Sleep Number Corporation

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

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In re: Chapter 11

SLEEP NUMBER CORPORATION, et al. Case No. 26-11399 (KYP)

Debtors. Jointly Administered

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MEMORANDUM DECISION OVERRULING OBJECTION OF

UNITED STATES TRUSTEE TO DEBTORS’ PAYMENTS UNDER

NON-INSIDER RETENTION PLAN

APPEARANCES:

DAVIS POLK & WARDWELL LLP

Counsel to Debtors

450 Lexington Avenue

New York, New York 10017

By: Brian M. Resnick, Esq.

Angela M. Libby, Esq.

Stephen D. Piraino, Esq.

Richard J. Steinberg, Esq.

Sihui (Sophy) Ma, Esq.

Mordechai Rivkin, Esq.

Of Counsel

WILLIAM K. HARRINGTON

UNITED STATES TRUSTEE, REGION 2

One Bowling Green, Room 534

New York, NY 10004

By: Andrea B. Schwartz, Esq.

Daniel Rudewicz, Esq.

Of Counsel

HONORABLE KYU YOUNG PAEK

UNITED STATES BANKRUPTCY JUDGE

INTRODUCTION

Sleep Number Corporation and its affiliated debtors (“Sleep Number” or

“Debtors”) filed these Chapter 11 bankruptcy cases to effectuate a going-concern sale of

its business. To ensure that certain employees remain with Sleep Number through the

sale, and to compensate those employees for the additional work stemming therefrom,

Sleep Number created a plan to pay retention awards to 38 non-insider employees in the

aggregate amount of $1.825 million payable upon completion of the sale (“Non-Insider

Retention Plan”). The Office of the United States Trustee for Region 2 (“U.S. Trustee”)

objects to the Non-Insider Retention Plan. For the reasons stated, the U.S. Trustee’s

objection is OVERRULED.

JURISDICTION

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and

1334 and the Amended Standing Order of Reference (M-431), dated January 31, 2012

(Preska, C.J.) referring bankruptcy cases and proceedings to the Bankruptcy Judges of

the Southern District of New York. This matter is a core proceeding under 28 U.S.C.

§ 157(b)(2)(A), (B) and (O).

BACKGROUND1

A. The Non-Insider Retention Plan

Sleep Number is a retail mattress company that assembles and sells adjustable

“smart” beds directly to customers and employs just under 3,000 people. (O’Keefe

1 Sleep Number Executive Vice President and Chief Financial Officer Amy O’Keefe (“Ms. O’Keefe”)

provided testimony on the Non-Insider Retention Plan. Her direct testimony was set forth in her July 19,

2026 declaration (“O’Keefe Declaration”) (ECF Doc. # 403 at ECF pp. 17-24). The O’Keefe Declaration

was admitted into evidence. (See Transcript of July 20, 2026 Hr’g (“Tr.”) at 47:7-14.) Counsel for the

U.S. Trustee cross-examined Ms. O’Keefe at the July 20, 2026 hearing, and such examination appears at

Tr. at 47:24-82:7. Debtors’ counsel’s re-direct examination of Ms. O’Keefe appears at Tr. at 82:12-84:16.

“ECF Doc. # _” refers to documents filed on the electronic docket of this bankruptcy case. “ECF

p. _” refers to the page number imprinted across the top of the page by the Court’s electronic filing

system.

Declaration ¶ 9; Tr. at 50:23-52:6.) Sleep Number is governed by the following

corporate hierarchy listed in descending order based on level of authority:

1. the board of directors (“Board”);

2. Linda Findley, Chief Executive Officer (“CEO”);

3. the Executive Leadership Team (“ELT”) consisting of (i) the CEO; (ii) Amy

O’Keefe as Chief Financial Officer; (iii) the Chief Product, Strategy and

Technology Officer; (iv) the Chief Marketing Officer; (v) the Chief Retail and

People Officer; (vi) the Chief Legal and Risk Officer and Secretary; and

(vii) the Chief Supply Chain and Transformation Officer;2 and

4. a five-member management committee (“Management Committee”).

(O’Keefe Declaration ¶¶ 5, 10; Tr. at 58:3-62:3.)

In May 2026, senior Sleep Number leadership, including Ms. O’Keefe,

formulated a plan to pay retention awards to 38 non-insider employees (“Employee

Participants”) with the assistance of compensation advisors and attorneys. (O’Keefe

Declaration ¶¶ 5, 12; Tr. at 83:25-84:14.) The retention awards range from $10,000.00

to $125,000.00, and the sum of the awards to all Employee Participants totals $1.825

million. (O’Keefe Declaration ¶ 5.) None of the Employee Participants are on the Board,

the ELT, or the Management Committee. (Id. ¶¶ 5-7, 10-11; Tr. at 61:15-62:3.) None of

the Employee Participants were appointed by the Board. (O’Keefe Declaration ¶ 5.)

None of the Employee Participants are involved in setting Sleep Number’s corporate

policy. (Id. ¶¶ 9-10.)

2 Except for the CEO, each member of the ELT held a second title of either “Executive Vice

President” or “Senior Vice President.” (O’Keefe Declaration ¶ 10.)

Nine of the Employee Participants have job titles with the words “vice president”

in them. (O’Keefe Declaration ¶ 6.) However, none of these nine employees are

considered “officers” for purposes of section 16 of the Securities Exchange Act of 1934.

(Id.) Although “vice president” denotes increased responsibility at Sleep Number, all

Sleep Number vice presidents report to either senior vice presidents or executive vice

presidents. (Id.; see supra note 2.) None of these nine employees are senior or

executive vice presidents.

Thirteen of the Employee Participants have job titles with the words “director” or

“senior director” in them. (O’Keefe Declaration ¶ 7.) However, none of these thirteen

employees are members of Sleep Number’s Board. (Id.) The terms “director” and

“senior director” included in these thirteen employees’ job titles signify a certain amount

of supervisory responsibility, but these employees are junior in seniority to the nine

“vice presidents” described in the prior paragraph. (Id.)

The remaining sixteen Employee Participants provide various management and

support functions for the Debtors. (Id. ¶ 8.)

Sleep Number leadership decided to enact the Non-Insider Retention Plan in

recognition that:

• each Employee Participant has specialized knowledge of Sleep Number’s business

that makes them a key part of many of the company’s workflows and processes;

• retaining the Employee Participants is essential to maintaining stability during

the sale process and to ensuring a smooth transition to new ownership;

• losing the Employee Participants would erode the enterprise value of the

Debtors;

• there is a risk that the Employee Participants would seek alternative employment

absent the retention awards given the uncertainty created by the Debtors’

bankruptcy; and

• the sale process would subject the Employee Participants to increased work

demands not accounted for by their normal salary.

(Id. ¶¶ 12-14.)

The letters informing the Employee Participants of the Non-Insider Retention

Plan were sent to the employees on or around May 26, 2026 (each, an “Award Letter”).3

The letters stated the amount of the retention award and that such amount would be

paid if the employee continued in active employment with Sleep Number through

December 31, 2026. (Award Letter § 1.) The Award Letter further stated that the

retention award would be accelerated and paid in the event of a change in control. (Id.

§ 2(g).) Thus, the Employee Participants stand to receive the retention awards upon

completion of a going-concern sale of the company.

B. The Bankruptcy Filing and the Going-Concern Sale

The Debtors filed petitions for relief under Chapter 11 of the Bankruptcy Code on

June 12, 2026 (“Petition Date”). The Debtors have continued in possession of their

property and have continued to operate their businesses as debtors in possession under

11 U.S.C. §§ 1107(a) and 1108. On June 23, 2026, the United States Trustee appointed

an Official Committee of Unsecured Creditors (“Creditors Committee”) pursuant to 11

U.S.C. § 1102(a)(1). (ECF Doc. # 110 (notice of appointment of Creditors Committee).)

3 A redacted version of an Award Letter is available at ECF Doc. # 438 at ECF pp. 19-22.

In her declaration supporting numerous first-day pleadings, Ms. O’Keefe

explained that the Debtors had been engaged in a months-long robust marketing

process to sell Sleep Number as a going-concern. This process was supported by the

Debtors’ pre-petition secured lenders who are owed approximately $672.5 million and

agreed to provide the Debtors with additional financing of up to $65 million in

bankruptcy. (ECF Doc. # 3 (Ms. O’Keefe’s first-day declaration).) On July 2, 2026, the

Court approved the bidding procedures for the auction as well as the asset purchase

agreement with the “stalking horse” bidder SNBR Inc. (“SNBR”), which ensured that the

Debtors’ bankruptcy estates would receive at minimum $415 million for the sale of the

company. (ECF Doc. # 167 (order approving, inter alia, the bid procedures and stalking

horse asset purchase agreement).)

The auction was held on July 13, 2026, and after multiple rounds of bidding,

SNBR emerged as the winning bidder with a total bid of $701,800,000.00. (ECF Doc. #

401 (notice of auction results).) The Court approved the sale at a July 20, 2026 hearing

and entered a corresponding order the following day. (ECF Doc. # 430 (order

approving sale).) There are still a number of matters to address, including ongoing

negotiations with contract counterparties (e.g., landlords, vendors, service providers),

and the sale is scheduled to close on or around July 31, 2026.4

C. The Employee Motion

Among the first-day motions filed by the Debtors was their motion to, among

other things, pay pre-petition wages owed to employees and maintain employee benefits

4 The sale order carved out a dispute between the U.S. Trustee and the Debtors as to the propriety

of SNBR’s satisfaction of the Debtors’ severance obligations owed to officers and directors. A hearing on

that matter is scheduled for August 3, 2026. (ECF Doc. # 432 (notice of hearing on severance payment

issue).)

programs (“Employee Motion”).5 Authorization for payments under the Non-Insider

Retention Plan was among the relief sought by the Debtors in the Employee Motion.

(Employee Motion ¶ 39.)

The U.S. Trustee filed an objection to the Debtors’ proposed payments under the

Non-Insider Retention Plan6 arguing that (i) the Employee Participants are statutory

“insiders,” which would subject the retention awards to the strict standard set forth in 11

U.S.C. § 503(c)(1), and, (ii) even if the Employee Participants are not statutory insiders,

the Debtors have not provided adequate justification for the retention awards under 11

U.S.C. § 503(c)(3).

The Debtors filed their reply brief as well as the O’Keefe Declaration on July 19,

2026. (ECF Doc. # 403.) At the July 20, 2026 hearing, the O’Keefe Declaration was

admitted in evidence as Ms. O’Keefe’s direct testimony, and counsel for the U.S. Trustee

cross-examined Ms. O’Keefe. (See supra note 1.) Following the evidentiary hearing,

each party filed an additional submission on July 27, 2026 (ECF Doc. ## 449 and 450),

and the Court heard oral argument the following day. Following oral argument, the

Court overruled the U.S. Trustee’s objection on the record and stated that it would issue

5 See Motion of the Debtors for Entry of Interim and Final Orders Authorizing (I) the Debtors to

(A) Honor Prepetition Employee Obligations and Director Obligations and (B) Maintain Employee

Benefits Programs and Pay Related Administrative Obligations, (II) Current and Former Employees to

Proceed With Outstanding Workers’ Compensation Claims, and (III) Financial Institutions to Honor

and Process Related Checks and Transfers, dated June 12, 2026 (ECF Doc. # 5).

6 See United States Trustee’s Objection to Motion of the Debtors for Entry of Interim and Final

Orders Authorizing (I) the Debtors to (A) Honor Prepetition Employee Obligations and Director

Obligations and (B) Maintain Employee Benefits Programs and Pay Related Administrative

Obligations, (II) Current and Former Employees to Proceed With Outstanding Workers’ Compensation

Claims, and (III) Financial Institutions to Honor and Process Related Checks and Transfers, dated July

14, 2026 (ECF Doc. # 366).

a memorandum decision explaining its ruling. This constitutes that memorandum

decision.

DISCUSSION

There are two matters before the Court: (i) whether the Employee Participants

are statutory insiders such that the retention awards are subject to scrutiny under 11

U.S.C. § 503(c)(1), and, if not, (ii) whether the payments under the Non-Insider

Retention Plan meet the requirements under 11 U.S.C. § 503(c)(3). These matters are

addressed in the sections that follow.

A. The Employee Participants are Not Statutory “Insiders”

A debtor’s ability to pay a retention bonus to an “insider” is “severely restricted.”

In re Glob. Home Prods., LLC, 369 B.R. 778, 785 (Bankr. D. Del. 2007). Section

503(c)(1) of the Bankruptcy Code states:

(c) Notwithstanding subsection (b), there shall neither be allowed, nor paid –

(1) a transfer made to . . . an insider of the debtor for the purpose of

inducing such person to remain with the debtor’s business, absent a

finding by the court based on evidence in the record that –

(A) the transfer . . . is essential to retention of the person because the

individual has a bona fide job offer from another business at the

same or greater rate of compensation;

(B) the services provided by the person are essential to the survival of

the business; and

(C) either –

(i) the amount of the transfer made to . . . the person is not greater

than an amount equal to 10 times the amount of the mean

transfer . . . of a similar kind given to nonmanagement

employees for any purpose during the calendar year in which

the transfer is made . . .; or

(ii) if no such similar transfers were made to . . . such

nonmanagement employees during such calendar year, the

amount of the transfer . . . is not greater than an amount equal

to 25 percent of the amount of any similar transfer . . . to . . .

such insider for any purpose during the calendar year before the

year in which such transfer is made . . . .

11 U.S.C. § 503(c)(1) (emphasis added). Section 503(c) was enacted as part of the

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to “eradicate the

notion that executives were entitled to bonuses simply for staying with the Company

through the bankruptcy process.” In re Mesa Air Grp., Inc., No. 10–10018 (MG), 2010

WL 3810899, at *2 (Bankr. S.D.N.Y. Sept. 24, 2010) (quoting Glob. Home Prods., 369

B.R. at 783-84).

When the debtor is a corporation, the term “insider” includes –

(i) director of the debtor;

(ii) officer of the debtor;

(iii) person in control of the debtor;

(iv) partnership in which the debtor is a general partner;

(v) general partner of the debtor; or

(vi) relative of a general partner, director, officer, or person in control of the debtor.

11 U.S.C. § 101(31)(B). Neither “director” nor “officer” is defined in the Bankruptcy

Code. However, “director” is generally understood to mean “an individual who sits on

the board of directors of a corporation.” In re Borders Grp., Inc., 453 B.R. 459, 468

(Bankr. S.D.N.Y. 2011). “Officer” is generally understood to mean a “person elected or

appointed by the board of directors to manage the daily operations of a corporation,

such as the CEO, president, secretary, or treasurer.” Id. (quoting BLACK’S LAW

DICTIONARY 1193 (9th ed. 2009)). An individual’s title alone is “insufficient to establish

that an individual is a director or officer.” Id. at 468-69. “Insider status can also be

determined on a case-by-case basis based on the totality of the circumstances, including

the degree of an individual’s involvement in a debtor’s affairs.” Id. at 469. “In such

cases, insiders must have at least a controlling interest in the debtor or exercise

sufficient authority over the debtor so as to unqualifiably dictate corporate policy and

the disposition of corporate assets.” Id. at 469 (quoting Hunter v. Babcock (In re

Babcock Dairy Co.), 70 B.R. 657, 661 (Bankr. N.D. Ohio 1986)) (alteration and internal

quotation marks omitted).

Here, none of the Employee Participants are “insiders” within the meaning of 11

U.S.C. § 101(31)(B). They are not members of the Board, the ELT, or the Management

Committee. None of the Employee Participants were appointed by the Board. Although

some of the Employee Participants have the words “vice president” or “director” in their

job titles, those terms were used to signify increased responsibility or a supervisory role.

In re Glob. Aviation Holdings Inc., 478 B.R. 142, 148 (Bankr. E.D.N.Y. 2012) (“The fact

that some of the KERP Employees have the word ‘director’ in their titles does not make

them insiders. . . . Likewise, titles such as ‘vice president’ are not determinative.”). The

terms did not signify that those individuals were Board members or high-ranking

executives. Accord Borders Grp. Inc., 453 B.R. at 469 (“Companies often give

employees the title ‘director’ or ‘director-level,’ but do not give them decision-making

authority akin to an executive.”). In fact, Ms. O’Keefe’s declaration and credible

testimony established that, while the Employee Participants serve certain critical

business functions, they are not the ones dictating Sleep Number’s corporate policy or

making critical financial decisions.

The U.S. Trustee argues that at least some of the Employee Participants are

insiders because they report directly to, and perform work for, insiders. This argument

lacks merit. Directors and officers do not work in isolation when making important

decisions for a corporation. It should come as no surprise that officers receive

contribution from corporate subordinates. Ms. O’Keefe testified that some of the

Employee Participants provide direct support to Sleep Number officers. (Tr. at 68:5-

70:25.) But an employee does not transform into an insider merely because they report

to, or perform tasks for, an insider.

The U.S. Trustee relies on Harrington v. LSC Commc’ns, Inc. (In re LSC

Commc’ns, Inc.), 631 B.R. 818 (S.D.N.Y. 2021). There, the District Court was

considering whether six employees were statutory insiders. After reviewing the caselaw,

District Judge Oetken favored analyzing insider status using an “objective criterion –

whether an employee was appointed by the board” – rather than a functional approach,

which looks to an employee’s responsibilities and authority within the company. Id. at

825; see also id. (“[T]he Court agrees with the [U.S. Trustee] that with respect to officers

appointed or elected by the Board, such individuals are ‘officers’ under the Bankruptcy

Code, at least absent a particularly strong showing that they do not perform a significant

role in management.”) (emphasis in original); id. at 826 (“[T]his Court concludes that

the Bankruptcy Court erred by inquiring beyond the fact that the six employees were

appointed by LSC’s board.”); id. (“Bankruptcy Court erred by analyzing whether the six

employees were statutory officers largely under a functional ‘control’ test, instead of

giving considerable weight due to the employees’ board appointment and resulting

officer status under Delaware law.”). The District Court opined that insider status

should be analyzed under a functional approach only when the employee in question

was not appointed by the board. Id. at 826 (“The Borders court’s admonishment about

employee titles comes in the context of employees who had officer-sounding titles but

who were not board-appointed. Thus, Borders should be read for the proposition that,

in the absence of board appointment, a title is insufficient.”) (emphases in original).

Here, the Employee Participants were not appointed by Sleep Number’s Board.

(O’Keefe Declaration ¶ 5.) Thus, under the objective criterion set forth in LSC

Commc’ns, the Employee Participants are not insiders. Further, the Employee

Participants are not insiders under the functional approach for the reasons already

stated, i.e., they lack the authority to dictate corporate policy.

Because the Employee Participants are not “insiders” under section 101(31)(B),

the retention payments to them are not subject to scrutiny under section 503(c)(1).

B. The Non-Insider Retention Plan Satisfies Section 503(c)(3)

Although the Non-Insider Retention Plan is not subject to section 503(c)(1)

review, it must still pass muster under section 503(c)(3). The latter provides that there

shall neither be allowed, nor paid –

other transfers or obligations that are outside the ordinary course of

business and not justified by the facts and circumstances of the case,

including transfers made to, or obligations incurred for the benefit of,

officers, managers, or consultants hired after the date of the filing of the

petition.

11 U.S.C. § 503(c)(3). Section 503(c)(3) applies to payments that are both (i) outside the

ordinary course of business, and (ii) not justified by the facts and circumstances of the

case. The “facts and circumstances” test “creates a standard no different than the

business judgment standard under section 363(b) of the Bankruptcy Code.” In re Endo

Int’l PLC, Case No. 22-22549 (JLG), 2022 WL 16935997, at *9 (Bankr. S.D.N.Y. Nov. 14,

2022) (quoting In re Velo Holdings, Inc., 472 B.R. 201, 212 (Bankr. S.D.N.Y. 2012));

accord Borders Grp., Inc., 453 B.R. at 473; In re Dana Corp., 358 B.R. 567, 576-77

(Bankr. S.D.N.Y. 2006). In Dana Corp., Judge Lifland set forth the following factors to

consider when deciding whether a compensation plan subject to section 503(c)(3)

satisfies the business judgment standard:

1) Is there a reasonable relationship between the plan proposed and the

results to be obtained, i.e., will the key employee stay for as long as it takes

for the debtor to reorganize or market its assets, or, in the case of a

performance incentive, is the plan calculated to achieve the desired

performance?

2) Is the cost of the plan reasonable in the context of the debtor’s assets,

liabilities and earning potential?

3) Is the scope of the plan fair and reasonable; does it apply to all employees;

does it discriminate unfairly?

4) Is the plan or proposal consistent with industry standards?

5) What were the due diligence efforts of the debtor in investigating the need

for a plan; analyzing which key employees need to be incentivized; what is

available; what is generally applicable in a particular industry?

6) Did the debtor receive independent counsel in performing due diligence in

creating and authorizing the incentive compensation?

Dana Corp., 358 B.R. at 576-77 (citations omitted).

Here, the Non-Insider Retention Plan satisfies the Dana Corp. test. First and

foremost, the Debtors have set forth several valid business reasons to pay retention

awards to the Employee Participants. These employees play important roles in Sleep

Number’s business, and it was critical to retain their services while Sleep Number

explored a sale of the company as a going concern. (O’Keefe Declaration ¶¶ 12, 14.)

Losing even some of these employees would have eroded the enterprise value of the

Debtors. (Id.) Given the uncertainty surrounding the restructuring, there was a risk

that the Employee Participants would seek alternative employment. (Id. ¶ 14.) This risk

proved not to be hypothetical. During Ms. O’Keefe’s testimony on July 20, she revealed

that one of the Employee Participants resigned that very day. (Tr. at 78:6-19.) Further,

the workload of the Employee Participants greatly increased because of the extra work

required to support the sale process. (O’Keefe Declaration ¶ 13; see also Tr. at 80:8-25

(“[T]he amount of third-party interest in this marketing process was overwhelming.

There were data rooms. There were thousands of documents. . . . And an

overwhelming amount of information was requested. . . . And then follow-up questions

and meetings and [tours]. So there was a significant amount of incremental workload

on many of these participants.”).) Thus, there was plainly a reasonable relationship

between the payments and the Debtors’ business objective, i.e., a successful going-

concern sale of the company.

Second, the cost of the Non-Insider Retention Plan is reasonable. The entirety of

the contemplated payments totals $1.825 million (the actual amount will be less given

the July 20 resignation of one Employee Participant). This amount is modest when

considering that the goal of the Non-Insider Retention Plan was to help facilitate a

successful going-concern sale of the company, which has resulted in a bid by SNBR in

excess of $700 million. Indeed, no party who could possibly be pecuniarily affected by

the loss of $1.825 million from the Debtors’ estates has objected to the Non-Insider

Retention Plan. In fact, the Creditors Committee, which has a fiduciary duty to act in

the best interest of all unsecured creditors, filed a statement in support of the Non-

Insider Retention Plan (ECF Doc. # 404 (Creditors Committee joinder)), and opined

that

• the Employee Participants are not statutory insiders (id. ¶ 2);

• the payments under the plan are within the range of average payments expected

under similar programs (id. ¶ 3);

• retention of the Employee Participants is important to the sale of Sleep Number

as a going concern (id. ¶ 4); and

• the completion of the sale to SNBR “will be a resounding success to all

constituents in these cases, including general unsecured creditors.” (Id. ¶ 5.)

Third, although the Non-Insider Retention Plan does not apply to all Sleep

Number employees, the scope of the plan is fair and reasonable. The Employee

Participants were selected by senior leadership through an “identification process

focused on various criteria, including the criticality of the position to the sale process

and business operations, the performance and potential of the employee, the risk of loss

of the employee and the potential difficulty of replacing the employee.” (O’Keefe

Declaration ¶ 14.) Moreover, senior leadership “carefully considered the award levels

necessary to retain the Employee Participants . . . .” (Id.)

Fourth, the Non-Insider Retention Plan was formulated “after rigorous

consideration and consultation with external advisors regarding the industry

standards.” (Id.; see also Tr. at 83:25-84:14.)

The U.S. Trustee argues that the retention awards are unnecessary because the

sale to SNBR will likely close in a matter of days and most of the Employee Participants

will likely be offered jobs with SNBR. But the success of the sale process was far from

certain when the Debtors’ senior management formulated the Non-Insider Retention

Plan. (O’Keefe Declaration ¶ 12.) Senior management enacted the Non-Insider

Retention Plan to stabilize Sleep Number’s operations, prevent value erosion, and ease

the transition for a purchaser. (Id.) Now that the Employee Participants have done

their part in contributing to what has been a remarkably successful sale process, it

would be wholly inequitable to renege on the incentive offered to them for providing

such contribution.

For these reasons, the Court finds that the Debtors exercised sound business

judgment in formulating the Non-Insider Retention Plan. Paying the Employee

Participants retention awards totaling $1.825 million is “justified by the facts and

circumstances” of these cases. 11 U.S.C. § 503(c)(3).

CONCLUSION

For the reasons stated, the U.S. Trustee’s objection to the Non-Insider Retention

Plan is OVERRULED.

/s/ Kyu Y. Paek

, a, cf U.S. Bankruptcy Judge

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