual
officers of a company may be held personally liable for failure to pay trust fund taxes). Because
certain Deductions and Payroll Taxes are not property of the Debtors’ estates, the Debtors request
that the Court authorize them to transmit the Deductions and Payroll Taxes to the proper parties in
the ordinary course of business.
51.
For the foregoing reasons, payment of the prepetition Employee Obligations
is necessary, appropriate, and in the best interests of the Debtors, their estates, and all other parties
in interest in these Chapter 11 Cases. Accordingly, the Court should authorize the relief requested
herein.
Reservation of Rights
52.
Nothing contained herein is intended or shall be construed as (a) an
admission as to the validity of any claim against the Debtors; (b) a waiver of the Debtors’ or any
appropriate party in interest’s rights to dispute the amount of, basis for, or validity of any claim
against the Debtors; (c) a waiver of any claim or cause of action which may exist against any
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 22 of 37

RLF1 28018234v.1
creditor or interest holder; or (d) an approval, assumption, adoption, or rejection of any agreement,
contract, lease, program, or policy between the Debtors and any third party under section 365 of
the Bankruptcy Code. Likewise, if the Court grants the relief sought herein, any payment made
pursuant to the Court’s order is not intended to be and should not be construed as an admission to
the validity of any claim or a waiver of the Debtors’ rights to dispute such claim subsequently.
Debtors Have Satisfied Bankruptcy Rule 6003(b)
53.
Bankruptcy Rule 6003(b) provides that, to the extent relief is necessary to
avoid immediate and irreparable harm, a Bankruptcy Court may issue an order granting “a motion
to use, sell, lease, or otherwise incur an obligation regarding property of the estate, including a
motion to pay all or part of a claim that arose before the filing of the petition” before 21 days after
filing of the petition. Fed. R. Bankr. P. 6003(b). As described above, and in the First Day
Declaration, the Debtors request authority to pay Employee Obligations and amounts with respect
to their business practices, programs, and policies for their Employees. Accordingly, the Debtors
believe that the relief requested herein is necessary to avoid immediate and irreparable harm, and,
therefore, Bankruptcy Rule 6003 is satisfied.
Bankruptcy Rules 6004(a) and (h)
54.
To implement the foregoing successfully, the Debtors request that the Court
find that notice of this Motion is adequate under Bankruptcy Rule 6004(a) under the circumstances,
and waive the 14-day stay of an order authorizing the use, sale, or lease of property under
Bankruptcy Rule 6004(h). As described above, and in the First Day Declaration, the relief
requested herein is necessary to avoid immediate and irreparable harm to the Debtors.
Accordingly, ample cause exists to justify finding that the notice requirements under Bankruptcy
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 23 of 37

RLF1 28018234v.1
Rule 6004(a) have been satisfied, and to grant a waiver of the 14-day stay imposed by Bankruptcy
Rule 6004(h), to the extent such notice requirements and such stay apply.
Notice
55.
Notice of this Motion will be provided to (a) the Office of the United States
Trustee for the District of Delaware; (b) the holders of the 30 largest unsecured claims against the
Debtors on a consolidated basis; (c) the Federal Reserve Bank; (d) Customers Bank; (e) Cross
River Bank; (f) the United States Department of Justice; (g) the Federal Trade Commission; (h) the
Small Business Administration; (i) the Internal Revenue Service; (j) the Securities and Exchange
Commission; (k) the United States Attorney’s Office for the District of Delaware; (l) the Banks;
(m) any party that is entitled to notice pursuant to Local Rule 9013-1(m); (n) the Employment
Vendors; and (o) Insperity, (p) NY Life, (q) United, (r) Kaiser, (s) VSP, and (t) Massachusetts
Mutual Life Insurance Company (collectively, the “Notice Parties”). As this Motion is seeking
“first-day” relief, the Debtors will serve copies of this Motion and any order entered in respect of
this Motion as required by Local Rule 9013-1(m). The Debtors believe that no further notice is
required.
No Prior Request
56.
No previous request for the relief sought herein has been made by the
Debtors to this or any other court.

[Remainder of page intentionally left blank]

Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 24 of 37

RLF1 28018234v.1
WHEREFORE the Debtors respectfully request entry of the Proposed Orders
granting the relief requested herein and such other and further relief as the Court may deem just
and appropriate.
Dated: October 3, 2022

Wilmington, Delaware

/s/ Zachary I. Shapiro
RICHARDS, LAYTON & FINGER, P.A.
Daniel J. DeFranceschi (No. 2732)
Amanda R. Steele (No. 5530)
Zachary I. Shapiro, Esq. (No. 5103)
Matthew P. Milana (No. 6681)
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
Telephone: (302) 651-7700
E-mail: defranceschi@rlf.com
steele@rlf.com
shapiro@rlf.com
milana@rlf.com

-and-

WEIL, GOTSHAL & MANGES LLP
Ray C. Schrock, P.C. (pro hac vice admission pending)
Candace M. Arthur (pro hac vice admission pending)
Natasha S. Hwangpo (pro hac vice admission pending)
Chase A. Bentley (pro hac vice admission pending)
767 Fifth Avenue
New York, New York 10153
Telephone:
(212) 310-8000
E-mail:
ray.schrock@weil.com

candace.arthur@weil.com
natasha.hwangpo@weil.com
chase.bentley@weil.com

Proposed Attorneys for Debtors
and Debtors in Possession

Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 25 of 37

RLF1 28018234v.1
Exhibit A

Proposed Interim Order

Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 26 of 37

RLF1 28018234v.1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

------------------------------------------------------------ x

In re
:
Chapter 11

KABBAGE, INC. d/b/a KSERVICING, et al., :
Case No. 22-10951 ( )

Debtors.1
:
(Joint Administration Requested)
------------------------------------------------------------ x

INTERIM ORDER (I) AUTHORIZING DEBTORS TO
(A) PAY PREPETITION WAGES, SALARIES, EMPLOYEE BENEFITS, AND OTHER
COMPENSATION AND (B) MAINTAIN EMPLOYEE BENEFIT PROGRAMS
AND PAY RELATED OBLIGATIONS AND (II) GRANTING RELATED RELIEF
Upon the motion, dated October 3, 2022 (the “Motion”)2 of Kabbage, Inc. d/b/a/
KServicing and its debtor affiliates, as debtors and debtors in possession in the Chapter 11 Cases
(collectively, the “Debtors”), for entry of an order pursuant to sections 105(a), 363(b), and 507(a)
of the Bankruptcy Code and Bankruptcy Rules 6003 and 6004, (i) authorizing the Debtors to
(a) pay the Employee Obligations and (b) maintain, continue to honor, and pay amounts with
respect to the Debtors’ business practices, programs, and policies for their employees as such were
in effect as of the commencement of these Chapter 11 Cases and as such may be modified during
the pendency of these Chapter 11 Cases and (ii) granting related relief, all as more fully set forth
in the Motion; and upon consideration of the Rieger-Paganis Declaration; and this Court having
jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. §§ 157

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification
number, as applicable are: Kabbage, Inc. d/b/a KServicing (3937); Kabbage Canada Holdings, LLC (N/A);
Kabbage Asset Securitization LLC (N/A); Kabbage Asset Funding 2017-A LLC (4803); Kabbage Asset Funding
2019-A LLC (8973); and Kabbage Diameter, LLC (N/A). Kabbage is a trademark of American Express used
under license; Kabbage, Inc. d/b/a KServicing is not affiliated with American Express. The Debtors’ mailing and
service address is 925B Peachtree Street NE, Suite 383, Atlanta, GA 30309.
2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the
Motion.
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 27 of 37

RLF1 28018234v.1
and 1334, and the Amended Standing Order of Reference entered by the United States District
Court for the District of Delaware, dated February 29, 2012; and consideration of the Motion and
the requested relief being a core proceeding pursuant to 28 U.S.C. § 157(b); and venue being
proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409; and due and proper notice of the
Motion having been provided; and such notice having been adequate and appropriate under the
circumstances, and it appearing that no other or further notice need be provided; and this Court
having reviewed the Motion; and this Court having held a hearing to consider the relief requested
in the Motion; and all objections, if any, to the Motion having been withdrawn, resolved, or
overruled; and upon the record of the hearing; and this Court having determined that the legal and
factual bases set forth in the Motion establish just cause for the relief granted herein; and it
appearing that the relief requested in the Motion is necessary to avoid immediate and irreparable
harm to the Debtors and their estates as contemplated by Bankruptcy Rule 6003; 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 to the extent set forth herein.
2.
The Debtors are authorized, but not directed, pursuant to sections 105(a),
363(b), and 507(a) of the Bankruptcy Code to (i) pay the prepetition Employee Obligations in an
aggregate amount not to exceed, absent further order of this Court, $1,050,800, (ii) pay any related
expenses, fees and costs incident to the foregoing, and (iii) maintain, honor, and continue the
Employee Benefit Programs in the ordinary course of business, as summarized in further detail in
the chart below:
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 28 of 37

RLF1 28018234v.1
Employee Obligations
Interim Amount
Administration Fees
$1,000
Compensation
$35,000
Employee Bonus Program
$0
Employee Benefit Programs
$2,000
Employer Taxes
$3,000
Deferred 2020 Payroll Tax
$600,000
Reimbursement Programs
$5,000
Contractor Workforce Compensation
$400,000
Employee Leave Benefits
$0
Health and Welfare Benefits
$2,800
Retirement Benefits
$2,000
Total
$1,050,800

3.
Notwithstanding any other provision of this Interim Order nothing in this
Interim Order shall authorize the Debtors to make any payment to, or on behalf of, any Employee
or Contractor on account of prepetition wages and other compensation obligations or other
prepetition obligations in excess of the statutory caps set forth in sections 507(a)(4) and (5) of the
Bankruptcy Code.
4.
Nothing in the Motion or this Interim Order shall be deemed to (i) authorize
the payment of any amounts in satisfaction of bonus or severance obligations, including but not
limited to the KERP program or the Employee Bonus Program, or which are subject to section
503(c) of the Bankruptcy Code, including, for the avoidance of doubt, payment of any obligations
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 29 of 37

RLF1 28018234v.1
to or on behalf of any “insider” (as defined by section 101(31) of the Bankruptcy Code) of the
Debtors or any non-Debtor affiliates, or violate or permit a violation of section 503(c) of the
Bankruptcy Code; or (ii) authorize the Debtors to cash out unpaid vacation or leave time except
upon termination of an employee, if applicable state law requires such payment.
5.
The Banks are authorized to receive, process, honor, and pay any and all
checks issued, or to be issued, and electronic funds transfers requested, or to be requested, by the
Debtors relating to such obligations, to the extent that sufficient funds are on deposit and standing
in the Debtors’ credit in the applicable bank accounts to cover such payments. The Banks are
authorized to accept and rely on all representations made by the Debtors with respect to which
checks, drafts, wires, or automated clearing house transfers should be honored or dishonored in
accordance with this or any other order of this Court, whether such checks, drafts, wires, or
transfers are dated prior to, on, or subsequent to the Petition Date, without any duty to inquire
otherwise.
6.
The Debtors are authorized, but not directed, to issue new post-petition
checks, or effect new electronic funds transfers, and to replace any prepetition checks or electronic
fund transfer requests that may be lost or dishonored or rejected as a result of the commencement
of the Debtors’ Chapter 11 Cases with respect to any prepetition amounts that are authorized to be
paid pursuant to this Interim Order.
7.
Nothing contained in the Motion or this Interim Order, nor any payment
made pursuant to the authority granted by this Interim Order, is intended to be or shall be construed
as an approval, assumption, adoption, or rejection of any agreement, contract, lease, program, or
policy between the Debtors and any third party under section 365 of the Bankruptcy Code.
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 30 of 37

RLF1 28018234v.1
8.
Nothing in this Interim Order shall implicitly or expressly approve or
sanction any current or prospective incentive bonus, key employee incentive or retention program,
or any payment having been made in relation to or pursuant thereto.
9.
The requirements of Bankruptcy Rule 6003(b) have been satisfied.
10.
Notice of the Motion is adequate under Bankruptcy Rule 6004(a).
11.
Notwithstanding the provisions of Bankruptcy Rule 6004(h), this Interim
Order shall be immediately effective and enforceable upon its entry.
12.
The Debtors are authorized to take all actions necessary or appropriate to
effectuate the relief granted in this Interim Order.
13.
This Court shall retain jurisdiction to hear and determine all matters arising
from or related to the implementation, interpretation, or enforcement of this Interim Order.
14.
The final hearing to consider the relief requested in the Motion shall be held
on
, 2022 at ______ (Prevailing Eastern Time), and any objections or responses to the Motion
shall be in writing, filed with the Court, and served so as to be actually received on or prior to
____________, 2022 at 4:00 p.m. (Prevailing Eastern Time).

Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 31 of 37

RLF1 28018234v.1
Exhibit B
Proposed Final Order
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 32 of 37

RLF1 28018234v.1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

------------------------------------------------------------ x

In re
:
Chapter 11

KABBAGE, INC. d/b/a KSERVICING, et al., :
Case No. 22-10951 ( )

Debtors.1
:
(Joint Administration Requested)
------------------------------------------------------------ x

FINAL ORDER (I) AUTHORIZING DEBTORS TO
(A) PAY PREPETITION WAGES, SALARIES, EMPLOYEE BENEFITS, AND OTHER
COMPENSATION AND (B) MAINTAIN EMPLOYEE BENEFIT PROGRAMS
AND PAY RELATED OBLIGATIONS AND (II) GRANTING RELATED RELIEF
Upon the motion, dated October 3, 2022 (the “Motion”)2 of Kabbage, Inc. d/b/a/
KServicing and its debtor affiliates, as debtors and debtors in possession in the Chapter 11 Cases
(collectively, the “Debtors”), for entry of an order pursuant to sections 105(a), 363(b), and 507(a)
of the Bankruptcy Code and Bankruptcy Rules 6003 and 6004, (i) authorizing the Debtors to
(a) pay the Employee Obligations and (b) maintain, continue to honor, and pay amounts with
respect to the Debtors’ business practices, programs, and policies for their employees as such were
in effect as of the commencement of these Chapter 11 Cases and as such may be modified during
the pendency of these Chapter 11 Cases and (ii) granting related relief, all as more fully set forth
in the Motion; and upon consideration of the Rieger-Paganis Declaration; and this Court having
jurisdiction to consider the Motion, and the relief requested therein pursuant to 28 U.S.C. §§ 157

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification
number, as applicable are: Kabbage, Inc. d/b/a KServicing (3937); Kabbage Canada Holdings, LLC (N/A);
Kabbage Asset Securitization LLC (N/A); Kabbage Asset Funding 2017-A LLC (4803); Kabbage Asset Funding
2019-A LLC (8973); and Kabbage Diameter, LLC (N/A). Kabbage is a trademark of American Express used
under license; Kabbage, Inc. d/b/a KServicing is not affiliated with American Express. The Debtors’ mailing and
service address is 925B Peachtree Street NE, Suite 383, Atlanta, GA 30309.
2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the
Motion.
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 33 of 37

RLF1 28018234v.1
and 1334, and the Amended Standing Order of Reference entered by the United States District
Court for the District of Delaware, dated February 29, 2012; and consideration of the Motion and
the requested relief being a core proceeding pursuant to 28 U.S.C. § 157(b); and venue being
proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409; and due and proper notice of the
Motion having been provided; and such notice having been adequate and appropriate under the
circumstances, and it appearing that no other or further notice need be provided; and this Court
having reviewed the Motion; and this Court having entered an order granting the relief requested
in the Motion on an interim basis; and this Court having held a hearing to consider the relief
requested in the Motion; and all objections, if any, to the Motion having been withdrawn, resolved,
or overruled; and this Court having determined that the legal and factual bases set forth in the
Motion 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 to the extent set forth herein.
2.
The Debtors are authorized, but not directed, pursuant to sections 105(a),
363(b), and 507(a) of the Bankruptcy Code, to (i) pay the prepetition Employee Obligations in an
aggregate amount not to exceed, absent further order of this Court, $1,070,800 and any related
expenses, fees and costs incident to the foregoing, and (ii) maintain, honor, and continue the
Employee Benefit Programs in the ordinary course of business, as summarized in further detail in
the chart below:
Employee Obligations
Final Amount
Administration Fees
$1,000
Compensation
$35,000
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 34 of 37

RLF1 28018234v.1
Employee Obligations
Final Amount
Employee Bonus Program
$0
Employee Benefit Programs
$22,000
Employer Taxes
$3,000
Deferred 2020 Payroll Tax
$600,000
Reimbursement Programs
$5,000
Contractor Workforce Compensation
$400,000
Employee Leave Benefits
$0
Health and Welfare Benefits
$2,800
Retirement Benefits
$2,000
Total
$1,070,800

3.
Nothing in the Motion or this Final Order shall be deemed to (i) authorize
the payment of any amounts in satisfaction of severance obligations, the KERP program, or which
are subject to section 503(c) of the Bankruptcy Code, including, for the avoidance of doubt,
payment of any obligations to or on behalf of any “insider” (as defined by section 101(31) of the
Bankruptcy Code) of the Debtors or any non-Debtor affiliates or violate or permit a violation of
section 503(c) of the Bankruptcy Code; or (ii) authorize the Debtors to cash out unpaid vacation
or leave time except upon termination of an employee, if applicable state law requires such
payment.
4.
The Banks are authorized to receive, process, honor, and pay any and all
checks issued, or to be issued, and electronic funds transfers requested, or to be requested, by the
Debtors relating to such obligations, to the extent that sufficient funds are on deposit and standing
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 35 of 37

RLF1 28018234v.1
in the Debtors’ credit in the applicable bank accounts to cover such payments. The Banks are
authorized to accept and rely on all representations made by the Debtors with respect to which
checks, drafts, wires, or automated clearing house transfers should be honored or dishonored in
accordance with this or any other order of this Court, whether such checks, drafts, wires, or
transfers are dated prior to, on, or subsequent to the Petition Date, without any duty to inquire
otherwise.
5.
The Debtors are authorized, but not directed, to issue new post-petition
checks, or effect new electronic funds transfers, and to replace any prepetition checks or electronic
fund transfer requests that may be lost or dishonored or rejected as a result of the commencement
of the Debtors’ Chapter 11 Cases with respect to any prepetition amounts that are authorized to be
paid pursuant to this Final Order.
6.
The Debtors are authorized to continue the Employee Bonus Program in the
ordinary course provided for in the Motion.
7.
Nothing contained in the Motion or this Final Order, nor any payment made
pursuant to the authority granted by this Final Order, is intended to be or shall be construed as an
approval, assumption, adoption, or rejection of any agreement, contract, lease, program, or policy
between the Debtors and any third party under section 365 of the Bankruptcy Code.
8.
Nothing in this Final Order shall implicitly or expressly approve or sanction
any current or prospective incentive bonus, key employee incentive or retention program, or any
payment having been made in relation to or pursuant thereto.
9.
Notice of the Motion is adequate under Bankruptcy Rule 6004(a).
10.
Notwithstanding the provisions of Bankruptcy Rule 6004(h), this Final
Order shall be immediately effective and enforceable upon its entry.
Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 36 of 37

RLF1 28018234v.1
11.
The Debtors are authorized to take all actions necessary or appropriate to
effectuate the relief granted in this Final Order.
12.
This Court shall retain jurisdiction to hear and determine all matters arising
from or related to the implementation, interpretation, or enforcement of this Final Order.

Case 22-10951-CTG Doc 10 Filed 10/03/22 Page 37 of 37

File and source

File: gov.uscourts.deb.188293.10.0.pdf
Size: 639,241 bytes
SHA-256: a1837ee511428fe6ddc417eeead99f12d6b555b6c27dcc42a590ff52dc65bba3
Our copy: gov.uscourts.deb.188293.10.0.pdf
Original: archive.org

First Day Motion (Employee Wages and Benefits) — In re KServicing Wind Down (Bankr. D. Del.)

Record facts

Full text

File and source

Related records