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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
---------------------------------In re:
PROTEUS DIGITAL HEALTH, INC.,
Debtor.1
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Chapter 11
Case No. 20-11580 (____)

DEBTOR’S MOTION FOR INTERIM AND FINAL ORDERS PURSUANT TO 11 U.S.C.
§§ 105(a), 363, 507(a), 541, 1107(a) AND 1108, AND FED. R. BANKR. P. 6003 AND 6004,
TO, INTER ALIA, (I) AUTHORIZE, BUT NOT DIRECT, THE DEBTOR TO PAY
PREPETITION WAGES, COMPENSATION AND EMPLOYEE BENEFITS;
(II) AUTHORIZE, BUT NOT DIRECT, THE DEBTOR TO CONTINUE
CERTAIN EMPLOYEE BENEFIT PROGRAMS IN THE ORDINARY COURSE;
(III) AUTHORIZE ALL BANKS TO HONOR PREPETITION CHECKS FOR
PAYMENT OF PREPETITION EMPLOYEE OBLIGATIONS; AND
(IV) GRANT OTHER RELATED RELIEF
By this motion (the “Motion”), the above-captioned debtor and debtor in
possession (the “Debtor”) seeks entry of interim and final orders, substantially in the forms
attached hereto as Exhibit A (the “Interim Order”) and Exhibit B (the “Final Order”),
respectively, pursuant to sections 105(a), 363, 507(a)(4), 507(a)(5), 541, 1107(a) and 1108 of
title 11 of the United States Code (the “Bankruptcy Code”), and Rules 6003 and 6004 of the
Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) (i) authorizing, but not
directing, the Debtor to pay prepetition wages, compensation and employee benefits,
(ii) authorizing, but not directing, the Debtor to continue certain employee benefit programs in
the ordinary course, (iii) authorizing all banks to honor prepetition checks for payment of
prepetition employee obligations, and (iv) granting other related relief. In support of this Motion,

1

The last four digits of the Debtor’s taxpayer identification number are 2680. The Debtor’s corporate
headquarters is located at 2600 Bridge Parkway, Redwood City, California 94065

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the Debtor relies upon and incorporates by reference the Declaration of Lawrence R. Perkins in
Support of the Chapter 11 Petition and First Day Pleadings (the “First Day Declaration”),2 filed
with the Court concurrently herewith. In further support of this Motion, the Debtor, by and
through its undersigned proposed counsel, respectfully represents:
JURISDICTION AND VENUE
1.

This Court has jurisdiction to consider this Motion under 28 U.S.C. §§ 157

and 1334 and the Amended Standing Order of Reference from the United States District Court
for the District of Delaware, dated as of February 29, 2012. This is a core proceeding under 28
U.S.C. § 157(b). Venue of this case and this Motion in this District is proper under 28 U.S.C.
§§ 1408 and 1409.
2.

The legal predicates for the relief requested herein are sections 105(a),

363(b), 507(a)(4), 507(a)(5), 541, 1107(a) and 1108 of the Bankruptcy Code, and Bankruptcy
Rules 6003 and 6004.
3.

Pursuant to Rule 9013-1(f) of the Local Rules for the United States

Bankruptcy Court for the District of Delaware (the “Local Rules”), the Debtor confirms its
consent to the entry of a final order or judgment by the Court with respect to this Motion if it is
determined that this Court, absent consent of the parties, cannot enter a final order or judgment
consistent with Article III of the United States Constitution.
GENERAL BACKGROUND
4.

On June 15, 2020 (the “Petition Date”), the Debtor commenced a case by

filing a petition for relief under chapter 11 of the Bankruptcy Code (the “Chapter 11 Case”). The

2

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the
First Day Declaration.

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Debtor continues to manage and operate its business as debtor in possession pursuant to
Bankruptcy Code sections 1107 and 1108.
5.

To date, no creditors’ committee has been appointed in the Chapter 11

Case by the Office of the United States Trustee for the District of Delaware (the “U.S. Trustee”).
No trustee or examiner has been appointed in this Chapter 11 Case.
6.

Founded in 2002, the Debtor is a pioneer and leader of the “Digital

Medicines” industry. “Digital Medicines” are oral pharmaceuticals formulated with an ingestible
sensor aimed at tracking a patient’s adherence to prescribed medication treatments. When
patients use Digital Medicines, their mobile devices collect information about medication taken
and safely transmit the data via the cloud to the healthcare provider, allowing the healthcare
provider to see if their patients are properly taking the medication and observe and analyze realtime data regarding the patient’s overall health. Digital Medicines also enable care teams to
manage larger patient populations and make medical decisions without the need for a patient to
physically travel to the doctor’s office, which has become particularly beneficial in light of
challenges posed by the COVID-19 pandemic and resulting social distancing measures.
7.

Since its founding, the Debtor has pursued its vision to revolutionize and

improve the healthcare industry through creating and establishing the clinical, regulatory and
commercial standards, infrastructure, pathways, evidence, and advocacy to make drug therapy
based on Digital Medicines the standard of care. The Debtor currently holds approximately 400
patents and has a panel of more than 20 Digital Medicines to treat cardiovascular and metabolic
diseases including hypertension and diabetes that have been prescribed to patients in the United
States.

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8.

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The Debtor’s business remains almost entirely in the “pre-revenue” stage

of development. Since inception, the Debtor has relied primarily on equity capital and advances
under its agreements with Otsuka Pharmaceutical Co., Ltd. (“Otsuka”), the primary licensee of a
significant portion of the Debtor’s intellectual property, to finance its operations.
9.

Prior to the Petition Date, facing mounting liquidity constraints, the

Debtor and its advisors commenced a robust marketing process to secure additional funding or
bids for a sale of the Debtor’s business. Despite having several promising opportunities, the
onset of the COVID-19 pandemic created significant uncertainty in the capital markets and
frustrated the Debtor’s efforts. However, the Debtor has had fruitful discussions with Otsuka
and other interested parties regarding a potential sale transaction. The Debtor has commenced
this Chapter 11 Case in order to preserve the Debtor’s assets and conduct a sale process or other
transaction, all in an effort to maintain continuity of business operations and maximize going
concern value for the benefit of the Debtor’s creditors and equity stakeholders. The Debtor has
negotiated with its Prepetition Lender for the consensual use of cash collateral and anticipates
that it will seek approval of bidding and sale procedures in the early weeks of the Chapter 11
Case.
10.

A detailed description of the Debtor, including its business operations, its

corporate and capital structure, the events leading to the commencement of the Chapter 11 Case,
and the facts and circumstances supporting this Motion, are set forth in greater detail in the First
Day Declaration and incorporated by reference herein.

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FACTS RELEVANT TO THIS MOTION
11.

As of the Petition Date, the Debtor employed approximately 93 employees

(the “Employees”).3 Of these, 69 are salaried Employees and 24 are hourly Employees. Most of
the Employees are highly skilled engineers or technicians (many of whom have advanced
degrees) with specialized training necessary to operate the Debtor’s business. The Employees
provide a variety of essential functions, including: research and development, software
development, manufacturing, quality control, regulatory compliance, customer service, and
general and administrative including executive, finance, legal, human resources, corporate
communications, information technology and other operations matters. The Employees’
expertise in each of their respective positions, and their understanding of the Debtor’s operations,
are essential to the effective operation of the Debtor’s business. The Debtor's Employees are
particularly critical to maintaining going concern value for the estate due to the highly technical
nature of the Debtor’s business; the Employees represent much of the core "know how" that
makes up the Debtor's technology assets.

Thus, retaining the Employees is critical to the

Debtor’s ability to operate and maximize value in this Chapter 11 Case.
12.

The Employees possess the institutional knowledge, experience, and skills

necessary to support the Debtor’s business operations during the Chapter 11 Case while the
Debtor pursues a value-maximizing transaction. These Employees rely on their compensation
from the Debtor to pay their daily living expenses.

The Debtor also incurs a number of

obligations related to the Employees, such as paid time off, federal and state withholding taxes
and other withheld amounts, expense reimbursements, health and insurance benefits, and other
3

In addition, the Debtor engages approximately six independent contractors, several of whom have been
sourced from various staffing agencies. The Independent Contractors provide accounting, clerical, and
manufacturing related services. The Independent Contractors, many of whom have worked with the Debtor over
significant periods of time, are an essential and integral part of the Debtor’s business operations.

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benefits and programs that the Debtor has historically provided in the ordinary course of business.
The Debtor’s compensation and benefit programs are referred to herein as the “Employee
Programs” and the obligations to the Employees thereunder are referred to herein as the
“Employee Obligations” and are more fully described below.4
13.

The Debtor needs the Employees’ continued commitment and support;

therefore, the Debtor is requesting the relief set forth in this Motion to minimize any hardship to
the Employees resulting from the commencement of the Debtor’s Chapter 11 Case. The Debtor
must take all necessary steps to retain the Employees and bolster their morale to preserve and
maximize the value of the Debtor’s estate.
14.

As described herein, the Debtor has satisfied most of its prepetition

Employee Obligations. However, a few prepetition Employee Obligations remain outstanding.
Accordingly, by this Motion, the Debtor seeks authority to pay and honor its prepetition
Employee Obligations, each as further detailed below, in the following amounts:
Employee Obligation
Payroll Processor Fees
Reimbursable Expenses
PTO Obligations
HSA Fee
Total:

15.

Interim Amount
$4,000
$10,000
$0
$3,000
$17,000

Final Amount
$4,000
$10,000
$800,000
$3,000
$817,000

To the extent any Employee is owed in excess of the $13,650.00 limit

contained in section 507(a)(4) of the Bankruptcy Code (the “Priority Cap”) on account of

4

The summary of the Employee Obligations provided herein is qualified entirely by the Debtor’s official
policies or other practices, programs, or agreements, whether written or unwritten, evidencing an arrangement
among the Debtor and its Employees (each, an “Official Policy”). In the event of any inconsistency or ambiguity
between this summary and an Official Policy, the terms of such Official Policy shall govern, but, for the avoidance
of doubt, in no event shall the Debtor make any payments or honor any prepetition obligations other than what is
authorized by the Court after consideration of this Motion.

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prepetition Employee Obligations, the Debtor will not pay any such Employee an amount more
than the Priority Cap on account of such obligations without further order of the Court.
I.

Employee Compensation: Wages, Salaries and Related Payroll Taxes
a. Wages and Salaries
16.

In the ordinary course of business, the Debtor pays its salaried Employees

and their hourly Employees on a bi-weekly basis.

The Debtor’s payroll obligation is

approximately $1,300,000 per month, including Withholdings (defined below).
17.

The Debtor’s payroll process is administered through Automatic Data

Processing, Inc. (“ADP”). In the ordinary course, the Debtor sends ADP the net payroll amount,
including payroll taxes, on Wednesday of the second week of the payroll cycle. On the same day,
ADP initiates an electronic fund withdrawal directly from the Debtor’s main operating account
with Silicon Valley Bank for the Employees’ wages. On the following day (Thursday), ADP
initiates an electronic fund withdrawal for payroll taxes to government agencies and handles
garnishments as necessary. On June 11, 2020 the Debtor initiated a special company-wide
payroll for the period beginning on June 6, 2020 and ending on June 19, 2020. These amounts
were disbursed by ADP to Employees through electronic funds transfer and checks. As of the
Petition Date, the Debtor believes that no prepetition amounts are owed on account of Wages and
Salaries or Withholdings.

However, out of an abundance of caution, the Debtor requests

authority to pay postpetition Wages and Salaries in the ordinary course when they become due.
18.

The Debtor pays service fees of approximately $2,000 per month to ADP

(the “Payroll Processor Fees”) on account of the administration of Employee payroll. The
Debtor believes that, as of the Petition Date, it owes up to $4,000 of Payroll Processor Fees to
ADP, all of which will be due and owing shortly after the Petition Date. Accordingly, the Debtor

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seeks authority to pay the Payroll Processor Fees in an amount up to $4,000 on interim and final
bases.
b. Social Security, Income Taxes and Other Withholding
19.

In connection with paying wages and salaries, the Debtor routinely

withholds from Employee payroll disbursements amounts that the Debtor is required to transmit
to third parties (“Withholdings”). Examples of such Withholdings include, without limitation,
FICA (Social Security and Medicare), federal, state and local income taxes, garnishments, health
care payments and certain voluntary payroll deductions.

Typically, total Withholdings are

approximately $250,000 per bi-weekly pay period, including both the Debtor’s obligations and
the Employees’ obligations. Such Withholdings, to the extent that they remain in the Debtor’s
possession, constitute moneys held in trust and, therefore, are not property of the Debtor’s
bankruptcy estate.
20.

As described above, the Debtor has remitted all prepetition Withholdings

to ADP as part of the special payroll the Debtor initiated on June 11, 2020. Out of an abundance
of caution, the Debtor hereby requests authority to direct such Withholdings to the appropriate
parties when such amounts become due.
II.

Other Employee Compensation: Paid Time Off and Expense Reimbursement
21.

In addition to salaries and wages, the Debtor offers its Employees other

forms of compensation, including paid time off in the forms of paid (i) holidays, (ii) personal
days (i.e., vacation, illness or personal matters), (iii) funeral or bereavement time off, (iv) civic
duty time off, (v) voting time off and (vi) time off for volunteer firefighters (collectively, the
“Paid Time Off”). The Debtor also reimburses certain business expenses incurred by Employees.
These forms of compensation are usual and customary and necessary if the Debtor is to retain
qualified Employees to maximize the value of the Debtor’s business. Accordingly, the Debtor
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requests authority, but not direction, to honor outstanding prepetition obligations with respect to
the Paid Time Off and expense reimbursement policies in the ordinary course of business, and
subject to the Debtor’s discretion and applicable restrictions under the Debtor’s policies.
a. Holidays
22.

The Debtor’s Employees are paid for ten (10) holidays per year. To be

eligible for holiday pay, the Employee must be regularly scheduled to work on the day on which
the holiday falls and must work his or her scheduled working day immediately preceding and the
scheduled working day immediately following the holiday. Part-time Employees working 30 or
more hours per week are eligible for holiday pay in proportion to the hours they normally would
be scheduled to work on the day of the holiday.
b. Accrued Paid Time-Off
23.

The Debtor provides its Employees paid time off for vacation, illness, and

tending to personal matters that cannot be handled outside of operational hours (“PTO”).
Employees working more than 40 hours per week begin accruing PTO on their first day of
employment with the Debtor at the rate of 15 days per year. Employees may accrue PTO time
up to 30 days or 240 hours. Accrued time is pro-rated for part-time Employees working more
than 30 hours per week. Once an Employee reaches the 30 day or 240 hour limit, PTO stops
accruing until the Employee uses enough PTO to bring the accrued hours below the 240 hour
limit. When an Employee is terminated, the Debtor will pay the Employee for any earned but
unused PTO time upon termination. The Debtor estimates that, as of the Petition Date, the value
of accrued and unused PTO equals approximately $800,000. This amount, however, is not a
current cash obligation. Accordingly, the Debtors seek authority to continue honoring the PTO
policy, and, subject to entry of the Final Order, to pay up to $800,000 on account of prepetition

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PTO. However, the Debtor will not pay any Employee an amount more than the Priority Cap on
account of any prepetition Employee Obligations, including prepetition PTO, without further
order of the Court.
c. Funeral or Bereavement Time Off
24.

The Debtor maintains a funeral or bereavement time off policy (“FBTO”).

Pursuant to the FBTO, in the event of the death of an Employee’s current spouse, spousal
equivalent, child, parent, brother, sister, mother- or father-in-law, the Employee may take up to
three (3) consecutive work days off with pay. The Employee may take one (1) work day off with
pay for the death of a current spouse’s or spousal equivalent’s brother or sister or for a
grandparent or grandchild of either the Employee or the Employee’s current spouse or spousal
equivalent.
d. Civic Duty Time-Off
25.

The Debtor maintains a civic duty time-off policy (the “Civic Duty

Policy”). Pursuant to the Civic Duty Policy, eligible Employees receive full pay while serving
up to five (5) business days of jury or witness duty.
f.

Voting Time-Off

26.

The Debtor maintains a voting duty time-off policy (the “VTO Policy”).

Pursuant to the VTO Policy, if an eligible Employee cannot vote before operational hours in
statewide public elections, the Debtor allows the Employees time to go to the polls, and will
compensate the Employees for up to the first two (2) hours of absence from regularly scheduled
work.

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e. Expense Reimbursement
27.

In the ordinary course of business, the Debtor routinely reimburses

Employees for certain pre-approved, reasonable expenses incurred within the scope of their
employment, including expenses for travel,5 lodging, ground transportation, meals, supplies, and
other business expenses (collectively, the “Reimbursable Expenses”). Employees are generally
required to seek pre-approval of expenses.

The Employees then charge the Reimbursable

Expenses to their personal credit cards and submit requests for reimbursement from the Debtor.
Accordingly, the Reimbursable Expenses are incurred by Employees with the understanding that
they will be reimbursed by the Debtor.
28.

The Debtor believes that payment of the Reimbursable Expenses is

important to the morale of the Debtor’s workforce, which, in turn, is critical to maximizing the
value of the estate. In addition, absent payment of the Reimbursable Expenses, the Debtor would
encounter difficulties with retention of its Employees, who are the key to the Debtor’s ability to
reorganize. The Reimbursable Expenses represent a relatively minimal cost to the Debtor’s
estate in light of the overall benefits achieved.
29.

Certain prepetition Reimbursable Expenses may not have been paid as of

the Petition Date because, among other reasons, Employees had not yet submitted a request for
reimbursement or an approval of an expense request was still pending. Generally, the Debtor
requires Employees to submit claims for reimbursement within 30 days after the expense is
incurred. As a result of the lag time between when expenses are incurred and when they are
submitted for reimbursement, it is difficult for the Debtor to determine with precision the actual
amount of incurred but not reported Reimbursable Expenses as of any particular time. The

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Employees pay for airfare using the Debtor’s travel account.

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average aggregate monthly amount expended by the Debtor for Reimbursable Expenses is
approximately $20,000.

The Debtor estimates that, as of the Petition Date, approximately

$10,000 will be due and owing to Employees on account of Reimbursable Expenses,
substantially all of which will be due within the first 21 days of this Chapter 11 Case.
Accordingly, the Debtor requests authority to pay up to $10,000 on account of prepetition
Reimbursable Expenses on interim and final bases.
30.

Requiring Employees to personally bear the cost of any approved,

business-related expenses incurred in furtherance of their responsibilities to the Debtor would
significantly impair Employee morale. Accordingly, to avoid harm to the Debtor’s business, the
Debtor seeks authority, but not direction, to pay all outstanding prepetition Reimbursable
Expenses and to continue its expense reimbursement policy in the ordinary course of business
and subject to the Debtor’s discretion and applicable restrictions under the Debtor’s policies.
III.

Employee Medical and Insurance Benefit Plans
31.

In the ordinary course of business, the Debtor has established standard and

customary plans and policies to provide its Employees with (a) health benefits, including medical,
prescription drug, dental, and vision benefits (collectively, the “Health Insurance Benefits”), and
(b) insurance benefits, including life and accidental death and dismemberment insurance, short
and long-term disability insurance and workers’ compensation insurance.
a. Health Insurance Benefits
32.

The Debtor offers Employees who work 30 or more hours per week, and

their dependents, a choice from four types of medical plans or programs of benefits: (i) HMO,
that is administered by Kaiser Foundation Health Plan, Inc.; (ii) HMO that is administered by
Anthem Blue Cross of California (together with Kaiser Foundation Health Plan, Inc., the

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“Medical Insurance Providers”); (iii) PPO that is administered by Anthem Blue Cross of
California; or (iv) HDHP with a health savings account (“HSA”) that is administered by Anthem
Blue Cross of California (collectively, the “Medical Plans”). The Debtor pays an average of
approximately $150,000 per month to the Medical Insurance Providers for premiums and
administration fees on account of the Medical Plans.
33.

The Debtor also offers a dental plan (the “Dental Plan”) administered by

Delta Dental of California (“Delta Dental”). The Debtor pays an average of approximately
$17,000 per month to Delta Dental for premiums. Further, the Debtor offers a vision plan (the
“Vision Plan”, and collectively with the Medical Plans and Dental Plan, the “Health Insurance
Plans”) administered by Vision Service Plan (“VSP”).

The Debtor pays an average of

approximately $3,000 per month to VSP for premiums and administration fees on account of the
Vision Plan.
34.

The Debtor pays all premiums and related fees on account of the Health

Insurance Plans each month in advance—and the Debtor is current on such payments—except
for a fee payable to Anthem Blue Cross of California in connection with the HSA (the “HSA
Fee”). The Debtor estimates that, as of the Petition Date, it owes up to $3,000 on account of the
HSA Fee, which will become due shortly after the Petition Date. Accordingly, the Debtor
requests authority to pay the HSA Fee in an amount up to $3,000 on interim and final bases.
35.

Each of the Health Insurance Plans is important to the maintenance of

Employee welfare and morale and is therefore critical to the uninterrupted operation of the
Debtor’s business. The Debtor therefore requests authority, but not direction, to continue to pay
benefits and administrative costs under the Health Insurance Plans, and to continue its practices
related to these plans in the ordinary course of business.

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b. Additional Insurance Benefits
36.

The Debtor provides Employees life and accidental death and

dismemberment insurance (the “Life and AD&D Plan”). Insurance under the Debtor’s Life and
AD&D Plan is provided by Anthem Blue Cross of California. Premiums for the Life and AD&D
Plan are included in the total premiums paid to the Medical Insurance Providers for the Medical
Plans. Like the Health Insurance Plans, the Life and A&D Plan is critical to maintaining
Employee morale.

The Debtor requests authority, but not direction, to pay benefits and

administrative costs under the Life and AD&D Plan, and to continue to pay for the policy and
continue its practices related to the Life and AD&D Plan, in the ordinary course of business.
c. Disability Benefits
37.

The Debtor also provides Employees with short-term and long-term

disability benefits (collectively, the “Disability Benefits Plan”, and together with the Health
Insurance Plans and the Life and A&D Plan, the “Medical and Insurance Benefits”). The
Insurance under the Disability Benefits Plan is provided by Anthem Blue Cross of California.
Premiums for the Disability Benefits Plan are included in the total premiums paid to the Medical
Insurance Providers for the Medical Plans.

Like the Health Insurance Plans and the Life and

A&D Plan, the Disability Benefits Plan is critical to maintaining Employee morale. The Debtor
requests authority, but not direction, to pay benefits and administrative costs under the Disability
Benefits Plan, and to continue to pay for the policy and continue its practices related to the
Disability Benefits Plan, in the ordinary course of business.
d. Workers’ Compensation Insurance
38.

The Debtor also provides workers’ compensation insurance (the

“Workers’ Compensation Plan”) under the Disability Benefits Plan provided by Travelers

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Insurance. On average, the Debtor pays approximately $2,000 per month under the Workers’
Compensation Plan. As of the Petition Date, the Debtor has paid all prepetition amounts owing
with respect to the Workers’ Compensation Plan. Like the Medical and Insurance Benefits, the
Workers’ Compensation Plan is critical to maintaining Employee morale. The Debtor requests
authority, but not direction, to continue to pay for the policy and continue its practices related to
the Workers’ Compensation Plan in the ordinary course of business.
IV.

Other Employee Benefit Plans and Programs
a. Savings Plan
39.

The Debtor also maintains a 401(k) Savings Plan for Employees (the

“Savings Plan”) administered by Fidelity.

Under the Savings Plan, the Debtor’s eligible

Employees have the option of contributing on a pre-tax basis to a traditional 401(k). Eligible
Employees may elect to contribute up to the annual IRS dollar limit (which varies annually) to
the Savings Plan. The Debtor matches Employee contributions to the Savings Plan for the first
$1,500 of an employee’s contributions. The Debtor believes that performing its obligations
under the Savings Plan is essential to maintaining Employee morale. Accordingly, the Debtor
requests authority, but not direction, to continue to honor its obligations under the Savings Plan.
RELIEF REQUESTED
40.

By this Motion, the Debtor requests entry of the Interim Order and the

Final Order, pursuant to Bankruptcy Code sections 105(a), 363, 507(a)(4), 507(a)(5), 541,
1107(a) and 1108, and Bankruptcy Rules 6003 and 6004, authorizing, but not directing, the
Debtor to (a) pay the Employee Obligations in an aggregate amount not to exceed $17,000 on an
interim basis, and in an aggregate amount not to exceed $817,000 on a final basis; and
(b) otherwise honor and continue (but not assume) the Employee Programs in the ordinary
course of business until further notice.
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To assist in implementing the relief requested, the Debtor also requests an

order (i) authorizing the Debtor’s banks to receive, process, honor and pay all of the Debtor’s
prepetition checks and to fund transfers on account of any Employee Obligations to the extent
sufficient funds are available; (ii) authorizing, but not directing, the Debtor to issue new
postpetition checks or effect new postpetition fund transfers on account of the Employee
Obligations to replace any prepetition checks or fund transfer requests that may be dishonored or
rejected; and (iii) authorizing, but not directing, the Debtor to continue its ordinary course
Employee Programs described in this Motion during the Debtor’s Chapter 11 Case.
42.

For the reasons set forth herein, the Debtor submits that the relief

requested is in the best interest of the Debtor, its estate, creditors and other parties in interest, and
therefore, should be granted.
BASIS FOR RELIEF
43.

As a result of the commencement of the Chapter 11 Cases and in the

absence of an order of the Court providing otherwise, the Debtor will be prohibited from paying
or otherwise satisfying its prepetition Employee Obligations, and the checks, wire transfers, and
direct deposit transfers issued in respect of any such prepetition Employee Obligations would be
dishonored. Failing to honor these obligations would have devastating consequences on the
Debtor’s pursuit of a value-maximizing transaction.
44.

Under section 363 of the Bankruptcy Code, a bankruptcy court is

empowered to authorize a chapter 11 debtor to expend funds in the bankruptcy court’s discretion
outside the ordinary course of business. 11 U.S.C. § 363. In order to obtain approval for the use
of estate assets outside the ordinary course of business, the debtor must articulate a valid
business justification for the requested use. See In re Ionosphere Clubs, Inc., 98 B.R. 174, 176
(Bankr. S.D.N.Y. 1989). Payment of prepetition wage and salary claims to preserve and protect
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a debtor’s business and maximize value of its estate and maintain positive employee morale,
even if such payment were deemed to be outside the ordinary course of business, is a sufficient
business justification for such an authorization. See id. at 175. Accordingly, this Court should
grant the requested relief under section 363 of the Bankruptcy Code.
45.

The Debtor believes that all or substantially all of the amounts they seek to

pay are entitled to priority under sections 507(a)(4) or (a)(5) of the Bankruptcy Code. Section
507(a)(4) of the Bankruptcy Code grants priority to employee claims for “wages, salaries, or
commissions, including vacation, severance and sick leave pay” earned within 180 days before
the filing of the applicable petition up to $13,650 per employee.

11 U.S.C. § 507(a)(4).

Similarly, section 507(a)(5) of the Bankruptcy Code provides that claims for contributions to
certain employee benefit plans are also afforded priority treatment to the extent of the number of
employees covered by each plan multiplied by $13,650, less any amounts paid pursuant to
section 507(a)(4) of the Bankruptcy Code. 11 U.S.C. § 507(a)(5). Thus, granting the relief
sought herein would affect only the timing, and not the amount, of payment of the Employee
Obligations to the extent they constitute priority claims.
46.

Even if a particular claim is not entitled to priority, payment is nonetheless

justified under section 105(a) of the Bankruptcy Code and the well-established “necessity of
payment doctrine.”

Under the “necessity of payment doctrine” and section 105(a) of the

Bankruptcy Code, courts have consistently permitted immediate payment of prepetition
obligations where necessary to preserve or enhance the value of a debtor’s estate for the benefit
of all creditors, specifically including payment of prepetition employee claims.

See, e.g.,

Miltenberger v. Logansport C. & S.W. Ry. Co., 106 U.S. 286, 312 (1882) (stating that payment
of pre-receivership claim prior to reorganization permitted to prevent “stoppage of . . . [crucial]

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business relations”); see also Gregg v. Metro Trust Co., 197 U.S. 183, 187 (1905) (stating that
“the payment of the employees of the [rail]road is more certain to be necessary in order to keep it
running than the payment of any other class of previously incurred debts”); In re Ionosphere
Clubs, Inc., 98 B.R. at 175-76 (finding that payment of prepetition wages, salaries, reimbursable
business expenses and health benefits to active employees of debtor airline authorized). The
modern application of the doctrine of necessity is largely unchanged from the Supreme Court’s
reasoning in Miltenberger. See In re Lehigh & New Eng. Ry. Co., 657 F.2d 570, 581-82 (3d Cir.
1981) (“[I]n order to justify payment under the ‘necessity of payment’ rule, a real and immediate
threat must exist that failure to pay will place the continued operation of the [debtor] in serious
jeopardy.”); see also In re Just for Feet, Inc., 242 B.R. 821, 825 (Bankr. D. Del. 1999) (“The
Supreme Court, the Third Circuit and the District of Delaware all recognize the court’s power to
authorize payment of pre-petition claims when such payment is necessary for the debtor’s
survival during chapter 11.”); In re Columbia Gas Sys., Inc., 171 B.R. 189, 191-92 (Bankr. D.
Del. 1994).
47.

As described above, the Employees are highly skilled and experienced,

without whom the Debtor could not operate. Thus, the Debtor’s ability to maximize value
depends, in large part, upon the retention and motivation of the Employees.

Most of the

Debtor’s Employees (and their families) are dependent upon the wages, salaries, reimbursements
and other benefits they receive from the Debtor. Any disruption from Employee resignations or
lack of morale could have devastating effects on the Debtor’s restructuring efforts. Indeed,
payments which are critical to the morale of the Debtor’s workforce actually add value to the
estate because an unplanned reduction in the workforce or productivity could have significant

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Accordingly, it is critical that the Debtor be

authorized to honor its Employee Obligations, subject to the limitations described herein.
48.

Moreover, a portion of the Employee Obligations constitutes funds held in

trust for payment to third parties.

Specifically, under Bankruptcy Code section 541, all

prepetition legal or equitable interests of a debtor are considered property of the estate subject to
certain exclusions. Bankruptcy Code section 541(b)(7) explicitly excludes amounts withheld by
an employer from employee wages as employee contributions to employee benefit plans under
ERISA and health insurance plans under state law.

Thus, the payment of the employee

contribution component of the employer taxes or payment of garnished wages will not prejudice
the Debtor’s estate because such withholdings are held in trust for the benefit of the related
payees and, thus, do not constitute property of the Debtor’s estate under section 541 of the
Bankruptcy Code. See Begier v. IRS, 496 U.S. 53, 57 (1990); In re Am. Int’l Airways, Inc., 70
B.R. 102, 103 (Bankr. E.D. Pa. 1987) (funds held in trust for federal excise and withholding
taxes are not property of debtor’s estate and, therefore, not available for distribution to creditors).
49.

Courts in this district have routinely granted to chapter 11 debtors the

same or similar relief as requested in this Motion. See, e.g., In re SFP Franchise Corp., Case No.
20-10134 (JTD) (Bankr. D. Del. Jan. 24, 2020); In re Blackhawk Mining, LLC, Case No. 1911595 (LSS) (Bankr. D. Del. Aug. 9, 2019); In re Gibson Brands Inc., Case No. 18-11025 (CSS)
(Bankr. D. Del. May 21, 2018); In re Southeastern Grocers, LLC, Case No. 18-10700 (MFW)
(Bankr. D. Del. Apr. 23, 2018); In re Aerospace Holdings, Inc., Case No. 17-10635 (KG) (Bankr.
D. Del. Apr.19, 2017); In re Bostwick Laboratories, Inc., Case No. 17-10570 (BLS) (Bankr. D.
Del. Apr. 10, 2017); In re General Wireless Operations Inc., Case No. 17-10506 (BLS) (Bankr.
D. Del. Mar. 10, 2017).

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For all the reasons previously set forth herein, the Debtor submits that

payment of the Employee Obligations and the continuation of the Employee Programs are
necessary to the success of the Debtor’s Chapter 11 Case and should be authorized by this Court.
51.

Nothing in this Motion is intended to, or shall, alter any rights of OrbiMed

Royalty Opportunities II, LP under (a) that certain Credit Agreement, dated as of May 8, 2015
(as amended, supplemented, or otherwise modified); (b) that certain Pledge and Security
agreement dated as of May 8, 2015; and (c) any order(s) approving Debtor’s Motion for Entry of
Interim and Final Orders (i) Authorizing Debtor to Use Cash Collateral, (ii) Granting Adequate
Protection to Secured Lender, (iii) Scheduling Final Hearing, and (iv) Granting Related Relief,
filed contemporaneously with the Motion.
IMMEDIATE RELIEF IS NECESSARY TO AVOID IMMEDIATE AND
IRREPARABLE HARM
52.

Bankruptcy Rule 6003 provides that the relief requested in this Motion

may be granted if the “relief is necessary to avoid immediate and irreparable harm.” Fed. R.
Bankr. P. 6003. The Third Circuit has interpreted the language “immediate and irreparable
harm” in the context of preliminary injunctions. In that context, the court has instructed that
irreparable harm is a continuing harm which cannot be adequately redressed by final relief on the
merits and for which money damages cannot provide adequate compensation. See, e.g., Norfolk
S. Ry. Co. v. City of Pittsburgh, 235 Fed. App’x 907, 910 (3d Cir. 2007) (citing Glasco v. Hills,
558 F.2d 179, 181 (3d Cir. 1977)). Furthermore, the harm must be shown to be actual and
imminent, not speculative or unsubstantiated. See, e.g., Acierno v. New Castle County, 40 F.3d
645, 653-55 (3d Cir. 1994). The Debtor submits that for the reasons already set forth herein, the
relief requested in this Motion is necessary to avoid immediate and irreparable harm to the
Debtor and, accordingly, should be granted on an interim basis.
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WAIVER OF NOTICE AND STAY UNDER BANKRUPTCY RULE 6004
53.

To the extent that Bankruptcy Rule 6004(a) applies, the Debtor

respectfully requests a waiver of such notice requirement in order to successfully implement the
foregoing requested relief.
54.

The Debtor also requests that the Court waive the stay imposed by

Bankruptcy Rule 6004(h), which provides that “[a]n order authorizing the use, sale, or lease of
property other than cash collateral is stayed until the expiration of 14 days after entry of the order,
unless the court orders otherwise.” Fed. R. Bankr. P. 6004(h). As described above, the relief
that the Debtor seeks in this Motion is necessary for the Debtor to operate its business without
interruption and to preserve value for its estate. Accordingly, the Debtor respectfully requests
that the Court waive the fourteen-day stay imposed by Bankruptcy Rule 6004(h), as the exigent
nature of the relief sought herein justifies immediate relief.
NOTICE
55.

The Debtor has provided notice of this motion to the following parties or

their respective counsel: (i) the Office of the United States Trustee for the District of Delaware;
(ii) the holders of the twenty (20) largest unsecured claims against the Debtor; (iii) counsel to the
Prepetition Lender; (iv) the Internal Revenue Service; (v) the United States Attorney’s Office for
the District of Delaware and all other states in which the Debtor operates; (vi) any party that has
requested notice pursuant to Bankruptcy Rule 2002; and (vii) all other parties entitled to notice
pursuant to Local Rule 9013-1(m). As this Motion is seeking “first day” relief, within two
business days of the hearing on this Motion, the Debtor will serve copies of this Motion and any
order entered in respect to this Motion as required by Local Rule 9013-1(m). The Debtor
submits that, in light of the nature of the relief requested, no other or further notice need be given.

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NO PRIOR REQUEST
56.

No previous request for the relief sought herein has been made to this

Court or any other court.

[Remainder of Page Intentionally Left Blank]

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CONCLUSION
WHEREFORE, the Debtor respectfully requests entry of the Interim Order, substantially
in the form attached hereto as Exhibit A, and following notice and the opportunity of parties in
interest to be heard, the Final Order, substantially in the form attached hereto as Exhibit B,
granting the relief requested herein and such other and further relief as may be just and proper.

Dated: June 16, 2020
Wilmington, Delaware

POTTER ANDERSON & CORROON LLP
/s/ L. Katherine Good
L. Katherine Good (No. 5101)
Aaron H. Stulman (No. 5807)
1313 North Market Street, 6th Floor
Wilmington, Delaware 19801
Tel:: (302) 984-6000
Facsimile: (302) 658-1192
Email: kgood@potteranderson.com
astulman@potteranderson.com
- and GOODWIN PROCTER LLP
Nathan A. Schultz (pro hac vice admission pending)
Three Embarcadero Center, 28th Floor
San Francisco, CA 94111
Tel: (415) 733-6000
Facsimile: (415) 677-9041
Email: nschultz@goodwinlaw.com
-andBarry Z. Bazian (pro hac vice admission pending)
The New York Times Building
620 Eighth Avenue
New York, NY 10018-1405
Tel: (212) 833-8800
Facsimile: (212) 355-3333
Email: bbazian@goodwinlaw.com
Proposed Counsel for Debtor and Debtor in Possession

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EXHIBIT A
Proposed Interim Order

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
---------------------------------In re:
PROTEUS DIGITAL HEALTH, INC.,
Debtor.1
----------------------------------

x
:
:
:
:
:
:
:
x

Chapter 11
Case No. 20-11580 (____)

INTERIM ORDER PURSUANT TO 11 U.S.C. §§ 105(a), 363, 507(a), 541, 1107(a) AND
1108, AND FED. R. BANKR. P. 6003 AND 6004, TO, INTER ALIA, (I) AUTHORIZE,
BUT NOT DIRECT, THE DEBTOR TO PAY PREPETITION WAGES,
COMPENSATION AND EMPLOYEE BENEFITS; (II) AUTHORIZE, BUT NOT
DIRECT, THE DEBTOR TO CONTINUE CERTAIN EMPLOYEE BENEFIT
PROGRAMS IN THE ORDINARY COURSE; (III) AUTHORIZE ALL BANKS TO
HONOR PREPETITION CHECKS FOR PAYMENT OF PREPETITION EMPLOYEE
OBLIGATIONS; AND (IV) GRANT OTHER RELATED RELIEF
Upon the motion (the “Motion”)2 of the above-captioned debtor and debtor in possession
(the “Debtor”), for entry of an interim order (this “Order”), pursuant to Bankruptcy Code
sections 105(a), 363, 507(a)(4), 507(a)(5), 541, 1107(a) and 1108, and Bankruptcy Rules 6003
and 6004 (i) authorizing, but not directing, the Debtor to pay prepetition wages, compensation
and employee benefits, (ii) authorizing, but not directing, the Debtor to continue certain
employee benefit programs in the ordinary course, (iii) authorizing all banks to honor prepetition
checks for payment of prepetition employee obligations, and (iv) granting other related relief;
and upon consideration of the Motion and all pleadings related thereto, including the First Day
Declaration; and upon the record of the hearing on the Motion; and due and proper notice of the
Motion having been given; and it appearing that no other or further notice of the Motion is
1

The last four digits of the Debtor’s taxpayer identification number are 2680. The Debtor’s corporate
headquarters is located at 2600 Bridge Parkway, Redwood City, California 94065
2

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

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required; and it appearing that the Court has jurisdiction to consider the Motion in accordance
with 28 U.S.C. §§ 157 and 1334; and it appearing that this is a core proceeding pursuant to 28
U.S.C. § 157(b)(2); and it appearing that venue of this proceeding and the Motion is proper
pursuant to 28 U.S.C. §§ 1408 and 1409; and it appearing that the relief requested in the Motion
and provided for herein is in the best interest of the Debtor, its estate, and creditors; and after due
deliberation and sufficient cause appearing therefor, it is hereby,
ORDERED, ADJUDGED AND DECREED THAT:
1.

The Motion is GRANTED on an interim basis to the extent set forth

2.

The final hearing (the “Final Hearing”) on the Motion shall be held on

herein.

_________, 2020, at__:__ _.m., prevailing Eastern Time. Any objections or responses to entry
of a final order on the Motion shall be filed with the Court, and served so as to be received by
the following parties, by no later than 4:00 p.m., prevailing Eastern Time, on _________,
2020: (i) proposed counsel to the Debtor, (a) Goodwin Procter LLP, 620 Eighth Ave., New York,
NY 10018 (Attn: Nathan A. Schultz (nschultz@goodwinlaw.com), Barry Z. Bazian
(bbazian@goodwinlaw.com)) and (b) Potter Anderson & Corroon LLP, 1313 North Market
Street,

6th

Floor,

Wilmington,

Delaware

19801

(Attn:

L.

Katherine

Good

(kgood@potteranderson.com)); (ii) Office of the United States Trustee, J. Caleb Boggs Federal
Building, 844 King Street, Suite 2207, Lockbox 35, Wilmington, DE 19801 (Attn: Benjamin A.
Hackman (Benjamin.A.Hackman@usdoj.gov)); and (iii) if any statutory committee has been
appointed in the Chapter 11 Case, counsel to such committee.
3.

In the event no objections to entry of a final order on the Motion are

timely received, this Court may enter such final order without need for the Final Hearing.

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The Debtor is authorized, but not directed, to pay and/or honor (including

to any third parties that provide or aid in the monitoring, processing or administration of the
Employee Obligations), in its discretion, prepetition Employee Obligations, as and when such
obligations are due and consistent with the Debtor’s ordinary course of business in an aggregate
amount not to exceed $17,000 prior to the entry of the final order, as follows:
Employee Obligation
Payroll Processor Fees
Reimbursable Expenses
HSA Fee
Total:
5.

Interim Amount
$4,000
$10,000
$3,000
$17,000

Notwithstanding the foregoing, the Debtor shall not make any payments

on account of prepetition Employee Obligations in excess of the limits provided for under
11 U.S.C. §§ 507(a)(4) or 507(a)(5).
6.

The Debtor is authorized, but not directed, in its discretion, to honor and

continue the Employee Programs that were in effect as of the Petition Date; provided, however,
that such relief shall not constitute or be deemed an assumption or an authorization to assume
any of such Employee Programs under section 365(a) of the Bankruptcy Code.
7.

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

that would violate or implicate section 503(c) of the Bankruptcy Code.
8.

The Debtor’s banks and other financial institutions shall be and hereby are

authorized to receive, process, honor and pay all prepetition and postpetition checks and fund
transfers on account of the Employee Obligations that had not been honored and paid as of the
Petition Date, up to the amounts authorized to be paid pursuant to this Order, provided that
sufficient funds are on deposit in the applicable accounts to cover such payments. The Debtor
shall be and hereby is authorized to issue new postpetition checks or effect new postpetition fund

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transfers on account of the Employee Obligations to replace any prepetition checks or fund
transfer requests that may be dishonored or rejected.
9.

The Debtor may pay any and all Withholdings, including social security,

FICA, federal and state income taxes, garnishments, health care payments, retirement fund
withholding and other types of withholding, whether these relate to the period prior to Petition
Date or subsequent thereto.
10.

The Debtor is authorized, but not directed, in its discretion, to pay all

processing fees associated with, and all costs incident to, the foregoing.
11.

Notwithstanding the relief granted in this Order and any actions taken

pursuant to such relief, nothing in the Motion or this Order shall be deemed: (a) an admission as
to the validity of any claim against the Debtor; (b) a waiver of any party’s right to dispute any
claim on any grounds; (c) a promise or requirement to pay any claim; (d) a request or
authorization to assume any agreement, contract, or lease pursuant to section 365 of the
Bankruptcy Code; (e) a waiver of any party’s rights under the Bankruptcy Code or any other
applicable law; or (f) to create any rights in favor of, or enhance the status of, any claim held by
any person or entity.
12.

Nothing in this Order is intended to, or shall, alter any rights of OrbiMed

Royalty Opportunities II, LP under (a) that certain Credit Agreement, dated as of May 8, 2015
(as amended, supplemented, or otherwise modified); (b) that certain Pledge and Security
agreement dated as of May 8, 2015; and (c) any order(s) approving Debtor’s Motion for Entry of
Interim and Final Orders (i) Authorizing Debtor to Use Cash Collateral, (ii) Granting Adequate
Protection to Secured Lender, (iii) Scheduling Final Hearing, and (iv) Granting Related Relief,
filed contemporaneously with the Motion.

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The Court finds and determines that the requirements of Bankruptcy Rule

6003 are satisfied and that the interim relief requested is necessary to avoid immediate and
irreparable harm.
14.

The notice requirement of Bankruptcy Rule 6004(a) is waived.

15.

Notwithstanding Bankruptcy Rule 6004(h), the Order shall be effective

and enforceable immediately upon entry hereof.
16.

The Debtor is authorized and empowered to take all actions necessary to

implement the relief granted in this Order.
17.

This Court shall retain jurisdiction with respect to all matters arising from

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

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EXHIBIT B
Proposed Final Order

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
---------------------------------In re:
PROTEUS DIGITAL HEALTH, INC.,
Debtor.1
----------------------------------

x
:
:
:
:
:
:
:
x

Chapter 11
Case No. 20-11580 (____)

FINAL ORDER PURSUANT TO 11 U.S.C. §§ 105(a), 363, 507(a), 541, 1107(a) AND 1108,
AND FED. R. BANKR. P. 6003 AND 6004, TO, INTER ALIA, (I) AUTHORIZE, BUT NOT
DIRECT, THE DEBTOR TO PAY PREPETITION WAGES, COMPENSATION AND
EMPLOYEE BENEFITS; (II) AUTHORIZE, BUT NOT DIRECT, THE DEBTOR TO
CONTINUE CERTAIN EMPLOYEE BENEFIT PROGRAMS IN THE ORDINARY
COURSE; (III) AUTHORIZE ALL BANKS TO HONOR PREPETITION CHECKS FOR
PAYMENT OF PREPETITION EMPLOYEE OBLIGATIONS; AND
(IV) GRANT OTHER RELATED RELIEF
Upon the motion (the “Motion”) 2 of the Debtor for a final order (the “Order”),
pursuant to Bankruptcy Code sections 105(a), 363, 507(a)(4), 507(a)(5), 541, 1107(a) and 1108,
and Bankruptcy Rules 6003 and 6004 (i) authorizing, but not directing, the Debtor to pay
prepetition wages, compensation and employee benefits, (ii) authorizing, but not directing, the
Debtor to continue certain employee benefit programs in the ordinary course, (iii) authorizing all
banks to honor prepetition checks for payment of prepetition employee obligations, and (iv)
granting other related relief; and upon consideration of the Motion and all pleadings related
thereto, including the First Day Declaration; and upon the record of the hearing on the Motion;
and due and proper notice of the Motion having been given; and it appearing that no other or
further notice of the Motion is required; and it appearing that the Court has jurisdiction to
1

The last four digits of the Debtor’s taxpayer identification number are 2680. The Debtor’s corporate
headquarters is located at 2600 Bridge Parkway, Redwood City, California 94065.
2

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

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consider the Motion in accordance with 28 U.S.C. §§ 157 and 1334; and it appearing that this is
a core proceeding pursuant to 28 U.S.C. § 157(b)(2); and it appearing that venue of this
proceeding and the Motion is proper pursuant to 28 U.S.C. §§ 1408 and 1409; and it appearing
that the relief requested in the Motion and provided for herein is in the best interest of the Debtor,
its estate, and creditors; and after due deliberation and sufficient cause appearing therefor, it is
hereby
ORDERED, ADJUDGED AND DECREED THAT:
1.

The Motion is GRANTED on a final basis to the extent set forth herein.

2.

The Debtor is authorized, but not directed, to pay and/or honor (including

to any third parties that provide or aid in the monitoring, processing or administration of the
Employee Obligations), in its discretion, prepetition Employee Obligations, as and when such
obligations are due and consistent with the Debtor’s ordinary course of business in an aggregate
amount not to exceed $817,000, as follows:
Employee Obligation
Payroll Processor Fees
Reimbursable Expenses
PTO Obligations
HSA Fee
Total:
3.

Final Amount
$4,000
$10,000
$800,000
$3,000
$817,000

Notwithstanding the foregoing, the Debtor shall not make any payments

on account of prepetition Employee Obligations in excess of the limits provided for under
11 U.S.C. §§ 507(a)(4) or 507(a)(5).
4.

The Debtor is authorized, but not directed, in its discretion, to honor and

continue the Employee Programs that were in effect as of the Petition Date; provided, however,
that such relief shall not constitute or be deemed an assumption or an authorization to assume
any of such Employee Programs under section 365(a) of the Bankruptcy Code.
2
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Nothing herein shall be deemed to authorize the payment of any amounts

that would violate or implicate section 503(c) of the Bankruptcy Code.
6.

The Debtor’s banks and other financial institutions shall be and hereby are

authorized to receive, process, honor and pay all prepetition and postpetition checks and fund
transfers on account of the Employee Obligations that had not been honored and paid as of the
Petition Date, up to the amounts authorized to be paid pursuant to this Order, provided that
sufficient funds are on deposit in the applicable accounts to cover such payments. The Debtor
shall be and hereby are authorized to issue new postpetition checks or effect new postpetition
fund transfers on account of the Employee Obligations to replace any prepetition checks or fund
transfer requests that may be dishonored or rejected.
7.

The Debtor may pay any and all Withholdings, including social security,

FICA, federal and state income taxes, garnishments, health care payments, retirement fund
withholding and other types of withholding, whether these relate to the period prior to Petition
Date or subsequent thereto.
8.

The Debtor is authorized, but not directed, in its discretion, to pay all

processing fees associated with, and all costs incident to, the foregoing.
9.

Notwithstanding the relief granted in this Order and any actions taken

pursuant to such relief, nothing in the Motion or this Order shall be deemed: (a) an admission as
to the validity of any claim against the Debtor; (b) a waiver of any party’s right to dispute any
claim on any grounds; (c) a promise or requirement to pay any claim; (d) a request or
authorization to assume any agreement, contract, or lease pursuant to section 365 of the
Bankruptcy Code; (e) a waiver of any party’s rights under the Bankruptcy Code or any other

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applicable law; or (f) to create any rights in favor of, or enhance the status of, any claim held by
any person or entity.
10.

Nothing in this Order is intended to, or shall, alter any rights of OrbiMed

Royalty Opportunities II, LP under (a) that certain Credit Agreement, dated as of May 8, 2015
(as amended, supplemented, or otherwise modified); (b) that certain Pledge and Security
agreement dated as of May 8, 2015; and (c) any order(s) approving Debtor’s Motion for Entry of
Interim and Final Orders (i) Authorizing Debtor to Use Cash Collateral, (ii) Granting Adequate
Protection to Secured Lender, (iii) Scheduling Final Hearing, and (iv) Granting Related Relief,
filed contemporaneously with the Motion.
11.

The notice requirement of Bankruptcy Rule 6004(a) is waived.

12.

Notwithstanding Bankruptcy Rule 6004(h), the Order shall be effective

and enforceable immediately upon entry hereof.
13.

The Debtor is authorized and empowered to take all actions necessary to

implement the relief granted in this Order.
14.

This Court shall retain jurisdiction with respect to all matters arising from

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

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