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Case 13-02100              Doc 11    Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main 1/19/2013
                                                                        Docket #0011 Date Filed:
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                       IN THE UNITED STATES BANKRUPTCY COURT
                        FOR THE NORTHERN DISTRICT OF ILLINOIS
                                   EASTERN DIVISION

In re
                                                                Chapter 11
LYON WORKSPACE PRODUCTS, L.L.C., et
al.1,                                                           Case No. 13-2100

                             Debtor.                            Honorable Janet S. Baer



  DEBTORS’ MOTION FOR ORDER PURSUANT TO 11 U.S.C. §§ 507 AND 363 (A)
 AUTHORIZING, BUT NOT DIRECTING, PAYMENT OF PREPETITION PRIORITY
   WAGES, SALARIES AND EMPLOYEE BENEFITS AND CONTINUATION OF
      EMPLOYEE BENEFIT PLANS AND PROGRAMS POSTPETITION, (B)
   AUTHORIZING, BUT NOT DIRECTING, DEDUCTIONS FROM EMPLOYEES’
   PAYCHECKS, AND (C) DIRECTING ALL BANKS TO HONOR PREPETITION
    CHECKS FOR PAYMENT OF PREPETITION EMPLOYEE OBLIGATIONS

        Lyon Workspace Products, L.L.C., et al. (collectively, the “Debtors”) submit this motion,

pursuant to sections 105, 363(b), 507(a)(4) and 507(a)(5) of the Bankruptcy Code, for entry of an

order: (a) authorizing, but not directing, the Debtors to pay or otherwise honor the Debtors’

employee-related prepetition priority obligations to, or for the benefit of, employees, and to

continue postpetition the employee benefit plans and programs in effect immediately prior to the

filing of this case; (b) authorizing, but not directing, the Debtors to make deductions from

employees’ paychecks; (c) directing all banks to honor prepetition checks for payment of the

Debtors’ prepetition employee obligations; and (d) granting related relief. In support of this

Motion, the Debtors respectfully represent as follows:

                                         I.       JURISDICTION

        1.       This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. This is

a core proceeding pursuant to 28 U.S.C. § 157(b)(2). Venue of these cases and this Motion in

this District is proper pursuant to 28 U.S.C. §§ 1408 and 1409. The statutory predicates for the

        1
          The other Debtors in these jointly administered chapter 11 cases are Pride Metals L.L.C., Sycamore
Systems, L.L.C., Paris Metal Products, L.L.C., Durand Products, L.L.C., L&D Group, Inc., Miller Global Solutions,



                                                                          ¨1¤>5 -!3                  *M«
                                                                              1302100130119000000000010
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relief requested herein are Bankruptcy Code sections 105, 363(b), 507(a)(4) and 507(a)(5).


                                         II.     BACKGROUND

        2.       On January 19, 2013, each of the Debtors 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. No request for the appointment of a trustee or examiner has been made in the

Chapter 11 Cases and no official committee has been appointed.

        3.       The factual background relating to the Debtors’ commencement of these Chapter

11 Cases is set forth in detail in the Declaration of Robert Wanat in Support of Debtors’ Chapter

11 Petitions and First Day Motions (the “Wanat Declaration”) filed on the Petition Date and

incorporated herein by reference.


                                      III.     RELIEF REQUESTED

        4.       By this Motion, the Debtors request that the Court enter an order under sections

507(a)(4) and (a)(5) and 363(b)(1) of the Bankruptcy Code authorizing the Debtors to (a) pay or

otherwise honor all employee-related prepetition priority obligations of the Debtors to, or for the

benefit of, current employees (the “Employees”), (b) make deductions from Employees’

paychecks, and (c) continue postpetition the Debtors’ employee benefit plans and programs as

described below.

        5.       The employee-related obligations (the “Prepetition Employee Obligations”)

include, without limitation:


                                (a) unpaid prepetition wages, salaries and commissions, up to the
                                    statutory maximum of $11,725 per employee, including holiday,

L.L.C., and Lyon Workspace Products, Inc.


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                                      vacation and sick leave pay earned prior to the Petition Date;

                                (b) reimbursable business expenses incurred before the Petition Date;
                                    and

                                (c) employee health and welfare benefit claims arising before the
                                    Petition Date (including, without limitation, (i) medical and dental
                                    claims under the Debtors’ self-funded health care plan and
                                    COBRA, (ii) long-term disability, accidental death and
                                    dismemberment and life insurance, (iii) supplemental health
                                    insurance, (iv) union dues for union Employees, (v) uniform
                                    rentals for uniformed Employees, and (iv) workers’ compensation
                                    claims arising before the Petition Date (collectively, the benefits in
                                    this subsection (c) shall be referred to as the “Employee
                                    Benefits”)).

        6.       The Debtors also seek an order directing all banks and financial institutions to

honor prepetition checks for payment of the Prepetition Employee Obligations.


                         IV.      AUTHORITY FOR REQUESTED RELIEF

        7.       In order to minimize the personal hardship that the Employees will suffer if

prepetition Employee-related obligations are not paid when due or as expected, and to maintain

morale and an essential workforce during this critical time, the Debtors respectfully submit that it

is in the best interests of their estate, creditors and parties-in-interest for this Court to authorize

payment of the Prepetition Employee Obligations, to allow the Debtors to make deductions from

the Employees’ paychecks and to continue the Employee Benefits in the ordinary course of

business.


A.      Unpaid Compensation

        8.       As of the Petition Date, the Debtors’ workforce consisted of approximately 400

full-time employees.          Approximately 53% of the Debtors’ workforce consists of salaried

Employees, and the remaining 47% of the workforce is paid on an hourly basis. Of the salaried

employees, approximately 55% are eligible for overtime pay.



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        9.       The Debtors have two payrolls: one weekly and the other bi-weekly. The weekly

payroll varies depending upon plant volume, but is approximately $200,000. The bi-weekly

payroll is approximately $295,000 per pay period. Generally, hourly Employees are paid weekly

and salaried Employees are paid bi-weekly. Both salaried and hourly Employees are paid

approximately one to two weeks in arrears.

        10.      Eight percent of the Debtors’ Employees are union members whose employment

is governed by a collective bargaining agreement (“CBA”) with Local Union No. 1636 of the

United Steelworkers of America, A.F.L.-C.I.O.

        11.      Through this Motion, the Debtors request authority, but not direction, to honor, in

the ordinary course of business, all of the obligations to union Employees in accordance with the

terms and conditions of the CBA, including, but not limited to, the relevant Unpaid Wages and

Salaries.

        12.      Though the Debtors are current on their payroll as of the Petition Date, the

Debtors owe their Employees compensation in the form of accrued but unpaid wages and salaries

(the “Unpaid Wages and Salaries”) in the approximate aggregate amount of $130,000.

        13.      The Debtors also use temporary workers during busy periods. These workers are

not Employees and are not paid by the Debtor. Rather, the Debtors pay the agencies that directly

employ these workers. As of the Petition Date, the Debtors used an average of 25 temp workers

per day and owe nine agencies at total of approximately $500,000 for the services of their

temporary workers.

        14.      Additionally, approximately 50 Employees in the Debtors’ sales force are entitled

to commissions based on a percentage of sales made each quarter (the “Unpaid Commissions,”

and together with the Unpaid Wages and Salaries, the “Unpaid Compensation”). As of the




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Petition Date, the Debtors estimate that the aggregate amount owed in the form of accrued but

Unpaid Commissions is approximately $200,000. The Debtors seek authority to pay such

Unpaid Compensation as it becomes due and owing in the ordinary course of business. Only one

of the Employees entitled to an Unpaid Commission is owed more than the statutory maximum.

In that case, the Debtors seek only to pay the statutory maximum of $11,725 (less any other

accrued priority compensation).


B.      Paid Time Off

        15.      During the course of each year, certain Employees accrue vacation, sick leave and

holiday pay that may be exercised in the ordinary course of the Debtors’ business (the “Paid

Time Off”). Accrual of vacation time varies depending on the location of the Employee, his or

her union membership, whether that employee is salaried or hourly and whether the employee is

in an overtime exempt role. Vacation time of four weeks is the maximum accrual for the most

senior non-union Employees and does not carry over from year to year, except for those

employees located in California. As of the Petition Date, aggregate accrued and unused vacation

time amounted to a total liability to the Debtors of approximately $300,000.

        16.      The Debtors also provide sick leave to full-time salaried Employees. The Debtors

request authority to continue to accrue such vacation, sick leave and other leave time in the

ordinary course of their business and to allow Employees to utilize such accrued time under the

customary and/or contractual terms and conditions of such Employees’ employment.


C.      Reimbursement Obligations

        17.      It is the Debtors’ policy to reimburse Employees for certain expenses within the

scope of their employment, including expenses for business-related travel (the “Reimbursement

Obligations”).      The Debtors average $24,000 per month in expense reimbursements, and


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estimates that, as of the Petition Date, approximately half that total was owed to Employees on

account of the Reimbursement Obligations. The Debtors request the authority to pay such

accrued but unpaid prepetition Reimbursement Obligations.


D.      Remitting and/or Paying Appropriate Deductions and Withholdings

        18.      During each applicable pay period, the Debtors routinely deduct certain amounts

from paychecks, including, without limitation, (a) garnishments, child support and similar

deductions, and (b) other pre-tax and after-tax deductions payable pursuant to certain of the

Employee Benefits discussed herein (such as an employee’s share of health care benefits,

insurance premiums, pension payments, 401(k) contributions and other miscellaneous

deductions) (collectively, the “Deductions”) and forwards those amounts to various third party

recipients. On average, the Debtors historically deducted approximately $12,000 from weekly

payroll and $28,000 from bi-weekly payroll from the Employees’ paychecks per applicable

payroll period. However, due to the commencement of this chapter 11 case, these funds were

deducted from Employees’ earnings, but may not have been forwarded to the appropriate third

party recipients prior to the Petition Date. Accordingly, the Debtors seek for it or their agent to

continue to forward these prepetition Deductions to the applicable third party recipients on a

postpetition basis, in the ordinary course of business, as routinely done prior to the Petition Date.

        19.      Further, the Debtors are required by law to withhold from an Employee’s wages

amounts related to federal, state and local income taxes and social security taxes (collectively,

the “Withheld Amounts”) for remittance to the appropriate federal, state or local taxing

authority. The Debtors must then match from their own funds for social security and pay, based

on a percentage of gross payroll, additional amounts for state and federal unemployment

insurance (the “Employer Payroll Taxes,” and together with the Withheld Amounts, the “Payroll



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Taxes”). The Debtors’ Payroll Taxes, including both the employee and employer portion, for the

last three quarters of 2012 were approximately $4,300,000. On average, the Debtors withhold

approximately $55,000 from weekly payroll and $80,000 from bi-weekly payroll in the

aggregate from the Employees’ paychecks each payroll period. Before the Petition Date, the

Debtors withheld the appropriate amounts from Employees’ earnings for the Payroll Taxes, but

such funds may not have been forwarded to the appropriate taxing authorities prior to the

Petition Date. As a result, the Debtors seek authority, but not direction, for it or their agent to

continue to honor and process the prepetition obligations with respect to Payroll Taxes on a

postpetition basis, in the ordinary course of business, as routinely done prior to the Petition Date.


E.      Employee Benefits

        20.      The Debtors also offer Employees many standard benefits under their Employee

Benefit programs. Specifically, certain of the Debtors’ Employees are offered a choice of,

among other things, medical and dental plans, COBRA, long-term disability, accidental death

and dismemberment insurance, basic life insurance and supplemental health insurance.

        21.      The Debtors offer medical and dental coverage to Employees and their families.

The insurance plan is self-funded and independently administered by Blue Cross/Blue Shield.

The total monthly contribution from Employees for insurance is approximately $45,000. The

Debtors are responsible for paying claims and administrative expenses to Blue Cross/ Blue

Shield from the Employees’ contribution and from their own funds. The monthly payment

varies depending on actual claims activity, but the average payment is approximately $300,000

per month, inclusive of the Employees’ contribution. As of the Petition Date, the Debtors

believe that claims for December and January in the approximate total amount of $400,000 will

be incurred but will not yet be due and owing.



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        22.      Approximately 350 Employees participate in one or more of: (a) long-term

disability through Met Life or Assurant, (b) life insurance through Met Life, (c) short term

disability, and/or (d) a uniform rental program. The annual cost to the Debtors is approximately

$175,000. As of the Petition Date, the Debtors expect that the aggregate amount of these

benefits outstanding will be $25,000.

        23.      The Debtors provide their Employees with a 401(k) plan. Under the CBA, the

Debtors must match contributions up to 6% of a union employee’s salary. The Debtors monthly

contributions average $4500. As of the Petition Date, the Debtors expect that approximately

$2,500 in required 401(k) contributions will be outstanding.

        24.      The Debtors request authority to continue to maintain the Employee Benefits in

their sole discretion and to pay any prepetition amounts related thereto.


F.      Workers Compensation

        25.      Because their sales force is national in scope, the Debtors are required to provide

workers’ compensation insurance 41 states. The Debtors insures workers’ compensation with a

large deductible program through Sentry Insurance, or if required by state law, through a

retrospective rating policy through Sentry Insurance.        The premiums for the insurance are

approximately $385,000 per year, plus claims paid.

        26.      It is critical that the Debtors be permitted to continue their workers’ compensation

program and to pay any reconciled balances and unpaid premiums because alternative

arrangements for workers’ compensation coverage would most certainly be more costly and the

failure to provide coverage may subject the Debtors and/or their officers to severe penalties.

Accordingly, the Debtors seeks authority to continue to pay premiums related to workers’

compensation, to pay any unpaid premiums that became due prepetition and to continue the



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workers’ compensation program in the ordinary course of business in their sole discretion.


G.      Summary of Requests

        27.      In sum, pursuant to this Motion, the Debtors seek to pay the Prepetition Employee

Obligations and to continue the Debtors’ Employee Benefits in effect immediately prior to the

filing of this case. If the Debtors fail to pay or honor the Employees’ prepetition compensation,

reimbursement procedures and employee benefits, the Employees will suffer extreme personal

hardship and in many cases will be unable to pay their basic living expenses. This clearly would

destroy Employee morale and result in unmanageable Employee turnover during the critical

early stages of the Debtors’ chapter 11 case, which would negatively impact the Debtors’ ability

to sell their assets in a sale pursuant to § 363 of the Bankruptcy Code. The Debtors submit that

any significant deterioration in morale at this time will substantially and adversely impact the

Debtors and their ability to sell their assets, thereby resulting in immediate and irreparable harm

to the Debtors and their estates. In addition, the failure to pay workers’ compensation claims

may result in Employee attempts to compel payment through litigation or similar means, thereby

jeopardizing the Debtors’ ability to conduct business.

        28.      To retain Employees and maintain their morale through the asset sale, the Debtors

seek authorization, but not direction, to satisfy the Prepetition Employee Obligations and

continue to provide postpetition the Employee Benefits and maintain accruals of those benefits in

the ordinary course of business. The Debtors further submit that the amounts to be paid to the

Employees pursuant to this Motion are reasonable compared with the importance and necessity

of preserving Employee loyalty and morale and with the difficulties and losses the Debtors likely

will suffer if those amounts are not paid.

        29.      Accordingly, the Debtors seek authorization to pay the Prepetition Employee



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Obligations (or to maintain accrued levels of benefits and continue such accrual where payment

is not yet due) all in accordance with the policies, plans and programs in place prior to the

Petition Date.


H.      Banks to Honor Prepetition Checks for Prepetition Employee Obligations

        30.      In addition, the Debtors request that all applicable banks and other financial

institutions be authorized and directed to receive, process, honor and pay all checks presented for

payment and to honor all fund transfer requests made by the Debtors related to the Prepetition

Employee Obligations, whether such checks were presented or fund transfer requests were

submitted prior to or after the Petition Date. The Debtors represent that checks other than those

for the Prepetition Employee Obligations will not be honored inadvertently. Moreover, the

Debtors represent that they have sufficient cash reserves, together with anticipated access to

debtor-in-possession financing, to promptly pay all of the Prepetition Employee Obligations, to

the extent described herein, on an ongoing basis and in the ordinary course of their business.


                                  V.      APPLICABLE AUTHORITY

        31.      Sections 507(a)(4) and (a)(5) of the Bankruptcy Code give priority up to $11,725

per individual for prepetition claims for wages, salaries, vacation, sick leave and contributions to

employee benefit plans. The Debtors believe that the Prepetition Employee Obligations that they

seek to pay are entitled to priority under sections 507(a)(4) and (a)(5) of the Bankruptcy Code,

and, as such, will be paid in full as a condition to confirmation of a plan of reorganization. See

11 U.S.C. § 1129(a)(9). Therefore, payment of the Prepetition Employee Obligations in the

ordinary course of business merely accelerates the timing of payment of obligations that will

otherwise be paid in any event, thereby not disrupting the Bankruptcy Code’s priority scheme.

        32.      This Court may also authorize the Debtors’ proposed payment of the Prepetition


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Employee Obligations under section 363(b)(1) of the Bankruptcy Code. Section 363(b)(1)

provides that a bankruptcy court, after notice and a hearing, may authorize a debtor to “use, sell,

or lease, other than in the ordinary course of business, property of the estate.” See 11 U.S.C. §

363(b)(1). Although stated various ways, courts generally hold that a debtor’s decision to enter

into a transaction outside of the ordinary course of business is governed by the business

judgment standard. 3 COLLIER          ON   BANKRUPTCY ¶ 363.02[4] (16th ed. 2012); See e.g. In re

Zeigler, 320 B.R. 362, 381 (Bankr. N.D. Ill. 2005); see also In re Schipper, 933 F.2d 513, 515

(7th Cir. 1991) (requiring “articulated business justification” for sale under § 363(b)(1)); In re

U.S. Airways Grp., Inc., 287 B.R. 643, 645 (Bankr. E.D. Va. 2002).

        33.      When applying the “business judgment” rule, courts show great deference to a

debtor’s decision making. See, e.g., In re Castre, 312 B.R. 426, 430 (Bankr. D. Colo. 2004); In

re Murphy, 288 B.R. 1, 5 (D. Me. 2002); In re Bakalis, 220 B.R. 525, 532 (Bankr. E.D. NY

1998); In re First Wellington Canyon Assoc., No. 89 C 593, 1989 WL 165028, at *1 (N.D. Ill

Dec. 28, 1989) (discussing business judgment rule in rejection of executory contracts); Summit

Land co. v. Allen (In re Summit Land Co.), 13 B.R. 310, 315 (Bankr. D. Utah 1981). The

Debtors submit that, because the Prepetition Employee Obligations are entitled to priority status,

and because the retention of the Debtors’ workforce is vital to the Debtors’ ongoing operations

and their prospects for effectuating a successful sale, it is in the best interest of the Debtors’

estate to pay such claims in the ordinary course of business during this chapter 11 case.

        34.      The Debtors believe that there is a significant risk that Employees whose

Prepetition Employee Obligations are not honored in the ordinary course of business will

terminate their employment relationships with the Debtors.            The continued service and

dedication of the Employees is critical to the Debtors and their prospects for consummating a




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successful sale. In order to retain their Employees, maintain morale under difficult working

conditions and avoid jeopardizing the basic operation of their business pending the sale of their

assets, the Debtors must have authority to pay or otherwise satisfy all Prepetition Employee

Obligations.

        35.      As the Wanat Declaration demonstrates, Employees leaving the Debtors’ employ

at this critical juncture will seriously undermine the sale process. Indeed, the vast majority of the

Employees are effectively irreplaceable during the expedited sale process because the Debtors

will be hard-pressed to hire replacements given the relatively uncertain situation. Moreover, the

amounts to be paid pursuant to this Motion are reasonable compared with the importance and

necessity of the Employees.

        36.      The relief requested in this Motion is appropriate—and indeed critical—and

should be authorized under sections 507(a)(4), 507(a)(5) and 363(b) of the Bankruptcy Code.

Courts routinely recognize that payment of employee obligations is essential to a Debtors’

reorganization efforts and authorize full payment of prepetition wage, salary, commission,

expense, severance and benefit claims. See, e.g., In re UNR Industries, 143 B.R. 506, 519

(Bankr. N.D. Ill. 1992) rev’d on other grounds; In re Enesco Group, Inc., Case No. 07-00565

(Bankr. N.D. Ill. Jan. 12, 2007); In re McLeodUSA Inc., Case No. 05-63230 (Bankr. N.D. Ill.

Oct. 31, 2005); In re Comdisco, Inc., Case No. 01-24795 (Bankr. N.D. Ill. July 16, 2001); In re

Outboard Marine Corporation, Case No. 00-37405 (EIK) (Bankr. N.D. Ill. Dec. 22, 2000); In re

SourceOne Wireless, Inc., Case No. 99-13841 (Bankr. N.D. Ill Feb. 1, 2000); In re Envirodyne

Industries, Inc., Case No. 93-00319 (Bankr. N.D. Ill. January 1, 1993).

        37.      Based upon the foregoing, the Debtors request that this Court enter an order

authorizing, but not directing, the Debtors to pay the Prepetition Employee Obligations as




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described herein and to continue the Employee Benefits plans postpetition in the ordinary course

of business.

        38.      Nothing in this Motion shall be construed as a request for authority to assume any

executory contract under section 365 of the Bankruptcy Code or affect the Debtors’ right to

assume or reject any executory contract.


                                            VI.   NOTICE

        39.      Notice of this Motion has been given to: (a) the Office of the United States

Trustee; (b) the creditors the Debtors’ consolidated list of twenty (20) largest unsecured

creditors; (c) counsel to the Debtors’ secured lenders; and (d) all other parties requesting notice

pursuant to Bankruptcy Rule 2002. In light of the nature of the relief requested, the Debtors

submit that no further notice is required.


        WHEREFORE, the Debtors respectfully request that the Court enter an order (a)

authorizing, but not directing, the Debtors to pay or otherwise honor the Debtors’ Prepetition

Employee Obligations, (b) authorizing the Debtors to make deductions from the Employees’

paychecks, (c) authorizing, but not directing, the Debtors to continue postpetition the Employee

Benefits in effect immediately prior to the Petition Date, (d) directing all banks to honor

prepetition checks for payment of such obligations, and (e) granting the Debtors such other and

further relief as is just and proper.

                                                     Respectfully submitted,

                                                     LYON WORKSPACE PRODUCTS, L.L.C.



                                                     By: s/ Daniel A. Zazove
                                                          One of the proposed attorneys for the
                                                          Debtor



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Daniel A. Zazove, ARDC No. 3104117
Kathleen A. Stetsko, ARDC No. 6297704
Charles R. Gibbs, ARDC No. 6309075
Perkins Coie LLP
131 South Dearborn Street, Suite 1700
Chicago, IL 60603-5559
312.324.8400




63897-0002/LEGAL25579843.1                       -14-
UNITED STATES BANKRUPTCY COURT
                           NORTHERN DISTRICT OF ILLINOIS
                                    Eastern Division

In Re:                                          )              BK No.: 13-2100
Lyon Workspace Products, L.L.C. et al.          )              (Jointly Administered)
                                                )              Chapter: 11
                                                )
                                                               Honorable Janet S. Baer
                                                )
                                                )
                 Debtor(s)                      )
      ORDER (A) AUTHORIZNG, BUT NOT DIRECTING, PAYMENT OF PREPETITION
  PRIORITY WAGES, SALARIES AND EMPLOYEE BENEFITS AND CONTINUATION OF
EMPLOYEE BENEFIT PLANS AND PROGRAMS POSTPETITION, (B) AUTHORIZNG, BUT
        NOT DIRECTING, DEDUCTIONS FROM EMPLOYEES’ PAYCHECKS, AND (C)
     DIRECTING ALL BANKS TO HONOR PREPETITION CHECKS FOR PAYMENT OF
                             PREPETITION EMPLOYEE OBLIGATIONS
         Upon the motion of the above-captioned debtors and debtors-in-possession (collectively, the
“Debtors”) seeking an order (a) authorizing, but not directing, the Debtors to pay or otherwise honor the
Debtors’ employee-related prepetition priority obligations to, or for the benefit of, employees, and to
continue postpetition the employee benefit plans and programs in effect immediately prior to the filing
of this case; (b) authorizing, but not directing, the Debtors to make deductions from employees’
paychecks; (c) directing all banks to honor prepetition checks for payment of the Debtors’ prepetition
employee obligations; and (d) granting related relief; the Court finding that (i) it has jurisdiction over
the matters raised in the Motion pursuant to 28 U.S.C. § 1334; (ii) this is a core proceeding pursuant to
28 U.S.C. § 157(b)(2); (iii) notice of the Motion and the hearing on the Motion was sufficient under the
circumstances; (iv) the relief requested in the Motion is warranted; and (v) upon the record herein; and
after due deliberation thereon, good and sufficient cause exists for the granting of relief as set forth
herein;
IT IS HEREBY ORDERED THAT:

  1. The Motion is granted.

  2. All objections to the Motion or the relief requested therein that have not been made, withdrawn,
waived, or settled, and all reservations of rights included therein, are overruled and disallowed on the
merits.

   3. The Debtors are authorized, but not directed, to pay certain of the Prepetition Employee
Obligations; provided, however, that payments to each Employee after the Petition Date on account of
amounts accrued prior to the Petition Date shall not exceed amounts afforded priority status by any
applicable provision of section 507 of the Bankruptcy Code; provided further, however, that any
payments to each Employee shall be in accordance with the court approved debtor-in-possession
financing / cash collateral order and corresponding Budget;

  4. The Debtors are authorized, but not directed, to continue the Employee Benefits; provided further,
however, that any payments to each Employee shall be in accordance with the court approved debtor-in-
possession financing / cash collateral order and corresponding Budget;

   5. In accordance with this Order and any other order of this Court, each of the banks and financial
institutions at which the Debtors maintain their accounts relating to the payment of the Employee
                                                                                     Rev: 20130104_bko
Obligations and the Employee Payment, are authorized to honor checks presented for payment, and to
honor all funds transfer requests made by the Debtors related thereto, to the extent that sufficient funds
are on deposit in such accounts;

  6. The relief granted herein shall not constitute or be deemed an assumption or an authorization to
assume any executory contract or agreement, including, but not limited to, any benefit plans,
employment agreements, or severance agreements to which the Debtors are party;

   7. The relief set forth herein is necessary to avoid immediate and irreparable harm to the Debtors'
estates; and

  8. The Court retains jurisdiction to hear and determine all matters arising from the entry of this Order.

                                                           Enter:




Dated:                                                              United States Bankruptcy Judge

Prepared by:
Daniel A. Zazove, ARDC No. 3104117
Kathleen A. Stetsko, ARDC No. 6297704
Charles R. Gibbs, ARDC No. 6309075
Perkins Coie LLP
131 South Dearborn Street, Suite 1700
Chicago, IL 60603-5559
312.324.8400




                                                                                     Rev: 20130104_bko

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Lyon workspace employee motion

  • 1. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main 1/19/2013 Docket #0011 Date Filed: Document Page 1 of 14 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION In re Chapter 11 LYON WORKSPACE PRODUCTS, L.L.C., et al.1, Case No. 13-2100 Debtor. Honorable Janet S. Baer DEBTORS’ MOTION FOR ORDER PURSUANT TO 11 U.S.C. §§ 507 AND 363 (A) AUTHORIZING, BUT NOT DIRECTING, PAYMENT OF PREPETITION PRIORITY WAGES, SALARIES AND EMPLOYEE BENEFITS AND CONTINUATION OF EMPLOYEE BENEFIT PLANS AND PROGRAMS POSTPETITION, (B) AUTHORIZING, BUT NOT DIRECTING, DEDUCTIONS FROM EMPLOYEES’ PAYCHECKS, AND (C) DIRECTING ALL BANKS TO HONOR PREPETITION CHECKS FOR PAYMENT OF PREPETITION EMPLOYEE OBLIGATIONS Lyon Workspace Products, L.L.C., et al. (collectively, the “Debtors”) submit this motion, pursuant to sections 105, 363(b), 507(a)(4) and 507(a)(5) of the Bankruptcy Code, for entry of an order: (a) authorizing, but not directing, the Debtors to pay or otherwise honor the Debtors’ employee-related prepetition priority obligations to, or for the benefit of, employees, and to continue postpetition the employee benefit plans and programs in effect immediately prior to the filing of this case; (b) authorizing, but not directing, the Debtors to make deductions from employees’ paychecks; (c) directing all banks to honor prepetition checks for payment of the Debtors’ prepetition employee obligations; and (d) granting related relief. In support of this Motion, the Debtors respectfully represent as follows: I. JURISDICTION 1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). Venue of these cases and this Motion in this District is proper pursuant to 28 U.S.C. §§ 1408 and 1409. The statutory predicates for the 1 The other Debtors in these jointly administered chapter 11 cases are Pride Metals L.L.C., Sycamore Systems, L.L.C., Paris Metal Products, L.L.C., Durand Products, L.L.C., L&D Group, Inc., Miller Global Solutions, ¨1¤>5 -!3 *M« 1302100130119000000000010 63897-0002/LEGAL25579843.1
  • 2. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 2 of 14 relief requested herein are Bankruptcy Code sections 105, 363(b), 507(a)(4) and 507(a)(5). II. BACKGROUND 2. On January 19, 2013, each of the Debtors 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. No request for the appointment of a trustee or examiner has been made in the Chapter 11 Cases and no official committee has been appointed. 3. The factual background relating to the Debtors’ commencement of these Chapter 11 Cases is set forth in detail in the Declaration of Robert Wanat in Support of Debtors’ Chapter 11 Petitions and First Day Motions (the “Wanat Declaration”) filed on the Petition Date and incorporated herein by reference. III. RELIEF REQUESTED 4. By this Motion, the Debtors request that the Court enter an order under sections 507(a)(4) and (a)(5) and 363(b)(1) of the Bankruptcy Code authorizing the Debtors to (a) pay or otherwise honor all employee-related prepetition priority obligations of the Debtors to, or for the benefit of, current employees (the “Employees”), (b) make deductions from Employees’ paychecks, and (c) continue postpetition the Debtors’ employee benefit plans and programs as described below. 5. The employee-related obligations (the “Prepetition Employee Obligations”) include, without limitation: (a) unpaid prepetition wages, salaries and commissions, up to the statutory maximum of $11,725 per employee, including holiday, L.L.C., and Lyon Workspace Products, Inc. 63897-0002/LEGAL25579843.1 -2-
  • 3. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 3 of 14 vacation and sick leave pay earned prior to the Petition Date; (b) reimbursable business expenses incurred before the Petition Date; and (c) employee health and welfare benefit claims arising before the Petition Date (including, without limitation, (i) medical and dental claims under the Debtors’ self-funded health care plan and COBRA, (ii) long-term disability, accidental death and dismemberment and life insurance, (iii) supplemental health insurance, (iv) union dues for union Employees, (v) uniform rentals for uniformed Employees, and (iv) workers’ compensation claims arising before the Petition Date (collectively, the benefits in this subsection (c) shall be referred to as the “Employee Benefits”)). 6. The Debtors also seek an order directing all banks and financial institutions to honor prepetition checks for payment of the Prepetition Employee Obligations. IV. AUTHORITY FOR REQUESTED RELIEF 7. In order to minimize the personal hardship that the Employees will suffer if prepetition Employee-related obligations are not paid when due or as expected, and to maintain morale and an essential workforce during this critical time, the Debtors respectfully submit that it is in the best interests of their estate, creditors and parties-in-interest for this Court to authorize payment of the Prepetition Employee Obligations, to allow the Debtors to make deductions from the Employees’ paychecks and to continue the Employee Benefits in the ordinary course of business. A. Unpaid Compensation 8. As of the Petition Date, the Debtors’ workforce consisted of approximately 400 full-time employees. Approximately 53% of the Debtors’ workforce consists of salaried Employees, and the remaining 47% of the workforce is paid on an hourly basis. Of the salaried employees, approximately 55% are eligible for overtime pay. 63897-0002/LEGAL25579843.1 -3-
  • 4. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 4 of 14 9. The Debtors have two payrolls: one weekly and the other bi-weekly. The weekly payroll varies depending upon plant volume, but is approximately $200,000. The bi-weekly payroll is approximately $295,000 per pay period. Generally, hourly Employees are paid weekly and salaried Employees are paid bi-weekly. Both salaried and hourly Employees are paid approximately one to two weeks in arrears. 10. Eight percent of the Debtors’ Employees are union members whose employment is governed by a collective bargaining agreement (“CBA”) with Local Union No. 1636 of the United Steelworkers of America, A.F.L.-C.I.O. 11. Through this Motion, the Debtors request authority, but not direction, to honor, in the ordinary course of business, all of the obligations to union Employees in accordance with the terms and conditions of the CBA, including, but not limited to, the relevant Unpaid Wages and Salaries. 12. Though the Debtors are current on their payroll as of the Petition Date, the Debtors owe their Employees compensation in the form of accrued but unpaid wages and salaries (the “Unpaid Wages and Salaries”) in the approximate aggregate amount of $130,000. 13. The Debtors also use temporary workers during busy periods. These workers are not Employees and are not paid by the Debtor. Rather, the Debtors pay the agencies that directly employ these workers. As of the Petition Date, the Debtors used an average of 25 temp workers per day and owe nine agencies at total of approximately $500,000 for the services of their temporary workers. 14. Additionally, approximately 50 Employees in the Debtors’ sales force are entitled to commissions based on a percentage of sales made each quarter (the “Unpaid Commissions,” and together with the Unpaid Wages and Salaries, the “Unpaid Compensation”). As of the 63897-0002/LEGAL25579843.1 -4-
  • 5. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 5 of 14 Petition Date, the Debtors estimate that the aggregate amount owed in the form of accrued but Unpaid Commissions is approximately $200,000. The Debtors seek authority to pay such Unpaid Compensation as it becomes due and owing in the ordinary course of business. Only one of the Employees entitled to an Unpaid Commission is owed more than the statutory maximum. In that case, the Debtors seek only to pay the statutory maximum of $11,725 (less any other accrued priority compensation). B. Paid Time Off 15. During the course of each year, certain Employees accrue vacation, sick leave and holiday pay that may be exercised in the ordinary course of the Debtors’ business (the “Paid Time Off”). Accrual of vacation time varies depending on the location of the Employee, his or her union membership, whether that employee is salaried or hourly and whether the employee is in an overtime exempt role. Vacation time of four weeks is the maximum accrual for the most senior non-union Employees and does not carry over from year to year, except for those employees located in California. As of the Petition Date, aggregate accrued and unused vacation time amounted to a total liability to the Debtors of approximately $300,000. 16. The Debtors also provide sick leave to full-time salaried Employees. The Debtors request authority to continue to accrue such vacation, sick leave and other leave time in the ordinary course of their business and to allow Employees to utilize such accrued time under the customary and/or contractual terms and conditions of such Employees’ employment. C. Reimbursement Obligations 17. It is the Debtors’ policy to reimburse Employees for certain expenses within the scope of their employment, including expenses for business-related travel (the “Reimbursement Obligations”). The Debtors average $24,000 per month in expense reimbursements, and 63897-0002/LEGAL25579843.1 -5-
  • 6. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 6 of 14 estimates that, as of the Petition Date, approximately half that total was owed to Employees on account of the Reimbursement Obligations. The Debtors request the authority to pay such accrued but unpaid prepetition Reimbursement Obligations. D. Remitting and/or Paying Appropriate Deductions and Withholdings 18. During each applicable pay period, the Debtors routinely deduct certain amounts from paychecks, including, without limitation, (a) garnishments, child support and similar deductions, and (b) other pre-tax and after-tax deductions payable pursuant to certain of the Employee Benefits discussed herein (such as an employee’s share of health care benefits, insurance premiums, pension payments, 401(k) contributions and other miscellaneous deductions) (collectively, the “Deductions”) and forwards those amounts to various third party recipients. On average, the Debtors historically deducted approximately $12,000 from weekly payroll and $28,000 from bi-weekly payroll from the Employees’ paychecks per applicable payroll period. However, due to the commencement of this chapter 11 case, these funds were deducted from Employees’ earnings, but may not have been forwarded to the appropriate third party recipients prior to the Petition Date. Accordingly, the Debtors seek for it or their agent to continue to forward these prepetition Deductions to the applicable third party recipients on a postpetition basis, in the ordinary course of business, as routinely done prior to the Petition Date. 19. Further, the Debtors are required by law to withhold from an Employee’s wages amounts related to federal, state and local income taxes and social security taxes (collectively, the “Withheld Amounts”) for remittance to the appropriate federal, state or local taxing authority. The Debtors must then match from their own funds for social security and pay, based on a percentage of gross payroll, additional amounts for state and federal unemployment insurance (the “Employer Payroll Taxes,” and together with the Withheld Amounts, the “Payroll 63897-0002/LEGAL25579843.1 -6-
  • 7. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 7 of 14 Taxes”). The Debtors’ Payroll Taxes, including both the employee and employer portion, for the last three quarters of 2012 were approximately $4,300,000. On average, the Debtors withhold approximately $55,000 from weekly payroll and $80,000 from bi-weekly payroll in the aggregate from the Employees’ paychecks each payroll period. Before the Petition Date, the Debtors withheld the appropriate amounts from Employees’ earnings for the Payroll Taxes, but such funds may not have been forwarded to the appropriate taxing authorities prior to the Petition Date. As a result, the Debtors seek authority, but not direction, for it or their agent to continue to honor and process the prepetition obligations with respect to Payroll Taxes on a postpetition basis, in the ordinary course of business, as routinely done prior to the Petition Date. E. Employee Benefits 20. The Debtors also offer Employees many standard benefits under their Employee Benefit programs. Specifically, certain of the Debtors’ Employees are offered a choice of, among other things, medical and dental plans, COBRA, long-term disability, accidental death and dismemberment insurance, basic life insurance and supplemental health insurance. 21. The Debtors offer medical and dental coverage to Employees and their families. The insurance plan is self-funded and independently administered by Blue Cross/Blue Shield. The total monthly contribution from Employees for insurance is approximately $45,000. The Debtors are responsible for paying claims and administrative expenses to Blue Cross/ Blue Shield from the Employees’ contribution and from their own funds. The monthly payment varies depending on actual claims activity, but the average payment is approximately $300,000 per month, inclusive of the Employees’ contribution. As of the Petition Date, the Debtors believe that claims for December and January in the approximate total amount of $400,000 will be incurred but will not yet be due and owing. 63897-0002/LEGAL25579843.1 -7-
  • 8. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 8 of 14 22. Approximately 350 Employees participate in one or more of: (a) long-term disability through Met Life or Assurant, (b) life insurance through Met Life, (c) short term disability, and/or (d) a uniform rental program. The annual cost to the Debtors is approximately $175,000. As of the Petition Date, the Debtors expect that the aggregate amount of these benefits outstanding will be $25,000. 23. The Debtors provide their Employees with a 401(k) plan. Under the CBA, the Debtors must match contributions up to 6% of a union employee’s salary. The Debtors monthly contributions average $4500. As of the Petition Date, the Debtors expect that approximately $2,500 in required 401(k) contributions will be outstanding. 24. The Debtors request authority to continue to maintain the Employee Benefits in their sole discretion and to pay any prepetition amounts related thereto. F. Workers Compensation 25. Because their sales force is national in scope, the Debtors are required to provide workers’ compensation insurance 41 states. The Debtors insures workers’ compensation with a large deductible program through Sentry Insurance, or if required by state law, through a retrospective rating policy through Sentry Insurance. The premiums for the insurance are approximately $385,000 per year, plus claims paid. 26. It is critical that the Debtors be permitted to continue their workers’ compensation program and to pay any reconciled balances and unpaid premiums because alternative arrangements for workers’ compensation coverage would most certainly be more costly and the failure to provide coverage may subject the Debtors and/or their officers to severe penalties. Accordingly, the Debtors seeks authority to continue to pay premiums related to workers’ compensation, to pay any unpaid premiums that became due prepetition and to continue the 63897-0002/LEGAL25579843.1 -8-
  • 9. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 9 of 14 workers’ compensation program in the ordinary course of business in their sole discretion. G. Summary of Requests 27. In sum, pursuant to this Motion, the Debtors seek to pay the Prepetition Employee Obligations and to continue the Debtors’ Employee Benefits in effect immediately prior to the filing of this case. If the Debtors fail to pay or honor the Employees’ prepetition compensation, reimbursement procedures and employee benefits, the Employees will suffer extreme personal hardship and in many cases will be unable to pay their basic living expenses. This clearly would destroy Employee morale and result in unmanageable Employee turnover during the critical early stages of the Debtors’ chapter 11 case, which would negatively impact the Debtors’ ability to sell their assets in a sale pursuant to § 363 of the Bankruptcy Code. The Debtors submit that any significant deterioration in morale at this time will substantially and adversely impact the Debtors and their ability to sell their assets, thereby resulting in immediate and irreparable harm to the Debtors and their estates. In addition, the failure to pay workers’ compensation claims may result in Employee attempts to compel payment through litigation or similar means, thereby jeopardizing the Debtors’ ability to conduct business. 28. To retain Employees and maintain their morale through the asset sale, the Debtors seek authorization, but not direction, to satisfy the Prepetition Employee Obligations and continue to provide postpetition the Employee Benefits and maintain accruals of those benefits in the ordinary course of business. The Debtors further submit that the amounts to be paid to the Employees pursuant to this Motion are reasonable compared with the importance and necessity of preserving Employee loyalty and morale and with the difficulties and losses the Debtors likely will suffer if those amounts are not paid. 29. Accordingly, the Debtors seek authorization to pay the Prepetition Employee 63897-0002/LEGAL25579843.1 -9-
  • 10. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 10 of 14 Obligations (or to maintain accrued levels of benefits and continue such accrual where payment is not yet due) all in accordance with the policies, plans and programs in place prior to the Petition Date. H. Banks to Honor Prepetition Checks for Prepetition Employee Obligations 30. In addition, the Debtors request that all applicable banks and other financial institutions be authorized and directed to receive, process, honor and pay all checks presented for payment and to honor all fund transfer requests made by the Debtors related to the Prepetition Employee Obligations, whether such checks were presented or fund transfer requests were submitted prior to or after the Petition Date. The Debtors represent that checks other than those for the Prepetition Employee Obligations will not be honored inadvertently. Moreover, the Debtors represent that they have sufficient cash reserves, together with anticipated access to debtor-in-possession financing, to promptly pay all of the Prepetition Employee Obligations, to the extent described herein, on an ongoing basis and in the ordinary course of their business. V. APPLICABLE AUTHORITY 31. Sections 507(a)(4) and (a)(5) of the Bankruptcy Code give priority up to $11,725 per individual for prepetition claims for wages, salaries, vacation, sick leave and contributions to employee benefit plans. The Debtors believe that the Prepetition Employee Obligations that they seek to pay are entitled to priority under sections 507(a)(4) and (a)(5) of the Bankruptcy Code, and, as such, will be paid in full as a condition to confirmation of a plan of reorganization. See 11 U.S.C. § 1129(a)(9). Therefore, payment of the Prepetition Employee Obligations in the ordinary course of business merely accelerates the timing of payment of obligations that will otherwise be paid in any event, thereby not disrupting the Bankruptcy Code’s priority scheme. 32. This Court may also authorize the Debtors’ proposed payment of the Prepetition 63897-0002/LEGAL25579843.1 -10-
  • 11. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 11 of 14 Employee Obligations under section 363(b)(1) of the Bankruptcy Code. Section 363(b)(1) provides that a bankruptcy court, after notice and a hearing, may authorize a debtor to “use, sell, or lease, other than in the ordinary course of business, property of the estate.” See 11 U.S.C. § 363(b)(1). Although stated various ways, courts generally hold that a debtor’s decision to enter into a transaction outside of the ordinary course of business is governed by the business judgment standard. 3 COLLIER ON BANKRUPTCY ¶ 363.02[4] (16th ed. 2012); See e.g. In re Zeigler, 320 B.R. 362, 381 (Bankr. N.D. Ill. 2005); see also In re Schipper, 933 F.2d 513, 515 (7th Cir. 1991) (requiring “articulated business justification” for sale under § 363(b)(1)); In re U.S. Airways Grp., Inc., 287 B.R. 643, 645 (Bankr. E.D. Va. 2002). 33. When applying the “business judgment” rule, courts show great deference to a debtor’s decision making. See, e.g., In re Castre, 312 B.R. 426, 430 (Bankr. D. Colo. 2004); In re Murphy, 288 B.R. 1, 5 (D. Me. 2002); In re Bakalis, 220 B.R. 525, 532 (Bankr. E.D. NY 1998); In re First Wellington Canyon Assoc., No. 89 C 593, 1989 WL 165028, at *1 (N.D. Ill Dec. 28, 1989) (discussing business judgment rule in rejection of executory contracts); Summit Land co. v. Allen (In re Summit Land Co.), 13 B.R. 310, 315 (Bankr. D. Utah 1981). The Debtors submit that, because the Prepetition Employee Obligations are entitled to priority status, and because the retention of the Debtors’ workforce is vital to the Debtors’ ongoing operations and their prospects for effectuating a successful sale, it is in the best interest of the Debtors’ estate to pay such claims in the ordinary course of business during this chapter 11 case. 34. The Debtors believe that there is a significant risk that Employees whose Prepetition Employee Obligations are not honored in the ordinary course of business will terminate their employment relationships with the Debtors. The continued service and dedication of the Employees is critical to the Debtors and their prospects for consummating a 63897-0002/LEGAL25579843.1 -11-
  • 12. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 12 of 14 successful sale. In order to retain their Employees, maintain morale under difficult working conditions and avoid jeopardizing the basic operation of their business pending the sale of their assets, the Debtors must have authority to pay or otherwise satisfy all Prepetition Employee Obligations. 35. As the Wanat Declaration demonstrates, Employees leaving the Debtors’ employ at this critical juncture will seriously undermine the sale process. Indeed, the vast majority of the Employees are effectively irreplaceable during the expedited sale process because the Debtors will be hard-pressed to hire replacements given the relatively uncertain situation. Moreover, the amounts to be paid pursuant to this Motion are reasonable compared with the importance and necessity of the Employees. 36. The relief requested in this Motion is appropriate—and indeed critical—and should be authorized under sections 507(a)(4), 507(a)(5) and 363(b) of the Bankruptcy Code. Courts routinely recognize that payment of employee obligations is essential to a Debtors’ reorganization efforts and authorize full payment of prepetition wage, salary, commission, expense, severance and benefit claims. See, e.g., In re UNR Industries, 143 B.R. 506, 519 (Bankr. N.D. Ill. 1992) rev’d on other grounds; In re Enesco Group, Inc., Case No. 07-00565 (Bankr. N.D. Ill. Jan. 12, 2007); In re McLeodUSA Inc., Case No. 05-63230 (Bankr. N.D. Ill. Oct. 31, 2005); In re Comdisco, Inc., Case No. 01-24795 (Bankr. N.D. Ill. July 16, 2001); In re Outboard Marine Corporation, Case No. 00-37405 (EIK) (Bankr. N.D. Ill. Dec. 22, 2000); In re SourceOne Wireless, Inc., Case No. 99-13841 (Bankr. N.D. Ill Feb. 1, 2000); In re Envirodyne Industries, Inc., Case No. 93-00319 (Bankr. N.D. Ill. January 1, 1993). 37. Based upon the foregoing, the Debtors request that this Court enter an order authorizing, but not directing, the Debtors to pay the Prepetition Employee Obligations as 63897-0002/LEGAL25579843.1 -12-
  • 13. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 13 of 14 described herein and to continue the Employee Benefits plans postpetition in the ordinary course of business. 38. Nothing in this Motion shall be construed as a request for authority to assume any executory contract under section 365 of the Bankruptcy Code or affect the Debtors’ right to assume or reject any executory contract. VI. NOTICE 39. Notice of this Motion has been given to: (a) the Office of the United States Trustee; (b) the creditors the Debtors’ consolidated list of twenty (20) largest unsecured creditors; (c) counsel to the Debtors’ secured lenders; and (d) all other parties requesting notice pursuant to Bankruptcy Rule 2002. In light of the nature of the relief requested, the Debtors submit that no further notice is required. WHEREFORE, the Debtors respectfully request that the Court enter an order (a) authorizing, but not directing, the Debtors to pay or otherwise honor the Debtors’ Prepetition Employee Obligations, (b) authorizing the Debtors to make deductions from the Employees’ paychecks, (c) authorizing, but not directing, the Debtors to continue postpetition the Employee Benefits in effect immediately prior to the Petition Date, (d) directing all banks to honor prepetition checks for payment of such obligations, and (e) granting the Debtors such other and further relief as is just and proper. Respectfully submitted, LYON WORKSPACE PRODUCTS, L.L.C. By: s/ Daniel A. Zazove One of the proposed attorneys for the Debtor 63897-0002/LEGAL25579843.1 -13-
  • 14. Case 13-02100 Doc 11 Filed 01/19/13 Entered 01/19/13 19:27:48 Desc Main Document Page 14 of 14 Daniel A. Zazove, ARDC No. 3104117 Kathleen A. Stetsko, ARDC No. 6297704 Charles R. Gibbs, ARDC No. 6309075 Perkins Coie LLP 131 South Dearborn Street, Suite 1700 Chicago, IL 60603-5559 312.324.8400 63897-0002/LEGAL25579843.1 -14-
  • 15. UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF ILLINOIS Eastern Division In Re: ) BK No.: 13-2100 Lyon Workspace Products, L.L.C. et al. ) (Jointly Administered) ) Chapter: 11 ) Honorable Janet S. Baer ) ) Debtor(s) ) ORDER (A) AUTHORIZNG, BUT NOT DIRECTING, PAYMENT OF PREPETITION PRIORITY WAGES, SALARIES AND EMPLOYEE BENEFITS AND CONTINUATION OF EMPLOYEE BENEFIT PLANS AND PROGRAMS POSTPETITION, (B) AUTHORIZNG, BUT NOT DIRECTING, DEDUCTIONS FROM EMPLOYEES’ PAYCHECKS, AND (C) DIRECTING ALL BANKS TO HONOR PREPETITION CHECKS FOR PAYMENT OF PREPETITION EMPLOYEE OBLIGATIONS Upon the motion of the above-captioned debtors and debtors-in-possession (collectively, the “Debtors”) seeking an order (a) authorizing, but not directing, the Debtors to pay or otherwise honor the Debtors’ employee-related prepetition priority obligations to, or for the benefit of, employees, and to continue postpetition the employee benefit plans and programs in effect immediately prior to the filing of this case; (b) authorizing, but not directing, the Debtors to make deductions from employees’ paychecks; (c) directing all banks to honor prepetition checks for payment of the Debtors’ prepetition employee obligations; and (d) granting related relief; the Court finding that (i) it has jurisdiction over the matters raised in the Motion pursuant to 28 U.S.C. § 1334; (ii) this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2); (iii) notice of the Motion and the hearing on the Motion was sufficient under the circumstances; (iv) the relief requested in the Motion is warranted; and (v) upon the record herein; and after due deliberation thereon, good and sufficient cause exists for the granting of relief as set forth herein; IT IS HEREBY ORDERED THAT: 1. The Motion is granted. 2. All objections to the Motion or the relief requested therein that have not been made, withdrawn, waived, or settled, and all reservations of rights included therein, are overruled and disallowed on the merits. 3. The Debtors are authorized, but not directed, to pay certain of the Prepetition Employee Obligations; provided, however, that payments to each Employee after the Petition Date on account of amounts accrued prior to the Petition Date shall not exceed amounts afforded priority status by any applicable provision of section 507 of the Bankruptcy Code; provided further, however, that any payments to each Employee shall be in accordance with the court approved debtor-in-possession financing / cash collateral order and corresponding Budget; 4. The Debtors are authorized, but not directed, to continue the Employee Benefits; provided further, however, that any payments to each Employee shall be in accordance with the court approved debtor-in- possession financing / cash collateral order and corresponding Budget; 5. In accordance with this Order and any other order of this Court, each of the banks and financial institutions at which the Debtors maintain their accounts relating to the payment of the Employee Rev: 20130104_bko
  • 16. Obligations and the Employee Payment, are authorized to honor checks presented for payment, and to honor all funds transfer requests made by the Debtors related thereto, to the extent that sufficient funds are on deposit in such accounts; 6. The relief granted herein shall not constitute or be deemed an assumption or an authorization to assume any executory contract or agreement, including, but not limited to, any benefit plans, employment agreements, or severance agreements to which the Debtors are party; 7. The relief set forth herein is necessary to avoid immediate and irreparable harm to the Debtors' estates; and 8. The Court retains jurisdiction to hear and determine all matters arising from the entry of this Order. Enter: Dated: United States Bankruptcy Judge Prepared by: Daniel A. Zazove, ARDC No. 3104117 Kathleen A. Stetsko, ARDC No. 6297704 Charles R. Gibbs, ARDC No. 6309075 Perkins Coie LLP 131 South Dearborn Street, Suite 1700 Chicago, IL 60603-5559 312.324.8400 Rev: 20130104_bko