American court hearing recordings and interviews - 23andMe - March 26 2025 Bankruptcy Court Hearing, case 2025-40976 before the US Bankruptcy Court for the Eastern District of Missouri, #bankruptcy, #privacy, #data, #genetics #sale #truecrime #23andMe

Episode Date: April 5, 2025

This is the official audio recording of the hearing conducted by the US Bankruptcy Court in the 23andMe bankruptcy proceedings on March 26, 2025 and is available for download as an MP3 that is contained in the PDF filed on the Bankruptcy Court docket as docket number 79.Given the massive public interest in the 23 and Me bankruptcy case due to #privacy concerns and other issues, a free docket and more information about the 23andMe bankruptcy proceedings are available through this link: https://restructuring.ra.kroll.com/23andMe/Home-DocketInfo

information pulled up here and we'll get underway just a second noon case 23 and me holding co at all let's have appearances in the courtroom please mr risky good afternoon your honor tom riski and nathan wallis and robert eggman harmony macdonald proposed co-counsel good afternoon your honor christopher hopkins of paul wrys riftkin wharton and garrison as proposed co-counsel to the company i'm here today with mr billy clareman miss grace huts miss lauren co-ckelio and mr just soon welcome to all of you thank you your honor good morning the honor Larry Paris and John Hall on behalf of Lewis Rice we are here with local as local council to good women practice is on the phone with you today it would be

Robert Lemmins and Catherine Lynn and we represent the special committee of the board of directors today Beth Neh Rose Fulbright on behalf of J&B Capital Partners and my partner Rob Hirsch is appearing he's from her New York office he's appearing via WebEx today. Very good. Good afternoon. Good afternoon, Your Honor, Carol Recheck and my colleague Joseph Schlottzauer on behalf of the United States Trustee. Good afternoon to you. Other appearances in the courtroom. All right, appearances on the WebEx. This will be a bit of a challenge, but if we try not to talk over each other, if you wish to enter your appearance, if you're just listening only, you don't need to enter

your parents. Good afternoon, Your Honor. This is Heather Crackett for the State of Indiana. Good afternoon. Good afternoon, Your Honor. Robert Lemons from Goodwin-Fractor. As Mr. Perez mentioned earlier, we are proposed counsel to, special counsel to the special committee.

Good afternoon to you. Good afternoon, Your Honor, Gillian Dent, at the BBC Galhansson on behalf of the class in the end of READ 23 and the customer data security breach litigation, which is pending in the Northern District of California.

My partner, Norman Siegel, who is unable to be here today, was appointed by the court as settlement class counsel in that case, along with Terry Bostenberg of Tyler Borbach and Gail Blatt of Casey Jerry. And Ms. Blas is appearing with me today as Chris Granger, who was on for Taylor Warbach. And just so the court knows, that case involves a data breach involving millions of claims and billions in statutory damages. and there the court is preliminarily approved a settlement and conditionally certified a settlement class. And settlement class counsel don't plan to intend to speak today unless you need us to, but we're here to let the court know that we're evaluating our options and intend to be active assistance of these proceedings

to protect the interests of the class who we believe, you know, are at the top of the list of unsecured creditors. Thank you, Your Honor. Thank you. Good afternoon, Your Honor. Andrew Bellman from Lowenstein-Standler. We represent a group of law firms that represent a large number of data breach arbitration claimant on the line today as well as my partner, Michael Eichkin,

and I believe the litigation council are on as well, but they are intending simply to monitor. Very good. Good afternoon to you. Other appearances on the WebEx? Good afternoon, Your Honor. My name is Kevin Barnes, Pro Se. I'm a shareholder of 23 and me. I appreciate the chance to be here today.

All right, welcome, Ms. Barnes. Mr. Vecito, I think you're on. My name is Charles Vecito. I'm also an equity shareholder and a member of the genetic database and customer of 23 and me. All right, welcome. Thank you.

This is, again, look at the current versions. No, someone is not currently muted, if you have just checked, unless you're speaking. Any other appearances on the WebEx before we get underway? All right, hearing none. Mr. Risky? Yes, Your Honor. Again, Tom Risky proposed co-counsel for the debtors. If it pleases the court, as far as proceeding today, I'd like to just do a little bit of introductory remarks.

I'll turn it over to my co-counsel, Mr. Hopkins, to give your honor an overview of how we got here, what we're doing, and where we see the case going certainly we filed the proposed agenda we're of course happy to accommodate however the court would like to take things up but we have kind of divided the labor of those motions your honor for presentation after that kind of an introductory presentation by mr. Hopkins if that's accepted that'll be great so briefly your honor I just at the outset of this as as your honor knows complex cases like this have a lot of moving parts and in order to get a case file proceeded through the filing process and before your honor with the relief

we seek it a day it requires a lot of people and it requires a lot of people working together so I think I have to start today by thanking the court for accommodating us with with the short hearing with being accessible to us to speak to concerns I have to thank the US trustee in this way they have been extremely accessible for us prior to the filing and through this filing have provided us valuable insight, comments on proposed orders, and really helped us streamline the issues that we be presenting before, Your Honor, today. So I do think I need to state on the record that we very much appreciate

all these parties helping us get here to stand here today, Your Honor. With that, Your Honor, I'll introduce my co-counsel from Paul Weiss, Christopher Hopkins, who will provide an overview of the company and in this case, Your Honor. Very good. Good afternoon again, Your Honor. For the record, Christopher Hopkins, Paul Weiss, Rifkin, Morton, and Garrison, proposed co-counsel company. I would also like to start echoing Mr. Risky's comments.

We appreciate everything the court, the U.S. Trustee's Office, and the clerk's office has done to work with us over the last week or so on our first day papers. I'm pleased to report, you know, I think as a result of those efforts, we've been able to resolve substantially all of the open issues and comments from the US trustee. There may be ones or Tuesdays here as we go through the agenda, but we really do appreciate that so we could have a smooth hearing today.

We do have a set of demonstrative materials, Your Honor, that I'd like to walk the court through, that really is intended to answer three questions. Who is 23 and me? What were the key events and facts that led us here today? And how do we see these cases proceeding with your honor's support? But before I get to the materials, just a couple

introductions for the court. So on the line today from the company, I believe we have Mr. Joe Sel Savage, who is the company's interim chief executive officer and also the chief accounting officer and chief financial officer of the company, as well as Mr. Guy Hayune, who is the company's general counsel. There are, you know, hard at work at the company attending to the important business of, you know, transitioning the company into Chapter 11 status, but I'm sure they're listening the debtors proposed investment banker as Mollison Company. Mr. Andrew Swift is here today and he's filed declarations in support of the debtors proposed bidding procedures as well as the proposed approval the dip motion. We're also joined by Mr. Matt Cavarda of Alvarez and Marcell. He is the

debtor's chief restructuring officer and Alvarez and Marcel has filed a retention application to designate him as the CRO and authorize Alvarez and Marcel to designate certain personnel to support him in that role. I've already introduced the Paul Wise team that's here today. My restructuring partner, Mr. Paul Basta, is also on the line. And I just want to pause here for a moment, Your Honor. There's a lot of attorneys from the firm here today. We did that because we felt they all worked hard and did a great job

to get the company to where we are today, and we wanted, Your Honor, to have an opportunity to meet the team for them to present some of the motions before the court. We are not going to be charging the estates for that time. And that's something you're going to hear repeatedly in these presentations is how important it's going to be for us as the debtors professionals and stewards of these cases. And really for all parties in interest to make every effort to conserve liquidity from these cases efficiently and keep case costs down

so we can preserve as much value as possible for distribution to our stakeholders at the end of the process. So with that, turning to the material, you know, who is 23M. So starting on slide three, to provide a brief overview of the company, the company was co-founded by Ms. Ann Wigiske and certain of her partners in 2006, and 23 and Me is a leading provider of genetic testing

and telehealth services and was really one of the leading pioneers in the direct consumer genetic testing space. Really since its inception, the company's mission has been focused on allowing allowing people to access unique personalized information about their ancestry, their health characteristics and other valuable information derived from their genetic data to benefit their overall well-being. And that mission has enabled the customer to serve over 15 million customers

and develop one of the world's largest crowdsource databases of genetic information. Getting into, on the next slide, you know, just a little bit more detail on the business. There's really three main segments. There's the personal genome service or PGS business, which is the primary, it's the primary business line. This is customers ordering kits, sending samples back to the company, in getting various forms of genetic reports based on their unique genotype. Through its lemonade health subsidiaries, the company, also operates a telehealth business that includes a telepharmacy as well.

And those services are provided by non-debtor affiliates that are owned by licensed medical professionals that actually provide the health care services in connection with the Lemonade Health Business. And finally, there's research services. So many of our customers have elected to opt into various research initiative and programs of 23 and me where the company uses various methods, including machine learning and other things, to analyze the database of genetic information it has, to identify and validate targets for drug development,

and other things that are designed to leverage the genetic health to benefit its customers and others in terms of the insights that can be deemed from that. On the next slide, this is the organizational chart for the company. So there's 12 debtors in these cases, 23 and Me Holding Company, is the company that, you know, as of the petition date, was publicly traded on NASDAQ. There is no capital structure slide here, Your Honor,

because this company has no funded debt, secured or unsecured. And so, really, you know, the equity holders are, you know, that's it. On the next slide, you know, just to start to introduce you to some of the folks at the company, This is the current Board of Directors. Mr. Mark Jensen is the chairman, Andre Fernandez, Jim Francola, Thomas Walper, and Ms. Ann Wajiske. That's the full board. On the next slide, we'll get into the,

we'll get into governance in a lot more detail later in the presentation, but there is a fully independent special committee of the board that has been delegated, the full authority of the board with respect to all restructuring matters, and it's comprised of everyone except this. Ms. Wigiski. And then finally, you know, I've already introduced them, but these are the, so you can put faces to the names. Here's the senior management team. So on the next, and then we've already introduced the proposed advisors, other than Kroll, who is our proposed claims and noticing agent, as well as our administrative advisor, and their retention app is also up for hearing today.

Customer data. So, Your Honor, with your permission, I'd like to spend a good amount of time on this topic. because it's an important aspect of these cases. And I'm sure the court is aware, you know, leading up to it immediately after the filing. There has been an extraordinary amount of attention given to this issue, media reports, and other things about customer data and how it's going to be treated in these cases. And I think it's very important that all of our stakeholders, our customers, the governmental agencies who are focused on this issue, you know, hear directly from us.

care directly from us on this topic. And simply put, the customer data is more protected today than it has ever been. And that's both from a Chapter 11 process perspective and from the cybersecurity perspective. Your Honor, heard from some of the council to claimants who believe they have claims arising from a cybersecurity incident that occurred

in the fall of 20th. We'll get to that later in the presentation because they are right. They are a major creditor constituency here, and I think it will be helpful to provide the court some background on that. But in our view, as I said, I think the concerns around the treatment of customer data here are predicated on a fundamental misunderstanding of how 23 and me has addressed the treatment of customer data in these cases for at least three reasons. First, the privacy policies that existed before the filing remain in place today. Nothing has changed.

Nothing in our first day relief seeks to modify those policies. And so the company intends to manage use and protect customer data as it always has. It's the status quo. Second, it is true that a major pillar of these cases is going to be running a sales process to maximize the value of our assets for the benefit of our state workers. But that's not a new fact. The company has been, you know, through 13Ds, media reports, press releases issued by the special committee. It is well known that the company has been exploring strategic alternatives for a long time.

But importantly for this process, the debtors proactively have required in our proposed bidding procedures, that it is a requirement of any bid that the buyer has to agree to take any customer. in a court-approved transaction subject to the policies that existed before we filed and are still in place today. And finally, Your Honor, we're now in Chapter 11. And so that comes with all the procedural safeguards and due process considerations that the debtors accept as a condition to using this process. And any transaction that involves customer data is going to be done on notice. parties are going to have an opportunity to object, and most importantly, it's going to have to pass muster in front of your honor,

that we're satisfying our obligations, the bankruptcy code, and applicable law. And so the reality here is that the privacy policies in place before the petition date remain in place. Any buyer must commit to honoring those policies and connection with the sale in all parties' rights with respect to the treatment of their data and to object to any potential sale or fully preserved. And we think it's important that we deliver that message clearly because obviously the success of the sale process is an important aspect

of these cases and we want it to be very clear as to how we're seeking to proceed and what we're actually doing by being here in the Chapter 11 case today. Now on the cybersecurity perspective, just to touch on it briefly, it is true the company was the victim of the cybersecurity incident, but since the company became aware of that it announced the incident, it has taken proactive steps to address its cybersecurity. infrastructure. And so just on that point, you know, from the pure cybersecurity perspective, I mean, the data is protected. And so the last issue I want to touch on with respect to the customer data is there have been news reports that customers have been issue, have been having

issues deleting their data. And there's a suggestion that the company is somehow affirmatively engaged in an effort to prevent that. We are not today. We haven't, in fact, it's the opposite. The company has deployed their engineering team, engaged with third-party vendors and other parties, to remedy the issues as soon as possible. As Your Honor can imagine, with the filing and the media scrutiny, the volume of traffic to the company's website has skyrocketed.

And it's just, it's a systems IT issue where the company's website and servers are just overloaded, and the company is working to address those issues. And so we hope through these comments to demonstrate to the court and our stakeholders that the company is committed to being responsible stewards of our customer data through this process consistent with our fiduciary duties to all of our stakeholders. So I know that was a long-winded speech, Your Honor, but it was very important to the company that that message be delivered today.

So unless Your Honor has any questions on those aspects of this, we can keep moving through the question. Go ahead. Thank you. Prior slide. So just to orient when we say customer data, what are we talking about? So over the course of its history, the company has collected over 15.5 million unique genotype customer, you know, samples over the course of its history.

That is the highest level. So they submit their, you know, they get their kit, they submit a saliva swab, the company processes it, that's that top line genetic information. And then many of the company's customers have voluntarily opted in to other programs at the company with respect to their data, including research, which effectively means that they are agreeing that their data can be used in connection with that research services businesses I described earlier in the presentation. And then there's also bio-bank data where customers have opted in to allow the company to store

or the saliva sample so it can go back and be retested and things like that at laboratories that the company contracts with. On the next slide, again, not to reiterate the points I already hit, but I think the key takeaway here is that the terms of the customer's privacy policies do permit in a situation where the company is involved in a bankruptcy, merger, acquisition, sale of assets, etc., that the data may be transferred in connection with any of those transactions. But importantly, it's at the end of the first sentence here, in connection with any of those transactions, the privacy statement will apply to their personal information as transferred to the new.

And so that is what consistent with the privacy policy, that's where the provision and the bidding procedures ties those two concepts together. Next slide, please. I think we've already covered a lot of this, Your Honor, but again, just to emphasize that the company wants to be responsible stewards of this data. We've already talked about the bidding procedures,

but we've also are seeking authority from the court and our first day relief to redact personal information of customers from our, you know, the various filings we need to make in the cases like the creditor matrix and other things. But we'll get into more detail on that later in the presentation. Next slide, please. So how did we get here? You know, at one point in time, this company had a market cap

approaching $6 billion. And the company has consistently generated significant revenue over its history, but for a variety of factors we'll get into in a second, it has never generated a net profit as it's tried to invest in its future growth and kind of right-size operations to bridge to profitability. And so historically, the company has funded operations primarily through PGS revenue, accessing the equity capital markets,

entering into research collaborations with third parties. You know, over time, however, a confluence of factors began to erode the company's ability to finance operations that way. And as a result, the company began to become liquidity strain. And so starting in around, you know, 2021, you know, there are some macroeconomic factors at play that I'm sure Your Honor has heard come up in many of your other recent filings, just rising costs led to increased operational expenses. The same factors resulted in decreased consumer discretionary spending.

And there's also increased competition in the, you know, direct to consumer genetic testing market. In addition, on the next slide, please, the cybersecurity incident occurred. And so the company announced, you know, became aware that a threat actor had accessed certain of its customers' data and announced that breach in October of 2023. The type of data accessed, you know, varied by customer,

but, you know, because one of the services the company provides is kind of an interconnectivity between customers where if you elect to share your data in this way, you can find out if your relatives have submitted a 23-and-Meat test kit or otherwise, the threat actor was able to be. to access certain information of about 7 million customers. And as Your Honor can imagine following that announcement, there was a explosion of litigation

resulting from the cyber incident. That includes 40 class action litigate lawsuits in the US, as well as two class action lawsuits in Canada. There were nine class actions commenced in state court. And because the companies, you know, terms and conditions included in arbitration clause were also subject to mass arbitration. And over 35,000 arbitration claimants have either initiated or threatened to arbitrate claims against the company, primarily in the U.S., but there's also some in the U.K. as well.

And then there was also a regulatory reaction. So the FTC instigated a CID against the company, and there is a – a group of state's attorney generals that also commenced an investigation into the company. On the next slide. So, you know, given the breadth of that litigation, you know, the company obviously had to act quickly so it didn't, you know, overcome the company. So that the federal class actions were consolidated in an MDL proceeding in the Northern District of California in front of the Honorable Edward Chen.

And the parties, you know, basically once the class was formed and the MDL was formed, they entered into mediation that ultimately was successful. So they reached agreement. And I'm going to paraphrase the terms here to focus on, you know, what's material. But effectively, it was a $30 million cash payment to the settling class. Certain other. You've finally broken loose from work. Three friends, one tea time.

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Non-monetary relief, and the company took that agreement forward to be approved. on a preliminary basis before Judge Chen. Importantly, because this will matter, and I'm sure it will come up at some point in the case, Your Honor will see some bifurcation between claimants who are litigating in federal court, claimants who are litigating in state court, and claimants who are electing to arbitrate against the company.

Judge Chen modified the proposed settlement class to say that effectively folk, any claimant who had elected to arbitrate their claims against the company could not be included in the settlement class. And from the company's perspective, that was a pretty devastating ruling in terms of the economic benefit to the company of providing the settlement, because it meant

that the company still faced around 30,000 plus individual arbitration claims, which, in the terms of just the filing fees alone, could have resulted in tens of millions of dollars of liability. And so, coming out of that ruling, the company determined to engage with counsel to a critical mass of the arbitrating claimants and state court claimants and try to enter into separate contractual settlements with them. And those efforts were actually successful. The company entered into binding term sheets with the settlement, with both sets of those claimants outside of the class.

In February of 2025, they were documented in executing terms of the case. executed settlement agreements with those groups of claimants, actually the Friday before we filed. And I believe it was on March 12th, the company told Judge Chen in the Northern District of California that in light of those settlements, they were willing to proceed with the class settlement as modified by Judge Chen's order. And the company engaged in those efforts primarily to try to remove the overhang that was on the business, to allow it to regain access either to the capital markets or to facilitate a strategic out-of-court transaction. Unfortunately, you know, we are – that didn't work.

And so we're here today. But that was why the company focused so much time and effort on trying to resolve this issue consensually and quickly before – so we could have tried to preserve an out-of-court option. Can I ask you, are there substantial numbers of plaintiffs who are not included in one of these three settlement groups? So it's a good question, Your Honor. This is not, it is true that this is not comprehensive.

So there are, like, there are the two class actions pending in Canada. There are some class action, you know, there is a threatened class action in the United Kingdom. We may be back to Your Honor on those topics later in the case to the extent, you know, we need to address that foreign litigation, but it's not an issue for today. And, you know, one of the issues with those settlements is, you know, as I'm sure Your Honor is aware, a class action settlement is a settlement, but claimants can opt out. Sure. So it is not comprehensive.

And then there's obviously, you know, this is really kind of the private claimant side of the cybersecurity issue. There's also the regulatory side. And, you know, potential government fines other things, et cetera, and litigation fraud. on a company that was already struggling with liquidity, I'm sure Your Honor can appreciate, how challenging the overlay of this data breach incident, how deeply it exacerbated the company's issue as we tried to effectuate an out-of-court transaction.

So on the next slide, so this will kind of get into, this is the segue into really how things accelerated into the filing. And I think it's worth spending time here. So Your Honor understands, you know, the key facts that led us to today, how robust our pre-petition marketing process was, how robust governance process around that was,

and how we ended up filing. So, you know, in early 2024, as those challenges, I mean, that predated the cyber incident by a couple of, or I'm sorry, no, it did post-dated it by thing. all the macroeconomic factors, the operational issues, the data breach issues, in light of those, all of that, Ms. Wajiski expressed her interest in potentially taking the company private. And for context, you know, Ms. Wigiski is the founder. She's also the controlling shareholder of the company. And until the petition date was also the CEO and chairman of the board.

In light of that dynamic, you know, the challenge. is facing the company and a CEO being a potential bidder, the board determined that it was appropriate to establish a special committee of the board responsible for reviewing and evaluating any strategic alternatives that might be available to the company, including a potential transaction with this decision. That special committee is not the special committee

that I introduced to you earlier today. I will explain why, but just for context, Your Honor, It will be clear in the presentation when things, you know, kind of switched over to the currently constituted special committee in this process. But, you know, back then in March of 2024, that special committee engaged Wells Fargo as a banker to help facilitate the assessment of strategic alternatives and Decker as independent counsel for the special committee. Next slide, please. And so in July, you know, a lot, a lot happened between, you know, March and I'll call it November of 2024, that I'm going to paraphrase here a bit. But just so Your Honor has the relevant background. So in July of 2024, Ms. Wigiski made an offer to the special committee to acquire, you know, the outstanding minority equity of the company.

that proposal was rejected by the company, or I'm sorry, was rejected by the special committee. You know, over time, you know, there were more proposals. There's a lot of 13Ds that are in the public record that kind of explain the back and forth. Wells Fargo, you know, ran a sales process, but there were statements in the market made in the 13D that Ms. Wojcicki, in her capacity as controlling shareholder, you know, was not willing to enter a change of control transaction. And so, you know, that process was ultimately not successful. And, you know, ultimately events culminated in September 2024

when the then serving independent members of the board and the special committee determined to resign. And they actually issued a public press release saying that, you know, after months of work with Ms. Wajiski, they had not received a fully financed, fully committed, actionable proposal. And given a difference in the strategic vision for the company, they determined that it was in the best interest of the shareholders for the independent directors of the board to resolve.

And so that brings us to November 2024. In November 2024, the special committee was repopulated with three of the four independent directors that I introduced you to today. And that's Mr. Jensen, Mr. Fernandez, and Mr. Frankola. And, you know, once they got on the scene, you know, the company began really a comprehensive and very proactive effort to try to address the company's issues quickly, given the liquidity position of the company, you know, was becoming more and more concerning from a liquidity runway perspective and how long the company would have to implement a transaction to stay out at court and continue to fund the business. And so, you know, once the new, once the special committee was repopulated, they hired MOLUS, who's here with us today, and Goodwin, who you heard from earlier in the hearing. And under the guidance of the new special, or the new members of the special committee, they engaged in some pretty robust, you know, operational restructuring initiatives to try to right-size the cost structure of the company. The company shuttered its historical therapeutics business.

It made the difficult decision to reduce overall headcount by about 40 percent. And they entered into negotiations with, primarily with their landlords. You know, the company had entered into leases for space that it just didn't need anymore, but were significant costs to the company. And so they really tried to pull the costs out of the company to preserve liquidity and maximize runway. You know, it became apparent, however, that those types of operational fixes alone were going to be insufficient. And so the special committee determined to, you know, kind of relaunch the sales process with MOLUS, you know, with working with MOLIS and Goodwin as its independent counsel. And that resulted in a very robust pre-petition marketing process.

On slide 20. So beginning, focusing on that process in January 2025, you know, that's when it really kicked off with Moles, you know, going out into the market. in seeking third-party proposals for a potential sale or a financing transaction with the company to address the liquidity position. That process was very active, you know, from January right through, you know, the weeks leading up to the filing. Over 103 potential investors were contacted. There were 90 introductory calls, 42 NDAs executed, and an extensive VDR populated so buyers had as much information as possible to assess, you know, what, if anything, they would be willing to do with the company. On the next slide.

And that process did generate meaningful interest. The company received various types of IOUIs, some out of court, some in court, different types of asset packages, different types of structures, and that included proposals from Ms. Wiches. Mollis and the other advisors worked hard to negotiate those proposals to try to land that. the plane on an acceptable and actionable out-of-court transaction. Unfortunately, the special committee in consultation with the company its advisors

determined that those proposals were either preliminary, not currently actionable, not capable of it being implemented on an out-of-court basis, or simply just otherwise not in the best interest. And so, you know, looking at the liquidity runway, looking where we were in the sales process, the special committee determined that it was the right thing for the company to commence these cases, stabilize the business, use the bankruptcy tools to attract new capital, which you'll hear about our dip motion later on in today's agenda, and be able to run a sales process in a court-supervised process that provides the debtor the opportunity to sell assets free and clear of things like the data breach liabilities

and all the uncertainty that was associated to those, either through a confirmed Chapter 11 plan or a 3603 sale. You know, on the next slide, Your Honor, I do want to just pause here. So I'm not going to go through this timeline. I think it shows kind of all the back and forth, really starting since April of 2024 and culminating, you know, with the filing. Ms. Wigiski has made certain statements in public expressing disappointment, in the special committee's decision.

From the company's perspective, that is surprising, to say the least. You know, as I think you can see here from, you know, the almost year that has passed from Ms. Wajiske's, you know, initial announcement that she was considering taking the company private to today, she has really had every opportunity to put forward an actionable, fully committed transaction proposal that would have kept this company out of Chapter 11. And, you know, this is not a criticism, but she failed to do so. And there may be many reasons for that, but we want to be clear that the special

committee's process and business judgment in commencing these cases is not among them. On the, and just, you know, that's a good segue into, you know, I told Your Honor we would talk about governance on the following slide. I have to say as a firm, we work with a lot of special committees as restructuring lawyers, and this group of individuals is among the most dedicated,

thoughtful, and diligent group of directors that I've ever had the privilege of working with. You know, for context, these three were appointed, as I said, in November, and since their appointment, they met 70 times. That's an average of three and a half times a week. And from February 21st through March 23rd, they met almost every single day.

Assessing proposals, assessing options, analyzing, you know, everything that independent fiduciaries that are good stewards of a company are supposed to do. And, you know, really at all relevant times leading up to these cases, this has been an independent, thorough, fair, conflict-free process that led us here today. I just think it's important, given all the noise, you know, outside the courtroom that folks understand. As in addition, you know, as the filing became increasingly imminent, the special committee and board took additional steps to bolster the governance protocols here coming into a filing. So on March 7th, the board approved a resolution expanding the special committee's delegation of authority of the board to cover the authority to commence these cases and all restructuring matters that arise from them. On March 22nd, or I'm sorry, on March 21st, Ms. Wigiski and the special committee reached a mutual agreement pursuant to which Ms. Wigiske agreed to resign from her role as the CEO of the company.

She has also said that she's still committed to the company and interested in bidding in this process, and we welcome that. Obviously, we want as competitive and value-maximizing process as possible. Other steps included electing Mr. Jensen as chairman of the board. Mr. Cavarda was designated the CRO. And we also, you know, you saw Mr. Walper as a member of the special committee and board. Mr. Walper was appointed to the board and special committee effectively contemporaneously with the law. So there is, you know, he is a new to the scene, independent director who's going to, you know,

assist the board and the special committee, you know, as we navigate this process together. And then Mr. Joe Sel Savage was elevated to the role of interim CEO in addition to his chief accounting and chief financial officer roles given Ms. Wajiske's, you know, mutually agreed resignation. On the following slide, you know, we also, the special committee has authorized certain specified counsel of the special committee in the company to commence an investigation into potential estate claims and causes of action to see if there are other valuable assets out there for potential. distribution to stakeholders, and that will include any claims or causes of action against the company's insider.

And on March 23rd, shortly before we filed, the special committee further delegated that authority to Mr. Walper as, you know, the newly appointed independent director who wasn't involved in any of the events that led us up to the following today. And so, you know, that's really the story of how we got here, Your Honor. I think any questions on any of that before we move into how we see these cases proceeding from here? I don't think so. Thank you, though. Thank you, Your Honor. So we really think, you know, obviously, as in many cases, our goal here is to move these cases forward as efficiently in expeditiously as possible so we can maximize distributions to our stateholders.

I'm sure Your Honor knows, you know, time is money in bankruptcy. And we hope that we will be able to, you know, we certainly are committed to doing everything we can to make sure that all stakeholders in the cases are focused on, you know, what's best for the stakeholders and how do we get to a successful outcome at the end of the process. And I really think there's four main pillars to that. You know, one is funding the cases.

We plan to do that through a combination of our revenue, our balance sheet cash coming into the filing and the proposed dip commitment from JMV capital that we'll present later at today's hearing. Obviously, we've talked a lot about the sales process. We're going to be seeking approval of proposed bidding procedures today that set the framework for, you know, a robust, transparent sales process, but also one that, you know, kind of acknowledges that the faster we move, the faster we can distribute value to stakeholder.

and hopefully the more value there is to distribute. And so given the robust pre-petition marketing process, all of the attention that's already around this process that we have already seen an uptick in bitter interest since we filed, so it's encouraging to us as we kind of get underway here. But that's going to be kind of the main event in terms of what is the size of the pie that we're going to be able to distribute for our state. You know, third, I think we want to work collaboratively and constructively with not just the cybersecurity incident claimants, you know, all stakeholders.

Obviously, we're focusing on them because we believe, you know, even at the proposed settlement amounts, they're among the largest unsecured creditors in these cases. And, you know, I'm encouraged that we were able to develop, you know, a constructive and collaborative relationship with them in documenting these settlements. in the months leading up to the petition date, and we hope that continues through the filing. And we're working together to figure out how to move these cases forward and maximize value to stakeholders as opposed to potentially fighting each other. And then finally, Your Honor, and we're going to try to do this as much as we can in parallel with those stakeholders' discussions

and the sale process, we want to move forward to expeditiously confirm the plan. You know, our view is that the sooner we can get to a confirmation hearing, the more value there will be to distribute to our stakeholders, which is what, you know, the special committee, the company, and all of its advisors are obviously focused on at the end of the day. I think that's all I have, Your Honor. I sincerely appreciate the time. I know that was a lot. This case has many different facets to it, and I just thought it would be helpful to kind of paint a picture for the court as we head into today's agenda. Oh, it is very helpful. Thank you. I appreciate that. I've read a lot in the last 24 hours. I have no doubt. I didn't absorb all of it, and so this is a nice refresher, and I appreciate that.

Thank you very much. Unless Your Honor has anything else for me, I think I'll sit down. You'll see me again when we get to the dip motion and the retention applications later in today's hearing. But otherwise, thank you, Your Honor. Thank you. I'm risky for the record, Your Honor. point one and two on our agenda are essentially housekeeping matters with respect to the expedited hearing that Your Honor would like to take either of them up first. Sure, why don't we go a higher level housekeeping? We're going to need a date for a second hearing. What does the debtor, what do the debtors propose about a second day hearing? Thank you, Your Honor.

There's actually two things. I forgot to do. One is the second day hearing. So we would ask for a hearing on or around April 22nd if the court can accommodate. I mean, if it's the 23rd, you know, that should work as well. But that was our proposal. That's a Monday, or is Tuesday to 22nd? After you anticipating evidentiary hearing extensive.

It would be easier for us to do in the afternoon on the 22nd. I can do it in the morning, particularly if it's more straightforward? Your Honor, I think our expectation will be that we will do everything possible to resolve issues ahead of the hearing. So if you can give us the afternoon, the debtors should be able to make that work. And if, you know, for some reason that's not the case and we expect, you know, a trial or something for that effect, you know, on the dip order or whatever, we can. We could set that up. We can coordinate with the court. Okay.

Why don't we, for now, pencil in. Excuse me, April 22nd, 1.30 central time for a second day hearing, as you indicate, if it looks like it's going to be a major event, I have hearing schedule in the morning of the 23rd, but we could double, we could weave things in if we want to continue that morning or if we want to set a piece of it later in the week. I mean, personally, Your Honor, I don't anticipate that there's going to be a big, dispute at the second day hearing. I don't want to prejudge the outcome, but I mean, it's a pretty

plain vanilla dip proposal. So I think that should be fine. Okay. So let's pencil in April 22nd, 130 central daylight time for a second day hearing. And you said there's one other thing. There is, Your Honor. I went off script. If it's all right with Your Honor as a housekeeping matter, I think what we would propose to do is there's really, three declarations that are going to be germane to substantive first day relief we're seeking. There's the declaration of Mr. Pavarda in support of the first day relief. That's at docket number 32. And then there's two declarations from Mr. Swift.

His declaration in support of the dip motion is filed at docket number 33. And he also submitted a declaration in support of the proposed bidding procedures, which is at docket number 30, Exhibit 6. And so if it's okay with Your Honor, what I would propose to do is admit those into evidence now, subject to anyone right who wants to cross a witness as we get to a motion where they have a potential objection, you know, fully preserved. Okay. Let's take them one at a time just to make sure we have a clear record. All right.

So first let's talk about the Cavarta Declaration Document 32. Does any party have an objection to my receipt of that declaration and evidence subject to the recognition? that you will still have an opportunity to cross-examine from time to time throughout the remainder of the hearing as anything in that declaration is relevant. All right, hearing no objection, I'll receive the Cavarta Declaration, document 32, with that qualification. Let's talk about the SWIFT declaration for the DIPP financing motion, docket 33. Does anyone have an objection of my receipt of that declaration from Mr. Swift into evidence subject to the same reservation of the ability to cross-examine? All right, hearing none, I'll receive that declaration. in evidence. And then finally, the Swift declaration attached to document number 30, the BID

Procedures motion. Does anyone have an objection to my receipt of that declaration and evidence subject to the same reservation? All right. Hearing none, I'll receive that one in evidence as well. Thank you very much, Your Honor. Thank you. And so we have second day hearing, and I would encourage Mr. Risky or someone from your... You've finally broken loose from work. Three friends, one tea time, and then the text. Honey, there's water in the basement. Not exactly how you pictured your Saturday. That's when you call us, Cincinnati Insurance.

We always answer the call because real protection means showing up, even when things are in the rough. Cincinnati Insurance, let us make your bad day better. Find an agent at CINFIN.com. Your team to reach out to Mr. Spital. We'll get some more hearings set up beyond that so that we have the ability to schedule That would be great, Your Honor. I think when we get to the bidding procedures motion,

we will ask the court for a sale hearing just so we can set up the notices, but we can deal with that. Yes. Okay, very good. Thank you very much. All right, Mr. Risky, you promised some housekeeping. Yes, Your Honor. We have two administrative motions up at the beginning of our proposed agenda, joint administration and motion expedite. With respect to the motion expedite,

as in any case, there's certain relief that we need to get in front of the court with, as soon as possible. This case, as you've heard from Mr. Hopkins, especially sensitive preservation of value. A lot of the first day relief and the declaration of support of that outlined the reasons that we need the relief

that we're seeking on an expedited basis. As soon as we received the proposed hearing data today, notices went out. I think those constituencies that Mr. Hopkins outlined, a lot of them received electronic notice in this case. We believe the notice of this hearing was robust, and as broad as we could do. So with that, Your Honor, I'd ask the motion

for expedited hearing. All right, is anyone wish to be heard on the motion to expedite hearing document 54? I will grant the motion if you'd submit an order to do. Thank you, Your Honor. Next motion up is the motion for joint administration. Your Honor, through, you know, as Your Honor said, the voluminous papers

that were filed through the first state hearings, I believe in some of them the US trustee noticed there might have been a mistake where the phrase procedurally consolidated was outlined. I just want to make it clear for this motion. All we are seeking is joint administration. We are not seeking substantial consolidation of these estates. We've received no formal or informal notice. We have circulated that proposed order and tried to make it fit within the clerk in this court's local practices and guidelines. So with that, we would ask that the motion for joint administration to grant me.

As anyone I wish to be heard on the motion for joint administration document three. Hearing none, I will grant that motion as well. Please submit an order. We will do so, Your Honor. And I believe you've submitted orders already. I'm just probably going to say that every time because that's what I say. And I think what we were going to submit just a fresh batch for Your Honor after the hearing, if that's okay, just to make it as clear as possible.

I think that would be fine. And I should add, for the benefit of you, and your co-counsel. I've reviewed the motions, the applications, the declarations. As I mentioned, I haven't committed everything to memory. So you should feel free to touch on whatever points you need to in your presentation of any particular motion or application. But I have reviewed them. And I have done my best to review the proposed orders that were on the third-party website as of early afternoon, mid-afternoon yesterday. So if there are substantive changes to the ones that you submit after the hearing, if you would either send Mr. Spital a red line or otherwise draw our attention to those changes that would help us expedite getting orders entered.

We'll do so and I think also as part of our presentation today we'll highlight the changes the proposed changes to those orders since the posting. Very good. That would be definitely help with the parties. All right. Thank you. Thank you. So with that your honor I believe the next motion on the doc is bidding procedures. I'll see the podium for my co-consultial. Very good. Good afternoon your honor. Grace hudson of Paul Weiss proposed counsels for the debtors. As Mr. Risky mentioned, I'm going to cover the bidding procedures motion. This is that docket number 30. This motion is accompanied by the declaration of Andrew Swift of Mollus, which was just entered into evidence. And as we've discussed today, his declaration really goes through the long process that's

been going on for close to a year now for the company to find strategic investors and other potential buyers for the business. So this motion really seeks to continue that process, except now with the benefit of the court supervision and oversight and with further notice to potential bidders in the process. We're available to the highest and best bidder. We want those bidders to come forward, and we're prepared to work with them quickly

and to document that transaction in whatever form that it takes. So first and foremost, this motion seeks approval of bidding proceedings, to govern this process. I recognize it's a long document. There's a lot in here, but it has a full suite of procedures that govern the requirements for bidders who want to participate in the process. And ultimately, how the debtors will work to determine who the successful bidder is following an auction if one is necessary.

There's a lot of mechanics in here. We have procedures to allow the debtors to designate a stocking horse bidder upon advance notice and an opportunity to object. There's a form notice of sale and auction, and there are procedures for the assumption and assignment of contracts and leases to a potential buyer. We've included all this information up front because for the reasons Mr. Hopkins outlined, we really can't afford any delay in these cases. We think everything should be in place if someone comes forward to buy the business

so that we can move quickly and everything should be available. parties should be on notice so that we can get to a successful conclusion of these cases. So on that note I think one of the most important aspects of this motion is the timeline. We are seeking a proposed bid deadline of May 7th, which is about 45 days from the petition date. If a party wants to be our stocking horse bidder, we would have to notice that by April 25th. And we're seeking to hold an auction on May 14th with the sale hearing on or around June 2nd subject to the court's availability. We've also worked in some proactive consultation rights for any committee that gets appointed in these cases. We want them to be keyed into the process.

We expect to work with them constructively and hear them out and get their feedback on this process, notwithstanding the fact that they're not here today. In addition to the bidding procedures, this motion also has separate procedures that we're proposing would govern de minimis asset sales and abandonment of smaller assets. This would be separate from the overarching bid process and govern what we would view as discrete asset sales

or discrete abandonment of property for lower value assets subject to a, million cap per sale. This is largely to help the company close out the shutdown of the therapeutics business that Mr. Hopkins disclosed earlier. Last year they shut it down. They've been working to get rid of the remaining assets and they anticipate that some of those sales might close or they might otherwise want to abandon the assets that were previously used to connection with that business. I'd be happy to answer any questions that you have on the motion. Otherwise, we would ask that you enter the order,

and we're also looking for a sale hearing on or around June 2nd that I think we would like to schedule today if possible. Okay. I'll hear from others, of course, but I did have a few questions for you. Let's start with that last one, the scheduling. I have some travel in early June that would make it challenging for me to schedule a hearing exactly on your time frame. Okay.

Based on what I see about other constraints in the dip and elsewhere, would a hearing in the second half of June say, I put down a date here, where did it go, 17th, 18th of June, would that be workable? I think if possible, we would like to do it earlier. Do you have any availability at the very end of May? I might. That's obviously making the timeline a bit more aggressive. And as you pointed out, we don't have a committee here today. What I would like to do is schedule a hearing that when the committee is appointed, reduces their desire to say, oh, my God, we've got to do something.

Because you will have noticed this to many, many people already. So I would like to balance the desire to move quickly with the desire to avoid collateral litigation about trying to set up. decide the deadlines and rescheduled them. And so I will, without disclosing too much information about my whereabouts on the record, I will be for a time in the first half of June not available to conduct a hearing even by video. And so that causes me some concern. I think I could have a sale hearing on your timeline. What I don't know is whether there will be motions to motions for reconsideration, motions to stay, that sort of thing, which, of course, one of my colleagues could cover, but that's a big ask of a colleague to drop, you know, what might be in order of including the sale or in order denying the sale, and I'm not going to prejudge it, on a colleague.

you can say here, and you can handle the motion. So that's what I'm trying to work with. Okay. If it's okay with your honor, maybe we could go through the rest of the motion, and I could control what kind of my call. Yeah, I don't want you to make that call. I just don't know availability. Right.

I don't want you to make that call unilaterally while you're at the lectern. That would not be fair. So, okay. And so the other, yeah, Mr. Hopkins, yes. Your Honor, if I may, do you mind if I confer the Plenders Council? Yes, certainly. Certainly.

Yes. We may be able to come back. Well, Ms. Hux covers the rest of your eyes. That's absolutely fine. Yes. Yes. Okay. So, the, so, you know, my overall reaction to the timeline is it's pretty tight.

But on the other hand, the pre-petition marketing process pretty robust. And so those two things obviously go hand to me. And so I think a sale hearing. In June is doable. I think the committee, when it is appointed, may have something to say about that. But as I indicated, if it goes a little later, there's less for them to say about that than if it goes earlier than that. So that's my initial question. What can we do there in terms of maybe moving that sale hearing a bit later in June?

another question is that non-binding indications of interest due April 13th, which is about two and a half weeks away. Is there any reason that needs to be quite so early? Again, I'm just thinking the committee is appointed maybe not too long before April 13th. Maybe a good bit before April 13th. It depends how things go. And knowing how committees work, if there is an imminent deadline, they may be forced into litigation mode.

And if that deadline doesn't need to be quite so far in advance of the qualified bid deadline in May 7th, perhaps some of that dynamic gets lessened to the world. So I would just point out that this is not, it's not something that every bidder needs to submit a bid buy. We're just looking for generalized interest terms. This would help us if we are going to appoint a stocking horse by the April 25th deadline. it would give us some time to work with that party document through a purchase agreement on the proposed timeline. So we're certainly open to extending that initial I.O.I. deadline

if there are parties who need more time, or if the committee would like us to make certain exceptions for people, we're happy to consider that and work with them. I think it really is just keyed off of that stocking horse deadline and trying to get just an initial read of like how much interest do we have here, how is the marketing process going, and just be able to kind of assess how the cases are going to look based on these deadlines. Okay, so am I correct then that it's not make an I.O.I.

Or you're out. This would be one of the many matters that debtors would consult with the committee if someone shows up with an IOI after April 13 and figure out what to do in the interests of the bankruptcy states. Yes, exactly. We would always consider any offers up and until the bid deadline. Okay. That's helpful clarification.

Thank you. The other question I have is in the proposed order, there's a finding in paragraph 37 that there's no policy prohibiting transfer of PII and therefore no consumer privacy on this. Do we need to do that today or should that be a sale hearing issue or on a separate track? In other words, I imagine there are parties who want to know more about that, whether there is a basis for the appointment of the CPO. And should we set that on a different track so that they can be heard on that? Realistic, I know they could be here today, but practically not everybody can be. Sure.

I mean, the reason we put this in there is because we don't believe a consumer privacy ombudsman is required here. The debtor's privacy policies, which we showed Your Honor earlier today, and the bankruptcy code are pretty clear on this point, that if a CPO is only required when the debtor intends to sell personally identifiable information in violation of its privacy policies, and the privacy policies here expressly state that the data can be transferred or sold, you know, explicitly in connection with a bankruptcy or other asset sale. So we, our position is that one is not required, but, you know, we're open to other parties' feedback if others don't agree with us. Okay, well, why don't we, I mean, I want to hear from others,

but that's just a question I have about how we ought to deal with that in connection with this motion versus the case, the larger case. Why don't we hear from other parties and then maybe circle back to the sale timing and the CPO issue. Who in a courtroom would like to be heard on the did-receive? Is Richie? Thank you, Your Honor. Oh, Ms. Richie?

I'm going to hear from parties in the courtroom first. Sorry. Your Honor, as you just alluded to, you know, the U.S. trustee has serious concerns about the privacy issues in this case, given the nature of the debtors businesses, the events leading up to the debtors' businesses, the debtor's proposal to sell its assets, and obviously the most valuable assets the debtors have is the genetic information of the debtor's customers, and there are very sensitive privacy concerns about that. I understand what the debtors are saying, that their privacy policy does let customers know

that their privacy and their information can be sold in the context of the bankruptcy. But, Your Honor, we know that most people just scan those things and really, if they notice them at all, don't really understand what that means in the context of their lives, their information. And second, Your Honor, even though I don't question the debtor's integrity or the efforts of their professionals, Sometimes it is just better to have a neutral third party looking at a procedure to make sure that everything done is done in a proper fashion. And sometimes we're just myopic about our own actions and what the implications of those actions can be. It would be much, much better for everyone's concerned, including the debtors, to have a consumer privacy, a consubriced commencement appointed in this case to review.

the procedures and make sure that those protections are in place with respect to any any safety. All right. Any thoughts on the other aspects of the motion? Your Honor, the U.S. trustee would prefer an extension of the deadlines for the bid procedures because, as you mentioned, they're very, very tight deadlines and I think it would be best for all the stakeholders in this case to have more time to review those. anyone has an objection to them, they can voice those.

I agree that the pre-petition marketing seems to have been very vigorous, I'm very extensive, very robust, but one never knows. And there are considerations that we may not be aware of it as we discussed this today, that someone else may raise. and I just think that they need that a little bit more time would be very helpful. Okay, thank you. Anyone else in the courtroom wish to be heard

on the bid procedures motion? All right, on the WebEx. Thank you, Your Honor. I'm Charles of Cito. Again, equity holder. With you guys to the motion, as articulated in the motion, there's no communities that have been appointed at this time.

If the court allows, I'm going to be making a motion at the end of the agenda, for the appointment of an equity committee on the oral motion if the court allows. But in regards to this motion, in that regard, if there wasn't equity committees or other committees, it's my opinion that they should be involved in the determination of the qualified bids and be involved in that process and also be involved in the determination of the stalking horse bidders and the approval of the stalking horse bidders.

I have language on page 1 and 6 that may accommodate that concern where basically in conjunction with the debtors, it would be in consultation with any court-approved committees that they would basically be involved with. And the debtors would be not the only ones that are making those determinations of the stalking horse bidders and what are the qualified bids and what is the highest bid. All right, Ms. Hots, my recollection of the bid procedures throughout, say, the debtors will consult with any committee capital C. Is that the general formulation? Let me just double-check the language. I know we did build-in consultation rights.

I just want to make sure it's any committee as opposed to the Unsecure Creditors Committee. But if we can certainly make a change to say any, you know, statutorily appointed committee, if it's not already in there. If there's an equity committee in this case, the debtors would consult with the Equity Committee along with the Official Insure Creditors Committee. committees. Yes. Okay. We'll make that change in the procedure. Okay.

So I think that's how I read it and that's how I understood it. So I think that would address that concern, Mr. Decito. On the motion to appoint an equity committee, I'm not going to grant that motion here today without giving parties an opportunity to be heard. So if you would like a committee to be appointed, please feel free to file a motion or contact the U.S. trustee and get the rules.

Anyone else on the WebEx wish to be heard? Yes, Your Honor. Heather Crockett from the State of Indiana. Yes, ma'am. Thank you. The State of Indiana is alluded to by Debtor Council is part of the state regulatory entities that are investigating the Stratabreech that occurred.

And we have serious concerns about the bidding procedures and echo what the U.S. R.C. stated about the consumer protection on buzzmen. But we also have concerns that the ideas. that just simply complying with the privacy procedures that are in place, the privacy policies that are in place, are not sufficient. So governmental entities, I'm sure that Your Honor is well aware, cannot be members of normal committees. In other cases, we have had ad hoc committees created, and certainly we will be reaching out

to the IRS staff. We thought that's to discuss that. But we would also ask to be part of any discussions to ensure that all security and privacy issues are dealt with in this case at a higher level because of the way the risk or matter. Currently, I'm only speaking for the statement again. I cannot represent any other states, of course, but I know that there are other states who also have these concerns and they're not here today to be able to raise their objections. And so we would ask that that be taken into consideration.

There are some very specific pieces and parts that I have, I would ask that we'd be part of, And that's over the bidding procedures with the submissions to the better, reviewing the potential bidders, the qualified bidders, privacy policies, and asking that consumer protections and data security be part of the requirements, but any bidders have to be in order to comply and be used qualified bidders. In addition to just the normal regulatory aspect, beyond that, we have concerns about the notice of the auctions. As it is currently done, we would ask that he modified to require compliance with any state requirements of security and protection as effective data and material.

And additionally, I know that this has not been clearly discussed with the sale order and the de minimis motions as well, we have concerns with having those entered today and would ask the no lead rate on those. Again, we don't know what's been sold. I know that we haven't gotten to this. The extension motion is on here. As it stands, if the extension motion is granted, it appears that the civilizing forces will not be $1,000,000 at the end of April. And we would be had concerns that we don't know what the assets are,

but may be included. A $2 million de minimis number is not a small number. It is a rather large number, and without knowing whether that could include customer information, you know, it's one thing if it's desks and chairs and office materials it's another thing that it's potentially protected or needs to be protected

information but could also be raised. So we would just ask for that and we did, I'm sure that your honor has not had a chance to see this, my appearance was entered as well as a notice of concerns of the security aspect and that was entered rocket number 74

earlier today. So we would ask that that be taken into consideration. of life. Okay, let me see if we can address these one at a time, to track it and see where we are. Let's start with the last one. Do the de minimis asset sale procedures contemplate personally identifiable information or genetic information being sold under those procedures? I mean, it's just a general de minimis asset sale procedures.

It doesn't specify what it would require the debtors to do is prior to effectuating any sale. We need to provide notice filed with the court, served on all parties who have requested notice in these cases about what assets we're trying to sell or abandon and a description of any kind of potential counterparty to the sale or abandonment party. So the debtor's position is that the government and other parties in interest have the opportunity at that time to assess what's being sold or abandoned and they can raise any objections before the closing of those sales would be approved by the court. Okay, that's helpful clarification.

Ms. Crockett, does that address your concern about the diminutive sale procedure? This is not authorization to just go selling stuff without any further proceedings. There will be additional notice. I guess my concern there is still stands, but I believe in, and I can be corrected if I read this one, but I believe it is a 10-day notice, which is really not a lot of time for states to review that and determine whether there's, genetic material that it needs to be objective to. I hear you on that.

Let me, go ahead. Sorry, Your Honor. We can revise the procedures to provide that if a sale involves any kind of personally identifiable information or customer data that we can notice it on the normal 21 days notice, as opposed to the truncated 10-day notice that we're proposing. You know, that strikes me as a helpful clarification. When I think of diminutive sale procedures, I think of desks and chairs and ice baskets. And so it didn't occur to me that it might implicate PII or genetic information.

It seems unlikely that it would. But in that case, it would just be teed up as a normal 363 sale with regular notice. I think that addresses the issue raised by Ms. Crockett on that one. Ms. Crackett, I'm not sure I follow what you wanted, what changes you wanted to the notice of auction. The notice of auction, we would ask that include a requirement that any bidder comply with any state regulations concerning security and protection of protective data and materials. Well, that's, you know, something that I think some people think about in regulatory schemes. This is a very unique and specialized information. And I know that in some states that are basic with consumer protection,

some states have a much broader thing that could include specifically to genetic material. So we would just ask that there would be a modification to make it clear that that that does include consumer protection laws, privacy laws, and then any other potential genetic material laws. That's your thoughts on that. Sure. So the bidding procedures already contemplate that any bidder in connection with submitting a bid is required to acknowledge their compliance with both the bankruptcy code and non-bankruptcy law. We didn't specifically call out any kind of privacy laws, but we believe this is already covered in the bidding procedures, and we can call out this notice or this requirement in the notice if that would be helpful, but we do take the position that it's already covered. Yeah, it seems to me that it is fundamentally an issue that is in the bidding. procedures, it belongs in the bid procedures.

The notice of auction is going to be widely circulated if I'm not confusing one notice for another here. Yes. And is not well, it is designed to attract bidders, but it's largely designed to make all

parties and interest aware that something is going on and that they can reject if they have an issue with it. And if they have not looked at the bid procedures to see the requirements to honor the privacy policy. etc., they may file an objection that is not necessary and that happens sometimes. So it sounds like, though, that the debtors are willing to put comparable language in this notice

that sort of repeats what's in the bid procedures. Is that what I understand? Sure. Let's do that, and then I think that resolves the objection. If you pair it the language, it's in the bid procedures, that puts parties on notice of what the debtors are proposing. If someone thinks more should be required, I think it would be. file an objection and raise that in connection with the sale here. All right.

I have in my notes Ms. Crockett consultation rights for attorneys general. Yes, please. And as I stated, we're not a normal committee number, and that's why it comes up as a concern for us to ensure that we are specifically noted as somebody that has to be consulted with on regulatory matters. On this one, Your Honor, I think this would be quite burdensome

for the company to consult with every regulator that's out there that may have an interest in the sale. I think it's going to slow down the process and distract the company from finding the best and most qualified bidders for this process. We do think that both the requirements of the bid procedures, as well as the notice that parties will have when a successful bidder is selected,

that period of time between the sale hearing will give regulators a chance to actually review who we're proposing to sell any of our assets to as opposed to kind of clogging that up throughout the process and potentially distracting from the ability to get this done in the most value-maximizing way. I'm inclined to agree. I think that the attorneys general and other regulators are protected here by the ability to object once they know who the proposed winning bidder is and the details of that deal. I do think that, and obviously I'm not going to require this,

but if the regulatory bodies select a single representative to be their eyes on the ground and to raise questions with the debtors as the process goes along, I would certainly encourage the debtors to be open and transparent if they only have to respond to one regulator who doesn't necessarily speak for everyone, but can be the eyes and ears, and communicate the information to learn to the other regulatory authority. I think that could expedite the process and be overall helpful.

So I would encourage that. But I'm not going to require the debtors to consult with regulatory authorities the way they will with any committee. And that's all I had my notes, Ms. Crackett. Did I miss one? It seems to me you might have had a fourth point. The other piece is on the sale order, we would ask that it not be a final. order at this point to allow all parties to have an opportunity to review and object to that.

So the sale order, I would not enter until after the sale hearing, which we're talking about, early June or late June, depending on how that discussion went. The bid procedures order is what might be up for entry if I grant the motion at today's hearing. So the sale order, everybody as to the sale or preserved. Sorry, I should clarify the portion that they ask for authorization of the sale of debtors' assets free and clear of any income of business, and that has to do with the de minimis sales. Oh, on the, oh, the order approving the de minimis sale proceedings. Yeah.

I do think that that is contemplated that that would be a final order. Obviously, any party could ask to reconsider it or object to any particular sale as a, goes along. And so I think that will address. There are no de minimis sales on the table today. I would be surprised if there were any, well, I don't, what do I know? Never mind. There may be some soon, but there's nothing on the table at the moment. So I'm comfortable subject to working out the other issues that I could enter in order that approves the de minimis sale procedures, but that doesn't mean it can't be changed later following appropriate procedures. Okay.

All right. Thank you. Anyone else on the WebEx wish to be heard? Yes, Your Honor. Let's go for Mr. Barnes. I'm sorry, he had his hand raised a little earlier. Mr. Barnes? Yes, Your Honor.

Thank you for the time. Once again, my name is Kevin Barnes, Pro se, and my fellow common shareholder of 23 and me. I just wanted to raise my concerns that some other parties have in regards to the accelerated timeline here for the bidding procedures. Although this was he the founder and ex-CEO, you know, leverage her 18% economic ownership

and through a 49% belief control. You know, she was actively hostile to other bidders during the pre-position marketing process. And so I don't think much we should be described to that process at this time in light of her obstruction of that and the resulting resignation of the prior board directors.

And then secondly, I just like to highlight the reported special committee. The only thing that's special about them is that they were both selected and appointed by Ms. Vosipi, who now has an ounce of LinkedIn that she's interested in acquiring these assets. So I think it's important, as some others have mentioned here, for a independent committee to be appointed

to supervise this process and ensure value is maximized. And I think an official equity committee in this situation is very appropriate. All right. On the issue of the Equity Committee, as I mentioned to Mr. DeCito, are you free to file a motion or address your issues to the U.S. trustee, and that will proceed in the ordinary course if you do that. Ms. Hatz, your thoughts on Mr. Barnes' other questions and comments? Yeah, the debtors disagree with the characterization of the pre-petition marketing process.

The special committee for this company, as Mr. Hopkins described in some detail, was represented by independent counsel. Goodwin Proctor. Goodwin was not representing the founder. They were not representing the company. They were laser focused on running a very independent process without any kind of undue influence or control from the people who could be potential counterparties

to that process. They also reached, as we've described today, external advisors were part of this process reaching out to other third parties. Several either indications of interest or term sheets were received, which we think reflects strong interest for buyers to acquire this company. And we want to continue that process post-petition. So there will be additional time for parties to come forward, especially now that the founder and former CEO no longer works at the company. and is not going to be involved in any decision-making with respect to approval of any restructuring matters. Okay, thank you. In response to Mr. Barnes' objection, I'm not prepared to interrupt the sale process today

based on argument or speculation about whether the special committee had-divided loyalties of some sort. If someone wants to raise that issue in connection with the sale hearing, I think that's open. I think they're free to do that. But for purposes of evaluating the right time frame for bid procedures, I have a detailed declaration in the record about the pre-petition process. And in particular, I'm relying on the post-November 2004 process, not the prior special committee, but the current special committee. And I think it is sufficiently robust that a sale hearing in June is a reasonable thing to do. And again, I'll hear from a committee if they're appointed, and if they have new information for me, I'll entertain what they have to say as well. But I don't think I'm prepared to disrupt the sale process based on Mr. Barnes County.

Anyone else on the WebEx? Ms. Ryan. Yes, good afternoon, Your Honor. For the record, Abigail Ryan, with the National Association of Attorneys General. I am the Bankruptcy Council for the National Association of Attorney General. I'm just going to echo what Ms. Crockett said, and I've been in touch with a number of the states, almost all of the states, regarding things have, you know, possibly come to light here during the bankruptcy and, you know, things that need to be paid attention to. And I completely understand that are counsel's concern about consulting with all the different states because there are very, very many living parks there, if you will. So I just wanted to let Dutterskampo know and to let you know, Your Honor, that I'm here for Dutters Council to reach out to if they need help, getting in touch with the state, if they need information given to a state that they don't have a contact for.

If the state's request me to represent them, I will file a Pohak in this case, and then I will have a constituent of states that I will represent. But I'm here to help, Your Honor. Great, thank you. So I hand raised Ms. Dent. Yes, thank you, Your Honor. Julian Dent on behalf of the settlement class council that was appointed in the cybersecurity litigation that we've heard about a lot today. And I just wanted to reiterate to your honor that, you know, we do care deeply about the consumer privacy. And a critical part of the settlement that was reached in the class action litigation,

was protection guaranteed and continued mechanism for consumers. They would cost to devise their data. So we just don't want that to get lost as part of the sale process and the bankruptcy proceedings. And, you know, we hope to take part and have a seat at the table in any committee that is appointed here. So I just wanted to let Your Honor know that. Thank you.

Thank you. Anyone else on the WebEx? Wish to be heard. All right. developments on sale hearing timing, Mr. Hopkins. Thank you, Your Honor. For the record, Christopher Hopkins of Paul Weiss proposed co-counsel to the debtors. Just to touch on one of the comments that the pro se, I apologize, I forget the gentleman's name,

but just to say it for the record, so, you know, shareholders, all other stakeholders, et cetera, understand kind of the state of play today from a governance perspective. Ms. Wigiske's sole role with the company today is as a member of the board of directors. And I just think it's important for everyone to understand that everything that happens in this case, and all related restructuring matters, have been delegated to the special committee of the board, of which Ms. Vajski is not member. So to the extent she is engaged in, you know, she elects to participate in the sales process, all of the company's deliberations are going to be fully independent of that.

And, you know, obviously, as I'm sure Your Honor is aware, our bidding procedures have, the customary protections around anti-collusion and everything else. So I'm not saying one way or another, whether those things were an issue or were not an issue prior to the petition date, but I think the process we're proposing is fair and independent. On the timing, obviously we want to be respectful of the court's calendar. The only reason we're focused on the debtors is, frankly, the cash burn. If Your Honor prefers June 18th.

We've consulted with the dip lender, and I could walk through this when we get to the dip motion. They will agree to make corresponding adjustments to the dip term sheet so that the debtors aren't prejudiced with respect to the dip by that delay. So, you know, whatever your honor prefer. All right. June 19th is a holiday, which complicates things. I don't know if you're expecting the sale here. It seems to me the sale hearing could be longer than your average sale hearing. It might not.

things may come together. June 17th, I also have available, which is a Tuesday. And we could start June 17th. I think I'll be on my jet pipe. I'll have coffee. So I would be inclined to go with June 17 to provide just that little bit more time. And also, I'm here for whatever needs to be addressed for months thereafter. Yes.

Without unnecessarily infringing on the court's schedule, the sooner than the more perspective. So whenever you... That's very helpful. Thank you. Thank you. All right. Ms. Hatz, what else do we need to address? I raise some questions and I haven't answered them yet.

That's what I mean. What other open issues do you see based on the party's objections and discussion? I don't think I have anything else. I just would take one opportunity to just address. the comments by the U.S. trustee on the appointment of a consumer privacy ombudsman. You know, I think we've said this, and I just want to make it clear that we do intend, and these procedures require any buyer to comply with our privacy policies, and our position is that those do permit the transfer of customer information.

I think this is going to be an issue that is a lot of parties are laser-focused on throughout these cases, and we think any, you know, parties can be free to take a question, any kind of potential purchaser on what they're planning to do with the data, what kind of policies they're going to have in place. So we think that the bidding procedures combined with the debtors, pretty straightforward privacy policies in this case, do not warrant a consumer privacy ombudsman at this time. Okay.

All right. So on the bid procedures motion, with a few adjustments that I'll discuss, the bid procedures appear to be a reasonable exercise of the debtor's business judgment and appropriate under the circumstances, and that includes the procedures for selection of the stalking horse,

notice of assumption and assignment, sale and abandonment of the minimis assets. The adjustments are the following. We talked about the I-O-I deadline. I'm satisfied with the discussion that the I-O-I deadline is not a put-up put up or shut up deadline. So I'm comfortable leaving that at April 21st. Let's set the sale hearing for June 17th at 9 a.m. Central Daylight time. That'll provide

a little more flexibility for me to address the issues as they've come up. We didn't discuss whether to move the objection deadline accordingly, but I think that would be appropriate. I want to give the debtors time to review and respond to whatever it is, but I'm not sure that you need an objection deadline in there. So I'll move the objection deadline to June 10th at 4 p.m. The one thing I didn't really discuss, but I think this will not be controversial, is the deadline to object to the selection of a stalking horse. If you were to select a stalking horse tomorrow, that deadline would perhaps run before the committee exists, and I think the committee should be able to weigh in on that.

So I think we should have the deadline to objective selection of a stalking horse and not be any earlier than seven days after the committee is appointed. If you want to select a stalking horse tomorrow, I'm not stopping you. You can give notice to everybody else, but the deadline will need to be at least seven days after the committee is appointed, and has an opportunity to see what they think about that. And then on the privacy policies and the CPO, I think that should be addressed on a separate track.

So I think that it makes sense to take out paragraph 37 of the proposed order. That's without prejudice to the debtor's ability to file a motion seeking an order that no CPO was required, any other party's ability to file a motion requesting the appointment of a CPO. Besides, as you point out, it may be the most effective strategy for a creditor or regulatory authority or someone else to engage in the process and find out directly from the potential bidders or from the debtors by the debtors, what the issues are and whether they think it makes sense to have a third party do an investigation. That's a long way of saying.

Asking for a CPO might not be the most efficient way for parties to get the information they're looking for, but I'm not going to preclude them from filing that motion if that's what they want to do. Paragraph 16 of the bid procedures mentions the privacy policy, but I think that's your characterization, not my finding, so that I'm, you can leave that end as far as I'm. Okay. And so I'll find that notice of the motion was appropriate and sufficient and under the circumstances. With the modifications, we've discussed, the bid procedures, including selection of stalking horse, notice of assumption, assignment, sale and abandonment of the minimums assets or reasonable exercise in judgment, the payments and other uses of assets for, are necessary to avoid immediate and irreparable harm,

and to the extent that federal rule 6,004H applies, that stay is waived in the order of the effecting. Do you need any other findings on that order other than what's in the proposed order? No, we'll make those changes to the order and the procedures, and then submit a redline to your chambers to review before. Very good, thank you very much. All right, you've got me for a little bit here.

I'm going to move on to item number four on the agenda, which is the cash management motion, filed the docket number 12. This is the debtor's request to continue their existing cash management system, including to maintain their existing bank accounts, business forms, and checks, seeking authority to pay bank fees and corporate card obligations, including on a free petition basis in the amount set forth in the motion, and to continue ordinary course intercompany transactions and accord intercompany claims against the debtors

with administrative priority status. Just for background, the debtors have 12 bank accounts. They are all maintained with J.P. Morgan, which we've confirmed with the U.S. trustees and authorized depository in this region. And most of the relief that we're seeking through this motion is really regular way cash management relief. There are a couple bespoke elements

that I just wanted to flag for Your Honor. And I also don't want to walk through some changes that we've made. discussions with the U.S. trustee, J.P. Morgan, and the debtor's payment process or PayPal. So the motion has what we're calling administrative expense procedures. We have a dip commitment, but we're not seeking to incur any dip financing today. That would all be reserved for the second day hearing. And so that being said, we did file a cash flow.

It's attached to the cash management order. It's also attached to the dip motion. I'm sure you might recognize it. It's often attached to dip in cash collateral orders. This is really geared towards our effort to make sure that we're running an open and transparent process and people know what kind of money is going to be spent on this case is, what the liquidity looks like, and have visibility into that process, and to make sure that we're operating with sufficient liquidity going forward. So we are seeking through this motion to modify the kind of.

management system in a limited way to establish a segregated bank account. This would be a bank account which the debtors would fund with U.S. trustee fees as they accrue, any fees paid to the clerk of the court, or to be paid to the clerk of the court, and the estate professional fees, both of the debtors and any other party that, you know, their fees are required to be paid by the estates. So we would fund the forecasted amounts each week and then go out to the professionals and seek actuals after the fact and then true up any difference

just to ensure that the key administrative costs of these cases are protected, notwithstanding the outcome of the cases. This is kind of similar to a carve-out structure that you would see in a dip, and we do expect that the dip order that's ultimately filed would replace this concept. So it's really just to govern kind of this interim period until there's a decision on the dip and make sure that those critical fees to this case are segregated and available separately we do have one investment account it's at JPMorgan but it's a

money market account whose funds are not FBIC insured so prior to the petition date these funds were transferred into the debtor's main concentration operating account and while we're not planning to use that account, its balance is zero, and we're not going to fund it during these cases. We are proposing to leave it open just for administrative efficiencies, and we've agreed to some language in the revised proposed order that will submit to you with the U.S. trustee that covers this concept, and we believe the U.S. trustee is signed off. A couple other minor comments that we've received from parties. We have some comments from the dip lender, or proposed dip lender, making any payments both under this order and really all the operational

first date orders in this case subject to any dip order if and when it gets entered and the budget and connection there with and giving some notice rights for things that we might change to the cash management system, opening new bank accounts, things like that, as well as a new paragraph for PayPal, which is the debtor's payment processor, who's just a requested some confirmatory language that they can continue to operate under the user agreement where they process sales and then remit the proceeds less of their processing fees to the debtors. I'm happy to answer any questions. I would just flag if possible we would like to get this order entered as quickly as possible

following the hearing just because there's a little bit of lead time to get the bank accounts open and JPM Morgan is standing by waiting for the order to get entered so that we can resume ordinary course operations. Sure. I'm assuming the filing. I think I only had one question. Paragraph 19 of the proposed order refers to a couple letters of credit for PayPal and SCG Grove 221 and an assignment of deposits.

I think I recall seeing the assignment of deposits has to be with credit cards. But the letters of credit, is that anything we need to know about? No, so J.P. Morgan maintains like a separate. what we call a restricted cash account. The debtors have issued or have had J.P. Morgan issue letters of credit for the benefit of PayPal as a payment processor

and as is required under one of the leases. That's a landlord. For the landlord. And there are funds in that account that just cover J.P. Morgan's obligations and all that cash is subject to a to a lien in favor of J.P. Morgan in case they have to

cover expenses that arise. That's just collateralizing. Yes. Oh, okay. All right. Okay, that was the only question I had. Anyone wish to be heard on the cash management motion in the courtroom first? On the WebEx, I will grant the motion on interim basis. We'll have final hearing April 22nd at 130, objections by April 15th.

And if you submit an order, please. Did I clarify on the bid procedures order? I'm granting the bid procedures aspect of that motion and not the sale aspect of that motion. And I think the experienced bankruptcy lawyers know what I was doing there, but I want to clarify that for those, not everybody who's with us today does bankruptcy a lot. I'm not granting the sale. I'm not approving the sale. I'm just approving the bid procedures and the related matters that we discussed.

There will be that final hearing on June 17th to address the proposed sale. Your Honor, Heather Cappertad, I'm from Indiana. Can I just ask for clarifying other. One other clarifying point on the procedures. Yes. We had discussed the de minimis sale and the additional time frame for anything that involving consumer data or genetic material. I wanted to make sure that that was also going to be included.

And also on the debtors agreed to that. I'm sorry. I interrupt you. The debtors agreed to the de minimis sale to the extent of all PII or genetic material. And I spoke over you on your second one. I'm sorry. What was that? It's okay. I appreciate that.

Abandonment of the same type of material, I don't know if we discuss that, but that would also be something we would want so long a time frame in order to object. Is that objectionable? To the extent it covers that same customer that or PII. TII or genetic material, it's going to be abandoned. That would also be subject to traditional notice. Yes. Okay. All right.

So the debtors will make those changes. Thank you, Mr. All right. Thank you, Mr. Crochet. All right. So that's the cash management motion. Okay, agenda item number five, I'm going to move to, which is what we're going to refer to as the PMC motion, filed at docket number seven. I think Mr. Hopkins briefly touched on this, but the debtors operated telehealth business, Lemonade Health.

They partner with doctor groups to provide medical care to patients through this telehealth platform. We refer to these doctor groups as professional medical corporations or PMCs. in all cases they're owned by licensed physicians because the debtors, a subject to certain corporate prohibition on the ownership of medical practices laws cannot actually own a medical practice. And so they partner with doctor groups that are independently owned and service the telehealth platform by providing doctors, nurses, nurse practitioners to access the debtors customers through the platform.

These arrangements are covered by agreements between the debtors and the PMCs, where the debtors are really responsible for nearly all administrative aspects of the PMCs. These entities are actually set up solely to service 23ME. And so the debtors are responsible for things like paying employee wages, taxes, vendors, really just kind of operating the administrative aspects apart from the medical services component. So this motion really seeks comfort in some regard to confirm that the PMC relationships and the ability to continue to operate Lemonade Health remain unchanged as a result of the Chapter 11. It's going to be helpful to point two to manage the relationships with the PMCs and answer questions that they may have. It also seeks some limited substantive relief as it relates to satisfying the debtor's obligations under the agreements with the PMCs. We don't believe that there are any pre-petition amounts outstanding that are not otherwise covered by the first-day orders that we're seeking today. But the agreements are quite broad.

There are, for example, instances where we might be responsible for indemnifying doctors or paying legal expenses that might not fit squarely into the other motions. So we're really just seeking this to cover anything that may come up. And we've worked closely with the U.S. trustee on this one over the last couple of days, and it comes to the U.S. trustee on this one over the last couple of days. and it comes to an agreement that any payments in the interim period would be limited to those where non-payment would cause irreparable harm to the debtors. And so all parties would have the standard notice period to object to this motion on the final basis. That will be reflected in the order we submit later today. And otherwise, I'm happy to answer any questions that you might have.

Okay. I only had one in my notes, and I think you answered it, but let's just clarify, Do the debtors or any employees of the debtors practice medicine, or is it all outsource? No, it's all outsource. Okay. That's how I read the motion and your comments. That's the only question I have. Anyone in the courtroom wish to be heard on the professional medical corporation's motion?

Anyone on the WebEx wish to be heard. Yes, Your Honor. Yes, Your Honor. Yes, Your Honor. Yes, Ms. Yes, ma. Thank you. The Indiana is just a little bit concerned in that we have

not had an opportunity to review those contracts. I know that Indiana Pharmacy Board oversees at least a portion of what goes on with some of the related debtors. And so as long as this is an interim order, I don't think we have an objection. We just want to make sure that we can review all of that information and get any questions to answer before the final order. Yeah, this is expressly set up for interim relief. So that's where I think we're headed.

Thank you. Anyone else on the WebEx? Reviewed the motion. and it appears to be appropriate. I'll grant interim relief. I will have a final hearing April 22nd at 130, objections by April 15th. If you'd submit an order,

and I'll make finding that anything that to the extent that anything is payable during the interim period, payments necessary to avoid immediate and irreparable harm, and I understand that will be inserted in the order expressly. And then to the extent that Rule 6,04H applies that stays waived or will be effective immediately. Great, thank you.

The last one for me today is agenda item number six. This is the customer programs motion. File the docket number nine. This is a motion to pay certain pre-petitioned customer obligations and maintain the customer programs in the ordinary course. We've heard a lot about customers today. They're very important to the business. The debtors maintain several customer programs

kind of categorized at a high level. It's four buckets. There's customer subscriptions for things like, almost like memberships where you get enhanced reports, and other health information, as well as memberships to utilize that telehealth business that we just talked about. The debtors from time to time also offer promotional offers. So I think I saw on the website yesterday, it's like buy one kit, get the second one 20% off. So sales promotions like that.

We have a refund and exchange program. And then there are retail, the debtors partner with third-party retailers to sell their kits on places like Amazon and other retailers like that. We're seeking to honor any of the obligations under these programs in connection with maintaining them and notwithstanding the Chapter 11 filing. We estimate that the amounts, the cash amounts due are approximately $1.1 million on a pre-petition basis. We're also just seeking confirmation that we can continue any non-cash obligations going forward. These are critical to maintaining customer goodwill and satisfaction, and so we think they're very important just to stabilize operations. So with that, I will conclude my presentation and answer any questions that you might have. I don't think I had any questions on this one.

Thank you, Ms. Hots. Anyone in the courtroom wish to be heard on the customer programs motion? Anyone on the WebEx, this is also seeking interim relief. Anyone on the WebEx wish to be heard, customer programs. Hearing none, I have to view the motion. It appears to be appropriate. I'll grant interim relief. Final hearing April 22nd at 130.

Objections by April 15th. Submit in order, please. And similarly, I'll find that to the extent, anything's payable during the interim period. It's necessary to avoid immediate and irreparable harm and a 4,000-H, 6,000-4-H stay, if applicable is weight. Great. Thank you, Your Honor. I'm going to cede the podium to my colleague. Thank you very much.

Actually, would this be a good time for a short recess? We've been going a couple hours here, and folks might want to stretch their legs. Sorry to interrupt your presentation before it got started. I won't. I won't hold it again. Why don't we take a 10-minute recess, and we'll be back. What time? We're at 155. We're about six or seven after the hour.

We'll be back. Thank you. Thank you. We are back on the record. Thank you. Please be seated, everyone. All right. All right.

Ready to go? Yes. Please remind me your name. I'm trying to keep things in my head like how many chromosomes there are and important numbers and I've forgotten your name. She had a lot of information all once. But my name is Lauren Castillo from Paul Weiss for those counsels of the debtors. Thank you.

Today I'm going to be presenting three motions, which are agenda items seven through nine, These items are the critical vendors motion, the wages motion, and the creditors matrix and scheduled and statements extension motion. I just want to flag early on that we did preview each of these motions with the U.S. trustee in advance of today's hearing have incorporated certain their comments into the motions and orders, and we believe with those changes, the U.S. trustees' outstanding concerns with respect to these motions have been resolved. But we'll, of course, let them speak for themselves during these presentations.

So I'll go ahead and start with the critical vendors motion, which is located. at agenda item number seven and was filed at docket number 15. By this motion, Your Honor, the debtors are seeking authority to pay pre-petition claims of certain vendor claimants in the ordinary course of business that are central to the debtors' operations. Specifically, the debtors are seeking to pay these claimants up to a cap of approximately $5.8 million, almost all of which will come due in the interim period. These claimants include lab testing service providers, third-party marketing service providers,

lien claimants, five or three B-9 claimants, foreign vendors, and other vendors that are critical to the going concern value of the debtors' business. And I just want to clarify that in order to identify this universe of cases, the debtors with the assistance of their advisors undertook a comprehensive process to ensure that only vendors that provide goods and services truly necessary that the value of the estate are included under this motion. Through this process, Your Honor, which I can go into more detail if you'd like, but the list was ultimately narrowed down to only 30 vendors

out of a total of 850 potential vendors that the debtors have made disparate decisions to in the past 12 months. Absent relief requested by this motion, there's a significant risk that some of these vendors may stop supplying goods and services that the debtors require to run their business, which would negatively impact the value of the business.

You know, as we flagged throughout the beginning of this case, the debtors were planning to run a sale process, and accordingly preservation of value, especially early on in these cases, is critically important. I also want to flag that we want to flag that we want to, will be submitting a revised form of the order, just to incorporate the operational language that our dip lender has requested. It just says that any payments made under the order will be made in accordance with the dip order.

And finally, Your Honor, based on our discussions with the U.S. trustee's office, we have agreed to provide the U.S. trustee with a monthly report of payments made to vendors pursuant to this order. And so unless you have any questions at this time on the motion, I'd respect your request that the critical vendors motion be granted. on an interim basis at this time. Okay. I have a comment followed by a question. The motion and Mr. Farter's declaration include what I think is very thorough description

of the process that the company went through and the reasons why in the debtor's judgment it is less expensive to pay these amounts than to deal with the consequences of not paying them. So the question is related. Who's responsible for who owns this process going forward? In other words, as payments come due, is someone responsible for saying, you know what? Last week, we thought this was critical. Now they just signed a new supply agreement with us. We don't, you know, who's responsible for saying, you know, we have the authority.

Let's not use it here. Right. So it's going to be, you know, of course, the company's management team, and the public members of that team in conjunction with the debtor's proposed financial advisor, A&M, who has also overseen the process through petition to identify. these critical vendors include them under this motion. And also, of course, legal counsel will be involved, either local counsel or Paul Weiss.

Okay. Actually, the second question. Yeah. I misled you there. You mentioned providing the matrix to the U.S. trustees. Are there any objection to providing it to the committee once they're appointed? I'd like to confer with my colleagues for one second. Certainly.

I think that's fine. Yeah, we have no issue. No objection. Okay. Okay. Who in the courtroom wishes to be heard on the critical vendor motion? Seeing none, anyone on the WebEx, which should be heard on the critical vendor motion.

This is, again, interim relief, although a lot of it happens during the interim period. Hearing none, I will grant interim relief on the motion, as we discussed, if you modified to provide that the committee will be provided with the matrix when they're appointed and periodically thereafter. We'll have a final hearing April 22nd at 130, objections April 15th, and please submit an order, and I'll find that payments outlined in the motion during the interim period are necessary to avoid immediate irreparable harm and waived 6,000-4-age stay. Thank you, Your Honor.

I'm sure our critical vendors very much appreciate that. So the next motion I'll be presenting, Your Honor, is the wages motion, which is located at agenda item number eight and was filed at docket number 11. Your Honor, I can speak from my own personal experience when I say that this company's management team, many of whom are on the line today, and so many of their employees have dedicated a significant portion of their time and energy to this business, most recently, by working late nights and weekends to get this company ready for a Chapter 11 filing. What this motion really does is just to try to do right by those employees and to preserve the value of the business going forward.

Specifically pursuant to this motion, the debtors are seeking to pay up to approximately $7.6 million, of which $6.5 million is requested under the interim order. Payments made under this order are going to be made on a kind of pre-petition obligations with respect to compensation and benefit programs owed to the employee's workforce and certain third parties, contacting authorities for 1K providers, and other certain parties, and to continue the debtors' competition and benefits programs in the ordinary course. Additionally, the debtors are also requesting a limited waiver of the automatic stay to allow claims against the debtor's workers' compensation programs to proceed. I'd also like to flag that we will be providing a revised form of the order to incorporate that operational dip language that I mentioned in. And then also for the record, I want to clarify it and at the U.S. trustees' request that the order, that I'd like to make clear that the wages motion does not seek to pay any insider or any amounts above the priority tax under sections 5074 and five of the bankruptcy code. Accordingly, at this time, Your Honor, unless you have any questions on the motion, I'd like to request that the motion be approved at this time on an interim basis.

Okay, I do not have any questions on this one. Anyone in the courtroom wish to be heard on the Wages and Benefits motion? Anyone on the WebEx wish to be heard. None, I review the motion. It appears to be appropriate. I'll grant interim relief. We'll have a final hearing April 22nd. Objections by April 15th.

You submit an order, and I'll make the same two findings I just made on the last motion. Great, thank you. It's okay. Going smoothly so far, I have to say. Okay, so the final motion I'll be presenting today is the creditor's matrix and schedules and statements extension. motion, which is located at agenda number nine and is filed a docket number 16. It also likes to flag that we did make some changes to this order before filing, just to work with the U.S.

just the answer in clarifying language to the request to waive for notice requirements to equity holders. Those changes just include specifying that we did provide a list of holders of outstanding common stock who own approximately 5% or more of attending common stock of the debtors, and that such equity holders will receive notice. pursuant to Section 2002D of the bankruptcy code. So by this motion, Your Honor, the debtors are seeking to extend the 14-day period to file their schedules and statements by an additional 22 days, fail-consolidated list of creditors, redact or impersonally identifiable information of natural persons,

and approve certain noticing procedures related to the notice of commencement and certain other procedural relief that's outlined in the motion. With respect to those more procedural aspects of the motion, Your Honor, including the request to file consolidated creditors matrix, the top 30 list of general and secured creditors, a list of counsel representing cybersecurity plaintiffs, and the extension for this deadline to file the schedules and statements. We believe such relief is warranted,

given the size and complexity of these Chapter 11 cases, and that requiring the debtors to strictly comply with these sections of bankruptcy code and rules would be unduly burdensome and would cause undue delay at this time. Finally, with respect to the request to redact certain identifiable personally identifiable information of individuals, Your Honor. We believe this relief is warranted given the circumstances surrounding these Chapter 11 cases.

As we discussed earlier, one of the primary factors leading to the debtors Chapter 11 filing was a data privacy breach whereby a threat actor was able to access certain debtors' customers' personal information. And accordingly, the privacy of individuals during these cases is of heightened importance. We believe the redaction request is reasonable light of such circumstances, and in the spirit of disclosure, we have implemented

certain procedures to provide the court and the U.S. trustee and certain other parties holding legitimate interest in such information with a copy of the unredacted creditors matrix motion. Finally, I do want to flag that right before the hearing started, we did receive an informal comment on this motion with respect to the language located at paragraph 36B in the motion. 36 Bravo? Yes, 36B. Okay, and what was the comment? So this comment was just from one of our law firms representing certain cybersecurity and stint claimants, and it was just with respect to that line that states that the debtors will provide notice to such counsel, and counsel will immediately send that notice to their claimants.

If counsel is on the phone, they can clarify if I get this wrong, but I believe they're just concerned with requiring counsel to immediately forward that information to their claimant without having agreed to it. I do want to clarify that these procedures were just put in place to make sure we give broad notice to all cybersecurity incident claimants. You'll also notice in that paragraph A that we're individually serving the notice of commencement to each individual claimant as well as their counsel. And so we're more than happy to revise this language to be something a little bit more appeasable to both parties.

Okay. If it's something that you can work out with the objecting party, obviously... Yes, I'm also certainly real shop to them. I just want to flag if there's a change in the order. Promptly, reasonably promptly, and whatever formulation works for the debtors and the objective party, I'm sure we'll be fine. Okay. Thank you for bringing that up. Okay, great. So with that, that's all I have. So unless Your Honor has any questions at this time with respects to the motion and respectfully requested the court approved the motion at this time. I do not have any

questions. Anyone in the courtroom wish to be heard on the motion for additional time to file the schedules and other related relief at document number 16? Anyone on the WebEx? Oh, I'm sorry, Ms. Richie. Ms. Mr. Susty had no objection to the timing. I just want

to make clear. I thought the U.S. S.C. had requested that at least with respect to the non-gate breach, individuals, who may be creditors on the, at least the names of those individuals be listed on the schedules. They don't have to be identified as employees of the debtors, anything of that nature, but just so that they are identified as creditors on the schedules. I don't know if there's any opposition to that or what the reason would be.

So it's true we provided, we redacted individuals' names in the creditor matrix that we filed with the court on the petition date. And we strongly believe that redaction of individuals' names in these cases is of critical importance to protect the personal information of those individuals, especially given the increased media surrounding these cases and the concerns around data privacy. We think the circumstances here make a strong justification under Section 107C of the bankruptcy code, that the personal identifiable information of natural persons be redacted. So, Ms. Rich Tait, you're talking about, we're talking about the schedules, not the, not the matrix? The schedules, right. You would like the names only.

Right. They don't have to identify someone as, I could communicate with debtors' counsel. I want to know, is this someone, this person, a creditor's, I mean, a regular trade creditor is this person an employee? I don't think that that needs to appear on a publicly filed document. But the code and the forms, the official forms do require that creditors be listed on the schedules. And I understand the privacy concerns, but if no one can identify why the debtors owe certain individuals money, I don't see what danger there is to just identifying those individuals as creditors on the debtor's schedules. But you're talking about non-data breach victims?

That's correct. Okay. Ms. Castillo, your thoughts on that? So, Your Honor, we believe that Section 107C applies to all individuals, not just the data breach individuals, and so we'd request that we still publicly file a redacted version of the schedules and statements on the docket under this motion. But in furtherance of the disclosure concerns, the U.S. trustee has brought up, we are willing to implement the same procedures that we have added to the motion with respect to the creditors' matrix

with respect to the schedules and statements, if that would work for the U.S. trustees' office. In other words, the U.S. trustee on request can receive an unredacted version? Yes, and we're willing to also extend that to the committee and other parties who have a legitimate interest with such information, with such information provided that the objection procedures outlined in the motion apply. Okay. I'm not sure that the requirements of Section 107C had been satisfied here, Your Honor. I think we could live with that.

I certainly don't want to be difficult, you know, necessarily, if there's no purpose to it. Other parties may be interested in it, and I would hope that if those other parties have a valid interest in knowing who the creditors of the debtors are, that the debtor would provide the unredacted information to those individuals. My recollection is if someone needs to serve a paper on all creditors, for example, there's a provision in the order where they can obtain the information needed to mail things out.

Is that right? Yeah, that's right. There's a provision in the paragraph that says any legitimate partly as well as the U.S. trustee and the committee can receive a copy of the unredacted creditors matrix, and with the revised language, the unredacted schedules and statements, as long as they have a legitimate interest in such information, and the debtors will reserve the right to object to such request. I think that would be saying.

Okay. Okay, let's do it that way then. I think that will resolve that objection. All right, we have several folks on the WebEx. Mr. Baalman raised his hand first, I'm told. So, Mr. Baalman. Thank you, Your Honor. Andrew Bellman from Lowenstein-Sandler

on behalf of the group of law firms that represent numerous data breach arbitration claimants, which I believe within the debtor's definition of cybersecurity incident claimants. One preliminary matter, Your Honor, so we just got involved this morning. we had sent our ProHawk applications to the court in hard copy. I don't know if they've gotten there yet.

They sent them their career, but they were in transit right before the hearing started. I just want to clear that and make sure it's okay to speak. It's fine. It's fine. Thank you for checking. Thank you, Your Honor. So we have a common concern, as Judge Counsel highlighted, we have a common concern between both the motion to extend time-to-file schedules and the case management and notice procedures motion.

I'm not entirely sure it can be resolved through meeting conferral, although we're certainly willing to do so. The concern, I think, is that as debtors' counsel hinted at, both of those motions seek to effectively shift the debtors noticing burdens to counsel for the represented cybersecurity incident claimants. So as opposed to saying, you know, we, the debtors are going to direct our claims and noticing agent to notice everybody, which it sounds like they're willing to do, although I think that's absent in some places and the orders for both.

they're saying we'll send it to council and we'll impose an affirmative obligation on them through our over in the bankruptcy court to pass things off basically putting us into the role of being an extension of the claims agent but they have a claims agent and in document number 10 in case management motion the debtors openly acknowledge we have the names and email addresses of our subscribers so the burden should be on them through their claims agent to serve things on individual creditors not to essentially offload that role in our subscribers and out outsource that role to counsel for other parties. These folks are canceled in the arbitration, not part of Quill, not part of the claims agent.

And we don't think that particular link in the service chain is necessary or appropriate, where the debtors can serve the documents, whether it's the notice of commencement of the case or anything else throughout the course of the case, directly on folks by email, as happens, fairly frequently. Ms. Kiske, do you? I think this is a good time to take a minute to sort of explain our general noticing plan for these cases, because I certainly understand that there's probably a lot of claimants out there. We're concerned with notice and how that's going to work in these cases.

And I do want to say our permanent goal when developing how we were going to provide notice to these claimants was to provide as much notice as possible, as quickly and efficiently as possible. With that in mind, I will just want to flag that under the creditor's matrix motion, which only deals with service of the notice of commencement, the creditors matrix motion, provides that the notice of commencement will be served on each individual cybersecurity claimant at the address or email address that we have on file, and then also separately served on such claimants' counsel. And then, like I said, there's that language in there that says claimant's counsel

will forward that information, but we're happy to work on that if there's any objections to that language. In addition, the case management motion, which will be up for discussion later this afternoon, discusses general notice requirements for other pleading files in these cases, except for a few others in the bar date and the sale notice, which are specifically called out in those motions. And pursuant to the case management motion, the way it works, is if an individual is represented, those notices will be sent via email to the law firm representing such individual.

And then if an individual claimant does not have representation, those notices will be sent to the individual so long as the company has sufficient notice information, which, like was mentioned previously, the company has those information for almost all of these claimants. And then again, if a claimant requests individual notice under Section 2002 of the bankruptcy code, we will also serve them individually by email or mail at the address we have on file for them. And we believe with respect to the case management motion,

these notice requirements are reasonable because there's a lot of paper in this case that might not necessarily apply to all of these cybersecurity counsel claimants. Obviously, there's a cost to the estate of noticing over 35,000 claimants. But there is a procedure in there that if a certain individual claimant believes they want notice of any sort of documents that they can get that information. Okay, so Mr. Belmont, it sounds like for this motion, your issue is maybe not right because this motion will deal with the notice of commencement, 341 notice, and it will go both to counsel and to the clients if the debtors know how to contact them. and then you and Ms. Castillo can work out the language about immediately forward or something else that works. Am I reading that correctly? That would take care of your objection to this motion?

Sort of, Your Honor. I think it's that affirmative obligation to immediately forward the notice that is a little perplexing to us because it's putting folks into the chain of notice that really shouldn't in the bankruptcy context where the debtors have acknowledged they can just send the notice of commencement to these people direct. The same issue with the subsequent pleadings as well, that we can save that for the case management order. But the issue here is that affirmative obligation to take steps in connection with the forwarding of the commencement of the case. Because let's say somebody erroneously leaves out 10 claimants. Are the betters going to come back and say, well, sorry, arbitration lawyers, that's your fault?

Because we've been affirmatively directed in the course of this order to pass things on. that's really the concern. It's that affirmative obligation. Well, don't lawyers have that affirmative obligation to keep their clients abreast of their matters regardless? Yes, but not by force of a court order in another court other court other than, you know, the arbitration form where their proceedings are pending. This is a bankruptcy notice and issue, not an arbitration issue. I just want to take it out and let lawyers risk malpractice claims. I mean, I will reiterate, like I said before,

we will be serving the individual notice on each claimant. So I think the concern that these claimants won't receive notice of the notice of commencement is minimal. And then also we are more than happy to strike that language from the motion and the order. Why don't we take it out? I mean, it seems to me that if counsel knows of a better address than the debtors do, counsel has an obligation,

whether it's imposed by me or not, I think it's imposed by the ethical rules of every state that I'm aware of. to let the client know what's going on. But the debtors have no objection to taking it out of this order and letting counsel address that on their own. That's fine with me. Okay, great.

Thank you. We will. That would solve our concern on document 16, and we'll come back, I guess, to the most procedures. Yep. Okay. Thank you, Your Honor. All right.

Ms. Dent? Yes, thank you, Your Honor. Here for Class Counsel. So I just wanted to let you know that we over here, the settlement class council are still digesting this language, and we would also like to meet and confer with the bankruptcy council because, as you know, in the class action, we have our settlement class representatives that the court has, you know, preliminarily approved, and we represent, but we also have, you know, six million putative class members who we don't know

their identities at this point. from the notice for the settlement has not yet gone out because there was issued preliminary approval. So I guess we just have some concerns that might need to be worked through, you know, immediately send to all, you know, people that you represent. Well, we are appointed to represent the class. Class consists of millions of individuals, but we don't know their identity. So I guess we're just, I just wanted to raise those concerns to your honor and, you know, we would like to meet and confer with bankruptcy council about how

the notice should go down from the class, so in the class perspective. Okay. Well, I think based on the changes we've just made, as to this motion, there is no issue because that language is coming out. Let's take up the question of how counsel deals with unnamed class members, whether they are clients or something else when we get to the case management. So in terms of the creditor's matrix and the service of notice of commencement, The way the motion works is the debtors will serve individually.

Those claimants that have filed lawsuits or arbitration claims against the debtor on account of cybersecurity incident claims and turned into any settlement with the debtors relating to such claims or received any payment from the debtors on behalf of such claims. So it is like claimants that we are aware of as of today. But in terms of case management or creditors matrix, if a party makes themselves aware to us and files a claim or such a claim, they want to receive notice, we're more than happy to provide that notice under the creditors' matrix motion.

Okay, so, I mean, the 341 notice is going to go out to the group that the debtors identify as needing to receive that notice. Correct. And it may also go to lawyers who represent some of those same 12th, but we're taking out the language that requires the lawyers to send it on. So I think we're resolved for this motion, and we can talk about where we are on broader service of other things that may happen in this case, move, that much. That's correct.

Okay. Very good. Yes, Ms. Mr. Mr. Kahn, I'll ask a quick question, Your Honor. Is the notice going to be sent out to all 6 million punitive class members? Is that what I'm hearing from 23-Avese Council, or I guess we're a little bit unclear on that over here based on the filings? So, so long as we have the information for those individuals,

and that they have, like, made themselves aware and filed claims against us, then they will receive that notice, but we have the same issue with any unnamed individuals have not made themselves aware that at this time we don't know or have their information to serve them. But again, we will also be serving class counsel with this notice.

If any individuals are made aware, they can receive that information from class counsel if they'd like to provide it, or we can also provide it separately if they make a request for us. Thank you. All right, Ms. Crockett. Thank you, Your Honor. Again, Heather Crockett on behalf of the State of Indiana. And I want to lead with, I do appreciate the fact that debtors' counsel is doing the redaction of the PII of those who were affected by the data breach.

That says, I'll lay one of the fears that, of course, of the regulators that we have. But our other concern actually involves the actual deadline of when these schedules and purposes are to be filed in relation to the sale date and then a person that the best of the deadline. and then a person that the bar date notion is not on for today, but it actually is very close in time. I believe it's 21 days between the schedules that filed, and when the bar date is for the general fetters. And that causes us concern. Of course, we will raise that concept as well,

but it's going to raise this to the court. There's the dates for when the schedules and such as we do, it's a way to the dates for the auction and the sales, and then the plates for the bar motion, do cause us concern. And you would ask that if it would be possible to actually not give them to the folks for only two days, but move it up

closer so that there is no time or if not we will be raising the objection to the date for the actual general bar date for the consumers to bother the complaint in the case. Okay, well, I'll defer the issue of the bar date until that motion is before the court

and the debtors may adjust their recommendation or request based on whether the schedules are filed on time or early or late. I'm not encouraging you to file them late, but if that happens, then there may need to be adjustments made. In terms of the interaction between the schedules and the sale process, I think the request here is reasonable. I'm comfortable that potential buyers will have sufficient information in the data room to understand what is for sale and how it might work without needing to rely unduly on the schedules. Schedules may prove helpful at some point in the process. They probably will make their way into the data room for what that's worth,

but I think that potential buyers will be sufficiently informed about what the debtor's own, and to the extent it matters to them what the debtors owe before the schedules are filed. So I'm going to overrule the objection to the timing of the schedules, and we'll go with what I believe is April 28th is what is proposed there. That's correct. All right. Anyone else wish to be heard on the WebEx? Hearing no one else. I will then grant the motion with the changes we've discussed,

really the change we've discussed, I think is just the one. And the relief request is reasonable in the circumstances, so I'll grant that motion if you submit an order. Great, thank you. That order will be coming around shortly after this hearing. And with that, Your Honor, that's it for my presentation today, and I will cede the podium to my colleague to present the next item on the agenda. Thank you, Ms. Cicill.

Good afternoon, Your Honor. For the record, Justin Sims of Paul Weiss proposed co-counsel for the debtors. Good afternoon. I will be presenting items 10 through 12 on the agenda. And as my colleagues have noted throughout their presentations, copies of these motions and the corresponding proposed orders have been provided to the United States trustee. And we sincerely appreciate how collaborative and constructive they've been throughout this process. And to my knowledge, there have been no objections formal or informal to the motions that I will be presenting. Moving to the motions themselves, item 10 on the agenda is the debtor's taxes motion, which is located at docket number 14.

By this motion, the debtors are seeking the authority to pay their pre-petition taxes and other related fees. In total, the debtors have approximately $481,000 of accrued and unpaid taxes and fees outstanding as of the petition date. of that 481,000, the debtors anticipate that about 100,000 will become due to, will become due to various authorities within the next 30 days. The pre-petition taxes and fees comprise income and franchise taxes, property taxes, sales and use taxes, as well as foreign taxes, and the debtors do incur certain intellectual property fees, licensing fees, NASDAQ fees, and other regulatory fees throughout the operation of their business.

If the debtors do not pay their taxes, it would severely interrupt their operations, and further, the debtors' directors and officers may open themselves up to personal liability, and it would also distract them from the administration of these Chapter 11 cases. If Your Honor does not have any other questions about this motion, the debtors do respectfully request that be granted on an interim basis. Thank you, Mr. Sims. I did not have any questions about this motion. Is anyone in the courtroom wish to be heard on the taxes motion, number 14?

Anyone on the WebEx wish to be heard on the taxes motion? Hearing none, I have reviewed the motion. It appears to be appropriate. I'll grant interim relief. We'll have a final hearing April 22nd, 130, objections April 15th. And if you would submit an order, please, I'll make the same $6,000, 3,000, 4-H findings.

I've made several times already today. Thank you, Your Honor. Thank you. The next item is item number 11 on the agenda, which is the debtor's insurance motion, and that's found at docket number 13. By this motion, the debtors seek the authority to continue their insurance program in the ordinary course of business and pay all insurance obligations. As outlined in the motion, the debtors maintain a comprehensive insurance program, which consists of 34 insurance policies.

These policies, the policies that comprise this program are standard of a company of the debtor size. The debtors do not believe that they owe any amounts, any pre-petition amounts, rather, in relation to their insurance program. And the debtors submit that their ability to continue their insurance programs are essential to preserving the value of the debtor's estate, as any lapse in coverage could open the debtors to significant liabilities. In addition to that, insurance coverage is required by the laws, regulations, and contracts that govern the debtor's commercial activities. Your Honor, we believe this is a standard insurance motion. So unless your honor has any questions, we would respectfully request that it be granted on an interim basis.

I don't have any questions. It does it appear to be a standard insurance motion based on my read of it? Does anyone in the courtroom wish to be heard on the insurance motion, Dr. Number 13. Anyone on the WebEx wish to be heard? All right. I will grant this motion on the interim basis as well. Final hearing April 22nd at 130,

objections by April 15th. We submit an order, and I will again make $6,000, 3,000, 4,000 for each finding it. Thank you, Your Honor. The last motion that I will be presenting today is agenda item 12, which is the retention application for Croll, which may be found at docket number eight. By this motion, the debtors proposed to appoint Croll as claims a noticing agent and administrative advisor pursuant to sections 156 C and 327A of the Bankruptcy Code. Your Honor, Mr. Benjamin Steele, who is a managing director at Croll, has submitted a declaration in support of this application.

and at this time, the debtors would like to offer this declaration into evidence. Yes. Any objection to my receipt of the steel declaration, which is attached to docket number 8 in evidence? Hearing none, the steel declaration will be admitted. Your Honor, the debtors anticipate that there will be millions of persons and entities noticed in these Chapter 11 cases and that many of those parties will subsequently file claims. And because of the large number of potential claimants, the appointment of a claims

and noticing agent and administrative advisor will help make these Chapter 11 cases efficient, run smoothly, and reduce the administrative burden on the clerk of the court. And to that end, the debtors and Kroll have been in contact with the clerk of the court, and I would just like to say how appreciative we are of their help throughout this process. She walked in right before you said that. The record will reflect that if I walked in the court, Immediately before you said that, that's a wonderful time. Well, I'm glad, and they've been incredibly helpful, as I said.

So thank you to them. Overall, the debtors submit that the appointment of parole is necessary, given the circumstances of these Chapter 11 cases, that Crow's rates are reasonable, given their extensive experience and their service offerings, and that they are a disinterested person under Section 101.14 of the Code. Your Honor, if you do not have any questions, we would receive. respectfully request that this motion be granted on an interim basis.

I do not have any questions. Anyone in the courtroom wish to be heard on the Kroll application number eight? Yes, Mr. Ritchie. Your Honor, the U.S. Trustee has no objection per se to this application. What the U.S. trustee will endeavor to do going forward is to make sure that the procedures that is implemented are secure enough because, obviously, a lot of very sensitive information. information is going to be in Kroll's possession throughout this case.

And also there's mention of Kroll's use of third parties for certain services. And we want to flesh that out, find out who the third parties are, what the third parties will do and what security procedures those parties have. But at this time, Your Honor, the U.S. Tricy, again, does not have any objection. That can all be addressed during the interim period. Is that ever to tell me? I'm sorry. That can all be addressed during the interim period?

Correct, Your Honor. Thank you. That's helpful. Anyone else in the courtroom? Anyone on the WebEx wish to be heard? All right, well, I have reviewed the application. It looks to be in order, so I will grant it on an interim basis. As with the other motions, final hearing,

22nd at 1.30, objections by April 15th. Please submit in order. Thank you, Your Honor. Thank you. I would like to cede the podium to our post-co-counsel of Harmony McDonald's. Mr. Risky. Thank you, Your Honor. Good afternoon again.

Your Honor, the first item that I'll be taking up today. It's the proposed utility motion. Your Honor, I would say this motion and the procedures contemplated by this motion are be standard for not only cases of this size, but essentially the mechanism that we seek in a lot of operating in Chapter 11 cases that we file in this district. Instead of posting a deposit, we have essentially a segregated deposit escrow account that is funded for 50% of the debtor's previous spend. The thing I would point out to parties, given the volume of the filings in this case,

if it looks like those numbers don't add up in the motion, it's because a lot of these utilities are kind of coinciding with the motion to reject that we filed some of those leases. So as soon as those leases drop off, a lot of these utility obligations will drop off as well. So that's why the proposed deposit of the motion seems a little de minimis. It got my attention at first. I saw the footnote. Okay, thank you, Your Honor.

And the other thing I would just highlight, Your Honor, of course, you know, you've heard the themes of preservation of value. You've heard irreparable harm. Sometimes when we have utilities and there's a debtor like this that has a good payment history and likely no material defaults, there could be a question whether there's potential irreparable harm. I think from what you've heard with respect to what this company is dealing with, the data issues, preservation, accommodating requests. I would hate for any wrong action to happen that disrupts those utilities for those servers

and the process and everything like that. So I just wanted to highlight, I do think, you know, sometimes we view these utilities a little generic. In this case, I think there's definite irreparable harm. We filed declarations and support. We've received no informal or formal objections to the motions. and so we would ask that it be granted as submitted.

Thank you. I didn't have any questions on this one. Anyone in the courtroom wish to be here on utility motion, docket 25. You know on the WebEx wish to be heard. I reviewed it and the procedures and the amounts of issues seem reasonable. I'll grant interim relief. Final hearing April 22nd. 13. Objections by April 15th.

To the extent I need to, I'll make the 6,03, 6,004H findings. I'm not sure whether they apply here, to be honest. And please submit an order. Thank you, Your Honor. Next motion I'm presenting is the debtor's NOL motion. Again, Your Honor, this is a fairly standard motion with respect to public companies that file, but I would like to highlight especially for the people on the phone who may not understand what we're trying to do here. As indicated in the declaration, the first day declaration at paragraph 166,

you know, we make sure to highlight that the proposed procedures do not bar all the first day declaration at paragraph 166, you know, we make sure to highlight that the proposed procedures do not bar all transfers or declarations of worthlessness. This is only to seek these procedures for these substantial transfers of ownership that would have a potential catastrophic or large impact on the value of the debtor's net operating losses. So, again, we're just trying to put procedures in place so that the debtor has kind of a procedure in place to react, if anything is going to happen with respect to these NOLs and what needs to be done. So I'm just highlighting that again, I think immediate relief in the form of an interim order is appropriate here. If any parties have objections to this at the final order, we can certainly take them up.

But I did want to kind of outline for the parties that may not do this as a typical motion what we're not seeking to do here. And I should also, I should say we have circulated this, of course, with the U.S. trustee, have not received any informal or formal comments or objections. Okay, I didn't have any questions on this one either. Anyone wish to be heard on the transfer and declaration of worthlessness motions, Doc, number six, in the courtroom. Anyone in the courtroom? On the WebEx, nothing there either. All right, I reviewed the motion.

It seems appropriate. I'll grant an interim order. We'll have a final hearing April 22nd, 13th. Objections by April 15th. And please submit an order. Thank you, Your Honor. Next document, next pleading that I'm taking up, Your Honor, is the case management order with I understand from,

some of the comments to date, I think there'll be some objections to it. Just from a high level, what we're seeking to do here, Your Honor. As we kind of outlined at the beginning, there's a lot of moving parts to this. We're proposing a procedure and a structure for how different procedural things

may come up in this case. You know, we're mindful of the local rules and practices of this court. We're not trying to sidestep anything like that, I do think our local rules, actually our first local rule, contemplates that in certain complex cases, the court has flexibility to accommodate feasibility with certain aspects of our local rules.

Again, I don't think we're trying to sidestep or overreach with respect to anything with respect to our standard local rules and procedures. These were designed for efficiency. With respect to the issue that I'm sure we'll hear about, with respect to the notice of counsel, again, the purpose of that is efficiency. Electronic notice to the council is gonna be immediate,

and they will be apprised of whatever has been sent to them by their counsel. But I also think, Your Honor, in the case management order, it still says if Your Honor were to approve those procedures of noticing to the council or if there is no council noticing to the actual claimant, it still says unless otherwise ordered by this court. But when it comes to bar date, when it comes to sale motion, I'm assuming there's going to be publication and I believe that's contemplated by the papers that we've put forth already that aren't before your honor, obviously the bar date.

But again, we're not trying to hide the ball that it's designed for efficiency to get noticed to counsel that is representing these people as quickly as possible, similar to the same way counsel is represented through the ECF notices in this case. I will say with respect to other than the comment I'm speaking to now, there was one aspect in the motion with respect to extension of deadlines. We conferred with the U.S. trustee on that. We tried to get some language that accomplished what we wanted while meeting their concerns, and we just agreed to take it out.

So we found that provision to be a little too confusing. So that is out of the proposed order where essentially it was like an automatic bridge order before a deadline. Oh, I see. If something was filed. So we understand the court's available if things need to be heard on an expert basis. That is true.

People need to seek extensions. They can seek extensions. They can seek them and seek them under expedited notice. So I did want to highlight for the US trustee that is something that has come out of you. Got it. Okay. So we're happy to speak to the concerns with respect to the noticing procedures. But that is the only aspect that we've received formal objection or pushback on.

Okay. I have a few questions for you on this one, Mr. Risky. Yes. Paragraph 13 of the motion, which I think corresponds to paragraph 5 of the order, post-order. The wording of this, basically people who've never entered an appearance. or requested service are deemed to receive electronic notice through the ECF system of each court document. I've never seen that formulation before. It seems to me that what you're saying is that if we flip this around,

I think what you're saying is that a motion can be served on ECF parties, non-ECF parties as defined, who have entered an appearance in hard copy, core parties and PIPs, which stands for, I forget what, particularly interested parties. I think that's the converse of what paragraph 13 says, and it makes a lot more sense to me, rather than deeming people who don't even know the ECF system exists to have notice of everything that's on it. Can we word it that way? Will that get you what you need? Yes. Okay. All right. Let's do that. I think then not only will I understand it better,

but all the people who get this may be in the same situation. We've got, and I'm sorry, in paragraph 15, we've got how we serve the core parties. So we have serving of core parties. It doesn't say how. I think paragraph 15 is intended to say U.S. mail or email. For core parties. Is that correct? Yes.

Okay. All right. So we can, and I think that goes into paragraph seven of the order. All right, then 14-day notice with a seven-day objection deadline. 30. As you know, that's not our standard practice here. We require a little longer notice than some courts 21 days. I'm inclined to stick with our usual rule,

but be generous in allowance of expedited and emergency hearings. just because of the volume and the body of the creditors here who may receive something via their counsel, may be traveling, may not know what it is, may need to find somebody to explain to them what it is, and by the time they do that, the seven days that they effectively have to object less if you count mailing time is gone. So I'm certainly willing to hear a rebuttal from you or your co-counsel. I understand. I'm not sure how I can speak because I understand. I mean, I know other courts do it, and I've practiced in other courts that have done that way.

But those are often cases where all the parties are commercial. Many of the parties are represented by lawyers, bankruptcy lawyers, and everybody's paying very close attention to everything that arrives by email or mail. I'm concerned about that here. So I think we should stick with our typical notice unless the matter is expedited or hurt on an emergency basis. And as I mentioned, if you would get with Mr. Spinal, I don't know how often you think it would be necessary to have standby hearing dates, but we'll get them set up. And if we don't use them, we don't use them.

Right. No, I definitely appreciate that invitation. Yeah, I don't think you're going to be waiting six weeks to get something hurt, for example. So we appreciate that. Okay. So let's do that. And in the motion, realize my comments are in here. All right. Paragraph 8 talks about particularized interest parties can be served by email.

The insured depository institutions in the creditor body are going to want to be served by their usual means. So why don't we just add unless the statute or rule requires service by some of the meaning. Or if you want to seek relief from that under the circumstances of, you know, you can serve it. It makes sense, Your Honor. And I guess the 21 days is in paragraph 17 alpha of the order. And then paragraph 20 on negative notice. Our negative notice rule is designed for simple issues in consumer cases, if I could oversimplify a little bit.

Our regular notice language permits the court to enter an order without a hearing if there are no objections. As you know, we don't typically do that. Given the number of parties in this case and the number of people, may be unrepresented and who may walk into the courtroom half an hour before the hearing with something to say, I'm not particularly likely to start entering orders six days before a hearing because nobody objected seven days before the hearing. On the other hand, I recognize that if counsel from New York has not come into town because there's nothing that appears to be contested on the calendar, I'm not going to do anything.

to prejudice counsel and their client who relied on something like that. So I think, I think, let's take out, yeah. Again, the purpose was not to give lack of notice. It was efficiency, but I understand. Yeah, it is more efficient. And I think it's work around. I think there are ways to work. Yeah, it is more efficient.

There's no question about it. It's more efficient. And, you know, there are certain types of matters where we do to straight up negative notice and we enter orders the day after passes. I'm concerned about doing that here. I think we can get things heard. I think it's manageable for the debtors. When I represented debtors in this court, I chafed at it a bit, and it worked anyway.

So I think that's what I'm inclined to do here. And then on paragraph 33, to be honest, the video conference procedures might be more COVID-era than today's environment. So let's just ask parties to contact the corporate deputy at the BCW Matters email, and Mr. Spidal will get taken care of like you did today. Perfect. And that should take care of it. Those were the comments of questions I had for you.

Anyone in the courtroom wished to be heard? And on the WebEx, we previewed some issues before. Mr. Belman? Your Honor. Thank you. Again, for the record, Andrew Dunman, Loenstein, Stanler, for the law firms representing the arbitral data bridge payments. I just want to respond to a couple of things that debtors' counsel had mentioned, both earlier by Ms. Castillo and just moments ago. Ms. Castillo mentioned earlier that the debtors, they don't want to serve everyone every pleading because they don't want to incur the cost of serving everyone everything.

We get that. I get a banker's box a week of documents in the FCX case, and I can't fathom what that cost to the estate over there. But she also said they don't want to have to figure out what goes where, and I'm paraphrasing, but essentially the debtors don't want to have the burden of deciding, does this impact the individual data breach claimants? An effectuating service of pleadings and other documents on affected parties is their burden, and with that burden comes the corollary of figuring out whether a pleading or a particular document affects a particular party that they then have to serve it on. And they're effectively seeking to outsource that burden to our clients by imposing a new affirmative burden on them by operation of an order that Your Honor will enter. It's that affirmative obligation that we're concerned about because we don't know what the ramifications are beyond that. That can happen from having a new burden on top of whatever else may exist up there, just anyway. But here we're not the debtors.

Our clients are not the claims agent. We do think counsel to the arbitral claimants should get served with pleadings that affect their clients. That's obvious. But it's kind of inappropriate for the debtors to say, well, you know, we don't want to figure out what matters. So we're just going to send everything to you, let you figure it out, and then pass it on to your clients. That is not discharging their own burden to give notice of things that happen in their own bankruptcy proceedings that may affect people's rights. And I take Mr. Risky's point that they've determined they're going to serve things like, the bar date motion, and he mentioned some other stuff, maybe a disclosure statement, whatever.

He mentioned that they intend to serve those things directly. If they admitted that determination as to certain pleadings, why can't they make that determination as to every pleading rather than trying to force that on other folks? Well, let me ask Mr. Risky. There's a reference in here somewhere to Rule 2002 continues to apply, and I take it that's one of the reasons why the debtors are going to serve the bar date notice and, yeah, it's a paragraph 24, and notice of the deadline to objective disclosure statement, et cetera, et cetera, on everybody. It seems to me that most proceedings will either affect all cyber claimants or no cyberclaimants,

most directly affect them. the exception that comes to mind would be an objection to a claim of one creditor. So how are the debtors proposing the deals? For example, if you object to the claim of one creditor, is that going directly to the creditor or is it going to counsel? Are you looking to see what the counsel puts his or her name on the proof of claim,

or her address on the proof of claim? I think it depends on how that objection aspired. Does it pro se individual finance, the CEO said that by counsel, that counsel. I think if it's someone that fits in the bucket that they are represented, but they're also filing something, they probably are getting both. Yeah, all right. So if the proof of claim says send notices to a certain address,

and you object to that quick claim, you're going to send a notice to that address. Okay. So we're not overriding that Rule 307 would have raised. So, Mr. Bellman, I guess I'm trying to, your view is that the debtors should serve anything that affects cyber claimants on all of the cyber claimants individually and on counsel. And on counsel. And our view is that there should not be that additional affirmative obligation set forth in an order from your honor directing us to do anything beyond that point. Do we solve this problem by taking out that language again that says counsel shall immediately forward and it's up to, it's up to counsel.

I mean, counsel for other parties who receive pleadings, they need to communicate with their clients. So for the record, Christopher Hopkins So we need to clear. Yes, you're told. Rift and Martin and Gerson, the postco counsel, the debtors. I just wanted to rise briefly on this issue, Your Honor. What we're trying to do here is promote two objectives,

ensuring that people get notice of the things they need to get notice for in a way that is reasonable under the circumstances and efficient from the perspective of the debtors of states. I'm confident that you will hear later on in this process from Mr. Bellman's clients that their clients have massive claims in these cases. And so they, as counsel to those claimants, should be incentivized more than anybody else or as much as everybody else to keep case costs down, to do things efficiently, and to, you know, kind of partner with others in the process to make sure we achieve those completely objectives. I think the notion that serving counsel who purports to represent clients with an interest in the case is being burdened by making a determination as to whether, as their counsel,

my understanding is that his clients are not representing these arbitration folks pro bono. There are engagement letters. They are compensated for that representation is not an unreasonable burden. when we have a duty to all stakeholders in the process to do what we can in a reasonable way to try to keep case costs down. And I'm not suggesting that the debtors can hide behind the expense of service

to strip people of due process or notice rights. But I don't think the notion that serving pleadings on counsel who is appearing on behalf of claimants with an interest in the case is somehow creating some... new framework that shifts service obligations to a third part. And so I totally understand Mr. Bellman's concern, and it's not the debtor's intention, to create any kind of gotcha on claimant's counsel in any way, shape, or form to say, like, you didn't move fast enough or you didn't do what you're supposed to do.

And I think the FTX example is a good one. There may be plenty of pleadings that are irrelevant to his clients. There may be plenty of pleadings that are relevant to his clients. And I do this all the time when I represent ad hoc creditor groups. I make a determination as counsel what documents I need to forward to my clients or not. And so I don't think this is, I'm a little surprised that this is necessarily an issue other than I agree and understand the concern about the language and the order requiring prompt notice where counsel through inadvertently, like we're not trying to somehow create a trap

where they've inadvertently violated an order of court. And so I do think there is a way to resolve this consensually, but I just think that it's important to put these points out there. It's not as if we're designating some random third party and saying you have to go notice these other unaffiliated people to whom you don't owe any kind of obligation. Yeah. That makes sense to me.

Let's, what I'm inclined to do with this order is making an interim order And not that I want to spend a lot of time at the second day hearing on this issue, but I think seeing the language, reviewing it in the context of client relationships, maybe short discussion between the parties in the meantime may resolve it. But for now, let's take out, and I'm actually not sure where it is in the proposed order, let's take out any language that imposes an affirmative obligation on counsel to forward something, particularly to do so immediately. And just as with other lawyers representing commercial clients,

if they receive something, as Mr. Hopkins explained, it is counsel's job to figure out what to do with it, if anything, which may include not even reading it. I'm not recommending that, but we all know there are times when things arrive in the mail and we look at the caption and we don't read it. So that's part of counsel's job. So for purposes of an interim order,

I think that's how we're going to resolve. this issue and if after reviewing the language, plaintiff's counsel have further issues, please take them up with debtors' counsel, see if we can get it resolved. If there's anything remaining, we'll deal with it in second. Thank you, Your Honor. Anything further, Ms. Billman? We're glad to meet and conferred with the debtors on the language

and take a look at what gets drafted in. Thank you. Okay. Ms. Dent? Yes, I just wanted to add that class council would also like to be involved in those discussions just to make sure that the result results in the sense, you know, we represent some of the class representatives and then the putative class that consists of millions of individuals who we don't necessarily know their identities.

Thank you, Your Honor. Yeah, and I'm not suggesting a particular language that's going to resolve that little conundrum right now, but there probably is something that the party can work out between now and 18. So, right, anyone else on the WebEx wish to be heard? All right. I think that takes care of it. So I will enter an interim order on this case management motion with the changes that we've discovered, if you would make changes that we've discussed and submit that,

and then we'll take it up again on April 20 second at 1.30. Thank you, Your Honor. Thank you. Final motion I'll be presenting to this segment is. the judge's motion to file under seal, Your Honor. I think this is consistent with the view you've heard thus far today with respect to the need to have this information protected. Yes.

It gets pretty narrow in scope. I haven't received any informal or formal objections with respect to it. Of course, any of those things that are under seal will be made available to the U.S. trustee and the parties that we've discussed. Sure. So this one puzzled me a little bit because in looking at the employment applications, I don't see that anything is redacted. So what is, what are we talking about? When we're doing the declarations and disclosing all the creditor bodies, there were, the data claimants were redacted off of that way.

Okay, so there are individuals listed, but they are other, like that, I have fine one of these, but. From what I'm looking at, I don't want to, should I not be drawing more attention to this than I am? So I'm looking at a potential parties and interest list. I mean, nothing's blacked out. There are no blank spaces. Yes, please do. Yes. Your Honor, Christopher Hawkins.

Yes. For the record, while we work through that, would it be all right with your honor if we took up the dip motion just to keep the hearing? Yes. Yes. Absolutely. All right. Let's move on to the dip motion number, document number 28. Thank you, Your Honor.

Bear with me one moment. Okay. So the next item on the agenda is the debtor's dip motion. All we're seeking approval of today is entry of an approval order, which I'll describe in a moment, and we would ask the court to set the hearing to hear the actual entry of the dip order for the second day hearing. through this motion that the debtors are seeking authority to enter into today

a binding dip term sheet with J&B capital partners the proposed dip lender under the facility for a $35 million dip facility that is like I said subject to entry of the dip order at the second day hearing as we noted at the top of the hearing Mr. Swift filed a declaration in support of the motion at docket number 33 And I will preview for the court the proposed terms of that dip, but just the level set at the outset of the hearing, the only thing we are seeking approval of today, it's really more akin to what you would see,

your honor, in like, an exit facility context. What we're seeking approval of today is entry into the binding dip term sheet, which, from our perspective, it's not a commitment letter, but it's the functional equivalent of a commitment letter. So it would be a binding term sheet as between us and JNB, so the debtor secure the value. You know, we get the value of having committed dip financing today. The order also seeks approval of two different fees. One is a $100,000 work fee, which is intended to compensate JMB's count, you know, JNB for its legal expenses in documenting the dip order and documenting the dip facility,

as well as a 2% commitment fee on the full 35 million of the facility, which equates to another $700,000. Everything else, in terms of the dip, all of the issues that a committee is going to care about, the U.S. trustees office may care about, all of that is not up for approval today. It's up for approval at the second day hearing. And at the request of the U.S. trustee

and with the consent of the dip lender, we will put language into a review. proposed form of order so that it is clear that the only thing being approved today on a final basis is our entry into that commitment letter and the payment of those. So with that, Your Honor, you know, just to briefly preview for the court. So as we discussed during our opening presentation, you know, in our business judgment, we believed it was very important to come into these cases. We've committed dip financing so that our customers, vendors,

potential bidders, you know, all interested parties in the case have certainty that the debtors will have sufficient liquidity to bridge through the sale process and then ultimately complete these cases through a confirmed Chapter 11 plan. And the proposed dip facility, you know, helps us achieve that effect. It was the part of the robust pre-petition marketing process that you've heard a lot about today. right up until the final wire before we actually filed these cases, we were actually negotiating competing dip proposals. We had the JMB proposal, and as set forth in Mr. Swift's declaration, we also had a dip proposal from Ms. Wojiski.

Ultimately, we determined in our business judgment that taken as a whole, the JMB facility was the best available terms for the debtors in terms of the dip financing options available to us. us coming into the case. On the specific terms of the facility, as I said, it's a $35 million, you know, multi-draw, super priority, you know, senior secured dip facility. The way the draws on that facility work, so when does the capital become available to the debtors, upon entry of the dip order, we have access to up to 10 million of that facility.

To access the other 25, we have to either obtain approval of a stocking horse bid that is acceptable to the dip lender, or obtain approval of a stalking horse proposal that there's a couple conditions. One would generate sufficient proceeds to repay the dip obligations in full. to is capable of being closed or, you know, would close on or before June 30th based on the terms of that APA. And then pursuant to the court order approving that stocking horse bid, you know, there would need to be language in that order that effectively says if the court designates this person as a stocking horse,

then we run the auction and that is the transaction that is approved, that the sale order will require that the proceeds of that transaction are used to actually repay the dip obligations. In terms of the other terms, you know, it's a 14% annual interest rate, payable monthly in arrears. There are some additional fees. They're not being approved today, but just so parties in interest have the preview, there is a 4% exit fee that is earned by the dip lender and payable by the debtors

kind of in parallel with how we can access the capital and good facility. So when the dip order is approved, we owe the 4% on the 10, and if we satisfy the conditions to get access to the additional 25, we owe the 4% on that 25. It's not double counting, but we were able to negotiate for that kind of bifurcation.

So if we, in the unlikely scenario, we don't satisfy that condition, we haven't paid exit fee on capital we'll never be able to access. In terms of the collateral package, you know, it's customary for dip facilities of this type. And again, to the extent parties have an objection to the scope of that collateral, they can take it up to the second day hearing. And in terms of the maturity date, it would be the earlier of September 30th, 2025,

a sale of all or substantially all of our assets, or if the court has not entered the final dip order by April 25th of 2025. In short, Your Honor, I mean, we think this is a sound exercise of the better business judgment. Effectively, what we're doing is we're securing committed dip financing up to $35 million in exchange for $800,000. And our business judgment is that the cost of that facility is far outweighed by the benefits that having that secured financing today provides. So with that, Your Honor, unless you have any other questions.

or, oh, I would add, Your Honor, the term sheet, of course, has a fiduciary out. So if we determine ahead of the Diff hearing that it's not in the best interest of the states to seek approval of the DIP order and enter into the DIP facility, we have that ability. Sure. Okay. I only have one question. There's a reference, maybe more than one reference in the motion to this being a priming dip. And since, as you described, there's no funded debt, I just want to make sure what we mean by priming dip.

That's a good question, Your Honor. So we are not aware today of liens that exist other than a certain specified categories that are currently scheduled in the dip. The permitted lease, yeah. So it's, right, it's a priming dip facility, but there's a bucket for priming liens, and then there's also a carve-out for the restricted cash account that Ms. Hutz covered in the cash management motion. It is a protective term, you know, that the dip lender negotiated for. If someone believes they have a lien and that they should be included in the permitted lien basket or otherwise, you know, we'll have that conversation between now and in the DIP order. Sure.

Okay. That makes sense. I didn't have any other questions on the DIP. Anyone in the courtroom wish to be heard on the DIP motion docket 28. Anyone on the WebEx wish to be heard. All right. Hearing none, I'll grant the motion on an interim basis. We'll have our final hearing, as with others, April 22nd at 1.30.

objections April 15th. I'll find that notice of the dip motion is appropriate and sufficient under the circumstances. Based on the declaration, I'll find the debtors have established that they're unable to obtain unsecured credit available as administrative expense. As you point out, if someone feels differently about that, there's time to address that before the final hearing. I'll find that entry in the term sheet is the exercise of the debtor's business judgment, reasonable exercise of the debtor's business judgment. The costs and expenses to be paid prior to a final hearing are necessary to prevent immediate and

will harm to the state and to the extent that full 6,004H applies, the state's weight. Thank you very much, Your Honor. Any further findings on that, Mr. Hopkins? I don't believe so. I believe the DIPLenders Council is here with us. Okay. Okay. And I would add just for the benefit of parties and interest,

the approval order itself requires that we get that that proposed form of dip order and credit agreement on the claims agent website, no later than at least 10 days before the effect. Right. So we'll be hard at work with our... Indeed. Indeed. Thank you.

Very good. Thank you. I'm risky for the record, Your Honor. Got some clarification on the... Back to the motion to file under seal. Okay. Motion seal. Okay.

To make it very easy, we'll be withdrawing that motion. So what happened was for disclosure purposes of the retention, we were originally contemplated whether we were going to list every name of every claimant. Yeah. For disclosure purposes, for the retention applications, we opt to choose the lead plaintiffs. Which are probably public record. So we don't. Okay. Very good. That's what's wrong.

Thank you, Your Honor. Next up, Your Honor, is the application to employ my firm, Carmony McDonald, as bankruptcy co-counsel for the debtors, filed a docket number 35. Yes. Please proceed. Thank you, Your Honor. I submitted a declaration in support of our application in which I list the reasons why I believe I'm just interested. Do not hold an interest

adverse to the estate. Did a detailed conflict check through not only our normal means at our firm, but some extended means, and making sure all staff has been aware of everything here, so we did the abundance of caution to make sure there were no issues of any conflict in this. We have had discussions with the US trustee about some of their comments on it.

I believe 2016 B of the local rules is not referenced, we of course do in the event that our applications are granted and tend to abide by the 80, 20 rules of this district when it comes to compensation before the application. Sure. I don't think I've received any formal or informal objections with respect to our application. And then I guess just another just matter of clarification. reason we're listed as co-counsel as opposed to purely local council. That's in keeping with Mr. Hopkins' comments at the beginning of this case that we're trying to keep administrative costs down as much as possible.

Our firm has consulted with Paul Weiss and has agreed will take out as much the day-to-day operation and administration as we can handle and help keep that cost down. So that's the clarification as to the way the application is framed. Very good. That's helpful. Okay. I didn't have any questions on your application. Anyone in the courtroom wish to be heard on the Carmine McDonald application, Docket 35?

Ms. Ritchell? Just a quick comment, just to spend the interest of saving time. The U.S. trustee does ask that all debtors' counsel complied with local role of 2016-2B in providing the monthly fee statements to the U.S. trustee, and I believe it's also to the creditors committee, it makes things a whole lot easier in reviewing fee applications. and we can resolve any issues early on. I cannot imagine anyone would be opposed to the opportunity to get paid monthly. I can't imagine that either.

I was pointing that Mr. Custins can verify. I said that before the hearings this afternoon. Just in case, I will encourage all debtors and committee counsel when they're appointed to take advantage of that opportunity. Right. And speaking of that, Your Honor, I will take this opportunity to echo what counsel for the debtors have said. They've been extremely cooperative. I can't even count the number of emails and meetings and phone calls we've had

trying to work things out in advance of this afternoon's hearing, and the U.S. State really appreciates it. It does appear to be running smoothly so far, so thanks to you all. Thank you. Thank you, Mr. President. Anyone else in the courtroom? Anyone on the WebEx wish to be heard on the Carmine McDonald's application? Hearing none, I'll grant the application on an interim basis.

We'll have a final hearing April 22nd and 130, objection. by April 15, please submit an order, and I'll find that under Rule 6,003, interim approval is necessary to avoid immediate and irreparable harm. Thank you very much, Your Honor. I'll ask Mr. Hopkins back to the podium. For the record, Christopher Hopkins of Paul Weiss proposed co-counsel to the Vettors. Your Honor, I'll be covering the remainder of the retention applications for the debtor professionals today, starting with number 19,

which is the retention application for our firm, Paul Weiss, that was filed at back at number 31. The largest interest in this declaration is Exhibit A to that motion. That's my declaration, and Mr. Hyun filed a declaration on behalf of the company. You know, as Mr. Risky said, we have very robust conflict systems at Paul Weiss. We searched the PII. All of the relevant information is set forth in the declaration. We discussed it with the U.S. trustee and provided some incremental information.

that they requested. And so I think the, unless your honor has any questions, we're not aware of any formal or informal objections to our proposed retention on an interim basis. All right. I don't have any questions. Anyone in the courtroom wish to be heard? Anyone on the WebEx wished to be heard on the Paul Weiss application,

document 19. 31, your honor. Thank you. 19 on here. Okay. Without objection, I will grant the application on an interim. basis final hearing April 22nd, 130. Objections April 15th. And I'll find for purposes of Rule 6,003, interim approvals

necessary to avoid immediate and reputable harm. Please submit an order. Thank you, Your Honor. Item number 20 on the agenda is the retention application for Molus and Company as investment banker for the debtors and debtors in possession. That application was filed at docket number 29. There is a declaration attached as Exhibit B, that is from Mr. Barack Klein of Molese Company, who is assisting Mr. Swift on this matter on behalf of the company. Same thing, Your Honor. We've discussed it with the U.S. trustee. We're not aware of any formal or informal objections, and so for today, we'd respectfully ask that, Your Honor,

enter the proposed interim order. Okay. Anyone in the courtroom wish to be heard on the Mollus application? Anyone on the WebEx wish to be heard. All right. I'm going to grant an interim order. I'm going to defer a couple things to the final hearing since we're only a couple days into this, and that is the 328A standard review and approval of indemnification.

I think the committee and others may want to weigh in on that, and others may want time to react to that. As you know, in many courts, we wouldn't even take this up until a month or so, post-petition anyway. So I don't think that's any hardship on MOLUS, but I do think it's appropriate to allow parties to take a little time. So if we just put in a proposed order subject to entry of a final hearing, order, et cetera, et cetera, on those two items, I think that will take care of this.

And so we'll take this up on April 22nd at 130 with objections due by April 15th, and I'll make the 6,000-free finding out to this one as well. Thank you, Your Honor. So the last one from me for today, item number 21, which is the application from Alvarez and Marcel to designate Mr. Carvarta as the debtor's CRO and authorize Alvarez and Marcel to provide designated support personnel, I'm sorry, certain additional personnel to support Mr. Cavarta in that role. Similar, you know, same, same spiel as for Paul Weiss and Molas.

We discussed with the U.S. trustee, there will be certain modified language in the proposed order that the U.S. trustee asked for, and Alvarez and Marcel agreed to, and so it relates to, you know, certain, like a reasonableness review on their completion fee that they'll file an application and parties will have the opportunity to object. That's the crux of it. But, again, no informal or informal objections. And unless Your Honor has any questions we'd ask for entry of the infirmortals. I do not.

Anyone in the courtroom wish to be heard, Mr. Schlott-Sauer. Good afternoon, Your Honor. Joe Schlossauer for the U.S. Trustee. We have had productive conversations with counsel for the debtors about the retention of Mr. Carvarda and A&M as the restructuring managers. This is kind of a special issue because they're not seeking retention under Section 327 because arguably Mr. Carvada is not disinterested as he's been serving as an officer of the debtor, and so they're seeking retention under Section 363. be in fact. My office has a protocol for matters just like these called the J. Alex protocol. It's been around a little over 20 years. Our discussions have mainly concerned confirmation of Mr. Kavarta's retention to that protocol and we've had a lot of progress

on that front. I think there's only one remaining issue as to the breadth of the indemnification provision. So we typically require that that be limited to the professionals, I guess I shouldn't use the word professionals, the people from A&M who are going to be doing work for the debtor as opposed to the entire corporate entity that those people come from. But otherwise, I think we've worked out most of the issues. Okay. Well, while you're both on your feet, similar to what we just discussed with Molas, I'm inclined to put off. indemnification until the final hearing just to make sure that the U.S. trustee and other parties have an opportunity to take a look at that more carefully. So I think that will defer the issue, that will give the party some time to work through whatever is remaining there, and if anybody else has an objection, we'll take that up to the final hearing.

Anything else, Mr. Schlazano? No, Your Honor, thank you. Okay. Anyone else in the courtroom? Anyone on the WebEx wish to be heard? Okay. So as we just discussed, we'll defer approval of identification to the final hearing as we just did with MOLIS. Otherwise, I'll approve the application on interim basis, and we'll take it up on April 22nd, 1, 30. The objections due by April 15th. Understood.

Thank you, Your Honor. I believe I will now turn it over to Mr. Lemons from Goodwin Proctor to handle their retention application. I believe he's on the WebEx today. Certainly, Mr. Lemons. Thank you. Good afternoon, Your Honor. Robert Lemons from Goodwin Proctor on the behalf of a proposed special counsel to the special committee. I don't know if Mr. Pairs wishes to speak first or if I should keep going.

Go right ahead. Okay, okay, thanks. Your Honor, Goodwin has been representing the special committee to the Board of Directors since shortly after it was reconstituted, starting in November of last year. We're seeking to be retained as special counsel under Section 327E. We are not being retained to play any sort of role in generally conducting the bankruptcy cases. Our role will be just to advise the special committee. I think the bulk of the work that we will do will likely be conducting an investigation into potential causes of action against the founder, as well as the board of directors that existed prior to the appointment of this ongoing committee so that we can,

and that will be under the direction of Mr. Walper, the newly appointed independent director, so that we can advise both him and the special committee when it's thinking about how to value and deal with causes of action that the estate may have against former Dino's in this case. We may have a little bit of other work to do in terms of advising the committee with respect to the city's shared duties, dealing with mandating an enormous number of meetings, and finishing getting those done that the committee conducted pre-petition, but that's the gist of the work that I expect us to do. We ran the master server, the list of all interested parties that was provided to us by Paul Weiss, against the firm's database and, as stated in my declaration,

can confirm that we don't hold or represent any interest to the debtors with our estates. So if there aren't any further questions, John, I'd ask if you approve on an unarmed basis of retention. I did not have any question, Mr. Lemons. Anyone in the courtroom wish to be heard on the Goodwin Proctor application? Anyone on the WebEx wish to be heard? Okay, I will then grant the Goodwin Proctor application on interim basis. Final hearing April 22nd, 1.30 p.m. objections by April 15th. And I'll make the Rule 6,03 findings to Goodwin Proctor as well, if you would submit an order, please.

Thank you, Your Honor. And Mr. Perez. Your Honor, last but not least on today's docket, we have Lewis Rice's application to be employed as special local counsel on behalf of a special committee. board of directors we have filed our declaration of disinterestedness you know we technically didn't have it we wanted to make sure that the court understood that Lewis Rice is disinterested in this case as well our employment is pursuant to section 327 and we have run all the conflicts checks and put together the declaration that I filed on behalf of Lewis Rice with that your

honor we would ask that you unless you have other questions that you employee Lewis Rice pursuant to the interim orders that we have already uplifted to the court. Okay, I do not have any questions. Anyone in the courtroom wish to be heard, Lewis Rice application? Anyone on the WebEx wish to be heard? I've reviewed it. It appears to be in order, Mr. Paris. I'll grant interim relief on the application.

We'll have a final hearing April 22nd at 130 with objections due by April 15th. I'll give you that 6,03 finding as well, sir. And since you already submitted an order, I won't tell you to submit one. All right, thank you. All right. Are there any further matters from the debtor? Checking with my co-counsel, I don't think so, Your Honor. We, again, greatly appreciate the court accommodating today's hearing.

We look forward to this case progressing. Thank you. Very good. Any further matters from any other parties? Yes. Since it came up earlier this afternoon, and I will advise the court that the U.S. trustee did send the solicitation for members of the Institute of Creditors Committee

on Monday afternoon, and the deadline for responses is noon next Monday. March 31st. Okay. So, yes, and then we'll see what the response is in from the committee. Very good. Very good. Thank you. We'll look forward to seeing what you come up with.

Thank you. One final point. Yes. Your Honor did ask about priority of orders. Yes. We, of course, will have a lot of work once we get back to the office and get things. However, I have already confirmed that I do believe wages and cash management are being submitted now, and I believe those are on the top of the list of things we just received today.

Okay, Mr. Spital is confirming he's received those. As you send in, others, just alert him as to their relative priority. We'll take them in that order. Perfect. Thank you, very good. Okay. Thank you, everyone. Court is adjourned.

Thank you very much, Your Honor.