Opinion
Case No. 01-70019-SCS, Chapter 11, (Jointly Administered)
August 8, 2002
Karen M. Crowley, Esq. Counsel for Camellia Food Stores, Inc.
Jonathan L. Hauser, Esq. Counsel for Richfood Holdings, Inc.
Brent C. Strickland, Esq. Counsel for the Official Committee of Unsecured Creditors
Cecelia A. Weschler, Esq. Counsel for Office of the United States Trustee
Lawrence J. Yumkas, Esq. Counsel for J.D. Associated, L.P.
ORDER CONFIRMING PLAN OF REORGANIZATION
The Disclosure Statement filed on November 1, 2001, (the "Disclosure Statement") and the Plan of Reorganization, filed on October 31, 2001 (the "Plan") under Chapter 11 of the Bankruptcy Code, by Camellia Food Stores, Inc., Eastern Shore Markets, Inc., and Bonnie Be-Lo Markets, Inc. (collectively the "Debtor"), were transmitted to all creditors and parties in interest on or about January 24, 2002, with notice of a hearing on confirmation of the Plan. The confirmation hearing was convened on February 26, 2002 and continued until June 25, 2002 (the "Confirmation Hearing"). A written objection was timely filed by Richfood Holdings, Inc. ("Richfood"). No other party appeared in opposition to the Plan.
A summary of the ballots has been filed with the Court. Based upon the evidence presented at the Confirmation Hearing, the representations of counsel and the agreement reached with the Richfood, the Court hereby makes the following findings of fact and conclusions of law:
1. Proper notice of the Plan and the payment provisions under the Plan were provided to all creditors and parties in interest, including shareholders who were provided additional notice as ordered by the Court on June 25, 2002.
2. The Plan has been accepted by all the classes of creditors whose acceptances are required by law.
3. The Plan complies with Title 11, United States Code, and the Debtor has complied with the Bankruptcy Code. All of the elements of 11 U.S.C. § 1129, required for confirmation of the Plan, have been satisfied.
4. The Plan is proposed in good faith and not by any means forbidden by law.
5. Each holder of a claim or interest in an impaired class of claims or interest has accepted the Plan, or will receive or retain under the Plan property of a value, as of the Effective Date of the Plan, that is not less than the amount that such holder would receive if the Debtor was liquidated under Chapter 7 of the Bankruptcy Code on the Effective Date of the Plan.
6. Any payment made or to be made by the Debtor for services or for costs and expenses in or in connection with the case, or in connection with the Plan and incident to the case, has been approved by the court or is subject to the approval of the Court as reasonable.
7. The identity of each insider that will be employed or retained by the Debtor and his or her compensation has been fully disclosed.
8. Creditors holding claims entitled to priority pursuant to §§ 507 (a)(l) through (9) of the Bankruptcy Code inclusive, are being paid as required by law or have agreed to treatment otherwise.
9. As to each Executory Contract or Unexpired Lease of the Debtor, which is being assumed as part of the Plan (which are included as part of the Plan or for which the Debtor elected assumption pursuant to a notice filed on January 29, 2002), the Plan provides the non-Debtor party to the contract or lease with the treatment provided for by 11 U.S.C. § 365 (b).
10. Confirmation of the Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Debtor, and such liquidation or reorganization is not proposed in the Plan.
11. All fees payable under 28 U.S.C. § 1930, as determined by the Court at the hearing on confirmation, have been paid or the Plan provides for all such fees on the Effective Date of the Plan continuing until the case is closed.
12. This Court shall retain jurisdiction over this case following confirmation and until consummation of the Plan for the purposes set forth in the Plan.
13. The capitalized terms used in this Order which are defined in the Plan will have the same meanings when used in this Order.
14. Richfood addressed a letter dated June 24, 2002 (the "Term Letter") to Camellia Food Stores, Inc. A copy of the Term Letter, without exhibits, is attached to the confirmation order as Exhibit C.
It is ORDERED, ADJUDGED AND DECREED that the Plan is hereby confirmed. The Debtor is ordered and authorized to perform all acts, execute and deliver all documents and instruments necessary to early out the intent and purposes of the Plan. The terms and provisions of the Plan, a copy of which is attached as Exhibit A, and as modified by the terms of this Order, are binding upon the Debtor, all its creditors, all parties in interest, and all equity security holders affected thereby.
It is further ORDERED, ADJUDGED AND DECREED that the order governing the executory contract between Camellia and Memo shall be treated in the manner previously ordered by this Court in the order entered on April 15, 2002 (the "MEMO Order"), including but not limited to the following provisions (the capitalized terms shall be as provided in the MEMO Order):
1. Except as modified by the MEMO Order, the rights and duties of Camellia and MEMO under the Memo Agreement, the Assumption Order and the Cash Collateral Orders shall remain in full force and effect until all obligations with respect to the MEMO Agreement are satisfied in full.
2. Upon termination of the MEMO Agreement, MEMO shall have a first priority lien against the proceeds of the Collateral without the necessity of filing financing statements to the extent of the Balance, as provided in Paragraph X of the Cash Collateral Orders.
3. Upon payment of the Balance, should either Camellia or MEMO assert any claim for additional charges or credits to the Balance, the party asserting such charges or credits shall notify the other via facsimile of the additional charges or credits and the party obligated to pay the additional charges or remit a refund to the other due to the credits shall wire transfer the amount due within five business days of notification.
4. The Debtor shall be deemed not to have substantially consummated this Plan unless and until the Balance, as defined in the MEMO Order, is paid in full.
5. This Court shall retain jurisdiction to resolve any disputes involving the payment of the Balance, as defined in the MEMO Order, the amount of any additional charges or credits to the Balance, and the enforcement of the MEMO lien.
It is further ORDERED, ADJUDGED AND DECREED that all other contracts and leases designated for assumption, either in the Plan or in the Notice attached as Exhibit B, shall be and hereby are assumed upon the terms specified between the parties (to the extent those terms vary from the original agreement between the parties). The lease of Store #253 shall be assumed upon the terms of the modification agreement executed between the parties, as modified by the executed letter agreement, dated Friday June 21, 2002.
It is further ORDER, AJDUDGED AND DECREED that the contracts and leases so designated for rejection, either in the Plan or in the Notice attached as Exhibit B, shall be rejected and that the non-debtor party to the rejected contract or lease shall file its proof of claim within the timeframe designated in the Plan.
It is further ORDERED, ADJUDGED AND DECREED that, as between Richfood and Camellia and as to the Class One Claim of Richfood, the terms set forth in Exhibit C shall apply and shall be binding upon both parties.
It is further ORDERED, ADJUDGED AND DECREED that, as to Class Three shareholders, the following shall apply:
I. The current stock of the Debtor, comprised of 52,946 shares, shall be reissued by the Reorganized Debtor (the "New Shares"), which reissuance shall be deemed made on the Effective Date, and shall be made as follows:
a. The New Shares shall be issued to any shareholder who owned stock Pre-Petition (the "Current Shareholder"), upon satisfaction of the following conditions: (a) Each Current Shareholder may elect to receive no more shares than it owned Pre-Petition; and (b) In order to obtain any New Shares, the Current Shareholder must elect to and must contribute cash, on or before 10 days after issuance of the Election Notice (defined below), and sign an indemnification agreement whereby they participate in the Guarantee by agreeing to indemnify James Harrell and Richard Saunders, up to $7.56 for each share of New Stock, to the extent that Harrell/Saunders are required to pay all or any portion of the Guarantee, as defined above. (The Current Shareholders issued New Stock shall be "Electing Shareholders").
b. Within 5 business days after Confirmation, the Debtor shall send forms (the "Election Notice") to each Current Shareholder, wherein they must elect to contribute the Cash Contribution and agree to indemnify James Harrell and Richard Saunders, up to $7.56 for each share of New Stock, to the extent that Harrell/Saunders are required to pay all or any portion of the Guarantee, if they want to obtain New Shares (the "Election"). Any Current Shareholder who does not return an Election, accompanied by the applicable Cash Contribution, within 10 days after issuance of the Election Notice, shall be deemed to have declined to contribute capital and obtain New Shares. The Cash Contribution shall be held in an interest bearing escrow account pending the Effective Date of the Plan when it will be contributed to the Debtor.
c. To the extent that any Current Shareholder declines New Shares, their shares (the "Undistributed Shares") will be available to the Electing Shareholders, based upon their pro rata ownership of the New Shares issued to Electing Shareholders, in exchange for their election to contribute $7.56 per Undistributed Share toward the Cash Contribution and execute their proportionate share of the Guarantee/Indemnity. (All Current Shareholders owning electing to own stock post-confirmation shall be the "New Shareholders"). The entire $400,000 must be in escrow by noon on August 2, 2002.
d. In order for the Debtor to be able to continue to utilize its net operating losses (the "NOL"), the following restrictions on the transfer or sale of the stock (post-confirmation) shall apply: (a) The Electing Shareholders may not sell or transfer the stock, on or within three years and one day after the Effective Date, to the extent that the sale or transfer will trigger an ownership change as defined in Section 382 of the Internal Revenue Code and to the extent that the sale or transfer is not approved by New Shareholders collectively owning more than 2/3 of the stock; and (b) In the event that Richfood elects, pursuant to the terms of this Plan, to purchase 20% of the stock of the Debtor, those shares will be sold pro rata by the Electing Shareholders but only to the extent that a pro rata sale will not trigger an ownership change as defined by Section 382 of the Internal Revenue Code. If a pro rata sale adversely triggers an ownership change, the purchase by Richfood will not be upon a pro rata basis and the respective shareholder will be required to sell its stock to Richfood upon the terms described for the Class One Treatment of Richfood. Any sale or transfer of stock in violation of these restrictions is void and without effect.
It is further ORDERED, ADJUDGED AND DECREED that Plan is modified to exclude Daniel Geraty as a Tier 1 employee, based upon his resignation during the case, and is modified, in Section I of the Plan, to provide the following directors and officers, following Confirmation:
James Harrell — Chairman of the Board of Directors
Richard Saunders — Director and Secretary/Treasurer
James Bertram Harrell — Director
Edward Dery — Director and President
It is further ORDERED, ADJUDGED AND DECREED that, as described and to the extent provided for in the discharge section of the Plan, the Debtor is released from all dischargeable debts and the obligations of the Debtor, for pre-petition debts and claims, whether known or unknown, and payment shall be upon the terms set forth in the Plan and this Order. Any judgment heretofore or hereafter obtained in any court, other than this Court, is null and void as a determination of the liability of the Debtor with respect to debts dischargeable under 11 U.S.C. § 1141 (d). All creditors whose debts are discharged by this Order, and all creditors whose judgments are declared null and void by this Order, and absent leave of this Court, are enjoined from instituting any act to collect such debts as personal liabilities of the Debtor, or a successor to the Debtor.
It is further ORDERED, ADJUDGED AND DECREED that, notwithstanding any other provision of this Confirmation Order, or any provision of the Term Letter, including, but not limited to the provisions of Paragraph 1 of said letter, the balance of the pre-petition, non-recourse debt owed by Camellia to Richfood shall be discharged upon the foreclosure by Richfood of the real property owned by Camellia against which Richfood has a lien. After the foreclosure sales, there shall be no further recourse or non-recourse obligation owing from the Debtor to Richfood, except for the obligations arising from the loan documents executed between the Debtor and Richfood (or its designee) as contemplated by the Term Letter and any lease agreements between the parties.
It is further ORDERED, ADJUDGED AND DECREED that Richfood (or its designee) and the appropriate post-confirmation stockholders shall execute and deliver the Stock Option Agreement contemplated in Paragraph 7 of the Term Letter following entry of this order and no Final Decree shall be entered in this case until the Stock Option Agreement has been executed and delivered. In no event shall the Final Decree be entered in this case without the endorsement of counsel for Richfood.
It is further ORDERED, ADJUDGED AND DECREED that any distributions made to creditors by the Debtor pursuant to this Plan which are not deposited or otherwise accepted by the creditor within 30 days after the distribution is mailed (after due diligence by the Debtor to locate such creditor), shall be returned to the Debtor.