EXHIBIT 99.2
THIS DISCLOSURE STATEMENT IS NOT A SOLICITATION OF ACCEPTANCES OR
REJECTIONS OF THE DEBTORS AND OFFICIAL COMMITTEE OF UNSECURED CREDITORS' SECOND
AMENDED JOINT CHAPTER 11 PLAN OF REORGANIZATION. ACCEPTANCES OR REJECTIONS MAY
NOT BE SOLICITED UNTIL THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF
DELAWARE HAS APPROVED A DISCLOSURE STATEMENT UNDER SECTION 1125 OF TITLE 11 OF
THE UNITED STATES CODE. THIS PROPOSED DISCLOSURE STATEMENT IS BEING SUBMITTED
FOR APPROVAL ONLY AND HAS NOT YET BEEN APPROVED BY THE BANKRUPTCY COURT.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE: ) CHAPTER 11
)
FLEMING COMPANIES, INC., ET AL.,(1) )
) CASE NO. 03-10945 (MFW)
DEBTORS. ) HONORABLE MARY F. WALRATH
) (JOINTLY ADMINISTERED)
)
SECOND AMENDED DISCLOSURE STATEMENT IN SUPPORT OF DEBTORS' AND OFFICIAL
COMMITTEE OF UNSECURED CREDITORS' SECOND AMENDED JOINT PLAN OF
REORGANIZATION OF FLEMING COMPANIES, INC. AND ITS FILING SUBSIDIARIES UNDER
CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
IMPORTANT DATES
- - Date by which Ballots must be received: [______], 2004
- - Date by which objections to Confirmation of the Plan must be filed and served:
[_____], 2004
- - Hearing on Confirmation of the Plan: [_______], 2004
THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE SECOND AMENDED
JOINT PLAN OF REORGANIZATION. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED
UNTIL THE BANKRUPTCY COURT HAS APPROVED THIS DISCLOSURE STATEMENT.
- --------------------
(1) The Debtors are the following entities: Core-Mark International, Inc.;
Fleming Companies, Inc.; ABCO Food Group, Inc.; ABCO Markets, Inc.; ABCO
Realty Corp.; ASI Office Automation, Inc.; C/M Products, Inc.; Core-Mark
Interrelated Companies, Inc.; Core-Mark Mid-Continent, Inc.; Dunigan Fuels,
Inc.; Favar Concepts, Ltd.; Fleming Foods Management Co., L.L.C., Fleming
Foods of Texas, L.P.; Fleming International, Ltd.; Fleming Supermarkets of
Florida, Inc.; Fleming Transportation Service, Inc.; Food 4 Less Beverage
Company, Inc.; Fuelserv, Inc.; General Acceptance Corporation; Head
Distributing Company; Marquise Ventures Company, Inc.; Minter-Weisman Co.;
Piggly Wiggly Company; Progressive Realty, Inc.; Rainbow Food Group, Inc.;
Retail Investments, Inc.; Retail Supermarkets, Inc.; RFS Marketing
Services, Inc.; and Richmar Foods, Inc.
KIRKLAND & ELLIS LLP PACHULSKI, STANG, ZIEHL, YOUNG,
James H. M. Sprayregen, P.C. (ARDC No. 6190206) JONES & WEINTRAUB P.C.
Richard L. Wynne (CA Bar No. 120349) Laura Davis Jones (Bar No. 2436)
Janet S. Baer (ARDC No. 6182994) Ira D. Kharasch (CA Bar No. 109084)
Geoffrey A. Richards (ARDC No. 6230120) Robert M. Saunders (CA Bar No. 226172)
Shirley S. Cho (CA Bar No. 192616) Scotta E. McFarland (Bar No. 4184)
200 East Randolph Drive Christopher J. Lhulier (Bar No. 3850)
Chicago, IL 60601-6436 919 North Market Street, Sixteenth Floor, P.O. Box 8705
Telephone: (312) 861-2000 Wilmington, Delaware 19899-8705 (Courier No. 19801)
Facsimile: (312) 861-2200 Telephone: (302) 652-4100
Facsimile: (302) 652-4400
Co-Counsel for the Debtors and Debtors-in-Possession
Dated: March 26, 2004
ii
THIS DISCLOSURE STATEMENT SUMMARIZES CERTAIN PROVISIONS OF THE DEBTORS'
AND OFFICIAL COMMITTEE OF UNSECURED CREDITORS' SECOND AMENDED JOINT PLAN OF
REORGANIZATION OF FLEMING COMPANIES, INC. AND ITS FILING SUBSIDIARIES UNDER
CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE ("PLAN") AS WELL AS CERTAIN
OTHER DOCUMENTS AND FINANCIAL INFORMATION. THE FINANCIAL INFORMATION SUMMARIES
AND OTHER DOCUMENTS ATTACHED HERETO OR INCORPORATED BY REFERENCE HEREIN ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THOSE DOCUMENTS. IN THE EVENT OF ANY
INCONSISTENCY OR DISCREPANCY BETWEEN A DESCRIPTION IN THIS DISCLOSURE STATEMENT
AND THE TERMS AND PROVISIONS OF THE PLAN, OR THE OTHER DOCUMENTS AND FINANCIAL
INFORMATION INCORPORATED HEREIN BY REFERENCE, THE PLAN OR THE OTHER DOCUMENTS
AND FINANCIAL INFORMATION, AS THE CASE MAY BE, SHALL GOVERN FOR ALL PURPOSES.
CAPITALIZED TERMS USED HEREIN BUT NOT DEFINED HEREIN SHALL HAVE THE MEANINGS SET
FORTH IN THE PLAN.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), ANY CANADIAN
SECURITIES ADMINISTRATOR ("CSA") OR ANY STOCK EXCHANGE, NOR HAS THE SEC, ANY CSA
OR ANY STOCK EXCHANGE PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS
CONTAINED HEREIN.
MOREOVER, THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE, AND MAY NOT BE
CONSTRUED AS, AN ADMISSION OF FACT OR LIABILITY, A STIPULATION OR A WAIVER BUT
RATHER SHOULD BE CONSTRUED AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS
RELATED TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER PENDING OR
THREATENED LITIGATION OR ACTIONS.
THE DEBTORS MAKE THE STATEMENTS AND PROVIDE THE FINANCIAL INFORMATION
CONTAINED HEREIN AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFIED. HOLDERS OF
CLAIMS AND EQUITY INTERESTS REVIEWING THIS DISCLOSURE STATEMENT SHOULD NOT INFER
AT THE TIME OF SUCH REVIEW THAT THE FACTS SET FORTH HEREIN HAVE NOT CHANGED
SINCE THE DATE HEREOF UNLESS SO SPECIFIED. EACH HOLDER OF AN IMPAIRED CLAIM
ENTITLED TO VOTE SHOULD THEREFORE CAREFULLY REVIEW THE PLAN, THIS DISCLOSURE
STATEMENT AND THE EXHIBITS TO BOTH DOCUMENTS IN THEIR ENTIRETY BEFORE CASTING A
BALLOT. THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE LEGAL, BUSINESS, FINANCIAL
OR TAX ADVICE. ALL PERSONS DESIRING SUCH ADVICE OR ANY OTHER ADVICE SHOULD
CONSULT WITH THEIR OWN ADVISORS.
NO PARTY IS AUTHORIZED TO PROVIDE TO ANY OTHER PARTY ANY INFORMATION
CONCERNING THE PLAN OTHER THAN THE CONTENTS OF THIS DISCLOSURE STATEMENT. THE
DEBTORS HAVE NOT AUTHORIZED ANY REPRESENTATIONS CONCERNING THE DEBTORS OR THE
VALUE OF THEIR PROPERTY OTHER THAN THOSE SET FORTH IN THIS DISCLOSURE STATEMENT.
HOLDERS OF CLAIMS SHOULD NOT RELY ON ANY INFORMATION, REPRESENTATIONS OR
INDUCEMENTS MADE TO OBTAIN YOUR ACCEPTANCE OF THE PLAN THAT ARE OTHER THAN, OR
INCONSISTENT WITH, THE INFORMATION CONTAINED HEREIN AND IN THE PLAN.
THE DEBTORS' MANAGEMENT HAS REVIEWED THE FINANCIAL INFORMATION PROVIDED
IN THIS DISCLOSURE STATEMENT. ALTHOUGH THE DEBTORS HAVE USED THEIR BEST EFFORTS
TO ENSURE THE ACCURACY OF THIS FINANCIAL INFORMATION, THE FINANCIAL INFORMATION
CONTAINED IN, OR INCORPORATED BY REFERENCE INTO, THIS DISCLOSURE STATEMENT HAS
NOT BEEN AUDITED.
UNLESS OTHERWISE SPECIFIED, ALL REFERENCES TO "DOLLARS" OR "$" SHALL BE
DEEMED TO REFER TO UNITED STATES DOLLARS.
iii
ALL CAPITALIZED TERMS IN THIS DISCLOSURE STATEMENT THAT ARE NOT
OTHERWISE DEFINED HEREIN HAVE THE MEANINGS GIVEN TO THEM IN THE PLAN.
iv
TABLE OF CONTENTS
I. SUMMARY........................................................................................... 1
A. Plan Overview............................................................................ 2
1. Purpose - Reorganization........................................................ 2
2. Substantive Consolidation....................................................... 2
3. Creation of Core-Mark Newco and the Post Confirmation Trust..................... 2
4. Summary of Plan Treatment....................................................... 3
5. Executory Contracts and Unexpired Leases........................................ 8
B. Voting and Confirmation.................................................................. 8
C. Risk Factors............................................................................. 8
D. Disclaimer............................................................................... 9
1. Read This Disclosure Statement And The Plan Carefully........................... 9
II. RECOMMENDATIONS................................................................................... 10
A. The Debtors And The Creditors' Committee Strongly Recommend That You Vote In Favor Of
The Plan................................................................................. 10
III. VOTING ON AND CONFIRMATION OF THE PLAN............................................................ 11
A. Deadline for Voting For or Against the Plan.............................................. 11
B. Confirmation Hearing For The Plan........................................................ 12
C. Any Objections To Confirmation Of The Plan............................................... 12
D. Questions About The Disclosure Statement, Plan Or Ballots................................ 13
IV. ORGANIZATION AND ACTIVITIES OF THE DEBTORS........................................................ 14
A. Operations............................................................................... 14
B. Debt Structure........................................................................... 14
1. Debt............................................................................ 14
2. Secured Debt.................................................................... 14
3. Unsecured Debt.................................................................. 15
4. Trade Debt...................................................................... 15
5. PBGC Debt....................................................................... 16
6. Potential Environmental Liabilities............................................. 16
C. Pre-Petition Operational Restructuring Efforts........................................... 16
V. THE CASES......................................................................................... 17
A. Events Leading to the Chapter 11 Cases................................................... 17
B. The Auction and Sale Process For the Wholesale Distribution Assets and Plans for
Fleming Convenience Assets............................................................... 17
1. Auction and Sale Process for Wholesale Distribution Assets...................... 17
2. Operations of Fleming Convenience Businesses and Plans for Assets............... 18
C. Significant Case Events.................................................................. 18
1. Summary of Significant Motions.................................................. 18
2. Retention of Professionals...................................................... 22
3. Appointment of Creditors' Committee and Retention of Professionals.............. 22
4. Asset Sales and Other Dispositions.............................................. 22
5. Debtor in Possession Operating Reports.......................................... 25
6. Pending Litigation And The Automatic Stay....................................... 26
7. Claims Bar Date and Review Process.............................................. 38
VI. SUMMARY OF THE PLAN OF REORGANIZATION............................................................. 40
A. Overview of Chapter 11................................................................... 40
B. Generally................................................................................ 41
1. Structure of Reorganizing Plan.................................................. 41
2. Creation of Core-Mark Newco..................................................... 41
v
3. Exit Financing Facility, Obtaining Cash for Plan Distributions and Transfers
of Funds Among the Debtors and the Reorganized Debtors.......................... 42
4. Tranche B Loan.................................................................. 42
5. Sale of Assets.................................................................. 42
C. Classification And Treatment Of Claims And Equity Interests.............................. 43
1. Summary of Unclassified Claims against all Debtors.............................. 43
2. Classification and Treatment of Classified Claims............................... 44
D. Special Provision Governing Unimpaired Claims............................................ 49
E. Acceptance And Rejection Of The Plan..................................................... 49
1. Voting Classes.................................................................. 49
2. Acceptance by Impaired Classes.................................................. 49
3. Presumed Acceptance of Plan..................................................... 50
4. Presumed Rejection of Plan...................................................... 50
5. Non-Consensual Confirmation..................................................... 50
F. Plan Implementation...................................................................... 50
1. Substantive Consolidation....................................................... 50
2. Continued Corporate Existence and Vesting of Assets in the Reorganized Debtors.. 54
3. Cancellation of Old Notes, Old Stock and Other Equity Interests................. 55
4. Issuance of New Securities; Execution of Related Documents...................... 55
5. Restructuring Transactions...................................................... 55
6. Corporate Governance, Directors and Officers, and Corporate Action.............. 56
7. Reclamation Claims.............................................................. 57
8. The Post Confirmation Trust..................................................... 59
G. Creation of Professional Fee Escrow Account.............................................. 60
H. Executory Contracts...................................................................... 61
1. Assumption/Rejection of Executory Contracts and Unexpired Leases................ 61
2. Claims Based on Rejection of Executory Contracts or Unexpired Leases............ 61
3. Cure of Defaults for Executory Contracts and Unexpired Leases Assumed........... 61
4. Indemnification of Directors, Officers and Employees............................ 61
5. Compensation and Benefit Programs............................................... 62
6. Insured Claims.................................................................. 62
I. Distributions............................................................................ 66
1. Distributions for Claims Allowed as of the Effective Date....................... 66
2. Distributions by Core-Mark Newco and the Post Confirmation Trust................ 67
3. Interest on Claims.............................................................. 67
4. Compliance with Tax Requirements/Allocations.................................... 67
5. Delivery of Distributions and Undeliverable or Unclaimed Distributions.......... 67
6. Distribution Record Date........................................................ 68
7. Timing and Calculation of Amounts to be Distributed............................. 68
8. Minimum Distribution............................................................ 69
9. Setoffs......................................................................... 69
10. Old Notes....................................................................... 69
11. Failure to Surrender Canceled Instruments....................................... 69
12. Lost, Stolen, Mutilated or Destroyed Debt Securities............................ 69
13. Share Reserve................................................................... 70
14. Settlement of Claims and Controversies.......................................... 70
J. Resolution of Disputed Claims............................................................ 70
1. Prosecution of Objections to Claims............................................. 70
2. Estimation of Claims............................................................ 70
3. Payments and Distributions on Disputed Claims................................... 70
4. Allowance of Claims............................................................. 71
5. Controversy Concerning Impairment............................................... 71
K. Retention Of Jurisdiction................................................................ 71
L. Release, Injunctive And Related Provisions............................................... 72
1. Subordination................................................................... 72
vi
2. MUTUAL RELEASES BY RELEASEES.................................................... 72
3. RELEASES BY HOLDERS OF CLAIMS................................................... 73
4. INDEMNIFICATION................................................................. 73
5. EXCULPATION..................................................................... 73
6. DISCHARGE OF CLAIMS AND TERMINATION OF EQUITY INTERESTS......................... 73
7. INJUNCTION...................................................................... 74
8. Police and Regulatory Powers.................................................... 74
9. Impact of Plan on Pending Litigation; Pension Plans............................. 74
10. Consideration for Releases, Indemnification and Exculpation..................... 75
M. Conditions Precedent to Plan Consummation................................................ 75
N. Conditions Precedent to Occurrence of the Effective Date................................. 75
O. Waiver of Conditions..................................................................... 76
P. Effect of Non-occurrence of Conditions to Occurrence of the Effective Date............... 76
Q. Severability Of Plan Provisions.......................................................... 77
R. Miscellaneous Provisions................................................................. 77
1. Effectuating Documents, Further Transactions and Corporation Action............. 77
2. Dissolution of Committee........................................................ 77
3. Payment of Statutory Fees....................................................... 77
4. Modification of Plan............................................................ 77
5. Revocation of Plan.............................................................. 77
6. Environmental Liabilities....................................................... 78
7. Successors and Assigns.......................................................... 78
8. Reservation of Rights........................................................... 78
9. Section 1146 Exemption.......................................................... 78
10. Further Assurances.............................................................. 78
11. Service of Documents............................................................ 78
12. Filing of Additional Documents.................................................. 79
13. Transactions on Business Days................................................... 79
14. Post-Effective Date Fees and Expenses........................................... 79
15. Conflicts....................................................................... 79
16. Term of Injunctions or Stays.................................................... 79
17. Entire Agreement................................................................ 80
18. Closing of the Chapter 11 Cases................................................. 80
VII. DEBTORS' RETAINED CAUSES OF ACTION................................................................ 81
A. Maintenance of Causes of Action.......................................................... 81
B. Preservation of Causes of Action......................................................... 81
C. Preservation of All Causes of Action Not Expressly Settled or Released................... 83
VIII. FEASIBILITY OF THE PLAN AND THE BEST INTERESTS TEST............................................... 85
A. Feasibility of the Plan.................................................................. 85
B. Best Interests Test...................................................................... 86
1. Generally....................................................................... 86
2. Debtors' Best Interests Test.................................................... 87
C. Estimated Valuation of the Reorganized Debtors........................................... 88
D. Confirmation Without Acceptance by All Impaired Classes: The `Cramdown' Alternative...... 90
IX IMPORTANT CONSIDERATIONS AND RISK FACTORS......................................................... 92
A. The Debtors Have No Duty To Update....................................................... 92
B. No Representations Outside The Disclosure Statement Are Authorized....................... 92
C. Information Presented Is Based On The Debtors' Books And Records, And No Audit Was
Performed ............................................................................... 92
D. All Information Was Provided by Debtors And Was Relied Upon By Professionals ............ 92
E. Projections And Other Forward Looking Statements Are Not Assured, And Actual Results
Will Vary ............................................................................... 92
1. Claims Could Be More Than Projected ............................................ 92
vii
2. Projections .................................................................... 92
F. This Disclosure Statement Was Not Approved By The Securities And Exchange Commission .... 93
G. No Legal Or Tax Advice Is Provided To You By This Disclosure Statement .................. 93
H. No Admissions Made ...................................................................... 93
I. No Waiver Of Right To Object Or Right To Recover Transfers And Estate Assets ............ 93
1. Business Factors and Competitive Conditions .................................... 93
2. Access to Financing and Trade Terms ............................................ 94
3. Market for New Securities ...................................................... 94
4. Impact of Interest Rates ....................................................... 95
J. Bankruptcy Law Risks and Considerations ................................................. 95
1. Confirmation of the Plan is Not Assured ........................................ 95
2. The Plan May Be Confirmed Without the Approval of All Creditors Through
So-Called "Cramdown"............................................................ 95
3. The Effective Date Might Be Delayed or Never Occur ............................. 95
4. The Projected Value of Estate Assets Might Not Be Realized ..................... 95
5. Allowed Claims in the Various Classes May Exceed Projections ................... 96
K. Tax Considerations....................................................................... 96
X. EFFECT OF CONFIRMATION............................................................................ 97
A. Binding Effect of Confirmation .......................................................... 97
B. Vesting Of Assets Free And Clear Of Liens, Claims And Interests ......................... 97
C. Good Faith............................................................................... 97
D. Discharge of Claims...................................................................... 97
E. Judicial Determination of Discharge...................................................... 97
XI. CERTAIN SECURITIES LAW CONSIDERATIONS............................................................. 99
A. Exemptions from Registration under Securities Act........................................ 99
B. Applicability Of Certain Canadian Securities Laws........................................ 99
XII. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN.......................................... 101
A. Certain U.S. Federal Income Tax Consequences To U.S. Holders Of Claims And Equity
Interests................................................................................ 101
1. Consequences to Holders of Prepetition Lenders' Secured Claims.................. 102
2. Consequences to Holders of Other Secured Claims that are not Class 1(B)
Claims, DSD Trust Claims, PACA/PASA Claims and Convenience Claims .............. 102
3. Consequences to Holders of Approved Trade Creditor Reclamation Lien Claims ..... 102
4. Consequences to Holders of Allowed Valid Reclamation Claims Other Than Class
3(B) Claims .................................................................... 102
5. Consequences to Holders of General Unsecured Claims (Other Than Convenience
Claims) ........................................................................ 103
6. Consequences to Holders of Equity Interests .................................... 104
7. Receipt of Interests in Post Confirmation Trust ................................ 104
8. Treatment of Subsequent Distributions on New Common Stock ...................... 105
9. Accrued Interest, Market Discount and Capital Losses ........................... 106
B. Certain U.S. Federal Income Tax Consequences to Non-U.S. Holders of Claims .............. 107
C. Certain U.S. Federal Income Tax Consequences To Reorganized Debtors ..................... 107
1. Transfer of Business Assets .................................................... 107
2. Cancellation of Indebtedness and Reduction of Tax Attributes ................... 108
3. Limitation of Net Operating Loss Carryovers and Other Tax Attributes ........... 109
D. Backup Withholding ...................................................................... 109
XIII. CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF CONSUMMATION OF THE PLAN ..................... 111
A. General ................................................................................. 111
B. Settlement of Debt ...................................................................... 111
viii
C. Resident Holders ........................................................................ 111
1. is or is deemed to be a resident of Canada; and ................................ 112
2. deals at arm's length and is not affiliated with the Debtors (a "Resident
Holder") ....................................................................... 112
D. Non-Resident Holders .................................................................... 112
1. is not and is not deemed to be a resident of Canada; ........................... 112
2. deals at arm's length and is not affiliated with the Debtors; and .............. 112
3. does not use or hold and is not deemed to use or hold the indebtedness in
carrying on a business in Canada (a "Non-Resident Holder") ..................... 112
E. Interests in Post Confirmation Trust .................................................... 112
1. Resident Holders ............................................................... 112
2. Non-Resident Holders ........................................................... 113
XIV. ALTERNATIVES TO PLAN ............................................................................. 114
A. Liquidation Under Chapter 7 ............................................................. 114
B. Dismissal ............................................................................... 114
C. Alternative Plan ........................................................................ 114
XV. CONCLUSION ....................................................................................... 115
EXHIBITS
Exhibit 1 Plan
Exhibit 2 Solicitation Order
Exhibit 3 Financial Information and Projections
3A -- Chapter 11 Emergence Balance Sheet
3B -- Core Mark Newco Financial Projections
3C -- Post Confirmation Trust Financial Projections
Exhibit 4 Best Interests Analysis
Exhibit 5 None
Exhibit 6 CUSIP Numbers of Old Notes
Exhibit 7 Indicative Exit Facility Term Sheet
Exhibit 8 Indicative Tranche B Loan Term Sheet
Exhibit 9 Draft Post Confirmation Trust Agreement
Exhibit 10 Class 3B Preferred Interest Term Sheet
Exhibit 11 Class 5 Preferred Interests Term Sheet
ix
I. SUMMARY
On the Petition Date, the following companies filed petitions under
chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the
United States Bankruptcy Court for the District of Delaware: Core-Mark
International, Inc.; Fleming Companies, Inc.; ABCO Food Group, Inc.; ABCO
Markets, Inc.; ABCO Realty Corp.; ASI Office Automation, Inc.; C/M Products,
Inc.; Core-Mark Interrelated Companies, Inc.; Core-Mark Mid-Continent, Inc.;
Dunigan Fuels, Inc.; Favor Concepts, Ltd.; Fleming Foods Management Co., O.K.,
Fleming Foods of Texas, L.P.; Fleming International, Ltd.; Fleming Supermarkets
of Florida, Inc.; Fleming Transportation Service, Inc.; Food 4 Less Beverage
Company, Inc.; Fuelserv, Inc.; General Acceptance Corporation; Head Distributing
Company; Marquise Ventures Company, Inc.; Minter-Weisman Co.; Piggly Wiggly
Company; Progressive Realty, Inc.; Rainbow Food Group, Inc.; Retail Investments,
Inc.; Retail Supermarkets, Inc.; RFS Marketing Services, Inc.; and Richmar
Foods, Inc. Collectively, these entities are referred to herein as the
"Debtors."
The Debtors are operating their businesses and managing their
properties as debtors and debtors-in-possession pursuant to sections 1107(a) and
1108 of the Bankruptcy Code.
As of the Petition Date, the Debtors were one of the largest
distributors of consumable goods in the United States, supplying food,
food-related and general merchandise products to approximately 45,000 retail
locations throughout the continental United States, Hawaii, Western Canada, and
the Caribbean, with distribution centers throughout the country. As of the
Petition Date, the Debtors employed over 15,000 people.
As of the Petition Date, the Debtors' distribution business operated
within two overall lines of business -- (i) wholesale grocery distribution (the
"Wholesale Distribution Business"), which supplied a full line of products to
grocery stores, discount stores, supercenters and specialty retailers, and (ii)
convenience store wholesale distribution ("Fleming Convenience"), which supplied
(and continues to supply) products to traditional convenience retailers. The
majority of Fleming Convenience is operated under the corporate name of
Core-Mark International, Inc. and its subsidiaries Core-Mark Interrelated
Companies, Inc., Core-Mark Mid Continent Inc., Minter-Weisman Co., and Head
Distributing Co., and the Debtors' other related convenience store operations.
Pursuant to section 363 of the Bankruptcy Code, the Bankruptcy Court approved
the sale of the Wholesale Distribution Business to C&S Acquisition, LLC (C&S),
which sale closed on August 23, 2003 and generated an initial net amount of $237
million and is expected to generate additional sums in the future for the
Debtors' estates. The sale to C&S did not include or otherwise affect the assets
of Fleming Convenience. By the proposed Second Amended Joint Plan of
Reorganization (the "Plan"), the Debtors seek to reorganize their operations
around Fleming Convenience.
The Debtors' third line of business, consisting of retail operations,
has been discontinued, and the Debtors have either sold or closed all of their
retail grocery stores.
Chapter 11 of the Bankruptcy Code allows a debtor to sponsor a plan of
reorganization that proposes how to dispose of a debtor's assets and treat
claims against, and interests in, such debtor. A plan of reorganization
typically may provide for a debtor-in-possession to reorganize by continuing to
operate, to liquidate by selling assets of the estate or to implement a
combination of both. As mentioned above, the Plan is a reorganizing plan.
WHY YOU ARE RECEIVING THIS DOCUMENT
The Bankruptcy Code requires that the party proposing a chapter 11 plan
of reorganization prepare and file with the Bankruptcy Court a document called a
"disclosure statement." THIS DOCUMENT IS THE DISCLOSURE STATEMENT (THE
"DISCLOSURE STATEMENT") FOR THE PLAN. THE DISCLOSURE STATEMENT INCLUDES CERTAIN
EXHIBITS, EACH OF WHICH IS INCORPORATED HEREIN BY REFERENCE.
PLEASE NOTE THAT ANY TERMS NOT SPECIFICALLY DEFINED IN THIS DISCLOSURE
STATEMENT HAVE THE MEANINGS ASCRIBED TO THEM IN THE PLAN, AND ANY CONFLICT
ARISING THEREFROM SHALL BE GOVERNED BY THE PLAN.
This Disclosure Statement summarizes the Plan's content and provides
information relating to the Plan and the process the Bankruptcy Court will
follow in determining whether to confirm the Plan. The Disclosure Statement
1
also discusses the events leading to the Debtors' filing their Chapter 11 Cases,
describes the main events that have occurred in the Debtors' Chapter 11 Cases,
and, finally, summarizes and analyzes the Plan. The Disclosure Statement also
describes certain potential U.S. and Canadian Federal income tax consequences to
Holders of Claims and Equity Interests, voting procedures and the confirmation
process.
THE BANKRUPTCY CODE REQUIRES A DISCLOSURE STATEMENT TO CONTAIN
"ADEQUATE INFORMATION" CONCERNING THE PLAN. IN OTHER WORDS, A DISCLOSURE
STATEMENT MUST CONTAIN SUFFICIENT INFORMATION TO ENABLE PARTIES WHO ARE AFFECTED
BY THE PLAN TO VOTE INTELLIGENTLY FOR OR AGAINST THE PLAN OR OBJECT TO THE PLAN,
AS THE CASE MAY BE. THE BANKRUPTCY COURT HAS REVIEWED THIS DISCLOSURE STATEMENT
AND HAS DETERMINED THAT IT CONTAINS ADEQUATE INFORMATION AND MAY BE SENT TO YOU
TO SOLICIT YOUR VOTE ON THE PLAN.
All Creditors should carefully review both the Disclosure Statement and
the Plan before voting to accept or reject the Plan. Indeed, Creditors should
not rely solely on the Disclosure Statement but should also read the Plan.
Moreover, the Plan provisions will govern if there are any inconsistencies
between the Plan and the Disclosure Statement.
A. Plan Overview
1. Purpose - Reorganization
The purpose of the Plan is to provide the Debtors with a
capital structure that can be supported by cash flows from operations. The
Debtors believe that the reorganization contemplated by the Plan is in the best
interests of their creditors as a whole. If the Plan is not confirmed, the
Debtors believe that they will be forced either to file an alternate liquidating
plan of reorganization or to liquidate under Chapter 7 of the Bankruptcy Code.
In either event, the Debtors believe that the Debtors' unsecured creditors would
realize a less favorable distribution of value, or, in certain cases, none at
all, for their Claims. See Article VIII hereof and the Liquidation Values set
forth in the Best Interest Test analysis attached hereto as Exhibit 4.
2. Substantive Consolidation
On the Effective Date, each of the Debtors' estates will be
substantively consolidated pursuant to section 105(a) of the Bankruptcy Code for
the limited purposes of allowance, treatment and distributions under the Plan.
As a result of the substantive consolidation, on the Effective Date, all
property, rights and claims of the Debtors shall be deemed pooled for purposes
of allowance, treatment and distributions under the Plan. See Section VI.F.1
hereof.
3. Creation of Core-Mark Newco and the Post Confirmation
Trust
The Plan will provide for the reorganization of the Debtors
centered around the Fleming Convenience business through the formation of a new
entity, Core-Mark Newco, as outlined in more detail in Section VI.B.2 herein.
Additionally, the Debtors' remaining assets and liabilities will be transferred
to the Post Confirmation Trust, which will have the responsibility for
liquidating such assets, pursuing causes of action and reconciling and paying
claims, as outlined in more detail in Section VI.F.8 herein.
2
4. Summary of Plan Treatment
UNCLASSIFIED
CLAIMS PLAN TREATMENT
Administrative Subject to the provisions of sections 330(a) and 331 of
Claim:(2) the Bankruptcy Code, each Holder of Claims:2 an Allowed
Administrative including Holders of Allowed Approved
Trade Creditor Lien Claims, but excluding Claims for
Professional Fees, will be paid the full unpaid amount of
such Allowed Administrative Claim in Cash (i) on the
Effective Date or as soon as practicable thereafter, or
(ii) if such Administrative Claim is Allowed after the
Effective Date, as soon as practicable after the date
such Claim is Allowed, or (iii) upon such other terms as
may be agreed upon by such Holder and the applicable
Reorganized Debtor or otherwise upon an order of the
Bankruptcy Court; provided that Allowed Administrative
Claims including Allowed Approved Trade Creditor Lien
Claims representing obligations incurred in the ordinary
course of business or otherwise assumed by the Debtors or
Reorganized Debtors pursuant hereto will be assumed on
the Effective Date and paid or performed by the
applicable Reorganized Debtor when due in accordance with
the terms and conditions of the particular agreements
governing such obligations.
Except as provided in the Plan, Holders of Administrative
Claims that arose on or before October 31, 2003 to which
the First Administrative Bar Date did not apply and
Holders of Administrative Claims that arose after October
31, 2003 that have not been paid as of the Effective
Date, must file an Administrative Claim by the Second
Administrative Bar Date. If an Administrative Claim is
not timely filed by the First Administrative Bar Date or
the Second Administrative Bar Date, as applicable, then
such Administrative Claim shall be forever barred and
shall not be enforceable against the Debtors or the
Reorganized Debtors, their successors, their assigns or
their property. The foregoing requirements to file
Administrative Claims by the relevant bar date shall not
apply to the (i) Administrative Claims of Professionals
retained pursuant to sections 327, 328 and 363 of the
Bankruptcy Code; (ii) expenses of members of the Official
Committee of Unsecured Creditors and the Official
Committee of Reclamation Creditors; (iii) all fees
payable and unpaid under 28 U.S.C. Section 1930; (iv) any
fees or charges assessed against the estates of the
Debtors under 28 U.S.C. Section 123; (v) Intercompany
Claims between Debtors and their affiliates; and (vi)
Administrative Claims arising in the ordinary course of
business relating to inventory, services or supplies
provided by trade vendors or service providers which are
paid or payable by the Debtors in the ordinary course of
business. An objection to an Administrative Claim filed
pursuant to this provision must be filed and properly
served within 220 days after the Effective Date. The
Debtors and the Post Confirmation Trustee, as applicable,
reserve the right to seek an extension of such time to
object.
All Professionals that are awarded compensation or
reimbursement by the Bankruptcy Court in accordance with
sections 330, 331 or 363 of the Bankruptcy Code that are
entitled to the priorities established pursuant to
sections 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of
the Bankruptcy Code, shall be paid in full, in Cash, the
amounts allowed by the Bankruptcy Court: (a) on or as
soon as reasonably practicable following the later to
occur of (i) the Effective Date;
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(2) Includes any claim for costs and expenses of administration pursuant to
sections 503(b), 507(a)(1), 507(b) or 1114(e)(2) of the Bankruptcy
Code, including, but not limited to: (a) the actual and necessary costs
and expenses incurred after the petition date of preserving the estates
and operating the businesses of the Debtors (such as wages, salaries or
commissions for services and payments for goods and other services and
leased premises); (b) compensation for legal, financial advisory,
accounting and other services and reimbursement of expenses awarded or
allowed pursuant to sections 328, 330(a) or 331 of the Bankruptcy Code
or otherwise for the period commencing on the petition date and ending
on the effective date of the Plan; and (c) all fees and charges
assessed against the estates pursuant to Chapter 123 of Title 28 United
States Code, 28 U.S.C. Sections 1911 through 1930. This excludes
Reclamation Claims.
3
UNCLASSIFIED
CLAIMS PLAN TREATMENT
and (ii) the date upon which the Bankruptcy Court order
allowing such Claim becomes a Final Order; or (b) upon
such other terms as may be mutually agreed upon between
such Professional and the Reorganized Debtors. On or
before the Effective Date and prior to any distribution
being made under the Plan, the Debtors shall escrow into
the Professional Fee Escrow Account, the Carve-Out and
the Additional Carve-Out as outlined in the Final DIP
Order and any additional estimated accrued amounts owed
to Professionals through the Effective Date.
Except as otherwise provided by Court order for a
specific Professional, Professionals or other entities
requesting compensation or reimbursement of expenses
pursuant to sections 327, 328, 330, 331, 503(b) and 1103
or 363 of the Bankruptcy Code for services rendered prior
to the Confirmation Date must file and serve an
application for final allowance of compensation and
reimbursement of expenses no later than forty-five (45)
days after the Effective Date. All such applications for
final allowance of compensation and reimbursement of
expenses will be subject to the authorization and
approval of the Court. Any objection to the Claims of
Professionals shall be filed on or before thirty (30)
days after the date of the filing of the application for
final compensation.
ALLOWED ADMINISTRATIVE CLAIMS WHICH SHALL BE PAID IN FULL
UNDER THE PLAN ARE CURRENTLY ESTIMATED TO BE IN THE RANGE
OF $96 TO 125 MILLION AS OF THE EFFECTIVE DATE.
Priority Tax In full satisfaction, settlement, release, and discharge
Claims of, and in exchange for, each Allowed Priority Tax Claim
that is due and payable on or prior to the Effective
Date:
(a) if payment of the Allowed Priority Tax Claim is not
secured or guaranteed by a surety bond or other similar
undertaking, commencing on the Effective Date or as soon
as practicable thereafter, the Holder of such Claim shall
be paid the principal amount of such Claim plus simple
interest on any outstanding balance from the Effective
Date calculated at the interest rate available on ninety
(90) day United States Treasuries on the Effective Date,
in quarterly deferred Cash payments over a period not to
exceed six years after the date of assessment of the tax
on which such Claim is based, unless the Debtor and
Holder mutually agree to a different treatment or as
otherwise ordered by the Court.
(b) if payment of the Allowed Priority Tax Claim is
secured or guaranteed by a surety bond or other similar
undertaking, the Holder of the Allowed Priority Tax Claim
shall be required to seek payment of its Claim from the
surety in the first instance and only after exhausting
all right to payment from its surety bond or other
similar undertaking shall the Holder be permitted to seek
payment from the Debtors under this Plan as a holder of
an Allowed Priority Tax Claim and the remainder, if any,
owing on an Allowed Claim after deducting all payments
received from the surety shall be treated as outlined in
paragraph (a) above.
To the extent the surety pays the Allowed Priority Tax
Claim in full, the Priority Tax Claim shall be
extinguished. The surety's Claim against the Debtors for
reimbursement is not entitled to be paid as a Priority
Tax Claim hereunder. To the extent the surety holds no
security for its surety obligations, it shall have a
Class 6 Claim and shall be paid in accordance with
section III.B.8. of the Plan. To the extent the surety
holds security for its surety obligations, the surety
shall have a Class 3(A) Claim under the Plan and be paid
in accordance with section III.B.3. of the Plan.
ALLOWED PRIORITY TAX CLAIMS WHICH SHALL BE PAID IN FULL
UNDER THE PLAN ARE CURRENTLY ESTIMATED TO BE IN THE RANGE
OF $11 TO 13 MILLION AS OF THE EFFECTIVE DATE.(3)
DIP Claims: On the Effective Date, or as soon as practicable
thereafter, each Holder of an Allowed DIP Claim shall be
paid in full in Cash in full satisfaction, settlement,
release and discharge of and in exchange for each and
every Allowed DIP Claim, unless such Holder consents to
other treatment.
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(3) This estimate does not include account payable and accrued liabilities
incurred in the ordinary course of business and carried through the
Effective Date by Core-Mark Newco.
4
UNCLASSIFIED
CLAIM PLAN TREATMENT
ALLOWED DIP CLAIMS, WHICH ARE COMPRISED OF LETTERS OF
CREDIT OUTSTANDING AND WHICH SHALL BE PAID IN FULL UNDER
THE PLAN, ARE CURRENTLY ESTIMATED TO BE IN THE RANGE OF
$25 TO 30 MILLION, AS OF THE EFFECTIVE DATE.
PLAN TREATMENT
CLASS CLAIM OF CLASS
1(A) Other Priority In full satisfaction, settlement, release,
Priority Non-Tax and Claim discharge of, and in exchange
for, Non-Tax Claims each Allowed Other
that is due and payable on or prior to the
Effective Date, on the Effective Date or
as soon as practicable thereafter, the
Holder of such Claim shall be paid the
principal amount of such Claim unless the
Holder consents to other treatment. THE
CLASS IS UNIMPAIRED AND IS DEEMED TO
ACCEPT.
ALLOWED CLASS 1 CLAIMS WHICH SHALL BE PAID
IN FULL UNDER THE PLAN ARE CURRENTLY
ESTIMATED TO BE IN THE RANGE OF $6 TO 15
MILLION AS OF THE EFFECTIVE DATE.
1(B) Property Tax Claims In full satisfaction, settlement, release,
and discharge of, and in exchange for,
each Allowed Property Tax Claim that is
due and payable on or prior to the
Effective Date, commencing on the
Effective Date or as soon as practicable
thereafter, the Holder of such Allowed
Property Tax Claim shall be paid the
principal amount of such Claim plus simple
interest on any outstanding balance from
the Effective Date calculated at the
interest rate available on ninety (90) day
United States Treasuries on the Effective
Date, in quarterly deferred Cash payments
over a period not to exceed six years
after the date of assessment of the tax on
which such Claim is based, unless the
Debtor and Holder mutually agree to a
different treatment. THE CLASS IS IMPAIRED
AND ENTITLED TO VOTE.
ALLOWED PROPERTY TAX CLAIMS, WHICH SHALL
BE PAID IN FULL UNDER THE PLAN, ARE
CURRENTLY ESTIMATED TO BE IN THE RANGE OF
$5 TO 6 MILLION AS OF THE EFFECTIVE DATE.
2 Pre-Petition On the Effective Date, or as soon as
Lenders' Secured practicable thereafter unless such Holder
Claims consents to other treatment, each Holder
of an Allowed Pre-Petition Lenders'
Secured Claim shall be paid in full and
shall either (i) assign its liens in the
Debtors' assets to the lender under the
Exit Financing Facility or (ii) assign its
liens in the Debtors' assets to Core-Mark
Newco which liens as assigned shall have
the same validity and priority as such
liens held by the Holders of the Class 2
Claims, and which liens as assigned shall
be subject to further transfer to the Post
Confirmation Trust, as applicable. THE
CLASS IS UNIMPAIRED AND IS DEEMED TO
ACCEPT.
ALLOWED CLASS 2 CLAIMS WHICH SHALL BE PAID
IN FULL UNDER THE PLAN ARE CURRENTLY
ESTIMATED TO BE $200 TO 220 MILLION AS OF
THE EFFECTIVE DATE.
3
3(A) Other Secured On the Effective Date or as soon as
Claims that are not practicable thereafter, each Holder of an
Class 1(B) Claims Class Allowed Other Secured Claim that is
not a (e.g. PMSI Holders, 1(B) Claims
equipment financing lenders, etc ) shall
receive one of the following treatments,
at the Debtors' option, such that they
shall be rendered unimpaired pursuant to
section 1124 of the Bankruptcy Code: (i)
the payment of such Holder's Allowed Other
Secured Claim in full, in Cash; (ii)
payment of the sale or disposition
proceeds of the property securing such
Allowed Other Secured Claim to the extent
of the value of the Holder's interest in
such property; or (iii) the surrender to
the Holder of the property securing such
Claim. THE CLASS IS UNIMPAIRED AND IS
DEEMED TO ACCEPT ALLOWED CLASS 3(A) CLAIMS
ARE CURRENTLY ESTIMATED TO BE IN THE RANGE
OF $750,000 TO $2 MILLION AS OF THE
EFFECTIVE DATE.
5
PLAN TREATMENT
CLASS CLAIM OF CLASS
3(B) Approved Trade On the Effective Date, or as soon as
Creditor practicable thereafter the Post
Reclamation Lien Confirmation Creditor Reclamation Trust
Claims shall issue the Class 3B Preferred
Interests in favor of the Holders of Lien
Claims Allowed Approved Trade in the
estimated aggregate amount of such Allowed
Claims under the terms and conditions
outlined in the Class 3B Preferred
Interests Term Sheet (with the interests
to be reissued as such Claims are Allowed
by Final Order or settlement) and grant a
first priority lien to such Holders on the
Post Confirmation Trust Distributable
Assets entitling each Holder of an Allowed
Approved Trade Creditor Reclamation Lien
Claim to its Ratable Proportion of the
Post Confirmation Trust Distributable
Assets up to the total amount of each
Holders' Allowed Approved Trade Creditor
Reclamation Lien Claim, in full
satisfaction, settlement, release and
discharge of each Allowed Approved Trade
Creditor Reclamation Lien Claim, unless
such Holder agrees to other treatment, and
subject at the Debtors' option, to
reduction for unpaid post-petition
deductions, preference payments and other
applicable setoff rights. As additional
security for the Class 3B Preferred
Interests, Core-Mark Newco shall provide a
junior secured guarantee under the terms
outlined in the Class 3B Preferred
Interests Term Sheet. THE CLASS IS
IMPAIRED AND ENTITLED TO VOTE.
ALLOWED CLASS 3(B) CLAIMS ARE CURRENTLY
ESTIMATED TO BE IN THE RANGE OF $43 TO 55
MILLION PRIOR TO SETOFFS WHICH MAY BE
AVAILABLE TO THE DEBTORS AS OF THE
EFFECTIVE DATE AND WILL BE PAID IN FULL
UNDER THE PLAN BY THE POST CONFIRMATION
TRUST OR CORE-MARK NEWCO AS OUTLINED IN
THE CLASS 3(B) PREFERRED INTERESTS TERM
SHEET.
3(C) DSD Trust Claims Each Holder of an Allowed DSD Trust Claim
shall be paid in full satisfaction,
settlement, release and discharge of each
Allowed DSD Trust Claim in Cash their
Ratable Proportion of the DSD Settlement
Fund as outlined in the DSD Settlement
Agreement. THE CLASS IS IMPAIRED AND
ENTITLED TO VOTE.
THE DSD SETTLEMENT FUND SHALL BE IN THE
AMOUNT OF $17.5 MILLION.
4 PACA/PASA In full satisfaction, settlement, release,
Claims:(4) and discharge of, and in exchange for,
each Allowed PACA/PASA Claim that is due
and payable on or prior to the Effective
Date, on the Effective Date or as soon as
practicable thereafter, the Holder of such
Claim shall be paid the principal amount
of such Claim unless the Holder consents
to other treatment. THE CLASS IS
UNIMPAIRED AND IS DEEMED TO ACCEPT.
ALLOWED CLASS 4 CLAIMS WHICH SHALL BE PAID
IN FULL UNDER THE PLAN ARE CURRENTLY
ESTIMATED TO BE IN THE RANGE OF $8 TO $14
MILLION AS OF THE EFFECTIVE DATE.
5 Valid Reclamation To the extent the Court determines that
Claims that are the Holders of Reclamation Claims that are
not not Class 3(B) Claims are entitled to priority treatment,
Claims on the Effective Date, Class 3(B) Claims
or as soon as practicable thereafter, the
Post Confirmation Trust, shall issue the
Class 5 Preferred Interests in favor of
such Holders in the estimated aggregate
amount of their Allowed Claims (with the
interests to be reissued as such Claims
are Allowed by Final Order or settlement)
and grant a second priority lien on the
Post Confirmation Trust Distributable
Assets entitling each Holder to its
Ratable Proportion of the Post
Confirmation Trust Distributable Assets,
after all Class 3(B) Claims are paid in
full.
As additional security for the Class 5
Preferred Interests in the event the Court
determines that the Holders of Class 5
Claims are entitled to priority treatment,
Core-Mark Newco shall provide a junior
guarantee under the terms outlined in the
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(4) Includes claims asserted pursuant to the Perishable Agricultural Commodities
Act, 7 U.S.C. Section 499a et seq. ("PACA"), the Packers and Stockyard Act, 7
U.S.C. Section 181 et seq. ("PASA"), or state statutes or similar import.
6
PLAN TREATMENT
CLASS CLAIM OF CLASS
Class 5 Preferred Interests Term Sheet.
In the event the Court denies the Holders
of Reclamation Claims that are not Class
3(B) Claims priority treatment, such
Reclamation Claims shall be treated as
Class 6 Claims hereunder, and any ballots
cast by Holders of Class 5 Claims shall be
counted as ballots cast by Holders of
Class 6 Claims. THE CLASS IS IMPAIRED AND
ENTITLED TO VOTE.
ALLOWED CLASS 5 CLAIMS ARE CURRENTLY
ESTIMATED TO BE IN THE RANGE OF [$0 TO $80
MILLION PRIOR TO GIVING AFFECT TO ALL OF
THE DEBTORS' PREPETITION DEDUCTIONS AS OF
THE EFFECTIVE DATE AND TO THE EXTENT THE
COURT DETERMINES THE HOLDERS OF CLASS 5
CLAIMS ARE ENTITLED TO PRIORITY TREATMENT,
THE HOLDERS OF CLASS 5 CLAIMS WILL BE PAID
IN FULL UNDER THE PLAN BY THE
POST-CONFIRMATION TRUST OR CORE-MARK NEWCO
AS OUTLINED IN THE CLASS 5 PREFERRED
INTERESTS TERM SHEET.
6 General Unsecured On the Effective Date, or as soon as
Claims other than practicable thereafter, each Holder of an
Convenience Claims Allowed General Unsecured Claim other than
Convenience Claims, shall be paid in full
satisfaction, settlement, release, and
discharge of and in exchange for each
and every Allowed General Unsecured Claim
other than Convenience Claims, at the
Debtors' option, in one or a combination
of the following manners: (i) issuance of
a Ratable Proportion of the New Common
Stock subject to dilution from the
issuance of warrants to the Tranche B
Lenders and through the Management
Incentive Plan; and/or (ii) in the event
the Debtors, with the consent of the
Creditors Committee, elect to sell some or
all of their assets as outlined herein, a
Ratable Proportion of Cash remaining from
the sale of such assets after all of the
Allowed Unclassified Claims and Claims of
Holders in Classes 1 through 5 have been
satisfied in full.
As additional consideration, each Holder
of an Allowed General Unsecured Claim
shall be entitled to a Ratable Proportion
of Excess Proceeds (as defined in the Post
Confirmation Trust Agreement), if any,
available from the Post Confirmation Trust
after payment by the Post Confirmation
Trust of all claims and obligations
required to be made by the Post
Confirmation Trust under the Plan, the
Post Confirmation Trust Agreement, or
otherwise, as set forth in the Post
Confirmation Trust Agreement.
THE CLASS IS IMPAIRED AND IS ENTITLED TO
VOTE.
ALLOWED CLASS 6 CLAIMS ARE CURRENTLY
ESTIMATED TO BE IN THE RANGE OF $2.6-$3.2
BILLION AS OF THE EFFECTIVE DATE. BASED ON
THIS ESTIMATED RANGE OF ALLOWED CLAIMS AND
THE ESTIMATED VALUE OF THE NEW COMMON
STOCK, THE HOLDERS OF CLASS 6 CLAIMS SHALL
BE RECEIVING STOCK IN CORE-MARK NEWCO WITH
A VALUE EQUAL TO APPROXIMATELY 4% TO 7% OF
THE ALLOWED AMOUNT OF EACH SUCH HOLDERS'
CLAIM.
7 Convenience On or as soon as practicable after the
Claims Effective Date, each Holder of an Allowed
Class 7 Claim shall receive, in full and
final satisfaction of such claim, a cash
distribution equal to 10% of the amount of
its Class 7 Claim, provided however, the
aggregate amount of such Allowed Class 7
Claims shall not exceed $10,000,000. If
the aggregate amount of the Allowed Class
7 Claims exceeds $10,000,000, each Holder
of an Allowed Class 7 Claim shall receive
its Ratable Proportion of $1,000,000. THE
CLASS IS IMPAIRED AND IS ENTITLED TO VOTE.
ALLOWED CLASS 7 CLAIMS ARE CURRENTLY
ESTIMATED TO BE IN THE RANGE OF $5-$10
MILLION AS OF THE EFFECTIVE DATE.
8 Equity Receives no distribution and
Interests: are canceled.
THE CLASS IS FULLY IMPAIRED AND DEEMED TO
REJECT.
9 Intercompany Receives no distribution and are canceled.
Claims THE CLASS IS FULLY IMPAIRED AND DEEMED TO
REJECT.
10 Other Securities Receives no distribution and are cancelled
Claims and and discharged. THE CLASS IS FULLY
Interests IMPAIRED AND DEEMED TO REJECT.
7
THE BANKRUPTCY COURT HAS NOT YET CONFIRMED THE PLAN DESCRIBED
IN THIS DISCLOSURE STATEMENT. IN OTHER WORDS, THE TERMS OF THE PLAN ARE NOT YET
BINDING ON ANYONE. HOWEVER, IF THE BANKRUPTCY COURT LATER CONFIRMS THE PLAN,
THEN THE PLAN WILL BE BINDING ON ALL CLAIM AND EQUITY INTEREST HOLDERS.
5. Executory Contracts and Unexpired Leases
Immediately prior to the Confirmation Date, except as
otherwise provided herein, all executory contracts or unexpired leases of the
Debtors will be deemed rejected in accordance with the provisions and
requirements of sections 365 and 1123 of the Bankruptcy Code except those
executory contracts and unexpired leases that (i) have been previously rejected
or assumed by Order of the Bankruptcy Court, (ii) are subject to a pending
motion to reject or assume or (iii) are specifically listed on the Assumption
Schedule to be filed with the Court 15 days prior to the Voting Deadline. The
Debtors, with the consent of the Creditors' Committee, reserve the right for 30
days after the Confirmation Date to modify the Assumption Schedule to add
Executory Contracts or Leases or remove Executory Contracts or Leases from such
Assumption Schedule. The Debtors shall provide appropriate notice to any party
added or removed from the Assumption Schedule after the Confirmation Date, and
any such party removed from the Assumption Schedule shall have thirty days from
the receipt of such notice to file a proof of claim with the Bankruptcy Court.
B. Voting and Confirmation
Each Holder of a Claim in Classes 1(B), 3(B), 3(C), 5, 6 and 7 will be
entitled to vote either to accept or reject the Plan. Classes 1(B), 3(B), 3(C),
5, 6 and 7 shall have accepted the Plan if: (i) the Holders of at least
two-thirds in dollar amount of the Allowed Claims actually voting in each such
Class have voted to accept the Plan and (ii) the Holders of more than one-half
in number of the Allowed Claims actually voting in each such Class have voted to
accept the Plan. Assuming the requisite acceptances are obtained, the Debtors
intend to seek confirmation of the Plan at the Confirmation Hearing scheduled to
commence on [_________], 2004 before the Bankruptcy Court. Notwithstanding the
foregoing, the Debtors will seek Confirmation of the Plan under section 1129(b)
of the Bankruptcy Code with respect to the Impaired Classes presumed to reject
the Plan and reserve the right to do so with respect to any other rejecting
Class or to modify the Plan in accordance with Article XIII.D of the Plan.
Article III of this Disclosure Statement specifies the deadlines,
procedures and instructions for voting to accept or reject the Plan and the
applicable standards for tabulating Ballots. The Bankruptcy Court has
established [_________], 2004, (the "Voting Record Date") as the date for
determining which Holders of Claims are eligible to vote on the Plan. Ballots
will be mailed to all registered Holders of Claims as of the Voting Record Date
who are entitled to vote to accept or reject the Plan. An appropriate return
envelope will be included with your Ballot, if necessary. Beneficial Holders of
Claims who receive a return envelope addressed to their bank, brokerage firm or
other Nominee, or any agent thereof, (each, a "Nominee") should allow sufficient
time for the Nominee to receive their votes, process them on a Master Ballot and
forward them to the Solicitation Agent before the Voting Deadline, as defined
below.
The Debtors have engaged the Solicitation Agent to assist in the voting
process. The Solicitation Agent will answer questions, provide additional copies
of all materials and oversee the voting tabulation. The Solicitation Agent will
also process and tabulate ballots for each Class entitled to vote to accept or
reject the Plan. The "Solicitation Agent" is Bankruptcy Management Corporation,
1330 E. Franklin Avenue, El Segundo, California 90245, (888) 909-0100 (toll
free).
C. Risk Factors
Prior to deciding whether and how to vote on the Plan, each Holder of a
Claim should consider carefully all of the information in this Disclosure
Statement and should particularly consider the Risk Factors described in Article
IX hereof.
8
D. Disclaimer
1. Read This Disclosure Statement And The Plan Carefully
All creditors are urged to carefully read this Disclosure Statement,
with all attachments and enclosures, in its entirety, in order to formulate an
informed opinion as to the manner in which the Plan affects their Claims against
the Debtors and to determine whether to vote to accept the Plan.
You should also read the Plan carefully and in its entirety. The
Disclosure Statement contains a summary of the Plan for your convenience, but
the terms of the Plan, itself, supersede and control the summary.
In formulating the Plan, the Debtors relied on financial data derived
from their books and records. The Debtors therefore represent that everything
stated in this Disclosure Statement is true to the best of their knowledge. We
nonetheless cannot, and do not, confirm the current accuracy of all statements
appearing in this Disclosure Statement.
The discussion in this Disclosure Statement regarding the Debtors may
contain "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements consist of any
statement other than a recitation of historical fact and can be identified by
the use of forward-looking terminology such as "may," "expect," "believe,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. The reader is cautioned that all
forward looking statements are necessarily speculative, and there are certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in such forward looking statements. The
liquidation analyses, distribution projections and other information are
estimates only, and the timing and amounts of actual distributions to creditors
may be affected by many factors that cannot be predicted. Therefore, any
analyses, estimates or recovery projections may or may not turn out to be
accurate.
NOTHING CONTAINED IN THIS DISCLOSURE STATEMENT IS, OR SHALL BE DEEMED
TO BE, AN ADMISSION OR STATEMENT AGAINST INTEREST BY THE DEBTORS FOR PURPOSES OF
ANY PENDING OR FUTURE LITIGATION MATTER OR PROCEEDING.
ALTHOUGH THE ATTORNEYS, ACCOUNTANTS, ADVISORS AND OTHER PROFESSIONALS
EMPLOYED BY THE DEBTORS HAVE ASSISTED IN PREPARING THIS DISCLOSURE STATEMENT
BASED UPON FACTUAL INFORMATION AND ASSUMPTIONS RESPECTING FINANCIAL, BUSINESS
AND ACCOUNTING DATA FOUND IN THE BOOKS AND RECORDS OF THE DEBTORS, THEY HAVE NOT
INDEPENDENTLY VERIFIED SUCH INFORMATION AND MAKE NO REPRESENTATIONS AS TO THE
ACCURACY THEREOF. THE ATTORNEYS, ACCOUNTANTS, ADVISORS AND OTHER PROFESSIONALS
EMPLOYED BY THE DEBTORS SHALL HAVE NO LIABILITY FOR THE INFORMATION IN THIS
DISCLOSURE STATEMENT.
THE DEBTORS AND THEIR PROFESSIONALS ALSO HAVE MADE A DILIGENT EFFORT TO
IDENTIFY IN THIS DISCLOSURE STATEMENT AND IN THE PLAN PENDING LITIGATION CLAIMS
AND PROJECTED CAUSES OF ACTION AND OBJECTIONS TO CLAIMS. HOWEVER, NO RELIANCE
SHOULD BE PLACED ON THE FACT THAT A PARTICULAR LITIGATION CLAIM OR PROJECTED
CAUSE OF ACTION OR OBJECTION TO CLAIM IS, OR IS NOT, IDENTIFIED IN THIS
DISCLOSURE STATEMENT OR THE PLAN. THE DEBTORS, THE REORGANIZED DEBTORS OR THE
POST CONFIRMATION TRUST MAY SEEK TO INVESTIGATE, FILE AND PROSECUTE LITIGATION
CLAIMS AND PROJECTED CAUSES OF ACTION AND OBJECTIONS TO CLAIMS AFTER THE
CONFIRMATION OR EFFECTIVE DATE OF THE PLAN IRRESPECTIVE OF WHETHER THIS
DISCLOSURE STATEMENT OR THE PLAN IDENTIFIES ANY SUCH CLAIMS, CAUSES OF ACTION OR
OBJECTIONS TO CLAIMS.
9
II. RECOMMENDATIONS
A. The Debtors And The Creditors' Committee Strongly Recommend
That You Vote In Favor Of The Plan
The Debtors and the Creditors' Committee strongly recommend that you
vote in favor of the Plan. Your vote on the Plan is important. Nonacceptance of
the Plan may result in protracted delays, a chapter 7 liquidation or the
confirmation of another less favorable chapter 11 plan. These alternatives may
not provide for distribution of as much value to Holders of Allowed Claims as
does the Plan. The Debtors and the Creditors' Committee believe that unsecured
creditors will receive a greater distribution under the Plan than they would in
a chapter 7 liquidation, as more fully discussed in "Alternatives to the Plan -
Liquidation Under Chapter 7" below.
10
III. VOTING ON AND CONFIRMATION OF THE PLAN
A. Deadline for Voting For or Against the Plan
If one or more of your Claims is in a voting Class, the Debtors'
solicitation agent, Bankruptcy Management Corporation ("Solicitation Agent") has
sent you one or more individual Ballots, with return envelopes (WITHOUT POSTAGE
ATTACHED) for voting to accept or reject the Plan. The Debtors and Creditors'
Committee urge you to accept the Plan by completing, signing and returning the
enclosed Ballot(s) in the return envelope(s) (WITH POSTAGE AFFIXED BY YOU), to
the Solicitation Agent as follows:
If by hand delivery/courier: If by U.S. mail:
Bankruptcy Management Corporation Bankruptcy Management Corporation
1330 E. Franklin Avenue P.O. Box 900
El Segundo, CA 90245 El Segundo, CA 90245-0900
Attn: Fleming Solicitation Agent Attn: Fleming Solicitation Agent
OR, IF YOU BENEFICIALLY OWN OLD NOTES THROUGH A NOMINEE OR OTHER RECORD HOLDER,
SUCH AS A BANK, BROKERAGE FIRM OR ANY OTHER AGENT THEREOF AND YOU RECEIVED THIS
DISCLOSURE STATEMENT DIRECTLY FROM SUCH NOMINEE, THEN YOU SHOULD RETURN YOUR
BALLOT TO SUCH NOMINEE. YOU SHOULD ALLOW FOR ENOUGH TIME SO THAT THE NOMINEE CAN
RECEIVE YOUR VOTE, REFLECT IT ON A MASTER BALLOT AND RETURN THE MASTER BALLOT TO
THE SOLICITATION AGENT BEFORE THE VOTING DEADLINE.
TO BE COUNTED, THE SOLICITATION AGENT MUST RECEIVE YOUR BALLOT (OR
MASTER BALLOT OF YOUR NOMINEE HOLDER) INDICATING ACCEPTANCE OR REJECTION OF THE
PLAN NO LATER THAN 5:00 P.M., PREVAILING EASTERN TIME, ON [_____], 2004 (THE
"VOTING DEADLINE"), UNLESS THE BANKRUPTCY COURT EXTENDS OR WAIVES THE PERIOD
DURING WHICH VOTES WILL BE ACCEPTED BY THE DEBTORS, IN WHICH CASE THE TERM
"VOTING DEADLINE" FOR SUCH SOLICITATION SHALL MEAN THE LAST TIME AND DATE TO
WHICH SUCH SOLICITATION IS EXTENDED. ANY EXECUTED BALLOT OR COMBINATION OF
BALLOTS REPRESENTING CLAIMS IN THE SAME CLASS OR SUBCLASS HELD BY THE SAME
HOLDER THAT DOES NOT INDICATE EITHER AN ACCEPTANCE OR REJECTION OF THE PLAN OR
THAT INDICATES BOTH AN ACCEPTANCE AND REJECTION OF THE PLAN SHALL NOT BE
COUNTED. ANY BALLOT RECEIVED AFTER THE VOTING DEADLINE MAY NOT BE COUNTED IN THE
DISCRETION OF THE DEBTORS AND THE CREDITORS' COMMITTEE.
Detailed voting instructions are printed on and/or accompany each
Ballot. Any Ballot and Master Ballot sent by mail must be received by the
Solicitation Agent no later than 5:00 p.m. Eastern Time on the Voting Deadline.
Any Ballot or Master Ballot received after the Voting Deadline, shall not be
counted, subject to the discretion of the Debtors and the Creditors' Committee.
Any Ballot or Master Ballot sent by any other means must be physically received
by the Solicitation Agent or a Nominee, as the case may be, by the Voting
Deadline or it shall not be counted. Any unsigned Ballot or any Ballot that has
no original signature, including any Ballot received by facsimile or other
electronic means, or any Ballot with only a photocopy of a signature shall not
be counted. Any Ballot that is not clearly marked as voting for or against the
Plan, or marked as both voting for and against the Plan, shall not be counted.
Any Ballot that is properly completed and timely received shall not be counted
if such Ballot was sent in error to, or by, the voting party, because the voting
party did not have a Claim that was entitled to be voted in the relevant Voting
Class as of the Voting Record Date. A Beneficial Holder (but not an entity
voting acting in a fiduciary capacity and on behalf of more than one Beneficial
Holder, such as a Nominee) that is voting more than one Claim in a Voting Class
must vote all of its Claims within a particular Voting Class either to accept or
to reject the Plan and may not split its vote in the same Voting Class, and
thus, any Ballot (or Ballots in the same Voting Class) of a Beneficial Holder
that partially rejects and partially accepts the Plan shall be deemed as
accepting the Plan. Whenever a Holder of a Claim in a Voting Class casts more
than one Ballot voting the same Claim prior to the Voting Deadline, the last
Ballot physically received by the Solicitation Agent or a Nominee, as the case
may be, prior to the Voting Deadline shall be deemed to reflect the voter's
intent and thus shall supersede and replace any prior cast Ballot(s), and any
prior cast Ballot(s), shall not be counted. The Debtors, in consultation with
the
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Committee, without notice, subject to contrary order of the Court, may waive
any defect in any Ballot or Master Ballot at any time, either before or after
the close of voting, and without notice. Such determinations will be disclosed
in the voting report and any such determination by the Debtors and the Committee
shall be subject to de-novo review by the Court.
The Debtors and the Creditors' Committee filed their Second Amended
Joint Plan of Reorganization of Fleming Companies, Inc. and its Filing
Subsidiaries Under Chapter 11 of the United States Bankruptcy Code [DOCKET NO.
__]; and the Bankruptcy Court has entered the Solicitation Order requested
thereby, which, among other things, approved the voting procedures addressed
herein. You should carefully read the Solicitation Order, which is annexed
hereto as Exhibit 2. It establishes, among other things: (a) the deadlines,
procedures and instructions for voting to accept or reject the Plan; (b) the
Voting Record Date, which is [____________], 2004 (c) the applicable standards
for tabulating Ballots; (d) the deadline for filing objections to Confirmation
of the Plan; and (e) the date and time of the Confirmation Hearing (also set
forth below).
The Solicitation Order should be referred to if you have any questions
concerning the procedures described herein. If there are any inconsistencies or
ambiguities between this Disclosure Statement and the Solicitation Order, the
Solicitation Order will control.
THE DEBTORS AND THE CREDITORS' COMMITTEE BELIEVE THAT THE PLAN IS IN
THE BEST INTEREST OF ALL OF THEIR CREDITORS AS A WHOLE. THE DEBTORS AND THE
CREDITORS' COMMITTEE THEREFORE RECOMMEND THAT ALL HOLDERS OF CLAIMS SUBMIT
BALLOTS TO ACCEPT THE PLAN.
B. Confirmation Hearing For The Plan
The Bankruptcy Court has set a hearing on the Confirmation of the Plan
(the "Confirmation Hearing") to consider objections to Confirmation, if any,
commencing at _:__ _.M., PREVAILING EASTERN TIME on _________ __, 2004, in the
United States Bankruptcy Court, 824 Market Street, Wilmington, Delaware 19801.
The Confirmation Hearing may be adjourned, from time to time, without notice,
other than an announcement of an adjourned date at such hearing or an adjourned
hearing, or by posting such continuance on the Court's docket.
C. Any Objections To Confirmation Of The Plan
Any responses or objections to Confirmation of the Plan must be in
writing (with proposed changes to the Plan being marked for changes, i.e.,
blacklined against the Plan), and must be filed with the Clerk of the Bankruptcy
Court with a copy to the Court's Chambers, together with a proof of service
thereof, and served on counsel for the Debtors, counsel for the Committee and
the Office of United States Trustee ON OR BEFORE _________ __, 2004 AT 5:00
P.M., PREVAILING EASTERN TIME. Bankruptcy Rule 3007 governs the form of any such
objection.
COUNSEL ON WHOM OBJECTIONS MUST BE SERVED ARE:
Counsel for the Debtors: Pachulski, Stang, Ziehl, Young, Jones &
Kirkland & Ellis LLP Weintraub P.C.
200 E. Randolph Drive 919 N. Market Street, Sixteenth Floor
Chicago, Illinois 60601 Post Office Box 8705
Attn: Geoffrey A Richards, Esq Wilmington, Delaware 19899-8705 (Courier
Janet S Baer, Esq 19801)
Attn: Laura Davis Jones, Esq.
Christopher J Lhulier, Esq.
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Counsel for the United States Trustee
Office of the United States Trustee
844 N. King Street, Second Floor
Wilmington, Delaware 19801
Attn: Joseph McMahon, Esq.
Counsel for the Official Committee
of Unsecured Creditors Pepper Hamilton LLP
Milbank, Tweed, Hadley & McCloy 100 Renaissance Center
1 Chase Manhattan Plaza Detroit, Michigan 48243
New York, New York 10005 Attn: I. William Cohen, Esq.
Attn: Dennis Dunne, Esq. Robert Hertzberg, Esq.
Paul S. Aronzon, Esq.
D. Questions About The Disclosure Statement, Plan Or Ballots
You may address any questions you have about this Disclosure Statement,
the Plan or your Ballot(s) to general bankruptcy counsel for the Debtors:
Evan R. Gartenlaub, Esq.
Kirkland & Ellis LLP
200 E. Randolph Drive
Chicago, Illinois 60601
Tel.: (312) 861-2000
Fax: (312) 861-2200
Unsecured creditors may also address any questions they may have to counsel for
the Creditors' Committee:
Dennis Dunne, Esq. Dennis S. Kayes, Esq.
Milbank, Tweed, Hadley & McCloy Pepper Hamilton LLP
1 Chase Manhattan Plaza 100 Renaissance Center
New York, New York 10005 Detroit, Michigan 48243
Tel: (212) 530-5000 Tel: (313) 259-7110
Fax: (212) 530-5219 Fax: (313) 259-7926
Email: ddunne@milbank.com Email: kayesd@pepperlaw.com
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IV. ORGANIZATION AND ACTIVITIES OF THE DEBTORS
A. Operations
As of the Petition Date, Fleming, together with its Debtor and
non-debtor affiliates, was an industry leading distributor of consumable
packaged goods in the United States. The Debtors' distribution business for both
the Wholesale Distribution Business and the Convenience Business involved
purchasing, receiving, warehousing, selecting, loading, delivering and
distributing a wide variety of consumable items including groceries, meat,
dairy, delicatessen products and packaged goods, as well as a variety of general
merchandise such as health and beauty care items. As of the Petition Date, the
Debtors' distribution network operated through 50 distribution centers. In 2002,
the average number of stock - keeping units, or SKUs, carried in the Debtors'
wholesale distribution centers ranged from 6,000 to 19,000 based on the size and
focus of the specific distribution center. The Wholesale Distribution Business
assets were sold during the course of the Chapter 11 Cases as outlined below.
Largely independent of its distribution segment, certain of the Debtor
entities also maintained retail operations. As of the Petition Date, the retail
segment operated approximately 100 stores under the Food 4 Less, Rainbow and
yes!LESS(R) trade names, serving primarily middle and lower income consumers.
The Debtors' retail establishments were concentrated in Texas, Arizona,
Minnesota, New Mexico, Northern California, Utah, Wisconsin and Louisiana. The
Debtors' retail operations have been discontinued, and all of the retail stores
have since been sold or closed.
The Debtors' corporate headquarters are located in Lewisville, Texas,
with accounting and information technology operations located in Oklahoma City,
Oklahoma. The corporate headquarters of Fleming Convenience, which is a premier
distributor of food and consumer products for convenience stores in North
America, are located in San Francisco, California.
B. Debt Structure
1. Debt
The Debtors, and their non-debtor subsidiaries, historically
have generated some of the cash necessary to finance operations by incurring
certain debt obligations primarily through bank loans and through the issuance
of a series of notes under indentures from time to time. Accordingly, the
Debtors are party to prepetition financing arrangements including secured bank
debt arising under a credit facility and obligations arising under a series of
unsecured indentures. Each of the foregoing types of indebtedness is described
more fully below.
2. Secured Debt
On June 18, 2002, Fleming entered into a $975 million secured
credit facility with a syndicate of banks agented by Deutsche Bank Trust Company
Americas and JPMorgan Chase Bank (the "Pre-Petition Lenders") to refinance the
then existing $850 million credit agreement. Under the terms of the Pre-Petition
Credit Agreement, the Pre-Petition Lenders made loans and advances to Fleming
and issued or caused to be issued letters of credit on Fleming's behalf. The
loans and advances were secured by first-priority security interests and liens
on all or substantially all of the then existing and after-acquired accounts
receivable, inventory, instruments and chattel paper evidencing accounts
receivable (or into which any accounts receivable have been, or hereafter are,
converted), securities, limited liability company interests, partnership
interests, security entitlements, financial assets and investment property, and
all proceeds and products of any and all of the foregoing (the "Prepetition
Collateral"). The Prepetition Collateral includes all of the proceeds of the
Prepetition Collateral existing before and after the commencement of these
Cases.
As of the Petition Date, Fleming's entire obligation to the
Pre-Petition Lenders under the Pre-Petition Credit Agreement totaled
approximately $604 million. Of this entire obligation, $219 million was
outstanding under the revolving loan, $239 million was outstanding under the
term loan, and $146 million was outstanding under certain letters of credit
issued on Fleming's account. Subsequent to the Petition Date, an automatic step
up provision in a letter of credit resulted in an increase of exposure in one
letter of credit in an
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amount of $5 million. After such step up, the outstanding pre-petition
indebtedness totaled $609 million, including $151 million of pre-petition
letters of credit. Of the $609 million outstanding on the Petition Date,
approximately $28 million is expected to be outstanding in funded debt on the
Effective Date and approximately $79 million is expected to be outstanding in
prepetition letters of credit, which are supported by approximately $60 million
of cash collateral as of January 29, 2004. See Section V.C.1b herein.
On April 24, 2003, the Bankruptcy Court approved an interim
"bridge" debtor in possession loan facility of $50 million from the Pre-Petition
Lenders (Docket No. 565), and on May 7, 2003, the Bankruptcy Court approved a
final debtor in possession loan facility of $150 million (Docket No. 743). Both
the interim DIP Credit Facility and the DIP Credit Facility are subject to
borrowing base requirements and are secured by virtually all of the Debtors'
assets on a superpriority basis. The DIP Credit Facility is paid off except for
approximately $25 million in outstanding letters of credit.
3. Unsecured Debt
Prior to the Petition Date, Fleming issued a series of
unsecured notes under indentures. Each of these notes is guaranteed by the
Fleming subsidiaries.
Outstanding obligations under these indentures are as follows:
- 10 1/8% SENIOR NOTES DUE IN 2008.
Under an Indenture dated as of March 15, 2001, Fleming issued its 10
1/8% senior notes due in 2008 in a principal amount of $355 million.
- 9 1/4% SENIOR NOTES DUE IN 2010.
Under an Indenture dated as of June 18, 2002, Fleming issued its 9 1/4%
senior notes due in 2010 in a principal amount of $200 million.
- 10 5/8% SENIOR SUBORDINATED NOTES DUE IN 2007 (TWO TRANCHES).
Under an Indenture dated as of October 15, 2001, Fleming issued two
series of 10 5/8% senior subordinated notes due in 2007 in a principal
amount of $400 million.
- 5 1/4% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE IN 2009.
Under an Indenture dated as of March 15, 2001, Fleming issued 5 1/4%
convertible senior subordinated notes due in 2009 in a principal amount
of $150 million. The holders of these notes may elect to convert these
notes into the common stock of Fleming at an initial conversion price
of $30.27 per share, subject to adjustment under certain circumstances
as described in the Indenture.
- 9 7/8% SENIOR SUBORDINATED NOTES DUE IN 2012.
Under an Indenture dated as of April 15, 2002, Fleming issued its 9
7/8% senior subordinated notes due in 2012 in a principal amount of
$260 million.
Attached as EXHIBIT 6 is a listing of all known CUSIP numbers
corresponding to the above notes.
4. Trade Debt
Debtors' businesses involve the resale of goods that are
purchased from third party vendors.
The Debtors transacted business with vendors that are
typically the sole suppliers of uniquely branded products for which there are no
viable substitutes, such as food products from major food distributors,
15
including, but not limited to, ConAgra Foods, Kraft and Nestle (collectively,
the "Merchandise Suppliers"). In addition to the Merchandise Suppliers, the
Debtors rely on other vendors to support their core business functions by way of
administrative and ancillary support, such as production of advertising
circulars for goods distributed.
The Debtors also contracted with transportation vendors to
support their core business of distributing food and consumer products from
their warehouses across the country to their customers in some 45,000 retail
locations.
5. PBGC Debt
As of the Petition Date, the Debtors sponsored five tax
qualified defined benefit pension plans. With respect to each of these plans,
the Pension Benefit Guaranty Corporation (the "PBGC") has filed Administrative
Claims for missed minimum funding contributions, unfunded benefit liabilities
and missed PBGC premium payments. The PBGC estimates that its claims total
approximately $400 million. The Debtors dispute both the categorization and
amounts of these claims. The Debtors believe that most, if not all, of the
claims are General Unsecured Claims and that the entire General Unsecured Claim
will be substantially less than the PBGC estimate. Benefits under four of the
pension plans have been frozen for a number of years, and benefits under the
fifth plan were frozen as of December 31, 2003. The Debtors commenced distress
termination application proceedings for all five pension plans, on October 31,
2003, in order to relieve themselves of future funding obligations towards these
plans. On February 12, 2004, by agreement between Fleming and the PBGC, the PBGC
became the Trustee of the Fleming Companies, Inc. Pension Plan (the "Fleming
Pension Plan") and the Fleming Pension Plan was terminated as of January 1,
2004. Discussions between the Debtors and the PBGC with respect to the Debtors'
other four pension plans (the "Existing Pension Plans") are ongoing.
The PBGC asserts that, as a matter of law, the Existing
Pension Plans may not be rejected in bankruptcy. Rather, they may be terminated
only in accordance with the Employee Retirement Income Security Act ("ERISA"),
and only if certain financial distress tests are met. In the event that the
Existing Pension Plans are not terminated in accordance with ERISA prior to the
Effective Date, the PBGC asserts that the Existing Pension Plans will remain
on-going as of and after the Effective Date, and that the Debtors, Reorganized
Debtors, and each member of the Debtors' control groups (as defined under 29
U.S.C. Section 1301(a)(14)) will be liable and responsible for the Existing
Pension Plans as required by applicable statutory and regulatory requirements.
The Debtors believe the Existing Pension Plans will either be terminated prior
to the Effective Date or rejected as of the Effective Date. Alternatively, the
Debtors may agree to not terminate or otherwise reject the Existing Pension
Plans as a result of their discussions with the PBGC regarding the treatment,
priority and amount of the PBGC's claims.
6. Potential Environmental Liabilities
Core Mark Newco and the Reorganized Debtors will continue to
comply post-Effective Date with environmental requirements, including any
remediation requirements, applicable to facilities it will own or operate
post-Effective Date. The Debtors have no known environmental remediation
liabilities at such facilities other than certain ongoing remediation activities
related to underground tanks at several facilities as to which C&S has yet to
determine whether it will assume, assign or reject the Leases for those
facilities. The Debtors are aware of a few Claims that have been asserted
against them for prepetition environmental liabilities which, if Allowed, will
be treated as Class 6 Claims under the Plan.
C. Pre-Petition Operational Restructuring Efforts
Prior to the filing of these Chapter 11 Cases, the Debtors attempted
several cost-cutting measures designed to increase their competitiveness and
focus on their core competencies, including consolidating distribution
operations, reducing overhead and operating expenses by centralizing functions
at the Debtors' headquarters in Dallas, Texas, and by selling their retail
grocery operations.
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V. THE CASES
A. Events Leading to the Chapter 11 Cases
Both the wholesale food distribution and retail food industries are
highly competitive. Generally, the consumable goods industry is marked by bulk
sales with low profit margins. Consequently, even the slightest price changes
have significant economic implications. Given the recent instability of the
national economy, the Debtors' businesses have suffered greatly.
In February 2003, Kmart Corporation, then the largest customer of the
Debtors' Wholesale Distribution Business, moved in its chapter 11 case in the
Northern District of Illinois to reject its supply agreement with Fleming. In
2002, Kmart accounted for approximately twenty percent (20%) of Fleming's net
sales, and Kmart listed Fleming as its single largest supplier of food and
consumable products in its bankruptcy pleadings, accounting for in excess of
$3.0 billion of total sales per annum.
The subsequent termination of the Kmart supply agreement as well as the
disputes over the amount of Fleming's claim for damages exacerbated existing
liquidity issues. In addition, the negative marketplace perceptions lead to
tightening of the credit terms offered to the Debtors by their suppliers which,
in turn, directly led to decreased liquidity.
Given the Debtors' liquidity crises, the Debtors attempted to
renegotiate with their Pre-Petition Lenders and Agents to reach an agreement to
amend the terms of the Pre-Petition Credit Facility in order to provide
liquidity and to avoid Debtors' default under the Pre-Petition Credit Agreement.
The Debtors were unsuccessful in renegotiating that amendment prior to the
Petition Date.
Furthermore, the Debtors were unable to meet a March 28, 2003 deadline
for the filing of their Form 10-K Annual Report with the SEC. On the Petition
Date, the Debtors were obligated to make a scheduled $18 million interest
payment to the holder of the 10 1/8% Senior Notes, which the Debtors did not
make. The Debtors filed for bankruptcy protection under Chapter 11 of title 11
of the United States Code on April 1, 2003 (the "Petition Date").
B. The Auction and Sale Process For the Wholesale Distribution
Assets and Plans for Fleming Convenience Assets
1. Auction and Sale Process for Wholesale Distribution
Assets
Certain of the Debtors(5) began an auction process after the
Petition Date for the sale of the assets of the Wholesale Distribution Business.
C&S Wholesale Grocers, Inc., a Vermont corporation ("C&S"), placed the largest
initial bid and became the "stalking horse" bidder in the auction process.
Solicitations were sent out, but no other qualified bids were received pursuant
to the bidding procedures order dated July 18, 2003.
The Bankruptcy Court approved the asset purchase agreement
with C&S (the "C&S Purchase Agreement") by its sale order dated August 15, 2003.
The C&S transaction closed August 23, 2003. Pursuant to the C&S Purchase
Agreement, C&S, its affiliates or third parties designated by C&S had the option
to have the Debtors acquire or reject certain assets of the Wholesale
Distribution Business and had the option to assume and assign or reject
contracts related to the Wholesale Distribution Business on a continual basis
over a six-month option period. Such option period expired on February 23, 2004.
- -----------------------
(5) Fleming, Fleming Transportation Service, Inc., Fleming International Ltd.,
Piggly Wiggly Company, RFS Marketing Services, Inc., Fleming Foods Of Texas
L.P., Fleming Foods Management Co., L.L.C., ABCO Food Group, Inc., ABCO
Markets, Inc. and ABCO Realty Corp.
17
2. Operations of Fleming Convenience Businesses and
Plans for Assets
The Fleming Convenience businesses are one of two national
wholesale distribution businesses serving the convenience retail industry in the
United States and Western Canada and the second largest in North America. The
Fleming Convenience Businesses, headquartered in South San Francisco,
California, provide distribution and logistics services as well as value-added
programs to over 19,500 customer locations (many customers own multiple
locations) of a variety of store formats including traditional convenience
retailers, mass merchandisers, drug stores, liquor stores, specialty stores and
other stores that carry convenience packaged goods.
Fleming Convenience operates 22 high velocity distribution
centers servicing 38 states and five Canadian provinces that have a total of 2.6
million square feet of total warehouse space. Fleming Convenience supplies a
broad line of approximately 55,800 stock-keeping units ("SKUs") including
cigarettes and tobacco products as well as dry, frozen and chilled food
products, health and beauty care products ("HBC") and general merchandise
products. Fleming Convenience also offers a broad array of value-added
information and data services that enable customers to more effectively manage
product movement as well as merchandising and sales functions.
Pursuant to the Plan, the Debtors intend to restructure around
the Fleming Convenience business as outlined in more detail in section VI.F.8
herein.
C. Significant Case Events
1. Summary of Significant Motions
The following summarizes significant motions that have been
filed in the Chapter 11 Cases. You can view these motions at
www.bmccorp.net/fleming or from the Bankruptcy Court's docket.
a. Post-Petition Financing
Debtors' Emergency Motion for (A) Interim and Final
Approval of Post-Petition Financing, Under 11 U.S.C. Sections 105, 361, 362, 363
and 364, Fed. R. Bankr. P. 2002, 4001(b), 4001(c) and 9014, and Del. Bankr. LR
4001-2, (B) Approving Terms of Trade Credit Program, and (C) Scheduling Final
Hearing Pursuant to Bankruptcy Rule 4001(c) (Docket No. 16). The Debtors
received postpetition financing from the Post-Petition Lenders. Pursuant to the
terms of the credit agreement, the Post-Petition Lenders were granted
super-priority liens on substantially all of the Debtors' assets. The Debtors do
not currently owe any amounts under the postpetition credit agreement except for
approximately $24.6 million in outstanding letters of credit. See Final Order
Authorizing (I) Post-Petition Financing Pursuant to 11 U.S.C. Section 364 and
Bankruptcy Rule 4001(c); (II) Use of Cash Collateral Pursuant to 11 U.S.C.
Section 363 and Bankruptcy Rules 4001(b) and (d); (III) Grant of Adequate
Protection Pursuant to 11 U.S.C. Sections 361 and 363; and (IV) Approving
Secured Inventory Trade Credit Program and Granting of Subordinate Liens,
Pursuant to 11 U.S.C. Sections 105 and 364(c)(3) and Rule 4001(c) (Docket No.
743).
b. Pay-Down of Pre-Petition Loans
Joint Motion of Debtors and Pre-Petition Agents for
Authorization, Pursuant to Sections 363 and 105 of the Bankruptcy Code, to Pay
Amounts to the Pre-Petition Agents on Behalf of the Pre-Petition Lenders (Docket
No. 4011). On October 10, 2003, the Debtors and the Pre-Petition Lenders filed
this motion to pay down $325 million of the Pre-Petition Lenders' Secured
Claims. After two contested hearings, the Bankruptcy Court approved the motion,
thus reducing the amount of the Pre-Petition Lenders' Secured Claims from $609
million to $228 million. The total amount of the Pre-Petition Lenders Secured
Claims is presently $144.38 million based on other paydowns that have
subsequently been allowed. (see, e.g., Replacement DIP Financing below.) See
Order Approving Joint Motion of Debtors and Pre-Petition Agents for
Authorization, to Pay Amounts to the Pre-Petition Agents on Behalf of the
Pre-Petition Lenders (Docket No. 4776).
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c. Replacement DIP Financing
Debtors' Motion For An Order (I) (A) Authorizing
Debtors To Obtain Replacement Post-Petition Financing Under 11 U.S.C. Section
364 And Bankruptcy Rule 4001(C) And Del.Bankr. LR 4001-2 And Assign The Existing
Secured Lenders' Liens To The Replacement Lenders, And (B) Authorizing Debtors
To Pay Certain Commitment And Related Fees And Expenses Relating To The
Replacement Post-Petition Financing, (II) Granting Adequate Protection Pursuant
To 11 U.S.C. Section 361 And 363; And (III )Authorizing Debtors To Repay Certain
Outstanding Obligations Under The Pre-Petition Credit Agreement And The
Post-Petition Loan Agreement (Docket No. 5034). On December 16, 2003, the
Debtors filed this motion to enter into a $250 million replacement DIP facility
in order to pay down the Pre-Petition Lenders and for other relief. After
contested hearings on February 17, 2004 and March 3, 2004, the Court approved
the Debtors' request to pay down the Pre-Petition Lenders $50 million. The
Debtors withdrew their request as to the remainder of the motion and have not
entered into a replacement DIP facility.
d. Cash Management Motion
Motion for Order (A) Authorizing (i) Maintenance of
Existing Bank Accounts, (ii) Continued Use of Existing Business Forms, (iii)
Continued Use of Existing Cash Management System and (iv) Existing Investment
Practices (Docket No. 16). The Bankruptcy Court granted the Debtors' request to
continue to utilize the same centralized cash management system, bank accounts
and investment practices, among other things, after the Petition Date that had
been in use before the Petition Date in order to effectuate a seamless
transition into Chapter 11. The Bankruptcy Court entered the Final Order (A)
Authorizing (i) Maintenance of Existing Bank Accounts, (ii) Continued Use of
Existing Business Forms, (iii) Continued Use of Existing Cash Management System
and (iv) Existing Investment Practices on April 22, 2003 (Docket No. 562).
e. Employee Wages and Benefits Motion
Motion of Debtors an Order Pursuant to Sections 105
and 363(b) of the Bankruptcy Code (I) Authorizing the Payment of Employee
Obligations and (II) Authorizing Institutions to Honor and Process Checks and
Transfers Related to Such Obligations (Docket No. 15). The Bankruptcy Court
granted the Debtors' request to pay certain employee obligations arising before
the Petition Date, including: wages, salaries, commissions and other
compensation, severance (subject to certain conditions precedent as set forth in
docket no. 1697), vacation, other paid leave, federal and state withholding
taxes, payroll taxes and medical benefits up to specified dollar amounts and
upon the terms as set forth in the orders approving components of the motion.
See Various Orders re Wage Motion (Docket Nos. 70, 557, 741, 1352, 1492, 1493,
1697). Although the Debtors sought authority to pay obligations arising in the
prepetition period for the Senior Executive Retirement Program ("SERP"), Senior
Executive Relocation Program, Aim High Program, Incentive Programs, Fleming
Pension Plan and Core-Mark Pension Plan, this request was ultimately withdrawn.
f. Employee Stay Program
Motion of Debtors for an Order Pursuant to Section
105 and 363(b) of the Bankruptcy Code Authorizing the Debtors to Implement
Wholesale and Convenience Business Employee Stay Program (Docket No. 1852). The
Bankruptcy Court granted the Debtors' request to pay $12,000,000 to those
certain eligible employees of Fleming Convenience and Debtors' Wholesale
Distribution Business as an incentive to stay in the Debtors' employ during its
critical stage of selling the Wholesale Distribution Business and to preserve
the value of those assets. See Order Pursuant to Section 105 and 363(b) of the
Bankruptcy Code Authorizing the Debtors to Implement Wholesale and Convenience
Business Employee Stay Program (Docket No. 2079).
g. Critical Trade Motion
Motion for Order Authorizing the Payment of Critical
Trade Vendors in Exchange for Continuing Relationship Pursuant to Customary
Trade Terms (Docket No. 11). The Bankruptcy Court granted the Debtors' request
to pay $100,000,000 to certain vendors with outstanding pre-petition claims
deemed critical to the Debtors' operations upon the restoration of customary
trade terms and the execution of the Critical Trade Agreement, as defined in
that Motion and Order. See Order Granting Motion for Order Authorizing the
Payment of
19
Critical Trade Vendors in Exchange for Continuing Relationship Pursuant to
Customary Trade Term (Docket No. 733).
h. Junior Trade Lien
Supplement to Motion for Order Authorizing the
Granting of Junior Trade Lien Status to Critical Vendors in Exchange for
Continuing Relationship Pursuant to Customary Trade Terms (Docket No. 297). In
connection with the critical trade vendor motion discussed above, the Bankruptcy
Court granted the Debtors' request to provide a junior trade lien to vendors who
provided trade terms to the Debtors after the Petition Date. Pursuant to the
terms of that motion and order and the terms of the Final DIP Order, vendors who
hold Reclamation Claims were also entitled to participate in the junior trade
lien program. See Order Granting Motion for Order Authorizing the Payment of
Critical Trade Vendors in Exchange for Continuing Relationship Pursuant to
Customary Trade Term (Docket No. 733). The Debtors' Post-Petition Lenders
consented to the granting of the junior trade liens as set forth in the Final
DIP Order. See Docket No. 743.
i. Pre-Petition Tax Motion
Motion of Debtors for Order Authorizing Payment of
Prepetition Taxes and Authorizing the Use of Existing Bonds to Pay Prepetition
Taxes (Docket No. 697). The Debtors obtained approval to pay up to $49,000,000
on account of sales/use, tobacco and excise taxes arising before the Petition
Date. See Order Authorizing Debtors to Pay Prepetition Taxes (Docket No. 1067).
j. Equity Bar Trading Motion
Emergency Motion for an Interim Order Under 11
U.S.C. Sections 105(a), 362(a)(3), and 541 Limiting Trading in Equity Securities
of the Debtors (Docket No. 937). The Debtors filed this motion on an emergency
basis requesting that the Bankruptcy Court institute procedures to prohibit,
without the consent of the Debtors or the Bankruptcy Court, sales and other
transfers of the outstanding common stock of Fleming by Substantial
Equityholders (those owning equity securities of any of the Debtors with an
aggregate fair market value equal to or greater than 5% of the fair market value
of the common stock of Fleming as defined in the motion). The Debtors requested
this relief in order to guard against an unplanned change in control for
purposes of section 382 of the Internal Revenue Code, which could limit the
Debtors' ability to use net operating losses in the future. The Bankruptcy Court
granted this motion and entered a final order on May 20, 2003. See Order Under
11 U.S.C. Sections 105(a), 362(a)(3), and 541 Limiting Trading in Equity
Securities of the Debtors (Docket No. 978).
k. PACA/PASA Claims Motion
Motion for Authority to Pay Prepetition Claims Under
the Perishable Agricultural Commodities Act and the Packers and Stockyard Act
(Docket No. 12). Prior to the Petition Date, certain of the Debtors' vendors (i)
sold goods to the Debtors that such vendors assert are covered by the Perishable
Agricultural Commodities Act ("PACA") and/or by state statutes of similar
effect, including the Minnesota Wholesale Produce Dealers Act (the "PACA
Claims") and/or (ii) sold livestock or other similar goods to the Debtors which
they assert are covered by the Packers and Stockyard Act ("PASA") and/or state
statutes of similar effect (the "PASA Claims"). Therefore, the Debtors filed a
Motion for Authority to Pay Prepetition Claims Under the Perishable Agricultural
Commodities Act and the Packers and Stockyard Act (Docket No. 12). On May 6,
2003, the Bankruptcy Court entered the Order Requiring Segregation of Funds to
Cover Certain PACA Claims and Authorizing Procedure for Reconciliation and
Payment of Valid Claims Under the Perishable Agricultural Commodities and the
Packers and Stockyard Act (the "PACA/PASA Order") (Docket No. 725). Since that
time, the Debtors have filed (a) their Report of Claims (Docket No. 1505) and
(b) their First through Seventh Supplemental Reports of Claims (Docket Nos.
1992, 3210, 3695, 4088, 4613, 5605 and 6779, respectively) (collectively, the
"Supplemental Reports"). To date, approximately
20
$56.4(6) million in PACA Claims have been asserted in these Cases. Of the
asserted PACA Claims, the Debtors have paid (or are scheduled to pay pursuant to
a pending PACA Report) $42.6 million and $3.6 million has been disallowed
pursuant to the PACA/PASA Order. In addition, with respect to $13.4 million of
the asserted PACA Claims, the Debtors are seeking to disallow such claims as
invalid PACA Claims, but the applicable claimants are contesting such
disallowance. The remaining $300,000 of PACA Claims have not been reconciled on
a final basis. The Debtors' next Supplemental PACA Report is scheduled to be
filed on March 16, 2004. The Debtors do not believe there are any valid PASA
Claims in these Cases.
l. Reclamation Related Matters
Motion of Debtors for an Order, Under 11 U.S.C.
Sections 105(a), 503(b) and 546(c): (a) Establishing Procedure for Treatment of
Reclamation Claims and (b) Prohibiting Third Parties from Interfering with
Delivery of Debtors' Goods (Docket No. 8). The Debtors anticipated that a number
of vendors would seek reclamation Claims against the Debtors and otherwise
interfere with the delivery of goods after receiving notice of the commencement
of these Chapter 11 Cases. Therefore, in the Motion of Debtors for an Order
Under 11 U.S.C. Sections 105(a), 503(b) and 546(c): (a) Establishing Procedure
for Treatment of Reclamation Claims and (b) Prohibiting Third Parties from
Interfering with Delivery of Debtors' Goods (Docket No. 8), the Debtors
requested a procedure by which reclamation claimants could proceed against the
Debtors' goods. The Bankruptcy Court entered the Order (the "Reclamation
Procedures Order") Under 11 U.S.C. Sections 105(a) 503(b), 546(c) and 546(g),
(a) Establishing Procedure for Treatment of Reclamation Claims and (b)
Prohibiting Third Parties from Interfering with Delivery of Debtors' Goods on
April 22, 2003 (Docket No. 559). On July 21, 2003, the Debtors filed their
Motion For Entry Of An Order With Respect To The Reclamation Claims Filed In The
Debtors' Cases [Docket No. 2050] (the "Initial Reclamation Motion") pursuant to
the Reclamation Procedures Order.
On November 25, 2003, the Debtors filed their
Combined Amended Reclamation Report and Motion to Determine that Reclamation
Claims are Valueless (the "Amended Report and Motion") (Docket No. 4596).(7) The
Amended Report and Motion consisted of two parts. In Part I of the Amended
Report and Motion, the Debtors sought the entry of an order that provides that
the Reclamation Claims other than Approved Trade Creditor Reclamation Lien
Claims are General Unsecured Claims that are not entitled to any priority under
section 546(c) of the Bankruptcy Code. Part II of the Amended Report and Motion
included detail regarding the Debtors' reconciliation of the reclamation claims
that have been filed. On December 12, 2003, the Bankruptcy Court, however,
declined to hear the motion and directed the Debtors to file separate adversary
proceedings against each reclamation claimant.
Assuming on or about January 31, 2004, the Debtors
filed 576 reclamation complaints (the "Reclamation Complaints"). The Debtors
also filed a motion (the "Consolidation Motion") to consolidate the Reclamation
Complaints to determine common legal issues arising from the reclamation claims.
The response date on the Consolidation Motion for all reclamation defendants was
February 25, 2004, and the reply date was March 3, 2004. The answer date for the
Reclamation Complaints has been extended by agreement to April 15, 2004 for all
defendants and the hearing on the Consolidation Motion is currently scheduled
for April 5, 2004.
On February 2, 2004, the Court, on request of various
reclamation claimants, ordered the appointment of an Official Committee of
Reclamation Creditors ( the "Reclamation Committee") for the purpose of
negotiating with the Debtors with respect to the proposed Chapter 11 Plan. On
February 13, 2004, the United States Trustee appointed the members of the
Reclamation Committee. The members are: The Procter & Gamble
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(6) All numbers in this paragraph have been rounded to the nearest hundred
thousand. Exact figures are contained in the Supplemental Reports.
(7) The Amended Report and Motion amends and supercedes the Initial Reclamation
Motion, and the Debtors have sought leave of court to withdraw the Initial
Reclamation Motion.
21
Distributing Company, Mead Johnson Nutritionals, Quaker Sales & Distribution,
Inc., Swift Company, DelMonte Corporation, Sara Lee Corp. and The Clorox Sales
Company.
m. Schedules and Statements
The Debtors filed their respective schedules of
assets and liabilities and statement of financial affairs (the "Schedules") with
the Bankruptcy Court on July 1, 2003. The Schedules can be reviewed at the
office of the Clerk of the Bankruptcy Court for the District of Delaware or can
be obtained on the website www.bmccorp.net/fleming.
2. Retention of Professionals
At various times through the Chapter 11 Cases, the Bankruptcy
Court has approved the retention of certain professionals to represent and
assist the Debtors in connection with the Chapter 11 Cases. These professionals
were intimately involved with the negotiation and development of the Plan. These
professionals include, among others: AP Services, LLC, crisis managers for the
Debtors (Docket No. 1698); Kirkland & Ellis LLP, co-counsel for Debtors (Docket
No. 740); Pachulski, Stang, Ziehl Young, Jones & Weintraub, P.C., co-counsel for
the Debtors (Docket No. 852); and The Blackstone Group, L.P., financial advisors
to the Debtors (Docket No. 1692).
The Bankruptcy Court also approved requests to retain other
professionals to assist the Debtors in ongoing specialized matters. These
professionals include, but are not limited to: McAfee & Taft, special corporate
counsel for the Debtors (Docket No. 1028); Ernst & Young LLP, inside auditor and
tax accountant for the Debtors (Docket No. 219); Baker, Botts, LLP, special
corporate and securities counsel for the Debtors (Docket No. 1241);
PricewaterhouseCoopers, LLP, forensic accountants for the audit committee of the
Board of Directors of the Debtors (Docket No. 732); Rider Bennett, LLP, special
labor relations and business litigation counsel for the Debtors (Docket No.
1065); and Kekst and Company, public relations and corporate communications
consultant to the Debtors (Docket No. 1380).
The Bankruptcy Court also approved requests to retain
real-estate professionals to assist the Debtors in their disposition efforts.
These professionals include, but are not limited to: Dovebid, Inc., auctioneers
for the sale of residual assets (Docket No. 1359); The Food Partners, retail
grocery financial advisor to the debtors (Docket No. 1691); Retail Consulting
Services, Inc./Staubach Retail Services, Inc., exclusive real estate consultants
to the debtors (Docket No. 1361); DMC Real Estate, Inc., realtors for the
Debtors (Docket No. 3948); and Keen Realty, LLP, special real estate consultant
to the Debtors (Docket No. 2161).
3. Appointment of Creditors' Committee and Retention of
Professionals
On April 16, 2003, the United States Trustee appointed the
following unsecured creditors to the Committee: (a) Bank One Trust Company,
N.A., as Indenture Trustee; (b) Apollo Management V, L.P.; (c) Northeast
Investors Trust; (d) Kraft Foods; (e) Nestle USA; (f) ConAgra Foods, Inc; and
(g) Pension Benefit Guaranty Corporation. The ex officio members of the
committee are S.C. Johnson and the Bank of New York.
The Bankruptcy Court also approved the retention of the
following professionals to represent and assist the Committee in connection with
these Chapter 11 Cases: Pepper Hamilton, LLP, co-counsel to the Official
Unsecured Committee of Creditors (Docket No. 1415); Milbank, Tweed, Hadley &
McCloy, LLP, co-counsel to the Official Committee of Unsecured Creditors (Docket
No. 2155); KPMG, LLP, accountants and restructuring advisors to the Official
Committee of Unsecured Creditors (Docket No. 1356); and Compass SRP Associates,
LLP, advisors to the Official Committee of Unsecured Creditors (Docket No.
2155).
4. Asset Sales and Other Dispositions
The Debtors have filed several motions for the sale of
disposal of the Debtor's assets as follows:
22
a. Sale of Debtors' Wholesale Distribution
Business
On or about July 11, 2003, the Debtors filed their
Motion For Order (A) Approving Asset Purchase Agreement With C&S Wholesale
Grocers, Inc. And C&S Acquisition LLC, (B) Authorizing (I) Sale Of Substantially
All Of Selling Debtors' Assets Relating To The Wholesale Distribution Business
To Purchaser Or Its Designee(s) Or Other Successful Bidder(s) At Auction, Free
And Clear Of All Liens, Claims, Encumbrances And Interests And (II) Assumption
And Assignment Of Certain Executory Contracts, License Agreements And Unexpired
Leases, And (C) Granting Related Relief (Docket No. 1906). This motion sought
the sale of substantially all of the Wholesale Distribution Business, which
supplied a full line of products to grocery stores, discount stores,
supercenters and specialty retailers. The winning bidder was determined to be
C&S Acquisition, LLC, whose bid was an estimated $400 million. After three days
of hearings, the Bankruptcy Court entered an order approving the sale on August
15, 2003 (Docket No. 3142) and the transaction was closed on August 23, 2003.
b. Adequate Protection Reserve
In the order approving the sale of the
Debtors' Wholesale Distribution Business to C&S, which order was entered by the
Bankruptcy Court on August 15, 2003 (Docket No. 3142), the Debtors were required
to set aside $75 million as an "Adequate Protection Reserve" for those
qualifying creditors' Offset Rights (as defined in the C&S asset purchase
agreement) only if those creditors (i) had asserted or joined in a demand for
adequate protection by a date certain in connection with the Wholesale
Distribution Business sale; (ii) were parties to facility standby agreements
that were rejected; and (iii) were parties to promissory notes or forgiveness
notes that the Bankruptcy Court determined was not an executory contract or an
integrated part of an executory contract.
By motion dated September 12, 2003 (Docket
No. 3667), the Debtors sought to reduce the amount of the Adequate Protection
Reserve by $40 million to reflect the correct amount of note balances
outstanding. The motion was granted, and an order was entered on December 23,
2003 (Docket No. 5224) allowing the Debtors to reduce the Adequate Protection
Reserve and further allowing the Debtors to reduce the Adequate Protection
Reserve by any settlements made on note balances. Currently, the Adequate
Protection Reserve is approximately $29 million. Upon approval of pending
settlements of note balances, the Debtors estimate that the amount of the
Adequate Protection Reserve will be reduced to approximately $20 million.
c. Sale of California Stores
On November 13, 2002, Fleming, Richmar and Save Mart
entered into an asset purchase agreement for the sale of twenty-eight (28)
Food-4-Less grocery stores located in California (the "California Stores") for
an aggregate purchase price of $105 million plus inventory at cost (subject to
certain purchase price adjustments). Due to the inability to receive the timely
approval of the transaction by the Federal Trade Commission (the "FTC"),
however, closing of the sale of all 28 stores never occurred. In late January
2003, the FTC permitted the parties to break the California Stores transaction
into two parts, one involving the sale of nineteen (19) of the California Stores
with a value of approximately $71 million plus inventory and the second
involving the sale of nine (9) stores with a value, at that time, of
approximately $34 million plus inventory. The parties closed the nineteen (19)
store transaction in late January 2003.
On or about May 12, 2003, the Debtors filed a motion
in these Chapter 11 Cases seeking to convey their interests in the remaining
nine (9) stores and certain contracts and leases to two (2) buyers for an
aggregate purchase price of approximately $27 million plus inventory (Docket No.
817). The Bankruptcy Court entered its orders approving this motion and the sale
to each buyer on June 4, 2003 (Docket Nos. 1375 & 1377).
d. Sale of Rainbow Food Retail Grocery Stores
On or about May 12, 2003, the Debtors filed their
Debtors' Motion For Order Authorizing: (A) Sale Of 31 Rainbow Food Retail
Grocery Stores' Assets Free And Clear Of All Liens, Claims, Interests And
Encumbrances; And (B) Assumption And Assignment Of Acquired Contracts And Leases
(Docket No. 816). This Motion sought to sell the assets used in the operation of
thirty-one (31) of the Rainbow Food retail
23
grocery stores. The aggregate purchase price was approximately $44 million plus
inventory. The Bankruptcy Court entered an order approving this motion on June
4, 2003 (Docket No. 1362).
e. Sale of Pharmacy Assets
On or about April 15, 2003, the Debtors filed their
Emergency Motion For An Order Authorizing Sale Of Pharmacy Assets Located At
Seven Of The Debtors' Stores (Docket No. 323). This motion sought the sale of
the Debtors' drug inventory, prescription files and related assets located at
seven (7) of the Debtors' stores to two (2) bidders for approximately $1.5
million. The Bankruptcy Court entered an order approving this motion on April
21, 2003 (Docket No. 556).
f. Sale of Fleming-Owned Real Property Under
Auction
On or about September 12, 2003, the Debtors filed
their "Debtors' Motion For Order: (A) Authorizing and Scheduling an Auction for
the Sale of Certain of the Debtors' Real Property; (B) Approving the Terms and
Conditions of Such Auction, Including Bidding Procedures Related Thereto; and
(C) Approving Assignment Procedures For Affected Unexpired Leases" (Docket No.
3666). This motion sought, among other things, approval of bidding procedures
for the sale of certain real property owned by the Debtors and the assignment of
the Debtors' rights under certain real property leases. The real property
subject to these proposed sales and assignments consisted of certain of the
Debtors' assets not associated with the Wholesale Distribution Business and
therefore not associated with the C&S Purchase Agreement.
At a hearing on October 2, 2003, the Bankruptcy Court
approved the motion and authorized the Debtors to proceed with an auction, upon
the terms described within the motion, on October 14, 2003. On October 14, 2003,
the auction was held, and the Debtors identified the highest and best bidders
for each of the real property locations subject to the auction. On October 24,
2003, the Bankruptcy Court entered an order approving the sale or assignment, as
applicable, of the auctioned properties to the highest and best bidders
identified by the Debtors at the auction (Docket No. 4205). The gross proceeds
received by the Debtors as a result of the auction were approximately $4.8
million.
g. Sale of Fleming-Owned Real Property Not
Under Auction
Pursuant to the "Order Establishing Procedures for
the sale of Real Estate And Personal Property Located Therein" under Sections
363(b), 363(f) and 1146(c) of the Bankruptcy Code (the "Expedited Procedures For
The Sale Of Real Estate And Personal Property), entered May 22, 2003 (Docket No.
1016), the Debtors may sell free and clear of all mortgages, liens, claims,
interests and encumbrances (Liens) certain real property and personal property
contained therein at the highest price offered, with all valid Liens to be
satisfied from the net proceeds of the sales without further order of the Court,
but subject to approval by the Notice Parties (as defined in the order) under a
5 business day notice period. The gross proceeds received by the Debtors to-date
as a result of these sales were approximately $9.2 million.
h. Order Authorizing Store Closing Sales and
Abandonment of Assets re Closing Locations
Pursuant to the "Order Authorizing The Debtor To
Conduct Store Closing Sales Pursuant To Section 363 Of The Bankruptcy Code And
Abandon Inconsequential Assets Related To The Closing Locations" (the "Store
Closing Sale Order"), entered on May 21, 2003 (Docket No. 1014), the Debtors are
authorized to conduct store closing sales free and clear of liens in the
ordinary course of business pursuant to a procedure whereby the Debtors give
notice of any store closing sale, and the Debtors may consummate the sale
without further order of the Court if there are no objections. Pursuant to this
procedure, the Debtors may also give notice of abandonment of assets at the
closed locations. If no timely objections are filed, the Debtors may abandon the
assets without further order of the Court.
24
i. Order Authorizing Sale or Abandonment of
Assets of De Minimis Value
Pursuant to the "Order Pursuant To Sections 363(b),
363(f), 554(a) And 1146(c) Of The Bankruptcy Code Authorizing And Approving
Expedited Procedures For The Sale Or Abandonment Of The Debtors' De Minimis
Assets" (the "De Minimis Sale Order"), entered May 21, 2003 (Docket No. 1018),
the Debtors may sell free and clear of liens various assets, including customer
lists and accounts receivable that are past due and owing to the Debtors,
remaining inventory in retail stores, tractors, trailers, furniture, fixtures
and other excess warehouse and supermarket equipment such as coolers,
refrigeration compressor systems, shelving, generators and material handling
equipment (e.g. stock carts, pallet jacks and fork lifts), and assets of de
minimis value to the Debtors, such as notes owing to the Debtors and franchise
rights (which may include the Debtors' rights under trademark licenses of de
minimis value to the Debtors), that relate to the Debtors' abandoned, or to be
abandoned, relationships with retail grocery store businesses.
Depending on whether the assets to be sold or
abandoned have a value under $2.5 million or a value between $2.5 million and
$6.5 million, different notice periods apply. Under both procedures, if no
timely objection is filed, the Debtors may file a Certificate of No Objection
and consummate the sale after entry of the order.
j. Order Authorizing Sale of Obsolete and Other
Excess Inventory
Pursuant to the "Order Under 11 U.S.C. Sections
105(a), 363(b) And 363(f) Granting Authority To Debtors To Dispose Of Obsolete
And Other Excess Inventory Free And Clear Of Any Existing Liens, Claims And
Interests" (the "Excess Inventory Sale Order"), entered on May 20, 2003 (Docket
No. 1031), the Debtors may sell free and clear of liens certain excess
inventory. Prior to accepting any bid to sell excess inventory to a diverter or
liquidator, the Debtors must give the Committee and the Lenders written notice
of its intention to accept such bid at least five (5) days prior to accepting
the bid.
k. Order Approving Going Out of Business
("GOB") Sale
Under the Order Approving GOB Procedures In
Connection With The Final Dip Order, (Final Order Authorizing (I) Post-Petition
Financing Pursuant to 11 U.S.C. Section 364 and Bankruptcy Rule 4001(c); (II)
Use of Cash Collateral pursuant to 11 U.S.C. Section 363 and Bankruptcy Rule
4001(b) and (d); (III) Grant of Adequate Protection Pursuant to 11 U.S.C.
Sections 361 and 363; and (IV) Approving Secured Inventory Trade Credit Program
and Granting of Subordinate Liens, Pursuant to 11 U.S.C. Sections 105 and
364(c)(3) and Rule 4001 (c) (Docket No. 743)) entered May 20, 2003 (Docket No.
1030), the Debtors are entitled, under certain circumstances, to vacate and
surrender certain premises, as well as abandon assets located in the premises.
On the surrender date, the lease is deemed rejected unless the Debtors have
filed a specific notice to assume the lease.
5. Debtor in Possession Operating Reports
Consistent with the operating guidelines and reporting
requirements established by the United States Trustee (the "Guidelines") in
these Chapter 11 Cases, the Debtors have satisfied their initial reporting
requirements, have filed their first eleven Monthly Operating Reports(8) and
will continue to file such Monthly Operating Reports as required by the
Guidelines. Each Monthly Operating Report includes for the relevant period,
among other things, (a) information regarding the Debtors' cash receipts and
disbursements, (b) an income statement
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(8) The Debtors have filed the following Monthly Operating Reports which Reports
can be obtained from the court's docket in these cases: 4/1/03 - 4/19/03
[Docket No. 3102]; 4/20-03 - 5/19/03 [Docket No. 3103]; 5/18/03 - 6/14/03
[Docket No. 3214]; 6/15/03 - 7/12/03 [Docket No. 3373]; 7/13/03 - 8/9/03
[Docket No. 3754]; 8/10/03 - 9/6/03 [Docket No. 4139 amended by Docket No.
5106]; 9/17/03-10/4/03 [Docket No. 4979]; 10/5/03-11/1/03 [Docket No. 5112];
11/2/03-11/30/03 [Docket No. 5720]; 12/1/03-12/31/03 [Docket No. 6776
amended by Docket No. 6969]; and 1/1/04-1/31/04 [Docket No. 7188].
25
(prepared on an accrual basis), (c) a balance sheet (prepared on an accrual
basis), (d) a statement regarding the status of the Debtor's post-petition taxes
and (e) a statement regarding the status of accounts receivable reconciliation
and aging.
6. Pending Litigation And The Automatic Stay
a. Directors' & Officers' Litigation
In re Fleming Companies Inc. Securities and
Derivative Litigation, United States District Court for the Eastern District of
Texas, Texarkana Division, Case No. MDL 1530. During 2002, a number of
securities class action cases were commenced by and on behalf of persons who
purchased Fleming's publicly traded securities. The actions named Fleming and
certain of Fleming's directors and officers as defendants and sought damages
under either or both of the Securities Exchange Act of 1934 (the "Exchange Act")
and the Securities Act of 1933 (the "Securities Act"). Various parties to those
actions asked the Judicial Panel on Multidistrict Litigation (the "JPML") to
consolidate that litigation, then consisting of 14 separately filed cases, in a
single court. On June 25, 2003, the JPML issued an order directing that all of
those actions be transferred to the Eastern District of Texas, Texarkana
Division, for coordinated or consolidated pretrial proceedings. During the same
time period, two derivative actions were filed on Fleming's behalf, seeking
damages from various of Fleming's directors and officers for alleged violations
of securities laws. Those derivative actions have been, or are in the process of
being, administratively closed or dismissed without prejudice.
On February 20, 2003, while the JPML proceedings were
pending, a class action generally captioned Massachusetts State Carpenters
Pension Fund, etc. v. Fleming Companies, Inc., et al., was filed in the 160th
District Court, Dallas County, Texas, and thereafter removed to the United
States District Court for the Northern District of Texas, Dallas Division, as
Case No. 3-03CV0460-P. That action named Fleming, various of Fleming's directors
and officers, Lehman Brothers, Inc., Deutsche Bank Securities, Inc., Wachovia
Securities, Morgan Stanley & Co., Inc., and Deloitte & Touche, L.L.P., as
defendants, and sought damages under the Securities Act. Subsequently, on April
17, 2003, an identical action (except for the elimination of Fleming as a
defendant) was commenced in the Eastern District of Texas, Texarkana Division,
as Case No. 03-CV-83, where it could be, and ultimately was, consolidated with
the Fleming securities litigation pending in that Court. Meanwhile, the District
Court for the Northern District of Texas denied the plaintiffs' motion to
dismiss that action without prejudice. Ultimately, the action was transferred to
the Eastern District of Texas where it, too, was consolidated with the
litigation pending in that district.
On June 27, 2003, eighty individual plaintiffs
commenced an action against various present and former directors and officers of
Fleming and against Deloitte & Touche, L.L.P. That action, captioned Rick
Fetterman, et al., v. Mark Hansen, et al., United States District Court for the
Northern District of Texas, Dallas Division, Case No. 3:03-CV-1435 (L), sought
damages for alleged violations of the Exchange Act and certain Texas securities
statutes. The JPML has transferred that case to the Eastern District of Texas as
a "tag-along" case, and it has been consolidated with the other cases pending in
that district.
On August 28, 2003, sixty-three individual plaintiffs
commenced an action against various present and former directors and officers of
Fleming and against Deloitte & Touche, L.L.P. That action, captioned Christopher
L. Doucet, et al. v. Mark Hansen, et al., United States District Court for the
Northern District of Texas, Dallas Division, Case No. 3-03-CV-1950 H, sought
damages for alleged violations of the Exchange Act and certain Louisiana
securities statutes and under theories of fraud, misrepresentation and
conspiracy. A "tag along" notice has been filed with the JPML, but the case has
not yet been transferred to the Eastern District of Texas for consolidated or
coordinated pretrial proceedings in that court.
See Article VI.L.9. herein for a discussion of the
effects the Plan and certain provisions therein will have on the directors and
officers litigation.
26
b. SEC Investigation
The lawsuits described above encompass allegations
dealing with accounting, financial reporting and other disclosures and claim
that Fleming falsely inflated its securities prices by means of accounting fraud
and false public statements about its business operations and profit. Shortly
after the first lawsuit was filed, the Wall Street Journal published an article
on September 5, 2002, citing examples where Fleming allegedly had taken certain
aggressive deductions against its suppliers.
These events prompted an informal inquiry by the SEC.
On November 13, 2002, Fleming announced that the SEC had initiated an informal
inquiry related to Fleming's vendor trade practices, the presentation of second
quarter 2001 adjusted earnings per share data in Fleming's second quarter 2001
and 2002 earnings press releases, Fleming's accounting for drop-ship sales
transactions with an unaffiliated vendor in Fleming's discontinued retail
operations, and its calculation of comparable store sales in its discontinued
retail operations.
The SEC converted the informal inquiry into a formal
investigation on February 13, 2003. The formal investigation has focused on
whether any persons or entities engaged in any acts, transactions, practices or
courses of business which operated or would operate as a fraud or a deceit upon
purchasers of Fleming securities or upon other persons in violation of the
federal securities laws. Fleming has answered questions submitted by the SEC and
has produced documents to the SEC. The SEC has interviewed several current and
former employees of Fleming as well as third parties. Fleming continues to be in
discussions with the SEC and intends to continue to fully cooperate with the
SEC. Kraft Foods, Dean Food and Frito-Lay recently announced they have been
notified that the SEC is considering filing charges against those companies in
connection with their business dealings with Fleming, including whether
employees of those companies aided Fleming in accelerating revenue improperly.
After receiving notice of the informal SEC inquiry,
Fleming undertook an independent investigation related to the same topics. The
Audit and Compliance Committee of the Board of Directors of Fleming ("Audit
Committee") engaged independent legal counsel and independent accounting
consultants to assist in connection with the independent investigation. The
independent investigation included a review of transactions that occurred during
the 2000, 2001 and 2002 time periods. These periods are the subject of the SEC
investigation. The scope of the independent investigation included the original
topics identified by the SEC as well as issues related to the timing of
recording revenue, documentation of certain vendor transactions and certain
initiatives undertaken for the purpose of increasing reported income.
On April 17, 2003, Fleming issued a press release
(the "April 17 Release") announcing that it would have to restate its 2001
annual and quarterly financial statements and 2002 quarterly financial
statements previously filed with the SEC and that it would revise its previously
announced 2002 fourth quarter and annual financial results. Fleming announced
that the restatements and revisions reflected significant business issues and
developments affecting it, including the recent termination of Fleming's supply
agreement with Kmart and events leading to Fleming's voluntary Chapter 11
bankruptcy filing on April 1, 2003, as well as adjustments identified in
connection with the continuing independent investigation by the Audit Committee
into certain accounting and disclosure issues.
The April 17 Release also reported that the
restatements of the results for the full-year 2001 and the first three quarters
of 2002 would reduce the pre-tax financial results from continuing operations
for such periods by an aggregate amount of not more than $85 million and that
the restatements would mainly correct the timing of when certain vendor
transactions are recognized and the balance of certain reserve accounts.
The April 17 Release also announced that Fleming
would have to revise its previously announced 2002 fourth quarter and annual
financial results to reflect a loss from continuing operations. In accordance
with Statement of Financial Accounting Standards ("SFAS") No. 142, Fleming
announced that it expected to record a non-cash adjustment to continuing
operations for a full impairment of goodwill currently valued at approximately
$645 million, due to an overall decrease in the value of Fleming. In accordance
with SFAS No. 144, Fleming also announced that it would record an additional
impairment charge to discontinued operations of approximately $90 million
related to retail store operations held for sale, due to a reduction in the net
realizable
27
value of such operations. In accordance with SFAS No. 109, Fleming announced
that it had determined that it would record a non-cash charge against continuing
operations in the fourth quarter of 2002 relating to its deferred tax assets in
the range of $275-325 million, due to uncertainties as to whether net operating
losses would be utilized against future tax payments. Fleming also announced
that its fourth quarter 2002 pre-tax loss from continuing operations would be
increased by expenses totaling not more than $80 million as a result of a number
of factors, including increased vendor payback rates, the Kmart contract
cancellation and corrections identified as a result of the Audit Committee's
independent investigation.
Finally, Fleming announced on April 17, 2003, that it
would early adopt EITF 02-16, Accounting by a Reseller for Cash Consideration
Received from a Vendor, retroactive to the beginning of fiscal year 2002. This
rule requires cash consideration received from a vendor to be recorded as an
adjustment to the prices for the vendor's products and therefore characterized
as a reduction of cost of sales when recognized in the customer's income
statement. Fleming announced that the 2002 effect of adopting EITF 02-16 was
expected to reduce the pre-tax loss from 2002 annual results in the range of
$5-15 million, although the cumulative effect that would be recorded as of the
beginning of 2002 was expected to be an expense of not more than $45 million.
In a Form 12b-25 filed by Fleming with the SEC on
June 4, 2003, Fleming announced that its 2000 annual financial statements
previously filed with the SEC would require restatement. The June 4th
announcement stated that it expected the related restatements of the results for
the full-year 2000 to reduce consolidated pre-tax financial results for such
period by an aggregate amount of not more than $2 million, reflecting an
increase in 2000 pre-tax loss from continuing operations of not more than $6
million and a decrease in 2000 pre-tax loss from discontinued operations of not
more than $4 million. As stated in the June 4th announcement, those restatements
would principally correct the timing of when certain vendor transactions were
recognized and would reflect other adjustments and corrections identified as a
result of the Audit Committee's independent investigation.
c. Labor-Related Claims
During the prepetition and post-petition period, the
Debtors had several labor-related claims pending against them by individual
employees and/or union representatives for grievance/arbitration claims for
vacation, pay, health and welfare payments, severance pay and discrimination
claims, the majority of which the Debtors believe, if allowed, will be General
Unsecured Claims.
In connection with the wind-down of their Wholesale
Distribution Business, the Debtors closed several facilities in various states,
including Wisconsin, for which there are currently claims pending by the
Wisconsin Department of Workforce Development for claims under Section 109.07 of
the Wisconsin Statutes based on insufficient notice of the facility closings.
In addition, except as set forth in the Benefits
Schedule, the Debtors shall have withdrawn from all "multiemployer plans" (as
such term in defined in Section 3(37) of ERISA) prior to the Effective Date. As
a result, several multiemployer benefit plans have filed proofs of claims
against the Debtors' estates. The Debtors propose to treat these claims as
General Unsecured Claims.
d. Significant Prepetition Litigation
(1) DiGiorgio Corp. v. Fleming Companies,
Inc., et al., United States District
Court for the District of New Jersey,
Case No. 02-2887-DMC. DiGiorgio alleged
that Fleming breached a non-compete
agreement with respect to supplying
certain grocery items in Connecticut,
New York and parts of New Jersey.
DiGiorgio sought injunctive relief and
an unspecified amount of damages and
requested an audit of Fleming's books
and an order extending the term of the
non-compete agreement beyond its
scheduled June 2004 expiration date.
Fleming denied that it breached the
agreement and, additionally, claimed
that the non-compete agreement was
invalid because it was unreasonably
broad. Finally, Fleming asserted that
even if there were an enforceable
agreement that had been breached,
DiGiorgio's damages, if any, were
28
nominal. On April 1, 2003, the court
granted DiGiorgio's motion for a
preliminary injunction and prohibited
Fleming from, among other things,
engaging in wholesale distribution of
meat, dairy, deli, frozen meats, frozen
dairy and frozen deli products for
retail sale within the Amended
Restricted Territory. On April 23, 2003,
the Bankruptcy Court lifted the
automatic stay to permit Fleming to
appeal and/or pursue other actions
regarding the order granting the
preliminary injunction, and on April 30,
2003, Fleming filed its notice of appeal
to the United States Court of Appeals
for the Third Circuit. The parties
reached a global settlement in the
bankruptcy case resolving all their
disputes, including the issues raised in
this litigation. The settlement was
approved by the Bankruptcy Court on
November 25, 2003.
(2) Harvest Logistics, Inc. and Iceworks
Logistics, Inc. v. Fleming Companies,
Inc., United States District Court for
the Northern District of Texas, Case No.
301-CV1813-L. After the parties mutually
agreed to terminate Harvest's five-year
written warehouse management contract
for a Ft. Wayne facility and Iceworks'
five-year oral warehouse management
contract for a Grand Rapids perishable
produces facility in August 2001, those
entities sued Fleming for breach of
contract, alleged anticipatory
repudiation of Fleming's obligation to
pay future management fees, unjust
enrichment and quantum meruit.
Plaintiffs claimed that they were owed
$6,000,000 for unreimbursed expenses and
$10,000,000 for five years of future
management fees. Fleming denied
Harvest's and Iceworks' claims and
asserted counterclaims against them for
breach of contract and against their
parent entity, Tibbett & Britten Group
North America, Inc., for failure to
properly supervise performance of those
agreements. Fleming alleged that Harvest
and Iceworks were corporate shells and
alter egos of Tibbett & Britten and
sought damages of approximately
$5,600,000, subsequently reduced to
$3,900,000. Discovery has been
completed, and the case was set for
trial in June 2003. Fleming moved for
summary judgment on the Harvest and
Iceworks' claims for alleged
anticipatory repudiation of Fleming's
obligation to pay future management
fees, and Harvest and Iceworks
cross-moved for summary judgment on
Fleming's claim that they were corporate
shells and alter egos of Tibbett &
Britten. The automatic stay that has
been imposed when Fleming commenced its
chapter 11 case was lifted to permit the
parties to brief these motions.
Thereafter, the parties reached an
agreement in principle that Fleming will
dismiss with prejudice its claims
against Tibbett & Britten (but not
against Harvest and Iceworks), and
Harvest and Iceworks will dismiss with
prejudice their claims against Fleming
insofar as those claims pertains to loss
of future management fees, but not as to
claimed unreimbursed expenses. This
agreement in principle will result in
the withdrawal of the cross-motions for
summary judgment, which no longer will
be necessary.
(3) SuperValu, Inc. and SuperValu Holdings,
Inc. v. Rainbow Food Group, Inc. H.
Brooks & Co., LLC and Fleming Companies,
Inc., Second Judicial District Court,
Ramsey County, Minnesota, Case No.
C4-02-4394. SuperValu alleged that
Rainbow had used Rainbow's broker, H.
Brooks, to obtain SuperValu's ads and
used the information in those ads to
undercut Cub Foods prices or to
reschedule promotions. SuperValu
asserted claims of misappropriation of
trade secrets and tortious interference
with prospective business advantage and
sought injunctive relief, unspecified
compensatory and punitive damages and
29
attorneys' fees. Rainbow and Fleming
denied SuperValu's claims and asserted
counterclaims for misappropriation of
trade secrets and confidential
information, tortious interference with
contract, unfair competition and
tortious employee raiding stemming from
SuperValu's wrongful raiding of former
Rainbow associates and subsequent use of
confidential information possessed by
those associates, and claims for
unlawful restraint of trade and
violation of the Minnesota antitrust
monopolization of food products statute.
Rainbow and Fleming sought injunctive
relief, unspecified actual and treble
damages, interest and attorneys' fees.
The parties agreed to a confidential
settlement prior to commencement of the
Chapter 11 Cases, and consummated that
settlement after the Petition Date.
(4) Home Depot v. Ronald Griffin and Fleming
Companies, Inc., Court of Chancery of
the State of Delaware, Case No.
19649-NC. Griffin, a former employee of
Home Depot, was hired by Fleming. Home
Depot alleged that Griffin breached his
agreement not to solicit Home Depot
employees and that Fleming tortiously
interfered with Griffin's
non-solicitation agreement and sought
compensatory damages in excess of
$6,000,000 (including $1,000,000 in
Griffin's stock option gains), plus
attorneys' fees totaling more than
$300,000. Griffin and Fleming denied the
allegations, Fleming has tendered
Griffin's defense to its directors' and
officers' liability insurance carrier.
The parties have reached a settlement in
principle in this case, although they
continue to work out the language of a
final settlement agreement and any
settlement is subject to approval of the
Bankruptcy Court.
(5) Fleming Companies, Inc. v. Clark Retail
Enterprises, Inc., American Arbitration
Association Case No. 51 181 00447 01; In
re Clark Retail Enterprises, Inc.,
United States Bankruptcy Court for the
Eastern District of Illinois, Case No.
02-40045 (JHS). Fleming asserted that
Clark committed to at least $80,000,000
annually in non-cigarette purchases
under a five-year supply agreement and
that such commitment induced Fleming to
enter into the agreement and to agree to
provide over $40,000,000 in incentive
payments over the five-year term of the
agreement. Fleming sought to rescind the
agreement due to Clark's failure to make
the requisite non-tobacco purchases.
Clark requested termination of the
agreement due to Fleming's unilateral
modification of contract terms in
alleged breach of the agreement. Fleming
agreed to the requested termination.
Fleming sought damages, including the
reimbursement of the approximately
$8,000,000 unamortized portion of the
$12,000,000 incentive payment it made to
Clark, plus more than $20,000,000 for
Fleming's start-up warehousing and other
costs. Clark replaced Fleming with a new
supplier and claimed related damages in
excess of $5,000,000, including lost
"benefit of the bargain" resulting from
termination of the agreement. The
dispute was scheduled for mandatory
arbitration, but all proceedings were
stayed when Clark filed its liquidating
chapter 11 case in October 2002. Fleming
filed a $31,600,000 proof of claim in
the Clark chapter 11 case. Just before
the commencement of the Chapter 11
Cases, Clark sought to lift the stay in
its own chapter 11 case to proceed with
the arbitration. All proceedings were
stayed when Fleming filed its bankruptcy
case. The parties have settled their
matter by agreeing to mutual releases.
The Bankruptcy Court approved the
settlement by order entered February 13,
2004.
30
(6) Russell Stover Candies, Inc., et al. v.
Fleming Companies, Inc., United States
District court for the Western District
of Missouri, Case No. 01-1022-CV-W-3.
Stover commenced an action against
Fleming based upon Fleming's
distribution of Stover candy that
allegedly had become heat damaged while
in Fleming's custody. Ultimately, Stover
and Fleming entered into a settlement
agreement resolving the litigation,
subject to full performance of the
settlement. A dispute arose over the
manner in which a term of the settlement
agreement was to be interpreted. Stover
asserted that Fleming was required to
pay an additional $737,000 under the
agreement. On February 28, 2003, the
parties filed cross motions for summary
judgment. The matter was submitted to
the court, and the parties engaged in
settlement negotiations, and those
motions were pending when Fleming
commenced bankruptcy. On September 15,
2003, the court dismissed the summary
judgment motions without prejudice to
their being reset if and when the
parties obtain relief from the automatic
stay in the Fleming bankruptcy case.
(7) Bank of New York v. Fleming Companies,
Inc., New York Supreme Court, Erie
County, Index No. 2001-9864. One of the
principals of Avery's Markets, a grocery
store operator supplied by Fleming,
owned real property subject to a
mortgage to Bank of New York ("BONY").
The mortgage contained an assignment of
rents clause. Fleming leased the
property and subleased the premises to
Avery's. The principal defaulted on the
BONY mortgage, Avery's and its
principals filed bankruptcy cases and
BONY foreclosed on its mortgage. Five
years later BONY sued Fleming to enforce
its assignment of rents rights and to
collect approximately $203,000. Fleming
asserted defenses of setoff, improper
exercise of the assignment of rents
clause and laches. The parties filed and
argued cross-motions for summary
judgment. The Chapter 11 Cases were
commenced before those motions were
decided, and all proceedings in the case
are now stayed.
(8) Wayne Berry v. Fleming Companies, Inc.,
et al, USDC Hawaii No. 01 00446 SPK-LEK.
Wayne Berry, designer of certain
software used by Fleming at its Kapolei,
Hawaii facilities to track freight, sued
Fleming for copyright infringement.
Fleming denied the allegations, and the
matter went to trial. On March 6, 2003,
the jury found in favor of Fleming on
all claims but one. With regard to the
claim on which the jury found in Berry's
favor, the jury awarded damages of
$98,250 and found that Fleming had
willfully infringed. Post-trial motions
were still pending when the bankruptcy
petition was filed on April 1, 2003,
staying the proceedings.
(9) Duane D. Betterman v. Fleming Companies
Inc., State of Wisconsin, Court of
Appeals District III, County of Douglas
(Case No. 02-2617). After a jury trial,
judgment was entered in favor of
Betterman in January 2002. Betterman was
awarded damages totaling $555,666. On
October 24, 2002, Fleming appealed to
the Wisconsin Court of Appeals. The
Wisconsin Court of Appeals affirmed the
judgement in favor of Betterman. Fleming
does not anticipate any further appeals.
e. Significant postpetition litigation outside
of Bankruptcy Court
(1) Fleming Companies, Inc. v. Baker
Petrolite Corporation and Baker Hughes,
Inc., 15th Judicial District Court,
Lafayette Parish, Louisiana,
31
20036373. Fleming filed suit against
defendants alleging their contamination
of certain real property owned by
Fleming in Broussard, Louisiana.
Defendants owned adjacent property whose
soil and groundwater became contaminated
from defendants' operations and
contaminated Fleming's property. Fleming
subsequently sold the property,
postpetition. The purchase required a $1
million reduction in the sale price due
to the contamination. Fleming filed suit
alleging claims of trespass, negligence,
nuisance and strict liability against
defendants to recover the diminution in
property value. This lawsuit is
currently pending.
(2) Chouteau I-35 Development, L.L.C. v.
Fleming Companies, Inc. and Kirsten
Richesson, Circuit Court of Clay County,
Liberty, Missouri. This proceeding
involved the liquidation of Fleming's
ownership interest in a joint venture.
Specifically, I-35 and Fleming
established a joint venture in 1998 to
own and develop a shopping center.
Fleming alleged that I-35 took every
possible action to prevent a sale of the
property and forced Fleming to pursue
attempts to sell the property by
dissolving the entity and liquidating
the assets as well as preparing
pleadings necessary to foreclose on a
mortgage loan Fleming extended to the
joint venture. I-35 alleged that Fleming
sought a quick repayment of its
outstanding loan balance in a
postpetition fire sale and that Fleming
had no right under the operating
agreement to sell the shopping center
without first meeting certain
prerequisites. The Bankruptcy Court
granted relief from stay on or about
December 15, 2003, to allow both parties
to litigate outside of Bankruptcy Court.
I-35 initiated a lawsuit against Fleming
in the Circuit Court of Clay County.
This matter was settled on or about
January 30, 2004. The terms of the
settlement agreement are, generally,
that Fleming and I-35 agreed to sell the
property for $10,550,000, that I-35
would receive $720,000, the parties
further waived and released each other
from all claims, and agreed that they
would then dissolve the joint venture
and wind up its affairs.
f. Significant Adversary Proceedings Filed in
the Debtors' Chapter 11 Cases
(1) Reclamation related adversary
proceedings. As described in section
C.1.l. above, on November 25, 2003, the
Debtors filed the Amended Report and
Motion in connection with Reclamation
Claims. In relevant part, the Amended
Report and Motion sought the entry of an
order that provides that the Reclamation
Claims are General Unsecured Claims that
are not entitled to any priority
(administrative or otherwise) and that
such Claims may not be asserted as
secured claims. The Bankruptcy Court,
however, declined to hear the motion and
directed Fleming to file separate
adversary proceedings against each and
every Reclamation Claimant. Accordingly,
the Debtors have filed approximately 575
such adversary proceedings against
reclamation claimants seeking a judicial
determination that the Reclamation
Claims are General Unsecured Claims that
are not entitled to any priority. In
addition to the declaratory relief
sought in each such adversary
proceeding, the Debtors asserted
additional causes of action or defenses,
if applicable, that related to any
particular Reclamation Claimant. Many of
the 576 adversary proceedings include
causes of actions related to
preferential transfers, other avoidance
powers, set off rights or actions based
on breach of contract.
32
(2) Adversary Proceedings against surety
companies. Fleming initiated a number
of Adversary Proceedings in these
Chapter 11 Cases against surety
companies. Below is a summary of each
such Adversary Proceeding.
(a) Fleming Companies, Inc. v. Hartford
Fire Insurance Company and Hartford
Casualty Insurance Company,
03-60185. This Adversary Proceeding
was commenced on December 23, 2003
to recover alleged preferences in
the sum of $12,644,152 from
Hartford Fire Insurance Company and
Hartford Casualty Insurance Company
(together, "Hartford"). On January
19, 2004, Hartford filed an answer
denying all liability and raising a
number of affirmative defenses.
(b) Fleming Companies, Inc. v. RLI
Insurance Company, 03-60186. This
Adversary Proceeding was commenced
on December 23, 2003 to recover
alleged preferences in the sum of
$15,000,000 from RLI Insurance
Company. The parties negotiated a
settlement, and on January 21,
2004, the Bankruptcy Court entered
its Order Granting Debtors' Motion
Pursuant To 11 U.S.C. Section
105(a) and Fed. R. Bankr. P. 9019
For Approval Of Compromise With RLI
Insurance Company. This adversary
proceeding was dismissed with
prejudice on February 17, 2004.
(c) Fleming Companies, Inc. v.
Travelers Casualty and Surety
Company of America, 03-60187. This
Adversary Proceeding was commenced
on December 23, 2003 to recover
alleged preferences in the sum of
$4,100,000 from Travelers Casualty
and Surety Company of America
("Travelers"). On February 6, 2004,
Travelers filed an answer denying
all liability and raising a number
of affirmative defenses.
(d) Fleming Companies, Inc. v.
Westchester Fire Insurance Company,
03-60188. This Adversary Proceeding
was commenced on December 23, 2003
to recover alleged preferences in
the sum of $11,000,000 from
Westchester Fire Insurance Company.
The parties negotiated a
settlement, and on January 21,
2004, the Bankruptcy Court entered
its Order Granting Debtors' Motion
Pursuant To 11 U.S.C. Section
105(a) and Fed. R. Bankr. P. 9019
For Approval Of Compromise With
Westchester Fire
33
Insurance Company. This adversary
proceeding was dismissed with
prejudice on February 17, 2004.
(e) Fleming Companies, Inc. v. Zurich
American Insurance Company,
03-60189. This Adversary Proceeding
was commenced on December 23, 2003
to recover alleged preferences in
the sum of $7,500,000 from Zurich
American Insurance Company
("Zurich"). On January 20, 2004,
Zurich filed Defendant's Motion To
Dismiss For Failure To State A
Claim Upon Which Relief Can Be
Granted. Fleming filed its
opposition to the motion on
February 13, 2004.
(f) Fleming Companies, Inc. v.
Greenwich Insurance Company, AIG
Europe (UK) Limited, Underwriters
at Lloyd's Syndicates, Zurich
Specialties London Limited, RLI
Insurance Company, Twin Cities Fire
Insurance Company, Starr Excess
Liability International Insurance,
Ltd., Underwriters at Lloyd's
Syndicates, Gulf Insurance Company
and Lumbermen's Mutual Casualty
Company, 03-59474. This Adversary
Proceeding was commenced on
December 9, 2003, to obtain
declaratory relief with respect to
various issues under primary and
excess policies of directors and
officers liability insurance.
Defendants Greenwich Insurance
Company, Underwriters at Lloyd's
Syndicates, Zurich Specialties
London Limited, Twin Cities Fire
Insurance Company, Gulf Insurance
Company and Lumbermen's Mutual
Casualty Company have answered the
complaint and have filed
counterclaims for declaratory
relief on the same issues that form
the basis of the complaint. Fleming
has filed a reply to each
counterclaim. Defendant AIG Europe
(UK) Limited was recently served
with summons and complaint and has
not yet responded to the complaint.
Defendant Starr Excess Liability
International Insurance Ltd.
demanded that it be served pursuant
to the provisions of the Hague
Convention on Service of Process
Abroad. That service has been made,
but Starr has not yet responded to
the complaint. The parties have a
greed to hold in abeyance all
issues other than coverage issues
raised by the complaint and
counterclaims and have propounded
written discovery to each other on
those issues.
34
(3) The following are other Adversary
Proceedings filed in these Chapter 11
Cases
(a) The Kroger Co. v. Fleming
Companies, Inc., 03-52915. This is
a reclamation claim. The parties
have stipulated to suspend
proceedings pending general
resolution of reclamation claims
collectively.
(b) Superior Dairy v. Fleming Companies
Inc. et al, 03-53034. Plaintiff
alleged that certain funds in
Fleming's possession were
Plaintiff's property. The parties
stipulated to a dismissal of the
action on or about February 13,
2004.
(c) American Greetings Corporation v.
Fleming Companies, Inc., 03-53346.
Plaintiff alleged that certain
funds in Fleming's possession were
held in constructive trust for the
benefit of the vendors. The parties
reached a settlement that was
approved by the Bankruptcy Court by
order entered February 5, 2003.
(d) Farris Produce, Inc., et al. v.
Fleming Companies, Inc., et al.
03-54449. This proceeding is a
class action brought by and on
behalf of numerous vendors who
delivered certain goods directly to
retailers and invoiced Fleming for
such deliveries. Plaintiffs contend
that certain funds in Fleming's
possession are held in constructive
trust for the benefit of the class
of vendors. Fleming denied
Plaintiffs' claims. The parties
reached a settlement on or about
February 5, 2004. Under the terms
of the proposed settlement, Fleming
will pay the class $17.5 million.
The parties are currently seeking
court approval.
(e) Fleming Companies, Inc. v. Jackson
Capital Management, et al.
03-54449. This proceeding is a
request for an injunction under 11
U.S.C. Section 105 to prevent class
actions against present and former
directors. The parties have
postponed the proceedings by
stipulation.
(f) Fleming Companies, Inc. v. Robert
Ellis et al., 03-54756. This
proceeding is a request for an
injunction under 11 U.S.C. Section
105 to prevent the State of Georgia
from criminally prosecuting a
Fleming executive. The Bankruptcy
Court granted a preliminary
injunction against the prosecution.
35
Discovery is ongoing in advance of
an unscheduled final hearing.
(g) Wayne Berry v. Hawaiian Express
Service et al., USDC Hawaii No. CV
03 00385 SOM-LEK. In this
proceeding, Wayne Berry has sued
Fleming, C&S and other companies
and individuals in the United
States District Court for Hawaii
alleging that the defendants
continue to violate his copyright
in certain freight tracking
software previously used by Fleming
at its facilities in Kapolei,
Hawaii. Berry's software was the
subject of a prepetition lawsuit,
discussed in the prepetition
section above, in which Berry won
$98,250 and a finding of willful
infringement against Fleming, but
the automatic stay went into effect
before the judgment was entered. In
the postpetition lawsuit,
originally filed on July 22, 2003
and amended on August 13, 2003 to
include Fleming, C&S and various
employees as individuals, Berry
alleges that the defendants
continue to infringe on his
software copyrights notwithstanding
the prepetition jury verdict.
Discovery is ongoing and a trial
date has been set for November 16,
2004.
(h) Gorman Foods, LLC v. Fleming
Companies, Inc., 03-55518. This
proceeding is a complaint brought
by a group of store owners seeking
over $445,000 in damages on the
basis that Fleming is holding in
trust for the benefit of the store
owners certain funds remitted by
certain vendors to Fleming to pay
for various product advertisements
run by the group of store owners.
Discovery is ongoing.
(i) The Unofficial Committee of
Unsecured Trade Creditors of
Dunigan Fuels, Inc. v. Deutsche
Bank Trust Company Americas, et
al., 03-55715. This proceeding is a
fraudulent conveyance complaint
brought by a group of creditors
against various banks and Fleming
for $9.2 million which was
allegedly owed by Dunigan Fuels,
Inc. The creditors group contends
that but for Fleming's causing
Dunigan Fuels to guarantee
unrelated debts, Dunigan Fuels
would have been able to repay the
group. The group therefore seeks to
have this money repaid by the banks
or by Fleming. The Debtors have
settled this matter and are
36
in the process of documenting the
settlement.
(j) Cavendish Farms et al. v. Fleming
Companies, Inc., et al., 03-56207.
This adversary proceeding was filed
on September 26, 2003, by eleven
PACA claimants against Fleming
Companies, Inc. and three of its
officers. In their adversary
complaint, plaintiffs seek to
recover $3,203,608.89 (plus costs
and attorneys' fees) as statutory
trust assets pursuant to the PACA.
In addition, plaintiffs assert
common law claims of breach of
contract and breach of fiduciary
duties. By order entered January
29, 2004, the Bankruptcy Court
granted Fleming's motion to
withdraw the reference.
(k) Sara Lee Bakery Group, Inc. v.
Fleming Companies, Inc., et. al.,
03-53027. Sara Lee Bakery Group
("SLBG") was a vendor that
delivered goods directly to
retailers and invoiced Fleming for
such deliveries. SLBG initiated
this adversary proceeding, on April
17, 2003, alleging, inter alia,
that the funds paid to Fleming by
the retailers were held in
constructive trust for the benefit
of SLBG. Fleming denied SLBG's
claims. On May 12, 2003, the
Bankruptcy Court entered a
Temporary Restraining Order (the
"TRO"). Pursuant to the TRO,
Fleming paid the amount of
$1,205,739.70 to SLBG and placed
$948,403.56 in a segregated account
pending the final resolution of the
Adversary Proceeding. After the
completion of discovery, the
parties reached a settlement which
was approved by the Bankruptcy
Court on November 25, 2003. Under
the terms of the settlement, SLBG
paid to Fleming the sum of
$205,739.70, SLBG retained the
remainder of the funds paid to it
by Fleming pursuant to the TRO and
SLBG retained an allowed unsecured
claim in the amount of $701,195. In
addition, the TRO was vacated and
Fleming and SLBG were relieved of
their obligations under the TRO,
including Fleming's obligation to
segregate funds for the benefit of
SLBG. Each party bore its own costs
and attorneys' fees.
37
7. Claims Bar Date and Review Process
a. Claims Bar Date
On June 25, 2003, the Bankruptcy Court entered an
order (the "Bar Date Order") establishing September 15, 2003 as the bar date
(the "Non-Governmental Claims Bar Date") for all non-governmental Persons and
Entities to file prepetition Claims in these Chapter 11 Cases and October 1,
2003 as the bar date (the "Governmental Bar Date") for all governmental Persons
and Entities to file prepetition Claims in these Chapter 11 Cases. The Bar Date
Order further provides that, among other things, any Person or Entity that is
required to file a Proof of Claim in these Chapter 11 Cases but fails to do so
in a timely manner shall be forever barred, estopped and enjoined from (a)
asserting any Claim against the Debtors that such Person or Entity has that (i)
is in an amount that exceeds the amount, if any, that may be set forth in the
Schedules or (ii) is of a different nature or in a different classification than
what may be set forth in the Schedules (in either case any such Claim referred
to as an "Unscheduled Claim") and (b) voting upon, or receiving distributions
under, any plan or plan of reorganization in these Chapter 11 Cases in respect
of an Unscheduled Claim.
b. Administrative Claim Bar Date
On December 3, 2003, the Bankruptcy Court entered an
order approving January 15, 2004 as the bar date for all persons or entities
holding an Administrative Claim arising on or after April 1, 2003, through and
including October 31, 2003 (the "First Bar Date Order") [Docket No. 4738]. For
purposes of the First Administrative Bar Date, an Administrative Claim includes
any Claim (as defined in 11 U.S.C. Section 101(5)) with respect to which the
holder intends to seek priority of payment pursuant to sections 503 and
507(a)(1) of the Bankruptcy Code, except for the following: (i) Administrative
Claims of professionals retained pursuant to sections 327 and 328 of the
Bankruptcy Code; (ii) expenses of members of the Creditors' Committee; (iii) all
fees payable and unpaid under 28 U.S.C. Section 1930; (iv) any fees or charges
assessed against the estates of the Debtors under 28 U.S.C. Section 123; (v)
intercompany Claims between Debtors and their affiliates; (vi) Administrative
Claims arising in the ordinary course of business relating to inventory,
services or supplies provided by trade vendors or service providers which are
paid or payable by the Debtors in the ordinary course of business; (vii) Claims
for reclamation asserted pursuant to section 546(c) of the Bankruptcy Code;
(viii) Administrative Claims relating to executory contracts and unexpired
leases that have neither been rejected nor assumed by the Debtors, as well as
Administrative Claims relating to, or arising under, executory contracts or
unexpired leases, regardless of whether such executory contracts or unexpired
leases have been assumed or rejected, that are unknown to the claim holder; (ix)
Administrative Claims that have previously been filed or for which any request
for payment pursuant to section 503(a) of the Bankruptcy Code or adversary
proceeding is pending; and (x) any Claims of the Pre-Petition Lenders' agents
and Pre-Petition Lenders as well as those of the Post-Petition Lenders' agents
and Post-Petition Lenders arising under or in connection with the Pre-Petition
Credit Agreement, DIP Credit Facility and the Final DIP Order. The
Administrative Bar Date Order further provides that any person or entity that is
required to file a Proof of Administrative Claim in these Chapter 11 Cases, but
fails to do so on or before the Administrative Claims Bar Date, shall not, with
respect to any such Administrative Claim, be treated as a creditor of the
Debtors for purposes of allowing such Claim. The court-approved Administrative
Claims Bar Date Notice provides that, among other things, any Person or Entity
that is required to file a Proof of Administrative Claim in these Chapter 11
Cases, but fails to do so in a timely manner, shall be forever barred, estopped
and enjoined from (a) asserting any such Administrative Claim against the
Debtors and (b) voting upon, or receiving distributions under, any plan or plan
of reorganization in these Chapter 11 Cases in respect of such Administrative
Claim.
c. Claims Review Process
The Debtors have begun to evaluate the numerous
Claims filed in these Cases to determine, among other things, whether it is
necessary and appropriate to file objections seeking to disallow, reduce and/or
reclassify such Claims The Debtors expect to also reconcile the Claims against
their Schedules in an effort to (a) eliminate duplicative or erroneous Claims
and (b) ensure that the Bankruptcy Court allows only valid Claims. If the
Debtors, Core-Mark Newco, or the Post Confirmation Trust, as applicable, objects
to a Claim, a hearing regarding such objection will be held and notice of such
objection and the related hearing will be provided to affected Claim Holders as
well as to other parties entitled to receive notice. To the extent necessary,
the Bankruptcy Court will rule on the objection and ultimately determine
whether, and in what amount and priority, to allow the
38
applicable Claim. If the Debtors, Core-Mark Newco, or the Post Confirmation
Trust, as applicable, do not object to a Claim by the Objection Deadline, such
Claim will be deemed allowed and will receive the treatment accorded such Claim
under the Plan. As appropriate, the Debtors, Core-Mark Newco, or the Post
Confirmation Trust, as applicable, may seek to negotiate and/or settle disputes
regarding a Claim or Claims as an alternative to filing objections to the
allowance or treatment of such Claims.
The Debtors have begun to file procedural and
substantive objections to secured, administrative and priority claims ("SAP
Claims") in order to reconcile their estimated exposure with the value of the
asserted SAP Claims. On December 5, 2003, the Debtors filed their First Omnibus
Objections to Claims (Docket No. 4790). On January 31, 2004, the Debtors filed
their Second and Third Omnibus Objections to Claims (Docket Nos. 6178 and 6179
respectively). These Omnibus Objections affect approximately 1,000 secured,
administrative and/or priority claims with an asserted value of $3.2 billion.
The Court has entered an Order granting the relief in the First Omnibus
Objection [Docket No. 5768]. The hearing date on the Second and Third Omnibus
Objections is March 25, 2004 with an objection deadline of March 18, 2004. On
February 24, 2004, the Debtors filed their Fourth and Fifth Omnibus Objections
to Claims (Docket Nos. 6178 and 6179 respectively). These Omnibus Objections
affect approximately 129 secured, administrative and/or priority claims with an
asserted value of $25 million.
On February 13, 2004, the Debtors filed their Motion
for Waiver of Del. Bankr. Local Rule 3007-1(f) With Respect To Certain Omnibus
Objections to Claims, which Motion requests authority, notwithstanding the Local
Rules, to object to more than 150 claims in specific "Reclassify Only"
Objections, to file more than two substantive Omnibus Objections in a month (for
Reclassify Only Objections) and to object to certain claims solely on the basis
of priority reserving the right to later object to such claims on other grounds.
The Motion was granted on March 3, 2004. On March 18, 2004, the Debtors filed
the first of their Reclassify Only Objections in the Debtors' Sixth Omnibus
Objection to Claims. These Reclassify Only Objections affect approximately 363
secured, administrative and/or priority claims with an asserted value of $160
million. The hearing date on the Sixth Omnibus Objection is April 19, 2004 with
an objection deadline of April 12, 2004.
39
VI. SUMMARY OF THE PLAN OF REORGANIZATION
A. Overview of Chapter 11
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under chapter 11 of the Bankruptcy Code, a debtor is authorized
to reorganize its business for the benefit of itself, its creditors and interest
holders. Another goal of chapter 11 is to promote equality of treatment for
similarly situated creditors and similarly situated interest holders with
respect to the distribution of a debtor's assets.
The commencement of a chapter 11 case creates an estate that is
comprised of all of the legal and equitable interests of the debtor as of the
filing date. The Bankruptcy Code provides that the debtor may continue to
operate its business and remain in possession of its property as a
"debtor-in-possession."
The consummation of a plan of reorganization is the principal objective
of a chapter 11 case. A plan of reorganization sets forth the means for
satisfying claims against, and interests in, a debtor. Confirmation of a plan of
reorganization by the Bankruptcy Court makes the plan binding upon the debtor,
any issuer of securities under the plan, any person or entity acquiring property
under the plan and any creditor of, or equity holder in, the debtor, whether or
not such creditor or equity holder (a) is impaired under or has accepted the
plan or (b) receives or retains any property under the plan. Subject to certain
limited exceptions and other than as provided in the plan itself or the
confirmation order, the confirmation order discharges the debtors from any debt
that arose prior to the date of confirmation of the plan and substitutes
therefore the obligations specified under the confirmed plan.
A chapter 11 plan may specify that the legal, contractual and equitable
right of the holders of claims or interests in classes are to remain unaltered
by the reorganization effectuated by the plan. Such classes are referred to as
"unimpaired" and, because of such favorable treatment, are deemed to accept the
plan. Accordingly, it is not necessary to solicit votes from the holders of
claims or equity interests in such classes. A chapter 11 plan also may specify
that certain classes will not receive any distribution of property or retain any
claim against a debtor. Such classes are deemed not to accept the plan and,
therefore, need not be solicited to vote to accept or reject the plan. Any
classes that are receiving a distribution of property under the plan but are not
"unimpaired" will be solicited to vote to accept or reject the plan.
Section 1123 of the Bankruptcy Code provides that a plan of
reorganization shall classify the claims of a debtor's creditors and equity
interest holders. In compliance therewith, the Plan divides Claims and Equity
Interests into various Classes and sets forth the treatment for each Class. The
Debtors also are required under section 1122 of the Bankruptcy Code to classify
Claims and Equity Interests into Classes that contain Claims and Equity
Interests that are substantially similar to the other Claims and Equity
Interests in such Classes. The Debtors believe that the Plan has classified all
Claims and Equity Interests in compliance with the provisions of section 1122 of
the Bankruptcy Code, but it is possible that a Holder of a Claim or Equity
Interest may challenge the classification of Claims and Equity Interests and
that the Bankruptcy Court may find that a different classification is required
for the Plan to be confirmed. In such event, the Debtors intend, to the extent
permitted by the Bankruptcy Court and the Plan, to make such reasonable
modifications of the classifications under the Plan to permit confirmation and
to use the Plan acceptances received in this solicitation for the purpose of
obtaining the approval of the reconstituted Class or Classes of which the
accepting Holder is ultimately deemed to be a member. Any such reclassification
could adversely affect the Class in which such Holder was initially a member, or
any other Class under the Plan, by changing the composition of such Class and
the vote required of that Class for approval of the Plan.
The Debtors (and each of their respective Affiliates, agents,
directors, officers, employees, advisors and attorneys), the Creditors Committee
(and each of their respective Affiliates, agents, directors, officers,
employees, advisors and attorneys) have, and upon confirmation of the Plan will
be deemed to have, participated in good faith and in compliance with the
applicable provisions of the Bankruptcy Code with regard to the distributions of
the securities under the Plan, and therefore are not, and on account of such
distributions will not be, liable at any time for the violation of any
applicable law, rule or regulation governing the solicitation of acceptances or
rejections of the Plan or such distributions made pursuant to the Plan.
THE REMAINDER OF THIS SECTION PROVIDES A SUMMARY OF THE STRUCTURE AND
MEANS FOR IMPLEMENTATION OF THE PLAN AND THE CLASSIFICATION AND TREATMENT OF
40
CLAIMS AND EQUITY INTERESTS UNDER THE PLAN AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE PLAN (AS WELL AS THE EXHIBITS THERETO AND DEFINITIONS IN THE
PLAN).
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT INCLUDE SUMMARIES
OF THE PROVISIONS CONTAINED IN THE PLAN AND IN THE DOCUMENTS REFERRED TO IN THE
PLAN. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT DO NOT PURPORT TO BE
PRECISE OR COMPLETE STATEMENTS OF ALL THE TERMS AND PROVISIONS OF THE PLAN OR
DOCUMENTS REFERRED TO IN THE PLAN, AND REFERENCE IS MADE TO THE PLAN AND TO SUCH
DOCUMENTS FOR THE FULL AND COMPLETE STATEMENT OF SUCH TERMS AND PROVISIONS.
THE PLAN ITSELF AND THE DOCUMENTS IN THE PLAN CONTROL THE ACTUAL
TREATMENT OF CLAIMS AGAINST, AND EQUITY INTERESTS IN, THE DEBTORS UNDER THE PLAN
AND WILL, UPON THE OCCURRENCE OF THE EFFECTIVE DATE, BE BINDING UPON ALL HOLDERS
OF CLAIMS AGAINST, AND EQUITY INTERESTS IN, THE DEBTORS, THE DEBTORS' ESTATES,
ALL PARTIES RECEIVING PROPERTY UNDER THE PLAN AND OTHER PARTIES IN INTEREST. IN
THE EVENT OF ANY CONFLICT BETWEEN THIS DISCLOSURE STATEMENT, ON THE ONE HAND,
AND THE PLAN OR ANY OTHER OPERATIVE DOCUMENT, ON THE OTHER HAND, THE TERMS OF
THE PLAN AND/OR SUCH OTHER OPERATIVE DOCUMENT SHALL CONTROL.
B. Generally
1. Structure of Reorganizing Plan
The Debtors believe that the Plan provides the best and most
prompt possible recovery to Holders of Claims and Equity Interests. For purposes
of this Disclosure Statement, the term Holder refers to the holder of a Claim or
Equity Interest in a particular Class under the Plan. If the Plan is confirmed
by the Bankruptcy Court and consummated, on the Effective Date or as soon as
practicable thereafter, the Debtors will make distributions in respect of
certain Classes of Claims and Equity Interests as provided in the Plan. The
Classes of Claims against, and Equity Interests in, the Debtors created under
the Plan, the treatment of those Classes under the Plan and distributions to be
made under the Plan are described below.
2. Creation of Core-Mark Newco
The Plan provides for the reorganization of the Debtors
centered around the remaining convenience store wholesale distribution business.
As a result of the restructuring transactions described below in section VI.F.5.
hereof, the Debtors' corporate structure will change as of the Effective Date.
On the Effective Date, two newly formed, wholly-owned subsidiaries of Core-Mark
Newco ("Core-Mark Holdings I" and "Core-Mark Holdings II") will each own 50% of
another newly formed subsidiary ("Core-Mark Holdings III"), all of Fleming's
assets related to it's convenience store business, including the Reorganized
Debtors, will be transferred to Core-Mark Holdings III and the reorganized
subsidiaries, Fleming's remaining assets will be transferred to a Post
Confirmation Trust which will be liquidated and Fleming's remaining direct and
indirect subsidiaries will be dissolved. As a result, Core-Mark International,
Inc., Core-Mark Interrelated Companies, Inc., Core-Mark Mid-Continent, Inc.,
General Acceptance Inc., C/M Products, Inc., ASI Office Automation, Inc., E.A.
Morris Distributors, Inc, Marquise Ventures Company, Inc., Minter-Weisman Co.,
and Head Distributing Co. (the "Reorganized Debtors"), will become indirect,
wholly-owned subsidiaries of Core-Mark Newco. An organizational chart depicting
the anticipated corporate structure of the new holding companies of the
Reorganized Debtors as of the Effective Date is set forth below.
41
[FLOW CHART]
3. Exit Financing Facility, Obtaining Cash for Plan
Distributions and Transfers of Funds Among the
Debtors and the Reorganized Debtors
All Cash necessary for Core-Mark Newco and the Post
Confirmation Trust, as applicable, to make payments pursuant to the Plan will be
obtained from the Reorganized Debtors' existing Cash balances, the continuing
operations of Core-Mark Newco, the Exit Financing Facility, the Tranche B Loan
and prosecution of Causes of Action, including collections of the Litigation
Claims, unless such Cash is not sufficient to fund the Plan, in which case the
Debtors, with the consent of the Committee, reserve the right to raise Cash from
a sale of some or substantially all of their assets. On the Effective Date, the
Reorganized Debtors are authorized to execute and deliver those documents
necessary or appropriate to obtain the Exit Financing Facility and the Tranche B
Loan, if necessary. The Exit Financing Facility shall not be secured by the
assets transferred to the Post Confirmation Trust.
4. Tranche B Loan
The Tranche B Loan shall be a term credit facility in the
amount of up to $60 million available to be borrowed from the Tranche B Lenders
on the Effective Date in the form of funded borrowings or letters of credit. All
obligations under the Tranche B Loan shall be secured by second priority
security interests in and liens upon substantially all present and future assets
of Core-Mark Newco, other than those assets transferred to the Post Confirmation
Trust, including accounts receivable, general intangibles, inventory, equipment,
fixtures and real property, and products and proceeds thereof. The Tranche B
Loan shall be junior to the Exit Financing Facility.
The Tranche B Loan shall be made by the Tranche B Lenders on
substantially the terms set forth in the Indicative Tranche B Loan Term Sheet
attached hereto as Exhibit 8.
5. Sale of Assets
In the event that the Debtors do not have sufficient Cash from
their (i) existing Cash balances on the Effective Date, (ii) operations, (iii)
the Exit Financing Facility, (iv) the Tranche B Loan or (v) pursuit of Causes of
Action to make the required payments under the Plan, the Debtors, with the
consent of the Creditors Committee, reserve the right to fund the Plan through a
sale of some or substantially all of the assets of the Debtors under section 363
of the Bankruptcy Code.
42
C. Classification And Treatment Of Claims And Equity Interests
1. Summary of Unclassified Claims against all Debtors
a. Administrative Claims
Subject to the provisions of section 330(a) and 331
of the Bankruptcy Code, each Holder of an Allowed Administrative Claim,
including Holders of Allowed Approved Trade Creditor Lien Claims, but excluding
claims for Professional Fees, will be paid the full unpaid amount of such
Allowed Administrative Claim in Cash (i) on the Effective Date or as soon as
practicable thereafter, or (ii) if such Administrative Claim is Allowed after
the Effective Date, as soon as practicable after the date such Claim is Allowed,
or (iii) upon such other terms as may be agreed upon by such Holder and the
applicable Reorganized Debtor or otherwise upon an order of the Bankruptcy
Court; provided that Allowed Administrative Claims including Allowed Approved
Trade Creditor Lien Claims representing obligations incurred in the ordinary
course of business or otherwise assumed by the Debtors or Reorganized Debtors
pursuant hereto will be assumed on the Effective Date and paid or performed by
the applicable Reorganized Debtor when due in accordance with the terms and
conditions of the particular agreements governing such obligations.
Except as provided in the Plan, Holders of
Administrative Claims that arose on or before October 31, 2003 to which the
First Administrative Bar Date did not apply and Holders of Administrative Claims
that arose after October 31, 2003 that have not been paid as of the Effective
Date, must file an Administrative Claim by the Second Administrative Bar Date.
If an Administrative Claim is not timely filed by the First Administrative Bar
Date or the Second Administrative Bar Date, as applicable, then such
Administrative Claim shall be forever barred and shall not be enforceable
against the Debtors or the Reorganized Debtors, their successors, their assigns
or their property. The foregoing requirements to file Administrative Claims by
the relevant bar date shall not apply to the (i) Administrative Claims of
Professionals retained pursuant to sections 327, 328 and 363 of the Bankruptcy
Code; (ii) expenses of members of the Official Committee of Unsecured Creditors;
(iii) all fees payable and unpaid under 28 U.S.C. Section 1930; (iv) any fees or
charges assessed against the estates of the Debtors under 28 U.S.C. Section 123;
(v) Intercompany Claims between Debtors and their affiliates; and (vi)
Administrative Claims arising in the ordinary course of business relating to
inventory, services or supplies provided by trade vendors or service providers
which are paid or payable by the Debtors in the ordinary course of business. An
objection to an Administrative Claim filed pursuant to this provision must be
filed and properly served within 220 days after the Effective Date. The Debtors
and the Post Confirmation Trustee, as applicable, reserve the right to seek an
extension of such time to object.
All Professionals that are awarded compensation or
reimbursement by the Bankruptcy Court in accordance with sections 330, 331 or
363 of the Bankruptcy Code that are entitled to the priorities established
pursuant to sections 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the
Bankruptcy Code, shall be paid in full, in Cash, the amounts allowed by the
Bankruptcy Court: (a) on or as soon as reasonably practicable following the
later to occur of (i) the Effective Date; and (ii) the date upon which the
Bankruptcy Court order allowing such Claim becomes a Final Order; or (b) upon
such other terms as may be mutually agreed upon between such Professional and
the Reorganized Debtors. On or before the Effective Date and prior to any
distribution being made under the Plan, the Debtors shall escrow into the
Professional Fee Escrow Account, the Carve-Out and the Additional Carve-Out as
outlined in the Final DIP Order and any additional estimated accrued amounts
owed to Professionals through the Effective Date.
Except as otherwise provided by Court order for a
specific Professional, Professionals or other entities requesting compensation
or reimbursement of expenses pursuant to sections 327, 328, 330, 331, 503(b) and
1103 or 363 of the Bankruptcy Code for services rendered prior to the
Confirmation Date must file and serve an application for final allowance of
compensation and reimbursement of expenses no later than forty-five (45) days
after the Effective Date. All such applications for final allowance of
compensation and reimbursement of expenses will be subject to the authorization
and approval of the Court. Any objection to the Claims of Professionals shall be
filed on or before thirty (30) days after the date of the filing of the
application for final compensation.
43
b. Priority Tax Claims
In full satisfaction, settlement, release, and
discharge of, and in exchange for, each Allowed Priority Tax Claim that is due
and payable on or prior to the Effective Date:
(1) If payment of the Allowed Priority
Tax Claim is not secured or
guaranteed by a surety bond or
other similar undertaking,
commencing on the Effective Date or
as soon as practicable thereafter,
the Holder of such Claim shall be
paid the principal amount of such
Claim plus simple interest on any
outstanding balance from the
Effective Date calculated at the
interest rate available on ninety
(90) day United States Treasuries
on the Effective Date, in quarterly
deferred Cash payments over a
period not to exceed six years
after the date of assessment of the
tax on which such Claim is based,
unless the Debtor and Holder
mutually agree to a different
treatment or as otherwise ordered
by the Court.
(2) If payment of the Allowed Priority
Tax Claim is secured or guaranteed
by a surety bond or other similar
undertaking, the Holder of the
Allowed Priority Tax Claim shall be
required to seek payment of its
Claim from the surety in the first
instance. Only after exhausting all
right to payment from its surety
bond or other similar undertaking
shall the Holder be permitted to
seek payment from the Debtors under
this Plan as a holder of an Allowed
Priority Tax Claim, and the
remainder, if any, owing on an
Allowed Claim after deducting all
payments received from the surety,
shall be treated as outlined in
paragraph (1) above.
To the extent the surety pays the
Allowed Priority Tax Claim in full,
the Priority Tax Claim shall be
extinguished. The surety's Claim
against the Debtors for
reimbursement is not entitled to be
paid as a Priority Tax Claim
hereunder. To the extent the surety
holds no security for its surety
obligations, it shall have a Class
6 Claim and shall be paid in
accordance with section III.B.8. of
the Plan. To the extent the surety
holds security for its surety
obligations, the surety shall have
a Class 3(A) Claim under the Plan
and be paid in accordance with
section III.B.3. of the Plan.
c. DIP Claims
On the Effective Date, or as soon as practicable
thereafter, each Holder of an Allowed DIP Claim shall be paid in full in Cash in
full satisfaction, settlement, release and discharge of and in exchange for each
and every Allowed DIP Claim, unless such Holder consents to other treatment.
2. Classification and Treatment of Classified Claims
a. Class 1(A) -- Other Priority Non-Tax Claims
(1) Classification: Class 1(A) consists
of all Allowed Other Priority
Non-Tax Claims.
(2) Treatment: In full satisfaction,
settlement, release, and discharge
of, and in exchange for, each
Allowed Other Priority Non-Tax
Claim that is due and payable on or
prior to the Effective Date, on the
Effective Date or as soon as
practicable thereafter, the Holder
of such Claim shall
44
be paid the principal amount of
such Claim on any outstanding
balance, unless the Holder consents
to other treatment.
(3) Voting: Class 1(A) is not impaired
and the Holders of Class 1(A)
Claims are conclusively deemed to
have accepted the Plan pursuant to
section 1126(f) of the Bankruptcy
Code. Therefore, the Holders of
Claims in Class 1 are not entitled
to vote to accept or reject the
Plan.
b. Class 1(B) -- Property Tax Claims
(1) Classification: Class 1(B) consists
of all Allowed Property Tax Claims.
(2) Treatment: In full satisfaction,
settlement, release, and discharge
of, and in exchange for, each
Allowed Property Tax Claim that is
due and payable on or prior to the
Effective Date, commencing on the
Effective Date or as soon as
practicable thereafter, the Holder
of such Allowed Property Tax Claim
shall be paid the principal amount
of such Claim plus simple interest
on any outstanding balance from the
Effective Date calculated at the
interest rate available on ninety
(90) day United States Treasuries
on the Effective Date, in quarterly
deferred Cash payments over a
period not to exceed six years
after the date of assessment of the
tax on which such Claim is based,
unless the Debtor and Holder
mutually agree to a different
treatment.
(3) Voting: Class 1(B) is impaired and
the Holders of Class 1(B) Claims
are entitled to vote to accept or
reject the Plan.
c. Class 2 -- Pre-Petition Lenders' Secured
Claims
(1) Classification: Class 2 consists of
all Allowed Pre-Petition Lenders'
Secured Claims.
(2) Treatment: On the Effective Date,
or as soon as practicable
thereafter, unless such Holder
consents to other treatment, each
Holder of an Allowed Pre-Petition
Lenders' Secured Claim shall be
paid in full and shall either (i)
assign its liens in the Debtors'
assets to the lender under the Exit
Financing Facility or (ii) assign
its liens in the Debtors' assets to
Core-Mark Newco, which liens as
assigned shall have the same
validity and priority as such liens
held by the Holders of the Class 2
Claims, and which liens as assigned
shall be subject to further
transfer to the Post Confirmation
Trust, as applicable.
Any default with respect to any
Class 2 Claim that existed
immediately prior to the filing of
the Chapter 11 Cases shall be
deemed cured upon the Effective
Date.
(3) Voting: Class 2 is not impaired and
the Holders of Class 2 Claims are
conclusively deemed to have
accepted the Plan pursuant to
section 1126(f) of the Bankruptcy
Code. Therefore, the Holders of
Claims in Class 2 are not entitled
to vote to accept or reject the
Plan.
45
d. Class 3(A) -- Other Secured Claims that are
not Class 1(B) Claims
(1) Classification: Class 3(A) consists
of all Allowed Other Secured Claims
that are not Class 1(B) Claims.
(2) Treatment: On the Effective Date or
as soon as practicable thereafter,
each Holder of an Allowed Other
Secured Claim that is not a Class
1(B) Claim (e.g. PMSI Holders,
equipment financing lenders, etc.)
shall receive one of the following
treatments, at the Debtors' option,
such that they shall be rendered
unimpaired pursuant to section 1124
of the Bankruptcy Code: (i) the
payment of such Holder's Allowed
Other Secured Claim in full, in
Cash; (ii) the sale or disposition
proceeds of the property securing
such Allowed Other Secured Claim to
the extent of the value of the
Holder's interests in such
property; or (iii) the surrender to
the Holder of the property securing
such Claim.
(3) Voting: Class 3(A) is unimpaired
and Holders of Class 3(A) Claims
are conclusively deemed to have
accepted the Plan pursuant to
section 1126(f) of the Bankruptcy
Code. Therefore, the Holders of
Claims in Class 3(A) are not
entitled to vote to accept or
reject the Plan.
e. Class 3(B) -- Approved Trade Creditor
Reclamation Lien Claims
(1) Classification: Class 3(B) consists
of all Allowed Approved Trade
Creditor Reclamation Lien Claims.
(2) Treatment: On the Effective Date,
or as soon as practicable
thereafter, the Post Confirmation
Trust shall issue the Class 3B
Preferred Interests in favor of the
Holders of Allowed Approved Trade
Creditor Reclamation Lien Claims in
the estimated aggregate amount of
such Allowed Claims under the terms
and conditions of the Class 3B
Preferred Interests Term Sheet
(with the interests to be reissued
as such Claims are Allowed by Final
Order or settlement) and grant a
first priority lien to such Holders
on the Post Confirmation Trust
Distributable Assets, entitling
each Holder of an Allowed Approved
Trade Creditor Reclamation Lien
Claim to its Ratable Proportion of
Post Confirmation Trust
Distributable Assets up to the
total amount of each Holders'
Allowed Approved Trade Creditor
Reclamation Lien Claim, in full
satisfaction, settlement, release
and discharge of each Allowed
Approved Trade Creditor Reclamation
Lien Claim, unless such Holder
agrees to other treatment, and
subject, at the Debtors' option, to
reduction for unpaid post-petition
deductions, preference payments and
other applicable setoff rights.
As additional security for the
Class 3B Preferred Interests,
Core-Mark Newco shall provide a
junior guarantee under the terms
outlined in the Class 3B Preferred
Interests Term Sheet.
(3) Voting: Class 3(B) is impaired and
the Holders of Class 3(B) Claims
are entitled to vote to accept or
reject the Plan.
f. Class 3(C) -- DSD Trust Claims
(1) Classification: Class 3(C) consists
of all Allowed DSD Trust Claims.
46
(2) Treatment: Each Holder of an
Allowed DSD Trust Claim shall be
paid in full satisfaction,
settlement, release and discharge
of each Allowed DSD Trust Claim in
Cash their Ratable Proportion of
the DSD Settlement Fund as outlined
in the DSD Settlement Agreement.
(3) Voting: Class 3(C) is impaired and
Holders of Claims in Class 3(C) are
entitled to vote to accept or
reject the Plan.
g. Class 4 -- PACA/PASA Claims
(1) Classification: Class 4 consists of
all Allowed PACA/PASA Claims.
(2) Treatment: In full satisfaction,
settlement, release, and discharge
of, and in exchange for, each
Allowed PACA/PASA Claim that is due
and payable on or prior to the
Effective Date, on the Effective
Date or as soon as practicable
thereafter, the Holder of such
Claim shall be paid the principal
amount of such Claim on any
outstanding balance, unless the
Holder consents to other treatment.
(3) Voting: Class 4 is unimpaired and
Holders of Allowed Claims in Class
4 are conclusively deemed to have
accepted the Plan pursuant to
section 1126(f) of the Bankruptcy
Code. Therefore, the Holders of
Claims in Class 4 are not entitled
to vote to accept or reject the
Plan.
h. Class 5 -- Valid Reclamation Claims that are
not Class 3(B) Claims
(1) Classification: Class 5 consists of
Allowed Valid Reclamation Claims
that are not Class 3(B) Claims.
(2) Treatment: To the extent the Court
determines that the Holders of
Reclamation Claims that are not
Class 3(B) Claims are entitled to
priority treatment, on the
Effective Date, or as soon as
practicable thereafter, the Post
Confirmation Trust, shall issue the
Class 5 Preferred Interests in
favor of such Holders in the
estimated aggregate amount of their
Allowed Claims (with the interests
to be reissued as such Claims are
Allowed by Final Order or
settlement) and grant a second
priority lien on the Post
Confirmation Trust Distributable
Assets entitling each Holder to its
Ratable Proportion of the Post
Confirmation Trust Distributable
Assets, after all Class 3(B) Claims
are paid in full.
As additional security for the
Class 5 Preferred Interests in the
event the Court determines that the
Holders of Class 5 Claims are
entitled to priority treatment,
Core-Mark Newco shall provide a
junior guarantee under the terms
outlined in the Class 5 Preferred
Interests Term Sheet.
In the event the Court denies the
Holders of Reclamation Claims that
are not Class 3(B) Claims priority
treatment, such Reclamation Claims
shall be treated as Class 6 General
Unsecured Claims hereunder, and any
ballots cast by Holders of Class 5
Claims shall be counted as ballots
cast by Holders of Class 6 Claims.
(3) Voting: Class 5 is impaired and
Holders of Allowed Claims in Class
5 are entitled to vote to accept or
reject the Plan.
47
i. Class 6 -- General Unsecured Claims other
than Convenience Claims
(1) Classification: Class 6 consists of
all Allowed General Unsecured
Claims other than Convenience
Claims.
(2) Treatment: On the Effective Date,
or as soon as practicable
thereafter, each Holder of an
Allowed General Unsecured Claim
other than Convenience Claims,
shall be paid in full satisfaction,
settlement, release, and discharge
of and in exchange for each and
every Allowed General Unsecured
Claim other than Convenience
Claims, at the Debtors' option, in
one or a combination of the
following manners: (i) issuance of
a Ratable Proportion of New Common
Stock subject to dilution from the
issuance of warrants to the Tranche
B Lenders and through the
Management Incentive Plan; and/or
(ii) in the event the Debtors, with
the consent of the Creditors
Committee, elect to sell some or
all of their assets as outlined
herein, a Ratable Proportion of
Cash remaining from the sale of
such assets after all of the
Allowed Unclassified Claims and
Claims of Holders in Classes 1
through 5 have been satisfied in
full.
As additional consideration, each
Holder of an Allowed General
Unsecured Claim shall be entitled
to a Ratable Proportion of Excess
Proceeds (as defined in the Post
Confirmation Trust Agreement), if
any, available from the Post
Confirmation Trust after payment by
the Post Confirmation Trust of all
claims and obligations required to
be made by the Post Confirmation
Trust under the Plan, the Post
Confirmation Trust Agreement, or
otherwise, as set forth in the Post
Confirmation Trust Agreement.
(3) Voting: Class 6 is impaired and
Holders of Claims in Class 6 are
entitled to vote to accept or
reject the Plan.
j. Class 7 - Convenience Claims
(1) Classification: Class 7 consists of
all General Unsecured Claims, other
than the claims of Holders of Old
Notes, of $5,000 or less held by a
single Holder. Holders of Old Notes
and General Unsecured Claims in
excess of $5,000 may not opt into
Class 7.
(2) Treatment: On or as soon as
practicable after the Effective
Date, each Holder of an Allowed
Class 7 Claim shall receive, in
full and final satisfaction of such
Claim, a Cash distribution equal to
10% of the amount of its Class 7
Claim, provided however, the
aggregate amount of such Allowed
Class 7 Claims shall not exceed
$10,000,000. If the aggregate
amount of the Allowed Class 7
Claims exceeds $10,000,000, each
Holder of an Allowed Class 7 Claim
shall receive its Ratable
Proportion of $1,000,000.
(3) Voting: Class 7 is impaired, and
Holders of Class 7 Claims are
entitled to vote to accept or
reject the Plan.
k. Class 8 -- Equity Interests
(1) Classification: Class 8 consists of
all Equity Interests.
48
(2) Treatment: Receives no distribution
and are canceled as of the
Effective Date.
(3) Voting: Class 8 is impaired, but
because no distributions will be
made to Holders of Class 8 Claims
nor will such Holders retain any
property, such Holders are deemed
to reject the Plan pursuant to
section 1126(g) of the Bankruptcy
Code. Class 8 is not entitled to
vote to accept or reject the Plan.
l. Class 9 -- Intercompany Claims
(1) Classification: Class 9 consists of
all Intercompany Claims.
(2) Treatment: Receives no distribution
and are canceled as of the
Effective Date.
(3) Voting: Class 9 is impaired, but
because no distributions will be
made to Holders of Class 9 Claims
nor will such Holders retain any
property, such Holders are deemed
to reject the Plan pursuant to
section 1126(g) of the Bankruptcy
Code. Class 9 is not entitled to
vote to accept or reject the Plan.
m. Class 10 - Other Securities Claims and
Interests
(1) Classification: Class 10 consists
of all Other Securities Claims and
Interests of whatever kind or
nature.
(2) Treatment: Receives no distribution
and are cancelled and discharged as
of the effective date.
(3) Voting: Class 10 is impaired, and
since no distributions will be made
to Holders of Class 10 Claims, such
Holders are deemed to reject the
Plan pursuant to Section 1126(g) of
the Bankruptcy Code. Class 10 is
not entitled to vote to accept or
reject the Plan.
D. Special Provision Governing Unimpaired Claims
Except as otherwise provided in the Plan, nothing under the Plan shall
affect the Debtors' or the Reorganized Debtors' rights in respect of any
Unimpaired Claims, including, but not limited to, all rights in respect of legal
and equitable defenses to or setoffs or recoupments against such Unimpaired
Claims.
E. Acceptance And Rejection Of The Plan
1. Voting Classes
Each Holder of an Allowed Claim in Classes 1(B), 3(B), 3(C),
5, 6 and 7 shall be entitled to vote to accept or reject the Plan.
2. Acceptance by Impaired Classes
An Impaired Class of Claims shall have accepted the Plan if
(a) the Holders (other than any Holder designated under section 1126(e) of the
Bankruptcy Code) of at least two-thirds in amount of the Allowed Claims actually
voting in such Class have voted to accept the Plan and (b) the Holders (other
than any Holder designated under section 1126(e) of the Bankruptcy Code) of more
than one-half in number of the Allowed Claims actually voting in such Class have
voted to accept the Plan.
49
3. Presumed Acceptance of Plan
Classes 1(A), 2, 3(A) and 4 are unimpaired under the Plan and,
therefore, are presumed to have accepted the Plan pursuant to section 1126(f) of
the Bankruptcy Code.
4. Presumed Rejection of Plan
Classes 8, 9 and 10 are impaired and shall receive no
distributions and, therefore, are presumed to have rejected the Plan pursuant to
section 1126(g) of the Bankruptcy Code.
5. Non-Consensual Confirmation
The Debtors and the Committee will seek Confirmation of the
Plan under section 1129(b) of the Bankruptcy Code, to the extent applicable,
based on the deemed rejection by classes 8, 9 and 10 and, if any Voting Class
fails to accept the Plan in accordance with section 1129(a)(8) of the Bankruptcy
Code. The Debtors and the Committee reserve the right (a) to request that the
Bankruptcy Court confirm the Plan in accordance with section 1129(b) of the
Bankruptcy Code and/or (b) to modify the Plan in accordance with section XIV.D.
thereof.
F. Plan Implementation
1. Substantive Consolidation
As set forth in section V.A of the Plan, all of the Debtors
seek a limited substantive consolidation of their estates solely for purposes of
actions associated with the confirmation and consummation of the Plan,
including, but not limited to, voting, confirmation and distribution. The Plan
does not contemplate the merger or dissolution of any Debtor which is currently
operating or which currently owns operating assets or the transfer or
commingling of any asset of any Debtor, except that the assets of Fleming
currently being used by Fleming Convenience in its operations shall be formally
vested in Core-Mark Newco, or one of the Reorganized Debtors, and except to
accomplish the distributions under the Plan. Such limited substantive
consolidation shall not affect (other than for Plan voting, treatment and/or
distribution purposes) (i) the legal and corporate structures of a Reorganized
Debtor or (ii) equity interests in the Filing Subsidiaries.
a. Other Effects of Substantive Consolidation
As set forth in Article V of the Plan, as a result of
substantive consolidation, a Holder of Claims against one or more of the Debtors
arising from or relating to the same underlying debt that would otherwise
constitute Allowed Claims against two or more Debtors, including, without
limitation, Claims based on joint and several liability, contribution,
indemnity, subrogation, reimbursement, surety, guaranty, co-maker and similar
concepts, shall have only one Allowed Claim on account of such Claims. In
addition, all Claims between and among Fleming and its Filing Subsidiaries shall
be eliminated as a result of substantive consolidation under the Plan.
b. Benefits of Substantive Consolidation
The Debtors and the Committee believe that
substantive consolidation is in the best interest of the Debtors' estates and
will promote a more expeditious and streamlined distribution and recovery
process for Creditors. Substantive consolidation of the Debtors' estates will
result in (i) the deemed consolidation of the assets and liabilities of the
Debtors; (ii) the deemed elimination of intercompany claims, multiple and
duplicative creditor claims, joint and several liability claims and guarantees;
and (iii) the payment of Allowed Claims from a common pool of assets.
Substantive consolidation will relieve the Debtors' estates from having to
engage in the costly and time-consuming exercise of litigating intercompany
claims as those claims will be eliminated. It will also relieve the Debtors from
having to litigate creditor claims against multiple Debtor entities on the same
liability, as only one claim will be deemed allowed and payable from one common
pool of assets. The Debtors estimate that there have been over $20 billion of
duplicate proofs of claim filed against the Debtors' estates. Moreover,
substantive consolidation will provide for a greater recovery overall for the
vast majority of creditors of the Debtors' estates.
50
c. Legal Analysis of Substantive Consolidation
Substantive consolidation is an equitable doctrine
that permits the Bankruptcy Court to merge the assets and liabilities of
affiliated entities so that the combined assets and liabilities are treated as
though held by one entity. It is well established that section 105(a) of the
Bankruptcy Code, which provides in pertinent part that the "court may issue any
order, process, or judgment that is necessary or appropriate to carry out the
provisions of this title," empowers a bankruptcy court to authorize substantive
consolidation. The Bankruptcy Code also contemplates consolidation in aid of
reorganization. 11 U.S.C. Section 1123(a)(5).
There are no express criteria in the Bankruptcy Code
for determining whether an order granting substantive consolidation should
issue, but the Third Circuit has generally articulated a standard based on two
cases, In re Auto-Train Corp., 810 F.2d 270 (D.C. Cir. 1987) and Union Savings
Bank v. Augie/Restivo Baking Co. (In re Augie/Restivo Baking Co.), 860 F.2d 515
(2d Cir. 1988). Under the Auto-Train test, the court looks at (1) whether there
is substantial identity between the entities to be consolidated and (2) whether
consolidation is necessary to avoid some harm or to realize some benefit. Under
the Augie/Restivo test, the court will examine: (1) whether creditors dealt with
the entities as a single economic unit and did not rely on their separate
identity in extending credit or (2) whether the affairs of the debtor companies
are so entangled that consolidation will be beneficial.
A party may be estopped from opposing substantive
consolidation where a reasonable party in a similar situation "knew or should
have known of the close association between affiliate and bankrupt," or where
the party could be deemed to have dealt with the debtors with full knowledge of
their consolidated operations. In re Snider Bros., Inc., 18 B.R. 230, 237-38
(Bankr. Mass. 1982). The existence of cross-corporate guarantees among each of
the debtor entities may also put a party on notice of substantial identity among
affiliates. See In re Commercial Envelope Mfg. Co., 3 B.C.D. 647, 655 (Bankr.
S.D.N.Y. 1977). Estoppel is warranted, even though a creditor may not have dealt
with more than any one debtor at a time, where the knowledge that there existed
an intercorporate relationship could have bolstered confidence in dealing with
any individual corporation because the creditor knew s/he could rely on the
credit and assets of all the entities, not just the one with which s/he was
dealing. Id.
Substantive consolidation is ultimately a test of
balancing of the equities where the court must weigh the economic prejudice of
continued debtor separateness against the economic prejudice of substantive
consolidation. As a court-made doctrine, substantive consolidation is constantly
evolving to meet the realities of the ever-changing and increasingly complex
business world. There is a modern trend towards favoring substantive
consolidation. This trend is driven by judicial cognizance of modern business
practices, which use complex interrelated business structures, involving
interconnected parents and subsidiaries, overlapping directorates, and
integrated administrative, operational and cash management systems. Murray
Indus., Inc., 119 B.R. 820, 832 (Bankr. M.D. Fla. 1990). Substantive
consolidation should be authorized whenever it will benefit the debtors' estates
without betraying legitimate expectations of the debtors and their respective
creditors. Id.
d. The Debtors Meet the Criteria for
Substantive Consolidation
The substantial interrelationship between and among
Fleming and the Filing Subsidiaries warrants substantive consolidation in this
case. For example, the Debtors currently share a joint corporate structure,
joint business operations and joint liability on the most significant and
largest outstanding debts in these Chapter 11 Cases.
(1) Joint Corporate Structure.
- Fleming operates as the parent company for the Filing
Subsidiaries as well as for the non-filing
subsidiaries and owns 100% of the capital stock
(directly or indirectly) of all of the Filing
Subsidiaries.
- Fleming's officers and directors also serve as
officers and directors of the Filing Subsidiaries'
boards.
51
- Important decisions were generally made by the
Fleming board and implemented by unanimous consent at
the subsidiary level without separate board meetings.
- The Debtors file joint tax returns and engage in
consolidated audits of their financial records.
- The Debtors filed consolidated financial statements
and SEC filings.
(2) Joint Business Operations.
- The Debtors use a centralized cash management system
for operations conducted between themselves, their
affiliates and third parties, including the
Pre-Petition Lenders.
- The Fleming Subsidiaries have no access to capital
outside of Fleming's credit facility because all
funds in the Fleming Subsidiaries' accounts are swept
on a daily basis into Fleming's main concentration
accounts.
- The Filing Subsidiaries were managed as seamless
divisions of Fleming. For example, after Fleming's
acquisition of Core-Mark in June 2002, Core-Mark
interacted with the public as part of Fleming
Convenience, an existing division of Fleming. The
Debtors also heavily promoted the acquisition of
Core-Mark as creating a seamless national geographic
network when combined with Fleming's existing
convenience operations (as discussed in more detail
infra).
- Fleming provided various insurance, SEC reporting and
other administrative services including legal
services for the Fleming Subsidiaries.
- Vendors perceived the Debtors as one integrated
company based on the fact that Vendors of Fleming
Convenience withdrew millions of dollars of credit
from Fleming Convenience because of fears concerning
Fleming Companies, Inc.'s economic condition.
(3) Joint Liability on Debt.
- The Filing Subsidiaries are liable to the
Pre-Petition Lenders for all Pre-Petition Lenders'
Claims arising under Class 2 of the Plan due to a
guarantee on the Pre-Petition Lenders' secured
pre-petition indebtedness executed by the Filing
Subsidiaries.
- The Filing Subsidiaries executed the Bond Guarantees
in favor of the Holders of Old Notes pre-petition and
are thus liable for amounts outstanding under the Old
Notes.
- The PBGC alleges that the Filing Subsidiaries, as
members of Fleming's controlled group, are liable for
the PBGC Claims.
- A substantial majority of the Claims filed against
the Debtors by the Bar Date are against multiple
Debtors for the same underlying debt.
Based upon the Debtors' joint corporate structure,
joint business operations, and joint liability on debt, among other things, the
Debtors believe that Fleming and all Filing Subsidiaries should be consolidated
for Plan purposes. The Debtors have undertaken an extensive factual review of
the factors in support of substantive consolidation and believe that the facts
in these cases warrant substantive consolidation.
For example, the Debtors believe that Core-Mark
International, Inc. ("Core-Mark") as well as its direct subsidiaries should be
consolidated with Fleming. Fleming acquired Core-Mark on June 18, 2002.
52
The code name for Fleming's acquisition of Core-Mark was "Project Platform."
That is, Fleming acquired Core-Mark as a platform to create a national
convenience store distribution business to compliment its national wholesale
distribution business. Immediately upon acquiring Core-Mark, Fleming went to
work on combining and promoting its new national convenience store distribution
business. For example, from the outset, Fleming instructed Core-Mark to change
the name under which it did business to include a reference to Fleming. Shortly
thereafter, Core-Mark and Fleming settled on the name "Fleming Convenience."
Fleming also gave operational control of its seven existing eastern convenience
store distribution centers to Fleming Convenience.
Core-Mark's transformation into Fleming Convenience
was accomplished both within the company and in the outside convenience
distribution world at large. Internally, Core-Mark changed virtually all aspects
of its identity from Core-Mark to Fleming Convenience. The company name on
everything from envelopes and letterhead to human resources forms and employee
benefits plans was changed from Core-Mark to Fleming Convenience. Core-Mark's
intercompany forms that were changed to Fleming Convenience forms included life
insurance forms, health insurance forms, job application forms, 401K plan forms,
designation of beneficiary forms, employee attendance record forms and summary
of benefits forms.
The change from Core-Mark to Fleming Convenience was
just as pronounced to the outside convenience distribution world. After the
acquisition, Core-Mark began answering its phones as Fleming-Convenience,
Fleming-Core-Mark, and/or Core-Mark-Fleming. The company name on the materials
given to the outside convenience distribution world was changed to Fleming
Convenience as well. For example, the name on company e-mails, letterhead,
envelopes, invoices, purchase orders, driver receipt forms, manual check stock,
customer reorder tags, credit-due-us forms and credit applications was changed
from Core-Mark to Fleming Convenience. In addition, shortly after the
acquisition, the business cards of the sales and marketing personnel added the
Fleming Convenience logo, and the business cards of the other Fleming
Convenience personnel changed thereafter as well.
By July 2002, less than a month after its acquisition
by Fleming, Core-Mark was marketing itself to the outside world as Fleming's
national convenience store distribution business. To accomplish this task,
Core-Mark changed the name on its Smart Stock, Smart Set, Cooler Door, Promo
Power and other marketing programs to Fleming Convenience. These Fleming
Convenience marketing materials were sent to its major vendors, as well as its
customers and potential customers. Core-Mark also changed the name on its
monthly newsletter which it sent to vendors and customers alike to Fleming
Convenience.
In addition, at the key convenience store industry
event of the year, the 2002 National Association of Convenience Stores (NACS)
conference in Orlando, Florida, Fleming went to great lengths to inform the
industry of the advent of Fleming Convenience, its new nationwide convenience
store distribution platform. Fleming Convenience sent invitations announcing the
change from Core-Mark to Fleming Convenience to all of the members of NACS,
which included vendors, distributors and customers alike. Fleming Convenience
also solicited its major vendors (now its creditors) to sponsor its much larger
than usual booth at the 2002 NACS Conference. Fleming Conveniences'
solicitations, as well as its NACS booth, heralded the change from Core-Mark to
Fleming Convenience. Fleming Convenience also hosted a golf tournament and a
separate gala at the NACS conference. Over 500 of its customers and vendors
participated in these events where the Fleming Convenience name was prominently
featured.
Fleming also held meetings with the industry's
largest trade credit group, the National Food Manufacturers Credit Group
(NFMCG), in which they discussed the acquisition of Core-Mark and its
transformation to Fleming Convenience. On October 25, 2002, representatives of
Fleming met with the NFMCG's Trade Relations Committee in Scottsdale, Arizona.
In that meeting, they discussed, among other things, Fleming's integration of
Core-Mark. On January 24, 2003, Fleming met again with the Trade Relations
Committee of the NFMCG. In that meeting, they discussed the success of Fleming's
acquisition of Core-Mark and presented the Trade Relations Committee with
consolidated financial information that included Fleming Conveniences' financial
information as well.
That the outside world knew full well of Fleming
Convenience's interconnection with Fleming was evident when the market became
aware of Fleming's financial troubles. Indeed, as early as November 2002, one or
more of Fleming Conveniences' large vendors tightened their credit terms with
Fleming Convenience
53
as a result of an unfavorable article published about Fleming in the Wall Street
Journal. Thereafter, in March 2003, as the market became more aware of Fleming's
troubles, many of Fleming Conveniences' vendors restricted their credit terms
based on the reputed troubles of Fleming.
e. Substantive Consolidation Will Provide A
Benefit To The Estates And Result In A
Higher Recovery For Creditors
Under the circumstances of this case, substantive
consolidation is warranted because there is substantial identity between Fleming
and the Filing Subsidiaries, because the benefits outweigh the harm of
consolidation, because untangling intercompany accounts would be lengthy and
needlessly costly, and because creditors, who may or may not be prejudiced, and
who knew or should have known they were dealing with a single entity, are
estopped from asserting any kind of defense against substantive consolidation,
which will facilitate the expedient consummation of the Plan. In particular, the
very same creditors who, prior to the bankruptcy treated Fleming Convenience as
part of Fleming, cannot now be heard to complain that they did not believe that
they were dealing with Fleming.
A denial of substantive consolidation will result in
lengthy delay as intercompany liabilities and duplicate Claims are adjudicated,
thereby threatening the timely consummation of the Plan and jeopardizing the
patience and credit of customers and vendors willing to work with the
reorganized Debtors, or Core-Mark Newco. These lengthy adjudications will
necessitate large administrative costs, which will consume the assets of the
Debtors' estates that would otherwise be used for distribution to creditors.
Substantive consolidation will benefit the vast majority of creditors, who will
not only benefit from streamlined legal proceedings and the administrative cost
savings that engenders, but will realize a greater distribution than if the
Debtors were forced to pursue separate liquidations or plans. Lastly,
substantive consolidation will benefit the creditors of these cases because it
will facilitate a speedy and cost-effective reorganization that will hasten the
emergence of a viable Fleming Convenience business in which these creditors will
have an interest.
f. Objections to Substantive Consolidation
The Debtors have received a few objections to the
Disclosure Statement which allege that the Disclosure Statement contains
inadequate information about the effect of substantive consolidation on the
creditors or, or potentially, the effect of not substantively consolidating the
Debtors' estates. The Debtors believe those Objections are not well founded. The
Disclosure Statement, as outlined above, outlines in great detail the grounds
for substantive consolidation and the negative impact attempting to construct a
plan which does not consolidate the estates would have on creditors. Section
1125(a) of the Bankruptcy Code specifically states that the adequate information
required for a disclosure statement to be approved "need not include such
information about any other possible or proposed plan."
Central States, Southeast and Southwest Areas Pension
Plan Fund ("CSPF"), complained that "substantive consolidation will undoubtedly
result in creditors of certain of the Debtors receiving a higher percentage
distribution than they might otherwise have received without consolidation,
while certain other creditors' distributions might be negatively impacted."
Essentially, this is a Plan Objection which is more appropriately addressed by
the Court at confirmation. Further, CSPF is essentially demanding the analysis
of another "possible plan," namely the no-substantive-consolidation-at-all Plan.
The "need not include" language of section 1125(a) indicates that a Disclosure
Statement is not required to contain information about another "possible plan."
Hence, under the very statutory section to which they cite, CSPF is not
empowered to demand such information. The Debtors do not believe they have to
provide CSPF with a smorgasbord of sundry plans because "the disclosure
statement is intended to assist the creditors in evaluating the plan on its face
rather than to promote a comparison among various proposed plans." In re Brandon
Mill Farms, Ltd., 37 B.R. 190, 192 (Bankr. Ga. 1984) (citing In re Civitella, 14
B.R. 151, 8 B.C.D. 12 (Bankr. E.D. Pa. 1981) (holding that the debtor's
disclosure statement need not indicate the existence of an alternate plan)).
2. Continued Corporate Existence and Vesting of Assets
in the Reorganized Debtors
Each Reorganized Debtor shall continue to exist after the
Effective Date as a separate legal entity, each with all the powers of a
corporation or partnership, as applicable, under the laws of its respective
jurisdiction of
54
organization and without prejudice to any right to alter or terminate such
existence (whether by merger or otherwise) under such applicable state law.
Except as otherwise provided in the Plan, on and after the Effective Date all
property of the Estate and any property acquired by the Reorganized Debtors
under the Plan shall vest in the applicable Reorganized Debtor, free and clear
of all Claims, liens, charges or other encumbrances. On and after the Effective
Date, the Reorganized Debtors may operate their respective businesses and may
use, acquire or dispose of property without supervision or approval by the
Bankruptcy Court and free of any restrictions of the Bankruptcy Code or
Bankruptcy Rules, other than those restrictions expressly imposed by the Plan
and the Confirmation Order.
3. Cancellation of Old Notes, Old Stock and Other Equity
Interests
On the Effective Date, except to the extent otherwise provided
in the Plan, all notes, instruments, certificates and other documents evidencing
(a) the Old Notes, (b) the Old Stock and (c) any stock options, warrants or
other rights to purchase Old Stock shall be canceled, and the obligations of the
Debtors thereunder or in any way related thereto shall be discharged. On the
Effective Date, except to the extent otherwise provided in the Plan, any
indenture relating to any of the foregoing, including, without limitation, the
Indentures, shall be deemed to be canceled, as permitted by section
1123(a)(5)(F) of the Bankruptcy Code, and the obligations of the Debtors
thereunder, except for the obligation to indemnify the Old Notes Trustees, shall
be discharged; provided that the indentures that govern the rights of the Holder
of a Claim and that are administered by the Old Notes Trustees, an agent or
servicer shall continue in effect solely for the purposes of (y) allowing the
Old Notes Trustees, agent or servicer to make the distributions to be made on
account of such Claims under the Plan and to perform such other necessary
administrative functions with respect thereto and (z) permitting the Old Notes
Trustees, agent or servicer to maintain any rights or liens it may have for
fees, costs and expenses under such indenture or other agreement. Any fees or
expenses due to any of the Old Notes Trustees, agent or servicer shall be paid
directly by the Debtors and shall not be deducted from any distributions to the
Holders of Claims and Equity Interests.
4. Issuance of New Securities; Execution of Related
Documents
On or as soon as practicable after the Effective Date,
Core-Mark Newco shall issue all securities, notes, instruments, certificates and
other documents of Core-Mark Newco required to be issued pursuant to the Plan,
including the New Common Stock which shall be distributed as provided in the
Plan. Core-Mark Newco shall execute and deliver such other agreements, documents
and instruments, as are necessary to effectuate the Plan.
5. Restructuring Transactions
On or before the Effective Date, Fleming intends to (i)
dissolve all other of its direct or indirectly wholly owned Debtor subsidiaries
other than (a) Core-Mark International, Inc.; (b) Core-Mark Mid Continent, Inc.;
(c) General Acceptance Corporation; (d) Core-Mark Interrelated Companies, Inc.;
(e) CM Products, Inc.; (f) ASI Office Automation, Inc.; (g) E.A. Morris
Distributors Limited; (h) Head Distributing Company; (i) Marquise Ventures
Company, Inc.; and (j) Minter-Weisman Co. and (ii) transfer the convenience
store assets that are part of its Leitchfield, Kentucky Division to either
Core-Mark International, Inc. or one of the Reorganized Debtors. The specific
recipient of these assets will be determined prior to the Confirmation Date.
On or before the Effective Date, Core-Mark Newco, a Delaware
corporation, shall be formed by certain of the Debtors' creditors or a nominee
on their behalf. Core-Mark Newco shall then form two wholly-owned subsidiaries,
Core-Mark Holdings I and Core-Mark Holdings II, both Delaware corporations, and
make a capital contribution of its stock to these entities. Core-Mark Holdings I
and Core-Mark Holdings II shall form another subsidiary, Core-Mark Holdings III,
owned equally by Core-Mark Holdings I and Core-Mark Holdings II, and shall make
a capital contribution of the stock of Core-Mark Newco to Core-Mark Holdings
III. On the Effective Date, Fleming will transfer the stock of the Reorganized
Debtors to Core-Mark Holdings III and Fleming will receive, in exchange for such
stock, stock of Core-Mark Newco. Core-Mark Holding III will retain a portion of
Core-Mark Newco's stock to satisfy disputed claims and hold such stock for the
benefit of the holders of Class 6 General Unsecured Claims. Fleming will
distribute the Core-Mark Newco stock received from Core-Mark Holdings III to its
creditors in accordance with the Plan of Reorganization. Core-Mark Holdings III
will transfer stock of Core-Mark Newco to holders of Class 6 General Unsecured
Claims as such claims are resolved. Once these transactions have occurred, the
creditors of Fleming, participants in the Management Incentive Plan and persons
acquiring Core-Mark Newco equity as a result of the exercise of warrants will be
the owners of Core-Mark Newco, which will act as the
55
holding company for the convenience store business. Core-Mark Newco will then
own 100% of each of Core-Mark Holdings I and Core-Mark Holdings II, and those
two entities will each own 50% of stock of Core-Mark Holdings III. Core-Mark
Holdings III will own the Reorganized Debtors.
On or after the Effective Date, the Reorganized Debtors may
continue to enter into such transactions and may continue to take such actions
as may be necessary or appropriate to effect a further corporate restructuring
of their respective businesses, including actions necessary to simplify,
reorganize and rationalize the overall reorganized corporate structure of the
Reorganized Debtors. While the Debtors are presently evaluating potential
restructuring transactions, the contemplated transactions may include (i)
dissolving various additional unnecessary subsidiary companies, including
certain of the Reorganized Debtors, (ii) filing appropriate certificates or
articles of merger, consolidation or dissolution pursuant to applicable state
law and (iii) any other action reasonably necessary or appropriate in connection
with the contemplated transactions. In each case in which the surviving,
resulting or acquiring corporation in any of these transactions is a successor
to a Reorganized Debtor, such surviving, resulting or acquiring corporation will
perform the obligations of the applicable Reorganized Debtor pursuant to the
Plan, to pay or otherwise satisfy the Allowed Claims against such Reorganized
Debtor.
6. Corporate Governance, Directors and Officers, and
Corporate Action
a. Amended Certificate of Incorporation and
By-laws
After the Effective Date, the Reorganized Debtors, as
applicable, may, if necessary, reincorporate in their respective states of
incorporation and file their Restated Certificates of Incorporation with the
Secretary of State in the state in which they are incorporated. After the
Effective Date, the Reorganized Debtors may, if necessary, amend and restate
their Restated Certificates of Incorporation and other constituent documents as
permitted by applicable law.
b. Directors and Officers of the Reorganized
Debtors
Subject to any requirement of Bankruptcy Court
approval pursuant to section 1129(a)(5) of the Bankruptcy Code, as of the
Effective Date, the principal officers of the Debtors immediately prior to the
Effective Date will be the officers of the Reorganized Debtors. The principal
officers of Core-Mark Newco are presently anticipated to be the following: J.
Michael Walsh, President and Chief Executive Officer; Henry Hautau, Vice
President, Employee and Corporate Services and Assistant Secretary; Stacy
Loretz-Congdon, Treasurer and Assistant Secretary; Gregory P. Antholzner,
Controller and Assistant Secretary; Basil P. Prokop, President, Canada Division;
Tom Barry, Vice President, National Accounts; Gerald Bolduc, Vice President,
Information Technology and Chief Information Officer; David W. Dresser, Vice
President, Merchandising; Thomas Small, Vice President, Operations; Chris Walsh,
Vice President, Marketing; Tom Perkins, Vice President, U.S. Divisions; Scott
McPherson, Vice President, U.S. Divisions; and Cyril Wan, Assistant Secretary.
Pursuant to section 1129(a)(5) of the Bankruptcy
Code, the Debtors will disclose, on or prior to the Confirmation Date, the
identity and affiliations of any Person proposed to serve on the initial board
of directors of Core-Mark Newco and each Reorganized Debtor. The initial board
of directors of Core-Mark Newco is presently contemplated to consist of five
members, the Chief Executive Officer of Core-Mark Newco, two representatives
selected by the Committee and two independent members to be mutually agreed upon
by the Debtors and the Committee. To the extent any such Person is an "insider"
under the Bankruptcy Code, the nature of any compensation for such Person will
also be disclosed. Each such director and officer shall serve from and after the
Effective Date pursuant to the terms of such Reorganized Debtor's certificate of
incorporation and other constituent documents.
c. Corporate Action
After the Effective Date, the adoption and filing, if
necessary, of any of the Reorganized Debtors' Restated Certificates of
Incorporation, the approval of their Restated By-laws, the appointment of
directors and officers for Core-Mark Newco, the adoption of the Management
Incentive Plan, and all other actions contemplated hereby with respect to each
of the Reorganized Debtors shall be authorized and approved in all
56
respects (subject to the provisions hereof). All matters provided for in the
Plan involving the corporate structure of any Debtor or any Reorganized Debtor,
and any corporate action required by any Debtor or any Reorganized Debtor in
connection with the Plan, shall be deemed to have occurred and shall be in
effect, without any requirement of further action by the security holders or
directors of such Debtor or Reorganized Debtor. On the Effective Date, the
appropriate officers of each Reorganized Debtor and members of the board of
directors of each Reorganized Debtor are authorized and directed to issue,
execute and deliver the agreements, documents, securities and instruments
contemplated by the Plan in the name of and on behalf of such Reorganized
Debtor.
7. Reclamation Claims
Pursuant to the Final DIP Order and in exchange for
the extension of post petition trade credit, the Debtors provided Approved Trade
Creditors holding Reclamation Claims with a junior lien in the lesser of (a) the
amount of actual trade credit provided pursuant to the agreement with the
Debtors as outlined in the Debtors' Trade Credit Program (as defined in the
Final DIP Order) and (b) the amount of the Allowed Reclamation Claim, as
outlined in the Trade Credit Program determined without consideration of whether
the value of the inventory of the Debtors exceeded the amount of the
Pre-Petition Lenders' Secured Claim as of the Petition Date. The Debtors also
agreed that to the extent that any valid Reclamation Claim held by an Approved
Trade Creditor and as set forth on such Approved Trade Creditor's Trade Credit
Program Letter Agreement (as defined in the Final DIP Order) is not covered
fully by such Approved Trade Creditor's Trade Creditors' Lien, then the balance
of such valid Reclamation Claims shall constitute an Administrative Expense
Claim, junior in right to the Post Petition Lender Superpriority Claim, the
Pre-Petition Lender Superpriority Claims and the Carve-Out and up to an
additional $6 million of professional fees and expenses approved by the Court.
Holders of Claims granted this protection under the Final DIP Order are Holders
of Class 3(B) Claims under the Plan.
Other creditors alleging Reclamation Claims that did
not participate in the Debtors' Trade Credit Program have not, to date, been
granted any lien or priority status by the Court and are simply creditors
asserting Reclamation Claims allegedly entitled to protection under section
546(c) of the Bankruptcy Code. Holders of such Reclamation Claims are Holders of
Class 5 Claims under the Plan.
Currently, the Holders of Class 3(B) claims have a
junior security interest in the assets of the Debtors. Under the Plan, however,
certain assets of the Debtors are being transferred to the Post Confirmation
Trust while certain other assets are being retained by the Reorganized Debtors
or transferred to Core-Mark Newco. As a result, the Plan replaces the lien
currently held by the Class 3(B) Claim Holders with a lien on the Post
Confirmation Trust's Distributable Assets. In addition, Core-Mark Newco is
providing a secured guarantee of the Post Confirmation Trust's obligation to the
Class 3(B) creditors under the terms outlined in the Class 3(B) Preferred
Interests Sheet attached hereto as Exhibit 10 in order to assure that Allowed
Class 3(B) Claims are paid in full.
The Debtors estimate that, as of the Effective Date,
the aggregate amount of the Class 3(B) Claims is in the range of $43 to 55
million, prior to setoffs which may be available to the Debtors. The Debtors
believe that certain of the Class 3(B) Claimants owe the Debtors funds related
to pre-petition transactions. Such debts due from the Class 3(B) Claimants may
be subject to setoff against liabilities owed by the Debtors to such claimants.
The Debtors believe they will be able to effect setoff of such amounts due to
the Debtors in full or in part against the Class 3(B) Claims. The Class 3(B)
Claimants have challenged this position of the Debtors. The treatment provided
for the Holders of Class 3(B) Claims under the Plan will afford such Holders
payment in full of their Allowed Claims from either the Post Confirmation Trust,
or in the event that the Post Confirmation Trust does not have sufficient
assets, from Core-Mark Newco as a result of the secured guaranty provided to
such Holders.
At the present time, it is unclear what the Court
will ultimately determine with respect to the priorities, if any, of the Claims
held by the Class 5 Claimants. On November 25, 2003, the Debtors filed their
Combined Amended Reclamation Report and Motion to Determine that Reclamation
Claims are Valueless (Docket No. 4596). Among other things, the Debtors sought
the entry of an order that provides that Class 5 Claims are General Unsecured
Claims that are not entitled to any priority under section 546(c) of the
Bankruptcy Code. On December 12, 2003, the Bankruptcy Court, however, declined
to hear the motion and directed the Debtors to file separate adversary
proceedings against each reclamation claimant.
57
On or about January 31, 2004, the Debtors filed
approximately 576 reclamation complaints (the "Reclamation Complaints"). The
Debtors also filed a motion to consolidate the Reclamation Complaints to
determine common legal issues arising from the reclamation claims, namely
whether the reclamation claims are entitled to any priority under section 546(c)
of the Bankruptcy Code. The consolidation motion is fully briefed and a hearing
has been requested. The answer date for the Reclamation Complaints has been
extended by agreement to April 15, 2004 for all defendants.
The projections attached to the Disclosure Statement
as Exhibit 3C assume that Class 5 Claims will be found to have a priority,
entitled to payment after payment of Claims, a reserve for Prioritized Property
Tax Claims reserve for a prudent minimum operating cash level for the Post
Confirmation Trust and payment of Class 3B Claims. The Plan also provides that,
to the extent the Court determines that the Holders of Reclamation Claims that
are not Class 3(B) Claims are entitled to priority treatment, on the Effective
Date, or as soon as practicable thereafter, the Post Confirmation Trust, shall
issue Preferred Interests in favor of such Holders in the estimated aggregate
amounts of their Allowed Claims and grant them a second priority lien on the
Post Confirmation Trust Distributable Assets entitling each Holder of a Class 5
Claim to its Ratable Proportion of the Post Confirmation Trust Distributable
Assets after all Class 3(B) Claims are paid in full. As additional security for
the Class 5 Preferred Interests, Core-Mark Newco shall provide a junior secured
guarantee under the terms outlined in the Class 5 Preferred Interests Term Sheet
attached to this Disclosure Statement as Exhibit 11.
The Debtors estimate that, as of the Effective Date,
the aggregate amount of Class 5 Claims is in the range of $0 to $80 million,
depending on the Bankruptcy Court's ruling with respect to the priority of these
claims and prior to giving affect to all of the Debtors' prepetition deductions.
The Debtors believe that certain of the Class 5 Claimants owe the Debtors funds
related to pre-petition transactions. Such debts due from the Class 5 Claimants
may be subject to setoff against liabilities owed by the Debtors to such
claimants. The Debtors believe they will be able to effect setoff of such
amounts due to the Debtors in full or in part against the Class 5 Claims. The
Class 5 Claimants have challenged this position of the Debtors. The treatment
provided to the Holders of Class 5 Claims under the Plan, including the
additional security issued by Core-Mark Newco, will assure that Class 5 Claims
shall be paid in full to the extent the Debtors are required to do so.
On February 9, 2004 Hershey Food Corporation
("Hershey") filed its Objection to the Debtors' Disclosure Statement.
Thereafter, 27 other objections to the Disclosure Statement were filed that
"joined" the Hershey's Objection or a similar Objection filed by the ad hoc
Reclamation Committee and related parties. Collectively, the 28 Objections shall
be referred to herein as the "Reclamation Objections" and the objectors shall be
referred to as the "Reclamation Objectors.") Some Reclamation Objectors hold
Trade Creditor Reclamation Lien Claims and some do not.
The Reclamation Objections are primarily objections
to the Debtors' Plan and specifically the treatment afforded to the Reclamation
Creditors under the Plan. Therefore, they are not proper objections to the
Disclosure Statement. The Reclamation Objectors will have the opportunity to
vote on the Plan. The Debtors believe that the treatment afforded to Holders of
Reclamation Claims under the Plan is consistent with the requirements of section
1129(a) of the Bankruptcy Code and the Plan is confirmable under section 1129(b)
of the Code. Nevertheless, the Plan has been amended to include the Class 3(B)
and Class 5 Preferred Interests and guarantees from Core-Mark Newco. These
Preferred Interests and guarantees address the Reclamation Objectors concerns
about violating the Final DIP Order and Trade Credit Program as they essentially
provide the Reclamation Claimants with the benefit of the liens given to the
Reclamation Lien Creditors thereunder. In addition, the Preferred Interests and
guarantees assure the feasibility of the Plan. To the extent the Post
Confirmation Trust does not have sufficient funds to pay the Class 3(B) or Class
5 Claims (if necessary) in full, Core-Mark Newco will ultimately assume that
responsibility. Thus, the financial strength of Core-Mark Newco will also assure
payment and thus, feasibility of the Plan.
Hershey also alleges that the treatment of Trade
Creditor Reclamation Lien Claims in the Plan violates the Debtors' Trade Credit
Program and that the Plan discriminates against the Reclamation Lien Claims by
treating only non-reclamation Trade Lien Claims as Administrative Claims. The
Debtors disagree. The treatment of the Reclamation Lien Claims is completely
consistent with the Final DIP Order and the Trade Credit Program. The
non-reclamation Trade Lien Creditors provided the debtors with post-petition
credit. As a result, under the Final DIP Order and section 503 of the Bankruptcy
Code, their Trade Lien Claims are entitled to
58
administrative status to the extent they are not paid in the ordinary course of
the Debtors business, which they, in fact, have been. With respect to the
Reclamation Lien Claims, their treatment is completely consistent with the Final
DIP Order and, by granting a lien in both the Post Confirmation Trust Assets and
in providing the Core-Mark Newco secured guarantee, the protections provided in
the Final DIP Order are maintained, and in fact, enhanced.
8. The Post Confirmation Trust
a. Formation/Purpose
On the Effective Date or as soon as practicable thereafter, the Debtors
and the Committee will form a Post Confirmation Trust to administer certain post
confirmation responsibilities under the Plan, including, but not limited to,
those responsibilities associated with the pursuit and collection of the
Litigation Claims and Causes of Action and the reconciliation and payment of
Claims.
b. Powers
The powers, authority, responsibilities and duties of the Post
Confirmation Trust and the allocation of such powers, authority,
responsibilities and duties between Core-Mark Newco and the Post Confirmation
Trust, shall be set forth and governed by the Post Confirmation Trust Agreement
to be mutually agreed upon by the Debtors and the Committee. A copy of the draft
Post Confirmation Trust Agreement is attached hereto as Exhibit 9. The Debtors
and the Committee shall also mutually agree upon appointment of the Post
Confirmation Representative who shall have the power to administer the Post
Confirmation Trust and will be advised by the Post Confirmation Trust Advisory
Board as specified in the Post Confirmation Trust Agreement. The Post
Confirmation Trust Advisory Board shall consist of four members plus the Post
Confirmation Representative, two members designated by Core-Mark Newco, one
member designated by the Committee other than trade members and the PBGC, who
shall be an Old Note Holder that holds in excess of [3.5%] or greater of the
total outstanding equity securities of Core-Mark Newco received as a result of
the distribution of such equity to Holders of Class 6 Claims under the Plan and
one member to be designated by the trade members of the Committee and the PBGC,
who shall be a Holder of a Class 6 Claim, other than with respect to the Old
Notes, against which there is not pending (or against which the Debtors on the
Post-Confirmation Trust do not reasonably contemplate bringing) a Cause of
Action and is not a Holder of a Class 3(B) or Class 5 Claim.
Pursuant to section 1129(a)(5) of the Bankruptcy Code, the Debtors will
disclose, on or prior to the Confirmation Date, the identity and any
affiliations of any Person proposed to serve on the initial Post Confirmation
Trust Advisory Board as well as the identity and affiliations of the Post
Confirmation Representative. To the extent any such Person is an "insider" under
the Bankruptcy Code, the nature of any compensation for such Person will also be
disclosed.
c. Assets of the Post Confirmation Trust
On the Effective Date or as soon as practicable thereafter, the
Debtors, the Reorganized Debtors and Core-Mark Newco, as applicable, shall
transfer, assign and deliver to the Post Confirmation Trust, the Post
Confirmation Trust Assets (the "PCT Assets"), as outlined in the Post
Confirmation Trust Agreement. The PCT Assets shall consist of all of the
following assets of the Debtors:
(1) trade accounts receivable including
credits for post-petition
deductions, other than the
pre-petition and post petition
trade accounts receivable and
post-petition deductions of the
continuing Fleming Convenience
business;
(2) royalty payments owing to the
Debtors related to the sale of the
Fleming wholesale operations;
(3) Litigation Claims which consist
primarily of vendor-related
receivables, primarily for
uncollected promotional allowances
(e.g.
59
rebates, discounts, price
reductions), unreimbursed funds
related to military receivables and
funds wired in advance for
inventory for which invoices were
not processed and inventory not
shipped, but not including vendor
deductions incurred in the ordinary
course of business of the Fleming
Convenience business which shall
remain with Core-Mark Newco;
(4) Avoidance Actions, especially
preference actions as outlined in
section 547 of the Bankruptcy Code;
(5) restricted cash, including the PACA
account and the FSA reserves;
(6) available cash in an amount
necessary to fund certain payments
required to be made by the Post
Confirmation Trust under the Plan
and Post Confirmation Trust
Agreement and Post Confirmation
Trust Administrator;
(7) any and all other Claims and Causes
of Action of the Debtors,
including, but not limited to,
those outlined in section VI of the
Plan, Exhibit A to the Plan, and
section VII herein, other than
Causes of Action related to the
fire loss at the Denver warehouse
occurring in December, 2002 which
shall be transferred to Core-Mark
Newco, and other than claims and
Causes of Action waived, exculpated
or released in accordance with the
provisions of the Plan; and
(8) all of the remaining assets of the
Debtors, other than the assets of
the Reorganized Debtors and the
assets of the continuing Fleming
Convenience businesses which will
have been transferred to Core-Mark
Newco and the Reorganized Debtors.
The PCT Assets do not include: (1) any of the assets of the continuing Fleming
Convenience businesses which are to be transferred to Core-Mark Newco and the
Reorganized Debtors; (2) the stock of Core-Mark Newco and the stock of the
Reorganized Debtors; and (3) the Professional Fee Escrow Account.
The PCT Assets shall be held by the Post Confirmation Trust for the
beneficiaries of the Post Confirmation Trust subject to the terms and conditions
of the Plan and the Post Confirmation Trust Agreement.
d. Funding
On the Effective Date, or as soon as practicable thereafter, the
Debtors, the Reorganized Debtors and Core-Mark Newco will transfer to the Post
Confirmation Trust certain cash on hand and/or certain proceeds from the Exit
Financing Facility and the Tranche B Loan necessary for the Post Confirmation
Trust to make the payments required on Allowed Claims pursuant to the Plan and
the Post Confirmation Trust Agreement. In addition, the Post Confirmation Trust
shall have available the proceeds from the prosecution of Causes of Action.
Core-Mark Newco and the Reorganized Debtors shall retain the remainder of the
cash and/or proceeds from the Exit Financing Facility and the Tranche B Loan to
operate their businesses. The capital structure of Core-Mark Newco, the
Reorganized Debtors and the Post Confirmation Trust on the Effective Date is
outlined on Exhibit 3 hereto.
G. Creation of Professional Fee Escrow Account
On or before the Effective Date, the Debtors shall establish and fund
the Professional Fee Escrow Account.
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H. Executory Contracts
1. Assumption/Rejection of Executory Contracts and
Unexpired Leases
As of the Effective Date, except as otherwise provided in the
Plan, all executory contracts or unexpired leases of the Debtors will be deemed
rejected in accordance with the provisions and requirements of sections 365 and
1123 of the Bankruptcy Code except those executory contracts and unexpired
leases that (i) have been previously rejected or assumed by Order of the
Bankruptcy Court, (ii) are subject to a pending motion to reject or assume or
(iii) are specifically listed on the Assumption Schedule to be filed 15 days
prior to the Voting Deadline. The Debtors reserve the right for 30 days after
the Confirmation Date to modify the Assumption Schedule to add executory
contracts or leases or remove executory contracts or leases from such Assumption
Schedule. The Debtors shall provide appropriate notice to any party added or
removed from the Assumption Schedule after the Confirmation Date and any such
party removed from the Assumption Schedule shall have thirty days from the
receipt of such notice to file a proof of claim with the Bankruptcy Court.
On the Petition Date, the Debtors were parties to certain
collective bargaining agreements ("CBA's"). The Debtors are assuming the four
(4) CBA's with labor organizations at facilities where the Debtors operations
are on-going, which CBA's are identified on the Assumption Schedule. All other
CBA's in existence on April 1, 2003 between labor organizations and the Debtors
either have been assumed and assigned to facility purchasers or have lapsed or
otherwise terminated in connection with facility or business closings or sales.
2. Claims Based on Rejection of Executory Contracts or
Unexpired Leases
Except as provided in section VIII.A. of the Plan, all proofs
of Claims with respect to Claims, if any, arising from the rejection of
executory contracts or unexpired leases that are rejected as a result of the
Plan must be filed with the Bankruptcy Court within thirty (30) days after the
Effective Date. Any Claims arising from the rejection of an executory contract
or unexpired lease not filed within such time or any applicable Contract Claims
Bar Date, will be forever barred from asserting against any Debtor or
Reorganized Debtor, their respective Estates, their property and the Post
Confirmation Trust unless otherwise ordered by the Bankruptcy Court or provided
in the Plan.
3. Cure of Defaults for Executory Contracts and
Unexpired Leases Assumed
Any monetary amounts by which each executory contract and
unexpired lease to be assumed pursuant to the Plan is in default shall be
satisfied, pursuant to section 365(b)(1) of the Bankruptcy Code, by payment of
the default amount in Cash as soon as practicable after the Effective Date or on
such other terms as the parties to such executory contracts or unexpired leases
may otherwise agree. In the event of a dispute regarding: (i) the amount of any
cure payments, (ii) the ability of the applicable Reorganized Debtor or any
assignee to provide "adequate assurance of future performance" (within the
meaning of section 365 of the Bankruptcy Code) under the contract or lease to be
assumed, or (iii) any other matter pertaining to assumption, the cure payments
required by section 365(b)(1) of the Bankruptcy Code shall be made following the
entry of a Final Order resolving the dispute and approving the assumption.
4. Indemnification of Directors, Officers and Employees
The obligations of each Debtor to indemnify any Person serving
at any time on or prior to the Effective Date as one of its directors, officers
or employees by reason of such Person's service in such capacity, or as a
director, officer or employee of any other corporation or legal entity, to the
extent provided in such Debtor's constituent documents, by a written agreement
with such Debtor or under Delaware or other applicable corporate law, and
specifically excluding any obligation to indemnify the Excluded Releasees listed
on Exhibit B attached to the Plan, shall be deemed and treated as executory
contracts that are assumed by such Reorganized Debtor pursuant to the Plan and
section 365 of the Bankruptcy Code as of the Effective Date. Accordingly, such
indemnification obligations shall be treated as obligations of the Reorganized
Debtors and shall survive unimpaired and unaffected by entry of the Confirmation
Order, irrespective of whether such indemnification is owed for an act or event
occurring before or after the Petition Date.
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5. Compensation and Benefit Programs
Except as otherwise expressly provided herein, all employment
and severance agreements and policies, and all compensation and benefit plans,
policies, and programs of the Debtors applicable to their employees, former
employees, retirees and non-employee directors and the employees, former
employees and retirees of their subsidiaries, including, without limitation, all
savings plans, retirement plans, health care plans, disability plans, severance
benefit agreements and plans, incentive plans, deferred compensation plans and
life, accidental death and dismemberment insurance plans (the "Company Benefit
Plans") shall be terminated or shall be treated as executory contracts under the
Plan and on the Effective Date any such remaining Company Benefit Plans that
have not been terminated will be deemed rejected pursuant to the provisions of
sections 365 and 1123 of the Bankruptcy Code, except for those with respect to
the Reorganized Debtors' employees specifically designated on the Benefits
Schedule to be filed 15 days prior to the Voting Deadline. The PBGC, however,
disagrees with the Debtors position that the Existing Pension Plans can be
rejected. The PBGC believes the Debtors position is contrary to applicable legal
precedent and, as a matter of law, the Existing Pension Plans cannot be
rejected. In addition, except as set forth in the Benefits Schedule, the Debtors
shall have withdrawn or shall withdraw from all "multiemployer plans" (as such
term in defined in section 3(37) of ERISA) prior to the Effective Date and all
claims of such multiemployer plans shall be treated as General Unsecured Claims.
Notwithstanding the termination of or rejection of the Company Benefit Plans
hereunder, vested retiree medical benefits, if any, under applicable Company
Benefit Plans shall become obligations of the Reorganized Debtors and/or
Core-Mark Newco unless terminated pursuant to section 1114 of the Bankruptcy
Code prior to the Effective Date. The Debtors believe that the Reorganized
Debtors and/or Core-Mark Newco may decide to terminate retiree medical benefits
after the Effective Date and expect that Reorganized Debtors and/or Core-Mark
Newco will incur substantial litigation costs if they attempt to eliminate any
retiree medical benefits that are considered vested.
6. Insured Claims
The Fleming Companies, Inc. maintained a comprehensive
insurance program that included insurance for: (i) workers' compensation, (ii)
directors & officers liability, and (iii) other casualty events as outlined
herein (collectively, the "Insurance Program"). The Debtors have maintained the
Insurance Program throughout the entire course of their bankruptcy cases. The
Plan will resolve all Claims covered by the Insurance Program (the "Insured
Claims") and all Claims made by insurance carriers (the "Insurers") arising from
the Insurance Program as outlined below.
a. Directors and Officers Related Insurance
Coverage
To encourage the hiring and retention of qualified
individuals as directors and officers, the Insurance Program includes directors'
and officers' liability and company reimbursement policies pursuant to which
coverage is provided not only for claims made against directors but also for
reimbursement obligations the Debtors may have to directors and officers and for
securities claims made against the Debtors (the "D&O Policies" and,
collectively, the "D&O Insurance Program"). The Debtors have continued to
maintain the D&O Insurance Program throughout the entire course of these
bankruptcy cases. The Debtors believe that maintaining the D&O Insurance Program
during these bankruptcy cases and after the Effective Date is consistent with
good business judgment. Accordingly, the Debtors will assume all of the D&O
Policies, and the Debtors will continue to pay premiums, deductibles, and any
other payments that they are obligated to make to the applicable Insurers in the
normal course of their business operations. In addition, Core-Mark Newco and the
Reorganized Debtors will likely obtain new D&O Insurance coverage as the
existing D&O Policies will be triggered into runoff as a result of the change of
control provisions within the Policies.
b. Worker's Compensation
Under the laws of most states in which the Debtors
operate, the Debtors are required to provide workers' compensation insurance for
their employees, and the Debtors believe that maintaining such insurance is
consistent with good business judgment. Shortly after the Petition Date, the
Debtors received authorization from the Bankruptcy Court to incur any and all
costs that are necessary to maintain the Debtors' workers' compensation
insurance policies (the "Workers' Compensation Program"). The Debtors have
maintained the Workers' Compensation Program throughout the entire course of
their chapter 11 cases and have also
62
maintained certain letters of credit to secure the Debtors' liabilities to the
Insurers under the Workers' Compensation Program and Casualty Insurance Program,
as herein defined (the "Insurance Security").
Under the Plan, the Debtors will assume all of the
existing contracts for workers' compensation insurance, and with respect to all
Workers' Compensation Policies except those issued by Ace American Insurance
Company ("Ace") and National Union Fire Insurance Company ("National Union"),
the Debtors will continue to pay premiums, deductibles, and any other payments
that the Debtors are obligated to make to Insurers (the "Workers' Compensation
Payments"). With respect to the Workers' Compensation Policies issued by Ace and
National Union, the Debtors will continue to permit Ace and National Union to
use the Insurance Security to make the Workers' Compensation Payments. Any
Claims that are covered by the Workers' Compensation Program shall continue to
be administered and paid by the Insurers, in accordance with the Workers'
Compensation Program.
To the extent that any of the Debtors' obligations
under the Workers' Compensation Program are secured by the Security, the
Insurers for the respective policies shall be entitled to draw upon the
appropriate letter(s) of credit to satisfy amounts due from the Debtors on
account of: (i) amounts expended by the Insurers in defense of allowed Claims,
(ii) administrative costs incurred by the Insurers to administer such Claims,
and (iii) payments made in satisfaction of allowed Claims.
c. Casualty Insurance Program
Under the Insurance Program, the Debtors maintain
various casualty insurance policies that include, but are not limited to,
automobile liability, general liability, property damage and other, similar
types of insurance coverage (the "Casualty Insurance Program"). Numerous Insured
Claims have been filed against the Debtors' estates. In addition, Insurers that
issued these policies may have Claims against the Debtors' estates
(collectively, the "Insurers Claims").
To secure payment of their obligations under the
Casualty Insurance Program, the Debtors provided the Insurers with the Insurance
Security. Under the Plan, the Insurers may draw upon the Insurance Security to
the extent that the Insurers properly expend monies in the administration or
defense of Claims against the Debtors. The Debtors may seek recovery of any
excess draws on such Insurance Security, which is not needed to reimburse an
obligation owed to the Insurer.
Distributions to holders of Insured Claims under the
Plan fall into three, distinct categories that will be resolved as follows:
(1) Under-Deductible Insured Claims.
One type of Claim under the
Casualty Insurance Program is a
Claim where the sum of the amount
of the Insured Claim plus the
Debtors' expenses on account of
such Claim equals or is less than
the applicable per-occurrence
deductible amount (the "Deductible
Amount") payable by the applicable
Debtor(s) under the relevant
insurance policies (the
"Under-Deductible Insured Claims").
An Under-Deductible Insured Claim
shall be treated in the same manner
as any other Unsecured Claim under
the Plan and shall be either a
Class 6 General Unsecured Claim or
Class 7 Convenience Claim, as
appropriate, under the Plan. The
Under-Deductible Insured Claim
shall be fully-satisfied by the
applicable distribution under the
Plan, regardless of the amount
actually distributed to the Holder
of the relevant Under-Deductible
Insured Claim under the Plan. The
respective Insurer shall have no
obligation under the Casualty
Insurance Program, or the Plan, to
pay any part of an Under-Deductible
Insured Claim. The Insurers may not
use the Insurance Security to pay
any party of an Under-Deductible
Insured Claim, but the Insurers may
use any applicable Insurance
Security to reimburse themselves
for
63
reasonable costs incurred to
administer the Under-Deductible
Insured Claims.
(2) Covered Allowed Insured Claims. The
second type of Claim covered by the
Casualty Insurance Program is a
Claim where the sum of the amount
of the Insured Claim plus the
Debtors' expenses on account of
such Claim exceeds the Deductible
Amount (the "Covered Allowed
Insured Claims") but does not
exceed the aggregate or
per-occurrence maximum amount of
insurance coverage (the "Aggregate
Limit") for that particular policy
(or policies, as the case may be).
The Covered Allowed Insured Claims
shall be satisfied as follows: (i)
the Insured Claim, up to the
Deductible Amount, shall be treated
as a Class 6 General Unsecured
Claim or Class 7 Convenience Claim,
as appropriate, under the Plan, and
that portion of the Insured Claim
shall be paid in the manner
provided by the Plan and be
fully-satisfied, regardless of the
amount actually distributed to the
Holder of the relevant Insured
Claim; and (ii) the Insurer shall
satisfy that portion of an Insured
Claim that exceeds the Deductible
Amount (the "Over-Deductible
Amount"). On the Effective Date,
the Debtors shall be discharged of
any liability for the Covered
Allowed Insured Claims.
(3) The Exceeded Allowed Insured
Claims. The third type of Claim
covered by the Casualty Insurance
Program is a Claim where the sum of
the Insured Claim plus the Debtor's
expenses on account of such Claim
exceeds the Aggregate Limit (the
"Exceeded Allowed Insured Claims").
The Exceeded Allowed Insured Claims
shall be satisfied as follows: (i)
the Insured Claim, up to the
Deductible Amount, shall be treated
as a Class 6 General Unsecured
Claim or Class 7 Convenience Claim,
as appropriate, under the Plan, and
that portion of the Insured Claim
shall be paid in the manner
provided by the Plan and be
fully-satisfied, regardless of the
amount actually distributed to the
Holder of the relevant Insured
Claim; (ii) the Insurer shall
satisfy the Over-Deductible Amount
up to the Aggregate Limit; and
(iii) that portion of the Insured
Claim that exceeds the Aggregate
Limit shall be treated as a Class 6
General Unsecured Claim or Class 7
Convenience Claim, as appropriate,
under the Plan, and the Insured
Claim shall be paid in the manner
provided by the Plan and shall be
fully satisfied, regardless of the
amount actually distributed to the
Holder of the Insured Claim under
the Plan. On the Effective Date,
the Debtors shall be discharged of
any liability for the Exceeded
Allowed Insured Claims.
d. The Old Republic Insurance Contracts
(1) The First Old Republic Stipulation,
the First Order, and the Second
Stipulation The Debtors and Old
Republic Insurance Company ("Old
Republic") entered into an
agreement, dated July 1, 2002 (as
amended, the "Old Republic Program
Agreement"), pursuant to which Old
Republic issued insurance policies
(the "Original Policies") that
provided insurance coverage to the
Debtors from July 1, 2002 through
July 1, 2003. To secure payment of
their obligations under the Old
Republic Program Agreement, the
Debtors provided Old Republic with
certain collateral including, but
not limited to, a letter of credit
from the Debtors' Pre-Petition
Secured Lenders in the amount of
$20,000,000
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(the "First Letter of Credit"). In
the course of discussions between
Old Republic and the Debtors
concerning Old Republic's issuance
under the Old Republic Program
Agreement of additional insurance
policies for the six month period
commencing July 1, 2003 (the
"Additional Policies"), Old
Republic informed the Debtors that
it was not willing to issue the
Additional Policies without: (i)
the Debtors' assumption of the Old
Republic Program Agreement and the
Original Policies, (ii) the
issuance of an additional letter of
credit, and (iii) clarification of
certain issues with respect to the
Additional Policies.
Prior to the expiration of the
Original Policies, the Debtors and
Old Republic entered into The
Stipulation (I) Authorizing and
Approving the Debtors' Conditional
Assumption of Certain Executory
Contracts, and (II) Approving
Stipulation Regarding Old Republic
Insurance Company (the "First Old
Republic Stipulation"), and the
Bankruptcy Court entered The Order
Approving the Stipulation Regarding
the Debtors' Conditional Assumption
of Certain Executory Contracts
Regarding Old Republic Insurance
Company (the "First Order").
Pursuant to the First Old Republic
Stipulation and the First Order,
the Debtors assumed the Old
Republic Program Agreement, and Old
Republic Issued the Additional
Policies, effective July 1, 2003
through January 1, 2004. The First
Stipulation provided that Old
Republic was entitled to an
unliquidated Administrative Claim
against the Debtors for the
Debtors' failure to make any
premium payments or any other
payments due under the Original
Policies or the Additional Policies
for deductibles relating to claims
covered by the Original Policies or
the Additional Policies or the
Debtor's failure to make payments
due to the third-party
administrator that is administering
Insured Claims. To secure payment
of the Debtors' obligations under
the Old Republic Program Agreement,
on or about June 22, 2003, the
Debtors provided Old Republic with
a letter of credit from the
Debtors' DIP Lenders in the amount
of $18,287,500 (the "Second Letter
of Credit"), which secured the
Debtors' obligations under the Old
Republic Program Agreement.
The Debtors and Old Republic
conducted discussions concerning
whether Old Republic would continue
to provide the Debtors with
workers' compensation, automobile
liability and general liability
insurance for the period from
January 1, 2004 through January 1,
2005 (the "New Policies" and,
together with the Original Policies
and the Additional Policies, the
"Old Republic Policies"). Old
Republic was unwilling to issue the
New Policies without: (i) the
issuance of an additional letter of
credit in the amount of $6,235, 000
(the "Third Letter of Credit" and,
collectively with the First Letter
of Credit and the Second Letter of
Credit, the "Old Republic Letters
of Credit") and (ii) the Debtors
obtaining clarification of the same
issues with respect to the New
Policies that the First Stipulation
addressed in connection with the
Original Policies and the
Additional Policies. On December
30, 2003, Core-Mark International,
Inc. (one of the Debtors) provided
the Third Letter of Credit to Old
Republic. Before Old Republic would
issue the New Policies, Old
Republic required the Debtors to
enter into the Second Stipulation
Between the Debtors and Old
Republic Insurance Company (the
"Second Old Republic Stipulation").
The Second Stipulation implements a
framework for the manner in which
Old Republic claims, if any,
related to the New Policies must be
treated in the Debtors' Plan.
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(2) Treatment of Old Republic's Claims
Pursuant to the Second Stipulation
and the Plan. Notwithstanding
anything to the contrary outlined
in Sections A, B, or C above, any
Insured Claims by Old Republic
shall be handled in the manner
prescribed by the Second
Stipulation. Pursuant to the Second
Stipulation, Old Republic shall be
entitled to an Administrative Claim
against the Debtors, subject to any
applicable defenses or
counterclaims of the Debtors, for
any failure by the Debtors to: (i)
make premium payments pursuant to
the Old Republic Program Agreement,
or pay any other amount due with
respect to Old Republic's issuance
of the Old Republic Policies; (ii)
the Debtors' failure to make
payments within the deductible
layer of they policies for
deductibles relating to or on
account of occurrences giving rise
to Claims covered by the Policies,
or (iii) make payments due to any
third-party administrator that is
administering covered claims under
the Old Republic Policies. Except
as the parties otherwise agree,
such Administrative Claim shall:
(i) survive confirmation of the
Plan, (ii) shall not be liquidated
or adjudicated by the Court, and
(iii) shall not be payable upon the
Effective Date of the Plan. The
Debtors will not seek to recover
from Old Republic before January 1,
2008 for any excess draw on the Old
Republic Letters of Credits, if
drawn by Old Republic, unless
otherwise agreed to by the parties.
e. Defense Costs
Some of the policies in the Debtors' Insurance
Program require the Debtors to reimburse the respective Insurers for certain
costs incurred by the respective Insurer in the defense and/or liquidation of
the Insured Claims (the "Allowed Defense Costs"). Notwithstanding the provisions
above with respect to the payment of Allowed Under-Deductible Insured Claims,
the Insurers shall have the right to seek reimbursement from the Debtors of
Allowed Defense Costs with respect to Under-Deductible Insured Claims, and such
reimbursement shall be obtained by deducting the Allowed Defense Costs from the
Insurance Security held by the respective Insurers as security for the payment
of such costs. However, if the sum of the Insured Claim and the Allowed Defense
Costs exceeds the applicable deductible amount under the respective policy, the
Insurer shall not be entitled to reimbursement for costs that exceed the
applicable deductible amount. To the extent that an Insurer is entitled to
reimbursement of Allowed Defense Costs, but the Insurer does not have Security
for the obligation, the Insurer shall be entitled to a Class 6 General Unsecured
Claim for the Allowed Defense Costs.
f. Loss Portfolio Transfers
The Debtors are currently in discussions with Ace and
National Union with respect to potential Loss Portfolio Transfers ("LPT"),
relating to certain Ace and National Union policies. In the event such LPT's are
completed, the provisions of the Plan with respect to the Ace and National Union
policies addressed by the LPT's shall not apply and, instead, the terms of the
LPT's shall apply to such policies and the Claims thereunder.
I. Distributions
1. Distributions for Claims Allowed as of the Effective
Date
Except as otherwise provided in the Plan or as may be ordered
by the Bankruptcy Court, distributions to be made on the Effective Date on
account of Claims that are Allowed as of the Effective Date and are entitled to
receive distributions under the Plan shall be made on the Effective Date or as
soon thereafter as practicable. Except as evidenced by an electronic entry, as a
condition to receive any distribution under the Plan, each Old Note Holder must
comply with sections IX.I. and IX.K. of the Plan. All distributions shall be
made in accordance with any applicable Indenture agreement, loan agreement or
analogous instrument or agreement.
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2. Distributions by Core-Mark Newco and the Post
Confirmation Trust
Except as otherwise provided in the Plan, Core-Mark Newco or
the Post Confirmation Trust, as applicable, shall make all distributions
required under the Plan. Notwithstanding the provisions of Section V.C. of the
Plan regarding the cancellation of the Indentures, the Indentures shall continue
in effect to the extent necessary to allow the Old Notes Trustees to provide
information to the Exchange Agent to permit distributions of the New Common
Stock and to receive New Common Stock on behalf of the Holders of the Old Notes
and make distributions pursuant to the Plan on account of the Old Notes as agent
for Core-Mark Newco. The Old Notes Trustees (or any agents or servicers)
providing services related to distributions to the Holders of Allowed Old Note
Claims shall receive, from Core-Mark Newco, reasonable compensation for such
services and reimbursement of reasonable expenses incurred in connection with
such services upon the presentation of invoices to Core-Mark Newco. All
distributions to be made under the Plan shall be made without any requirement
for bond or surety with respect thereto.
3. Interest on Claims
Except as otherwise specifically provided for in the Plan or
in the Confirmation Order, or required by applicable bankruptcy law,
post-petition interest shall not accrue or be paid on any Claims, other than the
Pre-Petition Lender Secured Claims and the DIP Claims, and no Holder of a Claim
shall be entitled to interest accruing on or after the Petition Date on any
Claim.
4. Compliance with Tax Requirements/Allocations
In connection with the Plan, to the extent applicable, the
Reorganized Debtors shall comply with all tax withholding and reporting
requirements imposed on them by any governmental unit, and all distributions
pursuant hereto shall be subject to such withholding and reporting requirements.
For tax purposes, distributions received in respect of Allowed Claims will be
allocated first to the principal amount of Allowed Claims with any excess
allocated, if applicable, to unpaid interest that accrued on such Claims.
5. Delivery of Distributions and Undeliverable or
Unclaimed Distributions
a. Delivery of Distributions in General
Distributions to Holders of Allowed Claims shall be
made at the address of the Holder of such Claim as indicated on the records of
Debtors or upon their proofs of Claims, if any, or, if such Holder holds Senior
Note Claims, distributions with respect to such Senior Note Claims will be made
to the Senior Notes Indenture Trustee which will make distributions to Holders
of Old Senior Notes. To the extent the Senior Notes Indenture Trustee makes
distributions to DTC, DTC will, in turn, make appropriate book entries to
reflect the distributions it makes to Holders. Except as otherwise provided by
the Plan or the Bankruptcy Code with respect to undeliverable distributions,
distributions to Holders of Old Note Claims shall be made in accordance with the
provisions of the applicable Indentures.
b. Undeliverable Distributions
(1) Holding of Undeliverable
Distributions. If any distribution
to a Holder of an Allowed Claim is
returned to Core-Mark Newco or the
Post Confirmation Trust as
undeliverable, no further
distributions shall be made to such
Holder unless and until Core-Mark
Newco or the Post Confirmation
Trust is notified in writing of
such Holder's then-current address.
Undeliverable distributions shall
remain in the possession of
Core-Mark Newco or Post
Confirmation Trust subject to
section IX.E.2(b) of the Plan until
such time as a distribution becomes
deliverable. Undeliverable Cash
shall not be entitled to any
interest, dividends or other
accruals of any kind. As soon as
reasonably
67
practicable, Core-Mark Newco or the
Post Confirmation Trust shall make
all distributions that become
deliverable.
(2) Failure to Claim Undeliverable
Distributions. In an effort to
ensure that all Holders of Allowed
Claims receive their allocated
distributions, no sooner than 240
days after the Effective Date, the
Debtors will compile a listing of
unclaimed distribution Holders.
This list will be maintained and
updated for as long as the Chapter
11 Cases stay open. Any Holder of
an Allowed Claim (irrespective of
when a Claim became an Allowed
Claim) that does not assert a Claim
pursuant to the Plan for an
undeliverable distribution
(regardless of when not
deliverable) within six months
after the distribution has been
attempted to be made to the Holder
of the Allowed Claim, shall have
its Claim for such undeliverable
distribution discharged and shall
be forever barred from asserting
any such Claim against any
Reorganized Debtor or its
respective property. In such cases:
(i) any Cash held for distribution
on account of such Claims shall be
the property of Core-Mark Newco or
the Post Confirmation Trust, as
applicable, free of any
restrictions thereon; and (ii) any
New Common Stock held for
distribution on account of such
Claims shall be canceled and of no
further force or effect. Nothing
contained in the Plan shall require
Core-Mark Newco or the Post
Confirmation Trust to attempt to
locate any Holder of an Allowed
Claim or Allowed Equity Interest.
(3) Abandoned Property Law. The
provisions of the Plan regarding
undeliverable distributions will
apply with equal force to
distributions made pursuant to the
Old Note Indentures notwithstanding
any provision in such indenture to
the contrary and notwithstanding
any otherwise applicable escheat,
abandoned or unclaimed property
law.
6. Distribution Record Date
As of the close of business on the Distribution Record Date,
the transfer register for the Old Notes, as maintained by the Debtors, the Old
Notes Trustees or their agents, shall be closed, and there shall be no further
changes in the record Holders of any Old Notes. Moreover, the Reorganized
Debtors shall have no obligation to recognize the transfer of any Old Notes
occurring after the Distribution Record Date and shall be entitled for all
purposes in the Plan to recognize and deal only with those Holders of record as
of the close of business on the Distribution Record Date.
7. Timing and Calculation of Amounts to be Distributed
Except as otherwise provided in the Plan, on the Effective
Date or as soon as practicable thereafter, each Holder of an Allowed Claim
against the Debtors shall receive the distributions that the Plan provides for
Allowed Claims in the applicable Class, provided however, Core-Mark Newco and
the Post Confirmation Trust, as applicable, shall maintain reserve accounts in
trust for the payment or distribution on account of potential or Disputed Claims
and shall make the appropriate adjustments in distributions to adequately take
into consideration and fund such reserve accounts. Core-Mark Newco and the Post
Confirmation Trust, as applicable, shall be authorized to make interim
distributions and any subsequent distributions necessary to distribute any Cash,
New Common Stock or other consideration held in any reserve account to the
appropriate Claim Holder as Claims are resolved and allowed and reserves are
reduced in accordance with the Plan. If and to the extent that there are
Disputed Claims, beginning on the date that is 45 calendar days after the end of
the month following the Effective Date and no more than 45 calendar days after
the end of each month thereafter, distributions shall also be made, pursuant to
the Plan, to Holders of formerly Disputed Claims in any Class whose Claims were
Allowed during the preceding month. As outlined in the Plan, the deadline by
which the Debtors or the Post-Confirmation Representative shall have to file
Objections to any Disputed Claims shall be one year after the Effective Date, or
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such later date as the Court may order. The Debtors and the Post Confirmation
Representative shall file objections, reconcile and Allow Claims and make
distributions on Claims as soon as reasonably practicable.
8. Minimum Distribution
The New Common Stock will be issued as whole shares. If a
registered record Holder of an Allowed Claim is entitled to the distribution of
a fractional share of New Common Stock, unless otherwise determined and approved
by the Bankruptcy Court, the fractional distribution to which such Holder would
be entitled shall be aggregated with all other such similar distributions by
Core-Mark Newco (or its agent), and as soon as practicable after final
reconciliation, Allowance or resolution of all Class 6 Claims sold by Core-Mark
Newco (or its agent) in a commercially reasonable manner. Upon the completion of
such sale, the net proceeds thereof shall be distributed (without interest), pro
rata in the case of New Common Stock, to the Holders of Allowed Claims, based
upon the fractional share of New Common Stock each such Holder would have been
entitled to receive or deemed to hold had Core-Mark Newco issued fractional
shares of New Common Stock. Such distributions shall be in lieu of any other
distribution.
9. Setoffs
The Reorganized Debtors may, pursuant to section 553 of the
Bankruptcy Code or applicable non-bankruptcy law, set off against any Allowed
Claim and the distributions to be made pursuant to the Plan on account of such
Claim (before any distribution is made on account of such Claim), the Claims,
rights and Causes of Action of any nature that the Debtors or the Reorganized
Debtors may hold against the Holder of such Allowed Claim; provided that neither
the failure to effect such a setoff nor the allowance of any Claim hereunder
shall constitute a waiver or release by the Debtors or the Reorganized Debtors
of any such Claims, rights and Causes of Action that the Debtors or the
Reorganized Debtors may possess against such Holder, except as specifically
provided in the Plan.
10. Old Notes
Each record Holder of an Allowed Claim relating to the Old
Notes not held through DTC shall either (a) tender its Old Notes relating to
such Allowed Claim in accordance with written instructions to be provided to
such Holders by the applicable Reorganized Debtor as promptly as practicable
following the Effective Date, or (b) if the Holder's Old Note has been
destroyed, lost, stolen or mutilated, comply with section IX.K. of the Plan.
Such instructions shall specify that delivery of such Old Notes will be
effected, and risk of loss and title thereto will pass, only upon the proper
delivery of such Old Notes with a letter of transmittal in accordance with such
instructions. All surrendered Old Notes shall be marked as canceled. If any
Holder of Old Notes not held through DTC submits bearer bonds without coupons or
coupons only, the Debtors shall adjust the consideration exchanged therefore
appropriately.
11. Failure to Surrender Canceled Instruments
Any Holder of Allowed Claims relating to the Old Notes not
held through DTC that fails to surrender or is deemed to have failed to
surrender its Old Notes required to be tendered hereunder or that has failed to
comply with section IX.L. of the Plan within one year after the Effective Date
shall have its Claim for a distribution pursuant to the Plan on account of such
Allowed Claim discharged and shall be forever barred from asserting any such
Claim against any Reorganized Debtor or their respective properties. In such
cases, any New Stock held for distribution on account of such Claim shall be
disposed of pursuant to the provisions set forth in section IX.E. of the Plan.
12. Lost, Stolen, Mutilated or Destroyed Debt Securities
In addition to any requirements under the Indentures or any
related agreement, any Holder of a Claim evidenced by an Old Note not held
through DTC that has been lost, stolen, mutilated or destroyed shall, in lieu of
surrendering such Old Note, deliver to the applicable Reorganized Debtor: (a) an
affidavit of loss reasonably satisfactory to such Reorganized Debtor setting
forth the unavailability of the Old Note not held through DTC; and
69
(b) such additional security or indemnity as may be reasonably required by such
Reorganized Debtor to hold such Reorganized Debtor harmless from any damages,
liabilities or costs incurred in treating such individual as a Holder of an
Allowed Claim. Upon compliance with this procedure by a Holder of a Claim
evidenced by an Old Note, such Holder shall, for all purposes under the Plan, be
deemed to have surrendered such non-DTC note.
13. Share Reserve
In addition to the provisions of section X.A.3. of the Plan,
Core-Mark Newco shall be required to establish and maintain an appropriate
reserve of New Common Stock to ensure distribution of New Common Stock to the
Holder of any Disputed Claim upon its allowance.
14. Settlement of Claims and Controversies
Pursuant to Fed. R. Bankr. P. 9019 and in consideration for
the distributions and other benefits provided under the Plan, the provisions of
the Plan shall constitute a good faith compromise and settlement of claims or
controversies relating to the contractual, legal and subordination rights that a
Holder of a Claim may have with respect to any Allowed Claim, or distribution to
be made on account of any such Allowed Claim.
The PBGC asserts that, as a matter of law, nothing in the Plan
or in the Confirmation Order may constitute a compromise and settlement of any
Claims or controversies arising prior to or after the Petition Date with respect
to any of the Existing Pension Plans not terminated prior to the Effective Date.
The Debtors dispute these assertions as the Debtors believe the Existing Pension
Plans will either be terminated prior to the Effective Date or rejected as of
the Effective Date.
J. Resolution of Disputed Claims
1. Prosecution of Objections to Claims
After the Effective Date, except in regard to objections to
Professional fees and other fees the Post-Confirmation Representative shall have
the exclusive authority to file objections, settle, compromise, withdraw or
litigate to judgment objections to Claims on behalf of the Debtors and
Reorganized Debtors. From and after the Effective Date the Post-Confirmation
Representative may settle or compromise any Disputed Claim on behalf of the
Reorganized Debtors without approval of the Bankruptcy Court.
2. Estimation of Claims
Core-Mark Newco and the Post Confirmation Representative, as
applicable, may, at any time, request that the Bankruptcy Court estimate any
contingent or unliquidated Claim pursuant to section 502(c) of the Bankruptcy
Code regardless of whether the Debtors, Core-Mark Newco or the Post Confirmation
Trust, as applicable, has previously objected to such Claim or whether the
Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court will
retain jurisdiction to estimate any Claim at any time during litigation
concerning any objection to any Claim, including during the pendency of any
appeal relating to any such objection. In the event that the Bankruptcy Court
estimates any contingent or unliquidated Claim, that estimated amount will
constitute either the Allowed amount of such Claim or a maximum limitation on
such Claim, as determined by the Bankruptcy Court. If the estimated amount
constitutes a maximum limitation on such Claim, Core-Mark Newco and the Post
Confirmation Representative, as applicable, may elect to pursue any supplemental
proceedings to object to any ultimate payment on such Claim. All of the
aforementioned Claims and objection, estimation and resolution procedures are
cumulative and not necessarily exclusive of one another. Claims may be estimated
and subsequently compromised, settled, withdrawn or resolved by any mechanism
approved by the Bankruptcy Court.
3. Payments and Distributions on Disputed Claims
Notwithstanding any provision in the Plan to the contrary,
except as otherwise agreed by Core-Mark Newco or the Post Confirmation Trust, as
applicable, Core-Mark Newco and the Post Confirmation Trust, as applicable, in
their sole discretion, shall not make any partial payments or partial
distributions with respect to a
70
Disputed Claim until the resolution of such disputes by settlement or Final
Order. On the date or, if such date is not a Business Day, on the next
successive Business Day that is 45 calendar days after the month in which a
Disputed Claim becomes an Allowed Claim, the Holder of such Allowed Claim will
receive all payments and distributions to which such Holder is then entitled
under the Plan. Notwithstanding the foregoing, any Person or Entity who holds
both an Allowed Claim(s) and a Disputed Claim(s) will not receive the
appropriate payment or distribution on the Allowed Claim(s), except as otherwise
agreed by Core-Mark Newco or the Post Confirmation Trust, as applicable, until
the Disputed Claim(s) is or are resolved by settlement or Final Order. In the
event there are Disputed Claims requiring adjudication and resolution, Core-Mark
Newco and the Post Confirmation Trust, as applicable, shall establish
appropriate reserves for potential payment of such Claims.
4. Allowance of Claims
Except as expressly provided in the Plan or in any order
entered in the Chapter 11 Cases prior to the Effective Date (including the
Confirmation Order), no Claim shall be deemed Allowed unless and until such
Claim is deemed Allowed under the Bankruptcy Code and no objection to such Claim
has been filed by the Objection Deadline or the Bankruptcy Court enters a Final
Order in the Chapter 11 Cases allowing such Claim. Except as expressly provided
in the Plan or any order entered in the Chapter 11 Cases prior to the Effective
Date (including the Confirmation Order), the Reorganized Debtors and the Post
Confirmation Trust, as applicable, after confirmation will have and retain any
and all rights, remedies, causes of action and defenses the Debtors had with
respect to any Claim as of the date the Debtors filed their petitions for relief
under the Bankruptcy Code. All Claims of any Person or Entity that may owe money
to the Debtors shall be disallowed unless and until such Person or Entity pays
the amount it owes the Debtors in full.
5. Controversy Concerning Impairment
If a controversy arises as to whether any Claims, or any Class
of Claims, is Impaired under the Plan, the Bankruptcy Court shall, after notice
and a hearing, determine such controversy before the Confirmation Date.
K. Retention Of Jurisdiction
Notwithstanding the entry of the Confirmation Order and the occurrence
of the Effective Date, the Bankruptcy Court shall retain such jurisdiction over
the Chapter 11 Cases after the Effective Date as legally permissible, including
jurisdiction to:
1. allow, disallow, determine, liquidate, classify,
estimate or establish the priority or secured or
unsecured status of any Claim or Equity Interest,
including the resolution of any request for payment
of any Administrative Claim and the resolution of any
and all objections to the allowance or priority of
Claims or Equity Interests;
2. grant or deny any applications for allowance of
compensation or reimbursement of expenses authorized
pursuant to the Bankruptcy Code or the Plan, for
periods ending on or before the Effective Date;
3. resolve any matters related to the assumption,
assumption and assignment or rejection of any
executory contract or unexpired lease to which any
Debtor is party or with respect to which any Debtor
may be liable and to hear, determine and, if
necessary, liquidate, any Claims arising therefrom,
including those matters related to the amendment
after the Effective Date pursuant to Article VII in
the Plan to add or strike any executory contracts or
unexpired leases to the list of executory contracts
and unexpired leases to be assumed;
4. ensure that distributions to Holders of Allowed
Claims are accomplished pursuant to the provisions of
the Plan;
71
5. decide or resolve any motions, adversary proceedings,
contested or litigated matters and any other matters
and grant or deny any applications involving the
Debtors;
6. enter such orders as may be necessary or appropriate
to implement or consummate the provisions in the Plan
and all contracts, instruments, releases, indentures
and other agreements or documents created in
connection with the Plan or this Disclosure
Statement;
7. resolve any cases, controversies, suits or disputes
that may arise in connection with the occurrence of
the Effective Date, interpretation or enforcement of
the Plan or any Person's or Entity's obligations
incurred in connection with the Plan;
8. issue injunctions, enter and implement other orders
or take such other actions as may be necessary or
appropriate to restrain interference by any Person or
Entity with occurrence of the Effective Date or
enforcement of the Plan, except as otherwise provided
in the Plan;
9. resolve any cases, controversies, suits or disputes
with respect to the releases, injunction and other
provisions contained in Article XII of the Plan and
enter such orders as may be necessary or appropriate
to implement such releases, injunction and other
provisions;
10. enter and implement such orders as are necessary or
appropriate if the Confirmation Order is for any
reason modified, stayed, reversed, revoked or
vacated;
11. determine any other matters that may arise in
connection with or relate to the Plan, this
Disclosure Statement, the Confirmation Order or any
contract, instrument, release, indenture or other
agreement or document created in connection with the
Plan or the Disclosure Statement; and
12. enter an order and/or final decree concluding the
Chapter 11 Cases.
L. Release, Injunctive And Related Provisions
1. Subordination
The classification and manner of satisfying all Claims and
Equity Interests and the respective distributions and treatments hereunder take
into account and/or conform to the relative priority and rights of the Claims
and Equity Interests in each Class in connection with any contractual, legal and
equitable subordination rights relating thereto whether arising under general
principles of equitable subordination, section 510(b) of the Bankruptcy Code or
otherwise, and any and all such rights are settled, compromised and released
pursuant hereto. The Confirmation Order shall permanently enjoin, effective as
of the Effective Date, all Persons and Entities from enforcing or attempting to
enforce any such contractual, legal and equitable subordination rights
satisfied, compromised and settled in this manner.
2. MUTUAL RELEASES BY RELEASEES
ON AND AFTER THE EFFECTIVE DATE, FOR GOOD AND VALUABLE
CONSIDERATION, INCLUDING THE SERVICES OF THE RELEASEES TO FACILITATE THE
EXPEDITIOUS REORGANIZATION OF THE DEBTORS AND THE IMPLEMENTATION OF THE
RESTRUCTURING CONTEMPLATED BY THE PLAN, EACH OF THE RELEASEES SHALL BE DEEMED TO
HAVE UNCONDITIONALLY RELEASED ONE ANOTHER FROM ANY AND ALL CLAIMS (AS DEFINED IN
SECTION 101(5) OF THE BANKRUPTCY CODE), OBLIGATIONS, RIGHTS, SUITS, DAMAGES,
REMEDIES AND LIABILITIES WHATSOEVER, INCLUDING ANY CLAIMS THAT COULD BE ASSERTED
ON BEHALF OF A DEBTOR, WHETHER KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN,
EXISTING OR HEREINAFTER ARISING, IN LAW, EQUITY OR OTHERWISE, THAT THE RELEASEES
OR THEIR SUBSIDIARIES WOULD HAVE BEEN LEGALLY ENTITLED TO ASSERT IN THEIR OWN
RIGHT (WHETHER INDIVIDUALLY OR COLLECTIVELY) OR ON BEHALF OF THE HOLDER OF ANY
CLAIM OR EQUITY INTEREST OR OTHER PERSON OR ENTITY, BASED IN WHOLE OR IN PART
UPON ANY ACT OR OMISSION, TRANSACTION,
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AGREEMENT, EVENT OR OTHER OCCURRENCE TAKING PLACE ON OR BEFORE THE EFFECTIVE
DATE, EXCEPT FOR CASES OF WILLFUL MISCONDUCT OR GROSS NEGLIGENCE AND PROVIDED
THAT THE DEBTORS, THE REORGANIZED DEBTORS AND THE POST CONFIRMATION TRUSTEE
RESERVE THEIR RIGHTS TO BRING AVOIDANCE ACTIONS, COLLECT VENDOR DEDUCTIONS, OR
ASSERT SETOFF, RECOUPMENT AND OTHER SIMILAR DEFENSES OR CLAIMS AGAINST MEMBERS
OF THE COMMITTEE WITH RESPECT TO DEBTORS' ORDINARY COURSE BUSINESS DEALINGS WITH
SUCH COMMITTEE MEMBERS.
3. RELEASES BY HOLDERS OF CLAIMS
ON AND AFTER THE EFFECTIVE DATE, EXCEPT FOR CASES OF WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE. EACH CLAIM HOLDER THAT HAS AFFIRMATIVELY VOTED
TO ACCEPT THE PLAN SHALL BE DEEMED TO HAVE UNCONDITIONALLY RELEASED THE
RELEASEES FROM ANY AND ALL CLAIMS, OBLIGATIONS, RIGHTS, SUITS, DAMAGES, REMEDIES
AND LIABILITIES WHATSOEVER, INCLUDING ANY CLAIMS THAT COULD BE ASSERTED ON
BEHALF OF A DEBTOR, WHETHER KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, EXISTING
OR HEREAFTER ARISING, IN LAW, EQUITY OR OTHERWISE, THAT SUCH CLAIM HOLDER WOULD
HAVE BEEN LEGALLY ENTITLED TO ASSERT (WHETHER INDIVIDUALLY OR COLLECTIVELY),
BASED IN WHOLE OR IN PART UPON ANY ACT OR OMISSION, TRANSACTION, AGREEMENT,
EVENT OR OTHER OCCURRENCE TAKING PLACE ON OR BEFORE THE EFFECTIVE DATE IN ANY
WAY RELATING OR PERTAINING TO (w) THE PURCHASE OR SALE, OR THE RESCISSION OF A
PURCHASE OR SALE, OF ANY SECURITY OF A DEBTOR, (x) A DEBTOR, REORGANIZED DEBTOR
OR CORE-MARK NEWCO, (y) THE CHAPTER 11 CASES OR (z) THE NEGOTIATION, FORMULATION
AND PREPARATION OF THE PLAN, OR ANY RELATED AGREEMENTS, INSTRUMENTS OR OTHER
DOCUMENTS.
4. INDEMNIFICATION
THE DEBTORS, REORGANIZED DEBTORS AND CORE-MARK NEWCO SHALL BE
JOINTLY AND SEVERALLY OBLIGATED TO INDEMNIFY ALL D&O RELEASEES AND THEIR
RESPECTIVE AFFILIATES, AGENTS AND PROFESSIONALS AGAINST ANY CLAIMS, OBLIGATIONS,
SUITS, JUDGMENTS, DAMAGES, DEMANDS, DEBTS, RIGHTS, CAUSE OF ACTION OR
LIABILITIES WHETHER DIRECT OR INDIRECT, DERIVATIVE, LIQUIDATED OR UNLIQUIDATED,
FIXED OR CONTINGENT, MATURED OR UNMATURED, KNOWN OR UNKNOWN, FORESEEN OR
UNFORESEEN, THEN EXISTING OR THEREAFTER ARISING, IN LAW, EQUITY OR OTHERWISE,
THAT ARE BASED IN WHOLE OR IN PART ON ANY ACT OR OMISSION, TRANSACTION, EVENT OR
OTHER OCCURRENCE TAKING PLACE ON OR PRIOR TO THE EFFECTIVE DATE IN ANY WAY
RELATING OR PERTAINING TO THE DEBTORS, THE REORGANIZED DEBTORS, CORE-MARK NEWCO,
THE CHAPTER 11 CASES, THE PLAN OR THIS DISCLOSURE STATEMENT EXCEPT FOR CASES OF
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE. THE DEBTORS WILL FUND THE PURCHASE OF
TAIL LIABILITY COVERAGE UNDER THE DEBTORS' DIRECTORS AND OFFICERS INSURANCE
POLICIES.
5. EXCULPATION
THE DEBTORS, THE REORGANIZED DEBTORS, CORE-MARK NEWCO, THE D&O
RELEASEES, THE POST-PETITION LENDERS, THE PRE-PETITION LENDERS, THE AGENTS, THE
OLD NOTES TRUSTEES, THE COMMITTEE, THE POST CONFIRMATION TRUSTEE, AND THE POST
CONFIRMATION ADVISORY BOARD, AND THEIR MEMBERS, EMPLOYEES AND PROFESSIONALS
(ACTING IN SUCH CAPACITY) SHALL NEITHER HAVE NOR INCUR ANY LIABILITY TO ANY
PERSON OR ENTITY FOR ANY PRE- OR POST-PETITION ACT TAKEN OR OMITTED TO BE TAKEN
IN CONNECTION WITH OR RELATED TO THE FORMULATION, NEGOTIATION, PREPARATION,
DISSEMINATION, IMPLEMENTATION, ADMINISTRATION, CONFIRMATION OR OCCURRENCE OF THE
EFFECTIVE DATE OF THE PLAN, THE DISCLOSURE STATEMENT OR ANY CONTRACT,
INSTRUMENT, RELEASE OR OTHER AGREEMENT OR DOCUMENT CREATED OR ENTERED INTO IN
CONNECTION WITH THE PLAN OR ANY OTHER PRE-PETITION OR POST-PETITION ACT TAKEN OR
OMITTED TO BE TAKEN IN CONNECTION WITH, OR IN CONTEMPLATION OF, RESTRUCTURING OF
THE DEBTORS.
6. DISCHARGE OF CLAIMS AND TERMINATION OF EQUITY
INTERESTS
EXCEPT AS OTHERWISE PROVIDED IN THE PLAN: (1) THE RIGHTS
AFFORDED IN THE PLAN AND THE TREATMENT OF ALL CLAIMS AND EQUITY INTERESTS IN THE
PLAN, SHALL BE IN EXCHANGE FOR AND IN COMPLETE SATISFACTION, DISCHARGE AND
RELEASE OF CLAIMS AND EQUITY INTERESTS OF ANY NATURE WHATSOEVER, INCLUDING ANY
INTEREST ACCRUED ON CLAIMS FROM AND AFTER THE PETITION DATE, AGAINST ANY DEBTOR
OR ANY OF ITS RESPECTIVE ASSETS OR PROPERTIES, (2) ON THE EFFECTIVE DATE, ALL
SUCH CLAIMS AGAINST, AND EQUITY INTERESTS IN, ANY DEBTOR SHALL BE SATISFIED,
DISCHARGED AND RELEASED IN FULL AND (3) ALL PERSONS AND ENTITIES SHALL BE
PRECLUDED FROM ASSERTING AGAINST ANY REORGANIZED DEBTOR, ITS SUCCESSORS OR ITS
ASSETS OR PROPERTIES ANY OTHER OR FURTHER CLAIMS OR EQUITY INTERESTS BASED UPON
ANY ACT OR OMISSION, TRANSACTION OR OTHER ACTIVITY OF ANY KIND OR NATURE THAT
OCCURRED PRIOR TO THE CONFIRMATION DATE.
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7. INJUNCTION
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE PLAN, ALL
HOLDERS OF CLAIMS AND EQUITY INTERESTS ARE PERMANENTLY ENJOINED, FROM AND AFTER
THE EFFECTIVE DATE, FROM (a) COMMENCING OR CONTINUING IN ANY MANNER ANY ACTION
OR OTHER PROCEEDING OF ANY KIND ON ANY SUCH CLAIM OR EQUITY INTEREST AGAINST THE
DEBTORS, THEIR ESTATES, CORE-MARK NEWCO OR THE REORGANIZED DEBTORS UNLESS A
PREVIOUS ORDER MODIFYING THE STAY PROVIDED UNDER SECTION 362 OF THE BANKRUPTCY
CODE WAS ENTERED BY THE COURT; (b) THE ENFORCEMENT, ATTACHMENT, COLLECTION OR
RECOVERY BY ANY MANNER OR MEANS OF ANY JUDGMENT, AWARD, DECREE OR ORDER AGAINST
THE DEBTORS, THEIR ESTATES, CORE-MARK NEWCO OR THE REORGANIZED DEBTORS; (c)
CREATING, PERFECTING, OR ENFORCING ANY ENCUMBRANCE OF ANY KIND AGAINST THE
PROPERTY OR INTERESTS IN PROPERTY OF THE DEBTORS, THEIR ESTATES, CORE-MARK NEWCO
OR THE REORGANIZED DEBTORS; AND (d) ASSERTING ANY RIGHT OF SETOFF, SUBROGATION
OR RECOUPMENT OF ANY KIND AGAINST ANY OBLIGATION DUE FROM THE DEBTORS OR AGAINST
THE PROPERTY OF THE DEBTORS, THEIR ESTATES, CORE-MARK NEWCO OR THE REORGANIZED
DEBTORS WITH RESPECT TO ANY SUCH CLAIM OR EQUITY INTEREST, UNLESS SUCH RIGHT OF
SETOFF, SUBROGATION OR RECOUPMENT HAS BEEN PREVIOUSLY ASSERTED IN A TIMELY FILED
PROOF OF CLAIM OR UNLESS ASSERTED AS A DEFENSE OR COUNTERCLAIM TO A CAUSE OF
ACTION BROUGHT BY THE REORGANIZED DEBTORS, CORE-MARK NEWCO OR THE POST
CONFIRMATION TRUST AFTER THE EFFECTIVE DATE. WITH RESPECT TO FSA RESERVE
PARTICIPANTS, TO THE EXTENT THAT ANY FSA RESERVE PARTICIPANT IS ENTITLED TO
SETOFF AGAINST THE FSA RESERVE BECAUSE IT HAS MET ALL THE REQUIREMENTS IN THE
BANKRUPTCY COURT ORDER ESTABLISHING THE FSA RESERVE FOR SETOFF AGAINST SUCH FSA
RESERVE, SUCH SETOFF RIGHT SHALL BE PRESERVED AGAINST THE POST CONFIRMATION
TRUST.
8. Police and Regulatory Powers
Notwithstanding the foregoing, the releases, exculpation and
injunction outlined herein shall not preclude a governmental entity from
enforcing its police and regulatory powers.
9. Impact of Plan on Pending Litigation; Pension Plans
Pursuant to section III.B.12 of the Plan, Other
Securities Claims and Interests, including, but not limited to, the securities
class action entitled In re Fleming Companies Securities Litigation, Master File
No. 5:03-md-1530TJW (the "Securities Class Action") brought by current or former
Fleming shareholders and creditors described in more detail in section V.C.6
herein, will be permanently enjoined as to the Debtors and any Claims with
respect thereto discharged. Litigation involving directors and officers of the
Debtors, including but not limited to, that described in section V.C.6 herein
may be affected by the releases contained in section XII of the Plan. Litigation
against the Debtors that is not deemed an Other Securities Claim or Interest or
is not affected by the releases contained in section XII of the Plan, and is not
otherwise discharged, settled or expunged in accordance with the Plan, will be
permanently enjoined pursuant to section XII.G. of the Plan, and any Allowed
Claims arising from such litigation will generally be treated as Class 6 Claims
under the Plan. Nothing in the Plan or in any order confirming the Plan,
however, shall affect, release, enjoin or impact in any way the prosecution of
the claims of the class claimants in the Securities Class Action asserted, or to
be asserted against the non-Debtor defendants and/or any other non-Debtor unless
(i) a Claim Holder has affirmatively voted in favor of the Plan, in which case
such Claim Holder shall release the Releasees as outlined in section XII.C. of
the Plan and any litigation by such Claim Holder against the Releasees of the
type outlined in section XII.C. of the Plan shall be permanently enjoined and
any Claims thereunder discharged as outlined herein and in Section XII.G. of the
Plan, or (ii) the litigation is among Releasees, in which case it shall be
released by the Mutual Releases outlined in section XII.B. of the Plan and shall
be permanently enjoined and any claims thereunder discharged as outlined herein
and in section XII.G of the Plan. The Plan shall forever bar any claimant,
including, but not limited to, the class claimants in the Securities Class
Action from pursuing claims against the Debtors which are covered by the
directors and officers liability insurance policies maintained by the Debtors
(the "D&O Insurance") but shall not bar such Claimants from pursuing the
non-Debtor defendants who may be entitled to coverage by the D&O Insurance.
On February 9, 2004, Jackson Capital Management LLC,
the lead plaintiff ("Lead Plaintiff") in the Securities Class Action, filed an
Objection to the Disclosure Statement. The Lead Plaintiff raised essentially two
objections. First, the Lead Plaintiff alleges that the provisions in the Plan
and Disclosure Statement relating to Releases are ambiguous in that they are
unclear as to whether such Releases shall have any impact on the rights of the
Lead Plaintiff and class claimants in the Securities Class Action or the claims
asserted in the Securities
74
Class Action against any non-Debtor. This Objection has been addressed by the
language inserted above suggested by the Lead Plaintiff which specifically
states that "Nothing in the Plan or in any Order confirming the Plan, shall
affect, release, enjoin or impact in any way the prosecution of the claims of
the class claimants asserted, or to be asserted, against the non-Debtor
defendants in the Securities Class Action and/or any other non-Debtor" unless
the class claimants also happen to have Claims against the Debtors in addition
to the Claims they have arising out of the Securities Class Action which are
Class 10 Claims, which are extinguished under the Plan and the Holders of which
are not entitled to vote and are deemed to have rejected the Plan.
The Lead Plaintiff's second Objection is really a
Plan Objection. The Lead Plaintiff alleges that "the class claimants are
entitled not only to look to the proceeds of D & O Insurance for payment of
their claims asserted or to be asserted in the Securities Class Action, but they
also may pursue their claims against the Debtor solely to the extent of such
available D & O Insurance." The Lead Plaintiff goes on to state that the "Plan
should not impact the class claimants' rights against the Debtor, either though
injunctive relief or discharge, to pursue their claims solely against such
insurance proceeds." Again, this is a Plan Objection. The Lead Plaintiff is
seeking treatment under the Plan that is not presently contemplated and not
agreed to by the Debtors. The Plan enjoins the Lead Plaintiff and the class
claimants from pursuing claims against the Debtors and discharges any and all
claims that the class claimants may have against the Debtors. The Debtors cannot
agree to permit the Lead Plaintiffs and class claimants to proceed against the
Debtors to the extent of D & O Insurance. Such treatment would provide the class
claimants with treatment more favorable than that accorded creditors whose
claims are of a higher priority than the class claimants who are not likely to
be receiving full recovery on these Claims, such as, e.g., claimants with Class
6 and 7 Claims.
The PBGC asserts that, as a matter of law, nothing in
the Plan or in the Confirmation Order may release, exculpate, discharge or
enjoin any Claims, obligations, suits, judgments, damages, demands, debts,
rights, Cause of Action or liabilities against any entity other than the Debtors
with respect to the Fleming Pension Plan and the Existing Pension Plans. The
Debtors dispute these assertions.
10. Consideration for Releases, Indemnification and
Exculpation
As discussed herein, the Releases provided for herein
are made in exchange for the significant contributions made by the Releasees to
the Debtors and the reorganization efforts. Certain Releasees, like the Debtors'
officers, directors, employees and Professionals, have made contributions both
in the form of the time and effort they have dedicated to the reorganization
process. Others, like the members of the Creditors' Committee and their
Professionals, in addition to their time and effort, have contributed
significantly by striving to obtain consensus among their constituents for the
joint Plan to benefit all unsecured creditors. Without these contributions, the
Debtors' reorganization certainly would be compromised.
M. Conditions Precedent to Plan Consummation
It shall be a condition to Confirmation of the Plan that all
provisions, terms and conditions of the Plan are approved in the Confirmation
Order.
N. Conditions Precedent to Occurrence of the Effective Date
It shall be a condition to occurrence of the Effective Date of the Plan
that the following conditions shall have been satisfied or waived pursuant to
the provisions of Section XI.C. thereof:
1. The Confirmation Order confirming the Plan, as the
Plan may have been modified, shall have been entered and become a Final Order in
form and substance satisfactory to the Debtors and the Committee and shall
provide that, among other things:
a. the Debtors and Reorganized Debtors are
authorized and directed to take all actions necessary or appropriate to enter
into, implement and consummate the contracts, instruments, releases, leases,
indentures and other agreements or documents created in connection with the
Plan;
75
b. the provisions of the Confirmation Order are
nonseverable and mutually dependent;
c. Core-Mark Newco is authorized to issue the
New Common Stock, and Management Options; and
d. the New Common Stock issued under the Plan
is exempt from registration under the Securities Act pursuant to section 1145 of
the Bankruptcy Code, except to the extent that Holders of the New Common Stock
are "underwriters," as that term is defined in section 1145 of the Bankruptcy
Code.
2. The following agreements, in form and substance
satisfactory to the Reorganized Debtors and the Committee, shall have been
tendered for delivery and all conditions precedent thereto shall have been
satisfied:
a. Exit Financing Facility;
b. Tranche B Loan Agreement; and
c. Management Incentive Plan.
3. The Certificate of Incorporation of Core-Mark Newco
shall have been filed with the Secretary of State of the State of Delaware.
4. All actions, documents and agreements necessary to
implement the Plan shall have been effected or executed.
5. The new board of directors of Core-Mark Newco shall
have been appointed.
6. The Reorganized Debtors shall have established and
funded the Professional Fee Escrow Account.
7. The appropriate Final Orders recognizing and
implementing the Plan in Canada shall have been obtained from the Canadian CCAA
Court.
8. The Post Confirmation Trust shall be established and
all actions, documents and agreements necessary to implement the Post
Confirmation Trust shall have been effected or executed.
9. The issuance of the New Common Stock under the Plan
shall be exempt from the prospectus and registration requirements and the first
trade thereof shall be exempt from the prospectus requirements of the securities
laws of each of the provinces of Canada (including, to the extent necessary,
pursuant to an order or orders issued by the applicable Canadian securities
regulators granting relief from any such prospectus and registration
requirements that would otherwise be applicable).
O. Waiver of Conditions
Except as otherwise required by the terms of the Plan, the Debtors,
with the consent of the Committee, may waive any of the conditions to
Confirmation of the Plan and/or to occurrence of the Effective Date of the Plan
set forth in Article XI of the Plan at any time, without notice, without leave
or order of the Bankruptcy Court, and without any formal action other than
proceeding to confirm and/or consummate the Plan.
P. Effect of Non-occurrence of Conditions to Occurrence of the
Effective Date
If the occurrence of the Effective Date of the Plan does not occur by
_______, 2004, the Plan shall be null and void in all respects and nothing
contained in the Plan or the Disclosure Statement shall: (1) constitute a waiver
76
or release of any Claims by or against the Debtors; (2) prejudice in any manner
the rights of the Debtors; or (3) constitute an admission, acknowledgment, offer
or undertaking by the Debtors in any respect.
Q. Severability Of Plan Provisions
The provisions of the Plan shall not be severable unless such severance
is agreed to by the Debtors and the Committee, if applicable, or, if after the
Effective Date, by Core-Mark Newco and the Post Confirmation Trust Advisory
Board on behalf of the Post Confirmation Trust, and such severance would
constitute a permissible modification of the Plan pursuant to section 1127 of
the Bankruptcy Code.
R. Miscellaneous Provisions
1. Effectuating Documents, Further Transactions and
Corporation Action
Each of the Debtors and Reorganized Debtors is authorized to
execute, deliver, file or record such contracts, instruments, releases and other
agreements or documents and take such actions as may be necessary or appropriate
to effectuate, implement and further evidence the terms and conditions hereof
and the notes and securities issued pursuant to the Plan.
Prior to, on or after the Effective Date (as appropriate), all
matters provided for hereunder that would otherwise require approval of the
shareholders or directors of the Debtors or Reorganized Debtors shall be deemed
to have occurred and shall be in effect prior to, on or after the Effective Date
(as appropriate) pursuant to the applicable general corporation law of the
states where each of the Debtors is organized without any requirement of further
action by the shareholders or directors of any Debtor or Reorganized Debtor.
2. Dissolution of Committee
The Creditors' Committee shall be dissolved on the Effective
Date, and members shall be released and discharged from all rights and duties
arising from, or related to, the Chapter 11 Cases provided that the Debtors
shall pay the reasonable fees and expenses of the Committee's Professionals
incurred in connection with winding up the Chapter 11 Cases.
3. Payment of Statutory Fees
All fees payable pursuant to section 1930(a) of Title 28 of
the United States Code, as determined by the Bankruptcy Court at the hearing
pursuant to section 1128 of the Bankruptcy Code, shall be paid for each quarter
(including any fraction thereof) until the Chapter 11 Case is converted,
dismissed or closed, whichever occurs first.
4. Modification of Plan
Subject to the limitations contained in the Plan, (1) the
Debtors, with the consent of the Committee, reserve the right, in accordance
with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify the Plan
prior to the entry of the Confirmation Order and (2) after the entry of the
Confirmation Order, the Debtors or the Reorganized Debtors, as the case may be,
with the consent of the Committee or the Post Confirmation Trust Advisory Board,
may upon order of the Bankruptcy Court, amend or modify the Plan, in accordance
with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or
reconcile any inconsistency in the Plan in such manner as may be necessary to
carry out the purpose and intent of the Plan.
5. Revocation of Plan
The Debtors reserve the right to revoke or withdraw the Plan
prior to the Confirmation Date and to file subsequent plans of reorganization.
If the Debtors revoke or withdraw the Plan, or if Confirmation or occurrence of
the Effective Date does not occur, then (a) the Plan shall be null and void in
all respects, (b) any settlement or compromise embodied in the Plan (including
the fixing or limiting to an amount certain any Claim or
77
Equity Interest or Class of Claims or Equity Interests), assumption or rejection
of executory contracts or leases affected by the Plan, and any document or
agreement executed pursuant to the Plan, shall be deemed null and void, and (c)
nothing contained in the Plan shall (i) constitute a waiver or release of any
Claims by or against, or any Equity Interests in, such Debtors or any other
Person, (ii) prejudice in any manner the rights of such Debtors or any other
Person or (iii) constitute an admission of any sort by the Debtors or any other
Person.
6. Environmental Liabilities
Nothing in the Plan discharges, releases or precludes any
environmental liability that is not a Claim. Furthermore, nothing in the Plan
discharges, releases or precludes any environmental claim of the United States
that arises on or after the Confirmation Date or releases any Reorganized Debtor
from liability under environmental law as the owner or operator of property that
such Reorganized Debtors owns or operates after the Confirmation Date. In
addition, nothing in the Plan releases or precludes any environmental liability
to the United States as to any Person or Entity other than the Debtors or
Reorganized Debtors. Nothing in the Plan enjoins the United States from
asserting or enforcing outside the Bankruptcy Court any liability described in
this paragraph. Other than as specifically stated in this paragraph, the Debtors
and Reorganized Debtors reserve their right to assert any and all defenses to
the assertion or enforcement by the United States or any other person of any
liability described in this paragraph.
7. Successors and Assigns
The rights, benefits and obligations of any Person or Entity
named or referred to in the Plan shall be binding on, and shall inure to the
benefit of, any heir, executor, administrator, successor or assign of such
Person or Entity.
8. Reservation of Rights
Except as expressly set forth herein, the Plan shall have no
force or effect unless the Bankruptcy Court shall enter the Confirmation Order.
None of the filing of the Plan, any statement or provision contained in the
Plan, or the taking of any action by the Debtors with respect to the Plan shall
be or shall be deemed to be an admission or waiver of any rights of the Debtors
with respect to the Holders of Claims or Equity Interests prior to the Effective
Date.
9. Section 1146 Exemption
Pursuant to section 1146(c) of the Bankruptcy Code, any
transfers of property pursuant to the Plan shall not be subject to any document
recording tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage
tax, stamp act, real estate transfer tax, mortgage recording tax or other
similar tax or governmental assessment in the United States, and the
Confirmation Order shall direct the appropriate state or local governmental
officials or agents to forgo the collection of any such tax or governmental
assessment and to accept for filing and recordation any of the foregoing
instruments or other documents without the payment of any such tax or
governmental assessment.
10. Further Assurances
The Debtors, Reorganized Debtors, Core-Mark Newco and all
Holders of Claims receiving distributions hereunder and all other parties in
interest shall, from time to time, prepare, execute and deliver any agreements
or documents and take any other actions as may be necessary or advisable to
effectuate the provisions and intent of the Plan.
11. Service of Documents
Any pleading, notice or other document required by the Plan to
be served on or delivered to any Reorganized Debtor or the Committee shall be
sent by first class U.S. mail, postage prepaid to:
78
Fleming Companies, Inc.
1945 Lakepoint Drive
Lewisville, Texas 75057
Attn: Rebecca A. Roof
Kirkland & Ellis LLP Milbank Tweed Hadley & McCloy LLP
200 E. Randolph Drive One Chase Manhattan Plaza
Chicago, Illinois 60601 New York, New York 10005
Attn: Geoffrey A. Richards Attn: Dennis Dunne
Janet S. Baer
and and
Pachulski, Stang, Ziehl, Young, Jones & Pepper Hamilton LLP
Weintraub P.C. 100 Renaissance Center
919 North Market Street Suite 3600
Sixteenth Floor Detroit, Michigan 48243-1157
P.O. Box 8705 Attn: I. William Cohen
Wilmington, Delaware 19899-8705 Robert S. Hertzberg
Attn: Laura Davis Jones
12. Filing of Additional Documents
On or before the Effective Date, the Debtors with the consent
of the Creditors' Committee may file with the Bankruptcy Court such agreements
and other documents as may be necessary or appropriate to effectuate and further
evidence the terms and conditions hereof.
13. Transactions on Business Days
If the date on which a transaction may occur under the Plan
shall occur on a day that is not a Business Day, then such transaction shall
instead occur on the next succeeding Business Day.
14. Post-Effective Date Fees and Expenses
From and after the Effective Date, Core-Mark Newco shall, in
the ordinary course of business and without the necessity for any approval by
the Bankruptcy Court, pay the reasonable professional fees and expenses incurred
by Core-Mark Newco and the Committee, if applicable, related to the Consummation
and implementation of the Plan.
15. Conflicts
To the extent any provision of this Disclosure Statement or
any document executed in connection therewith or any documents executed in
connection with the Confirmation Order (or any exhibits, schedules, appendices,
supplements or amendments to any of the foregoing) conflicts with, or is in any
way inconsistent with, the terms of the Plan, the terms and provisions of the
Plan shall govern and control.
16. Term of Injunctions or Stays
Unless otherwise provided in the Plan or in the Confirmation
Order, all injunctions or stays in effect in the Chapter 11 Cases under sections
105 or 362 of the Bankruptcy Code or any order of the Bankruptcy Court, and
still extant on the Confirmation Date (excluding any injunctions or stays
contained in the Plan or the Confirmation Order), shall remain in full force and
effect until the Effective Date. All injunctions or stays contained in the Plan
or the Confirmation Order shall remain in full force and effect in accordance
with their terms.
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17. Entire Agreement
The Plan (as amended) supersedes all previous and
contemporaneous negotiations, promises, covenants, agreements, understandings
and representations on such subjects, all of which have become merged and
integrated into the Plan.
18. Closing of the Chapter 11 Cases
The Post-Consummation Estate shall promptly, upon the full
administration of the Chapter 11 Cases, file with the Bankruptcy Court all
documents required by Fed. R. Bankr. P. 3022 and any applicable order of the
Bankruptcy Court to close the Chapter 11 Cases.
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VII. DEBTORS' RETAINED CAUSES OF ACTION
A. Maintenance of Causes of Action
Except as otherwise provided in the Plan, Core-Mark Newco, the
Reorganized Debtors and the Post Confirmation Trust, as applicable, shall retain
all rights on behalf of the Debtors, Core-Mark Newco and the Reorganized Debtors
to commence and pursue, as appropriate, in any court or other tribunal
including, without limitation, in an adversary proceeding filed in one or more
of the Debtors' Chapter 11 Cases, any and all Causes of Action, whether such
Causes of Action accrued before or after the Petition Date, including, but not
limited to, the actions specified in section VI.B. in the Plan, as well as those
Causes of Action listed on Exhibit A to the Plan filed herewith.
Except as otherwise provided in the Plan, in accordance with section
1123(b)(3) of the Bankruptcy Code, any Claims, rights, and Causes of Action that
the respective Debtors, Core-Mark Newco and the Reorganized Debtors may hold
against any Person shall vest in Core-Mark Newco or the Post Confirmation Trust,
as applicable. Core-Mark Newco or the Post Confirmation Trust, as applicable,
shall retain and may exclusively enforce any and all such Claims, rights or
Causes of Action, and commence, pursue and settle the Causes of Action in
accordance with the Plan, provided the Post Confirmation Trust may commence,
pursue and settle certain Causes of Action, including, but not necessarily
limited to, the Litigation Claims as outlined more fully in the Post
Confirmation Trust Agreement. Core-Mark Newco and the Post Confirmation Trust,
as applicable, shall have the exclusive right, authority, and discretion to
institute, prosecute, abandon, settle, or compromise any and all such claims,
rights, and Causes of Action without the consent or approval of any third party
and without any further order of court.
B. Preservation of Causes of Action
The Debtors are currently investigating whether to pursue potential
Causes of Action against any Creditors, Entities, or other Persons, but not as
against the Releasees. The investigation has not been completed to date, and
under the Plan, Core-Mark Newco and the Post Confirmation Trust, as applicable,
retain the right on behalf of the Debtors and Reorganized Debtors to commence
and pursue any and all Causes of Action. Potential Causes of Action currently
being investigated by the Debtors, which may, but need not, be pursued by the
Debtors before the Effective Date or by Core-Mark Newco or the Post Confirmation
Trust, as applicable, after the Effective Date include, without limitation, the
following Causes of Action:
- All actual or potential avoidance actions pursuant to any
applicable section of the Bankruptcy Code including, without
limitation, sections 544, 545, 547, 548, 549, 550, 551, 553(b)
and/or 724(a) of the Bankruptcy Code, arising from any
transaction involving or concerning the Debtors, and among
others, without limitation, those entities listed on Exhibit
A-3 and A-7 to the Plan;
- All actual or potential actions, whether legal, equitable or
statutory in nature, for, or in any way involving, the
collection of accounts receivable or general ledger items that
are due and owing to Fleming or its subsidiaries, including
without limitation trade receivables, rent and other lease and
sublease charges, franchise and/or license fees, payments due
under equipment leases and licenses, other miscellaneous
charges, and principal and interest on promissory notes by any
Person or Entity (collectively, the "Accounts Receivable"),
including, but not limited to, the Accounts Receivable owed by
those customers listed on Exhibit A-1 and A-2 to the Plan.
- All actual actions or potential actions, whether legal,
equitable or statutory in nature, against customers,
including, but not limited to, those customers listed in
Exhibit A-1 and A-2, for Accounts Receivable, improper setoff,
overpayment, claims under the facility standby agreement, or
any other claim arising out of the customer relationship;
- All actual actions or potential actions, whether legal,
equitable or statutory in nature, against vendors, including,
but not limited to, those vendors listed on Exhibit A-4
hereto, for overpayment, improper setoff, warranty, indemnity,
retention of double payments, retention of mis-directed wires,
deductions owing or improper deductions taken, claims for
damages arising out of a military distribution
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relationship, claims for overpayment of drop-ship-delivery
amounts, or any other claim arising out of the vendor
relationship;
- All actual actions or potential actions against vendors for
violation of the Trade Credit Program or the Trade Credit
Program Letter Agreement as set forth in the Final Order
Authorizing (I) Post- Petition Financing Pursuant To 11 U.S.C.
Section 364 And Bankruptcy Rule 4001(c); (II) Use Of Cash
Collateral Pursuant To 11 U.S.C. Section 363 And Bankruptcy
Rules 4001(b) And (d); (III) Grant Of Adequate Protection
Pursuant To 11 U.S.C. Sections 361 And 363; And (IV) Approving
Secured Inventory Trade Credit Program And Granting Of
Subordinate Liens, Pursuant To 11 U.S.C. Sections 105 And
364(c)(3) And Rule 4001(c) entered on May 7, 2003 and the
Order Granting Motion for Order Authorizing the Payment of
Critical Trade Vendors in Exchange for Continuing Relationship
Pursuant to Customary Trade Terms, entered on May 6, 2003. The
Debtors are still investigating which vendors they have
actions against. A list of the vendors participating in the
Critical Trade Lien Program is attached hereto as Exhibit A-7;
- All actual or potential actions, whether legal, equitable or
statutory in nature, against Persons or Entities including
vendors with respect to prepetition violations of applicable
federal or state securities laws;
- All actual or potential breach of contract actions against any
customers, vendors or Entities who improperly exited the
Debtors' system or who violated the automatic stay after the
Petition Date, including, but not limited to, those customers
or vendors listed on Exhibit A-1, A-2, and A-3;
- All actual or potential actions, whether legal, equitable or
statutory in nature, against landlords, lessees, sublessees,
or assignees arising from various leases, subleases and
assignment agreements relating thereto, including, without
limitation, actions for unpaid rent, overcharges relating to
taxes, common area maintenance and other similar charges,
including, but not limited to, those claims identified on
Exhibit A-10. In addition, two landlords, Massilon Food
Company and LLC Tulsa Food Company, LLC, drew down on standby
letters of credit under their respective leases shortly after
the Debtors filed for bankruptcy. The Debtors are
investigating whether these draw-downs were proper and reserve
all rights to bring actions against these landlords;
- All actual or potential actions, whether legal, equitable or
statutory in nature, against the Debtors' current or former
insurance carriers to recover unpaid reimbursements and
claims, overpayment of premiums and fees, claims for breach of
contract, indemnity obligations or coverage or similar Causes
of Action, including, but not limited to, those insurers
listed on Exhibit A-12;
- All actual or potential Causes of Actions, whether legal,
equitable or statutory in nature, against purchasers of assets
from the Debtors relating to breach of the purchase agreement
or unpaid compensation thereunder, including, but not limited
to, those purchasers listed on Exhibit A-9;
- Any and all rights to payment against any taxing authority
listed on Exhibit A-11 for any tax refunds, credits,
overpayments or offsets that may be due and owing to the
Debtors for taxes that the Debtors may have paid to any such
taxing authority;
- All actions or potential actions, whether legal, equitable or
statutory in nature, relating to deposits or other amounts
owed by any creditor, lessor utility, supplier, vendor,
landlord, sub-lessee, assignee or other Person or Entity;
- All actions or potential actions, whether legal, equitable or
statutory in nature, relating to environmental and product
liability matters;
- All actions or potential actions, whether legal, equitable or
statutory in nature, arising out of, or relating to, the
Debtors' intellectual property rights;
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- Any litigation or lawsuit initiated by any of the Debtors that
is currently pending, whether in the Bankruptcy Court, before
the American Arbitration Association, or any other court or
tribunal or initiated against the Debtors after the Petition
Date for which the Debtors may have counterclaims or other
rights, including, but, not limited to, those actions listed
on Exhibit A-4 hereto;
- Potential actions against any of the prepetition directors,
officers, employees, attorneys, financial advisors,
accountants, investment bankers, agents and representatives of
each Debtor and their respective subsidiaries, including, but
not limited to those employees on Exhibit A-5 hereto, except
the D&O Releasees, for breaches of fiduciary duty, negligent
mismanagement, wasting of corporate assets, and diversion of
corporate opportunity;
- All actual or potential actions, whether legal, equitable or
statutory in nature, against all Persons except the D&O
Releasees arising out of, or in connection with, any of the
Debtors' prepetition management, operation and/or reporting of
financial or other information;
- All actions or potential actions, whether legal, equitable or
statutory in nature, against any of the Debtors' current or
former professionals, except the Releasees, for breach of
fiduciary duty, breach of contract, negligence or professional
misconduct or malpractice, or other tortuous conduct,
including, but not limited to, those former professionals
listed on Exhibit A-8 hereto;
- All rights against any shareholders or others for
subordination of their Claims pursuant to section 510(b) of
the Bankruptcy Code or against any Person that has agreed to
subordination of their claim pursuant to section 510(a) of the
Bankruptcy Code;
- All actions or potential actions against the prepetition
members of the Debtors' board of directors and/or officers
except the D&O Releasees, including, without limitation, the
right to equitably subordinate claims held by such directors
and officers pursuant to section 510(c) of the Bankruptcy
Code;
- All actual or potential actions, whether legal, equitable or
statutory in nature, to recover amounts improperly awarded to
employees except the D&O Releasees under the terms of any
prepetition employment or change-in-control agreement or bonus
arrangement;
- All actual or potential contract and tort actions that may
exist or may subsequently arise; and
- All actual or potential actions whether legal, equitable or
statutory in nature, arising out of, or in connection with the
Debtors' business or operations.
The above categories of preservation of causes of action shall not be
limited in any way by reference to Exhibit A nor are the categories intended to
be mutually exclusive.
In addition, there may be numerous other Causes of Action which
currently exist or may subsequently arise that are not set forth herein, because
the facts upon which such Causes of Action are based are not fully or currently
known by the Debtors and, as a result, cannot be specifically referred to herein
(collectively, the "Unknown Causes of Action"). The failure to list any such
Unknown Causes of Action herein, or on Exhibit A to the Plan (except as to
Releasees), is not intended to limit the rights of Core-Mark Newco or the Post
Confirmation Trust to pursue any Unknown Cause of Action to the extent the facts
underlying such Unknown Cause of Action become fully known to the Debtors.
C. Preservation of All Causes of Action Not Expressly Settled or
Released
Unless a Claim or Cause of Action against a Creditor or other Person is
expressly waived, relinquished, released, compromised or settled in the Plan or
any Final Order, the Debtors expressly reserve such Claim or Cause of Action for
later adjudication by Core-Mark Newco or the Post Confirmation Trust, as
applicable (including, without limitation, Unknown Causes of Action), and,
therefore, no preclusion doctrine, including, without
83
limitation, the doctrines of res judicata, collateral estoppel, issue
preclusion, claim preclusion, waiver, estoppel (judicial, equitable, or
otherwise) or laches shall apply to such Claims or Causes of Action upon or
after the Confirmation or Effective Date of the Plan based on the Disclosure
Statement, the Plan or the Confirmation Order, except where such Claims or
Causes of Action have been released in the Plan or other Final Order. In
addition, the Debtors, Core-Mark Newco, the Reorganized Debtors, the Post
Confirmation Trust and the successor entities under the Plan expressly reserve
the right to pursue or adopt any Claim alleged in any lawsuit in which the
Debtors are defendants or an interested party, against any Person or Entity,
including, without limitation, the plaintiffs or co-defendants such lawsuits.
Any Person to whom the Debtors have incurred an obligation (whether on
account of services, purchase or sale of goods or otherwise), or who has
received services from Debtors or a transfer of money or property of the
Debtors, or who has transacted business with the Debtors, or leased equipment or
property from the Debtors should assume that such obligation, transfer, or
transaction may be reviewed by the Debtors or the Post Confirmation Trust
subsequent to the Effective Date and may, if appropriate, be the subject of an
action after the Effective Date, whether or not (i) such Entity has filed a
proof of Claim against the Debtors in these Bankruptcy Cases; (ii) such
Creditor's proof of Claim has been objected to; (iii) such Creditor's Claim was
included in the Debtors' Schedules; or (iv) such Creditor's scheduled Claim has
been objected to by the Debtors or has been identified by the Debtors as
disputed, contingent, or unliquidated.
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VIII. FEASIBILITY OF THE PLAN AND THE BEST INTERESTS TEST
At the Confirmation Hearing, the Bankruptcy Court shall determine
whether the requirements of section 1129 of the Bankruptcy Court have been
satisfied. If so, the Bankruptcy Court shall enter the Confirmation Order.
Debtors believe that the Plan satisfies or will satisfy the applicable
requirements, as follows:
- The Plan complies with the applicable provisions of the
Bankruptcy Code.
- The Debtors and the Creditors' Committee, as Plan proponents,
will have complied with the applicable provisions of the
Bankruptcy Code.
- The Plan has been proposed in good faith and not by any means
forbidden by law.
- Any payment made or promised under the Plan for services or
for costs and expenses in, or in connection with, the Chapter
11 Cases, or in connection with the Plan and incident to the
case, has been disclosed to the Bankruptcy Court, and any such
payment made before the confirmation of the Plan is
reasonable, or if such payment is to be fixed after the
confirmation of the Plan, such payment is subject to the
approval of the Bankruptcy Court as reasonable.
- With respect to each Class of Impaired Claims or Equity
Interests, either each Holder of a Claim or Equity Interest of
such Class has accepted the Plan or will receive or retain
under the Plan on account of such Claim or Equity Interest
property of a value, as of the Effective Date, that is not
less than the amount that such Holder would receive or retain
if the Debtors were liquidated on such date under Chapter 7 of
the Bankruptcy Code.
- Each Class of Claims or Equity Interests that is entitled to
vote on the Plan will either have accepted the Plan or will
not be impaired under the Plan, or the Plan may be confirmed
without the approval of each voting Class pursuant to section
1129(b) of the Bankruptcy Code.
- Except to the extent that the Holder of a particular Claim
will agree to a different treatment of such Claim, the Plan
provides that Allowed Administrative, Allowed Priority Tax
Claims and Allowed Other Priority Claims will be paid in full
on the Effective Date, or as soon thereafter as practicable.
- At least one Class of Impaired Claims or Equity Interests will
have accepted the Plan, determined without including any
acceptance of the Plan by any insider holding a Claim of such
Class.
- Confirmation of the Plan is not likely to be followed by the
liquidation, or the need for further financial reorganization,
of the Debtors or any successor to the Debtors under the Plan,
unless such liquidation or reorganization is proposed in the
Plan.
- All fees of the type described in 28 U.S.C. Section 1930,
including the fees of the United States Trustee, will be paid
as of the Effective Date.
Debtors believe that (a) the Plan satisfies or will satisfy all of the
statutory requirements of Chapter 11 of the Bankruptcy Code, (b) it has
complied, or will have complied, with all of the requirements of Chapter 11 and
(c) the Plan has been proposed in good faith.
A. Feasibility of the Plan
To confirm the Plan, the Bankruptcy Court must find that confirmation
of the Plan is not likely to be followed by the liquidation or the need for
further financial reorganization of the Debtors. This requirement is imposed by
section 1129(a)(11) of the Bankruptcy Code and is referred to as the
"feasibility" requirement. The Debtors believe that they will be able to timely
perform all obligations described in the Plan and, therefore, that the Plan is
feasible.
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To demonstrate the feasibility of the Plan, the Debtors have prepared
financial projections for Fiscal Years 2004 through 2008 for Core-Mark Newco and
2004 through 2006 for the Post-Confirmation Trust, as set forth in Exhibit 3A -
3C attached hereto. EXHIBITS 3A - 3C AND THE NOTES THERETO ARE AN INTEGRAL PART
OF THIS DISCLOSURE STATEMENT AND SHOULD BE READ IN CONJUNCTION WITH THIS
DISCLOSURE STATEMENT.
In addition, the Plan has been amended to include the Class 3(B) and
Class 5 Preferred Interests and guarantees from Core-Mark Newco, the terms of
which are outlined in Exhibits 10 and 11 to this Disclosure Statement. These
Preferred Interests and guarantees address the Reclamation Objectors concerns
about the Debtors' violating the Final DIP Order and Trade Credit Program. The
Preferred Interests essentially provide the Reclamation Claimants with the
benefit of the liens given to the Reclamation Lien Creditors thereunder. In
addition, the Preferred Interests and guarantees assure the feasibility of the
Plan. To the extent the Post Confirmation Trust does not have sufficient funds
to pay the Class 3(B) or Class 5 Claims (if necessary) in full, Core-Mark Newco
will ultimately assume that responsibility. Thus, the financial strength of
Core-Mark Newco will also assure payment in full of the Claims of the
Reclamation Creditors and thus, the feasibility of the Plan.
The projections indicate that Core-Mark Newco and the Post-Confirmation
Trust should have sufficient cash flow to pay and service their debt obligations
and to fund their operations. Accordingly, the Debtors believe that the Plan
satisfies the feasibility requirement of section 1129(a)(11) of the Bankruptcy
Code. As noted in the projections, however, the Debtors caution that no
representations can be made as to the accuracy of the projections or as to the
Reorganized Debtors' ability to achieve the projected results. Many of the
assumptions upon which the projections are based are subject to uncertainties
outside the control of the Debtors. Some assumptions inevitably will not
materialize, and events and circumstances occurring after the date on which the
projections were prepared may be different from those assumed or may be
unanticipated, and may adversely affect the Debtors' financial results.
Therefore, the actual results can be expected to vary from the projected results
and the variations may be material and adverse.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD COMPLIANCE WITH
THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS, THE PRACTICES RECOGNIZED TO BE IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES, OR THE RULES AND REGULATIONS OF THE SEC
REGARDING PROJECTIONS. FURTHERMORE, THE PROJECTIONS HAVE NOT BEEN AUDITED BY ANY
INDEPENDENT ACCOUNTANTS. ALTHOUGH PRESENTED WITH NUMERICAL SPECIFICITY, THE
PROJECTIONS ARE BASED UPON A VARIETY OF ASSUMPTIONS, SOME OF WHICH IN THE PAST
HAVE NOT BEEN ACHIEVED AND WHICH MAY NOT BE REALIZED IN THE FUTURE, AND ARE
SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE DEBTORS.
CONSEQUENTLY, THE PROJECTIONS SHOULD NOT BE REGARDED AS A REPRESENTATION OR
WARRANTY BY THE DEBTORS, OR ANY OTHER PERSON, THAT THE PROJECTIONS WILL BE
REALIZED. ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE PRESENTED IN THE
PROJECTIONS.
B. Best Interests Test
1. Generally
Even if a plan is accepted by each class of holders of claims
and interests, the Bankruptcy Code requires the bankruptcy court to determine
that the plan is in the "best interests" of all holders of claims and interests
that are impaired by the plan and that have not accepted the plan. The "best
interests" test, as set forth in section 1129(a)(7) of the Bankruptcy Code,
requires a bankruptcy court find either that (i) all members of an impaired
class of claims or interests have accepted the plan or (ii) the plan will
provide a member who has not accepted the plan with a recovery of property of a
value, as of the effective date of the plan, that is not less than the amount
that such holder would recover if the debtor were liquidated under Chapter 7 of
the Bankruptcy Code.
To calculate the probable distribution to members of each
impaired class of holders of claims and interests if the debtor were liquidated
under Chapter 7, a bankruptcy court must first determine the aggregate dollar
86
amount that would be generated from the debtor's assets if its Chapter 11 case
were converted to a Chapter 7 case under the Bankruptcy Code. This "liquidation
value" would consist primarily of the proceeds from a forced sale of the
debtor's assets by a Chapter 7 trustee.
The amount of liquidation value available to unsecured
creditors would be reduced by, first, the claims of secured creditors to the
extent of the value of their collateral, and, second, by the costs and expenses
of liquidation, as well as by other administrative expenses and costs of both
the Chapter 7 case and the Chapter 11 case. A liquidation under Chapter 7 does
not affect the priority of several holders of claims to be paid first. Costs of
liquidation under Chapter 7 of the Bankruptcy Code would include the
compensation of a trustee, as well as of counsel and other professionals
retained by the trustee, asset disposition expenses, all unpaid expenses
incurred by the debtor in its bankruptcy case (such as compensation of
attorneys, financial advisors, and restructuring consultants) that are allowed
in the Chapter 7 case, litigation costs, and claims arising from the operations
of the debtor during the pendency of the bankruptcy case. The liquidation itself
would trigger certain priority payments that otherwise would be due in the
ordinary course of business. Those priority claims would be paid in full from
the liquidation proceeds before the balance would be made available to pay
general unsecured claims or to make any distribution in respect of equity
interests. The liquidation also would prompt the rejection of a large number of
executory contracts and unexpired leases and thereby create a significantly
higher number of unsecured claims. As a general matter, a liquidation under
Chapter 7 will not affect the rights of letter of credit beneficiaries,
including certain sureties who posted bonds that the Debtors purchased for
various business, litigation and other reasons.
Once the court ascertains the recoveries in liquidation of
secured creditors and priority claimants, it must determine the probable
distribution to general unsecured creditors and equity security holders from the
remaining available proceeds in liquidation. If such probable distribution has a
value greater than the distributions to be received by such creditors and equity
security holders under a debtor's plan, then such plan is not in the best
interests of creditors and equity security holders.
2. Debtors' Best Interests Test
The Debtors' liquidation analysis (the "Best Interests
Analysis") is attached hereto as Exhibit 4. The Debtors believe that any Best
Interests Analysis is speculative. For example, the Best Interests Analysis
necessarily contains an estimate of the amount of Claims which will ultimately
become Allowed Claims. In preparing the Best Interests Analysis, the Debtors
have projected the amount of Allowed Claims based upon a review of their
scheduled and filed proofs of claim. No order or finding has been entered by the
Bankruptcy Court estimating or otherwise fixing the amount of Claims at the
projected amounts of Allowed Claims set forth in the Best Interests Analysis.
Although the analysis was prepared after the deadline for filing Claims against
the Debtors' estates, those Claims have not been fully evaluated by the Debtors.
In preparing the Best Interests Analysis, the Debtors have projected a range for
the amount of Allowed Claims with the low end of the range the lowest reasonable
amount of Claims and the high end of the range the highest reasonable amount of
the Claims, thus allowing assessment of the most likely range of Chapter 7
liquidation dividends to the holders of the Allowed Claims. The estimate of the
amount of Allowed Claims set forth in the Best Interests Analysis should not be
relied on for any other purpose, including, without limitation, any
determination of the value of any distribution to be made on account of Allowed
Claims and Interests under the Plan. In addition, as noted above, the valuation
analysis of the Reorganized Debtors also contains numerous estimates and
assumptions. For example, the value of the New Common Stock cannot be determined
with precision due to the absence of a public market for the New Common Stock.
Notwithstanding the difficulties in quantifying recoveries to
creditors with precision, the Debtors believe that, taking into account the Best
Interests Analysis and the valuation analysis (outlined in section VIII.C.
herein) of the Reorganized Debtors, the Plan meets the "best interests" test of
section 1129(a)(7) of the Bankruptcy Code. The Debtors believe that the members
of each Impaired Class will receive at least as much under the Plan as they
would in a liquidation in a hypothetical chapter 7 case. Claim Holders will
receive a better recovery through the distributions contemplated by the Plan
because the continued operation of the Debtors as going concerns rather than a
forced liquidation will allow the realization of more value for the Debtors'
assets. Although the Analysis was prepared after the deadline for filing Claims
against the estates of the Debtors, those Claims have not been fully evaluated
by the Debtors or adjudicated by the Bankruptcy Court and, accordingly, the
amount of the final Allowed Claims against the Estates may differ from the Claim
amounts used in this Analysis. Finally, the Analysis is based
87
on the Debtors' projected balance sheet as of July 31, 2004 (except as
indicated), and the actual amount of assets available to the Estates as of the
date of liquidation may differ from the amount of assets used in this Analysis.
Conversion of these Chapter 11 Cases to Chapter 7 would likely result in
additional costs to the Estates. Costs of liquidation under Chapter 7 of the
Bankruptcy Code would include the compensation of a trustee, as well as of
counsel and other professionals retained by the trustee, asset dispositions
expenses, all unpaid expenses incurred by the Debtors in the Chapter 11 Cases
(such as compensation of attorneys, financial advisors and restructuring
consultants) that are allowed in the Chapter 7 case, litigation costs, and
Claims arising from the operations of the Debtors during the pendency of the
bankruptcy cases. Lastly, in the event of liquidation, the aggregate amount of
General Unsecured Claims will no doubt increase significantly (as reflected in
the high range estimate), and such Claims will be subordinated to priority
claims that will be created. For example, employees will file Claims for wages,
pensions and other benefits, some of which will be entitled to priority.
Landlords will no doubt file large Claims for both unsecured and priority
amounts. The resulting increase in both general unsecured and priority Claims
will decrease percentage recoveries to Holders of General Unsecured Claims of
the Debtors. All of these factors lead to the conclusion that recoveries under
the Plan would be at least as much, and in many cases significantly greater,
than the recoveries available in a Chapter 7 liquidation.
C. Estimated Valuation of the Reorganized Debtors
The reorganized value for Core-Mark Newco was determined based upon two
valuation methodologies, both of which are described more fully below. To
determine the equity value for Core-Mark Newco, estimates for long-term debt and
certain legacy liabilities at the Effective Date were subtracted from the
reorganized value.
The two primary methodologies used to determine the reorganized
enterprise value of Core-Mark Newco were: (i) an analysis of transaction value
as a multiple of various operating statistics for selected public merger and
acquisition transactions involving companies that are similar to Core-Mark
Newco, which calculated multiples were then applied to the operating metrics of
Core-Mark Newco, and (ii) a calculation of the present value of the free cash
flows under the Projections, including assumptions for a terminal value. Both
methodologies rely upon the Projections for Core-Mark Newco, which were prepared
by management with the assistance of AP Services LLC. A third methodology was
considered, based on an analysis of public market value as a multiple of various
operating statistics for selected public companies that are similar to Core-Mark
Newco; however, the methodology was not used because it was concluded there were
no appropriate publicly-traded comparable companies on which to base a
meaningful analysis. Based upon the two methods described above, the estimated
reorganized enterprise value for Core-Mark Newco at the Effective Date is
approximately $265 million to $315 million, with $290 million used as the
midpoint estimate. The Committee has not yet agreed to this valuation.
Precedent Transaction Analysis. The precedent transaction analysis
("Precedent Transaction Analysis") estimates value by examining selected public
merger and acquisition transactions. An analysis of a company's transaction
value as a multiple of various operating statistics provides valuation multiples
for companies in similar lines of businesses to Core-Mark Newco. Multiples for
selected precedent transactions were calculated based on the purchase price
(including any debt assumed) paid. These multiples were then applied to
Core-Mark Newco's key operating statistics to determine the reorganized value of
Core-Mark Newco to a potential buyer.
Valuation conclusions cannot be based solely upon quantitative results.
The reasons for, and circumstances surrounding, each acquisition transaction are
specific to such acquisition and there are inherent differences between the
businesses, operations and prospects of each. Qualitative judgments must be made
concerning the differences among the characteristics of these reorganizations
and transactions and other factors and issues, which could affect the target's
value. Therefore, each of the multiples based on precedent transactions was
evaluated and judgments were made as to their relative significance in
determining the reorganized value of Core-Mark Newco.
Multiples of various financial results to the acquisition values of
these companies were calculated and analyzed. Emphasis was placed on multiples
based upon revenue and operational earnings before interest, taxes, depreciation
and amortization ("EBITDA"). On the basis of enterprise value as a multiple of
projected revenues, the precedent transactions indicated a range of 0.07x to
0.09x. On the basis of enterprise value as a multiple of projected EBITDA, the
precedent transactions indicated a range of 5.0x to 6.0x. As discussed above,
the determination of these multiple ranges took into account a variety of
factors, both quantitative and qualitative. In addition, due to the fact that
the results of a Precedent Transaction Analysis often reflect a control premium,
or are
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impacted by a competitive dynamic due to multiple bidders, the valuation
multiples indicate aspects of value not necessarily present in a reorganization.
The ranges of multiples were applied to the Projections focusing on
projected revenue for 2004 and projected EBITDA for full-year 2004, the
second-half 2004 run-rate and 2005. The valuation results using the revenue and
EBITDA multiples were then increased by $40 million, an estimate for the
additional value from the projected near-term operating cash flow from resuming
certain vendor trade terms, which is not captured in the Precedent Transaction
Analysis.
Discounted Cash Flow Analysis. The discounted cash flow analysis
("DCF") valuation methodology relates the value of an asset or business to the
present value of expected future cash flows to be generated by that asset or
business. The DCF methodology is a "forward looking" approach that discounts the
expected future cash flows by a theoretical or observed discount rate determined
by calculating an estimated cost of debt and equity for Core-Mark Newco based
upon similar companies. The DCF analysis has two components: the present value
of the projected un-levered free cash flows based upon the Projections and the
present value of the terminal value (representing Core-Mark Newco's value beyond
the time horizon of the Projections).
The analyses of the results of the estimated cash flows, estimated
discount rate and expected capital structure, all used to derive a potential
value for Core-Mark Newco, are not purely mathematical, but instead involve
considerations and judgments concerning potential variances in the projected
financial and operating characteristics of Core-Mark Newco, as well as other
factors that could affect the future prospects and cost of capital
considerations for Core-Mark Newco.
In calculating the un-levered free cash flows for Core-Mark Newco, the
Projections (from August 1, 2004 to December 31, 2008), prepared by management,
served as the primary input. Beginning with annual earnings before interest and
taxes (EBIT), the analysis taxed EBIT at an assumed rate of 40% to calculate an
un-levered net income figure. The analysis then added back the non-cash
operating expense of depreciation and amortization. In addition, other factors
affecting free cash flow were taken into account, such as changes in working
capital and capital expenditures, neither of which affect the income statement
and therefore require separate adjustment in the calculation of free cash flow.
For purposes of determining reorganized value, projected payments of legacy
casualty liabilities were excluded from un-levered free cash flows. The present
value of these payments is later deducted from enterprise value to determine
equity value.
The un-levered cash flows and the estimate for terminal value were
discounted to a present value using an estimate for Core-Mark Newco's
post-restructuring weighted average cost of capital ("WACC"). The WACC was
calculated based on a number of assumptions regarding, among other things,
Core-Mark Newco's projected capital structure and costs of debt and equity. The
estimated ratio of debt to equity for Core-Mark Newco's capital structure
reflects the estimated indebtedness as of the Effective Date and during the
Projection period. Core-Mark Newco's estimated cost of debt was based upon
proposals received for exit financing received from external financial
institutions. Core-Mark Newco's estimated cost of equity was derived using the
capital asset pricing model, which assumes that the required equity return is a
function of the risk-free cost of capital and the correlation of a publicly
traded stock's performance to the return of the overall market. Also included in
the calculation of the cost of equity was an implementation risk premium of
10.0% to 15.0% to reflect the risks associated with the fundamental and unproven
changes to the ongoing operations for Core-Mark Newco, which are currently being
implemented by management.
The DCF analysis used a WACC range of 15.0% to 20.0%, which included
the calculation of a cost of equity of 20.0% to 30.0% (including the
implementation risk premium of 10.0% to 15.0%), an average after-tax cost of
debt of 5.6%, and a target debt to capital ratio of approximately 30% to 40%.
The after-tax cost of debt is itself weighted based on the projected tranches of
debt outstanding. The exit multiple used in the terminal value calculation was
based upon the EBITDA multiple used in the precedent transaction analysis, which
was 5.0x to 6.0x 2008 projected EBITDA.
Calculation of Core-Mark Newco Equity Value. To determine the equity
value of Core-Mark Newco, the estimated long-term indebtedness and the present
value of projected payments of legacy casualty liabilities were both subtracted
from the reorganized enterprise value. The long-term indebtedness of Core-Mark
Newco at the
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Effective Date of approximately $100 million is projected to include $40 million
of drawn senior secured debt and $60 million of drawings under a junior secured
Tranche B Loan. The present value of the legacy casualty liability of
approximately $35 million reflects the payments as forecast in the Projections
for Core-Mark Newco, discounted back at the midpoint of the WACC range of 17.5%.
Subtracting these amounts from reorganized value of $265 million to $315
million, with $290 million used as the midpoint, resulted in Core-Mark Newco
equity value of approximately $130 million to $180 million, with $155 million
used as the midpoint.
The calculation of Core-Mark Newco Equity Value does not consider
future dilution that could occur upon the exercise of options and warrants
distributed to management and Tranche B Lenders. All such options are expected
to have an exercise or strike price based upon the reorganized value of
Core-Mark Newco.
ESTIMATES OF VALUE DO NOT PURPORT TO BE APPRAISALS NOR DO THEY
NECESSARILY REFLECT THE VALUE WHICH MAY BE REALIZED IF ASSETS ARE SOLD. THE
ESTIMATES OF VALUE REPRESENT HYPOTHETICAL REORGANIZED ENTERPRISE VALUES ASSUMING
THE IMPLEMENTATION OF THE CORE-MARK NEWCO BUSINESS PLAN AS WELL AS OTHER
SIGNIFICANT ASSUMPTIONS. SUCH ESTIMATES WERE DEVELOPED SOLELY FOR PURPOSES OF
FORMULATING AND NEGOTIATING A PLAN OF REORGANIZATION AND ANALYZING THE PROJECTED
RECOVERIES THEREUNDER.
THE ESTIMATED ENTERPRISE VALUE IS HIGHLY DEPENDENT UPON ACHIEVING THE
FUTURE FINANCIAL RESULTS SET FORTH IN THE PROJECTIONS AS WELL AS THE REALIZATION
OF CERTAIN OTHER ASSUMPTIONS WHICH ARE NOT GUARANTEED.
THE VALUATIONS SET FORTH HEREIN REPRESENT ESTIMATED REORGANIZATION
VALUES AND DO NOT NECESSARILY REFLECT VALUES THAT COULD BE ATTAINABLE IN PUBLIC
OR PRIVATE MARKETS. THE EQUITY VALUE ASCRIBED IN THE ANALYSIS DOES NOT PURPORT
TO BE AN ESTIMATE OF THE POST-REORGANIZATION MARKET VALUE. SUCH SALABLE VALUE,
IF ANY, MAY BE MATERIALLY DIFFERENT FROM THE REORGANIZATION EQUITY VALUE RANGES
ASSOCIATED WITH THE VALUATION ANALYSIS.
D. Confirmation Without Acceptance by All Impaired Classes: The
`Cramdown' Alternative
Section 1129(b) of the Bankruptcy Code provides that a plan may be
confirmed even if it has not been accepted by all impaired classes as long as at
least one impaired class of claims has accepted it. The Bankruptcy Court may
confirm the plan at the request of the debtors notwithstanding the plan's
rejection (or deemed rejection) by impaired classes as long as the plan "does
not discriminate unfairly" and is "fair and equitable" as to each impaired class
that has not accepted it. A plan does not discriminate unfairly within the
meaning of the Bankruptcy Code if a dissenting class is treated equally with
respect to other classes of equal rank.
A plan is fair and equitable as to a class of secured claims that
rejects such plan if the plan provides (1) (a) that the holders of claims
included in the rejecting class retain the lien securing those claims, whether
the property subject to those liens is retained by the debtor or transferred to
another entity, to the extent of the allowed amount of such claims, and (b) that
each holder of a claim of such class receives on account of that claim deferred
cash payments totaling at least the allowed amount of that claim of a value, as
of the effective date of the plan, of at least the value of the holder's
interest in the estate's interest in such property; (2) for the sale, subject to
section 363(k) of the Bankruptcy Code, of any property that is subject to the
liens securing the claims included in the rejecting class, free and clear of the
liens, with the liens to attach to the proceeds of the sale, and the treatment
of the liens on proceeds under clause (1) or (2) of this paragraph; or (3) for
the realization by such holders of the indubitable equivalent of such claims.
A plan is fair and equitable as to a class of unsecured claims which
rejects a plan if the plan provides (1) for each holder of a claim included in
the rejecting class to receive or retain on account of that claim property that
has a value, as of the effective date of the plan, equal to the allowed amount
of such claim; or (2) that the holder of any claim or interest that is junior to
the claims of such rejecting class will not receive or retain on account of such
junior claim or interest any property at all.
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A plan is fair and equitable as to a class of equity interests that
rejects a plan if the plan provides (1) that each holder of an interest included
in the rejecting class receive or retain on account of that interest property
that has a value, as of the effective date of the plan, equal to the greatest of
the allowed amount of any fixed liquidation preference to which such holder is
entitled, any fixed redemption price to which such holder is entitled, or the
value of such interest; or (2) that the holder of any interest that is junior to
the interest of such rejecting class will not receive or retain under the plan
on account of such junior interest any property at all.
The votes of holders of Claims and Equity Interests under Classes 8, 9
and 10 are not being solicited because such holders are not entitled to receive
or retain under the Plan any interest in property on account of their Claims and
Equity Interests. Such Classes therefore are deemed to have rejected the Plan
pursuant to section 1126(g) of the Bankruptcy Code. Accordingly, the Debtors are
seeking confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy
Code with respect to such Classes and may seek confirmation pursuant to the Plan
as to other Classes if such Classes vote to reject the Plan. Notwithstanding the
deemed rejection by such Classes, the Debtors believe that Classes 8, 9 and 10
are being treated fairly and equitably under the Bankruptcy Code. The Debtors
therefore believe the Plan may be confirmed despite its deemed rejection by
these Classes.
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IX. IMPORTANT CONSIDERATIONS AND RISK FACTORS
A. The Debtors Have No Duty To Update
The statements contained in this Disclosure Statement are made by the
Debtors as of the date hereof, unless otherwise specified herein, and the
delivery of this Disclosure Statement after that date does not imply that there
has been no change in the information set forth herein since that date. The
Debtors have no duty to update this Disclosure Statement unless otherwise
ordered to do so by the Court.
B. No Representations Outside The Disclosure Statement Are
Authorized
No representations concerning or related to the Debtors, the Chapter 11
Cases or the Plan are authorized by the Bankruptcy Court or the Bankruptcy Code,
other than as set forth in this Disclosure Statement. Any representations or
inducements made to secure your acceptance, or rejection, of the Plan that are
other than as contained in, or included with, this Disclosure Statement should
not be relied upon by you in arriving at your decision. You should promptly
report unauthorized representations or inducements to Debtors' counsel,
Creditors' Committee counsel, and the Office of the United States Trustee.
C. Information Presented Is Based On The Debtors' Books And
Records, And No Audit Was Performed
While the Debtors have endeavored to present information fairly in this
Disclosure Statement, because of Debtors' financial difficulties, as well as the
complexity of Debtors' financial matters, the Debtors' books and records upon
which this Disclosure Statement is based might be incomplete or inaccurate. The
financial information contained herein, unless otherwise expressly indicated, is
unaudited.
D. All Information Was Provided by Debtors And Was Relied Upon By
Professionals
Each of Kirkland & Ellis LLP and Pachulski, Stang, Ziehl, Young, Jones
& Weintraub P.C. was approved by the Bankruptcy Court to represent the Debtors
effective as of the Petition Date as general insolvency co-counsel. All counsel
and other professionals for the Debtors have relied upon information provided by
the Debtors in connection with preparation of this Disclosure Statement.
Although counsel for the Debtors have performed certain limited due diligence in
connection with the preparation of this Disclosure Statement, counsel have not
verified independently the information contained herein.
E. Projections And Other Forward Looking Statements Are Not
Assured, And Actual Results Will Vary
Certain of the information contained in this Disclosure Statement is,
by nature, forward looking, and contains estimates and assumptions which might
ultimately prove to be incorrect, and contains projections which may be
materially different from actual future experiences. There are uncertainties
associated with any projections and estimates, and they should not be considered
assurances or guarantees of the amount of funds or the amount of Claims in the
various classes that might be allowed.
1. Claims Could Be More Than Projected
The allowed amount of Claims in each Class could be
significantly more than projected, which in turn, could cause the value of
distributions to be reduced substantially. If Administrative Claims and/or Other
Priority Claims exceed projections, it may impair the value of the New Common
Stock being distributed to the Holders of Class 6 Claims.
2. Projections
While the Debtors believe that their projections are reasonable, there
can be no assurance that they will be realized, resulting in recoveries that
could be significantly less than projected.
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F. This Disclosure Statement Was Not Approved By The Securities
And Exchange Commission
Although a copy of this Disclosure Statement was served on the SEC and
the SEC was given an opportunity to object to the adequacy of this Disclosure
Statement before the Bankruptcy Court approved it, this Disclosure Statement was
not registered under the Securities Act or applicable state securities laws.
Neither the SEC nor any state regulatory authority or Canadian Securities
Administrator has passed upon the accuracy or adequacy of this Disclosure
Statement, the exhibits or the statements contained herein, and any
representation to the contrary is unlawful.
G. No Legal Or Tax Advice Is Provided To You By This Disclosure
Statement
The contents of this Disclosure Statement should not be construed as
legal, business or tax advice. Each creditor or Holder of Equity Interest should
consult his, her or its own legal counsel and accountant as to legal, tax and
other matters concerning his, her, or its Claim or equity interest.
This Disclosure Statement is not legal advice to you. This Disclosure
Statement may not be relied upon for any purpose other than to determine how to
vote on the Plan or object to confirmation of the Plan.
H. No Admissions Made
Nothing contained herein shall constitute an admission of any fact or
liability by any party (including, without limitation, the Debtors) or to be
deemed evidence of the tax or other legal effects of the Plan on the Debtors or
on Holders of Claims or Equity Interests.
I. No Waiver Of Right To Object Or Right To Recover Transfers And
Estate Assets
A creditor's vote for or against the Plan does not constitute a waiver
or release of any Claims or rights of the Debtors (or any party in interest, as
the case may be) to object to that creditor's Claim, or recover any
preferential, fraudulent or other voidable transfer or estate assets, regardless
of whether any Claims of the Debtors or their respective estates are
specifically or generally identified herein.
1. Business Factors and Competitive Conditions
a. General Economic Conditions
In their financial projections, the Debtors have
assumed that the general economic conditions of the United States economy will
improve over the next several years. An improvement of economic conditions is
subject to many factors outside the Debtors' control, including interest rates,
inflation, unemployment rates, consumer spending, war, terrorism and other such
factors. Any one of these or other economic factors could have a significant
impact on the operating performance of Core-Mark Newco. There is no guarantee
that economic conditions will improve in the near term.
b. Business Factors
The Debtors believe that they will succeed in
implementing and executing their operational restructuring for the benefit of
all constituencies. However, there are risks that the goals of the Debtors'
going-forward business plan and operational restructuring strategy will not be
achieved. In such event, the Debtors may be forced to sell all or parts of their
business, develop and implement further restructuring plans not contemplated
herein or become subject to further insolvency proceedings. Because the Claims
of substantially all creditors will be converted into equity in Core-Mark Newco
under the Plan, in the event of further restructurings or insolvency proceedings
of Core-Mark Newco, the equity interests of such persons could be substantially
diluted or even cancelled.
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c. Competitive Conditions
In addition to uncertain economic and business
conditions, Core-Mark Newco will likely face competitive pressures and other
third party actions, including pressures from pricing and other promotional
activities of competitors as well as new competition. Core-Mark Newco's
anticipated operating performance will be impacted by these and other
unpredictable activities by competitors.
d. Other Factors
Other factors that Holders of Claims should consider
are potential regulatory and legal developments that may impact Core-Mark
Newco's business. Although these and other such factors are beyond the Debtors'
control and cannot be determined in advance, they could have a significant
impact on Core-Mark Newco's operating performance.
2. Access to Financing and Trade Terms
The Debtors' operations are dependent on the availability and
cost of working capital financing and trade terms provided by vendors and may be
adversely affected by any shortage or increased cost of such financing and trade
vendor support. The Debtors' postpetition operations have been financed from
operating cash flow and borrowings pursuant to the DIP Credit Facility. The
Debtors believe that substantially all of their needs for funds necessary to
consummate the Plan and for post-Effective Date working capital financing will
be met by projected operating cash flow, the Exit Financing Facility trade terms
supplied by vendors, collection of Causes of Action and the Tranche B Loan.
However, if the Reorganized Debtors or Core-Mark Newco require working capital
and trade financing greater than that provided by such sources, they may be
required either to (a) obtain other sources of financing or (b) curtail their
operations.
No assurance can be given, however, that any additional
financing will be available, if at all, on terms that are favorable or
acceptable to the Reorganized Debtors or Core-Mark Newco. The Debtors believe
that it is important to their going-forward business plan that their performance
meet projected results in order to ensure continued support from vendors and
factors. There are risks to the Reorganized Debtors in the event such support
erodes after emergence from Chapter 11 that could be alleviated by remaining in
Chapter 11. Chapter 11 affords a debtor such as Fleming the opportunity to close
facilities and liquidate assets relatively expeditiously, tools that will not be
available to the Reorganized Debtors upon emergence. However, the Debtors
believe that the benefits of emergence from Chapter 11 at this time outweigh the
potential costs of remaining in Chapter 11, and that emergence at this time is
in the long-term operational best interests of the Debtors and their creditors.
3. Market for New Securities
There can be no assurance that an active market for the New
Common Stock to be distributed pursuant to the Plan will develop, and no
assurance can be given as to the prices at which such securities might be
traded. Moreover, there can be no assurances that Core-Mark Newco will be able
to list the New Common Stock on a national securities exchange, a foreign
securities exchange or a national quotation system such as the NASDAQ National
Market.
On the Effective Date, it is highly unlikely that Core-Mark
Newco will have the audited financial statements that are necessary in order to
register the New Common Stock with the Securities and Exchange Commission and
there can be no assurance as to when such audited financial statements for the
requisite periods will be completed. Until such financial statements have been
prepared and audited, Core-Mark Newco will not be filing annual or other
periodic reports with the SEC and Core-Mark Newco will not be able to list its
stock on a national securities exchange, a foreign securities exchange or a
national quotation system such as the NASDAQ National Market nor will Core-Mark
Newco be able to offer any new debt or equity securities for sale to the public.
There will therefore be a limited trading market for the New Common Stock until
such audit financial statements are available and Core-Mark Newco is able to
register the New Common Stock.
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The ultimate value of Reorganized Debtors will not be
determined until such time as an active market for the New Common Stock develops
and the securities begin to trade. The valuation of Core-Mark Newco could be
substantially lower than that estimated by the Debtors in the Disclosure
Statement and could be adversely impacted over time if Core-Mark Newco's
business plan does not meet expectations or if factors beyond Core-Mark Newco's
control materialize, including war, terrorist attacks, recession or further
weakening of the economy.
4. Impact of Interest Rates
Changes in interest rates and foreign exchange rates may
affect the fair market value of the Debtors' assets. Specifically, decreases in
interest rates will positively impact the value of the Debtors' assets and the
strengthening of the dollar will negatively impact the value of their net
foreign assets, although the value of such foreign assets is very small in
relation to the value of the Debtors' operations as a whole.
J. Bankruptcy Law Risks and Considerations
1. Confirmation of the Plan is Not Assured
Although the Debtors believe that the Plan will satisfy all
requirements necessary for Confirmation by the Bankruptcy Court, there can be no
assurance that the Bankruptcy Court will reach the same conclusion. There can
also be no assurance that modifications to the Plan will not be required for
Confirmation or that such modifications would not necessitate resolicitation of
votes.
2. The Plan May Be Confirmed Without the Approval of All
Creditors Through So-Called "Cramdown"
If one or more Impaired Classes of Claims does not accept the
Plan, the Bankruptcy Court may nonetheless confirm the Plan at the Debtors'
request, if all other conditions for Confirmation have been met and at least one
Impaired Class of Claims has accepted the Plan (without including the vote of
any insider in that Class) and, as to each Impaired Class that has not accepted
the Plan, the Bankruptcy Court determines that the Plan does not discriminate
unfairly and is fair and equitable.
The votes of holders of Claims and Equity Interests under
Classes 8, 9 and 10 are not being solicited because such holders are not
entitled to receive or retain under the Plan any interest in property on account
of their Claims and Equity Interests. Such Classes therefore are deemed to have
rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code.
Accordingly, the Debtors are seeking confirmation of the Plan pursuant to
section 1129(b) of the Bankruptcy Code with respect to such Classes and may seek
confirmation pursuant to the Plan as to other Classes if such Classes vote to
reject the Plan. Notwithstanding the deemed rejection by such Classes, the
Debtors believe that Classes 8, 9 and 10 are being treated fairly and equitably
under the Bankruptcy Code. The Debtors therefore believe the Plan may be
confirmed despite its deemed rejection by these Classes.
3. The Effective Date Might Be Delayed or Never Occur
There can be no assurance as to the timing of the Effective
Date or that it will occur. If the conditions precedent to the Effective Date
set forth in the Plan have not occurred or been waived, the Confirmation Order
shall be vacated in accordance with the Plan and such Confirmation Order. In
that event, no Distributions would be made, and the Holders of Claims and Equity
Interests would be restored to their previous position as of the moment before
Confirmation, and the Debtors' obligations for Claims and the Equity Interests
would remain unchanged.
4. The Projected Value of Estate Assets Might Not Be
Realized
In the Best Interests Analysis, the Debtors project the value
of the Estates' Assets which would be available for payment of expenses and
distributions to Holders of Allowed Claims, as set forth in the Plan. The
Debtors have made certain assumptions, as described in the notes to the Best
Interests Analysis contained in Exhibit 4 to the Disclosure Statement, and which
should be read carefully.
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5. Allowed Claims in the Various Classes May Exceed
Projections
The Debtors have also projected the allowed amount of Claims
in each Class in the Best Interests Analysis. Certain Classes, and the Classes
below them in priority, could be significantly affected by the allowance of
Claims in an amount that is greater than projected.
K. Tax Considerations
There are significant tax consequences to Holders of Claims and Equity
Interests. These are discussed below in the Sections entitled "Certain U.S.
Federal Income Tax Consequences of the Plan" and "Certain Canadian Federal
Income Tax Consequences of the Plan." You should consult your own tax advisor
about your particular circumstances.
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X. EFFECT OF CONFIRMATION
A. Binding Effect of Confirmation
Confirmation will legally bind the Debtors, all creditors, Equity
Interest Holders and other parties in interest to the provisions of the Plan,
whether or not the Claim or Equity Interest Holder is impaired under the Plan,
and whether or not such creditor or Equity Interest Holder has accepted the
Plan.
B. Vesting Of Assets Free And Clear Of Liens, Claims And
Interests
Except as otherwise provided in the Plan or in the Confirmation Order,
upon the Effective Date, title to all assets and property of the Debtors, and
all property of the Estates, including, pursuant to section 1123(b)(3)(b) of the
Bankruptcy Code, each and every Claim, demand or Cause of Action which the
Debtors have or have power to assert immediately prior to Confirmation, will
vest in Core-Mark Newco or the Post Confirmation Trust as provided in the Plan,
free and clear of all Liens, Claims and Interests. Thereafter, Core-Mark Newco
or the Post Confirmation Trust will hold these assets without further
jurisdiction, restriction or supervision of the Bankruptcy Court, except as may
be provided in this Disclosure Statement.
C. Good Faith
Confirmation of the Plan shall constitute a finding that the Plan has
been proposed in good faith and in compliance with applicable provisions of the
Bankruptcy Code.
D. Discharge of Claims
The rights afforded in the Plan and the treatment of all Claims and
Equity Interests in the Plan, shall be in exchange for and in complete
satisfaction, discharge and release of Claims and Equity Interests of any nature
whatsoever, including any interest accrued on Claims from and after the Petition
Date, against any Debtor or any of its respective assets or properties. On the
Effective Date, all such Claims against, and Equity Interests in, any Debtor
shall be satisfied, discharged and released in full and all Persons and Entities
shall be precluded from asserting against any Reorganized Debtor, its successor
or its assets or properties any other or further Claims or Equity Interests
based upon any act or omission, transaction or other activity of any kind or
nature that occurred prior to the Confirmation Date.
The PBGC asserts that, as a matter of law, nothing in the Plan or in
the Confirmation Order may discharge, release or relieve any of the Debtors or
any of their respective assets and properties, any of the Reorganized Debtors or
any of their respective assets or properties, any of the member of the Debtors'
or Reorganized Debtors' controlled group (as defined under 29 U.S.C. Section
1301(a)(14)) or any of their respective assets or properties, or any other
party, in any capacity, from any current or future liability with respect to any
of the Existing Pension Plans that are not terminated prior to the Effective
Date. The Debtors dispute these assertions as the Debtors believe the Existing
Pension Plans will either be terminated prior to the Effective Date or rejected
as of the Effective Date.
E. Judicial Determination of Discharge
All Holders of Claims and Equity Interests are permanently enjoined,
from and after the Effective Date, from (a) commencing or continuing in any
manner any action or other proceeding of any kind on any such Claim or Equity
Interest against the Debtors, their estates, Core-Mark Newco or the Reorganized
Debtors; (b) the enforcement, attachment, collection or recovery by any manner
or means of any judgment, award, decree or order against the Debtors, their
estates, Core-Mark Newco or the Reorganized Debtors; (c) creating, perfecting,
or enforcing any encumbrance of any kind against the property or interests in
property of the Debtors, their estates, Core-Mark Newco or the Reorganized
Debtors; and (d) asserting any right of setoff, subrogation or recoupment of any
kind against any obligation due from the Debtors or against the property of the
Debtors, their estates, Core-Mark Newco or the Reorganized Debtors with respect
to any Claim or Equity Interest. The Confirmation Order shall be a judicial
determination of discharge of all Claims against the Debtors pursuant to section
524 and 1141 of the
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Bankruptcy Code, and shall void any judgment obtained or entered against Debtors
at any time, to the extent the judgment relates to a discharged Claim.
With respect to the matters within the scope of Article XIII of the
Plan, all Persons and Entities shall be and are permanently enjoined from
commencing or continuing any action with respect thereto except in the
Bankruptcy Court and the Bankruptcy Court shall retain exclusive jurisdiction
over such matters.
The PBGC asserts that, as a matter of law, nothing in the Plan or in
the Confirmation Order may (i) enjoin any Claims against any of the Debtors or
their estates, the Reorganized Debtors, or any of the members of the Debtors' or
the Reorganized Debtors' controlled groups (as defined under 29 U.S.C. Section
1301(A)(14)), or any other party, in any capacity, with respect to the Existing
Pension Plans that are not terminated prior to the Effective Date, or (ii) alter
the appropriate jurisdiction as specified under ERISA for bringing any such
Claims. The Debtors dispute these assertions as the Debtors believe the Existing
Pension Plans will either be terminated prior to the Effective Date or rejected
as of the Effective Date.
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XI. CERTAIN SECURITIES LAW CONSIDERATIONS
A. Exemptions from Registration under Securities Act
Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of
securities under a plan of reorganization from registration under section 5 of
the Securities Act and state laws if three principal requirements are satisfied:
(i) the securities must be offered and sold under a plan of reorganization and
must be securities of the debtor, of an affiliate participating in a joint plan
with the debtor, or of a successor to the debtor under the plan; (ii) the
recipients of the securities must hold Claims against or interests in the
debtor; and (iii) the securities must be issued in exchange (or principally in
exchange) for the recipient's Claims against or interests in the debtor. The
Debtors believe that the offer and sale of the New Common Stock under the Plan
satisfies the requirements of section 1145(a)(1) of the Bankruptcy Code and the
New Common Stock is, therefore, exempt from registration under the Securities
Act and state securities laws.
To the extent that the New Common Stock is issued under the Plan and is
covered by section 1145(a)(1) of the Bankruptcy Code, it may be resold by the
holders thereof without registration unless, as more fully described below, the
holder is an "underwriter" with respect to such securities. Generally, section
1145(b)(1) of the Bankruptcy Code defines an "underwriter" as any person who:
(i) purchases a Claim against, an interest in, or a Claim for an administrative
expense against the debtor, if such purchase is with a view to distributing any
security received in exchange for such a Claim or interest; (ii) offers to sell
securities offered under a plan for the holders of such securities; (iii) offers
to buy such securities from the holders of such securities, if the offer to buy
is: (A) with a view to distributing such securities; and (B) under an agreement
made in connection with the plan, the consummation of the plan, or with the
offer or sale of securities under the plan; or (iv) is an "issuer" with respect
to the securities, as the term "issuer" is defined in section 2(a)(11) of the
Securities Act.
Under section 2(a)(11) of the Securities Act, an "issuer" includes any
person directly or indirectly controlling or controlled by the issuer, or any
person under direct or indirect common control of the issuer. To the extent that
Persons who receive New Common Stock pursuant to the Plan are deemed to be
"underwriters" as defined in section 1145(b) of the Bankruptcy Code, resales by
such Persons would not be exempted by section 1145 of the Bankruptcy Code from
registration under the Securities Act or other applicable law. Such Persons
would, however, be permitted to sell such New Common Stock or other securities
without registration if they are able to comply with the provisions of Rule 144
under the Securities Act. These rules permit the public sale of securities
received by such person if current information regarding the issuer is publicly
available and if volume limitations and certain other conditions are met. Any
person who is an "underwriter" but not an "issuer" with respect to an issue of
securities is, however, entitled to engage in exempt "ordinary trading
transactions" within the meaning of section 1145(b) of the Bankruptcy Code.
Whether or not any particular person would be deemed to be an
"underwriter" with respect to the New Common Stock to be issued pursuant to the
Plan would depend upon various facts and circumstances applicable to that
person. Accordingly, the Debtors express no view as to whether any particular
person receiving New Common Stock under the Plan would be an "underwriter" with
respect to such New Common Stock.
GIVEN THE COMPLEX AND SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A
PARTICULAR HOLDER MAY BE AN UNDERWRITER, THE DEBTORS MAKE NO REPRESENTATION
CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN THE NEW COMMON STOCK. THE DEBTORS
RECOMMEND THAT POTENTIAL RECIPIENTS OF THE NEW COMMON STOCK CONSULT THEIR OWN
COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE THE NEW COMMON STOCK WITHOUT
COMPLIANCE WITH THE SECURITIES ACT, THE EXCHANGE ACT OR SIMILAR STATE AND
FEDERAL LAWS.
B. Applicability Of Certain Canadian Securities Laws
The following trades of securities contemplated under the Plan will be
subject to the securities laws of the provinces and territories of Canada in
which Persons entitled to receive such securities reside:
- the issuance of New Common Stock by Core-Mark Newco;
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- the distribution of New Common Stock by the Reorganized
Debtors; and
- subsequent transfers made by the recipients of such
securities.
Such trades will be made pursuant to exemptions from the applicable
dealer registration and prospectus requirements of Canadian securities laws or
pursuant to discretionary orders from applicable Canadian provincial securities
regulatory authorities. Although there can be no assurance that any required
discretionary orders will be obtained, based on relief granted in similar
circumstances to other public companies, the Reorganized Debtors believe that
such discretionary relief or rulings are obtainable. Obtaining such
discretionary orders (to the extent required) is a condition to the occurrence
of the Effective Date of the Plan.
Persons resident in Canada who are entitled to receive such securities
pursuant to such exemptions or orders are advised that they will not be entitled
to the statutory rights that would have been available to them had such
securities been distributed pursuant to a prospectus, including rights of
rescission and damages.
If at the time of any subsequent transfer in Canada of the New Common
Stock, the seller holds a sufficient number of any New Common Stock to
materially affect control of Core-Mark Newco, a prospectus will be required to
be delivered to the purchaser(s) unless a prospectus exemption is then available
for such transfer. For these purposes, and in the absence of evidence to the
contrary, any Person or combination of Persons who hold more than 20% of the
voting securities of Core-Mark Newco shall be deemed to materially affect its
control.
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XII. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following is a summary of certain U.S. federal income tax
consequences of the Plan to Debtors and Holders of Claims and Equity Interests.
Unless otherwise indicated, this discussion addresses the treatment of Claims
and Equity Interests against both the Company and the Filing Subsidiaries. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations thereunder, and administrative and judicial interpretations
and practice, all as in effect on the date hereof and all of which are subject
to change, with possible retroactive effect. Due to the lack of definitive
judicial and administrative authority in a number of areas, substantial
uncertainty may exist with respect to some of the tax consequences described
below. No opinion of counsel has been obtained, and Debtors do not intend to
seek a ruling from the Internal Revenue Service (the "IRS") as to any of such
tax consequences, and there can be no assurance that the IRS will not challenge
one or more of the tax consequences of the Plan described below.
Unless otherwise indicated, this summary does not apply to Holders of
Claims and Equity Interests that are non-U.S. Holders (as defined below) or that
are otherwise subject to special treatment under U.S. federal income tax law
(including, for example, banks, governmental authorities or agencies, financial
institutions, insurance companies, pass-through entities, tax-exempt
organizations, brokers and dealers in securities, mutual funds, small business
investment companies, regulated investment companies, investors that hold the
instruments as part of a straddle or hedging, constructive sale, integrated or
conversion transactions for U.S. federal income tax purposes or investors whose
functional currency is not the U.S. dollar). The following discussion assumes
that Holders of Claims and Equity Interests hold their instruments as "capital
assets" within the meaning of Code Section 1221. Moreover, this summary does not
purport to cover all aspects of U.S. federal income taxation that may apply to
Debtors and Holders of Claims and Equity Interests based upon their particular
circumstances. Additionally, this summary does not discuss any tax consequences
that may arise under state, local, or foreign tax law.
For purposes of this discussion, a "U.S. Holder" means a Holder of
Claims and Equity Interests that is either: (i) an individual citizen or
resident of the United States; (ii) a corporation, partnership, or other entity
created or organized in the United States or under the laws of the United States
or of any political subdivision of the United States; (iii) an estate, the
income of which is includible in gross income for U.S. federal income tax
purposes regardless of its source, or (iv) a trust, the administration of which
is subject to the primary supervision of the U.S. courts and that has one or
more U.S. Persons who have the authority to control all substantial decisions of
the trust. A "Non-U.S. Holder" is a holder of Claims and Equity Interests other
than a "U.S. Holder."
If a partnership holds Claims or Equity Interests, the tax treatment of
a partner will generally depend upon the status of the partner and the
activities of the partnership. Partners in partnerships that hold Claims or
Equity Interests should consult their tax advisors.
THE FOLLOWING SUMMARY IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND
ADVICE BASED ON THE PARTICULAR CIRCUMSTANCES OF EACH HOLDER OF CLAIMS AND EQUITY
INTERESTS. ALL HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
U.S. FEDERAL INCOME TAX CONSEQUENCES, AS WELL AS ANY APPLICABLE STATE, LOCAL,
AND FOREIGN TAX CONSEQUENCES OF THE PLAN.
A. Certain U.S. Federal Income Tax Consequences To U.S. Holders
Of Claims And Equity Interests
Debtors intend to take the position that the reorganization undertaken
pursuant to the Plan constitutes a taxable sale of Fleming's assets to Core-Mark
Holdings III. As a consequence, Holders of Claims will be treated as exchanging
such Claims for New Common Stock, a preferred interest in the Post-Confirmation
Trust in favor of certain Holders of Claims and cash, if any, in a taxable
exchange.
The IRS may take the position that the exchange constitutes a tax-free
reorganization. If the IRS were to succeed in asserting that the exchange
qualifies as a tax-free reorganization, the tax consequences to Holders of
Claims that receive New Common Stock may differ from the consequences described
below.
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1. Consequences to Holders of Prepetition Lenders'
Secured Claims
Holders of Allowed Prepetition Lenders' Secured Claims will
receive, in exchange for and in full and final satisfaction of their Prepetition
Lenders' Secured Claims, payment in full in cash on account of the Allowed
Pre-Petition Lenders' Secured Claims.
Holders of Allowed Prepetition Lenders' Secured Claims should
be treated as exchanging their Prepetition Lenders' Secured Claims for Cash in a
taxable exchange under Section 1001 of the Code. In such case, a Holder of
Prepetition Lenders' Secured Claims should recognize gain (or loss) equal to the
amount by which (i) the amount of Cash received (to the extent such Cash is not
allocable to accrued but untaxed interest) exceeds (or, in the case of loss, is
less than) (ii) such Holder's tax basis in the existing Prepetition Lenders'
Secured Claims. Any gain or loss recognized in a taxable exchange by a Holder of
Prepetition Lenders' Secured Claims that constitute capital assets in the hands
of the Holder should be capital in nature (subject to the market discount rules
discussed below), and should be long term capital gain or loss if the
Prepetition Lenders' Secured Claims were held for more than one year. To the
extent that Cash received in exchange for Prepetition Lenders' Secured Claims is
treated as received in satisfaction of accrued but untaxed interest on such
Claims, a Holder should recognize ordinary income. See "Accrued But Untaxed
Interest" below.
2. Consequences to Holders of Other Secured Claims that
are not Class 1(B) Claims, DSD Trust Claims,
PACA/PASA Claims and Convenience Claims
Holders of Allowed Other Secured Claims that are not Class
1(B) Claims, DSD Trust Claims, PACA/PASA Claims and Convenience Claims will
receive a distribution of Cash and/or property, and a lien on account of such
Claims, as specified in the Plan. Accordingly, a Holder of Other Secured Claims
that are not Class 1(B) Claims, DSD Trust Claims, PACA/PASA Claims, and
Convenience Claims should recognize gain or loss equal to the difference between
(a) the sum of (i) the amount of Cash, and (ii) the fair market value of other
property received in exchange for such claims; and (b) the Holder's adjusted
basis in such claims. Such gain or loss should be capital in nature if such
Other Secured Claims, DSD Trust Claims, PACA/PASA Claims and Convenience Claims
are held as capital assets (subject to the "market discount" rules described
below) and should be long-term capital gain or loss if such Claims were held for
more than one year. To the extent that a portion of cash received in exchange
for such Claims is allocable to accrued but untaxed interest, the Holder should
recognize ordinary income. See "Accrued But Untaxed Interest" below.
3. Consequences to Holders of Approved Trade Creditor
Reclamation Lien Claims
Holders of Allowed Approved Trade Creditor Reclamation Lien
Claims will receive a preferred interest in the Post Confirmation Trust, a Lien
on account of such Claims and a secured guarantee from Core-Mark Newco, as
specified in the Plan, entitling such Holders to their Ratable Proportion of the
Post Confirmation Trust Distributable Assets. Accordingly, Holders of Allowed
Approved Trade Creditor Reclamation Lien Claims will be treated as exchanging
such Claims for promissory notes in a taxable exchange under section 1001 of the
Code. Accordingly, a Holder of an Approved Trade Creditor Reclamation Lien Claim
should recognize gain or loss equal to the difference between (i) the fair
market value of a preferred interest in the Post Confirmation Trust and (ii) the
Holder's adjusted basis in the Approved Trade Creditor Reclamation Lien Claims.
Such gain or loss should be capital in nature so long as Approved Trade Creditor
Reclamation Lien Claims were held as capital assets (subject to the "market
discount rates" described below) and should be long-term capital gain or loss if
Approved Trade Creditor Reclamation Lien Claims were held for more than one
year. To the extent that a portion of the preferred interest in the Post
Confirmation Trust received in exchange for the Claim is allocable to accrued
but untaxed interest, the Holder should recognize ordinary income. See Accrued
But Untaxed Interest below. Holders should consult their tax advisors about the
possibility of reporting gain on the installment method.
4. Consequences to Holders of Allowed Valid Reclamation
Claims Other Than Class 3(B) Claims
To the extent the Court determines that the Holders of
Reclamation Claims that are not Class 3(B) Claims are entitled to priority
treatment, such Holders will receive a preferred interest in the Post
Confirmation Trust, a lien on account of such Claims and a guarantee from
Core-Mark Newco as outlined in the Plan, entitling
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such Holder to their Ratable Proportion of the Post Confirmation Trust
Distributable Assets, after payment in full of all Allowed Class 3(B) Claims. If
the Court denies the Holders of Reclamation Claims that are not Class 3(B)
Claims priority treatment, such Reclamation Claims will be treated as Class 6
Claims with the tax consequences to the Holders as described below.
Holders of Allowed Valid Reclamation Claims that are not Class
3(B) Claims will be treated as exchanging such Claims for a preferred interest
in the Post Confirmation Trust in a taxable exchange under Section 1001 of the
Code. Accordingly, a Holder of Allowed Valid Reclamation Claims that are not
Class 3(B) Claims should recognize gain or loss equal to the difference between
(i) the fair market value of a preferred interest in the Post Confirmation Trust
and (ii) the Holder's adjusted basis in Allowed Valid Reclamation Claims that
are not Class 3(B) Claims. Such gain or loss should be capital in nature so long
as Allowed Valid Reclamation Claims that are not Class 3(B) Claims were held as
capital assets (subject to the "market discount" rules described below) and
should be long-term capital gain or loss if Allowed Valid Reclamation Claims
that are not Class 3(B) Claims were held for more than one year. To the extent
that a portion of a preferred interest in the Post Confirmation Trust received
in exchange for Allowed Valid Reclamation Claims that are not Class 3(B) Claims
is allocable to accrued but untaxed interest, the Holder should recognize
ordinary income. See "Accrued But Untaxed Interest" below. Holders should
consult their tax advisers about the possibility of reporting gain on the
installment method.
5. Consequences to Holders of General Unsecured Claims
(Other Than Convenience Claims)
Holders of Allowed General Unsecured Claims, other than
Convenience Claims, will receive, in full and final satisfaction of their
Claims, at the Debtors' option, one or a combination of the following: (i) a
Ratable Proportion of the New Common Stock, subject to dilution from the
issuance of warrants to the Tranche B Lenders or the shares issued pursuant to
the Management Incentive Plan; and/or (ii) in the event the Debtors, with the
consent of the Creditors Committee, elect to sell some or all of their assets as
outlined herein, a Ratable Proportion of Cash remaining from the sale of such
assets after all of the Allowed Unclassified Claims and Claims of Holders in
Classes 1 through 5 have been satisfied in full. As described in more detail
below, New Common Stock will be held by Core-Mark Holding III in a reserve for
the benefit of such Holders.
As additional consideration, each Holder of an Allowed General
Unsecured Claim other than a Convenience Claim shall be entitled to a Ratable
Proportion of Excess Proceeds (as defined in the Post Confirmation Trust
Agreement), if any, available from the Post Confirmation Trust after payment by
the Post Confirmation Trust of all claims and obligations required to be made by
the Post Confirmation Trust under the Plan, the Post Confirmation Trust
Agreement, or otherwise, as set forth in the Post Confirmation Trust Agreement.
Holders of Allowed General Unsecured Claims other than
Convenience Claims will be treated as exchanging their General Unsecured Claims
for New Common Stock, Post Confirmation Trust interests and/or Cash in a taxable
exchange under Section 1001 of the Code. Accordingly, a Holder of an Allowed
General Unsecured Claim other than a Convenience Claim should recognize gain or
loss (at the time such Holder receives New Common Stock) equal to the difference
between (i) the sum of (a) the fair market value of the New Common Stock (as of
the Effective Date) received in exchange for the General Unsecured Claims; (b)
an amount of Cash received and (c) the fair market value of any interest in the
Post Confirmation Trust (to the extent such New Common Stock, Cash and interests
in the Post Confirmation Trust are not allocable to accrued but unpaid interest)
and (ii) the Holder's adjusted basis in the General Unsecured Claims. Such gain
or loss should be capital in nature so long as the General Unsecured Claims
other than Convenience Claims are held as capital assets (subject to the "market
discount" rules described below) and should be long-term capital gain or loss if
the General Unsecured Claims other than Convenience Claims were held for more
than one year. To the extent that a portion of the New Common Stock,
Post-Confirmation Trust Interests and Cash received in exchange for General
Unsecured Claims other than Convenience Claims is allocable to accrued but
untaxed interest, the Holder should recognize ordinary income. See "Accrued But
Untaxed Interest" below. A Holder's tax basis in the New Common Stock and the
Post Confirmation Trust interests received in exchange for the General Unsecured
Claims should equal the fair market value of the New Common Stock and the Post
Confirmation Trust interests, respectively, as of the Effective Date. A Holder's
holding period for the New Common Stock and the Post Confirmation Trust
interests should begin on the day following the Effective Date.
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Pursuant to the Plan, any New Common Stock retained by
Core-Mark Holdings III on account of disputed claims shall be held for the
benefit of holders of such disputed claims (each a "Disputed Claims Reserve")
pending the claim's resolution.
Under section 468B(g) of the Tax Code, amounts earned by an
escrow account, settlement fund or similar fund must be subject to current tax.
Although certain Treasury Regulations have been issued under this section, no
Treasury Regulations have as yet been promulgated to address the tax treatment
of such accounts in a bankruptcy setting. Thus, depending on the facts of a
particular situation, such an account could be treated as a separately taxable
trust, as a grantor trust treated as owned by the holders of disputed claims or
by the Debtor (or, if applicable, any of its successors), or otherwise. On
February 1, 1999, the IRS issued proposed Treasury Regulations that, if
finalized in their current form, would specify the tax treatment of reserves of
the type here involved that are established after the date such Treasury
Regulations become final. In general, such Treasury Regulations would tax such a
reserve as a "qualified settlement fund" under Treasury Regulation sections
1.468B-1 et seq. and thus subject to a separate entity level tax. As to
previously established escrows and the like, such Treasury Regulations would
provide that the IRS would not challenge any reasonably, consistently applied
method of taxation for income earned by the escrow or account, and any
reasonably, consistently applied method for reporting such income.
Absent definitive guidance from the IRS or a court of
competent jurisdiction to the contrary, Core-Mark Holdings III shall (i) treat
each Disputed Claims Reserve as a discrete trust for federal income tax
purposes, consisting of separate and independent shares to be established in
respect of each disputed claim in the class of claims to which such reserve
relates, in accordance with the trust provisions of Code, and (ii) to the extent
permitted by applicable law, report consistently for state and local income tax
purposes. In addition, pursuant to the Plan, all parties shall report
consistently with such treatment.
Accordingly, subject to issuance of definitive guidance,
Core-Mark Holdings III will report as subject to a separate entity level tax any
amounts earned by the Disputed Claims Reserve, except to the extent such
earnings are distributed by Core-Mark Holdings III during the same taxable year.
In such event, any amount earned by the Disputed Claims Reserve that is
distributed to a holder during the same taxable year will be includible in such
holder's gross income.
Distributions from the Disputed Claims Reserve will be made to
holders of disputed claims when such claims are subsequently allowed and to
holders of previously allowed claims when any disputed claims are subsequently
disallowed. Such distributions (other than amounts attributable to earnings)
should be taxable to the recipient in accordance with the principles discussed
above.
ACCORDINGLY, EACH HOLDER OF GENERAL UNSECURED CLAIMS (OTHER
THAN CONVENIENCE CLAIMS) IS URGED TO CONSULT ITS TAX ADVISOR REGARDING THE
POTENTIAL TAX TREATMENT OF THE DISPUTED CLAIM RESERVE, DISTRIBUTIONS THEREFROM,
AND ANY TAX CONSEQUENCES TO SUCH HOLDER RELATING THERETO.
6. Consequences to Holders of Equity Interests
Holders of Equity Interests that are cancelled under the Plan
will be allowed a "worthless stock deduction" (unless such Holder had previously
claimed a worthless stock deduction with respect to the Equity Interest) in the
tax year in which such Equity Interest becomes worthless (which could be a tax
year prior to the year the Plan becomes effective) in an amount equal to the
Holder's adjusted basis in its Equity Interest. If the Holder held an Equity
Interest as a capital asset, the loss will be treated as a loss from the sale or
exchange of such capital asset.
7. Receipt of Interests in Post Confirmation Trust
On the Effective Date, the Post Confirmation Trust shall be
settled and is currently anticipated to exist as either a grantor trust or
partnership, in each case, for the benefit of certain creditors. Subject to
definitive guidance from the IRS or a court of competent jurisdiction to the
contrary (including the receipt of an adverse determination by the IRS upon
audit if not contested by the Post Confirmation Trustee), pursuant to Treasury
Regulation Section 1.671-1(a) and/or Treasury Regulation Section 301.7701-4(d)
and related regulations, the Post
104
Confirmation Trustee may designate and file returns for the Post Confirmation
Trust as a "grantor trust" and/or "liquidating trust" and therefore, for federal
income tax purposes, the Post Confirmation Trust's taxable income (or loss)
should be allocated pro rata to its beneficiaries.
Subject to the discussion below, holders of claims that
receive a beneficial interest (including a preferred interest) in the Post
Confirmation Trust will be required to report on their U.S. federal income tax
returns their share of the Post Confirmation Trust's items of income, gain,
loss, deduction and credit in the year recognized by the Post Confirmation
Trust, whether or not the Post Confirmation Trust is taxed as a partnership or a
grantor trust. This requirement may result in Holders being subject to tax on
their allocable share of the Post Confirmation Trust's taxable income prior to
receiving any cash distributions from the Post Confirmation Trust. In general,
holders of interest in the Post Confirmation Trust will not be subject to tax on
their receipt of distributions from the trust.
It is conceivable that the IRS would attempt to treat the
preferred interests in the Post Confirmation Trust as debt (and not equity) and
recharacterize the Post Confirmation Trust as a grantor trust with respect to
Core-Mark Newco because of the guarantee by Core-Mark Newco of the preferred
interests issued by the Post Confirmation Trust. If the IRS asserts and
ultimately prevails in its position, the preferred interests issued by the Post
Confirmation Trust would be viewed as debt issued directly by Core-Mark Newco to
such Holders. In that case, Core-Mark Newco will be required to report on its
U.S. federal income tax return its share of the Post Confirmation Trust's items
of income, gain, loss, deduction and credit in the year recognized by the trust.
The Post Confirmation Representative intends to take a position on Post
Confirmation Trust's tax return that the Post Confirmation Trust should be
treated as a grantor trust set up for the benefit of creditors.
Holders of Claims are urged to consult their tax advisors
regarding the tax consequences of the right to receive and of the receipt (if
any) of property from the Post Confirmation Trust.
8. Treatment of Subsequent Distributions on New Common
Stock
a. Distributions--In General
The amount of distributions, if any, by Core-Mark Newco in
respect of New Common Stock will be equal to the amount of cash and the fair
market value as of the date of distribution of any property distributed.
Distributions generally will be treated for federal income tax purposes first as
a taxable dividend to the extent of Core-Mark Newco's current and accumulated
earnings and profits (as determined for federal income tax purposes) and then as
a tax-free return of capital to the extent of the Holder's tax basis in its
stock, with any excess treated as capital gain from the sale or exchange of the
stock.
b. Subsequent Sale, Redemption, or other
disposition of New Common Stock
The federal income tax treatment to a Holder of New Common
Stock upon sale, redemption, or other disposition of such stock will depend on
the particular facts relating to such Holder at the time of such sale,
redemption, or other disposition. Generally, any gain recognized by a Holder may
be treated as ordinary income to the extent of (i) any bad debt deductions (or
additions to a bad debt reserve) claimed with respect to such Holder's Claim and
any ordinary loss deductions incurred upon satisfaction of its Claim, less any
income (other than interest income) recognized by the Holder upon satisfaction
of its Claim, and (ii) any amounts received by a cash-basis Holder which would
have been included in its gross income if the Holder's Claim had been satisfied
in full but which was not included by reason of the cash method of accounting.
The rules applicable to the treatment of the receipt of
constructive distributions, and the sale, redemption, or other disposition of
New Common Stock are complex and in some cases uncertain. Thus, Holders of New
Common Stock are urged to consult their own tax advisors regarding the
application of the rules to their particular situations.
105
9. Accrued Interest, Market Discount and Capital Losses
a. Accrued But Untaxed Interest.
To the extent that any amount received by a Holder of Claims
under the Plan is attributable to accrued but untaxed interest, such amount
should be taxable to the Holder as interest income, if such accrued interest has
not been previously included in the Holder's gross income for U.S. federal
income tax purposes. Conversely, a Holder of Claims may be able to recognize a
deductible loss (or, possibly, a write-off against a reserve for bad debts) for
such purposes to the extent that any accrued interest was previously included in
the Holder's gross income but was not paid in full by the Debtors.
The extent to which any consideration received by a Holder of
Claims under the Plan will be attributable to accrued but untaxed interest is
unclear. Under the Plan, the Debtors will treat the aggregate consideration to
be distributed to Holders of Allowed Claims in each Class as first satisfying
the stated principal amount of the Claims with any excess allocated to accrued,
but unpaid, interest, if any. Certain legislative history indicates that an
allocation of consideration as between principal and interest provided in a
bankruptcy plan is binding for federal income tax purposes. However, the IRS
could take the position that the consideration received by a Holder should be
allocated in some way other than as provided in the Plan. Holders of Claims
should consult their own tax advisors regarding the proper allocation of the
consideration received by them under the Plan.
b. Market Discount.
Holders of Claims who realize gain as a result of receipt of
consideration under the Plan may be affected by the "market discount" provisions
of Code Sections 1276 through 1278. Under these rules, some or all of the gain
realized by Holders of Claims may be treated as ordinary income (instead of
capital gain), to the extent of the amount of "market discount" on such Claims.
In general, a debt obligation with a fixed maturity of more
than one year that is acquired by a holder on the secondary market (or, in
certain circumstances, upon original issuance) is considered to be acquired with
"market discount" as to that holder if the debt obligation's stated redemption
price at maturity (or revised issue price, in the case of a debt obligation
issued with original issue discount) exceeds the tax basis of the debt
obligation in the holder's hands immediately after its acquisition. However, a
debt obligation will not be a "market discount bond" if such excess is less than
a statutory de minimis amount (equal to 0.25 percent of the debt obligation's
stated redemption price at maturity or revised issue price, in the case of a
debt obligation issued with original issue discount, multiplied by the number of
remaining whole years to maturity).
Any gain recognized by a Holder on the taxable disposition of
Claims (determined as described above) that had been acquired with market
discount should be treated as ordinary income to the extent of the market
discount that accrued thereon while the Claims were considered to be held by the
Holder (unless the Holder elected to include market discount in income as it
accrued). To the extent that any Claims that had been acquired with market
discount are exchanged in a tax-free transaction for other property, any market
discount that accrued on such Claims but was not recognized by the Holder is
carried over to the property received therefore and any gain recognized on the
subsequent sale, exchange, redemption or other disposition of such property is
treated as ordinary income to the extent of such accrued market discount.
c. Limitation on Use of Capital Losses.
Holders of Claims and Equity Interests who recognize capital
losses as a result of the exchange under the Plan will be subject to limits on
their use of such losses. For noncorporate Holders, capital losses may be used
to offset any capital gains (without regard to holding periods) plus the lesser
of (1) $3,000 ($1,500 for married individuals filing separate returns) or (2)
the excess of the capital losses over the capital gains. For corporate Holders,
losses from the sale or exchange of capital assets may only be used to offset
capital gains. Holders who have more capital losses than can be used in a tax
year may be allowed to carry over the excess capital losses for use in
succeeding tax years. Noncorporate Holders may carry over unused capital losses
and apply them to capital gains and a portion of their ordinary income (see
described immediately above) for an unlimited number of years.
106
Corporate Holders may generally only carry over unused capital losses for the
five years following the capital loss year, but are allowed to carry back unused
capital losses to the three years preceding the capital loss year.
B. Certain U.S. Federal Income Tax Consequences to Non-U.S.
Holders of Claims
Except as provided below or in the following paragraph, Non-U.S.
Holders of Claims exchanging such Claims for New Common Stock, Cash (if any),
and Post Confirmation Trust interests should not be subject to U.S. federal
income or withholding tax on gain realized on the exchange of their Claims for
New Common Stock, and Cash (if any), and Post Confirmation Trust interests
unless (a) that Non-U.S. Holder is an individual who is present in the U.S. for
183 days or more during the taxable year and certain other requirements are met,
(b) the gain is effectively connected with the conduct of a U.S. trade or
business of the Non-U.S. Holder, or (c) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. federal income tax law applicable to certain
U.S. expatriates. Gain that is effectively connected with the conduct of a trade
or business in the United States by a Non-U.S. Holder will be subject to the
U.S. federal income tax imposed on net income on the same basis that applies to
U.S. Persons generally (as described above) and, for corporate holders and under
certain circumstances, also the branch profits tax, but will generally not be
subject to withholding. Non-U.S. Holders should consult any applicable income
tax treaties that may provide for different rules.
In addition, Non-U.S. Holders should not be subject to U.S. federal
income or withholding tax on any amounts of New Common Stock, or Cash (if any)
or Post Confirmation Trust interests that are treated as received in
satisfaction of accrued but untaxed interest with respect to their Claims,
provided that (a) the Non-U.S. Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of the Debtors'
stock entitled to vote, (b) the Non-U.S. Holder is not (i) a bank receiving
interest pursuant to a loan agreement entered into in the ordinary course of its
trade or business or (ii) a controlled foreign corporation that is related to
the Debtors through the stock ownership, (c) the interest payments are not
effectively connected with the conduct of a U.S. trade or business of the
Non-U.S. Holder, and (d) the beneficial owner of the Claim certifies (generally
on an IRS Form W-8BEN or a permissible substitute or successor form) to the
Person otherwise required to withhold U.S. federal income tax from such
interest, under penalties of perjury, that it is not a United States Person and
provides its name and address and such other information as the form may
require.
Non-U.S. Holders of Claims that receive a beneficial interest
in the Post Confirmation Trust should not be treated as engaged in a U.S. trade
or business as a result of holding interests in the Post Confirmation Trusts.
Such Non-U.S. Holders should not be required to file U.S. federal income tax
returns with respect to their share of the Post Confirmation Trust's items of
income, gain, loss, deduction and credit, but may be subject to withholding with
respect to certain items of income allocated to them, whether or not the Post
Confirmation Trust is taxed as a partnership or a grantor trust. In general,
Non-U.S. Holders of interests, in the Post Confirmation Trust will not be
subject to tax on their receipt of distributions from the trust.
Non-U.S. Holders of Claims that receive New Common Stock
should be subject to withholding with respect to any distributions on the New
Common Stock at the 30% rate, unless reduced by an applicable treaty between the
United States and the country of residence of a Non-U.S. Holder. Any gain with
respect to the disposition of the New Common Stock should not be subject to
withholding in the United States.
NON-U.S. HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE APPLICATION OF THE RULES TO THEIR PARTICULAR SITUATIONS.
C. Certain U.S. Federal Income Tax Consequences To Reorganized
Debtors
1. Transfer of Business Assets
As described above, Debtors intend to take the position that
the reorganization undertaken pursuant to the Plan constitutes a taxable sale of
the Fleming Convenience assets to Core-Mark Holdings III. As a consequence,
Core-Mark Holdings III should obtain a tax basis in the assets received from
Fleming equal to their cost to Core-Mark Holdings III, which generally should
equal the fair market value of Core-Mark Newco's stock transferred to Fleming
plus the amount of liabilities assumed by Core-Mark Holdings III.
107
Provided the reorganization undertaken pursuant to the Plan
constitutes a taxable transfer, Fleming would recognize gain or loss upon the
transfer of assets to Core-Mark Holdings III in an amount equal to the
difference between the fair market value of its assets and its tax basis in such
assets. Fleming believes that no significant federal, state, or local tax
liability, if any, should be incurred upon the transfer.
There is no assurance, however, that the exchange will be
treated by the IRS as a taxable sale of assets by Fleming to Core-Mark Holdings
III. Instead, the IRS may take the position that the exchange constitutes a
tax-free reorganization. If the IRS were to succeed in asserting that the
exchange qualifies as a tax-free reorganization, Fleming would not recognize any
gain or loss on the exchange. Instead, Core-Mark Holdings III would succeed to
certain tax attributes of Fleming, including Fleming's tax basis in the assets
transferred to Core-Mark Holdings III, but only after taking into account the
reduction in such tax attributes and tax basis on account of the discharge of
indebtedness pursuant to the Plan. Thus, Core-Mark Holdings III would generally
have no NOL carryforwards (as described below) and would have a significantly
diminished tax basis in the assets received from Fleming, with the result that
future tax depreciation and amortization with respect to Core-Mark Holdings
III's real and personal property would be substantially reduced.
2. Cancellation of Indebtedness and Reduction of Tax
Attributes
As a result of the transactions undertaken pursuant to the
Plan, the amount of Debtors' aggregate outstanding indebtedness will be
substantially reduced or eliminated. In general, absent an exception, a debtor
will realize and recognize cancellation of indebtedness income ("COD Income")
upon satisfaction of its outstanding indebtedness for an amount less than its
adjusted issue price. The amount of COD Income, in general, is the excess of (a)
the adjusted issue price of the indebtedness satisfied, over (b) the sum of the
issue price of any new indebtedness of the taxpayer issued, the amount of cash
paid and the fair market value of any new consideration (including stock of
debtor and Post Confirmation Trust interests) given in satisfaction of such
indebtedness at the time of the exchange.
A debtor will not, however, be required to include any amount
of COD Income in gross income if the debtor is under the jurisdiction of a court
in a bankruptcy case and the discharge of debt occurs pursuant to that case.
Instead, a debtor must (as of the first day of the next taxable year) reduce its
tax attributes by the amount of COD Income which it excluded from gross income.
In general, tax attributes will be reduced in the following order: (a) net
operating losses ("NOLs"), (b) tax credits and capital loss carryovers, and (c)
tax basis in assets.
Because, under the Plan, Holders of certain Claims may receive
New Common Stock and Post Confirmation Trust interests, the amount of COD
Income, and accordingly the amount of tax attributes required to be reduced,
will depend on the fair market value of New Common Stock and of Post
Confirmation Trust interests. This value cannot be known with certainty until
after the Effective Date. Thus, although it is expected that a reduction of tax
attributes will be required, the exact amount of such reduction cannot be
predicted.
The IRS recently released temporary regulations (the "New
Regulations") governing the reduction of tax attributes when a member of a
consolidated group realizes cancellation of debt income that is excluded from
gross income ("Excluded COD Income"). The New Regulations apply to discharges of
indebtedness that occur after August 29, 2003. In general, the New Regulations
require a member of a consolidated group that realizes Excluded COD Income to
reduce the tax attributes that are attributable to that member (and its direct
and indirect subsidiaries under various look-through rules when the tax basis of
stock of such subsidiaries is reduced as a result of the member realizing
Excluded COD Income). To the extent that Excluded COD Income is not applied to
reduce the tax attributes attributable to the member actually realizing Excluded
COD Income, after applying the look-through rules described in the paragraph
below, the remaining consolidated tax attributes attributable to the
consolidated group (but not basis in assets) are required to be reduced by such
amount. The Debtors anticipate that the amount of Excluded COD Income will
likely eliminate or substantially reduce the NOL carryforwards of Debtors'
consolidated group and may eliminate or substantially reduce the tax basis in
assets (including depreciable assets) of Debtors' consolidated group. Because
(i) any COD Income should be realized by Fleming prior to the transfer of assets
to Core-Mark Holdings III and (ii) Debtors intend to take the position that the
reorganization undertaken pursuant to the Plan constitutes a taxable transfer of
Fleming's assets to Core-Mark Holdings III, Core-Mark Holdings III should not
suffer any attribute reduction as a result of COD Income.
108
3. Limitation of Net Operating Loss Carryovers and Other
Tax Attributes
Code Section 382 generally limits a corporation's use of its
NOLs (and may limit a corporation's use of certain built-in losses if such
built-in losses are recognized within a five-year period following an ownership
change) if a corporation undergoes an "ownership change." This discussion
describes the limitation determined under Code Section 382 in the case of an
"ownership change" as the "Section 382 Limitation". The Section 382 Limitation
on the use of pre-change losses (the NOLs and built-in losses recognized within
the five year post-ownership change period) in any "post change year" is
generally equal to the product of the fair market value of the loss
corporation's outstanding stock immediately before the ownership change and the
long term tax-exempt rate (which is published monthly by the Treasury Department
and was approximately 4.74% for ownership changes occurring in December 2003) in
effect for the month in which the ownership change occurs. Code Section 383
applies a similar limitation to capital loss carryforward and tax credits.
In general, an ownership change occurs when the percentage of
the corporation's stock owned by certain "5 percent shareholders" increases by
more than 50 percentage points over the lowest percentage owned at any time
during the applicable "testing period" (generally, the shorter of (a) the
three-year period preceding the testing date or (b) the period of time since the
most recent ownership change of the corporation). A "5 percent shareholder" for
these purposes includes, generally, an individual or entity that directly or
indirectly owns 5 percent or more of a corporation's stock during the relevant
period, and may include one or more groups of shareholders that in the aggregate
own less than 5 percent of the value of the corporation's stock. Under
applicable Treasury Regulations, an ownership change with respect to an
affiliated group of corporations filing a consolidated return that has
consolidated NOLs is generally measured by changes in stock ownership of the
parent corporation of the group.
Because (i) substantially all of the Debtors' NOLs will likely
be eliminated or substantially reduced and (ii) Debtors intend to take the
position that the reorganization undertaken pursuant to the Plan constitutes a
taxable sale of Fleming's assets to Core-Mark Holdings III, Core-Mark Holdings
III should not succeed to any of the NOLs of Fleming and hence the Section 382
Limitation will not be relevant to the NOLs of Fleming.
The restructuring pursuant to the Plan will cause an ownership
change to occur with respect to subsidiaries of Fleming, if any, transferred to
Core-Mark Holdings III. As a result, such subsidiaries may be affected by the
Section 382 Limitation with respect to their NOLs and built-in losses (if any)
following the Effective Date. This limitation is independent of, and in addition
to, the reduction of tax attributes described in the preceding Section resulting
from the exclusion of COD Income. Similarly, the ability to use any remaining
capital loss carryforwards and tax credits by such subsidiaries will also be
limited. Special rules may apply in determining the Section 382 Limitation with
respect to a corporation that experiences an ownership change as the result of a
bankruptcy case. However, the Debtors believe that such subsidiaries have a
limited amount of NOLs and built-in losses, which may be eliminated in whole or
in part as a result of the attribute reduction described above and thus the
Section 382 Limitation will not materially affect the business of Core-Mark
Newco going forward.
D. Backup Withholding
Under the backup withholding rules, a Holder of Claims may be subject
to backup withholding with respect to distributions or payments made pursuant to
the Plan unless that holder (a) comes within certain exempt categories (which
generally include corporations) and, when required, demonstrates that fact or
(b) provides a correct taxpayer identification number and certifies under
penalty of perjury that the taxpayer identification number is correct and that
the holder is not subject to backup withholding because of a failure to report
all dividend and interest income. Backup withholding is not an additional tax,
but merely an advance payment that may be refunded to the extent it results in
an overpayment of tax.
Debtors will withhold all amounts required by law to be withheld from
payments of interest and dividends. Debtors will comply with all applicable
reporting requirements of the Code.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ARE COMPLEX. THE
FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT
MAY BE RELEVANT TO A PARTICULAR HOLDER IN LIGHT OF SUCH HOLDER'S CIRCUMSTANCES
AND INCOME TAX SITUATION. ALL HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD
109
CONSULT WITH THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF
THE TRANSACTION CONTEMPLATED BY THE RESTRUCTURING, INCLUDING THE APPLICABILITY
AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGE IN
APPLICABLE TAX LAWS.
110
XIII. CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF CONSUMMATION OF THE
PLAN
A. General
A DESCRIPTION OF CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF
THE CONSUMMATION OF THE PLAN IS PROVIDED BELOW. THE DESCRIPTION IS BASED ON THE
PROVISIONS OF THE INCOME TAX ACT (CANADA) AND THE REGULATIONS THERETO (THE
"ACT"), THE PUBLISHED ADMINISTRATIVE AND INTERPRETIVE POSITIONS OF THE CANADA
CUSTOMS AND REVENUE AGENCY, PROPOSED AMENDMENTS TO THE ACT AND CASE LAW
PUBLISHED OR REPORTED AS AT THE DATE OF THIS DISCLOSURE STATEMENT. CHANGES IN
ANY OF THESE AUTHORITIES OR CHANGES IN THE INTERPRETATIONS OF ANY OF THESE
AUTHORITIES, THAT MAY HAVE RETROACTIVE EFFECT, MAY CAUSE THE CANADIAN FEDERAL
INCOME TAX CONSEQUENCES OF THE PLAN TO DIFFER MATERIALLY FROM THE CONSEQUENCES
DESCRIBED BELOW. MOREOVER, NO ADVANCE INCOME TAX RULING HAS BEEN REQUESTED FROM
CANADA CUSTOMS & REVENUE AGENCY, NO LEGAL OPINION HAS BEEN REQUESTED FROM
COUNSEL CONCERNING ANY TAX CONSEQUENCE OF THE PLAN; AND NO TAX OPINION IS GIVEN
BY THIS DISCLOSURE STATEMENT.
THIS DESCRIPTION DOES NOT COVER ALL ASPECTS OF CANADIAN FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO THE DEBTORS OR HOLDERS OF CLAIMS OR INTERESTS.
FOR THESE REASONS, THE DESCRIPTION THAT FOLLOWS IS NOT A SUBSTITUTE FOR
CAREFUL TAX PLANNING AND PROFESSIONAL TAX ADVICE BASED UPON THE INDIVIDUAL
CIRCUMSTANCES OF EACH HOLDER OF A CLAIM OR INTEREST. HOLDERS OF CLAIMS OR
INTERESTS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE
CANADIAN FEDERAL, PROVINCIAL AND NON-CANADIAN CONSEQUENCES OF THE PLAN.
B. Settlement of Debt
The settlement of Core-Mark International's commercial debt obligations
(as defined in the Act) for an amount (the "Settlement Amount") that may be less
than the full amount owed (the "Outstanding Indebtedness") by Core-Mark
International (the difference between the Settlement Amount and the Outstanding
Indebtedness being hereinafter referred to as the "Forgiven Amount") will result
in the application of the Canadian debt forgiveness rules. Under these rules,
the Forgiven Amount will reduce certain tax attributes of Core-Mark
International in the order prescribed by the Act, and may result in an amount
being included in Core-Mark International's taxable income earned in Canada if
the Forgiven Amount exceeds Core-Mark International's tax attributes.
Core-Mark International believes that the Forgiven Amount will exceed
its tax attributes and that, accordingly, Core-Mark International will be
required to include an amount (the "Excess Amount") in its taxable income earned
in Canada as a result of the settlement of its commercial debt obligations. It
is expected that Core-Mark International will be entitled to claim reserves so
that the Excess Amount will generally be included in its income over five
taxation years.
C. Resident Holders
The following is a summary of certain Canadian federal income tax
considerations generally applicable to a holder of indebtedness of a Debtor who,
at all relevant times, for purposes of the Act and any applicable tax treaty or
convention:
111
1. is or is deemed to be a resident of Canada; and
2. deals at arm's length and is not affiliated with the
Debtors (a "Resident Holder").
This summary does not address the considerations applicable to Resident
Holders that are "financial institutions" (as defined in the Act) and assumes
that no amount on account of interest is received by a Resident Holder of
indebtedness.
A Resident Holder of indebtedness who receives a promissory note, New
Common Stock, cash, an interest in the Post Confirmation Trust (the "Trust"), or
a combination of the foregoing (the "Consideration"), in full or partial
satisfaction of the outstanding principal amount of such holder's indebtedness
will be treated as having disposed of its indebtedness for proceeds of
disposition equal to the fair market value of the Consideration so received. If
such indebtedness is held by a holder as capital property, the disposition will
give rise to a capital gain (or capital loss) to the extent that the proceeds of
disposition, net of any reasonable costs of disposition related thereto, exceed
(or are less than) the adjusted cost base to the Resident Holder, immediately
before the disposition of the indebtedness. If the indebtedness represents trade
debts of the holder, the holder will be required to include in its income (or
deduct in computing its income) the amount by which the fair market value of the
Consideration exceeds (or is less than) the amount of the indebtedness and any
reasonable costs of disposition.
D. Non-Resident Holders
The following is a summary of certain Canadian federal income tax
considerations generally applicable to a holder of indebtedness of a Debtor who,
at all relevant times, for purposes of the Act and any applicable income tax
treaty or convention:
1. is not and is not deemed to be a resident of Canada;
2. deals at arm's length and is not affiliated with the
Debtors; and
3. does not use or hold and is not deemed to use or hold
the indebtedness in carrying on a business in Canada
(a "Non-Resident Holder").
This summary does not address the considerations relevant to a
Non-Resident Holder that is an insurer carrying on business in Canada and
elsewhere or a Non-Resident Holder to whom the indebtedness of a Debtor is
taxable Canadian property (as defined in the Act). This summary assumes that no
amount on account of interest is received by a Non-Resident Holder of
indebtedness.
A Non-Resident Holder of indebtedness of a Debtor will not realize any
Canadian federal income tax consequences as a result of the Plan.
E. Interests in Post Confirmation Trust
1. Resident Holders
The following is a summary of certain Canadian federal income tax
considerations generally applicable to a Resident Holder who holds an interest
in the Trust as capital property (a "Resident Beneficiary"). This summary does
not address the considerations applicable to Resident Holders that are
"financial institutions" (as defined in the Act).
A Resident Beneficiary will generally be required to include in
computing its income for a particular taxation year the portion of the income of
the Trust for the Trust's taxation year that ended in the particular taxation
year of the Resident Beneficiary that is paid or payable to the Resident
Beneficiary in the particular taxation year. SUBJECT TO THE LIMITATIONS IN THE
ACT, ANY U.S. WITHHOLDING TAX PAID BY THE RESIDENT BENEFICIARY ON SUCH AMOUNTS
PAID OR PAYABLE TO THE RESIDENT BENEFICIARY MAY BE CREDITED AGAINST THE RESIDENT
BENEFICIARY'S
112
CANADIAN INCOME TAX PAYABLE OR, TO THE EXTENT A FOREIGN TAX CREDIT IS NOT
AVAILABLE, MAY BE DEDUCTED IN COMPUTING THE RESIDENT BENEFICIARY'S INCOME.
On October 30, 2003, the Minister of Finance released revised draft
legislation (the "proposed rules") relating to the income tax treatment of
investments by Canadian residents in foreign investment entities ("FIEs"). The
proposed rules apply, in very general terms, to a participating interest in an
FIE. BASED ON A DESCRIPTION OF THE PROPOSED ACTIVITIES OF THE TRUST AND OF THE
PROPERTY PROPOSED TO BE HELD BY THE TRUST RECEIVED FROM THE POST CONFIRMATION
REPRESENTATIVE, it is expected that the Trust will be an FIE and that an
interest therein will be a participating interest in an FIE. If the Trust is an
FIE, a Resident Beneficiary will be required under the proposed rules to take
into account in computing its income, on an annual basis, an amount based on a
prescribed rate of return on the "designated cost" of its interest in the Trust,
unless the Resident Beneficiary makes a valid election to recognize a share of
the Trust's underlying income in accordance with the proposed rules. RESIDENT
BENEFICIARIES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES
UNDER THE PROPOSED RULES OF HOLDING INTERESTS IN THE TRUST.
On a disposition or deemed disposition of an interest in the Trust, a
Resident Beneficiary will realize a capital gain (or a capital loss) equal to
the amount by which the proceeds of disposition exceed (or are less than) the
aggregate of the Resident Beneficiary's adjusted cost base of the interest in
the Trust and any reasonable costs of disposition.
2. Non-Resident Holders
BASED ON A DESCRIPTION OF THE PROPOSED ACTIVITIES OF THE TRUST AND OF
THE PROPERTY PROPOSED TO BE HELD BY THE TRUST RECEIVED FROM THE POST
CONFIRMATION REPRESENTATIVE, a Non-Resident Holder who is not an insurer
carrying on business in Canada and elsewhere will not realize any Canadian
federal income tax consequences as a result of acquiring, holding or disposing
of an interest in the Trust.
113
XIV. ALTERNATIVES TO PLAN
The Debtors believe that if the Plan is not confirmed, or is not
confirmable, the alternatives to the Plan include: (a) the conversion to a
chapter 7 case and concomitant liquidation of the Debtors' assets on a "forced
sale" basis; (b) dismissal of the case(s); or (c) an alternative plan of
reorganization.
A. Liquidation Under Chapter 7
If no plan can be confirmed, the Chapter 11 Cases may be converted to
Chapter 7 of the Bankruptcy Code, pursuant to which a trustee would be appointed
to liquidate the assets of the Debtors for distribution to creditors in
accordance with the priorities established by the Bankruptcy Code. For the
reasons previously discussed above, the Debtors believe that Confirmation of the
Plan will provide each Holder of an Unsecured Claim entitled to receive a
distribution under the Plan with a recovery that is expected to be substantially
more than it would receive in a liquidation under Chapter 7 of the Bankruptcy
Code.
B. Dismissal
Dismissal of the Chapter 11 Case(s) would leave the secured creditors
in a position to exercise their state law rights under their existing securities
interest, including foreclosure of such liens. The Debtors believe that in a
dismissal scenario the unsecured creditors would not receive any Distribution.
C. Alternative Plan
The Debtors believe that any alternative plan would not result in as
favorable of treatment of Claims as proposed under the Debtors' Plan.
114
XV. CONCLUSION
The Debtors and Creditors' Committee believe that the Plan maximizes
recoveries to all creditors and, thus, is in their best interests. The Plan as
structured, among other things, allows creditors to participate in distributions
in excess of those that would be available if the Debtors were liquidated under
chapter 7 of the Bankruptcy Code and minimizes delays in recoveries to all
creditors.
115
THE DEBTORS AND THE CREDITORS' COMMITTEE URGE CREDITORS TO ACCEPT THE
PLAN AND TO EVIDENCE SUCH ACCEPTANCE BY RETURNING THEIR PROPERLY COMPLETED
BALLOT(S) SO THAT THEY WILL BE ACTUALLY RECEIVED, AS INSTRUCTED ABOVE, BY THE
SOLICITATION AGENT IDENTIFIED HEREIN AT 5:00 P.M., PREVAILING EASTERN TIME, ON
___________ __ 2004.
/s/ Rebecca A. Roof
--------------------------------------------
Rebecca A. Roof, Interim Chief Financial
Officer of FLEMING COMPANIES, INC., et. al.,
Debtors and Debtors in Possession
KIRKLAND & ELLIS LLP
Richard L. Wynne, Esq. (CA Bar No. 120349)
Shirley S. Cho, Esq. (CA Bar No. 192616)
777 South Figueroa Street
Los Angeles, California 90017
Telephone: (213) 680-8400
Facsimile: (213) 680-8500
And
KIRKLAND & ELLIS LLP
James H. M. Sprayregen, P.C. (ARDC No. 6190206)
Janet S. Baer (ARDC No. 6182994)
Geoffrey A. Richards, Esq. (ARDC No. 6230120)
200 East Randolph Drive
Chicago, Illinois 60601-6636
Telephone: (312) 861-2000
Facsimile: (312) 861-2200
And
PACHULSKI, STANG, ZIEHL, YOUNG, JONES & WEINTRAUB P.C.
Laura Davis Jones, Esq. (Bar No. 2436)
Ira D. Kharasch, Esq. (CA Bar No. 109084)
919 North Market Street, Sixteenth Floor
Post Office Box 8705
Wilmington, Delaware 19899-8705 (Courier 19801)
Telephone: (302) 652-4100
Facsimile: (302) 652-4400
Counsel to Debtors and Debtors in Possession
116
EXHIBITS
Exhibit 1 Plan
Exhibit 2 Solicitation Order
Exhibit 3 Financial Information and Projections
3A -- Chapter 11 Emergence Balance Sheet
3B -- Core Mark Newco Financial Projections
3C -- Post Confirmation Trust Financial Projections
Exhibit 4 Best Interests Analysis
Exhibit 5 None
Exhibit 6 CUSIP Numbers of Old Notes
Exhibit 7 Exit Facility Term Sheet
Exhibit 8 Tranche B Loan Term Sheet
Exhibit 9 Draft Post Confirmation Trust Agreement
Exhibit 10 Class 3B Preferred Interests Term Sheet
Exhibit 11 Class 5 Preferred Interests Term Sheet
117
EXHIBIT 1
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE: ) CHAPTER 11
)
FLEMING COMPANIES, INC., ET AL.,(1) ) CASE NO. 03-10945 (MFW)
) (JOINTLY ADMINISTERED)
)
DEBTORS. )
DEBTORS' AND OFFICIAL COMMITTEE OF UNSECURED CREDITORS' SECOND AMENDED
JOINT PLAN OF REORGANIZATION OF FLEMING COMPANIES, INC. AND ITS FILING
SUBSIDIARIES UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
KIRKLAND & ELLIS LLP MILBANK TWEED HADLEY & MCCLOY LLP
200 East Randolph Drive One Chase Manhattan Plaza
Chicago, IL 60601 New York, NY 10005
(312) 861-2000 (212) 530-5000
and and
PACHULSKI, STANG, ZIEHL, YOUNG, PEPPER HAMILTON LLP PC
JONES & WEINTRAUB, 100 Renaissance Center
919 North Market Street, 16th Floor Suite 3600
PO Box 8705 Detroit, MI 48243-1157
Wilmington, DE 19899-8705 (313) 259-7110
(302) 652-4100
Co-Counsel for the Official Committee of
Co-Counsel for the Debtors and Unsecured Creditors
Debtors in Possession
Dated: March 26, 2004
- ---------------------
(1) The Debtors are the following entities: Core-Mark International, Inc.;
Fleming Companies, Inc.; ABCO Food Group, Inc.; ABCO Markets, Inc.;
ABCO Realty Corp.; ASI Office Automation, Inc.; C/M Products, Inc.;
Core-Mark Interrelated Companies, Inc.; Core-Mark Mid-Continent, Inc.;
Dunigan Fuels, Inc.; Favar Concepts, Ltd.; Fleming Foods Management
Co., L.L.C., Fleming Foods of Texas, L.P.; Fleming International, Ltd.;
Fleming Supermarkets of Florida, Inc.; Fleming Transportation Service,
Inc.; Food 4 Less Beverage Company, Inc.; Fuelserv, Inc.; General
Acceptance Corporation; Head Distributing Company; Marquise Ventures
Company, Inc.; Minter-Weisman Co.; Piggly Wiggly Company; Progressive
Realty, Inc.; Rainbow Food Group, Inc.; Retail Investments, Inc.;
Retail Supermarkets, Inc.; RFS Marketing Services, Inc.; and Richmar
Foods, Inc.
TABLE OF CONTENTS
PAGE
----
ARTICLE I. RULES OF INTERPRETATION, COMPUTATION OF TIME, GOVERNING LAW, RESERVATION OF RIGHTS AND
DEFINED TERMS........................................................................................... 1
A. Rules of Interpretation, Computation of Time and Governing Law................................. 1
B. Reservation of Rights.......................................................................... 1
C. Defined Terms.................................................................................. 1
ARTICLE II. UNCLASSIFIED CLAIMS.................................................................................. 12
A. Administrative Claims.......................................................................... 12
B. Priority Tax Claims............................................................................ 13
C. DIP Claims..................................................................................... 14
ARTICLE III. CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS.............................. 14
A. Summary........................................................................................ 14
B. Classification and Treatment................................................................... 14
C. Special Provision Governing Unimpaired Claims.................................................. 19
ARTICLE IV. ACCEPTANCE OR REJECTION OF THE PLAN.................................................................. 19
A. Voting Classes................................................................................. 19
B. Acceptance by Impaired Classes................................................................. 19
C. Presumed Acceptance of Plan.................................................................... 19
D. Presumed Rejection of Plan..................................................................... 19
E. Non-Consensual Confirmation.................................................................... 19
ARTICLE V. MEANS FOR IMPLEMENTATION OF THE PLAN.................................................................. 20
A. Substantive Consolidation...................................................................... 20
B. Continued Corporate Existence and Vesting of Assets in the Reorganized Debtors [.............. 20
C. Cancellation of Old Notes, Old Stock and Other Equity Interests................................ 20
D. Issuance of New Securities; Execution of Related Documents..................................... 21
E. Restructuring Transactions..................................................................... 21
F. Corporate Governance, Directors and Officers, and Corporate Action............................. 21
G. Post Confirmation Trust........................................................................ 22
H. Creation of Professional Fee Escrow Account.................................................... 24
ARTICLE VI. DEBTORS' RETAINED CAUSES OF ACTION................................................................... 24
A. Maintenance of Causes of Action................................................................ 24
B. Preservation of Causes of Action............................................................... 24
C. Preservation of All Causes of Action Not Expressly Settled or Released......................... 27
ARTICLE VII. FUNDING OF THE PLAN................................................................................. 27
A. Exit Financing Facility, Obtaining Cash for Plan Distributions and Transfers of Funds
Among the Debtors and the Reorganized Debtors.................................................. 27
B. Tranche B Loan................................................................................. 28
C. Sale of Assets................................................................................. 28
ARTICLE VIII. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.............................................. 28
A. Assumption/Rejection of Executory Contracts and Unexpired Leases............................... 28
B. Claims Based on Rejection of Executory Contracts or Unexpired Leases........................... 28
C. Cure of Defaults for Executory Contracts and Unexpired Leases Assumed.......................... 28
D. Indemnification of Directors, Officers and Employees........................................... 29
E. Compensation and Benefit Programs.............................................................. 29
ii
PAGE
----
F. Insured Claims................................................................................. 29
ARTICLE IX. PROVISIONS GOVERNING DISTRIBUTIONS................................................................... 31
A. Distributions for Claims Allowed as of the Effective Date...................................... 31
B. Distributions by Core-Mark Newco and the Post Confirmation Trust............................... 31
C. Interest on Claims............................................................................. 31
D. Compliance with Tax Requirements/Allocations................................................... 31
E. Delivery of Distributions and Undeliverable or Unclaimed Distributions......................... 32
F. Distribution Record Date....................................................................... 32
G. Timing and Calculation of Amounts to be Distributed............................................ 32
H. Minimum Distribution........................................................................... 33
I. Allowance or Resolution Setoffs................................................................ 33
J. Old Notes...................................................................................... 33
K. Failure to Surrender Canceled Instruments...................................................... 33
L. Lost, Stolen, Mutilated or Destroyed Debt Securities........................................... 34
M. Share Reserve.................................................................................. 34
N. Settlement of Claims and Controversies......................................................... 34
ARTICLE X. PROCEDURES FOR RESOLUTION OF DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS............................. 34
A. Resolution of Disputed Claims.................................................................. 34
B. Allowance of Claims............................................................................ 35
C. Controversy Concerning Impairment.............................................................. 35
D. Impact on Pending Litigation; Pension Plans.................................................... 35
ARTICLE XI. CONDITIONS PRECEDENT TO CONFIRMATION AND OCCURRENCE OF THE EFFECTIVE DATE OF THE PLAN................ 36
A. Conditions Precedent to Confirmation........................................................... 36
B. Conditions Precedent to Occurrence of the Effective Date....................................... 36
C. Waiver of Conditions........................................................................... 37
D. Effect of Non-occurrence of Conditions to Occurrence of the Effective Date..................... 37
ARTICLE XII. DISCHARGE, RELEASE, INJUNCTION AND RELATED PROVISIONS............................................... 38
A. Subordination.................................................................................. 38
B. MUTUAL RELEASES BY RELEASEES................................................................... 38
C. RELEASES BY HOLDERS OF CLAIMS.................................................................. 38
D. INDEMNIFICATION................................................................................ 38
E. EXCULPATION.................................................................................... 39
F. DISCHARGE OF CLAIMS AND TERMINATION OF EQUITY INTERESTS........................................ 39
G. INJUNCTION..................................................................................... 39
H. POLICE AND REGULATORY POWERS................................................................... 39
ARTICLE XIII. RETENTION OF JURISDICTION.......................................................................... 40
ARTICLE XIV. MISCELLANEOUS PROVISIONS............................................................................ 41
A. Effectuating Documents, Further Transactions and Corporation Action............................ 41
B. Dissolution of Committee....................................................................... 41
C. Payment of Statutory Fees...................................................................... 41
D. Modification of Plan........................................................................... 41
E. Revocation of Plan............................................................................. 41
F. Environmental Liabilities...................................................................... 41
G. Successors and Assigns......................................................................... 42
H. Reservation of Rights.......................................................................... 42
I. Section 1146 Exemption......................................................................... 42
J. Further Assurances............................................................................. 42
K. Entire Agreement............................................................................... 42
iii
PAGE
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L. Service of Documents........................................................................... 42
M. Filing of Additional Documents................................................................. 44
iv
TABLE OF EXHIBITS TO BE FILED WITH THE PLAN
EXHIBIT A SCHEDULE OF RETAINED CAUSES OF ACTION
EXHIBIT B EXCLUDED RELEASEES
v
DEBTORS' AND OFFICIAL COMMITTEE OF UNSECURED CREDITORS' SECOND AMENDED
JOINT
PLAN OF REORGANIZATION OF FLEMING COMPANIES, INC. AND ITS
FILING SUBSIDIARIES UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
Pursuant to Title 11 of the United States Code, 11 U.S.C. Sections 101
et seq., Fleming Companies, Inc. and its Filing Subsidiaries, debtors and
debtors-in-possession in the above-captioned and numbered case, and their
Official Committee of Unsecured Creditors hereby respectfully propose the
following Second Amended Joint Plan of Reorganization of Fleming Companies, Inc.
and its Filing Subsidiaries Under Chapter 11 of the United States Bankruptcy
Code:
ARTICLE I.
RULES OF INTERPRETATION,
COMPUTATION OF TIME, GOVERNING LAW, RESERVATION OF RIGHTS AND DEFINED TERMS
A. Rules of Interpretation, Computation of Time and Governing Law
1. For purposes herein: (a) whenever from the context it is
appropriate, each term, whether stated in the singular or the plural, shall
include both the singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, feminine and the neuter
gender; (b) any reference herein to a contract, instrument, release, indenture
or other agreement or document being in a particular form or on particular terms
and conditions means that such document shall be substantially in such form or
substantially on such terms and conditions; (c) any reference herein to an
existing document or exhibit Filed, or to be Filed, shall mean such document or
exhibit, as it may have been or may be amended, modified or supplemented; (d)
unless otherwise specified, all references herein to Sections, Articles and
Exhibits are references to Sections, Articles and Exhibits hereof or hereto; (e)
the words "herein," "hereof" and "hereto" refer to the Plan in its entirety
rather than to a particular portion of this Plan; (f) captions and headings to
Articles and Sections are inserted for convenience of reference only and are not
intended to be a part of or to affect the interpretation hereof; (g) the rules
of construction set forth in section 102 of the Bankruptcy Code shall apply; and
(h) any term used in capitalized form herein that is not otherwise defined but
that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the
meaning assigned to such term in the Bankruptcy Code or the Bankruptcy Rules, as
the case may be.
2. In computing any period of time prescribed or allowed hereby,
the provisions of Bankruptcy Rule 9006(a) shall apply.
3. Except to the extent that the Bankruptcy Code or Bankruptcy
Rules are applicable, and subject to the provisions of any contract, instrument,
release, indenture or other agreement or document entered into in connection
herewith, the rights and obligations arising hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
without giving effect to the principles of conflict of laws thereof.
B. Reservation of Rights
This Plan is a joint Plan of the Debtors and the Committee. The Plan
currently contains several matters on which the Debtors and the Committee have
not reached final agreement. In the event that the parties can not reach final
agreement on such matters prior to solicitation of votes on the Plan, the
parties reserve their respective rights to withdraw their support for this joint
Plan and proceed in any manner appropriate as outlined in the Stipulation Re
Co-Exclusive Period to File Plan of Reorganization dated November 25, 2003, or
under the Bankruptcy Code.
C. Defined Terms
Unless the context requires otherwise, the following terms shall have
the following meanings when used in capitalized form herein:
1
1. "5 1/4% Convertible Senior Subordinated Notes" means the 5
1/4% Convertible Senior Subordinated Notes, CUSIP numbers 339130AQ9 and
339130AR7, due 2009 issued by Fleming in the original principal amount of $150
million and guaranteed by all of the Debtors.
2. "5 1/4% Convertible Senior Subordinated Notes Indenture" means
that certain indenture dated March 15, 2001, between Bank One, N.A., as
indenture trustee, and Fleming, as amended or supplemented.
3. "9 1/4% Senior Notes" means the 9 1/4% Senior Notes, CUSIP
number 339130AX4, due 2010 issued by Fleming in the original principal amount of
$200 million and guaranteed by all of the Debtors.
4. "9 1/4% Senior Notes Indenture" mean that certain indenture
dated June 18, 2002, between the Bank of New York., as successor trustee to
Manufactures and Traders Trust Company, and Fleming, as amended or supplemented.
5. "9 7/8% Senior Subordinated Notes" means the 9?% Senior
Subordinated Notes, CUSIP number 339130AW6, due 2012 issued by Fleming in the
original principal amount of $260 million and guaranteed by all of the Debtors.
6. "9 7/8% Senior Subordinated Notes Indenture" means that
certain indenture dated April 15, 2002, between Bank One, N.A., as indenture
trustee, and Fleming, as amended or supplemented.
7. "10 1/8% Senior Notes" means the 10?% Senior Notes, CUSIP
number 339130AP1, due 2008 issued by Fleming in the original principal amount of
$355 million and guaranteed by all of the Debtors.
8. "10 1/8% Senior Notes Indenture" means that certain indenture
dated March 15, 2001, between the Bank of New York as successor indenture
trustee to Bankers Trust Company, and Fleming, as amended or supplemented.
9. "10 5/8% Senior Subordinated Notes" means the Series A and B
10?% Senior Notes, CUSIP numbers 339130AL0 and 339130AT3, due in 2007 issued by
Fleming in the original principal amount of $400 million and guaranteed by all
of the Debtors.
10. "10 5/8% Senior Subordinated Notes Indenture" means that
certain indenture dated July 25, 1997, between Bank One, N.A. as indenture
trustee, and Fleming as amended or supplemented.
11. "Additional Carve-Out" means that additional carve-out
provided for Professional Fees and expenses of $6.0 million, which are entitled
to payout prior to the payment of Administrative Claims to Allowed Approved
Trade Creditor Lien Claim Holders, as outlined in the Final DIP Order.
12. "Administrative Claim" means a Claim for costs and expenses of
administration under section 503(b), 507(b) or 1114(e)(2) of the Bankruptcy
Code, including, but not limited to: (a) the actual and necessary costs and
expenses incurred after the Petition Date of preserving the Estates and
operating the businesses of the Debtors (including Approved Trade Creditor Lien
Claims as well as wages, salaries or commissions for services and payments for
goods and other services and leased premises); (b) compensation for legal,
financial advisory, accounting and other services and reimbursement of expenses
awarded or allowed under sections 328, 330(a) or 331 of the Bankruptcy Code or
otherwise; and (c) all fees and charges assessed against the Estates under
chapter 123 of Title 28 United States Code, 28 U.S.C. Sections 1911-1930.
13. "Agents" mean Deutsche Bank Trust Company Americas, acting in
its capacity as administrative agent for the Post-Petition Lenders, and JPMorgan
Chase Bank, acting in its capacity as collateral agent for the Post-Petition
Lenders.
14. "Aggregate Limit" means the aggregate or per-occurrence
maximum amount of insurance for a particular insurance policy (or policies, as
the case may be) owned by the Debtors.
15. "Allowed" means, with respect to any Claim except as otherwise
provided herein: (a) a Claim that has been scheduled by a Debtor in its schedule
of liabilities as other than disputed, contingent or unliquidated and as to
which the Debtors or any other party in interest has not Filed an objection by
the Objection Deadline; (b) a Claim
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that either is not a Disputed Claim or has been allowed by a Final Order; (c) a
Claim that is determined by the Debtors or the Post Confirmation Trust, as
applicable, to be allowed; (d) a Claim that is allowed: (i) in any stipulation
of amount and nature of Claim executed prior to the Effective Date; (ii) in any
stipulation with the Post-Confirmation Trust of amount and nature of Claim
executed on or after the Effective Date; or (iii) in or pursuant to any
contract, instrument, indenture or other agreement entered into or assumed in
connection herewith; (e) a Claim relating to a rejected executory contract or
unexpired lease that either (i) is not a Disputed Claim or (ii) has been allowed
by a Final Order, in either case only if a proof of Claim has been Filed by the
Claims Bar Date or has otherwise been deemed timely Filed under applicable law;
or (f) a Claim as to which a proof of Claim has been timely filed and as to
which the Debtors, the Post Confirmation Trust or any party in interest has not
filed an objection by the Objection Deadline; and with respect to all Claims
only after reduction for unpaid pre-petition and post-petition deductions,
preference payments and other applicable setoff rights.
16. "Allowed Claim" means an Allowed Claim in the particular Class
described.
17. "Allowed Defense Costs" means certain costs incurred by an
Insurer in the defense and/or liquidation of an Insured Claim, for which the
Debtors are obligated to reimburse the respective Insurers.
18. "Approved Trade Creditor" means a trade creditor who elected
to participate in the Trade Credit Program established under the Final DIP Order
and provided post-petition trade credit thereunder.
19. "Approved Trade Creditor Lien" means the junior lien of an
Approved Trade Creditor in the amount of actual trade credit provided pursuant
to the agreement with the Debtors and as outlined in the Trade Credit Program.
20. "Approved Trade Creditor Lien Claim" means the Claim of an
Approved Trade Creditor in the amount of actual unpaid trade credit provided
pursuant to the agreement with the Debtors and as outlined in the Trade Credit
Program.
21. "Approved Trade Creditor Reclamation Lien Claim" means the
Claim of an Approved Trade Creditor holding a Reclamation Claim in the lesser of
(a) the amount of the actual trade credit provided pursuant to the agreement
with the Debtors as outlined in the Trade Credit Program and (b) the amount of
the Allowed Reclamation Claim, as outlined in the Trade Credit Program
determined without consideration of whether the Inventory of the Debtors
exceeded the amount of the Pre-Petition Lenders' Secured Claim.
22. "Assumption Schedule" means the schedule to be filed 15 days
prior to the Voting Deadline, of executory contracts and unexpired leases that
are to be assumed by the Reorganized Debtors on the Effective Date.
23. "Avoidance Actions" means those avoidance actions available
pursuant to Chapter 5 of the Bankruptcy Code.
24. "Ballots" means the ballots accompanying the Disclosure
Statement upon which Holders of Impaired Claims entitled to vote shall indicate
their acceptance or rejection of the Plan in accordance with the Plan and the
Voting Instructions.
25. "Bank Guarantees" means those guarantees issued by the Filing
Subsidiaries in favor of the Pre-Petition Lenders, guaranteeing the obligations
of Fleming on the Pre-Petition Credit Agreement.
26. "Bankruptcy Code" means Title 11 of the United States Code,
and applicable portions of Titles 18 and 28 of the United States Code.
27. "Bankruptcy Court" means the United States District Court
having jurisdiction over the Chapter 11 Cases and, to the extent of any
reference made pursuant to section 157 of Title 28 of the United States Code
and/or the General Order of such District Court pursuant to section 151 of Title
28 of the United States Code, the bankruptcy unit of such District Court.
28. "Bankruptcy Rules" means the Federal Rules of Bankruptcy
Procedure, as amended from time to time, as applicable to the Chapter 11 Cases,
promulgated under 28 U.S.C. Section 2075 and the General, Local and Chambers
Rules of the Bankruptcy Court.
3
29. "Beneficial Holder" means the Person or Entity holding the
beneficial interest in a Claim or Equity Interest.
30. "Bondholders" mean the Beneficial Holders of the Old Notes.
31. "Business Day" means any day, other than a Saturday, Sunday or
"legal holiday" (as defined in Bankruptcy Rule 9006(a)) in Wilmington, Delaware.
32. "Canadian CCAA Court" means the Supreme Court of British
Columbia or such other court in Canada having jurisdiction over Core-Mark
International Inc.'s proceedings under the CCAA from time to time.
33. "Carve-Out" means the carve-out provided for in the Final DIP
Order or any Court Order or credit agreement executed with respect to a
refinancing of the DIP Credit Facility or Pre-Petition Credit Agreement which
includes but is not necessarily limited to (i) in the event of the occurrence
and during the continuation of a Termination Event (as defined in the Final DIP
Order), the payment of allowed and unpaid professional fees and disbursements
incurred by the Debtors and the Committee in an aggregate amount not in excess
of $4.0 million (plus all unpaid professional fees and disbursements incurred
prior to the occurrence of such Termination Event strictly in accordance with
the budget described in the Final DIP Order and to the extent allowed by the
Bankruptcy Court), and (ii) the payment of all fees required to be paid pursuant
to 28 U.S.C. Section 1930(c)(6) and all unpaid fees payable to the Clerk of this
Court or the United States Trustee.
34. "Cash" means cash and cash equivalents.
35. "Casualty Insurance Program" means the certain insurance
policies maintained by the Debtors pursuant to the Insurance Program, including,
but not limited to: automobile liability, general liability, property damage and
other, similar types of insurance coverage.
36. "Cause of Action" means, including but is not limited to, all
Claims, actions, choses in action, causes of action, suits, debts, dues, sums of
money, accounts, reckonings, bonds, bills, specialties, covenants,
controversies, agreements, promises, variances, trespasses, damages, judgments,
third-party claims, counterclaims and cross claims (including, but not limited
to, all claims in any avoidance, recovery, subordination or other actions
against Insiders and/or any other Persons under the Bankruptcy Code, including
sections 510, 542, 543, 544, 545, 547, 548, 549, 550, 551 and 553) of the
Debtors, the Debtors in Possession and/or the Estates (including, but not
limited to, those actions listed in this Plan, Exhibit A filed herewith and the
Disclosure Statement that are or may be pending on the Effective Date or
instituted by Core-Mark Newco, the Reorganized Debtors or the Post Confirmation
Trust, as applicable, after the Effective Date against any Person based on law
or equity, including, but not limited to, under the Bankruptcy Code, whether
direct, indirect, derivative, or otherwise and whether asserted or unasserted,
known or unknown.
37. "CCAA" means the Companies' Creditors Arrangement Act
(Canada).
38. "Chapter 11 Cases" means the chapter 11 bankruptcy cases filed
by the Debtors on April 1, 2003, in the Bankruptcy Court.
39. "Claim" means (a) right to payment, whether or not such right
is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (b)
any right to an equitable remedy for breach of performance if such breach gives
rise to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured, as defined in section 101(5) of the Bankruptcy
Code.
40. "Claim Holder" means the Holder of a Claim.
41. "Claims Bar Date" means September 15, 2003.
42. "Class" means a category of Claims or Equity Interests as set
forth in Article III herein.
4
43. "Class 3B Preferred Interests" means those certain secured
preferred interests to be issued by the Post Confirmation Trust in favor of the
Holders of Allowed Class 3B Claims pursuant to the terms of the Class 3B
Preferred Interests Term Sheet.
44. "Class 3B Preferred Interests Term Sheet" means that certain
Indicative Term Sheet, Secured Preferred Interests with Junior Secured
Guarantee, March 2004, attached to the Disclosure Statement as Exhibit 10.
45. "Class 5 Preferred Interests" means those certain junior
secured preferred interests to be issued by the Post Confirmation Trust in favor
of the Holders of Allowed Class 5 Claims pursuant to the terms of the Class 5
Preferred Interests Term Sheet.
46. "Class 5 Preferred Interests Sheet" means that certain
Indicative Term Sheet, Junior Secured Preferred Interests with Junior Secured
Guarantee, March 2004, attached to the Disclosure Statement as Exhibit 11.
47. "COBRA Claims" means those Claims for continuation of health
plan coverage as required in section 4980B of the Internal Revenue Code of 1986,
as amended.
48. "Confirmation" means the entry of the Confirmation Order.
49. "Confirmation Date" means the date upon which the Confirmation
Order is entered by the Bankruptcy Court on its docket, within the meaning of
Bankruptcy Rule 5003.
50. "Confirmation Hearing" means that hearing before the
Bankruptcy Court wherein the Debtors seek confirmation of the Plan as provided
for in section 1128 of the Bankruptcy Code.
51. "Confirmation Order" means the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code.
52. "Convenience Claims" means those General Unsecured Claims in
Class 7 herein, as described in section III.B.9 herein.
53. "Core-Mark Newco" means the Delaware corporation to be formed
on the Effective Date, as well as Core-Mark Holdings I, Core-Mark Holdings II
and Core-Mark Holdings III, as further described in section V.E. herein.
However, for purposes of distribution of the New Common Stock, "Core-Mark Newco"
shall not include Core-Mark Holdings I, Core-Mark Holdings II and Core-Mark
Holdings III.
54. "Covered Allowed Insured Claims" means a Claim covered by the
Casualty Insurance Program where the sum of the amount of the Insured Claim plus
the Debtors' expenses on account of such Claim, exceeds the Deductible Amount
but does not exceed the Aggregate Limit for that particular policy (or policies,
as the case may be).
55. "Creditors Committee" or "Committee" means the Official
Committee of Unsecured Creditors appointed in the Chapter 11 Cases by the United
States Trustee on April 14, 2003.
56. "D&O Policies" means the insurance policies purchased by the
Debtors to provide coverage for certain amounts owed by directors and officers
to third parties on account of actions taken by directors and officers during
the course of their roles as officers and/or directors of the Debtors.
57. "D&O Releasees" means all officers, directors, employees,
attorneys, financial advisors, accountants, investment bankers, agents and
representatives of each Debtor and their respective subsidiaries, in each case
in their capacity as such as of the Petition Date or thereafter, whose
identities shall be mutually agreed upon by the Debtors and the Committee, but
excluding the Excluded Releasees.
58. "Debtors" means Fleming and its Filing Subsidiaries, as
debtors in the Chapter 11 Cases.
59. "Deductible Amount" means the per-occurrence deductible amount
payable by the applicable Debtor(s) under a respective insurance policy.
5
60. "DIP Claim" means a Claim arising under or as a result of the
DIP Credit Facility, including letters of credit issued thereunder.
61. "DIP Credit Facility" means the commitment secured by the
Debtors for debtor-in-possession financing from the post-petition lenders
authorized in the Final DIP Order or any refinancing thereof, including but not
limited to a refinancing whereby the refinancing lender takes an assignment of
the DIP Credit Facility or the Claims of the Post-Petition Lenders thereunder.
62. "Disclosure Statement" means the Second Amended Disclosure
Statement in Support of Debtors' and Official Committee of Unsecured Creditors'
Second Amended Joint Plan of Reorganization of Fleming Companies, Inc., and its
Filing Subsidiaries under Chapter 11 of the Bankruptcy Code dated March __,
2004, as amended, supplemented, or modified from time to time, describing the
Plan, that is prepared and distributed in accordance with the Bankruptcy Code.
63. "Disputed" means, for purposes of this Plan, with respect to
any Claim or Equity Interest, any Claim or Equity Interest: (a) listed on the
Schedules as unliquidated, disputed or contingent and for which a timely
Objection has been filed; or (b) as to which any Debtor, the Post Confirmation
Trust, or any other party in interest has interposed a timely objection or
request for estimation in accordance with the Bankruptcy Code and the Bankruptcy
Rules which has not been withdrawn or determined by a Final Order.
64. "Distribution Record Date" means the Effective Date unless a
different date is ordered by the Bankruptcy Court.
65. "DSD Settlement Agreement" means that Statement of Settlement
Agreement between Debtors and DSD Class Plaintiffs dated February 5, 2004,
whereby the DSD Trust Claims and corresponding litigation was settled.
66. "DSD Settlement Fund" means the fund established under the DED
Settlement Agreement in the amount of $17.5 million.
67. "DSD Trust Claims" means those claims of certain vendors that
arose from the direct shipment of goods to retailers, and which Claims were
settled in the DSD Settlement Agreement.
68. "DTC" means The Depository Trust Company.
69. "Effective Date" means the date selected by the Debtors and
the Committee on which: (a) no stay of the Confirmation Order is in effect, and
(b) all conditions specified in Article XI herein have been (i) satisfied or
(ii) waived pursuant to Section XI.C. The Effective Date is anticipated to be
seven days after the Confirmation Date.
70. "Entity" means an entity as defined in section 101(15) of the
Bankruptcy Code.
71. "Equity Interest" means (a) any equity interest in Fleming,
including, but not limited to, all issued, unissued, authorized or outstanding
shares or stock (including the Old Stock) and (b) any interest, including but
not limited to, any warrant, options, conversion privileges or contract rights
to purchase or acquire any equity security of Fleming at any time.
72. "Estate" means the estate of each Debtor created by section
541 of the Bankruptcy Code upon the commencement of the Chapter 11 Cases.
73. "Exceeded Allowed Insured Claims" means a Claim covered by the
Casualty Insurance Program where the sum of the Insured Claim plus the Debtor's
expenses on account of such Claim exceeds the Aggregate Limit.
74. "Exchange Agent" means the institution engaged by the Debtors
to conduct the exchange of certain securities as provided for herein.
6
75. "Excluded Releasees" means those parties listed on Exhibit B
filed herewith, which Exhibit shall be mutually agreed upon by the Debtors and
the Committee.
76. "Exit Financing Facility" means the senior secured term and
revolving credit facilities in the anticipated aggregate amount of [$250
MILLION], that will be entered into by Core Mark Newco on the Effective Date on
substantively the terms set forth on Exhibit 7 to the Disclosure Statement.
77. "File" or "Filed" means file or filed with the Bankruptcy
Court in the Chapter 11 Cases.
78. "Filing Subsidiaries" means Core-Mark International, Inc.;
ABCO Food Group, Inc.; ABCO Markets, Inc.; ABCO Realty Corp.; ASI Office
Automation, Inc.; C/M Products, Inc.; Core-Mark Interrelated Companies, Inc.;
Core-Mark Mid-Continent, Inc.; Dunigan Fuels, Inc.; Favar Concepts, Ltd.;
Fleming Foods Management Co., L.L.C., Fleming Foods of Texas, L.P.; Fleming
International, Ltd.; Fleming Supermarkets of Florida, Inc.; Fleming
Transportation Service, Inc.; Food 4 Less Beverage Company, Inc.; Fuelserv,
Inc.; General Acceptance Corporation; Head Distributing Company; Marquise
Ventures Company, Inc.; Minter-Weisman Co.; Piggly Wiggly Company; Progressive
Realty, Inc.; Rainbow Food Group, Inc.; Retail Investments, Inc.; Retail
Supermarkets, Inc.; RFS Marketing Services, Inc.; and Richmar Foods, Inc.
79. "Final Decree" means the decree contemplated under Bankruptcy
Rule 3022.
80. "Final DIP Order" means that Final Order entered by the
Bankruptcy Court on May 6, 2003, providing final authorization for the Debtors
to utilize the DIP Credit Facility.
81. "Final Order" means an order or judgment of the Bankruptcy
Court, or other court of competent jurisdiction with respect to the subject
matter, which has not been reversed, stayed, modified or amended, and as to
which the time to appeal or seek certiorari has expired and no appeal or
petition for certiorari has been timely taken, or as to which any appeal that
has been taken or any petition for certiorari that has been or may be filed has
been resolved by the highest court to which the order or judgment was appealed
or from which certiorari was sought.
82. "First Administrative Bar Date" means January 15, 2004.
83. "First Administrative Bar Date Order" means the Order
Establishing Deadline for Filing Requests for Allowance of Certain
Administrative Expense Claims, Approving Form and Manner of Notice thereof and
Approving Proof of Administrative Claim Form dated November 26, 2003.
84. "Fleming" means Fleming Companies, Inc.
85. "Fleming Convenience" means Core-Mark International Inc.,
Core-Mark Interrelated Companies, Inc., Core-Mark Mid Continent Inc.,
Minter-Weisman Co., Head Distributing Company and the Debtors' other related
convenience store operations.
86. "FSA" means the $75 million reserve established under
paragraph 6 of the Bankruptcy Court's Order entered on August 15, 2003 (Docket
No. 3142) approving the sale of the Debtors' Wholesale Distribution Business to
C&S, which reserve has been reduced pursuant to the Bankruptcy Court's Order
entered on December 23, 2003 (Docket No. 5224).
87. "FSA Participants" means those creditors who are entitled to
assert "Offset Rights" against the FSA as specifically set forth under paragraph
6 of the Bankruptcy Court's Order entered on August 15, 2003 (Docket No. 3142)
approving the sale of the Debtors' Wholesale Distribution Business to C&S.
88. "General Unsecured Claim" means any Claim against any Debtor
that is not a Claim within Classes 1, 2, 3(A), 3(B), 3(C), 4, 5, 8 and 9 and is
not an Administrative Claim, Priority Tax Claim or DIP Claim.
89. "Holder" and, collectively, "Holders" mean a Person or Entity
holding an Equity Interest or Claim, including a Holder of the Old Notes or the
Old Stock, and with respect to a vote on the Plan, means the Beneficial Holder
as of the Record Date or any authorized signatory who has completed and executed
a Ballot or on whose behalf a Master Ballot has been completed and executed in
accordance with the Voting Instructions.
7
90. "Impaired" means with respect to any Class of Claims or Equity
Interests, that such Claims or Equity Interests will not be paid in full upon
the effectiveness of this Plan, will not be reinstated or will be changed by the
reorganization effectuated hereby.
91. "Impaired Claim" means a Claim classified in an Impaired Class
of Claims.
92. "Impaired Class" means each of the Classes that is not an
Unimpaired Class.
93. "Indentures" means, collectively, the 5 1/4% Convertible
Senior Subordinated Notes Indenture, the 9 1/4% Senior Notes Indenture, the 9
7/8 % Senior Subordinated Notes Indenture, the 10 1/8 % Senior Notes Indenture
and the 10 5/8 % Senior Subordinated Notes Indenture.
94. "Insurance Program" means the comprehensive collection of
insurance policies maintained by the Debtors, which includes, but is not limited
to, policies for (i) workers' compensation, (ii) directors & officers liability,
and (iii) casualty events.
95. "Insurance Security" means the certain letters of credit
issued by third-parties to secure the Debtors' liabilities to the Insurers under
the Insurance Program.
96. "Insurers" means the insurance carriers that provide insurance
policies to the Debtors pursuant to the Insurance Program.
97. "Intercompany Claims" means any Claim held by any Debtor
against any other Debtor or any Claim held by a Debtor subsidiary that is not a
Filing Subsidiary against any Debtor.
98. "Inventory" means products and supplies of the Debtors, on
hand or in transit on the Petition Date, specifically excluding Cash, property,
plant and equipment, capital leases or similar items.
99. "Litigation Claims" means all Avoidance Actions and Vendor
Deductions.
100. "Management Incentive Plan" means that certain equity
incentive program (the terms of which shall be outlined in a term sheet to be
filed 15 days prior to the Voting Deadline) pursuant to which certain key
employees of the Reorganized Debtors or its subsidiaries will receive or have
the right to receive up to [__%] of the New Common Stock to be issued pursuant
hereto.
101. "Master Ballots" mean the master ballots accompanying the
Disclosure Statement upon which Holders of Old Notes shall indicate their
acceptance or rejection of the Plan in accordance with the Voting Instructions.
102. "New Common Stock" means the shares of Core-Mark Newco common
stock, par value $.01 per share, to be authorized pursuant to its Certificate of
Incorporation which shall be issued pursuant to this Plan.
103. "Nominee" means any broker, dealer, commercial bank, trust
company, savings and loan, financial institution or other nominee in whose name
securities are registered or held of record on behalf of a Beneficial Holder.
104. "Objection Deadline" means that date which is one year after
the Effective Date or such later date as the Court may allow upon request by the
Reorganized Debtors or the Post Confirmation Representative, as applicable, by
which the Debtors, the Post Confirmation Representative or any party in interest
has to file an objection to any Claim not previously allowed.
105. "Old Notes" means the 5 1/4% Convertible Senior Subordinated
Notes, the 9 1/4% Senior Notes, the 9 7/8% Senior Subordinated Notes, the
10 1/8% Senior Notes and the 10 5/8% Senior Subordinated Notes.
106. "Old Notes Trustees" means Bank One, N.A, the Bank of New York
and Bankers Trust Company.
107. "Old Republic Letters of Credit" means the letters of credit
obtained by the Debtors, for the benefit of Old Republic Insurance Company, to
secured any obligations owed by the Debtors to Old Republic
8
Insurance Company pursuant to the Old Republic Program agreement and the Old
Republic Policies that were issued thereunder.
108. "Old Republic Policies" means the insurance policies issued to
the Debtors by Old Republic Insurance Company pursuant to the Old Republic
Program Agreement, as amended.
109. "Old Republic Program Agreement" means the agreement, as
amended, between the Debtors and Old Republic Insurance Company, dated July 1,
2002, pursuant to which Old Republic issued insurance policies that provided
insurance coverage to the Debtors from July 1, 2002 through January 1, 2005.
110. "Old Senior Notes" means the 9 1/4% Senior Notes and the
10 1/8% Senior Notes.
111. "Old Senior Subordinated Notes" means the 5 1/4% Convertible
Senior Subordinated Notes, the 9 7/8% Senior Subordinated Notes and the 10 5/8%
Senior Subordinated Notes.
112. "Old Stock" means all of the issued and outstanding shares of
Fleming common stock, $.01 par value per share.
113. "Other Priority Non-Tax Claim" means any Claim accorded
priority in right of payment under section 507(a) of the Bankruptcy Code, other
than a Priority Tax Claim or an Administrative Claim.
114. "Other Secured Claims" means secured claims not in Classes
1(B), 2, 3(B) or 3(C).
115. "Other Securities Claims and Interests" means (a) any Equity
Interest (other than Old Stock), including, but not limited to, any warrants,
options, conversion privileges or contract rights to purchase or acquire any
equity securities of Fleming at any time, and (b) any Claims, obligations,
rights, suits, damages, causes of action, remedies, and liabilities whatsoever,
whether known or unknown, foreseen or unforeseen, currently existing or
hereafter arising, in law, equity or otherwise arising from the purchase or sale
of a security of Fleming or the rescission of a purchase or sale of a security
of Fleming (including the Old Notes and Old Stock) or the purchase or sale of a
security of any affiliate of Fleming or the rescission of a purchase or sale of
a security of any affiliate of Fleming, for damages arising from the purchase,
sale or holding of such securities or the exercise of an option, warrant,
conversion privilege or contractual right to such purchase or sale, or for
reimbursement, indemnification or contribution allowed under section 502 of the
Bankruptcy Code on account of such a Claim.
116. "Over-Deductible Amount" means that portion of an Insured
Claim that exceeds the Deductible Amount.
117. "PACA/PASA Claims" means Claims asserted pursuant to the
Perishable Agricultural Commodities Act, 7 U.S.C. Section 499a et seq., the
Packers and Stockyard Act, 7 U.S.C. Section 181 et seq., or state statutes of
similar import.
118. "Person" means a person as defined in section 101(41) of the
Bankruptcy Code.
119. "Petition Date" means April 1, 2003, the date on which the
Debtors filed their petitions for relief commencing the Chapter 11 Cases.
120. "Plan" means this Chapter 11 Plan of Reorganization, either in
its present form or as it may be altered, amended, modified or supplemented from
time to time in accordance with the Plan, the Bankruptcy Code and the Bankruptcy
Rules.
121. "Post Confirmation Representative" means the trustee under the
Post Confirmation Trust Agreement.
122. "Post Confirmation Trust" means that trust that shall be
created pursuant to the Plan and the Post Confirmation Trust Agreement for the
purposes of carrying out certain provisions of the Plan.
123. "Post Confirmation Trust Advisory Board" means that board
created to advise the Post Confirmation Trust, as outlined in section V.G.2
herein.
9
124. "Post Confirmation Trust Agreement" means that agreement, a
draft of which is attached to the Disclosure Statement as Exhibit 9, that shall
be entered into by the Debtors, the Committee and the Post Confirmation
Representative on or before the Effective Date, and which shall govern the Post
Confirmation Trust.
125. "Post Confirmation Trust Distributable Assets" means the
assets in the Post Confirmation Trust, net of expenses, reserves and the payment
of certain Claims and obligations under the Plan and otherwise as outlined in
more detail in the Post Confirmation Trust Agreement, which are available for
distribution to the Holders of Allowed Class 3(B) or Class 5 Claims.
126. "Post-Petition Lenders" means the lenders under the DIP Credit
Facility or any lender participating in the refinancing of the DIP Credit
Facility, including but not limited to a refinancing lender which takes an
assignment of the DIP Credit Facility or the Claims of the Post-Petition Lenders
thereunder.
127. "Preference Actions" means those avoidance actions provided
for in section 547 of the Bankruptcy Code.
128. "Pre-Petition Agent" means each agent under, and as defined
in, the Pre-Petition Credit Agreement, including, each Joint Book Manager and
each Joint Lead Arranger, in each case under, and as defined in, the
Pre-Petition Credit Agreement.
129. "Pre-Petition Credit Agreement" means the Credit Agreement
dated June 18, 2002, as amended, among the Debtors and the lenders party thereto
providing for secured credit borrowing term loans and letters of credit in an
aggregate amount of $755,000,000 or any refinancing thereof, including but not
limited to a refinancing whereby the refinancing lender takes an assignment of
the Pre-Petition Credit Agreement or the Claims of the Pre-Petition Lenders
thereunder.
130. "Pre-Petition Lenders" means the lenders pursuant to the
Pre-Petition Credit Agreement or any lender to a refinancing of the Pre-Petition
Credit Agreement, including, but not limited to, a lender which takes an
assignment of the Pre-Petition Credit Agreement or the Claims of the
Pre-Petition Lenders thereunder.
131. "Pre-Petition Lenders' Secured Claims" means the Claims
arising under the Pre-Petition Credit Agreement.
132. "Priority Tax Claim" means a Claim of a governmental unit
(including any Canadian taxing authority) of the kind specified in section
507(a)(8) of the Bankruptcy Code, including Claims of a governmental unit for
which a surety bond may be posted, but excluding Property Tax Claims.
133. "Professional," or, collectively, "Professionals" means a
Person or Entity (a) employed pursuant to a Final Order in accordance with
sections 327 and 1103 or 363 of the Bankruptcy Code and to be compensated for
services rendered prior to the Effective Date pursuant to sections 327, 328,
329, 330 and 331 or 363 of the Bankruptcy Code, or (b) for which compensation
and reimbursement has been allowed by the Bankruptcy Court pursuant to section
503(b)(4) of the Bankruptcy Code.
134. "Professional Fee Escrow Account" means the account
established by the Reorganized Debtors on the Effective Date, solely for the
purpose of paying all accrued and anticipated Professional Fees through the
Effective Date.
135. "Professional Fees" means all fees and expenses (including,
but not limited to, success fees, if any) for services rendered by all
Professionals in the Chapter 11 Cases through the Effective Date that the
Bankruptcy Court has not denied by Final Order, regardless of whether a fee
application has been filed for such fees.
136. "Property Tax Claims" means a claim of a governmental unit for
taxes owing with respect to real or personal property owned by the Debtors,
including ad valorem taxes, which claim may be but is not necessarily secured by
the real or personal property on which the tax is owing.
137. "PMSI" means a purchase money security interest as defined in
Section 9-312 of the Uniform Commercial Code.
10
138. "Ratable Proportion" means the ratio (expressed as a
percentage) of the amount of an Allowed Claim in a Class to the aggregate amount
of all Allowed Claims in the Class.
139. "Reclamation Claims" means Claims to which a Trustee's
avoidance powers are subject pursuant to section 546(c) of the Bankruptcy Code.
140. "Record Date" means [_______], 2004.
141. "Releasees" means, other than the Excluded Releasees, each of
the Debtors, the Reorganized Debtors, Core-Mark Newco, each of the D&O
Releasees, the Pre-Petition Lenders, the Old Notes Trustees, the Post-Petition
Lenders, the Tranche B Lenders, the Committee, each member of the Committee, the
Post Confirmation Representative and the Post Confirmation Trust Advisory Board,
the Agents and the affiliates, agents and professionals of each of the
foregoing, each in their capacity as such.
142. "Reorganized Debtors" means collectively Core-Mark Newco, and
Core-Mark International, Inc., Core-Mark Mid-Continent, Inc., General Acceptance
Inc., C/M Products, Inc., ASI Office Automation, Inc., E.A. Morris Distributors,
Inc., Head Distributing Company, Marquise Ventures Company, Inc. and
Minter-Weisman Co. or any successor thereto by merger, consolidation, or
otherwise, on and after the Effective Date.
143. "Restated By-laws" means the restated by-laws of the
Reorganized Debtors, if necessary, the form of which shall be Filed 20 days
prior to the Confirmation Hearing.
144. "Restated Certificate of Incorporation" means those certain
Restated Certificates of Incorporation of the Reorganized Debtors which,
pursuant hereto, are to be filed with the Secretary of State of the State of
Delaware, the form of which shall be filed 20 days prior to the Confirmation
Hearing.
145. "Schedules" mean the schedules of assets and liabilities,
schedules of executory contracts, and the statement of financial affairs filed
by the Debtors pursuant to section 521 of the Bankruptcy Code, the Official
Bankruptcy Forms and the Bankruptcy Rules, as they have been and may be amended
and supplemented from time to time.
146. "Second Administrative Bar Date" means that date that is
forty-five (45) days after the Effective Date.
147. "Securities Act" means the Securities Act of 1933, 15 U.S.C.
sections 77a-77aa, as now in effect or hereafter amended, or any similar
federal, state or local law.
148. "Senior Note Claims" means those Claims derived from or based
upon the Old Senior Notes.
149. "Senior Notes Indentures" means the 9 1/4% Senior Notes
Indenture and the 10 1/4 Senior Notes Indenture.
150. "Senior Notes Indenture Trustee" means the Bank of New York.
151. "Senior Subordinated Note Claims" means those Claims derived
from or based upon 5 1/4% Convertible Senior Subordinated Notes, the 9 7/8 %
Senior Subordinated Notes and the 10 5/8 % Senior Subordinated Notes.
152. "Trade Credit Program" means that program established under
the Final DIP Order providing a junior lien to Approved Trade Creditors who made
post-petition credit available to the Debtors.
153. "Tranche B Lenders" means those lenders who are participants
in the Tranche B Loan.
154. "Tranche B Loan" means the loan of up to $60,000,000 of term
credit extensions to be made by the Tranche B Lenders to Core-Mark Newco on the
Effective Date on substantially the terms set forth on Exhibit 8 to the
Disclosure Statement.
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155. "Unclassified Claims" means those Administrative and Priority
Claims described in Article II herein.
156. "Under-Deductible Insured Claims" means a Claim under the
Casualty Insurance Program, where the sum of the amount of the Insured Claim
plus the Debtors' expenses on account of such Claim, equals or is less than the
applicable per-occurrence deductible amount payable by the applicable Debtor(s)
under the relevant insurance policies.
157. "Unimpaired Claims" means Claims in an Unimpaired Class.
158. "Unimpaired Class" means an unimpaired Class within the
meaning of section 1124 of the Bankruptcy Code.
159. "Unsecured Claim" means any Claim against any Debtor that is
not a Secured Claim, Administrative Claim, DIP Claim, Priority Tax Claim, Other
Priority Claim or Other Secured Claim.
160. "Valid Reclamation Claims" means those Reclamation Claims with
an interest in the Debtors' Inventory under section 546 of the Bankruptcy Code
to the extent such Inventory has value in excess of the aggregate dollar amount
of Allowed Class 2 and Class 3(B) Claims.
161. "Vendor Deductions" means the amounts owed by vendors to the
Debtors, relating to the provision of pre-petition and post-petition goods and
services that remain unpaid as of the Effective Date.
162. "Voting Class" means any class of Claims entitled to vote on
the Plan.
163. "Voting Deadline" means the date stated in the Voting
Instructions by which all Ballots must be received.
164. "Voting Instructions" mean the instructions for voting on the
Plan contained in section III of the Disclosure Statement entitled "Voting and
Confirmation of the Plan" and in the Ballots and the Master Ballots.
165. "Wholesale Distribution Business" means that business segment
of the Debtors sold under section 363 of the Bankruptcy Code pursuant to the
Bankruptcy Court's Order dated August 15, 2003.
166. "Workers' Compensation Program" means the workers'
compensation insurance maintained by the Debtors to insure against injuries to
their employees that were incurred while certain employees were performing in
their respective employment positions with the Debtors.
ARTICLE II.
UNCLASSIFIED CLAIMS
A. Administrative Claims
Subject to the provisions of section 330(a) and 331 of the Bankruptcy
Code, each Holder of an Allowed Administrative Claim, including Holders of
Allowed Approved Trade Creditor Lien Claims, but excluding claims for
Professional Fees, will be paid the full unpaid amount of such Allowed
Administrative Claim in Cash (i) on the Effective Date or as soon as practicable
thereafter, or (ii) if such Administrative Claim is Allowed after the Effective
Date, as soon as practicable after the date such Claim is Allowed, or (iii) upon
such other terms as may be agreed upon by such Holder and the applicable
Reorganized Debtor or otherwise upon an order of the Bankruptcy Court; provided
that Allowed Administrative Claims including Allowed Approved Trade Creditor
Lien Claims representing obligations incurred in the ordinary course of business
or otherwise assumed by the Debtors or Reorganized Debtors pursuant hereto will
be assumed on the Effective Date and paid or performed by the applicable
Reorganized Debtor when due in accordance with the terms and conditions of the
particular agreements governing such obligations.
Except as provided herein, Holders of Administrative Claims that arose
on or before October 31, 2003 to which the First Administrative Bar Date did not
apply and Holders of Administrative Claims that arose after October
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31, 2003 that have not been paid as of the Effective Date, must file an
Administrative Claim by the Second Administrative Bar Date. If an Administrative
Claim is not timely filed by the First Administrative Bar Date or the Second
Administrative Bar Date, as applicable, then such Administrative Claim shall be
forever barred and shall not be enforceable against the Debtors or the
Reorganized Debtors, their successors, their assigns or their property. The
foregoing requirements to file Administrative Claims by the relevant bar date
shall not apply to the (i) Administrative Claims of Professionals retained
pursuant to sections 327 and 328 of the Bankruptcy Code; (ii) expenses of
members of the Official Committee of Unsecured Creditors; (iii) all fees payable
and unpaid under 28 U.S.C. Section 1930; (iv) any fees or charges assessed
against the estates of the Debtors under 28 U.S.C. Section 123; (v) Intercompany
Claims between Debtors and their affiliates; and (vi) Administrative Claims
arising in the ordinary course of business relating to inventory, services or
supplies provided by trade vendors or service providers which are paid or
payable by the Debtors in the ordinary course of business. An objection to an
Administrative Claim filed pursuant to this provision must be filed and properly
served within 220 days after the Effective Date. The Debtors and the Post
Confirmation Representative, as applicable, reserve the right to seek an
extension of such time to object.
All Professionals that are awarded compensation or reimbursement by the
Bankruptcy Court in accordance with sections 330, 331 or 363 of the Bankruptcy
Code that are entitled to the priorities established pursuant to sections
503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code, shall be
paid in full, in Cash, the amounts allowed by the Bankruptcy Court: (a) on or as
soon as reasonably practicable following the later to occur of (i) the Effective
Date; and (ii) the date upon which the Bankruptcy Court order allowing such
Claim becomes a Final Order; or (b) upon such other terms as may be mutually
agreed upon between such Professional and the Reorganized Debtors. On or before
the Effective Date and prior to any distribution being made under the Plan, the
Debtors shall escrow into the Professional Fee Escrow Account, the Carve-Out and
the Additional Carve-Out as outlined in the Final DIP Order and any additional
estimated accrued amounts owed to Professionals through the Effective Date.
Except as otherwise provided by Court order for a specific
Professional, Professionals or other entities requesting compensation or
reimbursement of expenses pursuant to sections 327, 328, 330, 331, 503(b) and
1103 or 363 of the Bankruptcy Code for services rendered prior to the
Confirmation Date must file and serve an application for final allowance of
compensation and reimbursement of expenses no later than forty-five (45) days
after the Effective Date. All such applications for final allowance of
compensation and reimbursement of expenses will be subject to the authorization
and approval of the Court. Any objection to the Claims of Professionals shall be
filed on or before thirty (30) days after the date of the filing of the
application for final compensation.
Allowed Administrative Claims, which shall be paid in full under the
Plan, are currently estimated to be in the range of $96 to $125 million as of
the Effective Date.(2)
B. Priority Tax Claims
In full satisfaction, settlement, release, and discharge of, and in
exchange for, each Allowed Priority Tax Claim that is due and payable on or
prior to the Effective Date: (i) if payment of the Allowed Priority Tax Claim is
not secured or guaranteed by a surety bond or other similar undertaking,
commencing on the Effective Date or as soon as practicable thereafter, the
Holder of such Claim shall be paid the principal amount of such Claim plus
simple interest on any outstanding balance from the Effective Date calculated at
the interest rate available on ninety (90) day United States Treasuries on the
Effective Date, in quarterly deferred Cash payments over a period not to exceed
six years after the date of assessment of the tax on which such Claim is based,
unless the Debtor and Holder mutually agree to a different treatment or as
otherwise ordered by the Court; (ii) if payment of the Allowed Priority Tax
Claim is secured or guaranteed by a surety bond or other similar undertaking,
the Holder of the Allowed Priority Tax Claim shall be required to seek payment
of its Claim from the surety in the first instance and only after exhausting all
right to payment from its surety bond or other similar undertaking shall the
Holder be permitted to seek payment from the Debtors under this Plan as a holder
of an Allowed Priority Tax Claim and the remainder
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(2) This estimate does not include accounts payable and accrued liabilities
incurred in the ordinary course of business and carried through the
Effective Date by Core-Mark Newco.
13
owing on an Allowed Claim after deducting all payments received from the surety,
shall be treated as outlined in clause (i) above.
Allowed Priority Tax Claims, which shall be paid in full under the
Plan, are currently estimated to be in the range of $11 to 13 million as of the
Effective Date.
C. DIP Claims
On the Effective Date, or as soon as practicable thereafter, each
Holder of an Allowed DIP Claim shall be paid in full in Cash in full
satisfaction, settlement, release and discharge of and in exchange for each and
every Allowed DIP Claim, unless such Holder consents to other treatment.
Allowed DIP Claims, which are comprised of letters of credit
outstanding and which shall be paid in full under the Plan, are currently
estimated to be in the range of $25 to 30 million as of the Effective Date.
ARTICLE III.
CLASSIFICATION AND TREATMENT
OF CLASSIFIED CLAIMS AND EQUITY INTERESTS
A. Summary
Class Status Voting Rights
Class 1(A) -- Other Priority Non-Tax Claims Unimpaired -- not entitled to vote
Class 1(B) -- Property Tax Claims Impaired -- entitled to vote
Class 2 -- Pre-Petition Lenders' Secured Claims Unimpaired -- not entitled to vote
Class 3(A) -- Other Secured Claims that are not Unimpaired -- not entitled to vote
Class 1(B) Claims
Class 3(B) -- Approved Trade Creditor Reclamation Impaired -- entitled to vote
Lien Claims
Class 3(C) -- DSD Trust Claims Impaired -- entitled to vote
Class 4 -- PACA/PASA Claims Unimpaired -- not entitled to vote
Class 5 -- Reclamation Claims that are not Class Impaired -- entitled to vote
3(B) Claims
Class 6 -- General Unsecured Claims Impaired -- entitled to vote
Class 7 -- Convenience Claims Impaired -- entitled to vote
Class 8 -- Equity Interests Impaired -- not entitled to vote
Class 9 -- Intercompany Claims Impaired -- not entitled to vote
Class 10 -- Other Securities Claims and Interests Impaired -- not entitled to vote
B. Classification and Treatment
1. Class 1(A)--Other Priority Non-Tax Claims
(a) Classification: Class 1(A) consists of all Allowed
Other Priority Non-Tax Claims.
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(b) Treatment: In full satisfaction, settlement, release,
and discharge of, and in exchange for, each Allowed Other Priority
Non-Tax Claim that is due and payable on or prior to the Effective
Date, on the Effective Date or as soon as practicable thereafter, the
Holder of such Claim shall be paid the principal amount of such Claim,
unless the Holder consents to other treatment.
(c) Voting: Class 1(A) is not impaired and the Holders of
Class 1(A) Claims are conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the
Holders of Claims in Class 1(A) are not entitled to vote to accept or
reject the Plan.
(d) Claims Estimate: Allowed Class 1(A) Claims are
currently estimated to be in the range of $6 to 15 million as of the
Effective Date.
2. Class 1(B)--Property Tax Claims
(a) Classification: Class 1(B) consists of all Allowed
Property Tax Claims.
(b) Treatment: In full satisfaction, settlement, release,
and discharge of, and in exchange for, each Allowed Property Tax Claim
that is due and payable on or prior to the Effective Date, commencing
on the Effective Date or as soon as practicable thereafter, the Holder
of such Allowed Property Tax Claim shall be paid the principal amount
of such Claim plus simple interest on any outstanding balance from the
Effective Date calculated at the interest rate available on ninety (90)
day United States Treasuries on the Effective Date, in quarterly
deferred Cash payments over a period not to exceed six years after the
date of assessment of the tax on which such Claim is based, unless the
Debtor and Holder mutually agree to a different treatment.
(c) Voting: Class 1(B) is impaired and the Holders of
Class 1(B) Claims are entitled to vote to accept or reject the Plan.
(d) Claims Estimate: Allowed Class 1(B) Claims are
currently estimated to be in the range of $5-6 million as of the
Effective Date.
3. Class 2--Pre-Petition Lenders' Secured Claims
(a) Classification: Class 2 consists of all Allowed
Pre-Petition Lenders' Secured Claims.
(b) Treatment: On the Effective Date, or as soon as
practicable thereafter, unless such Holder consents to other treatment,
each Holder of an Allowed Pre-Petition Lenders' Secured Claim shall be
paid in full and shall either (i) assign its liens in the Debtors'
assets to the lender under the Exit Financing Facility or (ii) assign
its liens in the Debtors' assets to Core-Mark Newco, which liens as
assigned shall have the same validity and priority as such liens held
by the Holders of the Class 2 Claims, and which liens as assigned shall
be subject to further transfer to the Post Confirmation Trust, as
applicable.
Any default with respect to any Class 2 Claim that existed immediately
prior to the filing of the Chapter 11 Cases shall be deemed cured upon
the Effective Date.
(c) Voting: Class 2 is not impaired and the Holders of
Class 2 Claims are conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the
Holders of Claims in Class 2 are not entitled to vote to accept or
reject the Plan.
(d) Claims Estimate: Allowed Class 2 Claims which shall
be paid in full under the Plan are currently estimated to be
approximately $200-220 million as of the Effective Date.
4. Class 3(A)-- Other Secured Claims that are not Class 1(B)
Claims
(a) Classification: Class 3(A) consists of all Allowed
Other Secured Claims that are not Class 1(B) Claims.
15
(b) Treatment: On the Effective Date or as soon as
practicable thereafter, each Holder of an Allowed Other Secured Claim
that is not a Class 1(B) Claim (e.g. PMSI Holders, equipment financing
lenders, etc.) shall receive one of the following treatments, at the
Debtors' option, such that they shall be rendered unimpaired pursuant
to section 1124 of the Bankruptcy Code: (i) the payment of such
Holder's Allowed Other Secured Claim in full, in Cash; (ii) the sale or
disposition proceeds of the property securing such Allowed Other
Secured Claim to the extent of the value of the Holder's interests in
such property; or (iii) the surrender to the Holder of the property
securing such Claim.
(c) Voting: Class 3(A) is unimpaired and Holders of Class
3(A) Claims are conclusively deemed to have accepted the Plan pursuant
to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of
Claims in Class 3(A) are not entitled to vote to accept or reject the
Plan.
(d) Claims Estimate: Allowed Class 3(A) Claims are
currently estimated to be in the range of $750,000 to $2 million as of
the Effective Date.
5. Class 3(B)--Approved Trade Creditor Reclamation Lien Claims
(a) Classification: Class 3(B) consists of all Allowed
Approved Trade Creditor Reclamation Lien Claims.
(b) Treatment: On the Effective Date, or as soon as
practicable thereafter, the Post Confirmation Trust, shall issue the
Class 3B Preferred Interests in favor of the Holders of Allowed
Approved Trade Creditor Reclamation Lien Claims in the estimated
aggregate amount of such Allowed Claims under the terms and conditions
of the 3B Preferred Interests Term Sheet (with the interests to be
reissued as such Claims are Allowed by Final Order or settlement) and
grant a first priority lien to such Holders on the Post Confirmation
Trust Distributable Assets entitling each Holder of an Allowed Approved
Trade Creditor Reclamation Lien Claim to its Ratable Proportion of the
Post Confirmation Trust Distributable Assets up to the total amount of
each Holders' Allowed Approved Trade Creditor Reclamation Lien Claim,
in full satisfaction, settlement, release and discharge of each Allowed
Approved Trade Creditor Reclamation Lien Claim, unless such Holder
agrees to other treatment, and subject at the Debtors' option, to
reduction for unpaid post-petition deductions, preference payments and
other applicable setoff rights.
As additional security for the Class 3B Preferred Interests,
Core-Mark Newco shall provide a junior secured guarantee under the
terms outlined in the Class 3B Preferred Interests Term Sheet.
(c) Voting: Class 3(B) is impaired and Holders of Class
3(B) Claims are entitled to vote to accept or reject the Plan.
(d) Claims Estimate: Allowed Class 3(B) Claims are
currently estimated to be in the range of $43-55 million as of the
Effective Date prior to setoffs which may be available to the Debtors
and will be paid in full under the Plan by the Post Confirmation Trust
or Core-Mark Newco as outlined in the Disclosure Statement and the
Class 3(B) Preferred Interests Term Sheet filed therewith.
6. Class 3 (C)--DSD Trust Claims
(a) Classification: Class 3(C) consists of all Allowed
DSD Trust Claims.
(b) Treatment: Each Holder of an Allowed DSD Trust Claim
shall be paid in full satisfaction, settlement, release and discharge
of each Allowed DSD Trust Claim in Cash their Ratable Proportion of the
DSD Settlement Fund as outlined in the DSD Settlement Agreement.
(c) Voting: Class 3(C) is impaired and Holders of Claims
in Class 3(C) are entitled to vote to accept or reject the Plan.
(d) Claims Estimate: The DSD Settlement Fund pursuant to
the DSD Settlement Agreement shall be in the amount of $17.5 million.
16
7. Class 4--PACA/PASA Claims
(a) Classification: Class 4 consists of all Allowed
PACA/PASA Claims.
(b) Treatment: In full satisfaction, settlement, release,
and discharge of, and in exchange for, each Allowed PACA/PASA Claim
that is due and payable on or prior to the Effective Date, on the
Effective Date or as soon as practicable thereafter, the Holder of such
Claim shall be paid the principal amount of such Claim, unless the
Holder consents to other treatment.
(c) Voting: Class 4 is unimpaired and Holders of Allowed
Claims in Class 4 are conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the
Holders of Claims in Class 4 are not entitled to vote to accept or
reject the Plan.
(d) Claims Estimate: Allowed Class 4 Claims which shall
be paid in full under the Plan are currently estimated to be in the
range of $8-$14 million as of the Effective Date.
8. Class 5--Valid Reclamation Claims that are not Class 3(B)
Claims
(a) Classification: Class 5 consists of Allowed Valid
Reclamation Claims that are not Class 3(B) Claims.
(b) Treatment: To the extent the Court determines that
the Holders of Reclamation Claims that are not Class 3(B) Claims are
entitled to priority treatment, on the Effective Date, or as soon as
practicable thereafter, the Post Confirmation Trust, shall issue the
Class 5 Preferred Interests in favor of such Holders in the estimated
aggregate amounts of their Allowed Claims under the terms and
conditions of the Class 5 Preferred Interests Term Sheet (with the
interests to be reissued as such Claims are Allowed by Final Order or
settlement) and grant a second priority lien on the Post Confirmation
Trust Distributable Assets entitling each Holder to its Ratable
Proportion of the Post Confirmation Trust Distributable Assets after
all Class 3(B) Claims are paid in full.
As additional security for the Class 5 Preferred Interests in
the event the Court determines that the Holders of Class 5 Claims are
entitled to priority treatment, Core-Mark Newco shall provide a junior
secured guarantee under the terms outlined in the Class 5 Preferred
Interests Term Sheet.
In the event the Court denies the Holders of Reclamation
Claims that are not Class 3(B) Claims priority treatment, such
Reclamation Claims shall be treated as Class 6 Claims hereunder, and
any ballots cast by Holders of Class 5 Claims shall be counted as
ballots cast by Holders of Class 6 Claims.
(c) Voting: Class 5 is impaired and Holders of Allowed
Claims in Class 5 are entitled to vote to accept or reject the Plan.
(d) Claims Estimate: Allowed Class 5 Claims are currently
estimated to be in the range of $0-$80 million as of the Effective Date
prior to giving affect to all of the Debtors' prepetition deductions,
and to the extent the Court determines the Holders of Class 5 Claims
are entitled to priority treatment, the Holders of Class 5 claims will
be paid in full under the Plan by the Post-Confirmation Trust or
Core-Mark Newco as outlined in the Disclosure Statement and the Class 5
Preferred Interests Term Sheet filed therewith.(3)
9. Class 6--General Unsecured Claims other than Convenience
Claims
(a) Classification: Class 6 consists of all Allowed
General Unsecured Claims other than Convenience Claims.
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(3) As per the November 21, 2003 Reclamation Claims Summary report filed
with the Court by the Debtors, this estimate is net of setoff of
prepetition deductions.
17
(b) Treatment: On the Effective Date, or as soon as
practicable thereafter, each Holder of an Allowed General Unsecured
Claim other than Convenience Claims shall be paid in full satisfaction,
settlement, release, and discharge of and in exchange for each and
every Allowed General Unsecured Claim other than Convenience Claims, at
the Debtors' option, in one or a combination of the following manners:
(i) issuance of a Ratable Proportion of New Common Stock subject to
dilution from the issuance of warrants to the Tranche B Lenders and
through the Management Incentive Plan; and/or (ii) in the event the
Debtors, with the consent of the Creditors Committee, elect to sell
some or all of their assets as outlined herein, a Ratable Proportion of
Cash remaining from the sale of such assets after all of the Allowed
Unclassified Claims and Claims of Holders in Classes 1 through 5 have
been satisfied in full.
(c) As additional consideration, each Holder of an
Allowed General Unsecured Claim shall be entitled to a Ratable
Proportion of Excess Proceeds (as defined in the Post Confirmation
Trust Agreement), if any, available from the Post Confirmation Trust
after payment by the Post Confirmation Trust of all claims and
obligations required to be made by the Post Confirmation Trust under
the Plan, the Post Confirmation Trust Agreement, or otherwise, as set
forth in the Post Confirmation Trust Agreement.
(d) Voting: Class 6 is impaired and Holders of Claims in
Class 6 are entitled to vote to accept or reject the Plan.
(e) Claims Estimate: Allowed Class 6 Claims are currently
estimated to be in the range of $2.6-$3.2 billion as of the Effective
Date. Based on this estimated range of Allowed Claims and the estimated
value of New Common Stock, the Holders of Class 6 Claims shall be
receiving stock on the Effective Date in Core-Mark Newco with a value
equal to approximately 4% to 7% of the Allowed Amount of each such
Holders' Claim.
10. Class 7 - Convenience Claims
(a) Classification: Class 7 consists of all General
Unsecured Claims, other than the Claims of Holders of Old Notes, of
$5000 or less held by a single Holder. Holders of Old Notes and General
Unsecured Claims in excess of $5,000 may not opt into Class 7.
(b) Treatment: On or as soon as practicable after the
Effective Date, each Holder of an Allowed Class 7 Claim shall receive,
in full and final satisfaction of such Claim, a Cash distribution equal
to 10% of the amount of its Class 7 Claim, provided however, the
aggregate amount of such Allowed Class 7 Claims shall not exceed
$10,000,000. If the aggregate amount of the Allowed Class 7 Claims
exceeds $10,000,000, each Holder of an Allowed Class 7 Claim shall
receive its Ratable Proportion of $1,000,000.
(c) Voting: Class 7 is impaired, and Holders of Class 7
Claims are entitled to vote to accept or reject the Plan.
(d) Claims Estimate: Allowed Class 7 Claims are currently
estimated to be in the range of $5-$10 million as of the Effective
Date.
11. Class 8 - Equity Interests
(a) Classification: Class 8 consists of all Equity
Interests.
(b) Treatment: Receives no distribution and are canceled
as of the Effective Date.
(c) Voting: Class 8 is impaired, but because no
distributions will be made to Holders of Class 8 Equity Interests nor
will such Holders retain any property, such Holders are deemed to
reject the Plan pursuant to section 1126(g) of the Bankruptcy Code.
Class 8 is not entitled to vote to accept or reject the Plan.
12. Class 9 - Intercompany Claims
(a) Classification: Class 9 consists of all Intercompany
Claims.
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(b) Treatment: Receives no distribution and are canceled
as of the Effective Date.
(c) Voting: Class 9 is impaired, but because no
distributions will be made to Holders of Class 9 Claims nor will such
Holders retain any property, such Holders are deemed to reject the Plan
pursuant to section 1126(g) of the Bankruptcy Code. Class 9 is not
entitled to vote to accept or reject the Plan.
13. Class 10 - Other Securities Claims and Interests
(a) Classification: Class 10 consists of all Other
Securities Claims and Interests of whatever kind or nature.
(b) Treatment: Receives no distribution and are cancelled
and discharged as of the Effective Date.
(c) Voting: Class 10 is impaired, but because no
distributions will be made to Holders of Class 10 Claims, such Holders
are deemed to reject the Plan pursuant to section 1126(g) of the
Bankruptcy Code. Class 10 is not entitled to vote to accept or reject
the Plan.
C. Special Provision Governing Unimpaired Claims
Except as otherwise provided in the Plan, nothing under the Plan shall
affect the Debtors' or the Reorganized Debtors' rights in respect of any
Unimpaired Claims, including, but not limited to, all rights in respect of legal
and equitable defenses to, or setoffs or recoupments against, such Unimpaired
Claims.
ARTICLE IV.
ACCEPTANCE OR REJECTION OF THE PLAN
A. Voting Classes
Each Holder of an Allowed Claim in Classes 1(B), 3(B), 3(C), 5, 6 and 7
shall be entitled to vote to accept or reject the Plan.
B. Acceptance by Impaired Classes
An Impaired Class of Claims shall have accepted the Plan if (a) the
Holders (other than any Holder designated under section 1126(e) of the
Bankruptcy Code) of at least two-thirds in amount of the Allowed Claims actually
voting in such Class have voted to accept the Plan and (b) the Holders (other
than any Holder designated under section 1126(e) of the Bankruptcy Code) of more
than one-half in number of the Allowed Claims actually voting in such Class have
voted to accept the Plan.
C. Presumed Acceptance of Plan
Classes 1(A), 2, 3(A) and 4 are unimpaired under the Plan and,
therefore, are presumed to have accepted the Plan pursuant to section 1126(f) of
the Bankruptcy Code.
D. Presumed Rejection of Plan
Classes 8, 9 and 10 are impaired and shall receive no distributions
and, therefore, are presumed to have rejected the Plan pursuant to section
1126(g) of the Bankruptcy Code.
E. Non-Consensual Confirmation
The Debtors and the Committee will seek Confirmation of the Plan under
section 1129(b) of the Bankruptcy Code, to the extent applicable based on the
deemed rejection by Classes 8, 9 and 10 and if any Voting Class fails to accept
the Plan in accordance with section 1129(a)(8) of the Bankruptcy Code. The
Debtors and the Committee reserve the right (a) to request that the Bankruptcy
Court confirm the Plan in accordance with section 1129(b) of the Bankruptcy Code
and/or (b) to modify the Plan in accordance with section XIV.D. hereof.
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ARTICLE V.
MEANS FOR IMPLEMENTATION OF THE PLAN
A. Substantive Consolidation
This Plan is premised upon the limited substantive consolidation of the
Debtors solely for purposes of actions associated with the Confirmation of this
Plan and occurrence of the Effective Date, including, but not limited to,
voting, confirmation and distribution. As a result of this limited substantive
consolidation, a Holder of Claims against one or more of the Debtors arising
from or relating to the same underlying debt that would otherwise constitute
Allowed Claims against two or more Debtors, including, without limitation,
Claims based on joint and several liability, contribution, indemnity,
subrogation, reimbursement, surety, guaranty, co-maker and similar concepts,
shall have only one Allowed Claim on account of such Claims. This Plan does not
contemplate the merger or dissolution of any Debtor which is currently operating
or which currently owns operating assets or the transfer or further commingling
of any asset of any Debtor, except that the assets of Fleming and certain Filing
Subsidiaries already being used by Fleming Convenience in its operations shall
be formally vested in Core-Mark Newco, or one of the Reorganized Debtors and
except to accomplish the distributions under this Plan. Such limited substantive
consolidation shall not affect (other than for Plan voting, treatment, and/or
distribution purposes) (i) the legal and corporate structures of the Reorganized
Debtors or (ii) Equity Interests in the Filing Subsidiaries.
This Plan shall serve as a motion seeking entry of an order
substantively consolidating the Chapter 11 Cases, as described herein. Unless an
objection to substantive consolidation is made in writing by any creditor
affected by this Plan as herein provided on or before 10 days prior to the date
that is fixed by the Bankruptcy Court as the last date on which acceptances to
this Plan may be received, or such other date as may be fixed by the Bankruptcy
Court, the substantive consolidation order (which may be the Confirmation Order)
may be entered by the Bankruptcy Court. In the event any such objections are
timely filed, a hearing with respect thereto shall be scheduled by the
Bankruptcy Court, which hearing may, but need not, coincide with the
Confirmation Hearing.
B. Continued Corporate Existence and Vesting of Assets in the Reorganized
Debtors
Each Reorganized Debtor shall continue to exist after the Effective
Date as a separate legal entity, each with all the powers of a corporation or
partnership, as applicable, under the laws of its respective jurisdiction of
organization and without prejudice to any right to alter or terminate such
existence (whether by merger or otherwise) under such applicable state law.
Except as otherwise provided in the Plan, on and after the Effective Date all
property of the Estate and any property acquired by the Reorganized Debtors
under the Plan shall vest in the applicable Reorganized Debtor, free and clear
of all Claims, liens, charges, or other encumbrances. On and after the Effective
Date, the Reorganized Debtors may operate their respective businesses and may
use, acquire or dispose of property without supervision or approval by the
Bankruptcy Court and free of any restrictions of the Bankruptcy Code or
Bankruptcy Rules, other than those restrictions expressly imposed by the Plan
and the Confirmation Order.
C. Cancellation of Old Notes, Old Stock and Other Equity Interests
On the Effective Date, except to the extent otherwise provided herein,
all notes, instruments, certificates, and other documents evidencing (a) the Old
Notes, (b) the Old Stock and (c) any stock options, warrants or other rights to
purchase Old Stock shall be canceled and the obligations of the Debtors
thereunder or in any way related thereto shall be discharged. On the Effective
Date, except to the extent otherwise provided herein, any indenture relating to
any of the foregoing, including, without limitation, the Indentures, shall be
deemed to be canceled, as permitted by section 1123(a)(5)(F) of the Bankruptcy
Code, and the obligations of the Debtors thereunder, except for the obligation
to indemnify the Old Notes Trustees, shall be discharged; provided that the
indentures that govern the rights of the Holder of a Claim and that are
administered by the Old Notes Trustees, an agent or servicer shall continue in
effect solely for the purposes of (y) allowing the Old Notes Trustees, agent or
servicer to make the distributions to be made on account of such Claims under
the Plan and to perform such other necessary administrative functions with
respect thereto and (z) permitting the Old Notes Trustees, agent or servicer to
maintain any rights or liens it may have for fees, costs and expenses under such
Indenture or other agreement. Any fees or expenses due to any of the Old Notes
Trustees, agent or servicer shall be paid directly by the Debtors and shall not
be deducted from any distributions to the Holders of Claims and Equity
Interests.
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D. Issuance of New Securities; Execution of Related Documents
On or as soon as practicable after the Effective Date, Core-Mark Newco
shall issue all securities, notes, instruments, certificates and other documents
of Core-Mark Newco required to be issued pursuant hereto, including, without
limitation, the New Common Stock, which shall be distributed as provided herein.
Core-Mark Newco shall execute and deliver such other agreements, documents and
instruments, as is necessary to effectuate the Plan.
E. Restructuring Transactions
On or before the Effective Date, Fleming intends to (i) dissolve all
other of its direct or indirectly wholly owned Debtor subsidiaries other than
(a) Core-Mark International, Inc.; (b) Core-Mark Mid Continent, Inc.; (c)
General Acceptance Corporation; (d) Core-Mark Interrelated Companies, Inc.; (e)
CM Products, Inc.; (f) ASI Office Automation, Inc.; (g) E.A. Morris Distributors
Limited; (h) Head Distributing Company; (i) Marquise Ventures Company, Inc.; and
(j) Minter-Weisman Co. and (ii) transfer the convenience store assets that are
part of its Leitchfield, Kentucky Division to either Core-Mark International,
Inc. or one of the Reorganized Debtors. The specific recipient of these assets
will be determined prior to the Confirmation Date.
On or before the Effective Date, Core-Mark Newco, a Delaware
corporation, shall be formed by certain of the Debtors' creditors or a nominee
on their behalf. Core-Mark Newco shall then form two wholly-owned subsidiaries,
Core-Mark Holdings I and Core-Mark Holdings II, both Delaware corporations, and
make a capital contribution of its stock to these entities. Core-Mark Holdings I
and Core-Mark Holdings II shall form another subsidiary, Core-Mark Holdings III,
owned equally by Core-Mark Holdings I and Core-Mark Holdings II, and shall make
a capital contribution of the stock of Core-Mark Newco to Core-Mark Holdings
III. On the Effective Date, Fleming will transfer the stock of the Reorganized
Debtors to Core-Mark Holdings III and Fleming will receive, in exchange for such
stock, stock of Core-Mark Newco. Core-Mark Holding III will retain a portion of
Core-Mark Newco's stock to satisfy disputed claims and hold such stock for the
benefit of the holders of Class 6 General Unsecured Claims. Fleming will
distribute the Core-Mark Newco stock received from Core-Mark Holdings III to its
creditors in accordance with the Plan of Reorganization. Core-Mark Holdings III
will transfer stock of Core-Mark Newco to holders of Class 6 General Unsecured
Claims as such claims are resolved. Once these transactions have occurred, the
creditors of Fleming, participants in the Management Incentive Plan and persons
acquiring Core-Mark Newco equity as a result of the exercise of warrants will be
the owners of Core-Mark Newco, which will act as the holding company for the
convenience store business. Core-Mark Newco will then own 100% of each of
Core-Mark Holdings I and Core-Mark Holdings II, and those two entities will each
own 50% of stock of Core-Mark Holdings III. Core-Mark Holdings III will own the
Reorganized Debtors.
On or after the Effective Date, the Reorganized Debtors may continue to
enter into such transactions and may continue to take such actions as may be
necessary or appropriate to effect a further corporate restructuring of their
respective businesses, including actions necessary to simplify, reorganize and
rationalize the overall reorganized corporate structure of the Reorganized
Debtors. While the Debtors are presently evaluating potential restructuring
transactions, the contemplated transactions may include (i) dissolving various
additional unnecessary subsidiary companies, including certain of the
Reorganized Debtors, (ii) filing appropriate certificates or articles of merger,
consolidation or dissolution pursuant to applicable state law and (iii) any
other action reasonably necessary or appropriate in connection with the
contemplated transactions. In each case in which the surviving, resulting or
acquiring corporation in any of these transactions is a successor to a
Reorganized Debtor, such surviving, resulting or acquiring corporation will
perform the obligations of the applicable Reorganized Debtor pursuant to the
Plan, to pay or otherwise satisfy the Allowed Claims against such Reorganized
Debtor.
F. Corporate Governance, Directors and Officers, and Corporate Action
1. Amended Certificate of Incorporation and By-laws
After the Effective Date, the Reorganized Debtors, as applicable, may,
if necessary, reincorporate in their respective states of incorporation and file
their Restated Certificates of Incorporation with the Secretary of State in the
state in which they are incorporated. After the Effective Date, the Reorganized
Debtors may, if necessary,
21
amend and restate their Restated Certificates of Incorporation and other
constituent documents as permitted by applicable law.
2. Directors and Officers of the Reorganized Debtors
Subject to any requirement of Bankruptcy Court approval pursuant to
section 1129(a)(5) of the Bankruptcy Code, as of the Effective Date, the
principal officers of the Debtors immediately prior to the Effective Date will
be the officers of the Reorganized Debtors. The principal officers of Core-Mark
Newco are presently anticipated to be the following: J. Michael Walsh, President
and Chief Executive Officer; Henry Hautau, Vice President, Employee and
Corporate Services and Assistant Secretary; Stacy Loretz-Congdon, Treasurer and
Assistant Secretary; Gregory P. Antholzner, Controller and Assistant Secretary;
Basil P. Prokop, President, Canada Division; Tom Barry, Vice President, National
Accounts; Gerald Bolduc, Vice President, Information Technology and Chief
Information Officer; David W. Dresser, Vice President, Merchandising; Thomas
Small, Vice President, Operations; Chris Walsh, Vice President, Marketing; Tom
Perkins, Vice President, U.S. Divisions; Scott McPherson, Vice President, U.S.
Divisions; and Cyril Wan, Assistant Secretary.
Pursuant to section 1129(a)(5) of the Bankruptcy Code, the Debtors will
disclose, on or prior to the Confirmation Date, the identity and affiliations of
any Person proposed to serve on the initial board of directors of Core-Mark
Newco and each Reorganized Debtor. The initial board of directors of Core-Mark
Newco is presently contemplated to consist of five members, the Chief Executive
Officer of Core-Mark Newco, two representatives selected by the Committee and
two independent directors to be mutually agreed upon by the Debtors and the
Committee. To the extent any such Person is an "insider" under the Bankruptcy
Code, the nature of any compensation for such Person will also be disclosed.
Each such director and officer shall serve from and after the Effective Date
pursuant to the terms of such Reorganized Debtor's certificate of incorporation
and other constituent documents.
3. Corporate Action
After the Effective Date, the adoption and filing, if necessary, of any
of the Reorganized Debtors' Restated Certificates of Incorporation, the approval
of their Restated By-laws, the appointment of directors and officers for
Core-Mark Newco, the adoption of the Management Incentive Plan, and all other
actions contemplated hereby with respect to each of the Reorganized Debtors
shall be authorized and approved in all respects (subject to the provisions
hereof). All matters provided for herein involving the corporate structure of
any Debtor or any Reorganized Debtor, and any corporate action required by any
Debtor or any Reorganized Debtor in connection with the Plan, shall be deemed to
have occurred and shall be in effect, without any requirement of further action
by the security holders or directors of such Debtor or Reorganized Debtor. On
the Effective Date, the appropriate officers of each Reorganized Debtor and
members of the board of directors of each Reorganized Debtor are authorized and
directed to issue, execute and deliver the agreements, documents, securities and
instruments contemplated by the Plan in the name of and on behalf of such
Reorganized Debtor.
G. Post Confirmation Trust
1. Formation/Purpose
On the Effective Date or as soon as practicable thereafter, the Debtors
and the Committee will form a Post Confirmation Trust to administer certain
post-confirmation responsibilities under the Plan, including, but not
necessarily limited to, those responsibilities associated with the pursuit and
collection of the Litigation Claims and Causes of Action and the reconciliation
and payment of Claims.
2. Powers
The powers, authority, responsibilities and duties of the Post
Confirmation Trust and the allocation of such powers, authority,
responsibilities and duties between Core-Mark Newco and the Post Confirmation
Trust, shall be set forth and governed by the Post Confirmation Trust Agreement
to be mutually agreed upon by the Debtors and the Committee. A copy of the draft
Post Confirmation Trust Agreement is attached to the Disclosure Statement as
Exhibit 9. The Debtors and the Committee shall also mutually agree upon
appointment of the Post Confirmation Representative who shall have the power to
administer the Post Confirmation Trust and will be advised by the Post
22
Confirmation Trust Advisory Board as specified in the Post Confirmation Trust
Agreement. The Post Confirmation Trust Advisory Board shall consist of four
members plus the Post Confirmation Representative, two members designated by
Core-Mark Newco, one member designated by the Committee other than trade members
and the PBGC, who shall be an Old Note Holder that holds in excess of [3.5%] or
greater of the total outstanding equity securities of Core-Mark Newco received
as a result of the distribution of such equity to Holders of Class 6 Claims
under the Plan and one member to be designated by the trade members of the
Committee and the PBGC, who shall be a Holder of a Class 6 Claim, other than
with respect to the Old Notes, against which there is not pending (or against
which the Debtors or the Post-Confirmation Trust do not reasonably contemplate
bringing) a Cause of Action and is not a Holder of a Class 3(B) or Class 5
Claim.
Pursuant to section 1129(a)(5) of the Bankruptcy Code, the Debtors will
disclose, on or prior to the Confirmation Date, the identity and any
affiliations of any Person proposed to serve on the initial Post Confirmation
Trust Advisory Board as well as the identity and affiliations of the Post
Confirmation Representative. To the extent any such Person is an "insider" under
the Bankruptcy Code, the nature of any compensation for such Person will also be
disclosed.
3. Assets of the Post Confirmation Trust
On the Effective Date or as soon as practicable thereafter, the
Debtors, the Reorganized Debtors and Core-Mark Newco, as applicable, shall
transfer, assign and deliver to the Post Confirmation Trust, the Post
Confirmation Trust Assets (the "PCT Assets") as outlined in the Post
Confirmation Trust Agreement. The PCT Assets shall consist of all of the
following assets of the Debtors:
(a) trade accounts receivable including credits for
post-petition deductions, other than the pre-petition and post petition
trade accounts receivable and post-petition deductions of the
continuing Fleming Convenience business;
(b) royalty payments owing to the Debtors related to the
sale of the Fleming wholesale operations;
(c) Litigation Claims which consist primarily of
vendor-related receivables, primarily for uncollected promotional
allowances (e.g. rebates, discounts, price reductions), unreimbursed
funds related to military receivables and funds wired in advance for
inventory for which invoices were not processed and inventory not
shipped, but not including vendor deductions incurred in the ordinary
course of business of the Fleming Convenience business which shall
remain with Core-Mark Newco;
(d) Avoidance Actions, especially preference actions as
outlined in section 547 of the Bankruptcy Code;
(e) restricted cash, including the PACA account, the FSA
and the FSA reserves;
(f) available cash in an amount necessary to fund certain
payments required to be made by the Post Confirmation Trust under the
Plan and Post Confirmation Trust Agreement and Post Confirmation Trust
Administrator;
(g) any and all other Claims and Causes of Action of the
Debtors, including but not limited to those outlined in section VI
hereof, Exhibit A hereto and section VII of the Disclosure Statement,
other than Causes of Action related to the fire loss at the Denver
warehouse occurring in December, 2002 which shall be transferred to
Core-Mark Newco, and other than claims and Causes of Action waived,
exculpated or released in accordance with the provisions of the Plan;
and
(h) all of the remaining assets of the Debtors, other
than the assets of the Reorganized Debtors and the assets of the
continuing Fleming Convenience businesses which will have been
transferred to Core-Mark Newco and the Reorganized Debtors.
The PCT Assets do not include: (1) any of the assets of the continuing Fleming
Convenience businesses which are to be transferred to Core-Mark Newco and the
Reorganized Debtors; (2) the stock of Core-Mark Newco and the
23
stock of the Reorganized Debtors; and (3) the Professional Fee Escrow Account.
The PCT Assets shall be held by the Post Confirmation Trust for the
beneficiaries of the Post Confirmation Trust subject to the terms and conditions
of the Plan and the Post Confirmation Trust Agreement.
4. Funding
On the Effective Date, or as soon as practicable thereafter, the
Debtors, the Reorganized Debtors and Core-Mark Newco will transfer to the Post
Confirmation Trust certain cash on hand and/or certain proceeds from the Exit
Financing Facility and the Tranche B Loan necessary for the Post Confirmation
Trust to make the payments required on Allowed Claims pursuant to the Plan and
the Post Confirmation Trust Agreement. In addition, the Post Confirmation Trust
shall have available the proceeds from the prosecution of Causes of Action.
Core-Mark Newco and the Reorganized Debtors shall retain the remainder of the
cash and/or proceeds from the Exit Financing Facility and the Tranche B Loan to
operate their businesses. The capital structure of Core-Mark Newco, the
Reorganized Debtors and the Post Confirmation Trust on the Effective Date is
outlined on Exhibit 3 to the Disclosure Statement.
H. Creation of Professional Fee Escrow Account
On or before the Effective Date, the Debtors shall establish and fund
the Professional Fee Escrow Account.
ARTICLE VI.
DEBTORS' RETAINED CAUSES OF ACTION
A. Maintenance of Causes of Action
Except as otherwise provided in the Plan, Core-Mark Newco, the
Reorganized Debtors and the Post Confirmation Trust, as applicable, shall retain
all rights on behalf of the Debtors, Core-Mark Newco and the Reorganized Debtors
to commence and pursue, as appropriate, in any court or other tribunal
including, without limitation, in an adversary proceeding filed in one or more
of the Debtors' Chapter 11 Cases, any and all Causes of Action, whether such
Causes of Action accrued before or after the Petition Date, including, but not
limited to, the actions specified in section VI.B. herein as well as those
Causes of Action listed on Exhibit A filed herewith.
Except as otherwise provided in the Plan, in accordance with section
1123(b)(3) of the Bankruptcy Code, any Claims, rights, and Causes of Action that
the respective Debtors, Core-Mark Newco and the Reorganized Debtors may hold
against any Person shall vest in Core-Mark Newco or the Post Confirmation Trust,
as applicable. Core-Mark Newco or the Post Confirmation Trust, as applicable,
shall retain and may exclusively enforce any and all such Claims, rights or
Causes of Action, and commence, pursue and settle the Causes of Action in
accordance with the Plan, provided the Post Confirmation Trust may commence,
pursue and settle certain Causes of Action, including, but not necessarily
limited to, the Litigation Claims as outlined more fully in the Post
Confirmation Trust Agreement. Core-Mark Newco and the Post Confirmation Trust,
as applicable, shall have the exclusive right, authority, and discretion to
institute, prosecute, abandon, settle, or compromise any and all such claims,
rights, and Causes of Action without the consent or approval of any third party
and without any further order of court.
B. Preservation of Causes of Action
The Debtors are currently investigating whether to pursue potential
Causes of Action against any Creditors, Entities, or other Persons, but not as
against the Releasees. The investigation has not been completed to date, and
under the Plan, Core-Mark Newco and the Post Confirmation Trust, as applicable,
retain the right on behalf of the Debtors and Reorganized Debtors to commence
and pursue any and all Causes of Action. Potential Causes of Action currently
being investigated by the Debtors, which may, but need not, be pursued by the
Debtors before the Effective Date or by Core-Mark Newco or the Post Confirmation
Trust, as applicable, after the Effective Date include, without limitation, the
following Causes of Action:
- All actual or potential avoidance actions pursuant to any
applicable section of the Bankruptcy Code including, without
limitation, sections 544, 545, 547, 548, 549, 550, 551, 553(b)
and/or 724(a) of the
24
Bankruptcy Code, arising from any transaction involving or
concerning the Debtors, and among others, without limitation,
those entities listed on Exhibit A-3 and A-7;
- All actual or potential actions, whether legal, equitable or
statutory in nature, for, or in any way involving, the
collection of accounts receivable or general ledger items that
are due and owing to Fleming or its subsidiaries, including
without limitation trade receivables, rent and other lease and
sublease charges, franchise and/or license fees, payments due
under equipment leases and licenses, other miscellaneous
charges, and principal and interest on promissory notes by any
Person or Entity (collectively, the "Accounts Receivable"),
including, but not limited to, the Accounts Receivable owed by
those customers listed on Exhibit A-1 and A-2 hereto;
- All actual actions or potential actions, whether legal,
equitable or statutory in nature, against customers,
including, but not limited to, those customers listed in
Exhibit A-1 and A-2, for Accounts Receivable, improper setoff,
overpayment, claims under the facility standby agreement, or
any other claim arising out of the customer relationship;
- All actual actions or potential actions, whether legal,
equitable or statutory in nature, against vendors, including,
but not limited to, those vendors listed on Exhibit A-4
hereto, for overpayment, improper setoff, warranty, indemnity,
retention of double payments, retention of mis-directed wires,
deductions owing or improper deductions taken, claims for
damages arising out of a military distribution relationship,
claims for overpayment of drop-ship-delivery amounts, or any
other claim arising out of the vendor relationship;
- All actual actions or potential actions against vendors for
violation of the Trade Credit Program or the Trade Credit
Program Letter Agreement as set forth in the Final Order
Authorizing (I) Post- Petition Financing Pursuant To 11
U.S.C. Section 364 And Bankruptcy Rule 4001(c); (II) Use Of
Cash Collateral Pursuant To 11 U.S.C. Section 363 And
Bankruptcy Rules 4001(b) And (d); (III) Grant Of Adequate
Protection Pursuant To 11 U.S.C. Sections 361 And 363; And
(IV) Approving Secured Inventory Trade Credit Program And
Granting Of Subordinate Liens, Pursuant To 11 U.S.C. Sections
105 And 364(c)(3) And Rule 4001(c) entered on May 7, 2003 and
the Order Granting Motion for Order Authorizing the Payment of
Critical Trade Vendors in Exchange for Continuing Relationship
Pursuant to Customary Trade Terms, entered on May 6, 2003. The
Debtors are still investigating which vendors they have
actions against. A list of the vendors participating in the
Critical Trade Lien Program is attached hereto as Exhibit A-7;
- All actual or potential actions, whether legal, equitable or
statutory in nature, against Persons or Entities including
vendors with respect to prepetition violations of applicable
federal or state securities laws;
- All actual or potential breach of contract actions against any
customers, vendors or Entities who improperly exited the
Debtors' system or who violated the automatic stay after the
Petition Date, including, but not limited to, those customers
or vendors listed on Exhibit A-1, A-2, and A-3;
- All actual or potential actions, whether legal, equitable or
statutory in nature, against landlords, lessees, sublessees,
or assignees arising from various leases, subleases and
assignment agreements relating thereto, including, without
limitation, actions for unpaid rent, overcharges relating to
taxes, common area maintenance and other similar charges,
including, but not limited to, those claims identified on
Exhibit A-10. In addition, two landlords, Massilon Food
Company and LLC Tulsa Food Company, LLC, drew down on standby
letters of credit under their respective leases shortly after
the Debtors filed for bankruptcy. The Debtors are
investigating whether these draw-downs were proper and reserve
all rights to bring actions against these landlords;
- All actual or potential actions, whether legal, equitable or
statutory in nature, against the Debtors' current or former
insurance carriers to recover unpaid reimbursements and
claims, overpayment of premiums and fees, claims for breach of
contract, indemnity obligations or coverage or similar Causes
of Action, including, but not limited to, those insurers
listed on Exhibit A-12;
25
- All actual or potential Causes of Actions, whether legal,
equitable or statutory in nature, against purchasers of assets
from the Debtors relating to breach of the purchase agreement
or unpaid compensation thereunder, including, but not limited
to, those purchasers listed on Exhibit A-9;
- Any and all rights to payment against any taxing authority
listed on Exhibit A-11 for any tax refunds, credits,
overpayments or offsets that may be due and owing to the
Debtors for taxes that the Debtors may have paid to any such
taxing authority;
- All actions or potential actions, whether legal, equitable or
statutory in nature, relating to deposits or other amounts
owed by any creditor, lessor utility, supplier, vendor,
landlord, sub-lessee, assignee or other Person or Entity;
- All actions or potential actions, whether legal, equitable or
statutory in nature, relating to environmental and product
liability matters;
- All actions or potential actions, whether legal, equitable or
statutory in nature, arising out of, or relating to, the
Debtors' intellectual property rights;
- Any litigation or lawsuit initiated by any of the Debtors that
is currently pending, whether in the Bankruptcy Court, before
the American Arbitration Association, or any other court or
tribunal or initiated against the Debtors after the Petition
Date for which the Debtors may have counterclaims or other
rights, including, but, not limited to, those actions listed
on Exhibit A-4 hereto;
- Potential actions against any of the prepetition directors,
officers, employees, attorneys, financial advisors,
accountants, investment bankers, agents and representatives of
each Debtor and their respective subsidiaries, including, but
not limited to those employees on Exhibit A-5 hereto, except
the D&O Releasees, for breaches of fiduciary duty, negligent
mismanagement, wasting of corporate assets, and diversion of
corporate opportunity;
- All actual or potential actions, whether legal, equitable or
statutory in nature, against all Persons except the D&O
Releasees arising out of, or in connection with, any of the
Debtors' prepetition management, operation and/or reporting of
financial or other information;
- All actions or potential actions, whether legal, equitable or
statutory in nature, against any of the Debtors' current or
former professionals, except the Releasees, for breach of
fiduciary duty, breach of contract, negligence or professional
misconduct or malpractice, or other tortuous conduct,
including, but not limited to, those former professionals
listed on Exhibit A-8 hereto;
- All rights against any shareholders or others for
subordination of their Claims pursuant to section 510(b) of
the Bankruptcy Code or against any Person that has agreed to
subordination of their claim pursuant to section 510(a) of the
Bankruptcy Code;
- All actions or potential actions against the prepetition
members of the Debtors' board of directors and/or officers
except the D&O Releasees, including, without limitation, the
right to equitably subordinate claims held by such directors
and officers pursuant to section 510(c) of the Bankruptcy
Code;
- All actual or potential actions, whether legal, equitable or
statutory in nature, to recover amounts improperly awarded to
employees except the D&O Releasees under the terms of any
prepetition employment or change-in-control agreement or bonus
arrangement;
- All actual or potential contract and tort actions that may
exist or may subsequently arise; and
- All actual or potential actions whether legal, equitable or
statutory in nature, arising out of, or in connection with the
Debtors' business or operations.
26
The above categories of preservation of causes of action shall not be
limited in any way by reference to Exhibit A nor are the categories intended to
be mutually exclusive.
In addition, there may be numerous other Causes of Action which
currently exist or may subsequently arise that are not set forth herein, because
the facts upon which such Causes of Action are based are not fully or currently
known by the Debtors and, as a result, cannot be specifically referred to herein
(collectively, the "Unknown Causes of Action"). The failure to list any such
Unknown Causes of Action herein, or on Exhibit A filed herewith (except as to
Releasees), is not intended to limit the rights of Core-Mark Newco or the Post
Confirmation Trust to pursue any Unknown Cause of Action to the extent the facts
underlying such Unknown Cause of Action become fully known to the Debtors.
C. Preservation of All Causes of Action Not Expressly Settled or Released
Unless a Claim or Cause of Action against a Creditor or other Person is
expressly waived, relinquished, released, compromised or settled in the Plan or
any Final Order, the Debtors expressly reserve such Claim or Cause of Action for
later adjudication by Core-Mark Newco or the Post Confirmation Trust, as
applicable (including, without limitation, Unknown Causes of Action), and,
therefore, no preclusion doctrine, including, without limitation, the doctrines
of res judicata, collateral estoppel, issue preclusion, claim preclusion,
waiver, estoppel (judicial, equitable, or otherwise) or laches shall apply to
such Claims or Causes of Action upon or after the Confirmation or Effective Date
of the Plan based on the Disclosure Statement, the Plan or the Confirmation
Order, except where such Claims or Causes of Action have been released in the
Plan or other Final Order. In addition, the Debtors, Core-Mark Newco, the
Reorganized Debtors, the Post Confirmation Trust and the successor entities
under the Plan expressly reserve the right to pursue or adopt any Claim alleged
in any lawsuit in which the Debtors are defendants or an interested party,
against any Person or Entity, including, without limitation, the plaintiffs or
co-defendants such lawsuits.
Any Person to whom the Debtors have incurred an obligation (whether on
account of services, purchase or sale of goods or otherwise), or who has
received services from Debtors or a transfer of money or property of the
Debtors, or who has transacted business with the Debtors, or leased equipment or
property from the Debtors should assume that such obligation, transfer, or
transaction may be reviewed by the Debtors or the Post Confirmation Trust
subsequent to the Effective Date and may, if appropriate, be the subject of an
action after the Effective Date, whether or not (i) such Entity has filed a
proof of Claim against the Debtors in these Bankruptcy Cases; (ii) such
Creditor's proof of Claim has been objected to; (iii) such Creditor's Claim was
included in the Debtors' Schedules; or (iv) such Creditor's scheduled Claim has
been objected to by the Debtors or has been identified by the Debtors as
disputed, contingent, or unliquidated.
ARTICLE VII.
FUNDING OF THE PLAN
All Cash necessary for Core-Mark Newco and the Post Confirmation Trust
to make payments pursuant to the Plan will be obtained from the Reorganized
Debtors' existing Cash balances, operations, the Exit Financing Facility, the
Tranche B Loan and prosecution of Causes of Action, including collections of the
Litigation Claims, unless such Cash is not sufficient to fund the Plan, in which
case the Debtors, with the consent of the Committee, reserve the right to raise
Cash from a sale of some or substantially all of their assets.
A. Exit Financing Facility, Obtaining Cash for Plan Distributions and
Transfers of Funds Among the Debtors and the Reorganized Debtors
Cash payments to be made pursuant to the Plan will be made by Core-Mark
Newco and the Post Confirmation Trust, as applicable, provided, however, that
the Debtors and the Reorganized Debtors will be entitled to transfer funds
between and among themselves as they determine to be necessary or appropriate to
enable Core-Mark Newco and the Post Confirmation Trust, as applicable, to
satisfy their respective obligations under the Plan. On the Effective Date, the
Reorganized Debtors are authorized to execute and deliver those documents
necessary or appropriate to obtain the Exit Financing Facility and the Tranche B
Loan, if applicable. The Exit Financing Facility shall not be secured by the
assets transferred to the Post Confirmation Trust.
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B. Tranche B Loan
The Tranche B Loan shall be a term credit facility in the amount of up
to $60 million available to be borrowed from the Tranche B Lenders on the
Effective Date in the form of funded borrowings or letters of credit. All
obligations under the Tranche B Loan shall be secured by second priority
security interests in and liens upon substantially all present and future assets
of Core-Mark Newco other than those assets transferred to the Post Confirmation
Trust, including accounts receivable, general intangibles, inventory, equipment,
fixtures and real property, and products and proceeds thereof. The Tranche B
Loan shall be junior to the Exit Financing Facility.
The terms of the Tranche B Loan are set forth in more detail in the
Indicative Tranche B Loan Term Sheet filed with the Disclosure Statement as
Exhibit 8.
C. Sale of Assets
In the event that the Debtors do not have sufficient Cash from their
existing Cash balances on the Effective Date, operations, the Exit Financing
Facility, the Tranche B Loan and pursuit of Causes of Action to make the
required payments under the Plan, the Debtors, with the consent of the
Committee, reserve the right to fund the Plan through a sale of some or
substantially all of the assets of the Debtors under section 363 of the
Bankruptcy Code.
ARTICLE VIII.
TREATMENT OF EXECUTORY CONTRACTS
AND UNEXPIRED LEASES
A. Assumption/Rejection of Executory Contracts and Unexpired Leases
As of the Effective Date, except as otherwise provided herein, all
executory contracts or unexpired leases of the Debtors will be deemed rejected
in accordance with the provisions and requirements of sections 365 and 1123 of
the Bankruptcy Code except those executory contracts and unexpired leases that
(i) have been previously rejected or assumed by Order of the Bankruptcy Court,
(ii) are subject to a pending motion to reject or assume or (iii) are
specifically listed on the Assumption Schedule to be filed 15 days prior to the
Voting Deadline. The Debtors reserve the right for 30 days after the
Confirmation Date to modify the Assumption Schedule to add executory contracts
or leases or remove executory contracts or leases from such Assumption Schedule.
The Debtors shall provide appropriate notice to any party added or removed from
the Assumption Schedule, and any such party removed from the Assumption Schedule
shall have thirty days from the receipt of such notice to file a proof of claim
with the Bankruptcy Court.
On the Petition Date, the Debtors were parties to certain collective
bargaining agreements ("CBA's"). The Debtors are assuming the four (4) CBA's
with labor organizations at facilities where the Debtors operations are
on-going, which CBA's are identified on the Assumption Schedule. All other CBA's
in existence on April 1, 2003 between labor organizations and the Debtors either
have been assumed and assigned to various purchasers or have lapsed or otherwise
terminated in connection with facility or business closings or sales.
B. Claims Based on Rejection of Executory Contracts or Unexpired Leases
Except as provided in section VIII.A., all proofs of Claim with respect
to Claims, if any, arising from the rejection of executory contracts or
unexpired leases that are rejected as a result of the Plan must be filed with
the Bankruptcy Court within thirty (30) days after the Effective Date. Any
Claims arising from the rejection of an executory contract or unexpired lease
not filed within such time or any applicable Contract Claims Bar Date, will be
forever barred from asserting against any Debtor or Reorganized Debtor, their
respective Estates, their property, and the Post Confirmation Trust unless
otherwise ordered by the Bankruptcy Court or provided herein.
C. Cure of Defaults for Executory Contracts and Unexpired Leases Assumed
Any monetary amounts by which each executory contract and unexpired
lease to be assumed pursuant to the Plan is in default shall be satisfied,
pursuant to section 365(b)(1) of the Bankruptcy Code, by payment of the default
amount in Cash as soon as practicable after the Effective Date or on such other
terms as the parties to such
28
executory contracts or unexpired leases may otherwise agree. In the event of a
dispute regarding: (i) the amount of any cure payments, (ii) the ability of the
applicable Reorganized Debtor or any assignee to provide "adequate assurance of
future performance" (within the meaning of section 365 of the Bankruptcy Code)
under the contract or lease to be assumed, or (iii) any other matter pertaining
to assumption, the cure payments required by section 365(b)(1) of the Bankruptcy
Code shall be made following the entry of a Final Order resolving the dispute
and approving the assumption.
D. Indemnification of Directors, Officers and Employees
The obligations of each Debtor to indemnify any Person serving at any
time on or prior to the Effective Date as one of its directors, officers or
employees by reason of such Person's service in such capacity, or as a director,
officer or employee of any other corporation or legal entity, to the extent
provided in such Debtor's constituent documents, by a written agreement with
such Debtor or under Delaware or other applicable corporate law, and
specifically excluding any obligation to indemnify the Excluded Releasees listed
on Exhibit B filed herewith, shall be deemed and treated as executory contracts
that are assumed by such Reorganized Debtor pursuant hereto and section 365 of
the Bankruptcy Code as of the Effective Date. Accordingly, such indemnification
obligations shall be treated as obligations of the Reorganized Debtors and shall
survive unimpaired and unaffected by entry of the Confirmation Order,
irrespective of whether such indemnification is owed for an act or event
occurring before or after the Petition Date.
E. Compensation and Benefit Programs
Except as otherwise expressly provided herein, all employment and
severance agreements and policies, and all compensation and benefit plans,
policies, and programs of the Debtors applicable to their employees, former
employees, retirees and non-employee directors and the employees, former
employees and retirees of their subsidiaries, including, without limitation, all
savings plans, retirement plans, health care plans, disability plans, severance
benefit agreements and plans, incentive plans, deferred compensation plans and
life, accidental death and dismemberment insurance plans (the "Company Benefit
Plans") shall be terminated, or shall be treated as executory contracts under
the Plan, and on the Effective Date any such remaining Company Benefit Plans
that have not been terminated will be deemed rejected pursuant to the provisions
of sections 365 and 1123 of the Bankruptcy Code, except for those with respect
to the Reorganized Debtors' employees specifically designated on the Benefits
Schedule to be filed 15 days prior to the Voting Deadline. In addition, except
as set forth on the Benefits Schedule, the Debtors shall have withdrawn or shall
withdraw from all "multiemployer plans" (as such term in defined in section
3(37) of ERISA) prior to the Effective Date, and all claims of such
multiemployer plans shall be treated as General Unsecured Claims.
Notwithstanding the termination or rejection of the Company Benefit Plans
hereunder, vested retiree medical benefits, if any, under applicable Company
Benefit Plans shall be obligations of the Reorganized Debtors and/or Core-Mark
Newco unless terminated pursuant to Section 1114 of the Bankruptcy Code prior to
the Effective Date. The Debtors believe that the Reorganized Debtors and/or
Core-Mark Newco may decide to terminate retiree medical benefits after the
Effective Date and expect that the Reorganized Debtors and/or Core-Mark Newco
will incur substantial litigation costs if they attempt to eliminate any retiree
medical benefits that are considered vested.
F. Insured Claims
1. Directors and Officers Related Insurance Coverage
The Debtors will assume all of the D&O Policies, and the
Debtors will continue to pay premiums, deductibles, and any other payments that
they are obligated to make to the applicable Insurers in the normal course of
their business operations.
2. Worker's Compensation
Under the Plan, the Debtors will assume all of the existing
contracts for workers' compensation insurance, and with respect to all Workers
Compensation Policies except those issued by Ace American Insurance Company
("Ace") and National Union Fire Insurance Company ("National Union") the Debtors
will continue to pay premiums, deductibles, and any other payments that the
Debtors are obligated to make to Insurers (the "Workers' Compensation
Payments"). With respect to the Workers Compensation Policies issued by Ace and
National Union,
29
the Debtors will continue to permit Ace and National Union to use the Debtors'
Insurance Security to make the Workers' Compensation Payments. Any Claims that
are covered by the Workers' Compensation Program shall continue to be
administered and paid by the Insurers, in accordance with the Workers'
Compensation Program.
To the extent that any of the Debtors' obligations under the
Workers' Compensation Program are secured by the Insurance Security, the
Insurers for the respective policies shall be entitled to draw upon the
appropriate letter(s) of credit to satisfy amounts due from the Debtors on
account of: (i) amounts expended by the Insurers in defense of allowed Claims,
(ii) administrative costs incurred by the Insurers to administer such Claims,
and (iii) payments made in satisfaction of allowed Claims.
3. Casualty Insurance Program
(a) Under-Deductible Insured Claims. An Under-Deductible
Insured Claim shall be treated in the same manner as any other
Unsecured Claim under the Plan and shall be either a Class 6 General
Unsecured Claim or Class 7 Convenience Claim, as appropriate, under the
Plan. The Under-Deductible Insured Claim shall be fully-satisfied by
the applicable distribution under the Plan, regardless of the amount
actually distributed to the Holder of the relevant Under-Deductible
Insured Claim under the Plan. The respective Insurer shall have no
obligation under the Casualty Insurance Program, or the Plan, to pay
any part of an Under-Deductible Insured Claim. The Insurers may not use
the Insurance Security to pay any party of an Under-Deductible Insured
Claim, but the Insurers may use any applicable Insurance Security to
reimburse themselves for reasonable costs incurred to administer the
Under-Deductible Insured Claims.
(b) Covered Allowed Insured Claims. The Covered Allowed
Insured Claims shall be satisfied as follows: (i) the Insured Claim, up
to the Deductible Amount, shall be treated as a Class 6 General
Unsecured Claim or Class 7 Convenience Claim, as appropriate, under the
Plan, and that portion of the Insured Claim shall be paid in the manner
provided by the Plan and be fully-satisfied, regardless of the amount
actually distributed to the Holder of the relevant Insured Claim; and
(ii) the Insurer shall satisfy that portion of an Insured Claim that
exceeds the Deductible Amount (the "Over-Deductible Amount"). On the
Effective Date, the Debtors shall be discharged of any liability for
the Covered Allowed Insured Claims.
(c) The Exceeded Allowed Insured Claims. The Exceeded
Allowed Insured Claims shall be satisfied as follows: (i) the Insured
Claim, up to the Deductible Amount, shall be treated as a Class 6
General Unsecured Claim or Class 7 Convenience Claim, as appropriate,
under the Plan, and that portion of the Insured Claim shall be paid in
the manner provided by the Plan and be fully-satisfied, regardless of
the amount actually distributed to the Holder of the relevant Insured
Claim; (ii) the Insurer shall satisfy the Over-Deductible Amount up to
the Aggregate Limit; and (iii) that portion of the Insured Claim that
exceeds the Aggregate Limit shall be treated as a Class 6 General
Unsecured Claim or Class 7 Convenience Claim, as appropriate, under the
Plan, and the Insured Claim shall be paid in the manner provided by the
Plan and shall be fully satisfied, regardless of the amount actually
distributed to the Holder of the Insured Claim under the Plan. On the
Effective Date, the Debtors shall be discharged of any liability for
the Exceeded Allowed Insured Claims.
4. The Old Republic Claims
Old Republic Insurance Company shall be entitled to an
Administrative Claim against the Debtors, subject to any applicable defenses or
counterclaims of the Debtors, for any failure by the Debtors to: (i) make
premium payments pursuant to the Old Republic Program Agreement, or pay any
other amount due with respect to Old Republic's issuance of the Old Republic
Policies; (ii) the Debtors' failure to make payments within the deductible layer
of the policies for deductibles relating to or on account of occurrences giving
rise to Claims covered by the Policies, or (iii) make payments due to any
third-party administrator that is administering covered claims under the Old
Republic Policies. Except as the parties otherwise agree, such Administrative
Claim shall: (i) survive confirmation of the Plan, (ii) shall not be liquidated
or adjudicated by the Court, and (iii) shall not be payable upon the Effective
Date of the Plan. The Debtors will not seek to recover from Old Republic before
January 1, 2008 for any excess draw on the Old Republic Letters of Credits, if
drawn by Old Republic, unless otherwise agreed to by the parties.
30
5. Defense Costs
Notwithstanding the provisions above with respect to the
payment of Allowed Under-Deductible Insured Claims, the Insurers shall have the
right to seek reimbursement from the Debtors of Allowed Defense Costs with
respect to Under-Deductible Insured Claims, and such reimbursement shall be
obtained by deducting the Allowed Defense Costs from the Insurance Security held
by the respective Insurers as security for the payment of such costs. However,
if the sum of the Insured Claim and the Allowed Defense Costs exceeds the
applicable Deductible Amount under the respective policy, the Insurer shall not
be entitled to reimbursement for costs that exceed the applicable Deductible
Amount. To the extent that an Insurer is entitled to reimbursement of Allowed
Defense Costs, but the Insurer does not have Insurance Security for the
obligation, the Insurer shall be entitled to a Class 6 General Unsecured Claim
for the Allowed Defense Costs.
ARTICLE IX.
PROVISIONS GOVERNING DISTRIBUTIONS
A. Distributions for Claims Allowed as of the Effective Date
Except as otherwise provided herein or as may be ordered by the
Bankruptcy Court, distributions to be made on the Effective Date on account of
Claims that are Allowed as of the Effective Date and are entitled to receive
distributions under the Plan shall be made on the Effective Date or as soon
thereafter as practicable. Except as evidenced by an electronic entry, as a
condition to receive any distribution under the Plan, each Old Note Holder must
comply with section IX.I and IX.K below. All distributions shall be made in
accordance with any applicable Indenture agreement, loan agreement or analogous
instrument or agreement.
B. Distributions by Core-Mark Newco and the Post Confirmation Trust
Except as otherwise provided herein, Core-Mark Newco or the Post
Confirmation Trust, as applicable, shall make all distributions required under
the Plan. Notwithstanding the provisions of Section V.C. herein regarding the
cancellation of the Indentures, the Indentures shall continue in effect to the
extent necessary to allow the Old Notes Trustees to provide information to the
Exchange Agent to permit distributions of the New Common Stock and to receive
New Common Stock on behalf of the Holders of the Old Notes and make
distributions pursuant to the Plan on account of the Old Notes as agent for
Core-Mark Newco. The Old Notes Trustees (or any agents or servicers) providing
services related to distributions to the Holders of Allowed Old Note Claims
shall receive, from Core-Mark Newco, reasonable compensation for such services
and reimbursement of reasonable expenses incurred in connection with such
services upon the presentation of invoices to Core-Mark Newco. All distributions
to be made herein shall be made without any requirement for bond or surety with
respect thereto.
C. Interest on Claims
Except as otherwise specifically provided for herein or in the
Confirmation Order, or required by applicable bankruptcy law, post-petition
interest shall not accrue or be paid on any Claims, other than the Pre-Petition
Lenders' Secured Claims and the DIP Claims, and no Holder of a Claim shall be
entitled to interest accruing on or after the Petition Date on any Claim.
D. Compliance with Tax Requirements/Allocations
In connection with the Plan, to the extent applicable, the Reorganized
Debtors shall comply with all tax withholding and reporting requirements imposed
on them by any governmental unit, and all distributions pursuant hereto shall be
subject to such withholding and reporting requirements. For tax purposes,
distributions received in respect of Allowed Claims will be allocated first to
the principal amount of Allowed Claims with any excess allocated, if applicable,
to unpaid interest that accrued on such Claims.
31
E. Delivery of Distributions and Undeliverable or Unclaimed Distributions
1. Delivery of Distributions in General
Distributions to Holders of Allowed Claims shall be made at the address
of the Holder of such Claim as indicated on the records of Debtors or upon their
proofs of Claim, if any, or, if such Holder holds Senior Note Claims,
distributions with respect to such Senior Note Claims will be made to the Senior
Notes Indenture Trustee which will make distributions to Holders of Old Senior
Notes. To the extent the Senior Notes Indenture Trustee makes distributions to
DTC, DTC will, in turn, make appropriate book entries to reflect the
distributions it makes to Holders. Except as otherwise provided by the Plan or
the Bankruptcy Code with respect to undeliverable distributions, distributions
to Holders of Old Note Claims shall be made in accordance with the provisions of
the applicable Indentures.
2. Undeliverable Distributions
(a) Holding of Undeliverable Distributions. If any
distribution to a Holder of an Allowed Claim is returned to Core-Mark
Newco or the Post Confirmation Trust as undeliverable, no further
distributions shall be made to such Holder unless and until Core-Mark
Newco or the Post Confirmation Trust is notified in writing of such
Holder's then-current address. Undeliverable distributions shall remain
in the possession of Core-Mark Newco or the Post Confirmation Trust
subject to Section IX.E.2(b) below until such time as a distribution
becomes deliverable. Undeliverable Cash shall not be entitled to any
interest, dividends or other accruals of any kind. As soon as
reasonably practicable, Core-Mark Newco or the Post Confirmation Trust
shall make all distributions that become deliverable.
(b) Failure to Claim Undeliverable Distributions. In an
effort to ensure that all Holders of Allowed Claims receive their
allocated distributions, no sooner than 240 days after the Effective
Date, the Debtors will compile a listing of unclaimed distribution
Holders. This list will be maintained and updated for as long as the
Chapter 11 Cases stay open. Any Holder of an Allowed Claim
(irrespective of when a Claim became an Allowed Claim) that does not
assert a Claim pursuant hereto for an undeliverable distribution
(regardless of when not deliverable) within six months after the
distribution has been attempted to be made to the Holder of the Allowed
Claim shall have its Claim for such undeliverable distribution
discharged and shall be forever barred from asserting any such Claim
against any Reorganized Debtor or its respective property. In such
cases: (i) any Cash held for distribution on account of such Claims
shall be the property of Core-Mark Newco or the Post Confirmation
Trust, as applicable, free of any restrictions thereon; and (ii) any
New Common Stock held for distribution on account of such Claims shall
be canceled and of no further force or effect. Nothing contained herein
shall require Core-Mark Newco or the Post Confirmation Trust to attempt
to locate any Holder of an Allowed Claim or Allowed Equity Interest.
(c) Abandoned Property Law. The provisions of the Plan
regarding undeliverable distributions will apply with equal force to
distributions made pursuant to the Old Note Indentures; notwithstanding
any provision in such indenture to the contrary and notwithstanding any
otherwise applicable escheat, abandoned or unclaimed property law.
F. Distribution Record Date
As of the close of business on the Distribution Record Date, the
transfer register for the Old Notes as maintained by the Debtors, the Old Notes
Trustees or their agents, shall be closed, and there shall be no further changes
in the record Holders of any Old Notes. Moreover, the Reorganized Debtors shall
have no obligation to recognize the transfer of any Old Notes occurring after
the Distribution Record Date and shall be entitled for all purposes herein to
recognize and deal only with those Holders of record as of the close of business
on the Distribution Record Date.
G. Timing and Calculation of Amounts to be Distributed
Except as otherwise provided herein, on the Effective Date or as soon
as practicable thereafter, each Holder of an Allowed Claim against the Debtors
shall receive the distributions that the Plan provides for Allowed Claims in the
applicable Class, provided however, Core-Mark Newco and the Post Confirmation
Trust, as applicable, shall
32
maintain reserve accounts in trust for the payment or distribution on account of
potential or Disputed Claims and shall make the appropriate adjustments in
distributions to adequately take into consideration and fund such reserve
accounts. Core-Mark Newco and the Post Confirmation Trust, as applicable, shall
be authorized to make interim distributions and any subsequent distributions
necessary to distribute any Cash, New Common Stock or other consideration held
in any reserve account to the appropriate Claim Holder as Claims are resolved
and allowed and reserves are reduced in accordance with the Plan. If and to the
extent that there are Disputed Claims, beginning on the date that is 45 calendar
days after the end of the month following the Effective Date and 45 calendar
days after the end of each month thereafter, distributions shall also be made,
pursuant hereto, to Holders of formerly Disputed Claims in any Class whose
Claims were Allowed during the preceding month.
H. Minimum Distribution
The New Common Stock will be issued as whole shares. If a registered
record Holder of an Allowed Claim is entitled to the distribution of a
fractional share of New Common Stock, unless otherwise determined and approved
by the Bankruptcy Court, the fractional distribution to which such Holder would
be entitled shall be aggregated with all other such similar distributions by
Core-Mark Newco (or its agent), and as soon as practicable after final
reconciliation allowance or resolution of all Class 6 Claims, sold by Core-Mark
Newco (or its agent) in a commercially reasonable manner. Upon the completion of
such sale, the net proceeds thereof shall be distributed (without interest), pro
rata in the case of New Common Stock, to the Holders of Allowed Claims, based
upon the fractional share of New Common Stock each such Holder would have been
entitled to receive or deemed to hold had Core-Mark Newco issued fractional
shares of New Common Stock. Such distributions shall be in lieu of any other
distribution.
I. Allowance or Resolution Setoffs
The Reorganized Debtors may, pursuant to section 553 of the Bankruptcy
Code or applicable non-bankruptcy law, set off against any Allowed Claim and the
distributions to be made pursuant hereto on account of such Claim (before any
distribution is made on account of such Claim), the Claims, rights and Causes of
Action of any nature that the Debtors or the Reorganized Debtors may hold
against the Holder of such Allowed Claim; provided that neither the failure to
effect such a setoff nor the allowance of any Claim hereunder shall constitute a
waiver or release by the Debtors or the Reorganized Debtors of any such Claims,
rights and Causes of Action that the Debtors or the Reorganized Debtors may
possess against such Holder, except as specifically provided herein.
J. Old Notes
Each record Holder of an Allowed Claim relating to the Old Notes not
held through DTC shall either (a) tender its Old Notes relating to such Allowed
Claim in accordance with written instructions to be provided to such Holders by
the applicable Reorganized Debtor as promptly as practicable following the
Effective Date, or (b) if the Holder's Old Note has been destroyed, lost, stolen
or mutilated, comply with section IX.K. below. Such instructions shall specify
that delivery of such Old Notes will be effected, and risk of loss and title
thereto will pass, only upon the proper delivery of such Old Notes with a letter
of transmittal in accordance with such instructions. All surrendered Old Notes
shall be marked as canceled. If any Holder of Old Notes not held through DTC
submits bearer bonds without coupons or coupons only, the Debtors shall adjust
the consideration exchanged therefore appropriately.
K. Failure to Surrender Canceled Instruments
Any Holder of Allowed Claims relating to the Old Notes not held through
DTC that fails to surrender or is deemed to have failed to surrender its Old
Notes required to be tendered hereunder or that has failed to comply with
section IX.L. below within one year after the Effective Date shall have its
Claim for a distribution pursuant hereto on account of such Allowed Claim
discharged and shall be forever barred from asserting any such Claim against any
Reorganized Debtor or their respective properties. In such cases, any New Stock
held for distribution on account of such Claim shall be disposed of pursuant to
the provisions set forth in section IX.E. above.
33
L. Lost, Stolen, Mutilated or Destroyed Debt Securities
In addition to any requirements under the Indentures or any related
agreement, any Holder of a Claim evidenced by an Old Note not held through DTC
that has been lost, stolen, mutilated or destroyed shall, in lieu of
surrendering such Old Note, deliver to the applicable Reorganized Debtor: (a) an
affidavit of loss reasonably satisfactory to such Reorganized Debtor setting
forth the unavailability of the Old Note not held through DTC; and (b) such
additional security or indemnity as may be reasonably required by such
Reorganized Debtor to hold such Reorganized Debtor harmless from any damages,
liabilities or costs incurred in treating such individual as a Holder of an
Allowed Claim. Upon compliance with this procedure by a Holder of a Claim
evidenced by an Old Note, such Holder shall, for all purposes under the Plan, be
deemed to have surrendered such non-DTC note.
M. Share Reserve
In addition to the provisions of section X.A.3. herein, Core-Mark Newco
shall be required to establish and maintain an appropriate reserve of New Common
Stock to ensure the distribution of New Common Stock to the Holder of any
Disputed Claim upon its allowance.
N. Settlement of Claims and Controversies
Pursuant to Fed. R. Bankr. P. 9019 and in consideration for the
distributions and other benefits provided under the Plan, the provisions of this
Plan shall constitute a good faith compromise and settlement of claims or
controversies relating to the contractual, legal and subordination rights that a
Holder of a Claim may have with respect to any Allowed Claim, or any
distribution to be made on account of any such Allowed Claim.
ARTICLE X.
PROCEDURES FOR RESOLUTION OF DISPUTED, CONTINGENT
AND UNLIQUIDATED CLAIMS
A. Resolution of Disputed Claims
1. Prosecution of Objections to Claims
After the Effective Date, except in regard to objections to
Professional fees and other fees, the Post Confirmation Representative shall
have the exclusive authority to file objections, settle, compromise, withdraw or
litigate to judgment objections to Claims on behalf of the Debtors and
Reorganized Debtors. From and after the Effective Date, the Post Confirmation
Representative may settle or compromise any Disputed Claim on behalf of the
Reorganized Debtors without approval of the Bankruptcy Court.
2. Estimation of Claims
Core-Mark Newco and the Post Confirmation Representative, as
applicable, may, at any time, request that the Bankruptcy Court estimate any
contingent or unliquidated Claim pursuant to section 502(c) of the Bankruptcy
Code regardless of whether the Debtors, Core-Mark Newco or the Post Confirmation
Trust, as applicable, has previously objected to such Claim or whether the
Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court will
retain jurisdiction to estimate any Claim at any time during litigation
concerning any objection to any Claim, including during the pendency of any
appeal relating to any such objection. In the event that the Bankruptcy Court
estimates any contingent or unliquidated Claim, that estimated amount will
constitute either the Allowed amount of such Claim or a maximum limitation on
such Claim, as determined by the Bankruptcy Court. If the estimated amount
constitutes a maximum limitation on such Claim, Core-Mark Newco and the Post
Confirmation Representative, as applicable, may elect to pursue any supplemental
proceedings to object to any ultimate payment on such Claim. All of the
aforementioned Claims and objection, estimation and resolution procedures are
cumulative and not necessarily exclusive of one another. Claims may be estimated
and subsequently compromised, settled, withdrawn or resolved by any mechanism
approved by the Bankruptcy Court.
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3. Payments and Distributions on Disputed Claims
Notwithstanding any provision herein to the contrary, except as
otherwise agreed by Core-Mark Newco or the Post Confirmation Trust, as
applicable, Core-Mark Newco and the Post Confirmation Trust, as applicable, in
their sole discretion shall not make any partial payments or partial
distributions with respect to a Disputed Claim until the resolution of such
disputes by settlement or Final Order. On the date or, if such date is not a
Business Day, on the next successive Business Day that is 45 calendar days after
the month in which a Disputed Claim becomes an Allowed Claim, the Holder of such
Allowed Claim will receive all payments and distributions to which such Holder
is then entitled under the Plan. Notwithstanding the foregoing, any Person or
Entity who holds both an Allowed Claim(s) and a Disputed Claim(s) will not
receive the appropriate payment or distribution on the Allowed Claim(s), except
as otherwise agreed by Core-Mark Newco or the Post Confirmation Trust, as
applicable, until the Disputed Claim(s) is or are resolved by settlement or
Final Order. In the event there are Disputed Claims requiring adjudication and
resolution, Core-Mark Newco and the Post Confirmation Trust, as applicable,
shall establish appropriate reserves for potential payment of such Claims.
B. Allowance of Claims
Except as expressly provided herein or in any order entered in the
Chapter 11 Cases prior to the Effective Date (including the Confirmation Order),
no Claim shall be deemed Allowed unless and until such Claim is deemed Allowed
under the Bankruptcy Code and no objection to such Claim has been filed by the
Objection Deadline or the Bankruptcy Court enters a Final Order in the Chapter
11 Cases allowing such Claim. Except as expressly provided in the Plan or any
order entered in the Chapter 11 Cases prior to the Effective Date (including the
Confirmation Order), the Reorganized Debtors and the Post Confirmation Trust, as
applicable, after confirmation will have and retain any and all rights,
remedies, causes of action and defenses the Debtors had with respect to any
Claim as of the date the Debtors filed their petitions for relief under the
Bankruptcy Code. All Claims of any Person or Entity that may owe money to the
Debtors shall be disallowed unless and until such Person or Entity pays the
amount it owes the Debtors in full.
C. Controversy Concerning Impairment
If a controversy arises as to whether any Claims, or any Class of
Claims, is Impaired under the Plan, the Bankruptcy Court shall, after notice and
a hearing, determine such controversy before the Confirmation Date.
D. Impact on Pending Litigation; Pension Plans
Pursuant to section III.B.12 herein, Other Securities Claims and
Interests, including, but not limited to, the securities class action entitled
In re Fleming Companies Securities Litigation, Master File No. 5:03-md-1530TJW
(the "Securities Class Action") brought by current or former Fleming
shareholders and creditors described in more detail in section V.C.6 of the
Disclosure Statement, will be permanently enjoined as to the Debtors and any
claims thereunder discharged. Litigation involving directors and officers of the
Debtors, including but not limited to, that described in section V.C.6 of the
Disclosure Statement may be affected by the releases contained in section XII
herein. Litigation against the Debtors that is not deemed an Other Securities
Claim or Interest or is not affected by the releases contained in section XII
herein, and is not otherwise discharged, settled or expunged in accordance with
the Plan, will be permanently enjoined pursuant to section XII.G. herein, and
any Allowed Claims arising from such litigation will generally be treated as
Class 6 Claims under the Plan. Nothing in the Plan or in any order confirming
the Plan, however, shall affect, release, enjoin or impact in any way the
prosecution of the claims of the class claimants in the Securities Class Action
asserted, or to be asserted, against the non-Debtor defendants in the Securities
Class Action and/or any other non-Debtor unless (i) a Claim Holder has
affirmatively voted in favor of the Plan, in which case such Claim Holder shall
release the Releasees as outlined in section XII.C. herein and any litigation by
such Claim Holder against the Releasees of the type outlined in section XII.C.
shall be permanently enjoined and any Claims thereunder discharged as outlined
herein and in section XII.G., or (ii) the litigation is among Releasees, in
which case it shall be released by the Mutual Releases outlined in section
XII.B. herein and shall be permanently enjoined and any claims thereunder
discharged as outlined herein and in section XII.G. The Plan shall forever bar
any claimant including, but not limited to, the class claimants in the
Securities Class Action from pursuing claims against the Debtors which are
covered by the directors and officers liability insurance policies maintained by
the Debtors (the "D&O Insurance") but shall not bar such Claim Holders from
pursuing the non-Debtor defendants who may be entitled to coverage by the D&O
Insurance.
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On February 9, 2004, Jackson Capital Management LLC, the lead plaintiff
("Lead Plaintiff") in the Securities Class Action filed an Objection to the
Disclosure Statement. The Lead Plaintiff raised essentially two objections.
First, the Lead Plaintiff alleges that the provisions in the Plan and Disclosure
Statement relating to Releases are ambiguous in that they are unclear as to
whether such Releases shall have any impact on the rights of the Lead Plaintiff
and class claimants in the Securities Class Action or the claims asserted in the
Securities Class Action against any non-Debtor. This Objection has been
addressed by the language inserted above suggested by the Lead Plaintiff which
specifically states that "Nothing in the Plan or in any Order confirming the
Plan, shall affect, release, enjoin or impact in any way the prosecution of the
claims of the class claimants asserted, or to be asserted, against the
non-Debtor defendants in the Securities Class Action and/or any other
non-Debtor" unless the class claimants also happen to have Claims against the
Debtors in addition to the Claims they have arising out of the Securities Class
Action which are Class 10 Claims, which are extinguished under the Plan and the
Holders of which are not entitled to vote and are deemed to have rejected the
Plan.
The Lead Plaintiff's second Objection is really a Plan Objection. The
Lead Plaintiff alleges that "the class claimants are entitled not only to look
to the proceeds of D & O Insurance for payment of their claims asserted or to be
asserted in the Securities Class Action, but they also may pursue their claims
against the Debtor solely to the extent of such available D & O Insurance." The
Lead Plaintiff goes on to state that the "Plan should not impact the class
claimants' rights against the Debtor, either though injunctive relief or
discharge, to pursue their claims solely against such insurance proceeds."
Again, this is a Plan Objection. The Lead Plaintiff is seeking treatment under
the Plan that is not presently contemplated and not agreed to by the Debtors.
The Plan enjoins the Lead Plaintiff and the class claimants from pursuing claims
against the Debtors and discharges any and all claims that the class claimants
may have against the Debtors. The Debtors cannot agree to permit the Lead
Plaintiffs and class claimants to proceed against the Debtors to the extent of D
& O Insurance. Such treatment would provide the class claimants with treatment
more favorable than that accorded creditors whose claims are of a higher
priority than the class claimants, especially with respect to claimants with
Class 6 and 7 Claims who are not likely to be receiving full recovery on their
Claims.
The PBGC asserts that, as a matter of law, nothing in the Plan or in
the Confirmation Order may release, exculpate, discharge or enjoin any Claims,
obligations, suits, judgments, damages, demands, debts, rights, Cause of Action
or liabilities against any entity other than the Debtors with respect to the
Fleming Pension Plan and the Existing Pension Plans. The Debtors dispute these
assertions.
ARTICLE XI.
CONDITIONS PRECEDENT TO CONFIRMATION
AND OCCURRENCE OF THE EFFECTIVE DATE OF THE PLAN
A. Conditions Precedent to Confirmation
It shall be a condition to Confirmation hereof that all provisions,
terms and conditions hereof are approved in the Confirmation Order.
B. Conditions Precedent to Occurrence of the Effective Date
It shall be a condition to occurrence of the Effective Date of the Plan
that the following conditions shall have been satisfied or waived pursuant to
the provisions of Section XI.C. herein:
1. The Confirmation Order confirming the Plan, as the Plan may
have been modified, shall have been entered and become a Final Order in form and
substance satisfactory to the Debtors and the Committee and shall provide that,
among other things:
(i) the Debtors and Reorganized Debtors are
authorized and directed to take all actions necessary or
appropriate to enter into, implement and consummate the
contracts, instruments, releases, leases, indentures and other
agreements or documents created in connection with the Plan;
36
(ii) the provisions of the Confirmation Order are
nonseverable and mutually dependent;
(iii) Core-Mark Newco is authorized to issue the
New Common Stock and Management Options; and
(iv) the New Common Stock issued under the Plan
is exempt from registration under the Securities Act pursuant
to section 1145 of the Bankruptcy Code, except to the extent
that Holders of the New Common Stock are "underwriters," as
that term is defined in section 1145 of the Bankruptcy Code.
2. The following agreements, in form and substance satisfactory
to the Reorganized Debtors and the Committee, shall have been tendered for
delivery and all conditions precedent thereto shall have been satisfied:
(a) Exit Financing Facility;
(b) Tranche B Loan Agreement; and
(c) Management Incentive Plan.
3. The Certificate of Incorporation of Core-Mark Newco shall have
been filed with the Secretary of State of the State of Delaware.
4. All actions, documents and agreements necessary to implement
the Plan shall have been effected or executed.
5. The new board of directors of Core-Mark Newco shall have been
appointed.
6. The Reorganized Debtors shall have established and funded the
Professional Fee Escrow Account.
7. The appropriate Final Orders recognizing and implementing the
Plan in Canada shall have been obtained from the Canadian CCAA Court.
8. The Post Confirmation Trust shall be established and all
actions, documents and agreements necessary to implement the Post Confirmation
Trust shall have been effected or executed.
9. The issuance of the New Common Stock under the Plan shall be
exempt from the prospectus and registration requirements and the first trade
thereof shall be exempt from the prospectus requirements of the securities laws
of each of the provinces of Canada (including, to the extent necessary, pursuant
to an order or orders issued by the applicable Canadian securities regulators
granting relief from any such prospectus and registration requirements that
would otherwise be applicable).
C. Waiver of Conditions
Except as otherwise required by the terms of the Plan, the Debtors,
with the consent of the Committee, may waive any of the conditions to
Confirmation of the Plan and/or to occurrence of the Effective Date of the Plan
set forth in this Article XI at any time, without notice, without leave or order
of the Bankruptcy Court, and without any formal action other than proceeding to
confirm and/or consummate the Plan.
D. Effect of Non-occurrence of Conditions to Occurrence of the Effective
Date
If the occurrence of the Effective Date of the Plan does not occur by
______________, 2004, the Plan shall be null and void in all respects and
nothing contained in the Plan or the Disclosure Statement shall: (1) constitute
a waiver or release of any Claims by or against the Debtors; (2) prejudice in
any manner the rights of the Debtors; or (3) constitute an admission,
acknowledgment, offer or undertaking by the Debtors in any respect.
37
ARTICLE XII.
DISCHARGE, RELEASE, INJUNCTION AND RELATED PROVISIONS
A. Subordination
The classification and manner of satisfying all Claims and Equity
Interests and the respective distributions and treatments hereunder take into
account and/or conform to the relative priority and rights of the Claims and
Equity Interests in each Class in connection with any contractual, legal and
equitable subordination rights relating thereto whether arising under general
principles of equitable subordination, section 510(b) of the Bankruptcy Code or
otherwise, and any and all such rights are settled, compromised and released
pursuant hereto. The Confirmation Order shall permanently enjoin, effective as
of the Effective Date, all Persons and Entities from enforcing or attempting to
enforce any such contractual, legal and equitable subordination rights
satisfied, compromised and settled in this manner.
B. MUTUAL RELEASES BY RELEASEES
ON AND AFTER THE EFFECTIVE DATE, FOR GOOD AND VALUABLE CONSIDERATION,
INCLUDING THE SERVICES OF THE RELEASEES TO FACILITATE THE EXPEDITIOUS
REORGANIZATION OF THE DEBTORS AND THE IMPLEMENTATION OF THE RESTRUCTURING
CONTEMPLATED BY THE PLAN, EACH OF THE RELEASEES SHALL BE DEEMED TO HAVE
UNCONDITIONALLY RELEASED ONE ANOTHER FROM ANY AND ALL CLAIMS (AS DEFINED IN
SECTION 101(5) OF THE BANKRUPTCY CODE), OBLIGATIONS, RIGHTS, SUITS, DAMAGES,
REMEDIES AND LIABILITIES WHATSOEVER, INCLUDING ANY CLAIMS THAT COULD BE ASSERTED
ON BEHALF OF A DEBTOR, WHETHER KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN,
EXISTING OR HEREINAFTER ARISING, IN LAW, EQUITY OR OTHERWISE, THAT THE RELEASEES
OR THEIR SUBSIDIARIES WOULD HAVE BEEN LEGALLY ENTITLED TO ASSERT IN THEIR OWN
RIGHT (WHETHER INDIVIDUALLY OR COLLECTIVELY) OR ON BEHALF OF THE HOLDER OF ANY
CLAIM OR EQUITY INTEREST OR OTHER PERSON OR ENTITY, BASED IN WHOLE OR IN PART
UPON ANY ACT OR OMISSION, TRANSACTION, AGREEMENT, EVENT OR OTHER OCCURRENCE
TAKING PLACE ON OR BEFORE THE EFFECTIVE DATE, EXCEPT FOR CASES OF WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE AND PROVIDED THAT THE DEBTORS, THE REORGANIZED
DEBTORS AND THE POST CONFIRMATION TRUST RESERVE THEIR RIGHTS TO BRING AVOIDANCE
ACTIONS, COLLECT VENDOR DEDUCTIONS, OR ASSERT SETOFF, RECOUPMENT AND OTHER
SIMILAR DEFENSES OR CLAIMS AGAINST MEMBERS OF THE COMMITTEE WITH RESPECT TO
DEBTORS' ORDINARY COURSE BUSINESS DEALINGS WITH SUCH COMMITTEE MEMBERS.
C. RELEASES BY HOLDERS OF CLAIMS
ON AND AFTER THE EFFECTIVE DATE, EXCEPT FOR CASES OF WILLFUL MISCONDUCT
OR GROSS NEGLIGENCE, EACH CLAIM HOLDER THAT HAS AFFIRMATIVELY VOTED TO ACCEPT
THE PLAN SHALL BE DEEMED TO HAVE UNCONDITIONALLY RELEASED THE RELEASEES FROM ANY
AND ALL CLAIMS, OBLIGATIONS, RIGHTS, SUITS, DAMAGES, REMEDIES AND LIABILITIES
WHATSOEVER, INCLUDING ANY CLAIMS THAT COULD BE ASSERTED ON BEHALF OF A DEBTOR,
WHETHER KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, EXISTING OR HEREAFTER ARISING,
IN LAW, EQUITY OR OTHERWISE, THAT SUCH CLAIM HOLDER WOULD HAVE BEEN LEGALLY
ENTITLED TO ASSERT (WHETHER INDIVIDUALLY OR COLLECTIVELY), BASED IN WHOLE OR IN
PART UPON ANY ACT OR OMISSION, TRANSACTION, AGREEMENT, EVENT OR OTHER OCCURRENCE
TAKING PLACE ON OR BEFORE THE EFFECTIVE DATE IN ANY WAY RELATING OR PERTAINING
TO (w) THE PURCHASE OR SALE, OR THE RESCISSION OF A PURCHASE OR SALE, OF ANY
SECURITY OF A DEBTOR, (x) A DEBTOR, REORGANIZED DEBTOR OR CORE-MARK NEWCO, (Y)
THE CHAPTER 11 CASES OR (z) THE NEGOTIATION, FORMULATION AND PREPARATION OF THE
PLAN, OR ANY RELATED AGREEMENTS, INSTRUMENTS OR OTHER DOCUMENTS.
D. INDEMNIFICATION
THE DEBTORS, REORGANIZED DEBTORS AND CORE-MARK NEWCO SHALL BE JOINTLY
AND SEVERALLY OBLIGATED TO INDEMNIFY ALL D&O RELEASEES AND THEIR RESPECTIVE
AFFILIATES, AGENTS AND PROFESSIONALS AGAINST ANY CLAIMS, OBLIGATIONS, SUITS,
JUDGMENTS, DAMAGES, DEMANDS, DEBTS, RIGHTS, CAUSE OF ACTION OR LIABILITIES
WHETHER DIRECT OR INDIRECT, DERIVATIVE, LIQUIDATED OR UNLIQUIDATED, FIXED OR
CONTINGENT, MATURED OR UNMATURED, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, THEN
EXISTING OR THEREAFTER ARISING, IN LAW, EQUITY OR OTHERWISE, THAT ARE BASED IN
WHOLE OR IN PART ON ANY ACT OR OMISSION, TRANSACTION, EVENT OR OTHER OCCURRENCE
TAKING PLACE ON OR PRIOR TO THE EFFECTIVE DATE IN ANY WAY RELATING OR PERTAINING
TO THE DEBTORS, THE REORGANIZED DEBTORS, CORE-MARK NEWCO, THE CHAPTER 11 CASES,
THE PLAN OR THE DISCLOSURE STATEMENT EXCEPT FOR CASES OF WILLFUL
38
MISCONDUCT OR GROSS NEGLIGENCE. THE DEBTORS WILL FUND THE PURCHASE OF TAIL
LIABILITY COVERAGE UNDER THE DEBTORS' DIRECTORS AND OFFICERS INSURANCE POLICIES.
E. EXCULPATION
THE DEBTORS, THE REORGANIZED DEBTORS, CORE-MARK NEWCO, THE D&O
RELEASEES, THE POST-PETITION LENDERS, THE PRE-PETITION LENDERS, THE AGENTS, THE
OLD NOTES TRUSTEES, THE COMMITTEE, THE POST CONFIRMATION TRUST, AND THE POST
CONFIRMATION ADVISORY BOARD, AND THEIR MEMBERS, EMPLOYEES, AND PROFESSIONALS
(ACTING IN SUCH CAPACITY) SHALL NEITHER HAVE NOR INCUR ANY LIABILITY TO ANY
PERSON OR ENTITY FOR ANY PRE- OR POST-PETITION ACT TAKEN OR OMITTED TO BE TAKEN
IN CONNECTION WITH OR RELATED TO THE FORMULATION, NEGOTIATION, PREPARATION,
DISSEMINATION, IMPLEMENTATION, ADMINISTRATION, CONFIRMATION OR OCCURRENCE OF THE
EFFECTIVE DATE OF THE PLAN, THE DISCLOSURE STATEMENT OR ANY CONTRACT,
INSTRUMENT, RELEASE OR OTHER AGREEMENT OR DOCUMENT CREATED OR ENTERED INTO IN
CONNECTION WITH THE PLAN OR ANY OTHER PRE-PETITION OR POST-PETITION ACT TAKEN OR
OMITTED TO BE TAKEN IN CONNECTION WITH, OR IN CONTEMPLATION OF, RESTRUCTURING OF
THE DEBTORS.
F. DISCHARGE OF CLAIMS AND TERMINATION OF EQUITY INTERESTS
EXCEPT AS OTHERWISE PROVIDED HEREIN: (1) THE RIGHTS AFFORDED HEREIN AND
THE TREATMENT OF ALL CLAIMS AND EQUITY INTERESTS HEREIN SHALL BE IN EXCHANGE FOR
AND IN COMPLETE SATISFACTION, DISCHARGE AND RELEASE OF CLAIMS AND EQUITY
INTERESTS OF ANY NATURE WHATSOEVER, INCLUDING ANY INTEREST ACCRUED ON CLAIMS
FROM AND AFTER THE PETITION DATE, AGAINST ANY DEBTOR OR ANY OF ITS RESPECTIVE
ASSETS OR PROPERTIES, (2) ON THE EFFECTIVE DATE, ALL SUCH CLAIMS AGAINST, AND
EQUITY INTERESTS IN, ANY DEBTOR SHALL BE SATISFIED, DISCHARGED AND RELEASED IN
FULL AND (3) ALL PERSONS AND ENTITIES SHALL BE PRECLUDED FROM ASSERTING AGAINST
ANY REORGANIZED DEBTOR, ITS SUCCESSORS OR ITS ASSETS OR PROPERTIES ANY OTHER OR
FURTHER CLAIMS OR EQUITY INTERESTS BASED UPON ANY ACT OR OMISSION, TRANSACTION
OR OTHER ACTIVITY OF ANY KIND OR NATURE THAT OCCURRED PRIOR TO THE CONFIRMATION
DATE.
G. INJUNCTION
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE PLAN, ALL HOLDERS OF
CLAIMS AND EQUITY INTERESTS ARE PERMANENTLY ENJOINED, FROM AND AFTER THE
EFFECTIVE DATE, FROM (a) COMMENCING OR CONTINUING IN ANY MANNER ANY ACTION OR
OTHER PROCEEDING OF ANY KIND ON ANY SUCH CLAIM OR EQUITY INTEREST AGAINST THE
DEBTORS, THEIR ESTATES, CORE-MARK NEWCO OR THE REORGANIZED DEBTORS UNLESS A
PREVIOUS ORDER MODIFYING THE STAY PROVIDED UNDER SECTION 362 OF THE BANKRUPTCY
CODE WAS ENTERED BY THE COURT; (b) THE ENFORCEMENT, ATTACHMENT, COLLECTION OR
RECOVERY BY ANY MANNER OR MEANS OF ANY JUDGMENT, AWARD, DECREE OR ORDER AGAINST
THE DEBTORS, THEIR ESTATES, CORE-MARK NEWCO OR THE REORGANIZED DEBTORS; (c)
CREATING, PERFECTING, OR ENFORCING ANY ENCUMBRANCE OF ANY KIND AGAINST THE
PROPERTY OR INTERESTS IN PROPERTY OF THE DEBTORS, THEIR ESTATES, CORE-MARK NEWCO
OR THE REORGANIZED DEBTORS; AND (d) ASSERTING ANY RIGHT OF SETOFF, SUBROGATION
OR RECOUPMENT OF ANY KIND AGAINST ANY OBLIGATION DUE FROM THE DEBTORS OR AGAINST
THE PROPERTY OF THE DEBTORS, THEIR ESTATES, CORE-MARK NEWCO OR THE REORGANIZED
DEBTORS WITH RESPECT TO ANY SUCH CLAIM OR EQUITY INTEREST, UNLESS SUCH RIGHT OF
SETOFF SUBROGATION OR RECOUPMENT HAS BEEN PREVIOUSLY ASSERTED IN A TIMELY FILED
PROOF OF CLAIM OR UNLESS ASSERTED AS A DEFENSE OR COUNTERCLAIM TO A CAUSE OF
ACTION BROUGHT BY THE REORGANIZED DEBTORS, CORE-MARK NEWCO OR THE POST
CONFIRMATION TRUST AFTER THE EFFECTIVE DATE. WITH RESPECT TO FSA RESERVE
PARTICIPANTS, TO THE EXTENT THAT ANY FSA RESERVE PARTICIPANT IS ENTITLED TO
SETOFF AGAINST THE FSA RESERVE BECAUSE IT HAS MET ALL OF THE REQUIREMENTS IN THE
BANKRUPTCY COURT ORDER ESTABLISHING THE FSA RESERVE FOR SETOFF AGAINST SUCH FSA
RESERVE, SUCH SETOFF RIGHT SHALL BE PRESERVED AGAINST THE POST-CONFIRMATION
TRUST.
H. POLICE AND REGULATORY POWERS
NOTWITHSTANDING THE FOREGOING, THE RELEASES, EXCULPATION AND INJUNCTION
OUTLINED HEREIN SHALL NOT PRECLUDE A GOVERNMENTAL ENTITY FROM ENFORCING ITS
POLICE AND REGULATORY POWERS.
39
ARTICLE XIII.
RETENTION OF JURISDICTION
Notwithstanding the entry of the Confirmation Order and the occurrence
of the Effective Date, the Bankruptcy Court shall retain such jurisdiction over
the Chapter 11 Cases after the Effective Date as legally permissible, including
jurisdiction to:
1. allow, disallow, determine, liquidate, classify, estimate or
establish the priority or secured or unsecured status of any Claim or Equity
Interest, including the resolution of any request for payment of any
Administrative Claim and the resolution of any and all objections to the
allowance or priority of Claims or Equity Interests;
2. grant or deny any applications for allowance of compensation
or reimbursement of expenses authorized pursuant to the Bankruptcy Code or the
Plan, for periods ending on or before the Effective Date;
3. resolve any matters related to the assumption, assumption and
assignment or rejection of any executory contract or unexpired lease to which
any Debtor is party or with respect to which any Debtor may be liable and to
hear, determine and, if necessary, liquidate, any Claims arising therefrom,
including those matters related to the amendment after the Effective Date
pursuant to Article VII herein to add or strike any executory contracts or
unexpired leases to the list of executory contracts and unexpired leases to be
assumed;
4. ensure that distributions to Holders of Allowed Claims are
accomplished pursuant to the provisions hereof;
5. decide or resolve any motions, adversary proceedings,
contested or litigated matters and any other matters and grant or deny any
applications involving the Debtors;
6. enter such orders as may be necessary or appropriate to
implement or consummate the provisions hereof and all contracts, instruments,
releases, indentures and other agreements or documents created in connection
with the Plan or the Disclosure Statement;
7. resolve any cases, controversies, suits or disputes that may
arise in connection with the occurrence of the Effective Date, interpretation or
enforcement of the Plan or any Person's or Entity's obligations incurred in
connection with the Plan;
8. issue injunctions, enter and implement other orders or take
such other actions as may be necessary or appropriate to restrain interference
by any Person or Entity with occurrence of the Effective Date or enforcement of
the Plan, except as otherwise provided herein;
9. resolve any cases, controversies, suits or disputes with
respect to the releases, injunction and other provisions contained in Article
XII hereof and enter such orders as may be necessary or appropriate to implement
such releases, injunction and other provisions;
10. enter and implement such orders as are necessary or
appropriate if the Confirmation Order is for any reason modified, stayed,
reversed, revoked or vacated;
11. determine any other matters that may arise in connection with
or relate to this Plan, the Disclosure Statement, the Confirmation Order or any
contract, instrument, release, indenture or other agreement or document created
in connection with the Plan or the Disclosure Statement; and
12. enter an order and/or final decree concluding the Chapter 11
Cases.
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ARTICLE XIV.
MISCELLANEOUS PROVISIONS
A. Effectuating Documents, Further Transactions and Corporation Action
Each of the Debtors and Reorganized Debtors is authorized to execute,
deliver, file or record such contracts, instruments, releases and other
agreements or documents and take such actions as may be necessary or appropriate
to effectuate, implement and further evidence the terms and conditions hereof
and the notes and securities issued pursuant hereto.
Prior to, on or after the Effective Date (as appropriate), all matters
provided for hereunder that would otherwise require approval of the shareholders
or directors of the Debtors or Reorganized Debtors shall be deemed to have
occurred and shall be in effect prior to, on or after the Effective Date (as
appropriate) pursuant to the applicable general corporation law of the states
where each of the Debtors is organized without any requirement of further action
by the shareholders or directors of any Debtor or Reorganized Debtor.
B. Dissolution of Committee
The Creditors' Committee shall be dissolved on the Effective Date, and
members shall be released and discharged from all rights and duties arising
from, or related to, the Chapter 11 Cases provided that the Debtors shall pay
the reasonable fees and expenses of the Committee's Professionals incurred in
connection with winding up the Chapter 11 Cases.
C. Payment of Statutory Fees
All fees payable pursuant to section 1930(a) of Title 28 of the United
States Code, as determined by the Bankruptcy Court at the hearing pursuant to
section 1128 of the Bankruptcy Code, shall be paid for each quarter (including
any fraction thereof) until the Chapter 11 Case is converted, dismissed or
closed, whichever occurs first.
D. Modification of Plan
Subject to the limitations contained in the Plan, (1) the Debtors, with
the consent of the Committee, reserve the right, in accordance with the
Bankruptcy Code and the Bankruptcy Rules, to amend or modify the Plan prior to
the entry of the Confirmation Order and (2) after the entry of the Confirmation
Order, the Debtors or the Reorganized Debtors, as the case may be, with the
consent of the Committee or the Post Confirmation Trust Advisory Board, may upon
order of the Bankruptcy Court, amend or modify the Plan, in accordance with
section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or
reconcile any inconsistency in the Plan in such manner as may be necessary to
carry out the purpose and intent of the Plan.
E. Revocation of Plan
The Debtors reserve the right to revoke or withdraw the Plan prior to
the Confirmation Date and to file subsequent plans of reorganization. If the
Debtors revoke or withdraw the Plan, or if Confirmation or occurrence of the
Effective Date does not occur, then (a) the Plan shall be null and void in all
respects, (b) any settlement or compromise embodied in the Plan (including the
fixing or limiting to an amount certain any Claim or Equity Interest or Class of
Claims or Equity Interests), assumption or rejection of executory contracts or
leases affected by the Plan, and any document or agreement executed pursuant
hereto, shall be deemed null and void, and (c) nothing contained in the Plan
shall (i) constitute a waiver or release of any Claims by or against, or any
Equity Interests in, such Debtors or any other Person (ii) prejudice in any
manner the rights of such Debtors or any other Person, or (iii) constitute an
admission of any sort by the Debtors or any other Person.
F. Environmental Liabilities
Nothing in the Plan discharges, releases or precludes any environmental
liability that is not a Claim. Furthermore, nothing in the Plan discharges,
releases or precludes any environmental claim of the United States that arises
on or after the Confirmation Date or releases any Reorganized Debtor from
liability under environmental law as the owner or operator of property that such
Reorganized Debtor owns or operates after the Confirmation Date. In
41
addition, nothing in the Plan releases or precludes any environmental liability
to the United States as to any Person or Entity other than the Debtors or
Reorganized Debtors. Nothing in the Plan enjoins the United States from
asserting or enforcing outside the Bankruptcy Court any liability described in
this paragraph. Other than as specifically stated in this paragraph, the Debtors
and Reorganized Debtors reserve their right to assert any and all defenses to
the assertion or enforcement by the United States or any other person of any
liability described in this paragraph.
G. Successors and Assigns
The rights, benefits and obligations of any Person or Entity named or
referred to herein shall be binding on, and shall inure to the benefit of any
heir, executor, administrator, successor or assign of such Person or Entity.
H. Reservation of Rights
Except as expressly set forth herein, this Plan shall have no force or
effect unless the Bankruptcy Court shall enter the Confirmation Order. None of
the filing of this Plan, any statement or provision contained herein, or the
taking of any action by the Debtors with respect to this Plan shall be or shall
be deemed to be an admission or waiver of any rights of the Debtors with respect
to the Holders of Claims or Equity Interests prior to the Effective Date.
I. Section 1146 Exemption
Pursuant to section 1146(c) of the Bankruptcy Code, any transfers of
property pursuant hereto shall not be subject to any document recording tax,
stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, stamp act,
real estate transfer tax, mortgage recording tax or other similar tax or
governmental assessment in the United States, and the Confirmation Order shall
direct the appropriate state or local governmental officials or agents to forgo
the collection of any such tax or governmental assessment and to accept for
filing and recordation any of the foregoing instruments or other documents
without the payment of any such tax or governmental assessment.
J. Further Assurances
The Debtors, Reorganized Debtors, Core-Mark Newco and all Holders of
Claims receiving distributions hereunder and all other parties in interest
shall, from time to time, prepare, execute and deliver any agreements or
documents and take any other actions as may be necessary or advisable to
effectuate the provisions and intent of this Plan.
K. Entire Agreement
The Plan supersedes all previous and contemporaneous
negotiations, promises, covenants, agreements, understandings and
representations on such subjects, all of which have become merged and integrated
into the Plan.
L. Service of Documents
Any pleading, notice or other document required by the Plan to be
served on or delivered to any Reorganized Debtor or the Committee shall be sent
by first class U.S. mail, postage prepaid to:
42
Fleming Companies, Inc. Milbank Tweed Hadley & McCloy LLP
1945 Lakepoint Drive One Chase Manhattan Plaza
Lewisville, Texas 75057 New York, New York 10005
Attn: Rebecca A. Roof Attn: Dennis Dunne
Kirkland & Ellis LLP Pepper Hamilton LLP
200 E. Randolph Drive 100 Renaissance Center
Chicago, Illinois 60601 Suite 3600
Attn: Geoffrey A. Richards Detroit, Michigan 48243-1157
Janet S. Baer Attn: I. William Cohen
Robert S. Hertzberg
Pachulski, Stang, Ziehl, Young, Jones &
Weintraub PC
919 North Market Street
Sixteenth Floor
P.O. Box 8705
Wilmington, Delaware 19899-8705
Attn: Laura Davis Jones
43
M. Filing of Additional Documents
On or before the Effective Date, the Debtors with the consent of the
Creditors' Committee may file with the Bankruptcy Court such agreements and
other documents as may be necessary or appropriate to effectuate and further
evidence the terms and conditions hereof.
Respectfully Submitted,
FLEMING COMPANIES, INC.
By: /s/ Rebecca A. Roof
---------------------------------------------
Name: Rebecca A. Roof
Title: Interim Chief Financial Officer
OFFICIAL COMMITTEE OF UNSECURED CREDITORS
By: /s/ Paul S. Aronzon
---------------------------------------------
Name: Paul S. Aronzon
----------------------------------------
Title: Co-Counsel
----------------------------------------
44
EXHIBIT 2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE: ) CHAPTER 11
)
FLEMING COMPANIES, INC., ET AL.,(1) ) CASE NO. 03-10945 (MFW)
) (JOINTLY ADMINISTERED)
DEBTORS. )
)
)
[DEBTORS' PROPOSED] ORDER (A) SCHEDULING A HEARING TO CONFIRM JOINT PLAN OF
REORGANIZATION; (B) ESTABLISHING VOTING DEADLINE AND DEADLINE FOR OBJECTING TO
THE PLAN; (C) APPROVING FORM OF BALLOTS AND MASTER BALLOTS; AND (D)
APPROVING SOLICITATION PROCEDURES AND FORM AND MANNER OF NOTICES
Upon the motion (the "Motion")(2) of the Debtors seeking entry of an
order (a) scheduling a hearing to confirm their first amended joint plan of
reorganization; (b) establishing voting deadline and deadline for objecting to
the plan; (c) approving form of ballots and master ballots; and (d) approving
solicitation procedures and form and manner of notices, and it appearing that
this Court has jurisdiction over this matter pursuant to 28 U.S.C. Sections 157
and 1334; and it appearing that this proceeding is a core proceeding pursuant to
28 U.S.C. Section 157(b)(2); and it appearing that venue of this proceeding and
the Motion are proper in this District pursuant to 28 U.S.C. Sections 1408 and
1409; and adequate notice of the Motion having been given; and it appearing that
no other notice need be given; and after due deliberation and sufficient cause
appearing therefor, it is hereby ORDERED that:
- ----------
(1) The Debtors are the following entities: Fleming Companies, Inc.; ABCO
Food Group, Inc.; ABCO Markets, Inc.; ABCO Realty Corp.; ASI Office
Automation, Inc.; C/M Products, Inc.; Core-Mark International, Inc.;
Core-Mark Interrelated Companies, Inc.; Core-Mark Mid-Continent, Inc.;
Dunigan Fuels, Inc.; FAVAR Concepts, Ltd.; Fleming Foods Management
Co., L.L.C., Fleming Foods of Texas, L.P.; Fleming International, Ltd.;
Fleming Supermarkets of Florida, Inc.; Fleming Transportation Service,
Inc.; Food 4 Less Beverage Company, Inc.; Fuelserv, Inc.; General
Acceptance Corporation; Head Distributing Company; Marquise Ventures
Company, Inc.; Minter-Weisman Co.; Piggly Wiggly Company; Progressive
Realty, Inc.; Rainbow Food Group, Inc.; Retail Investments, Inc.;
Retail Supermarkets, Inc.; RFS Marketing Services, Inc.; and Richmar
Foods, Inc.
(2) Capitalized terms not defined herein shall have the same meaning as in
the Motion.
1. The Motion is granted.
2. The Disclosure Statement is hereby approved as containing adequate
information within the meaning of section 1125(a) and (b) of the Bankruptcy
Code.
3. All earlier versions and interim forms of the Disclosure Statement
and the Plan are of no force or effect.
4. The Debtors and the Committee are authorized to make non-substantive
conforming changes to the Plan and Disclosure Statement prior to solicitation.
5. A hearing to confirm the Plan (the "Confirmation Hearing") will
commence on June 19, 2004 at ______ __.m. Eastern Time, before the Honorable
Mary F. Walrath, Chief United States Bankruptcy Judge, at 824 Market Street, 5th
Floor, Wilmington, Delaware 19801.
6. The Confirmation Hearing may be continued from time to time by
announcing such continuance in open court or by posting such continuance on the
Court's docket without further notice to parties-in-interest.
7. The deadline to file and serve objections to the confirmation of the
Plan (the "Plan Objection Deadline") is 4:00 p.m. Eastern Time on June 4, 2004.
8. The parties shall conduct discovery with respect to confirmation of
the Plan on the basis of the following schedule:
a. The Debtors shall establish an electronic repository of
documents relevant to the confirmation of the Plan available
on their website by no later than April 19, 2004.
b. All parties in interest who may object shall serve written
discovery requests on the Debtors by no later than May 5,
2004.
c. All parties in interest who may object shall identify
potential witnesses for the Confirmation Hearing no later than
May 5, 2004.
d. The Debtors shall serve their written discovery requests no
later than May 15, 2004.
e. The Debtors shall identify potential witnesses for the
Confirmation Hearing no later than May 15, 2004.
f. The Debtors shall produce documents responsive to the
discovery requests not already in the electronic repository
and add such documents to the electronic repository no later
than May 15, 2004.
g. Fact witness depositions shall take place from May 15, 2004
through May 25, 2004.
h. Expert reports of all parties shall be due on May 25, 2004.
i. Rebuttal expert reports shall be due May 30, 2004.
j. Expert depositions shall take place from May 25, 2004 through
May 30, 2004.
k. The Discovery Cutoff(3) shall be May 30, 2004.
l. All parties shall exchange final witness lists and exhibits
lists on June 14, 2004.
m. All parties shall serve motions in limine on June 14, 2004.
n. All parties shall exchange responses to motions in limine on
June 19, 2004.
9. All objections to the confirmation of the Plan must be filed with
the Court and served in a manner so that they are actually received on or before
4:00 p.m. Eastern Time on the Plan Objection Deadline by the Notice Parties
(each as listed below):
Counsel to the Debtors Counsel to the Debtors
Kirkland & Ellis LLP Pachulski Stang Ziehl Young & Jones PC
200 East Randolph Drive 919 N. Market Street
Chicago, IL 60601 16th Floor
312-861-2000 Wilmington, DE 19899
Fax: 312-861-2200 Attn: Laura Davis Jones
Attn: Janet S. Baer Christopher J. Lhulier
Evan R. Gartenlaub
Office of the United States Trustee Co-Counsel to the Creditors Committee
844 King Street, Room 2207 Pepper Hamilton LLP
Lockbox #35 100 Renaissance Center, Suite 3600
Wilmington, DE 19801 Detroit, MI 48243-1157
302-573-6491 Fax: (313) 259-7926
Attn: Joseph J. McMahon Attn: I. William Cohen
Robert S. Hertzberg
- ----------
(3) "Discovery Cutoff" refers to the last day for all factual and expert
discovery, including, but not limited to, all depositions,
interrogatories and document requests.
Counsel to the Prepetition Lenders Co-Counsel to the Creditors Committee
White & Case Milbank, Tweed, Hadley & McCloy LLP
1155 Avenue of the Americas One Chase Manhattan Plaza
New York, NY 10036-2787 New York, NY 10005
Fax:: (212) 354-8113 Fax: (212) 530-5219
Attn: Andrew P. DeNatale Attn: Dennis F. Dunne
10. The Debtors and any other party in interest may file a response to
any timely-filed Plan Objection(s) by 4:00 p.m. Eastern Time, on June 19, 2004.
11. All objections to the Plan shall state with particularity the
grounds for such objection and provide the specific text, if any, that the
objecting party believes to be appropriate to insert into the Plan.
12. The Court shall consider only written objections and responses
timely filed and served by the applicable deadline.
13. April 5, 2004 (Date of approval of the Disclosure Statement) shall
be the record date for purposes of determining which Creditors are entitled to
vote on the Plan (the "Voting Record Date"). The Voting Record Date shall apply
to (a) all creditors who have filed timely proofs of Claim or whose Claims are
listed as non-contingent, liquidated or undisputed on the Debtors' schedules of
assets and liabilities, and (b) all trustees, agents and Nominees that will cast
votes on behalf of the Beneficial Holders, provided, however, that all
applicable procedures discussed herein regarding objections to, and estimation
procedures for, Claims shall apply to such Claims.
14. All Ballots or Master Ballots, as applicable, accepting or
rejecting the Plan must be received by Bankruptcy Management Corporation (the
"Solicitation Agent") by 5:00 p.m. Eastern Time on June 4, 2004, (the "Voting
Deadline") at the following addresses:
IF BY U.S. MAIL: IF BY COURIER/HAND DELIVERY:
Bankruptcy Management Corporation Bankruptcy Management Corporation
Attention: Fleming Solicitation Agent Attention: Fleming Solicitation Agent
PO Box 900 1330 E. Franklin Avenue
El Segundo, CA 90245-900 El Segundo, CA 90245
15. The Debtors, in consultation with the Committee, may extend or
waive the period during which votes will be accepted by the Debtors, in which
case the Voting Deadline for such solicitation shall mean the last time and date
to which such solicitation is extended.
16. The form of the Ballots, substantially in the forms attached hereto
as Exhibit A, are hereby approved.
17. The form of the Master Ballots, substantially in the form attached
hereto as Exhibit B, is hereby approved.
18. All votes to accept or reject the Plan must be cast by using the
appropriate Ballot or Master Ballot.
19. The voting instructions, substantially in the forms attached to the
Ballots and Master Ballots on Exhibit A and Exhibit B attached hereto, are
hereby approved.
20. The Solicitation Procedures are hereby approved; provided, however
that the Debtors and the Committee reserve the right to modify, amend or
supplement the Solicitation Procedures subject to Court approval.
21. The Confirmation Hearing Notice, substantially in the form attached
hereto as Exhibit C, is hereby approved.
22. The Non-Voting Notices, substantially in the form attached hereto
as Exhibit D, are hereby approved.
23. Within fourteen days after the entry of this Order, the Debtors
shall distribute the following solicitation materials (the "Solicitation
Package"): (a) the Disclosure Statement (including exhibits, one of which is the
Plan); (b) the appropriate Ballot(s), Master Ballots and voting instructions;
(c) the Confirmation Hearing Notice; (d) any supplemental solicitation materials
the Debtors or the Committee may file with the Court; (e) a pre-addressed return
envelope, if applicable, and (f) any other materials ordered by the Court to be
included as part of the Solicitation Package, to (i) all known Holders of Claims
against the Debtors as of the Voting
Record Date who are entitled to vote on the Plan; (ii) the Office of the United
States Trustee; and (iii) the Securities and Exchange Commission.
24. Holders of Claims who have more than one Claim shall receive only
one Solicitation Package and as many Ballots as their Claims entitle them to
vote.
25. Within fourteen days after the entry of this Order, the Debtors
shall distribute the following materials: (a) the Confirmation Hearing Notice;
and (b) a Non-Voting Notice, to Holders of Claims against or Equity Interests in
the Debtors that are placed in a class under the Plan that is deemed to accept
or reject the Plan under section 1126 of the Bankruptcy Code.
26. As soon as practicable after entry of this Order, the Debtors shall
publish the Confirmation Hearing Notice once in the publications listed on
Exhibit E.
27. The following rules shall be used to determine the Claim amount
associated with a creditor's vote:
a. If the Debtors have not filed a written objection to a Claim,
the Claim amount for voting purposes shall be the amount
contained on a timely filed proof of Claim or, if no timely
proof of Claim was filed, the non-contingent, liquidated and
undisputed Claim amount listed in the Debtors' schedules of
liabilities;
b. If the Debtors have filed an objection to a Claim and such
objection is still pending, such Claim Holder's vote shall not
be counted in accordance with Fed. R. Bankr. P. 3018(a),
unless its Claim is temporarily allowed by the Court for
voting purposes, after notice and a hearing, pursuant to
instruction (c) below. The deadline for the Debtors to file
and serve written objections to Claims for purposes of this
instruction (b) shall be 4:00 p.m. Eastern Time on the date
that is forty-five (45) days prior to the Confirmation
Hearing;
c. In regard to instruction (b), if the Debtors object to a Claim
seeking to reduce and allow such Claim, that Claim shall be
counted for purposes of Fed. R. Bankr. P. 3018(a), in the
amount that the Debtors seek to allow in their objection,
unless such Claim is temporarily allowed in full by the Court
for voting purposes, after notice and a hearing, pursuant to
instruction (e) below.
d. Instruction (b) shall not apply when the Debtors have filed an
objection to a Claim solely seeking to reclassify such Claim.
In that case, the holder of such Claim will receive
solicitation materials and/or Ballots reflecting their voting
rights for both: (i) as if the Debtors' reclassify only
objection is granted, and (ii) as if the Debtors' reclassify
only objection is denied. Such Ballots will be counted as
though the Debtors' reclassification
objection has been denied unless the Court grants the Debtors'
reclassify only objection before the Voting Deadline.
Additionally, a copy of the Notice attached hereto as Exhibit
F, explaining the two Ballots shall be sent to the Holder of
any such Claim receiving multiple solicitation materials
and/or ballots as a result of the Debtors' reclassify only
objection;
e. If a creditor is: (i) not entitled to vote pursuant to
instruction (b) above; or (ii) not entitled to vote its claim
in full pursuant to instruction (c) above, and the creditor
believes that it should be entitled to vote its Claim on the
Plan as filed, then such creditor must serve on the Debtors
and file with the Court a motion for an order pursuant to Fed.
R. Bankr. P. 3018(a) (a "Rule 3018(a) Motion") seeking
temporary allowance for voting purposes. Such Rule 3018(a)
Motion, with evidence in support thereof, must be filed and
received by the Debtors by 4:00 p.m. Eastern Time on the date
that is ten (10) days prior to the Confirmation Hearing. With
regard to any timely filed Rule 3018(a) Motions, the Debtors
may file a response no later than one (1) business day before
the commencement of the Confirmation Hearing. The Debtors
further request that the Court consider timely filed Rule
3018(a) Motions, if any, at the Confirmation Hearing; and
f. Ballots cast by creditors who timely file proofs of Claim for
only unliquidated, contingent or unknown amounts that are not
the subject of a pending objection will be counted for
satisfying the numerosity requirement of section 1126(c) of
the Bankruptcy Code and will be counted in the amount of $1.00
for the purpose of satisfying the dollar amount provisions of
section 1126(c) of the Bankruptcy Code. However, Ballots cast
by creditors who file timely proofs of Claim with liquidated
portions in addition to unliquidated, contingent or unknown
amounts that are not subject to a pending objection shall be
counted in the amount asserted in the liquidated portion of
such Claim for the purpose of satisfying the dollar amount
provisions of section 1126(c) of the Bankruptcy Code; and
g. Creditors holding claims in a class that is designated as
impaired and entitled to vote under the Plan shall receive
only the Ballot appropriate for that impaired class. To avoid
duplication and reduce expenses, creditors who have filed
duplicate claims in any given class shall be entitled to
receive only one Ballot for voting their claims with respect
to that class.
28. To ensure that its vote is counted, each Holder of a Claim must:
a. complete a Ballot;
b. indicate whether it is voting to accept or reject the Plan in
the boxes provided in the respective Ballot; and
c. sign and return the Ballot to the address set forth on the
envelope enclosed therewith on or prior to the Voting
Deadline, or in the case of a Beneficial Holder whose
securities are held in the name of a Nominee, in sufficient
time to permit the Nominee to include its vote in the
applicable Master
Ballot and return the Master Ballot to the Solicitation Agent
on or prior to the Voting Deadline.
29. The following general voting procedures and standard assumptions
shall be used to tabulate the votes cast with respect to the Plan:
a. Except to the extent determined by the Debtors and the
Committee, the Debtors will not accept or count any Ballots or
Master Ballots received after the Voting Deadline. Such
determinations will be disclosed in the voting report and any
such determination by the Debtors and the Committee shall be
subject to de novo review by this Court.;
b. Creditors shall not be allowed to split their vote within a
Claim; thus, each creditor that splits its vote shall be
deemed to have voted the full amount of its Claim to accept
the Plan;
c. The method of delivery of Ballots and Master Ballots to the
Solicitation Agent is at the election and risk of each Holder;
provided that, except as otherwise provided in the Plan, such
delivery will be deemed made only when the original executed
Ballot or Master Ballot is actually received by the
Solicitation Agent;
d. The Solicitation Agent must receive an original executed
Ballot or Master Ballot; delivery of a Ballot or Master Ballot
by facsimile, email or any other electronic means will not be
accepted or counted;
e. Any Ballot or Master Ballot not sent to the Solicitation
Agent, but instead, sent to (i) the Debtors, (ii) any
indenture trustee or agent, or (iii) the Debtors' or the
Committee's financial or legal advisors shall not be accepted
or counted;
f. The Debtors and the Committee expressly reserve the right to
amend Plan terms at any time, and from time to time (subject
to compliance with section 1127 of the Bankruptcy Code and the
terms of the Plan regarding modification). If the Debtors
materially change any Plan terms or waive a material
condition, the Debtors will disseminate additional
solicitation materials and will extend the solicitation
period, in each case, to the extent directed by the Court;
g. If multiple Ballots or Master Ballots are received from, or on
behalf of, an individual Holder for the same Claim prior to
the Voting Deadline, the last Ballot or Master Ballot timely
received will be deemed to reflect the voter's intent and to
supersede and revoke any prior Ballot or Master Ballot;
h. All Ballots executed by a Holder of Claims which do not
indicate an acceptance or rejection of the Plan or which
indicate both an acceptance and rejection of the Plan shall
not be counted;
i. Any trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation, or other person
acting in a fiduciary or representative capacity, who signs a
Ballot or Master Ballot must (i) indicate his or her
capacity as such when signing and, (ii) unless otherwise
determined by the Debtors, submit proper evidence of such
authority to act on behalf of a beneficial interest Holder in
form and content satisfactory to the Debtors and the
Committee;
j. To the extent that conflicting votes or over-votes are
submitted by a Nominee, the Solicitation Agent will attempt to
reconcile discrepancies with the Nominee.
k. To the extent that over-votes on a Master Ballot are not
reconcilable prior to the Debtors' preparation of the vote
certification, the Solicitation Agent will apply the votes to
accept and reject the Plan in the same proportion as the votes
to accept or reject the Plan submitted on the Master Ballot
that contained the over vote but only to the extent of the
Nominee's position in the applicable Old Notes.
l. The Debtors, in consultation with the Committee, without
notice, subject to contrary order of the Court, may waive any
defect in any Ballot or Master Ballot at any time, either
before or after the close of voting, and without notice. Such
determinations will be disclosed in the voting report and any
such determination by the Debtors and the Committee shall be
subject to de novo review by this Court.;
m. Any Holder of a Claim who has delivered a valid Ballot may
withdraw its vote solely in accordance with Fed. R. Bankr. P.
3018(a);
n. The Debtors' and the Committee's interpretation of the terms
and conditions of the Plan pertaining to solicitation
procedures shall be final and binding on all parties, unless
otherwise directed by the Court;
o. The Debtors and the Committee reserve the absolute right to
reject any and all Ballots and Master Ballots not proper in
form, the acceptance of which would, in the opinion of the
Debtors or their counsel, not be in accordance with the
provisions of the Bankruptcy Code. Such determinations will be
disclosed in the voting report and any such determination by
the Debtors and the Committee shall be subject to de novo
review by this Court; and
p. Neither the Debtors, the Committee, nor any other person or
entity will be under any duty to provide notification of
defects or irregularities with respect to the Ballots or
Master Ballots nor will any of them incur any liabilities for
failure to provide such notification. Delivery of such Ballots
or Master Ballots will not be deemed to have been made until
such irregularities have been cured or waived. Ballots and
Master Ballots previously furnished (as to which any
irregularities have not theretofor been cured or waived) will
not be counted.
30. The following procedures, in addition to the aforementioned
procedures, apply to the Holders of Old Notes (collectively, the "Beneficial
Holder Claims") which under the Plan fall within Class 6-General Unsecured
Claims:
a. The Debtors shall distribute a Ballot to each record Holder of
the Beneficial Holder Claims as of the Voting Record Date;
b. The Debtors shall also distribute a Master Ballot and an
appropriate number of copies of Solicitation Packages
(including Class 6 Ballots) to each bank or brokerage firm (or
the agent or other Nominee therefor) identified by the
Solicitation Agent as an entity through which beneficial
owners hold their Beneficial Holder Claims. Each Nominee will
be requested to immediately distribute the Solicitation
Packages to all Beneficial Holders for which it holds the
Beneficial Holder Claims;
c. Each Nominee must summarize the individual votes of the
Beneficial Holders on whose behalf it holds the Old Notes
Claims from their individual Ballots on a Master Ballot and
return such Master Ballot to the Solicitation Agent;
d. Each Beneficial Holder of the Beneficial Holder Claims holding
as a record Holder in its own name, shall vote on the Plan by
completing and signing the Ballot and returning it to the
Solicitation Agent;
e. Each Beneficial Holder of the Beneficial Holder Claims who
holds in "street name" through a Nominee shall vote on the
Plan by promptly completing and signing a Ballot and returning
it to its Nominee in sufficient time to allow the Nominee to
process the Ballot and return a Master Ballot to the
Solicitation Agent by the Voting Deadline;
f. Any Ballot returned to a Nominee by a Beneficial Holder will
not be counted for purposes of accepting or rejecting the Plan
unless and until such Nominee properly completes and timely
delivers to the Solicitation Agent a Master Ballot that
reflects the vote of such Beneficial Holder;
g. If a Beneficial Holder holds its Beneficial Holder Claims
through more than one Nominee, such Beneficial Holder must
execute a separate Ballot for each block of the Beneficial
Holder Claims that it holds through any one Nominee and return
each such Ballot to the Nominee that holds of record the
applicable Beneficial Holder Claims;
h. If a Beneficial Holder holds a portion of its Beneficial
Holder Claims through a Nominee and another portion directly
or in its own name as a record Holder, such Beneficial Holder
should follow the procedures described herein with respect to
voting each such portion separately; and
i. Nominees which are participants with The Depository Trust
Company ("DTC"), shall not be permitted to cast votes on
behalf of their Beneficial Holders in excess of their
respective positions in the DTC as of the Voting Record Date.
31. With respect to Solicitation Packages or Notices returned by the
United States Postal Service as undeliverable, the Debtors are not required to
re-mail such Solicitation
Packages or Notices, as the case may be, to entities whose addresses differ from
the addresses in the claims register or the Debtors' records as of the Voting
Record Date.
32. The Debtors are authorized, but not directed, to reimburse any
Nominee, and any of their agents, only for their reasonable, actual and
necessary out-of-pocket expenses incurred in performing the tasks described
above (subject to the Court retaining jurisdiction to resolve any disputes over
any request for reimbursement).
33. The Debtors are authorized and empowered to take all actions and
execute such other documents as may be necessary to implement the relief granted
herein.
34. This Court shall retain jurisdiction to hear and determine all
matters arising from the implementation of this Order.
Dated: , 2004
------------------
------------------------------------
The Honorable Mary F. Walrath
Chief United States Bankruptcy Judge
FLEMING COMPANIES, INC., ET AL.
DISCLOSURE STATEMENT
EXHIBIT 3
INTRODUCTION:
FINANCIAL INFORMATION AND PROJECTIONS
EXHIBIT 3
FINANCIAL INFORMATION AND PROJECTIONS
(UNAUDITED)
(All $$ in 000's Unless Otherwise Noted)
The financial projections ("Projections") contained herein reflect numerous
assumptions, including the confirmation and consummation of the plan of
reorganization as amended (the "Plan") for Fleming Companies, Inc., et al. as
filed with the Bankruptcy Court. The Projections should be viewed in conjunction
with a review of these assumptions including the qualifications and footnotes as
set forth herein. The Projections were prepared by management in good faith
based upon assumptions believed to be reasonable. While presented with numerical
specificity, the Projections are based upon a variety of estimates and
assumptions subject to significant business, economic, and competitive
uncertainties and contingencies, many of which are beyond the control of the
Debtors. Actual results may vary materially from those presented. The
Projections have not been prepared to comply with the guidelines established
with respect to Projections by the Securities and Exchange Commission or the
American Institute of Certified Public Accountants ("AICPA") and have not been
audited.
The Projections are based on the assumption that the Debtors will emerge from
Chapter 11 on July 31, 2004(1), with a new parent holding company, Core-Mark
Newco. Core-Mark Newco and the Reorganized Debtors (collectively referred to
herein as "Core-Mark Newco") will conduct operations centered around the
Debtors' former Fleming Convenience businesses still in operation.
In addition, a Post-Confirmation Trust ("PCT") will be formed. The
responsibilities and authority of the PCT shall include (a) facilitating the
prosecution or settlement of objections to and estimations of Claims, (b)
calculating and implementing all distributions in accordance with the Plan, (c)
filing all required tax returns and paying taxes and all other obligations on
behalf of the PCT from funds held by the PCT, (d) periodic reporting to the
Bankruptcy Court, if required, and parties in interest of the status of the
Claims resolution process, distributions on Allowed Claims, prosecution of
Bankruptcy Causes of Action and substantially all other causes of action, (e)
liquidating the PCT Assets and providing for the distribution of the net
proceeds thereof in accordance with the provisions of the Plan, (f) managing the
wind-down of Debtors' non-Fleming Convenience operations, and (g) such other
responsibilities as may be vested in the PCT pursuant to the Plan or Bankruptcy
Court order or as may be necessary and proper to carry out the provisions and
intent of the Plan.
- --------------------------------------------------------------------------------
(1) If the Effective Date of the Plan is significantly delayed, additional
expenses, including professional fees, may be incurred and operating
results may be negatively impacted.
Page 1
The assets to be contributed to the PCT by the Debtors include:
1) trade accounts receivable, including credits for post-petition
deductions, other than the pre-petition and post-petition trade
accounts receivable and deductions of the continuing Fleming
Convenience business;
2) royalty payments owing to the Debtors related to the sale of the
Fleming Wholesale Distribution Business;
3) litigation Claims which consist primarily of vendor-related
receivables, primarily for uncollected promotional allowances (e.g.
rebates, discounts, price reductions), unreimbursed funds related to
military receivables and funds wired in advance for inventory for
which invoices were not processed and inventory not shipped; but not
including vendor deductions incurred in the ordinary course of
business of the Fleming Convenience business which shall remain with
Core-Mark Newco;
4) vendor-related avoidance actions, especially preference actions as
outlined in section 547 of the Bankruptcy Code;
5) restricted cash, including the PACA escrow, other escrows and the FSA
reserves;
6) available cash in an amount necessary to fund certain payments
required to be made by the PCT under the Plan and PCT Agreement; and
7) all other Claims and Causes of Action as outlined in the Plan and the
Disclosure Statement, other than Causes of Action related to the fire
loss at the Denver warehouse occurring in December 2002, which shall
be transferred to Core-Mark Newco, and other than Causes of Action
waived, exculpated, or released in accordance with the provisions of
the Plan;
provided however, the PCT Assets do not include: (1) any of the assets of the
continuing Fleming Convenience business which are to be transferred to Core-Mark
Newco; (2) the stock of Core-Mark Newco and the stock of the Reorganized
Debtors; and (3) the Professional Fee Escrow Account.
The Projections include (a) the Fleming Companies Inc., et al.
Pre-Reorganization Balance Sheet as projected at July 31, 2004 (Exhibit 3A);
(b) adjustments to the Pre-Reorganization Balance Sheet to reflect projected
payments and borrowings made as a result of consummation of the Plan and
adjustments pursuant to the principles of "fresh-start accounting" as required
by Statement of Position 90-7 ("SOP 90-7") issued by the AICPA (Exhibit 3A);
(c) projected assets and liabilities contributed to the PCT; (Exhibit 3A);
(d) the opening balance sheet for Core-Mark Newco (Exhibit 3A); (e)
post-consummation balance sheets, income statements, and statements of cash
flows for Core-Mark Newco (Exhibit 3B); and (f) post-consummation statements of
assets and liabilities and cash receipts and disbursements for the PCT
(Exhibit 3C).
The Projections are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Factors that could cause
actual results to differ materially include, but are not limited to, Core-Mark
Newco's ability to operate their business consistent
Page 2
with their projections, comply with the covenants of their financing agreement,
attract and retain key executives and customers, and respond to adverse
regulatory actions taken by the federal and state governments and the PCT's
ability to prevail in various litigation and other adversarial matters or
realize the proceeds from the collections of various amounts outstanding.
Page 3
FLEMING COMPANIES, INC., ET AL.
DISCLOSURE STATEMENT
EXHIBIT 3A
PRO FORMA BALANCE SHEETS
EXHIBIT 3A
FLEMING COMPANIES, INC., ET AL. - PRO FORMA BALANCE SHEETS
AS OF JULY 31, 2004
(Unaudited)
<Table>
<Caption>
JUL-04
FLEMING CO. ASSETS & LIABS. JUL-04
INC., ET AL. EMERGENCE & ESCROW FUNDING TRANSFERRED TO CORE-MARK
PRE-REORG "FRESH START" & EXIT FINANCING POST-CONFIRM. NEWCO OPENING
(dollars in thousands) BALANCE SHEET(1) ADJUSTMENTS(2) ADJUSTMENTS TRUST(3) BALANCE SHEET(4)
---------------- --------------- --------------- --------------- ----------------
ASSETS:
Cash & equivalents $ 105,837 $ -- $ (28,837)(11) $ 57,000 $ 20,000
Restricted cash 114,450 -- (61,027)(12) 25,643 27,780
Trade accounts
receivable &
royalty, net 150,216 -- -- 18,000 132,216
Other receivables 272,098 (15,158)(5) -- 183,000 73,940
Inventories, net 180,811 -- -- -- 180,811
Other current assets 33,179 -- -- -- 33,179
--------------- --------------- --------------- --------------- ---------------
TOTAL CURRENT
ASSETS $ 856,592 $ (15,158) $ (89,864) $ 283,643 $ 467,927
Property plant &
equipment, net 48,181 (48,181)(6) -- -- --
Reorganization value
in excess of amounts
allocable to
identifiable assets -- -- -- -- --
Other assets 38,074 (43,038)(7) 4,963(13) -- --
--------------- --------------- --------------- --------------- ---------------
TOTAL NON-CURRENT ASSETS 86,255 (91,219) 4,963 -- --
--------------- --------------- --------------- --------------- ---------------
TOTAL ASSETS $ 942,847 $ (106,377) $ (84,900) $ 283,643 $ 467,927
=============== =============== =============== =============== ===============
LIABILITIES & SHAREHOLDERS'
EQUITY/(DEFICIT):
Short-term debt $ -- -- 40,300(14) $ -- $ 40,300
Accounts payable & accrued
liabilities 395,338 -- (56,300)(15) 230,893 108,145
Cigarette & tobacco taxes
payable 61,345 -- -- -- 61,345
Taxes payable & deferred
taxes 6,427 (2,727)(8) -- -- 3,700
Other current liabilities -- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
TOTAL CURRENT LIABILITIES $ 463,109 $ (2,727) $ (15,999) $ 230,893 $ 213,490
Long-term debt -- -- 60,000(16) -- 60,000
Other long-term
liabilities 45,165 -- -- -- 45,165
--------------- --------------- --------------- --------------- ---------------
TOTAL LIABILITIES $ 508,274 $ (2,727) $ 44,001 $ 230,893 $ 318,655
TOTAL LIABILITIES SUBJECT
TO COMPROMISE $ 2,184,715 (2,055,814)(9) (128,901)(17) $ -- $ --
Shareholders' equity/(deficit) (1,750,142) 1,952,164(10) -- 52,750 149,272
--------------- --------------- --------------- --------------- ---------------
TOTAL LIABILITIES & EQUITY $ 942,847 $ (106,377) $ (84,900) $ 283,643 $ 467,927
=============== =============== =============== =============== ===============
</Table>
Page 5
EXHIBIT 3A
PRO FORMA BALANCE SHEETS
(UNAUDITED)
(All $$ in 000's unless otherwise noted)
1. The Pre-Reorganization Balance Sheet for Fleming Companies, Inc., et al. is
based upon the Debtors' estimates of the results of operations of the
Debtors' estates through July 31, 2004, the assumed Effective Date of the
Plan.
2. The pro forma balance sheet adjustments contained herein account for the
reorganization and related transactions pursuant to the Plan using the
principles of "fresh-start" accounting as required by SOP 90-7 issued by
the AICPA. The fresh start adjustments are based on an estimated Core-Mark
Newco reorganization value of $290 million and the transfer of the assets
and liabilities to the PCT at their estimated realizable value and payment
obligation amount. Under SOP 90-7, if reorganization value is greater than
the tangible assets, reorganization value is allocated first to tangible
assets, then to identifiable intangible assets, and lastly to excess
reorganization value. In the case of Core-Mark Newco, the projected value
of tangible assets exceeds the estimated enterprise value and the
difference is booked as an extraordinary gain. In the case of the PCT, the
value of estimated recoverable assets exceeds the estimated liabilities
transferred to the PCT. Actual adjustments will be determined at a later
date and may be materially different from those presented herein, based
upon completion of asset appraisals and other factors.
Page 6
3. The estimated assets and liabilities transferred to the PCT are as follows:
<Table>
Assets transferred:
Unrestricted cash $ 57,000
Restricted/escrowed cash
PACA $ 8,762
GLN 500
Jubilee 225
ESA Reserve (a) 16,156
---------------
Total restricted/escrowed cash 25,643
Trade accounts receivable & royalty, net
Accounts receivable 15,000
Royalties due 3,000
---------------
Total accounts receivable 18,000
Vendor deduction collections 113,000
Preference and litigation recoveries (b) 70,000
---------------
Total assets transferred $ 283,643
Liabilities transferred:
General accounts payable $ 3,000
PACA, GLN, Jubilee 9,487
Priority & property tax Claims 20,250
Class 3B reclamation Claims 46,000
Class 5 reclamation Claims 79,000
Health & welfare benefits 5,000
FSA damage Claims (a) 16,156
Severance & stay program 27,000
Convenience Claims 1,000
Non-tax priority Claims 6,000
Other administrative Claims 17,000
Other secured Claims 1,000
---------------
Total liabilities transferred 230,893
---------------
Excess of assets over liabilities transferred $ 52,750
===============
</Table>
(a) The Debtors were required to segregate certain amounts pursuant to
Court order to preserve the potential setoff rights of parties to
facility standby agreements ("FSA") whose notes have been sold in
connection with the sale of the Wholesale Distribution Business to C&S
Acquisition, LLC. The Debtors are authorized to reduce the amount in
the reserve upon settlement of the note balance with the FSA
counterparty. At the Effective Date, the amount of the reserve is
assumed to be $16.2 million, which is not necessarily the amount that
the Debtors believe is subject to setoff by the FSA counterparties.
(b) Does not include any amount for those actions for which a recovery
amount cannot be currently estimated.
Page 7
4. Opening Balance Sheet for Core-Mark Newco created pursuant to the Plan. See
Exhibit 3B.
5. Pursuant to SOP 90-7, certain vendor debit balances estimated to be
uncollectable net of estimated collectable vendor litigation recoveries are
written off
6. Pursuant to SOP 90-7, Core-Mark Newco net property, plant & equipment is
written-down because the Core-Mark Newco enterprise value is less than the
value of the Core-Mark Newco current assets.
7. Pursuant to SOP 90-7, other assets including Core-Mark Newco assets are
written-off as a result of the enterprise value being less than the value
of the Core-Mark Newco current assets.
8. Pursuant to SOP 90-7, certain Core-Mark Newco tax-related liabilities are
written off to adjust to the true value of the liabilities upon emergence.
9. Represents the elimination of certain liabilities subject to compromise
based on the forgiveness of debt as provided for in the Plan.
10. The adjustment to shareholders' equity & retained earnings is the result of
generating income through debt forgiveness, offset by the write-down of
assets and elimination of retained earnings.
11. The net adjustment to cash reflects the net of the following receipts &
disbursements at confirmation:
<Table>
RECEIPTS:
Tranche B proceeds $60,000
Exit Financing Facility borrowing 40,300
Return of cash collateralized for LCs 59,683
--------
Total receipts 159,983
DISBURSEMENTS:
Repayment of bank debt $128,901
Exit financing fee & Tranche B fees 4,963
Escrow for professional fees 38,800
Escrow related to FSA damage reserve 16,156
--------
Total disbursements 188,820
--------
Net change in cash $(28,837)
--------
</Table>
12. The adjustment to restricted cash reflects the net of the increase in
restricted cash for the FSA damage escrow net of return of cash collateral
related to LCs and the release of the restricted cash escrowed for the DSD
class to the DSD settlement fund.
Page 8
13. Represents the fees paid for the Core-Mark Newco Exit Financing Facility
and Tranche B Loan which are booked as deferred financing assets but
subsequently written-off as a Fresh Start adjustment.
14. Represents the borrowing at emergence on the Exit Financing Facility.
15. Represents the reduction in accounts payable for the DSD class as a result
of payment from the DSD escrow to the DSD settlement fund and accrued
professional fees as a result of the funding of the escrow for unpaid
professional fees including holdbacks and success fees.
16. Adjustment reflects the proceeds of Tranche B Loan.
17. Reflects the re-payment of the pre-petition bank debt.
Page 9
FLEMING COMPANIES, INC., ET AL.
DISCLOSURE STATEMENT
EXHIBIT 3B
CORE-MARK NEWCO FINANCIAL PROJECTIONS
EXHIBIT 3B
CORE-MARK NEWCO
PROJECTED STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
PROJECTED
------------------------------------------------------------------
PROJECTED FOR THE 12 MONTHS ENDING DECEMBER 31,
5 MOS. ENDING ------------------------------------------------------------------
(dollars in thousands 12/31/2004 2005 2006 2007 2008
------------- ------------ ------------ ------------ ------------
Net Sales $ 1,667,279 $ 4,247,343 $ 4,575,090 $ 4,935,534 $ 5,312,870
Cost of Sales 1,566,657 3,995,526 4,301,530 4,640,632 4,995,228
------------- ------------ ------------ ------------ ------------
GROSS PROFIT 100,632 251,818 273,560 249,902 317,642
Selling, general & administrative expenses 84,787 208,588 219,297 228,110 241,694
------------- ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 84,787 208,588 219,297 228,110 241,694
Operating income/(loss) 15,845 43,230 54,263 66,792 75,949
Interest Expense 4,990 10,407 9,044 7,683 5,866
------------- ------------ ------------ ------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES 10,855 32,823 45,219 59,109 70,082
Provision/(benefit) from income taxes 4,342 13,129 18,088 23,643 28,033
------------- ------------ ------------ ------------ ------------
NET INCOME/(LOSS) $ 6,513 $ 19,694 $ 27,131 $ 35,466 $ 42,049
============= ============ ============ ============ ============
</Table>
Page 11
EXHIBIT 3B
CORE-MARK NEWCO
PROJECTED BALANCE SHEETS
(UNAUDITED)
<Table>
<Caption>
PROJECTED
----------------------------------------------------------
PROJECTED DECEMBER 31,
JULY 31, ----------------------------------------------------------
2004 2004 2005 2006 2007 2008
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
ASSETS:
Cash & equivalents $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000
Restricted cash 27,780 15,982 15,982 15,982 15,982 15,982
Trade accounts receivable 132,216 97,197 144,841 154,755 165,288 178,503
Other receivables 73,940 74,707 71,867 68,899 65,659 64,928
Inventories, net 180,811 159,148 148,404 159,954 172,602 186,465
Other current assets 33,179 32,125 32,125 32,125 32,125 32,125
-------- -------- -------- -------- -------- --------
TOTAL CURRENT ASSETS 467,927 399,159 433,219 451,715 471,657 498,002
Property plant & equipment, net -- 2,739 11,311 18,688 24,847 29,836
Other assets -- 261 2,248 2,673 2,673 2,673
-------- -------- -------- -------- -------- --------
TOTAL NON-CURRENT ASSETS -- 3,000 13,559 21,361 27,520 32,509
-------- -------- -------- -------- -------- --------
TOTAL ASSETS $467,927 $402,159 $446,779 $473,077 $499,177 $530,511
======== ======== ======== ======== ======== ========
LIABILITIES & SHAREHOLDERS'
EQUITY/(DEFICIT):
Short-term debt $ 40,300 $ 672 $ 12,421 $ 20,275 $ 23,439 $ 23,899
Accounts payable &
accrued liabilities 108,145 96,595 128,478 131,926 135,685 139,653
Cigarette & tobacco taxes
payable 61,345 50,354 60,379 64,412 68,804 71,204
Taxes payable & deferred taxes 3,700 3,700 -- -- -- --
-------- -------- -------- -------- -------- --------
TOTAL CURRENT LIABILITIES 213,490 151,322 201,278 216,613 227,928 234,756
Long-term debt - Tranche B 60,000 50,391 35,268 26,500 11,682 --
Other long-term liabilities 45,165 44,661 34,754 27,354 21,492 15,630
-------- -------- -------- -------- -------- --------
TOTAL LIABILITIES 318,655 246,374 271,300 270,467 261,102 250,386
Shareholders' equity/(deficit) 149,272 155,785 175,478 202,609 238,075 280,124
-------- -------- -------- -------- -------- --------
TOTAL LIABILITIES & EQUITY $467,927 $402,159 $446,779 $473,076 $499,177 $530,510
======== ======== ======== ======== ======== ========
</Table>
Page 12
EXHIBIT 3B
CORE-MARK NEWCO
PROJECTED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<Table>
<Caption>
PROJECTED
----------------------------------------
PROJECTED FOR THE 12 MONTHS ENDING DECEMBER 31,
5 MOS. ENDING ----------------------------------------
12/31/2004 2005 2006 2007 2008
(Dollars in thousands) ------------- ------- -------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,513 $19,694 $ 27,131 $ 35,466 $ 42,049
Depreciation, amortization & other non-cash
items 85 1,094 2,489 3,913 5,373
Changes in working capital accounts 34,430 4,147 (11,015) (11,791) (19,977)
Changes in long-term accounts (764) (11,895) (7,825) (5,862) (5,862)
-------- ------- -------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES 40,263 13,040 10,780 21,726 21,583
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,824) (9,666) (9,866) (10,072) (10,361)
-------- ------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES (2,824) (9,666) (9,866) (10,072) (10,361)
CASH FLOWS FROM FINANCING ACTIVITIES
Other current liabilities (39,628) 11,749 7,854 3,165 459
Long-term debt -- Tranche B (9,609) (15,123) (8,768) (14,818) (11,682)
-------- ------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES (49,237) (3,374) (914) (11,654) (11,222)
BEGINNING CASH & CASH EQUIVALENTS BALANCE 47,780 35,982 35,982 35,982 35,982
Net increase/(decrease) in cash (11,798) 0 (0) 0 0
-------- ------- -------- -------- --------
ENDING CASH & CASH EQUIVALENTS BALANCE $ 35,982 $35,982 $ 35,982 $ 35,982 $ 35,982
======== ======= ======== ======== ========
</Table>
Page 13
EXHIBIT 3B
CORE-MARK NEWCO PROJECTION ASSUMPTIONS
(UNAUDITED)
(All $$ in 000's unless otherwise noted)
GENERAL ASSUMPTIONS
The Projections are aggregated from the projected opening balance sheet
for Core-Mark Newco as of July 31, 2004 (see Exhibit 3A) and operating
forecasts for Core-Mark Newco along with expenses and liabilities that
exist as a result of the Plan. The Projections assume a generally
stable economic environment with low inflation, consistent with
prevailing analyst forecasts. Interest rate projections assume a stable
LIBOR rate relative to rates as of the date of the Plan.
PROJECTED STATEMENT OF OPERATIONS
REVENUES: Revenues are projected to decline, on a year-over-year basis,
by 16.2% in 2004 and increase, on a year-over-year basis, by 7.5% in
2005, 7.7% in 2006, 7.9% in 2007 and 7.6% in 2008. These growth rates
assume that Core-Mark Newco is able to expand its sales to existing
customers, to add additional local and regional customers and are net
of the historical churn rate of approximately 4.0%. The Projections do
not reflect extraordinary cigarette price increases or the addition of
super-regional or national customers.
COST OF GOODS SOLD: Cost of goods sold is projected to be at 94.1% of
sales in 2004 and 2005 and then to decrease to 94.0% from 2006 to 2008.
Cost of goods sold is reduced by cigarette manufacturer incentive
allowances and non-cigarette merchandise income, which is projected to
be 2.7% of sales in 2004, then increase to 2.8% in 2005 and then remain
flat at 2.9% in 2006 through 2008.
OPERATING EXPENSES: Operating expenses are projected to improve from
5.1% of sales for the 5 months ending December 2004, to 4.9% in 2005,
to 4.8% in 2006, to 4.6% in 2007 and 4.5% in 2008. Improvements are the
direct result of efficiencies gained from increased volumes,
operational improvement projects and the continued integration of the
Eastern divisions.
INTEREST EXPENSE: Exit Financing Facility interest rates are based off
of various spreads, which are listed in the Exit Financing Facility
section below, above LIBOR based on the type of borrowing outstanding.
LIBOR is assumed to remain constant throughout the projection period.
The Tranche B Loan includes a LIBOR plus 9.0% cash payment interest
rate, which is assumed to be paid in the month accrued, and a 3.0% PIK
interest rate, which is assumed to accrue as additional funded
borrowings under the Tranche B Loan.
Page 14
INCOME TAXES: The Projections assume that income is taxed at an
effective rate of 40.0% and is paid in the month accrued.
PROJECTED BALANCE SHEET AND STATEMENT OF CASH FLOW.
CASH & EQUIVALENTS: The Projections assume that systemic cash, which
are payments received by Core-Mark Newco, but not yet cleared or
available at the bank, remains flat at $20 million.
RESTRICTED CASH: The Projections assume that a Canadian province will
continue to require Core-Mark Newco to maintain a trust account for
taxes on all cigarettes sold in the province throughout the projection
period.
ACCOUNTS RECEIVABLE: Accounts receivable are projected to remain stable
at an average of 7.9 days sales outstanding for the remainder of 2004,
to increase to 8.8 in 2005, to decrease to 8.7 in 2006 and then remain
flat at 8.6 for 2007 and 2008. The accounts receivable will also
increase in accordance with the projected sales growth creating a use
of working capital.
INVENTORY: Inventory is projected to fluctuate between 9.8 days of
inventory on hand and 13.4 days of inventory on hand for the remainder
of 2004. This is due to the steady decrease of inventory levels in the
continuing Eastern divisions. The days of inventory on hand is assumed
to remain flat at 9.8 for years 2005 to 2008. The inventory levels
will, however, increase in accordance with the projected sales growth
creating a use of working capital.
FIXED ASSETS: Due to SOP 90-7, Core-Mark Newco is projecting that it
will emerge from Chapter 11 without any book value for its fixed
assets. Accordingly, the Projections reflect the capital expenditures
anticipated from August 1, 2004 forward net of applicable depreciation.
SHORT-TERM DEBT: The Projections assume that, on the Effective Date,
$107.6 million in letters of credit will be outstanding. This
represents $83.8 million for casualty and workers compensation
liabilities, $19.9 million for pre-petition tax liabilities and $4.0
million for other liabilities. The Projections assume that $0.3 million
will be drawn in each month of the Projections to fund casualty and
workers compensation liabilities. The Projections reflect a reduction
in accrued liabilities and long-term liabilities associated with these
monthly draws. It is anticipated that $9.4 million will be drawn during
August 2004 for cigarette and tobacco taxes incurred prepetition. The
Projections reflect the liabilities associated with these drawn letters
of credit in accrued liabilities. Of the $10.4 million remaining in
undrawn letter-of-credit for pre-petition tax liabilities, it is
assumed that $1.2 million will remain in an outstanding letter of
credit and that $9.2 million will be released. The released amount
provides liquidity in the form of a reduction in the reserves for
letters-of-credit netted against borrowing base availability from the
Exit Financing Facility. All other letters of credit are projected to
remain in place for the
Page 15
Projection period. The projected cash borrowings outstanding on the
Effective Date will be $40.3 million with the first $10.0 million in a
Term B Loan and the remaining $30.3 million in the Exit Financing
Facility. The Projections assume excess cash will be used to pay down
the Exit Financing Facility and cash needs will be drawn against the
Exit Financing Facility.
ACCOUNTS PAYABLE: The Projections assume days payable outstanding for
cigarette purchases to remain at one day in advance for the US
divisions and at zero for the Canadian divisions for the entire
projection period. The Projections assume days payable outstanding for
non-cigarette purchases will increase one day per month from August
2004 to December 2004 and then to return to normalized levels in 2005.
The accounts payable levels will, however, increase in accordance with
the projected sales growth creating a source of working capital.
CIGARETTE & TOBACCO TAXES PAYABLE: The Projections assume that the days
payable outstanding will remain at current levels, however the
cigarette & tobacco taxes payable levels will increase in accordance
with the projected sales growth creating a source of working capital.
TAXES PAYABLE AND DEFERRED TAXES: The amount reflected in this account
is the amount that Core-Mark Newco believes it may owe as taxes in
Canada related to cancellation of debt income.
EXIT FINANCING FACILITY: The Projections assume an Exit Financing
Facility commitment is extended to Core-Mark Newco of $250 million with
the first $10 million of borrowings in a Term B Loan and the remaining
borrowings in a working capital revolver. This assumption is based on
an indicative term sheet received from a financial institution. The
Projections allow for Core-Mark Newco to borrow up to an available
amount calculated under a borrowing base formula as follows:
A/R advance rates of 85%
Blended inventory advance rates of 70%
A/R ineligibles of 23%
Gross inventory ineligibles of 10%
Reserves totaling $25.7 million
Pricing assumed for the Exit Financing Facility commitment is based on
an indicative term sheet received from a financial institution and
include the following terms and assumptions (all interest percentages
on a per annum basis):
Revolver - LIBOR plus 2.75%
Term B Loan - LIBOR plus 4.00%
Letters of Credit - 2.75%
Unused Commitment - 0.50%
LIBOR - 1.16%
Page 16
It is assumed that the balance outstanding is retired as cash in excess
of minimum working capital becomes available.
LONG-TERM DEBT - Tranche B Loan: The Projections assume an initial
borrowing of $60.0 million for working capital needs and to fund
payments made on the Effective Date. The Projections assume a cash
interest rate of LIBOR plus 9.0% and a PIK interest of 3.0%. The cash
interest is assumed to be paid in the month accrued.
At the end of each calendar quarter, the Projections calculate
Core-Mark Newco's excess liquidity as defined in the Tranche B
indicative term sheet. The Tranche B Loan is first paid down with any
excess cash generated and then by borrowings against the Exit Financing
Facility as borrowing base availability is generated.
OTHER LONG-TERM LIABILITIES: This account is comprised of $41.1 million
in workers' compensation liabilities (of which $3.0 million is related
to Core-Mark Newco and $38.1 million are related to the discontinued
Wholesale Distribution Business) and $4.0 million in pension
liabilities. The Projections assume workers' compensation payments to
be $8.5 million in 2005, $6.6 million in 2006 and $5.6 million in 2007
and 2008. The Projections assume no pension funding waivers for 2004 to
2006 and cash payments of $1.5 million in 2005, $0.8 million in 2006
and $0.2 million in 2007 and 2008.
SHAREHOLDERS' EQUITY: Core-Mark Newco will emerge from Chapter 11 with
a balance in this account due to the valuation of the company being
lower than the market value of the current assets and the resulting
accounting treatments of SOP 90-7, which result in a one-time gain to
earnings.
CAPITAL EXPENDITURES: Core-Mark Newco is projecting that capital
expenditures will approximate $10 million per year for the projection
period shown with the only change being a 3.0% increase for inflation.
The Projections include $3.0 million per year for years 2005 to 2008
for growth capital expenditure projects with the remaining capital
expenditures designated for maintenance projects.
Page 17
FLEMING COMPANIES, INC., ET AL.
DISCLOSURE STATEMENT
EXHIBIT 3C
POST-CONFIRMATION TRUST FINANCIAL PROJECTIONS
EXHIBIT 3C
POST-CONFIRMATION TRUST
PROJECTED STATEMENTS OF CASH RECEIPTS AND DISBURSEMENTS
(Unaudited)
<Table>
<Caption>
PROJECTED
-----------------------------
PROJECTED 12 MONTHS ENDING DECEMBER 31,
5 MOS. ENDING -----------------------------
(dollars in thousands) 12/31/2004 2005 2006 TOTAL
------------- ---------- ---------- ----------
BEGINNING CASH $ 57,000 $ 20,486 $ 18,500 $ 57,000
CASH RECEIPTS
Trade accounts receivable collections 4,167 10,000 833 15,000
Royalty payment collections 400 800 1,800 3,000
Litigation claims recovery 34,313 91,500 57,188 183,000
Release of restricted cash 14,573 2,915 8,156 25,643
---------- ---------- ---------- ----------
TOTAL CASH COLLECTIONS 53,452 105,215 67,977 226,643
DISBURSEMENTS FOR TRUST EXPENSES
Employee & payroll (1,364) -- -- (1,364)
Lease & recurring (232) -- -- (232)
Professional fees (6,000) (3,500) (1,000) (10,500)
Other operating expenses (4,797) (5,138) (1,061) (10,996)
---------- ---------- ---------- ----------
TOTAL TRUST EXPENSES (12,394) (8,638) (2,061) (23,093)
---------- ---------- ---------- ----------
EXCESS OF CASH COLLECTIONS OVER DISBURS. FOR TRUST EXPENSES 41,058 96,576 65,916 203,551
CLAIMS & OTHER DISBURSEMENTS
General accounts payable (3,000) -- -- (3,000)
Health & welfare benefits (5,000) -- -- (5,000)
Priority & property tax claims (3,000) (3,750) (3,600) (10,350)
PACA & other claims (7,906) (1,581) -- (9,487)
Severance & stay program (27,000) -- -- (27,000)
Convenience claims (1,000) -- -- (1,000)
Priority non-tax claims (6,000) -- -- (6,000)
Other administrative claims (17,000) -- -- (17,000)
Other secured claims (1,000) -- -- (1,000)
FSA settlements (6,667) (1,333) -- (8,000)
---------- ---------- ---------- ----------
Subtotal claims & other disbursements (77,573) (6,665) (3,600) (87,837)
---------- ---------- ---------- ----------
EXCESS (DEFICIT) OR CASH COLLECTIONS OVER TOTAL DISBURSEMENTS (36,514) 89,912 62,316 115,713
---------- ---------- ---------- ----------
ENDING CASH BEFORE PAYMENTS TO RECLAMATION CLAIMANTS 20,486 110,397 80,816 172,713
Minimum operating cash (5,000) (5,000) (5,000) (5,000)
Reserve for unpaid priority tax claims (17,250) (13,500) (9,900) (9,900)
---------- ---------- ---------- ----------
Cash available to pay reclamation claimants (1,764) 91,897 65,916 157,813
RECLAMATION CLAIMS DISBURSEMENTS
Trade Creditor Reclamation Lien (Class 3(B)) -- (46,000) -- (46,000)
Valid Rec. Claims that are not Class 3(B) (Class 5) -- (45,897) (33,103) (79,000)
---------- ---------- ---------- ----------
Total reclamation claim disbursements -- (91,897) (33,103) (125,000)
---------- ---------- ---------- ----------
ENDING CASH $ 20,486 $ 18,500 $ 47,713 $ 47,713
========== ========== ========== ==========
</Table>
Page 19
EXHIBIT 3C
POST-CONFIRMATION TRUST
PROJECTED ASSETS & LIABILITIES
(Unaudited)
<Table>
<Caption>
PROJECTED
----------------------------------------
PROJECTED DECEMBER 31,
JULY 31, ----------------------------------------
(dollars in thousands) 2004 2004 2005 2006
---------- ---------- ---------- ----------
ASSETS:
Cash & equivalents $ 57,000 $ 20,486 $ 18,500 $ 47,713
Restricted cash 25,643 11,071 8,156 --
Trade accounts receivable & royalty, net 18,000 13,433 2,633 --
Other receivables 183,000 148,688 57,188 --
---------- ---------- ---------- ----------
Total current assets 283,643 193,677 86,477 47,713
---------- ---------- ---------- ----------
TOTAL ASSETS $ 283,643 $ 193,677 $ 86,477 $ 47,713
========== ========== ========== ==========
LIABILITIES:
Accounts payable & accrued liabilities:
General accounts payable $ 3,000 $ -- $ -- $ --
Health & welfare benefits 5,000 -- -- --
Priority & property tax claims 20,250 17,250 13,500 9,900
PACA & other claims 9,487 1,581 -- --
Severance & stay program 27,000 -- -- --
Convenience claims 1,000 -- -- --
Priority non-tax claims 6,000 -- -- --
Other administrative claims 17,000 -- -- --
Other secured claims 1,000 -- -- --
Trade Creditor Reclamation Lien Claims (Class 3(B))(1) 46,000 46,000 -- --
Valid Rec. Claims that are not Class 3(B) Claims (Class 5)(1) 79,000 79,000 33,103 --
FSA reserve 16,156 9,489 8,156 --
---------- ---------- ---------- ----------
Total current liabilities 230,893 153,321 54,759 9,900
---------- ---------- ---------- ----------
Excess (deficit) of assets over liabilities $ 52,750 $ 40,356 $ 31,718 $ 37,813
========== ========== ========== ==========
RESTRICTED CASH ACTIVITY
Beginning restricted cash $ 25,643 $ 11,071 $ 8,156
PACA & other payments (7,906) (1,581) --
FSA settlements (6,667) (1,333) --
Release of remaining FSA reserve -- -- (8,156)
---------- ---------- ----------
Ending restricted cash $ 11,071 $ 8,156 $ --
========== ========== ==========
</Table>
(1) Includes the Debtors' estimate of Valid Reclamation Claims assuming that the
Debtors are unsuccessful in their allegation related to valuation, use of
pre-petition deductions as set-offs to Valid Reclamation Claims and military
receivables due from vendors alleged to be a constructive trust. Additionally,
the Debtors have classified those Claims of Trade Lien creditors that violated
the Trade Lien agreement as Class 5 Claims rather than Class 3 (B) Claims.
Page 20
EXHIBIT 3C
POST-CONFIRMATION TRUST PROJECTION ASSUMPTIONS
(UNAUDITED)
(All $$ in 000's Unless Otherwise Noted)
The Projections presented for the PCT are aggregated from the assets and
liabilities transferred from the Debtors to the PCT (see Exhibit 3A) and the
cash receipts and disbursements for the PCT operations between August 1, 2004
and December 31, 2006. Through December 31, 2004, the Projections assume that
the PCT will employ a small staff and utilize existing facilities to manage and
assist in the collection of trade and vendor accounts receivable. Beginning
January 1, 2005, management of the PCT will be outsourced and as such most of
the related costs will be professional fee-related.
The Projections include cash receipts and disbursements forecasts and projected
balance sheets that have been prepared on a cash basis and do not conform to the
United States Generally Accepted Accounting Principles ("GAAP").
PROJECTED STATEMENTS OF CASH RECEIPTS AND DISBURSEMENTS
CASH RECEIPTS:
TRADE ACCOUNTS RECEIVABLE COLLECTIONS: Cash collections from
outstanding customer accounts receivable totaling $15.0 million are
projected to be $4.2 million for the 5 months ending December 2004,
$10.0 million for 2005 and $0.8 million for 2006. Collections have been
forecast based on the accounts receivable currently outstanding and
estimates of collections through settlements as well as arbitration and
litigation efforts.
ROYALTY PAYMENTS: The Projections assume that royalty payments related
to the sale of the Wholesale Distribution Business totaling $3.0
million will be collected quarterly through December 2005 with a final
settlement pre-payment in 2006. All other royalty payments related to
the sale were settled and collected pre-confirmation.
LITIGATION CLAIMS: Cash collections from vendor-related receivables,
primarily for uncollected promotional allowances (e.g. ad rebates,
discounts, price reductions), unreimbursed funds related to military
receivables and funds wired in advance for inventory for which invoices
were not processed and inventory was not shipped are projected to total
$113.0 million. Collections are estimated to be $21.2 million for
August 2004-December 2004, $56.5 million for 2005 and $35.3 million for
2006.
Collections from vendor-related avoidance actions are projected to
total $70.0 million. These collections are estimated to be $13.0
million for August 2004-December 2004, $35.0 million for 2005 and $22.0
million for 2006.
Page 21
The Debtors have not quantified the estimated proceeds recoverable from
other litigation Claims and, therefore, no estimation of the amount or
timing of these receipts is included.
RELEASE OF RESTRICTED CASH: It is assumed that, during the life of the
PCT, releases of restricted cash in the amount of $25.6 million are
made to satisfy PACA and other Claims in the amount of $9.5 million and
release the FSA reserves. Of the FSA reserves released, $8.0 million is
paid to settle Claims and $8.2 million is released to the PCT in 2006.
OTHER: No provision has been included in the Projections for the
collection of escrows established pursuant to the sale to Roundy's of
certain of the Debtors' retail operations and the sale to C&S of the
Debtors' Wholesale Distribution Business.
DISBURSEMENTS FOR TRUST EXPENSES:
EMPLOYEE & PAYROLL: It is assumed that the PCT incurs salary and
benefits costs only through December 2004. The PCT employees will
pursue collection of trade accounts receivables, litigation Claims, and
escrow releases. For 2005 and 2006, the Projections assume that these
activities are outsourced and the costs are included in the expenses
for Professional Fees.
LEASE & RECURRING: The Projections include the assumption that one
existing facility is leased through December 2004 for approximately
$46,000 per month. After 2004, all management and collection activities
are assumed to be outsourced and the costs are included in the expenses
for Professional Fees.
OTHER OPERATING EXPENSES: The amounts projected for other operating
expenses for the 5 months ending December 2004 include document
storage, supplies, repairs and maintenance, postage, equipment rental,
and other operating items. For the 2005 and 2006, Other operating
expenses primarily include document storage and other miscellaneous
expenses. Additionally, amounts for each period include interest
expense paid on the reclamation claim Notes Payable offset by interest
income earned on the outstanding cash balance.
PROFESSIONAL FEES: The Professional Fees forecast relate to the
management and administration of the trust in addition to specific
activities related to the pursuit of settlements, arbitrations and
litigation Claims.
CLAIMS AND OTHER DISBURSEMENTS:
GENERAL ACCOUNTS PAYABLE: It is assumed that accounts payable totaling
$3.0 million are outstanding as of the Effective Date and are paid in
the ordinary course during August 2004 through November 2004.
HEALTH & WELFARE BENEFITS: It is assumed that post-petition health and
welfare benefits totaling $5.0 million are outstanding as of the
Effective Date and are paid in the ordinary course during August 2004
through November 2004.
Page 22
PRIORITY & PROPERTY TAX PAYMENTS: The Debtors estimate that $20.2
million, including interest, in Priority Tax Claims and Class 1(B)
Property Tax Claims will be allowed and assumed to be paid annually
over six years with interest at an assumed annual rate of 5%.
PACA & OTHER CLAIMS: The Debtors were previously required to escrow
certain amounts pursuant to Court order for the benefit of PACA/PASA
(Class 4) and other claimants. At the Effective Date, the amount of the
escrow is estimated to be $9.5 million, which is assumed to be paid
during 2004 from restricted cash funds.
SEVERANCE & STAY PROGRAM PAYMENTS: The Debtors estimate that $27
million will be allowed and paid to former Fleming employees shortly
after the emergence date and prior to December 31, 2004 for the
Severance and Employee Stay Programs as approved by the Bankruptcy
Court.
CONVENIENCE CLAIMS: The Debtors estimate that a total of $1 million
will be paid for Class 7 convenience Claims prior to December 31, 2004.
NON-TAX PRIORITY CLAIMS: The Debtors estimate that $6 million will be
allowed and paid prior to December 31, 2004 to holders of Class 1(A)
Non-tax Priority Claims.
OTHER ADMINISTRATIVE CLAIMS: The Debtors estimate that $17 million will
be allowed and paid prior to December 31, 2004 to holders of other
Administrative Claims.
OTHER SECURED CLAIMS: The Debtors estimate that $1 million will be
allowed and paid to holders of Class 3(A) Other Secured Claims prior to
December 2004.
FSA SETTLEMENTS: The Debtors were required to segregate certain amounts
pursuant to Court order to preserve the potential setoff rights of
parties to facility standby agreements ("FSA") whose notes have been
sold in connection with the sale of the Wholesale Distribution Business
to C&S Acquisition, LLC. The Debtors are authorized to reduce the
amount in the reserve upon settlement of the note balance with the FSA
counter party. The Debtors estimate that settlements will not exceed
$8.0 million and that $8.2 million in excess funds previously escrowed
will be released to the PCT in 2006.
TRADE CREDITOR RECLAMATION LIEN CLAIMS (CLASS 3(B)): The amounts
presented reflect an estimate of the Class 3(B) claims, prior to
potential set-offs available to the Debtors. The Debtors believe that
certain of the Class 3(B) Claimants owe the Debtors funds related to
pre-petition transactions. Such debts due from the Class 3(B) Claimants
may be subject to setoff against liabilities owed by the Debtors to
such claimants. The Debtors believe they will be able to effect setoff
of such amounts due to the Debtors in full or in part against the Class
3(B) Claims. The Class 3(B) Claimants have challenged this position of
the Debtors. For purposes of this presentation, which is a
conservative, worse case scenario with respect to these claims, the
Debtors have depicted the Class 3(B) claims without effect of setoffs
that may be utilized by the Debtors to reduce such claims. This
depiction is without prejudice to the Debtors' rights to continue to
assert that such setoffs are available and will reduce the amount of
the Class 3(B) Claims.
Page 23
The Plan provides that, on the Effective Date, or as soon as
practicable thereafter, the PCT, shall issue Secured Preferred
Interests in favor of the Class 3(B) Claims in the estimated aggregate
amounts of such Allowed Claims and grant a first priority lien to such
Holders on the proceeds of the PCT Distributable Assets, entitling each
Holder of a Class 3(B) Claim to its ratable proportion of the PCT
Distributable Assets. Additionally, Core-Mark Newco will provide a
secured guarantee for the benefit of the Holders of the Secured
Preferred Interest issued by the PCT to the Class 3(B) Claimants. The
specific terms of the Preferred Interests are described fully in the
Indicative Term Sheet included in Exhibit 10.
VALID RECLAMATION CLAIMS THAT ARE NOT CLASS 3(B) CLAIMS (CLASS 5): The
amounts presented are the Debtors' estimates of Class 5 Reclamation
Claims, without regard to the Debtors' belief that such claims are no
more than General Unsecured Claims. On November 24, 2003, the Debtors
filed their Combined Amended Reclamation Report and Motion to Determine
that Reclamation Claims Are Valueless, whereby the Debtors sought an
order finding the Class 5 Reclamation Claims to be no more than
Unsecured Claims. The Bankruptcy Court, however, declined to hear that
Motion and directed the Debtors to file separate Adversary Proceedings
against each and every Class 5 Reclamation Claimant. The Debtors have
filed such Adversary Proceedings and are seeking to move forward with
the actions against the Class 5 Reclamation Claimants. For purposes of
this presentation, which is a conservative, worse case scenario with
respect to these claims, the Debtors have depicted the Class 5
Reclamation Claims as secured claims even though the Debtors do not
believe they are or should be treated as such. This depiction is
without prejudice to the Debtors' rights to continue to assert that
such Reclamation Claims are not secured claims and are not entitled to
any priority treatment under the Plan. If the Debtors are correct in
their position regarding the value of the Class 5 Reclamation Claims,
the Class 5 Reclamation Claims will be no more than General Unsecured
Claims and the amount outlined herein will be available to pay other
Claims. Likewise, if the Debtors reach a consensual resolution with the
Class 5 Reclamation Claimants, some portion of the amounts outlined
herein will likely be available to pay other Claims. The Debtors
believe that certain of the Class 5 Reclamation Claimants owe the
Debtor funds related to pre-petition transactions. Such debts due from
the Class 5 Reclamation Claimants may be subject to setoff. The Debtors
believe they will be able to effect setoff of such amounts due to the
Debtors in full or in part against the Class 5 Reclamation Claims. The
Class 5 Reclamation Claimants have challenged this position of the
Debtors. For purposes of this presentation, which is a conservative,
worse case scenario with respect to these claims, the Debtors have
depicted the Class 5 Reclamation Claims without effect of setoffs that
may be utilized by the Debtors to reduce such claims. This depiction is
without prejudice to the Debtors' rights to continue to assert that
such setoffs are available and will reduce the amount of the Class 5
Reclamation Claims.
If the Court decides that the Class 5 Reclamation Claims are entitled
to priority treatment, on the Effective Date, or as soon as practicable
thereafter, the PCT shall issue Junior Secured Preferred Interests in
favor of the Holders of Allowed Class 5 Reclamation Claims in the
estimated aggregate amounts of such Allowed Claims and
Page 24
grant a junior lien to such Holders on the proceeds of the PCT
Distributable Assets, entitling each Holder of a Class 5 Reclamation
Claim to its ratable proportion of the PCT Distributable Assets, after
the full payment of the Class 3(B) claims. Additionally, Core-Mark
Newco will provide a junior secured guarantee for the benefit of the
Holders of the Junior Secured Preferred Interests issued by the PCT to
the Class 5 Reclamation Claimants. The specific terms of the Junior
Secured Preferred Interests are described fully in the Indicative Term
Sheet included in Exhibit 11.
PROJECTED ASSETS & LIABILITIES
The Projected Assets & Liabilities included in these projections are
based on the assets and liabilities transferred to the PCT at July 31,
2004 (See Exhibit 3A) and reflect the cash receipts and disbursements
projections discussed herein.
OTHER
ASSUMED TAX STATUS OF PCT: On the Effective Date, the PCT shall be
settled and is currently anticipated to exist as a grantor trust for
the benefit of certain creditors. Subject to definitive guidance from
the IRS or a court of competent jurisdiction to the contrary (including
the receipt of an adverse determination by the IRS upon audit if not
contested by the Post Confirmation Representative), pursuant to
Treasury Regulation Section 1.671-1(a) and/or Treasury Regulation
Section 301.7701-4(d) and related regulations, the Post Confirmation
Representative may designate and file returns for the Post Confirmation
Trust as a "grantor trust" and/or "liquidating trust" and therefore,
for federal income tax purposes, the Post Confirmation Trust's taxable
income (or loss) should be allocated pro rata to its beneficiaries. The
tax consequences of the right to receive and of the receipt (if any) of
property from the Post Confirmation Trust are uncertain, and may
depend, among other things, on the timing of the distribution and the
nature of the property received. It is possible that the receipt of
property from the Post Confirmation Trust would be a taxable event to
the Holders of Claims at the time the property is received; however, it
is also possible that the IRS could seek to treat the right to receive
property from the Post Confirmation Trust as property received on the
Effective Date, and tax it in the same manner as cash or other property
received on the Effective Date. Alternatively, the Holders of Claims
could be treated as exchanging the right to receive property from the
Post Confirmation Trust for a portion of their Claims. Finally, a
portion of any amount of property received from the Post Confirmation
Trust may be treated in respect of accrued but unpaid interest to the
Holders of Claims. In light of these substantial uncertainties, Holders
of Claims are urged to consult their tax advisors regarding the tax
consequences of the right to receive and of the receipt (if any) of
property from the Post Confirmation Trust.
Page 25
FLEMING COMPANIES, INC. ET AL.
DISCLOSURE STATEMENT
EXHIBIT 4
BEST INTERESTS ANALYSIS
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
INTRODUCTION
A Chapter 11 plan cannot be confirmed unless the Bankruptcy Court determines
that the plan is in the "best interests" of all holders of claims and interests
that are impaired by the plan and that have not accepted the plan. The "best
interests" test requires a Bankruptcy Court to find either that (i) all members
of an impaired class of claims or interests have accepted the plan or (ii) the
plan will provide a member who has not accepted the plan with a recovery of
property of a value, as of the effective date of the plan, that is not less than
the amount that such holder would recover if the debtor were liquidated under
Chapter 7 of the Bankruptcy Code.
The following document is the Best Interests Analysis (the "Analysis") of
Fleming Companies, Inc. and its 28 subsidiaries (collectively, the "Debtors").
The Analysis assumes the Debtors' estates are substantively consolidated solely
for the purposes of actions associated with the confirmation and consummation of
the Plan, including, but not limited to, voting, confirmation and distribution.
Although the Analysis was prepared after the deadline for filing Claims against
the Debtors' Estates, those Claims have not been fully evaluated by the Debtors
or adjudicated by the Bankruptcy Court and, accordingly, the amount of the final
Allowed Claims against the Estates may differ from the Claim amounts used in
this Analysis. Finally, the Analysis is based on the Debtors' projected balance
sheet as of July 31, 2004 (except as indicated), and the actual amount of assets
available to the Estates as of the date of liquidation may differ from the
amount of assets used in this Analysis.
Conversion of these cases to Chapter 7 would likely result in additional costs
to the Estates. Costs of liquidation under Chapter 7 of the Bankruptcy Code
would include the compensation of a trustee, as well as of counsel and other
professionals retained by the trustee, asset dispositions expenses, all unpaid
expenses incurred by the Debtors in the Chapter 11 Cases (such as compensation
of attorneys, financial advisors, and restructuring consultants) that are
allowed in the Chapter 7 case, litigation costs, and Claims arising from the
operations of the Debtors during the pendency of the Bankruptcy cases.
Lastly, in the event of liquidation, the aggregate amount of General Unsecured
Claims will no doubt increase significantly (as reflected in the higher range
estimate), and such Claims will be subordinated to priority claims that will be
created. For example, employees will file Claims for wages, pensions and other
benefits, some of which will be entitled to priority. Landlords will no doubt
file large Claims for both unsecured and priority amounts. The resulting
increase in both general unsecured and priority Claims will decrease percentage
recoveries to Holders of General Unsecured Claims of the Debtors.
Management of the Debtors, with the assistance of AP Services LLC, prepared the
Analysis. The Analysis presents management's estimated net value of the Debtors'
assets, if the Debtors were liquidated under the provisions of Chapter 7 of the
Bankruptcy Code and the net proceeds of the liquidation were applied in strict
priority to satisfy Claims against the Debtors.
The purpose of the Analysis is to provide information in order that the
Bankruptcy Court may determine that the Plan is in the best interests of all
classes of creditors and equity interest holders impaired by the Plan. The
Analysis was prepared to assist the Bankruptcy Court in making this
determination and it should not be used for any other purpose.
For purposes of this Analysis, management assumes a liquidation would take place
as part of an orderly liquidation sale. The underlying assumption to such a
scenario is that the sale would not exceed eight weeks from the commencement of
the sale. Recoveries unless explicitly stated elsewhere are net of necessary
liquidation expenses. If actual results were lower than those shown, or if the
assumptions used in formulating the Analysis were not realized, distribution to
each member of each class of Claims could be adversely affected.
The Analysis is limited to presenting information that is the representation of
management in good faith based on assumptions believed to be reasonable. The
Analysis has not been examined or reviewed by independent accountants in
accordance with standards promulgated by the American Institute of Certified
Public Accountants. The estimates and assumptions, although considered
reasonable by management, are inherently subject to significant uncertainties
and contingencies beyond the control of management. Accordingly, there can be no
assurance that the results shown would be realized if the Company were
liquidated and actual results in such case could vary materially from those
presented.
The accompanying notes are an integral part of the Best Interests Analysis
Page 2
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
I. CALCULATION OF NET ESTIMATED PROCEEDS AVAILABLE FOR ALLOCATION
<Table>
<Caption>
Projected Estimated
Balances @ Recovery Rate Estimated Recovery See
7/31/2004 Range on Collateral Note
---------- ------------------------ ---------------------- ----
Low High Low High
---------- ---------- ---------- ----------
A. STATEMENT OF ASSETS
Cash and Equivalents $ 220,287 100% 100% $ 220,287 $ 220,287
Accounts Receivable 150,216 44% 65% 66,136 97,880 1
Inventories 180,811 63% 72% 114,219 130,484 2
Other Current Assets 305,277 22% 36% 68,025 109,171 3
Net PP&E 48,181 6% 12% 2,838 5,717 4
Other Non-Current Assets 38,074 0% 0% -- -- 5
---------- ---------- ---------- ---------- ----------
Total Assets 942,846 50% 60% 471,504 563,539
B. RECOVERIES FROM EXERCISE OF AVOIDING POWERS 50,000 90,000 6
---------- ----------
C. GROSS PROCEEDS 521,504 653,539
D. CREDITOR RECOVERY EXPENSES
Corporate Expenses (7,920) (6,600) 7
Employee Retention and Severance (863) (863) 7
Chapter 7 Trustee Fees (3% of Gross Proceeds) (15,645) (19,606)
Other Professional Fees ($1MM per month for 12 months) (12,000) (12,000)
---------- ----------
(36,428) (39,069)
E.ALLOWANCE FOR RESERVE CLAIMS
PACA and other (14,000) (8,000)
DSD (17,500) (17,500)
FSA Reserve (a) (24,000) (8,000)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR ALLOCATION $ 429,577 $ 580,970
========== ==========
</Table>
- ----------
(a) The Debtors were required to segregate certain amounts pursuant to
Court order to preserve the potential setoff rights of parties to
facility standby agreements ("FSA") whose notes have been sold in
connection with the sale of the Wholesale Distribution Business to C&S
Acquisition, LLC. The Debtors are authorized to reduce the amount in
the reserve upon settlement of the note balances with the FSA
counterparties. This range of numbers represents the amounts that may
be held in the FSA reserve on the Effective Date, and not necessarily
the amount that the Debtors believe is subject to setoff by the FSA
counterparties.
The accompanying notes are an integral part of the Best Interests Analysis
Page 3
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
II. ALLOCATION OF NET ESTIMATED PROCEEDS TO SECURED CLAIMS
<Table>
<Caption>
Principal
and Accrued Estimated Recovery
Interest on Secured Claims
------------ -----------------------------
Low High
------------ ------------
NET ESTIMATED PROCEEDS AVAILABLE FOR ALLOCATION TO SECURED CLAIMS $ 429,577 $ 580,970
SECURED CLAIMS:
Pre-Petition Secured Debt 128,901 128,901 128,901
Pre-Petition Letters of Credit (a) 78,904 78,904 78,904
Post-Petition Letters of Credit (a) 28,679 28,679 28,679
Other Secured Claims 1,000 1,000 1,000
------------ ------------
TOTAL SECURED CLAIMS 237,484 237,484
------------ ------------
NET ESTIMATED PROCEEDS AFTER SECURED CLAIMS $ 192,093 $ 343,486
============ ============
Secured Reclamation Claims of Junior Lien Trade Vendors (b) 55,000 43,000
Other Reclamation Claims (c) (d) 80,000 62,000
Secured Post-Petition Accounts Payable of Junior Lien Trade Vendors 18,000 10,000
------------ ------------
NET ESTIMATED PROCEEDS AFTER JUNIOR LIENS & RECLAMATION CLAIMS $ 39,093 $ 228,486
============ ============
</Table>
- ----------
(a) Assumes that Letters of Credit are cash collateralized with no recovery
of value.
(b) The Debtors believe that certain of the Class 3(B) Claimants owe the
Debtors funds related to pre-petition transactions. Such debts due from
the Class 3(B) Claimants may be subject to setoff against liabilities
owed by the Debtors to such claimants. The Debtors believe they will be
able to effect setoff of such amounts due to the Debtors in full or in
part against the Class 3(B) Claims. The Class 3(B) Claimants have
challenged this position of the Debtors. For purposes of this Analysis,
which is a conservative, worse case scenario with respect to these
claims, the Debtors have depicted the Class 3(B) claims without effect
of setoffs that may be utilized by the Debtors to reduce such claims.
This depiction is without prejudice to the Debtors' rights to continue
to assert that such setoffs are available and will reduce the amount of
the Class 3(B) Claims.
(c) The Debtors believe that the Class 5 Reclamation Claims are no more
than General Unsecured Claims. On November 24, 2003, the Debtors filed
their Combined Amended Reclamation Report and Motion to Determine that
Reclamation Claims Are Valueless, whereby the Debtors sought an order
finding the Class 5 Reclamation Claims to be no more than Unsecured
Claims. The Bankruptcy Court, however, declined to hear that Motion and
directed the Debtors to file separate Adversary Proceedings against
each and every Class 5 Reclamation Claimant. The Debtors have filed
such Adversary Proceedings and are seeking to move forward with the
actions against the Class 5 Reclamation Claimants. For purposes of this
Analysis, which is a conservative, worse case scenario with respect to
these Claims, the Debtors have depicted the Class 5 Reclamation Claims
as Secured Claims even though the Debtors do not believe they are or
should be treated as such. This depiction is without prejudice to the
Debtors' rights to continue to assert that such Class 5 Reclamation
Claims are not Secured Claims and are not entitled to any priority
treatment under the Plan. If the Debtors are correct in their position
regarding the value of the Class 5 Reclamation Claims, the Class 5
Reclamation Claims will be no more than General Unsecured Claims and
the amount outlined herein will be available to pay other Claims.
Likewise, if the Debtors reach a consensual resolution with the Class 5
Reclamation Claimants, some portion of the amounts outlined herein will
likely be available to pay other Claims.
(d) The Debtors believe that certain of the Class 5 Claimants owe the
Debtors funds related to pre-petition transactions. Such debts due from
the Class 5 Claimants may be subject to setoff. The Debtors believe
they will be able to effect setoff of such amounts due to the Debtors
in full or in part against the Class 5 Reclamation Claims. The Class 5
Reclamation Claimants have challenged this position of the Debtors. For
purposes of this Analysis, which is a conservative, worse case scenario
with respect to these claims, the Debtors have depicted the Class 5
Reclamation Claims without effect of setoffs that may be utilized by
the Debtors to reduce such claims. This depiction is without prejudice
to the Debtors' rights to continue to assert that such setoffs are
available and will reduce the amount of the Class 5 Reclamation Claims.
The accompanying notes are an integral part of the Best Interests Analysis
Page 4
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
III. ALLOCATION OF NET ESTIMATED PROCEEDS TO ADMINISTRATIVE AND PRIORITY CLAIMS
<Table>
<Caption>
Estimated Estimated Recovery
Allowable on Administrative and
Claims Priority Claims
-------------------------- --------------------------
High Low Low High
---------- ---------- ---------- ----------
NET ESTIMATED PROCEEDS AFTER SECURED CLAIMS $ 39,093 $ 228,486
LESS PRIORITY CLAIMS:
CHAPTER 11 ADMINISTRATIVE CLAIMS:
Administrative Claims (Non Professional Fees) 35,000 25,000
Post-Petition Cigarette Taxes 43,000 38,000
Accrued Liabilities 15,000 10,000
Professional Fees Residual 40,000 30,000
Severance and Stay Pay 38,000 34,000
Post-Petition Accounts Payable (Net of Secured Portion) 18,000 13,000
Pension Underfunding (Admin. Portion) 5,000 2,000
Total Administrative Claims 194,000 152,000
Recovery on Administrative Claims 20% 100%
---------- ----------
Net Estimated Proceeds After Secured and Administrative Claims -- 76,486
Employee Priority Claims 15,000 6,000
Priority & Property Tax Claims 21,000 10,000
Total Priority Claims 36,000 16,000
Recovery on Priority Claims 0% 100%
---------- ----------
NET ESTIMATED PROCEEDS AFTER SECURED AND ADMINISTRATIVE AND
PRIORITY TAX CLAIMS $ -- $ 60,486
========== ==========
</Table>
- ----------
(a) The Debtors believe that the Reclamation Claims outlined herein are no
more than General Unsecured Claims against the Debtors' estates. On
November 24, 2003, the Debtors filed their Combined Amended Reclamation
Report and Motion to determine that Reclamation Claims are valueless,
whereby Debtors seek an order determining the Reclamation Claims to be
no more than Unsecured Claims. The Bankruptcy Court, however, declined
to hear that Motion and directed the Debtors to file separate Adversary
Proceedings against each and every Reclamation Claimant. The Debtors
have filed such Adversary Proceedings and are seeking to move forward
with the actions against the Reclamation Claimants. For purposes of
this Analysis, which is a conservative, worse case scenario with
respect to these Claims, the Debtors have depicted the Reclamation
Claims as Administrative Claims even thought the Debtors do not believe
they are or should be treated as Administrative Claims. This depiction
is without prejudice to the Debtors' rights to continue to assert that
such Reclamation Claims are not Secured Claims and are not entitled to
any priority or administrative treatment under the Plan. If the Debtors
are correct in their position regarding the priority of the Reclamation
Claims, the Reclamation Claims will be no more than General Unsecured
Claims and the amount outlined herein will be available to pay other
Claims. Likewise, if the Debtors reach a consensual resolution with the
Reclamation Claimants, some portion of the amounts outlined herein will
likely be available to pay other Claims. The debtors believe that
certain of the Secured Reclamation claimants owe the debtor funds
related to pre-petition transactions. Such debts due from the Secured
Reclamation claimants may be subject to setoff.
(b) Further to the above, the Debtors believe that certain of the
Reclamation Claimants owe the Debtors funds related to pre-petition
transactions. Such debts due from the Reclamation Claimants may be
subject to setoff against liabilities owed by the Debtors to such
claimants. The Debtors believe they will be able to effect setoff of
such amounts due to the Debtors in full or in part against the
Reclamation Claims. The Reclamation Claimants have challenged this
position of the Debtors. For purposes of this Analysis, which is a
conservative, worse case scenario with respect to these Claims, the
Debtors have depicted the Reclamation Claims without effect of setoffs
that may be utilized by the Debtors to reduce such Claims. This
depiction is without prejudice to the Debtors' rights to continue to
assert that such setoffs are available and will reduce the amount of
the Reclamation Claims.
The accompanying notes are an integral part of the Best Interests Analysis
Page 5
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
IV. ALLOCATION OF NET ESTIMATED PROCEEDS TO UNSECURED CLAIMS
<Table>
<Caption>
Estimated Estimated Estimated
Allowable Recovery on Recovery
Claims Unsecured Claims Range
---------------------- ----------------- ----------
High Low Low High Low High
---------- ---------- ----- ---------- ---- ----
NET ESTIMATED PROCEEDS AFTER SECURED, ADMINISTRATIVE AND PRIORITY CLAIMS $ -- $ 60,486
Notes (Including pre-petition interest) - Before Subordinated
Notes Refunding
10.125% Senior Notes due April 1, 2008 $ 373,271 $ 373,271 -- 9,039 0% 2%
9.250% Senior Notes due June 15, 2010 205,550 205,550 -- 4,978 0% 2%
10.625% Senior Subordinated Notes due July 31, 2007 407,674 407,674 -- 9,872 0% 2%
9.875% Senior Subordinated Notes due May 1, 2012 270,841 270,841 -- 6,559 0% 2%
5.250% Conv. Senior Subordinated Notes due March 15, 2009 150,380 150,380 -- 3,642 0% 2%
--------- --------- ----- ------ -- --
1,407,716 1,407,716 -- 34,089 0% 2%
Notes (Including pre-petition interest) - After Subordinated
Notes Refunding
10.125% Senior Notes due April 1, 2008 373,271 373,271 -- 21,983 0% 6%
9.250% Senior Notes due June 15, 2010 205,550 205,550 -- 12,106 0% 6%
10.625% Senior Subordinated Notes due July 31, 2007 407,674 407,674 -- -- 0% 0%
9.875% Senior Subordinated Notes due May 1, 2012 270,841 270,841 -- -- 0% 0%
5.250% Conv. Senior Subordinated Notes due March 15, 2009 150,380 150,380 -- -- 0% 0%
--------- --------- ----- ------ -- --
1,407,716 1,407,716 -- 34,089 0% 2%
General Unsecured Claims:
PBGC 386,000 40,000 -- 969 0% 2%
Severance 10,000 8,000 -- 194 0% 2%
Pre-Petition Accounts Payable 675,000 600,000 -- 14,529 0% 2%
Multi-Employer Pension Withdrawal 20,000 2,000 -- 48 0% 2%
Claims Asserted After Preference Recoveries 60,000 30,000 -- 726 0% 2%
Other General Unsecured Claims 200,000 160,000 -- 3,875 0% 2%
Contingency 100,000 50,000 -- 1,211 0% 2%
Rejection Claims 300,000 200,000 -- 4,843 0% 2%
--------- --------- -- ------ -- --
1,751,000 1,090,000 -- 26,397 0% 2%
--------- --------- ----- ------ -- --
Total $3,158,716 $2,497,716 $ -- $ 60,486 0% 2%
========== ========== ===== ========== == ==
</Table>
The accompanying notes are an integral part of the Best Interests Analysis
Page 6
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
NOTE 1 - ACCOUNTS RECEIVABLE
Accounts Receivable are mainly comprised of customers from the Fleming
Convenience entities. Fleming Convenience services traditional convenience
stores as well as alternative outlets selling convenience store products.
Traditional convenience store customers include most of the major national and
super-regional convenience store operators as well as thousands of multi and
single-store customers. Alternative channel customers comprise a variety of
store formats, including drug stores, mass merchandisers, grocery stores, liquor
stores, cigarette and tobacco shops, hotel gift shops, state correctional
facilities, military exchanges, college bookstores, casinos, video rental
stores, hardware stores and airport concessions.
Wholesale Distribution Business Accounts Receivable are mainly comprised of
miscellaneous trade receivables and includes a small amount of royalty
receivables.
As of February 29, 2004, Fleming Convenience's top twenty customers accounted
for approximately 34% of the receivables total.
<Table>
<Caption>
Recovery Rate Estimated Proceeds
Projected Range Range
Balance @ -------------------------- --------------------------
Accounts Receivable 7/31/2004 Low High Low High
- ------------------- ---------- ---------- ---------- ---------- ----------
Fleming Convenience $ 132,216 40% 60% $ 52,886 $ 79,330
Wholesale 18,000 50% 70% 13,250 18,550
---------- ---------- ----------
$ 150,216 $ 66,136 $ 97,880
44% 65%
</Table>
The accompanying notes are an integral part of the Best Interests Analysis
Page 7
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
NOTE 2 - INVENTORIES
The inventory remaining at July 31, 2004 is solely from Fleming Convenience.
Inventory has been valued as if an orderly liquidation had taken place. Fleming
Convenience's inventory is comprised of food products (approximately 35,125
SKUs), including candy, snacks, fast food, groceries and non-alcoholic
beverages, and non-food products (approximately 17,000 SKUs), including general
merchandise, equipment and HBC products. In addition, Fleming Convenience offers
approximately 3,700 SKUs of cigarette and other tobacco items.
All recovery amounts are net of the required costs to liquidate such inventory.
<Table>
<Caption>
Recovery Rate Estimated Proceeds
Projected Range Range
Balance @ -------------------------- -------------------------
Inventory Commodity Type 7/31/2004 Low High Low High
- ----------------------------- ---------- ---------- ---------- ---------- ----------
Fast Foods $ 16,896 53% 63% $ 8,955 $ 10,645
Snacks 9,132 60% 70% 5,479 6,393
Candy 37,029 62% 72% 22,958 26,660
Groceries 10,684 59% 69% 6,303 7,372
Retail Beverages 7,111 54% 64% 3,840 4,551
General Merchandise 13,400 44% 54% 5,896 7,236
HBC 7,955 48% 58% 3,818 4,614
Cigars & Tobacco 7,336 60% 70% 4,401 5,135
Cigarettes 42,388 69% 79% 29,248 33,486
Generic Cigarettes 10,582 69% 79% 7,302 8,360
Equipment 132 36% 46% 48 61
Stamps 11,480 100% 100% 11,480 11,480
Dry Room 2,195 0% 0% -- --
Excise Taxes 4,491 100% 100% 4,491 4,491
---------- ---------- ---------- ---------- ----------
Total Inventory $ 180,811 63% 72% $ 114,219 $ 130,484
</Table>
The accompanying notes are an integral part of the Best Interests Analysis
Page 8
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
NOTE 3 - OTHER CURRENT ASSETS
The recoveries under this section are mainly related to post petition Vendor
Deductions at the Wholesale Distribution Business and manufacturers' incentive
allowances carried as other A/R by Fleming Convenience.
The Debtors are entitled to incentive payments from vendors for attaining
certain targeted sales levels of their products. The amounts that are on the
balance sheet are accruals based on prior performance. Payments are typically
made in arrears, approximately 60 days after the prior quarter end for which the
payment is calculated.
Other Current Assets is comprised of Deposits, Prepaid Expenses, Suspense, Other
& Deferred Costs, Goodwill, Investment in Subsidiary and are considered to have
negligible liquidation recovery value.
<Table>
<Caption>
Recovery Rate Estimated Proceeds
Projected Range Range
Balance @ -------------------------- -------------------------
Other Current Assets 7/31/2004 Low High Low High
- ------------------------------- ---------- ---------- ---------- ---------- ----------
Vendor Deductions and Other A/R $ 272,098 25% 40% $ 68,025 $ 108,839
Other Current Assets 33,179 0% 1% -- 332
---------- ---------- ----------
Total $ 305,277 $ 68,025 $ 109,171
</Table>
The accompanying notes are an integral part of the Best Interests Analysis
Page 9
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
NOTE 4 - NET PP&E - OWNED AND LEASED
Net PP&E is comprised of buildings and improvements, autos and trucks, various
equipment, furniture and fixtures and leasehold improvements. The largest line
items by book value are Equipment, Leasehold Improvements and Autos & Trucks.
Leasehold Improvements have been valued at a zero recovery. Autos & Trucks
consists mainly of tractors and trailers.
Proceeds from the sale of these items were based upon management's best estimate
from prior dispositions.
All recovery amounts are net of the required costs to liquidate such assets.
<Table>
<Caption>
Recovery Rate Estimated Proceeds
Projected Range Range
Balance @ -------------------------- -------------------------
PP&E 7/31/2004 Low High Low High
- ------------------------ ---------- ---------- ---------- ---------- ----------
Buildings & Improvements $ 1,957 77% 87% $ 1,500 $ 1,700
Autos & Trucks 8,921 15% 30% 1,338 2,676
Equipment 26,533 0% 5% -- 1,327
Furniture & Fixtures 277 0% 5% -- 14
Leasehold Improvements 10,493 0% 0% -- --
---------- ---------- ----------
Total $ 48,181 $ 2,838 $ 5,717
</Table>
The accompanying notes are an integral part of the Best Interests Analysis
Page 10
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
NOTE 5 - OTHER NON CURRENT ASSETS
Other Non Current Assets is comprised of Goodwill and Deferred Charges and are
considered to have no liquidation recovery value.
<Table>
<Caption>
Recovery Rate Estimated Proceeds
Projected Range Range
Balance @ -------------------------- -------------------------
Other Non Current Assets 7/31/2004 Low High Low High
- ------------------------ ---------- ---------- ---------- ---------- ----------
Other Non Current Assets $ 38,074 0% 0% $ -- $ --
</Table>
The accompanying notes are an integral part of the Best Interests Analysis
Page 11
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ IN 000S)
NOTE 6 - RECOVERIES FROM AVOIDANCE ACTIONS
Debtors have identified certain pre-petition payments to third-parties. It is
likely in a Chapter 7 liquidation that the trustee would seek to recover all
such payments. The pre-petition payments listed below exclude vendor debit
balances, which are assumed to reside in Accounts Receivable. The schedule below
shows management's estimate of recoveries, net of recovery expenses, that would
be received after the beginning of Chapter 7 liquidation proceedings.
The outcome of any particular preference action is subject to a number of
uncertainties. Moreover, the potential value of a preference action against a
particular preference defendant ultimately is dependent upon the specific
payment history and other facts and circumstances pertaining to that vendor and
its relationship with the Debtors. It is therefore difficult to precisely apply
results from an individual vendor analysis to an entire class of preference
claims. The Debtors have not undertaken an exhaustive analysis of all potential
preference claims in order to arrive at the estimates contained herein. Rather,
the analysis undertaken by the Debtors for purposes of these estimates is based
on the analysis of a sample set of vendors. The estimates contained herein
therefore may be materially different from actual results achieved.
For purposes of this Analysis, which is a conservative, worst case scenario, the
Debtors have estimated the recoveries net of all potential setoffs, recoupment
and other defenses and claims that are likely to be asserted by the preference
defendants. This depiction is without prejudice to the Debtors' right to
challenge those defenses and claims.
<Table>
<Caption>
Estimated
Recovery Range
-----------------------------
Component Low High
- -------------------------------- ------------ ------------
Total Preference Period Payments $ 3,000,000 $ 3,000,000
Maximum Net Preference 809,000 809,000
ESTIMATED RECOVERY $ 50,000 $ 90,000
</Table>
The accompanying notes are an integral part of the Best Interests Analysis
Page 12
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ IN 000S)
NOTE 7 - CORPORATE EXPENSES
It is assumed that the creditor recovery process occurs over a twelve month
period. For purposes of the Analysis, corporate expenses include both
headquarters and distribution centers related expense. A nearly full complement
of corporate expenses is assumed to be required during the first three months,
with reducing amounts of corporate expenses required in the following months. It
is assumed, further, that there will be an additional compensation program
designed to retain key employees during the liquidation period.
<Table>
<Caption>
Fleming Convenience
------------------------------------ Retention % of
Run Reduction Total & Severance Salaries
Rate Rate Expense Wholesale Total Estimate & Wages
-------- --------- -------- --------- -------- ----------- --------
PHASE I MONTHS 1-3
Corporate Rent & Occupancy $ 203 100% $ 203 $ 279 $ 482
Corporate Employment Expense 1,736 80% 1,388 310 1,698 509 30%
Corporate SG&A 2,275 80% 1,820 506 2,326
-------- --------- -------- --------- --------
4,214 81% 3,411 1,095 4,506
PHASE II MONTHS 4-12
Corporate Rent & Occupancy 608 25% 152 419 571
Corporate Employment Expense 5,209 10% 521 186 707 353 50%
Corporate SG&A 6,824 10% 682 152 834
-------- --------- -------- --------- -------- -----------
12,641 11% 1,355 757 2,112 862
CALCULATED TOTAL CORPORATE EXPENSES $ 6,618
========
ESTIMATED CORPORATE EXPENSE RANGE
HIGH $ 7,920
LOW $ 6,600
</Table>
The accompanying notes are an integral part of the Best Interests Analysis
Page 13
EXHIBIT 6
CUSIP NUMBERS OF OLD NOTES
- - 10 1/8% SENIOR NOTES, CUSIP NUMBER 339130AP1 DUE IN 2008.
Under an Indenture dated as of March 15, 2001, Fleming issued
its 10 1/8% senior notes due in 2008 in a principal amount of
$355 million.
- - 9 1/4% SENIOR NOTES, CUSIP NUMBER 339130AX4 DUE IN 2010.
Under an Indenture dated as of June 18, 2002, Fleming issued
its 9 1/4% senior notes due in 2010 in a principal amount of
$200 million.
- - 10 5/8% SENIOR SUBORDINATED NOTES, CUSIP NUMBERS 339130ALO AND
339130AT3 DUE IN 2007 (TWO TRANCHES, SERIES A & B).
Under an Indenture dated as of October 15, 2001, Fleming
issued two series of 10 5/8% senior subordinated notes due in
2007 in a principal amount of $400 million.
- - 5 1/4% CONVERTIBLE SENIOR SUBORDINATED NOTES, CUSIP NUMBERS 339130AQ9
AND 339130AR7 DUE IN 2009.
Under an Indenture dated as of March 15, 2001, Fleming issued
5 1/4% convertible senior subordinated notes due in 2009 in a
principal amount of $150 million.
- - 9 7/8% SENIOR SUBORDINATED NOTES, CUSIP NUMBER 339130AW6 DUE IN 2012.
Under an Indenture dated as of April 15, 2002, Fleming issued
its 9 7/8% senior subordinated notes due in 2012 in a
principal amount of $260 million.
EXHIBIT 7
EXIT FACILITY INDICATIVE TERM SHEET
MARCH, 2004
BORROWERS: Core-Mark Newco, as reorganized under
Chapter 11 of the U.S. Bankruptcy Code
("Newco"), and certain subsidiaries of Newco
to be determined.
AGENT: TBD.
LENDERS: TBD.
REVOLVING LOAN: Up to $240 million (including a Letter of
Credit Subfacility in an amount to be
mutually agreed by Agent and the Borrowers).
Borrowers shall have no access to the
Revolving Loan at any time unless the FILO
Loan is fully funded at such time.
TERM OF
REVOLVING LOAN: Thirty-six (36) months.
REVOLVING LOAN
AVAILABILITY: Up to (i) 85% of Borrowers' eligible
accounts receivable, (ii) up to the lesser
of (x) 65% of Borrowers' eligible inventory
valued at the lower of cost (FIFO) or market
and (y) 85% of net orderly liquidation value
of Borrowers' eligible inventory, in each
case excluding inventory constituting
unaffixed stamps, and (iii) 90% of
Borrowers' unaffixed tax stamps on hand
which constitute eligible inventory, in each
case, less reserves. Agent will retain the
right from time to time to establish advance
rates, standards of eligibility and reserves
against Revolving Loan Availability pursuant
to the terms of the final financing
documents.
FILO LOAN: Up to $10 million. The FILO Loan will be a
revolving credit facility available to
Borrowers on a first-in, last-out basis.
TERM OF
FILO LOAN: Thirty-six (36) months.
1
FILO LOAN
AVAILABILITY: FILO Loan Availability will be limited to an
additional amount over and above any
Availability under the Revolving Loan equal
to the lesser of (i) up to 10% of Borrowers'
eligible inventory valued at the lower of
cost (FIFO) or market, or (ii) 7.5% of net
orderly liquidation value of eligible
inventory, in each case less reserves. Agent
will retain the right from time to time to
establish advance rates, standards of
eligibility and reserves against FILO Loan
Availability pursuant to the terms of the
final financing documents.
USE OF PROCEEDS: Loans made on the date the financing is
consummated (the "Closing Date") will be
used to repay certain of Borrowers'
post-petition secured indebtedness and
pre-petition obligations on the effective
date (the "Effective Date") of the Plan of
Reorganization, to otherwise enable the
Borrowers to consummate the Plan of
Reorganization on the Effective Date and to
fund certain fees and expenses associated
with the financing. Loans made after the
Closing Date will be used for Borrowers'
working capital and general corporate
purposes and permitted capital expenditures.
INTEREST: For all loans at either (i) absent a
default, a 1, 2 or 3-month reserve-adjusted
LIBOR Rate plus the Applicable LIBOR Margin,
or (ii) a floating rate equal to the Index
Rate (higher of the prime rate as reported
by The Wall Street Journal or 50 basis
points over the federal funds rate) plus the
Applicable Index Margin.
Interest will be payable monthly in arrears
and calculated on the basis of a 365/366-day
year and actual days elapsed (except LIBOR
which shall be paid at the expiration of
each LIBOR period and calculated on the
basis of a 360-day year and actual days
elapsed).
APPLICABLE MARGINS: The following applicable margins will apply
so long as Revolving Loans and the FILO Loan
remain outstanding:
2
If the Used Portion of Availability
under the Revolving Loan is: Level of Applicable Margins:
---------------------------- ----------------------------
< or = 1/3 Level I
- --------------------------------------------------------------------
> 1/3, but < or = 2/3 Level II
- --------------------------------------------------------------------
> 2/3 Level III
- --------------------------------------------------------------------
APPLICABLE MARGINS
- -------------------------------------------------------------------
LEVEL I LEVEL II LEVEL III
- -------------------------------------------------------------------
Applicable Revolver 1.00% 1.25% 1.50%
Index Margin
- -------------------------------------------------------------------
Applicable Revolver LIBOR Margin 2.25% 2.50% 2.75%
- -------------------------------------------------------------------
Applicable L/C Margin 2.25% 2.50% 2.75%
- -------------------------------------------------------------------
Applicable FILO Index Margin 2.75%
Applicable FILO LIBOR Margin 4.00%
Applicable Unused Facility Fee Margin 0.50%
FEES: Commitment Fee of up to 0.25% of the
Revolving Loan and FILO Loan commitment due
and payable upon Bankruptcy Court approval
("Commitment Fee").
Closing Fee of up to 1.25% of the Revolving
Loan and FILO loan commitment payable on the
Closing Date, against which will be credited
the prior payment of the Commitment Fee.
Letter of Credit Fee equal to the Applicable
L/C Margin (calculated on the basis of a
360-day year and actual days elapsed) on the
face amount of Letters of Credit, payable
monthly in arrears, plus any reasonable
costs and expenses incurred by Agent in
arranging for the issuance or guaranty of
Letters of Credit plus any reasonable
charges assessed by the issuing financial
institution.
Unused Facility Fee equal to the Applicable
Unused Facility Fee Margin (calculated on
the basis of a 360-day year and actual days
elapsed) on the average unused daily balance
of the financing, payable to Agent monthly
in arrears. For purposes of the calculation
of the used portion
3
of the financing, the issued and outstanding
amount of Letters of Credit shall be counted
as usage.
Collateral Monitoring Fee of $20,833.33 per
month, payable to Agent monthly in advance
beginning on the Closing Date.
DEFAULT RATES: Default interest and the Letter of Credit
Fee increased 2% per annum above the
interest rate or Letter of Credit Fee
otherwise applicable.
SECURITY AND
PRIORITY: To secure all obligations of Borrowers to
Agent and Lenders, Agent, for itself and the
ratable benefit of Lenders, will receive a
fully perfected first priority security
interest in substantially all of the
existing and after acquired real and
personal, tangible and intangible assets of
each Borrower including, without limitation,
all cash, cash equivalents, bank accounts,
accounts, other receivables, chattel paper,
contract rights, inventory (wherever
located), instruments, documents, securities
(whether or not marketable), equipment,
fixtures, real property interests, franchise
rights, patents, trade names, trademarks,
copyrights, intellectual property, general
intangibles, investment property, supporting
obligations, letter of credit rights,
commercial tort claims, causes of action and
all substitutions, accessions and proceeds
of the foregoing (including insurance
proceeds).
MANDATORY
PREPAYMENTS: Subject to negotiated exclusions and
thresholds, customary mandatory prepayments
(to be negotiated) upon disposition of
assets (including condemnation and insurance
proceeds) and upon sale of equity, with no
permanent reduction in the commitments.
FINANCIAL AND OTHER
REPORTING: The final financing documents will require
Borrowers to provide to Agent various
operating reports, financial statements,
borrowing base certificates and other
information reasonably requested by Agent.
DOCUMENTATION: The final financing documents will be
mutually acceptable to all parties and will
contain representations and warranties;
conditions precedent; affirmative, negative
and
4
financial covenants; indemnities; and events
of default and remedies as negotiated.
5
EXHIBIT 8
TRANCHE B NOTE INDICATIVE TERM SHEET
MARCH, 2004
BORROWER Core-Mark Newco, as reorganized under Chapter 11
of the U.S. Bankruptcy Code ("Newco").
AMOUNT Up to $60,000,000 of term credit extensions
available to be borrowed/issued on the Effective
Date of a Plan of Reorganization (the "Issuance
Date") in the form of funded borrowings or
letters of credit (collectively, the "Tranche B
Note"); provided, however, that, if Newco
determines that it requires additional term
credit extensions, it will seek availability in
excess of $60,000,000.
COLLATERAL All obligations under the Tranche B Note shall
be secured by second priority security interests
in and liens upon substantially all present and
future assets of Newco, including accounts
receivable, general intangibles, inventory,
equipment, fixtures and real property, and
products and proceeds thereof (which collateral
package shall be the same as that securing
Newco's senior secured exit facility (the "Exit
Facility")). The Tranche B Note shall be junior
to the Exit Facility. The Tranche B Note will
contain provisions such that only the Exit
Facility shall be senior to it in priority.
INTEREST RATE Interest on funded amounts outstanding will be
payable on a monthly basis at the rate of LIBOR
+ 12.0%, with a portion paid in cash and the
remainder paid by the issuance of additional
Tranche B Notes. Interest on letters of credit
outstanding will be payable on a monthly basis
at the rate of 12.0%, with a portion paid in
cash and the remainder paid by the issuance of
additional Tranche B Notes. Additionally, the
Tranche B Noteholders will be granted warrants
for a percentage (to be negotiated) of the
fully-diluted equity of Newco (prior to the
effect of any shares or warrants issued to
management for which management did not pay any
consideration).
TERM The Tranche B Note will have an initial term of
five years from the Issuance Date. The Tranche B
Note maturity shall be no less than the maturity
of the Exit Facility.
REDEMPTION FEATURES As long as no event of default has occurred and
is continuing under the Exit Facility, on a
quarterly basis, Newco shall redeem a portion of
the Tranche B Note in an amount equal to 50% of
unused excess availability above a minimum
unused availability to be negotiated. Any
quarterly
Page 1
mandatory redemptions shall be at par plus
accrued and unpaid interest in respect of such
repaid principal amount.
The Tranche B Note shall be subject to optional
redemption at any time at declining redemption
premiums (103% in first year, 102% in second
year, 101% in third year, par thereafter).
INTERCREDITOR ARRANGEMENTS The relative rights of the lenders under the
Exit Facility and the holders of the Tranche B
Note shall be as set forth in a mutually
agreeable intercreditor agreement to be
negotiated between the respective creditors.
COVENANTS No more restrictive than those contained in the
Exit Facility.
FEES A fee of up to 2.5% will be due to the
underwriters of the Tranche B Notes, in addition
to reimbursement for customary due diligence and
administrative expenses. The fee may be payable
in cash, Tranche B Notes or a combination
thereof. The expenses must be reimbursed in
cash.
Page 2
EXHIBIT 9
POST-CONFIRMATION TRUST AGREEMENT
This AGREEMENT is made this ____ day of ______________, 2004, by and
among Fleming Companies, Inc. and its subsidiaries and affiliates who are
chapter 11 debtors (collectively, the "Debtors")1, the Official Committee of
Unsecured Creditors (the "Committee) and _____________________ or a limited
liability Company of which he is a managing member ("__________________", and
together with any successors, the "PCT Representative") under the Plan (as
defined below).
RECITALS:
A. On April 1, 2003 each of the Debtors filed a voluntary
petition for relief under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the District of
Delaware; and
B. By order, dated ________________________2004, the Bankruptcy
Court confirmed the Debtors' and the Official Committee of Unsecured Creditors'
Second Amended Joint Plan of Reorganization of Fleming Companies, Inc. and Its
Filing Subsidiaries Under Chapter 11 of the Bankruptcy Code (as the same may
have been or may be amended, the "Plan"); and
C. In accordance with the Plan, certain duties and
responsibilities shall be borne by the PCT Representative; and
D. The Plan provides for, among other things, the distribution to
the holders of certain Allowed Claims (the "Beneficiaries") of, in the
aggregate, one hundred percent (100%) of the beneficial interests of the
Post-Confirmation Trust (the "PCT") created hereby; and
E. The PCT is created pursuant to, and to effectuate, the Plan;
and
F. The PCT is created on behalf of, and for the sole benefit of,
the Beneficiaries; and
G. The PCT is established for the primary purpose of liquidating
the assets transferred to it (the "PCT Assets") for the benefit of the
Beneficiaries as a liquidating trust, in accordance with Treasury Regulation
Section 30I. 770I-4(d), with no objective to continue or engage in the conduct
of a trade or business except to the extent reasonably necessary to, and
consistent with, the liquidating purpose of the PCT; and
- --------------------
(1) The Debtors are the following entities: Core-Mark International, Inc.;
Fleming Companies, Inc.; ABCO Food Group, Inc.; ABCO Markets, Inc.; ABCO
Realty Corp.; ASI Office Automation, Inc.; C/M Products, Inc.; Core-Mark
Interrelated Companies, Inc.; Core-Mark Mid-Continent, Inc.; Dunigan Fuels,
Inc.; Favar Concepts, Ltd.; Fleming Foods Management Co., L.L.C., Fleming
Foods of Texas, L.P.; Fleming International, Ltd.; Fleming Supermarkets of
Florida, Inc.; Fleming Transportation Service, Inc.; Food 4 Less Beverage
Company, Inc.; Fuelserv, Inc.; General Acceptance Corporation; Head
Distributing Company; Marquise Ventures Company, Inc.; Minter-Weisman Co.;
Piggly Wiggly Company; Progressive Realty, Inc.; Rainbow Food Group, Inc.;
Retail Investments, Inc.; Retail Supermarkets, Inc.; RFS Marketing Services,
Inc.; and Richmar Foods, Inc.
H. The PCT is intended to qualify as a "grantor trust" for
federal income tax purposes with the Beneficiaries treated as the grantors and
owners of the trust; and
I. Capitalized terms used herein without definition shall have
the respective meanings assigned to such terms in the Plan.
J. In the event of any inconsistency between the Plan and this
agreement, the terms of the Plan shall govern.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and in the Plan, the Debtors, the
Committee and the PCT Representative agree as follows:
ARTICLE I
POST CONFIRMATION TRUSTEE
1.1 Appointment. The Debtors and the Committee hereby appoint
_________________ to serve as the initial PCT Representative under the Plan, and
______________hereby accepts such appointment and agrees to serve in such
capacity, in each case effective upon the Effective Date of the Plan. A
successor PCT Representative shall be appointed by the PCT Board (as defined
herein) in the event that the PCT Representative is removed or resigns pursuant
to this Agreement or the PCT Representative otherwise vacates the position, and
if not so appointed, shall be appointed by the Bankruptcy Court.
1.2 Generally. The PCT Representative's powers are exercisable
solely in a fiduciary capacity consistent with, and in furtherance of, the
purposes of the PCT and not otherwise, except that the PCT Representative may
deal with the PCT Assets for his own account as permitted by the provisions of
Section 1.4 hereof. The PCT Representative shall have the authority to bind the
PCT but shall for all purposes hereunder be acting in the capacity as PCT
Representative and not individually. Notwithstanding anything to the contrary
contained herein or in the Plan, the PCT Representative shall not be required to
take any action or omit to take any action if, after the advice of counsel, the
PCT Representative believes such action or omission is not consistent with the
PCT Representative's fiduciary duties to the Beneficiaries.
1.3 Scope of Authority. The responsibilities and authority of the
PCT shall include (a) facilitating the prosecution or settlement of objections
to and estimations of Claims, (b) calculating and implementing all distributions
in accordance with the Plan, (c) filing all required tax returns and paying
taxes and all-other obligations on behalf of the PCT from funds held by the PCT,
(d) periodic reporting to the Bankruptcy Court and parties in interest of the
status of the Claims resolution process, distributions on Allowed Claims,
prosecution of Bankruptcy Causes of Action and all other causes of action, (e)
liquidating the PCT Assets and providing for the distribution of the net
proceeds thereof in accordance with the provisions of the Plan, (f) managing the
wind-down of Debtors' non-Fleming Convenience Operations, and (g) such other
responsibilities as may be vested in the PCT pursuant to the Plan or Bankruptcy
Court order or as may be necessary and proper to carry out the provisions of the
Plan. The PCT Representative shall not take material action involving the
initiation of litigation involving claims in excess of $l0 million, the
retention of professionals to conduct such litigation or the settlement of such
2
litigation without first obtaining either the consent of the PCT Board or an
order of the Bankruptcy Court. The PCT Representative shall use reasonable best
efforts to comply with an affirmative direction from the PCT Representative
Board.
1.4 Powers.
(a) The powers of the PCT shall, without any further
Bankruptcy Court approval in each of the following cases, include (i)
the power to invest funds in, and withdraw, make distributions and pay
taxes and other obligations owed by the PCT from funds held by the PCT
Representative and/or the PCT in accordance with the Plan, (ii) the
power to engage employees and professional persons to assist the PCT
and/or the PCT Representative with respect to its or his
responsibilities, (iii) the power to compromise and settle claims,
Bankruptcy Causes of Action and causes of action on behalf of or
against the PCT after notice to adversely affected Parties in interest,
and (iv) such other powers as may be vested in or assumed by the PCT or
the PCT Representative pursuant to the Plan, Bankruptcy Court order or
as may be necessary and proper to carry out the provisions of the Plan.
Except as expressly set forth herein, the PCT shall have absolute
discretion to pursue or not to pursue any and all claims, rights,
Bankruptcy Causes of Action or other causes of action, as it determines
is in the best interests of the Beneficiaries and consistent with the
purposes of the PCT, and shall have no liability for the outcome of its
decision. The PCT may incur any reasonable and necessary expenses in
liquidating and converting the PCT Assets to cash.
(b) In connection with the administration of the PCT,
except as otherwise set forth in this Agreement or the Plan, the PCT is
authorized to perform any and all acts necessary and desirable to
accomplish the purposes of the PCT. Without limiting, but subject to,
the foregoing, the PCT shall be expressly authorized, but shall not be
required, to:
(i) hold legal title to the PCT Assets, any and
all rights of the Beneficiaries in or
arising from the PCT Assets, including, but
not limited to, the right to vote any claim
or interest held by the PCT Assets in a case
under the Bankruptcy Code and receive any
distribution therein;
(ii) protect and enforce the rights to the PCT
Assets vested in the PCT by this Agreement
by any method deemed appropriate including,
without limitation, by judicial proceedings
or pursuant to any applicable bankruptcy,
insolvency, moratorium or similar law and
general principles of equity;
(iii) compromise, adjust, arbitrate, sue on or
defend, abandon, or otherwise deal with and
settle, in accordance with the terms set
forth in Section 4.2 hereof, claims in favor
of or against the PCT as the PCT shall deem
advisable;
3
(iv) determine and satisfy any and all
liabilities created, incurred or assumed by
the PCT;
(v) file, if necessary, any and all tax and
information returns with respect to the PCT
and Pay taxes properly Payable by the PCT,
if any;
(vi) Pay all expenses and make all other Payments
relating to the PCT Assets;
(vii) obtain insurance coverage with respect to
the liabilities and obligations of the PCT
Representative and the PCT (in the form of
an errors and omissions policy, fiduciary
policy or otherwise);
(viii) obtain insurance coverage with respect to
real and personal property which may be or
may become PCT Assets, if any;
(ix) retain and Pay such law firms as counsel to
the PCT as the PCT in its sole discretion
may select to aid in the prosecution of any
claims that constitute the PCT Assets, and
to perform such other functions as may be
appropriate in the PCT Representative's sole
discretion. The PCT Representative may
commit the PCT to and the PCT shall pay such
law firms compensation for services rendered
and expenses incurred;
(x) retain and pay a public accounting firm to
perform such reviews and/or audits of the
financial books and records of the PCT as
may be appropriate in the PCT's sole
discretion and to prepay and file any tax
returns or informational returns for the PCT
as may be required. The PCT Representative
may commit the PCT to and the PCT shall pay
such accounting firm reasonable compensation
for services rendered and expenses incurred;
(xi) retain and pay such third parties as the
PCT, in its sole discretion, may deem
necessary or appropriate to assist the PCT
in carrying out its powers and duties under
this Agreement. The PCT Representative may
commit the PCT to and the PCT shall pay all
such persons or entities compensation for
services rendered and expenses incurred, as
well as commit the PCT to indemnify any such
parties in connection with the performance
of services;
(xii) invest any moneys held as Part of the PCT
Assets in accordance with the terms of
Section 1.10 hereof.
(xiii) engage in any transaction material to the
foregoing, including, but not limited to,
opening bank accounts in the name of the PCT
and entering into contracts and leases on
behalf of the PCT; and
4
(xiv) assume such other powers as may be vested in
or assumed by the PCT pursuant to the Plan
or Bankruptcy Court order, or as may be
necessary and proper to carry out the
provisions of the Plan or of this agreement.
1.5 Additional Powers. Except as otherwise set forth in this
Agreement or in the Plan, and subject to the retained jurisdiction of the
Bankruptcy Court as provided for in the Plan, but without prior or further
authorization, the PCT Representative may control and exercise authority over
the PCT Assets and over the protection, conservation and disposition thereof. No
person dealing with the PCT shall be obligated to inquire into the authority of
the PCT Representative connection with the protection, conservation or
disposition of PCT Assets.
1.6 Other Activities. The PCT Representative shall be entitled to
perform services for and be employed by third parties; provided, however, that
such performance or employment affords the PCT Representative sufficient time to
carry out its responsibilities as PCT Representative. The PCT Representative may
delegate the performance of services and the fulfillment of responsibilities to
other persons. Such persons shall be entitled to be compensated and to be
reimbursed for out-of-pocket disbursements in the same manner as the PCT
Representative.
1.7 Limitation of PCT Representative's Authority.
(a) The PCT Representative shall have no power or
authority except as set forth in this Agreement or the Plan.
(b) The PCT Representative shall not and shall not be
authorized to engage in any trade or business with respect to the PCT
Assets or any proceeds therefrom except to the extent reasonably
necessary to, and consistent with, the liquidating purpose of the PCT
and shall take such actions consistent with the prompt orderly
liquidation of the PCT Assets as are required by applicable law and
consistent with the treatment of the PCT as a liquidating trust under
Treasury Regulation Section 301.7701-4(d), and such actions permitted
herein.
1.8 Liability of PCT Representative. In no event shall the PCT
Representative, the PCT Representative's employees, the PCT's employees or any
of the PCT Representative's or PCT's professionals or representatives be held
personally liable for any claim asserted against the PCT, the PCT
Representative, the PCT Representative's employees, the PCT's employees or any
of the PCT Representative's or PCT's professionals or representatives.
Specifically, the PCT Representative, the PCT Representative's employees, the
PCT's employees and any of the PCT Representative's or PCT's professionals or
representatives shall not be liable for any negligence or any error of judgment
made in good faith, or with respect to any action taken or omitted to be taken
in good faith, except to the extent that the action taken or omitted to be taken
by the PCT Representative, the PCT Representative's employees, the PCT's
employees or any of the PCT Representative's or PCT's professionals or
representatives are determined by a Final Order to be due to their own
respective gross negligence or willful misconduct.
5
1.9 Reliance by PCT Representative. Except as otherwise provided
in Section 1.8 hereof:
(a) the PCT Representative may rely, and shall be
protected in acting upon, any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, or other
paper or document believed by him to be genuine and to have been signed
or presented by the proper party or parties;
(b) the PCT Representative may consult with legal
counsel, financial or accounting advisors and other professionals to be
selected by him, and the PCT Representative shall not be liable for any
action taken or omitted to be taken by him in accordance with the
advice thereof; and
(c) persons dealing with the PCT Representative shall
look only to the PCT Assets to satisfy any liability incurred by the
PCT Representative to such person in carrying out the terms of this
Agreement, and the PCT Representative shall have no personal obligation
to satisfy any such liability.
1.10 Investment and Safekeeping of PCT Assets. All moneys and other
assets received by the PCT shall, until distributed or paid over as herein
provided, be held in trust for the benefit of the Beneficiaries, but need not be
segregated from other PCT Assets, unless and to the extent required by the Plan
or by law. The PCT Representative shall be under no liability for interest or
producing income on any moneys received by the PCT hereunder and held for
distribution or payment to the Beneficiaries, except as such interest shall
actually be received by the PCT Representative. Investments of any moneys held
by the PCT shall be administered in view of the manner in which individuals of
ordinary prudence, discretion and judgment would act in the management of their
own affairs; provided, however, that the right and power of the PCT
Representative to invest the PCT Assets, the proceeds thereof, or any income
earned by the PCT, shall be limited to the right and power to invest such assets
(pending periodic distributions in accordance with Section 4.4 hereof) in demand
and time deposits, such as short-term certificates of deposit, in banks or other
savings institutions, or other temporary liquid investments, such as Treasury
bills; and, provided, further, that the scope of any such permissible
investments shall be limited to include only those investments, or shall be
expanded to include any additional investments, as the case may be, that a
liquidating trust, within the meaning of Treasury Regulation section 301.770
1-4( d), may be permitted to hold, pursuant to the Treasury Regulations, or any
modification in the IRS guidelines, whether set forth in IRS rulings, other IRS
pronouncements or otherwise.
1.11 Authorization to Expend PCT Assets. Subject to the
Post-Effective Date Administrative Expense Budget (it being understood that the
PCT Representative shall be entitled to make such modifications as to timing and
expense category as may be approved by the PCT Representative in his or its
discretion), the PCT Representative may expend the assets of the PCT (i) as
necessary to meet contingent liabilities and to maintain the value of the assets
of the PCT during liquidation, (ii) to pay administrative expenses of the PCT
(including, but not limited to, any taxes imposed on the PCT or fees and
expenses in connection with litigation), and (iii) to satisfy other liabilities
incurred or assumed by the PCT (or to which the assets are otherwise subject) in
accordance with the PCT Agreement or the Plan. The PCT Representative
6
shall expend funds in accordance with quarterly budgets that have been approved
by the PCT Board and the PCT Representative or as otherwise ordered by the
Bankruptcy Court. The PCT Representative may, as required, request additional
funds from the PCT Board or authority to borrow additional funds if supported
and necessary to exercise the duties of the PCT Representative.
1.12 Compensation of the PCT Representative.
(a) The PCT shall reimburse the PCT Representative for
the actual out-of-pocket expenses incurred by the PCT Representative,
including, without limitation, necessary travel, lodging, postage,
telephone and facsimile charges upon receipt of periodic billings. The
PCT Representative and employees of the PCT and the PCT Representative
who perform services for the PCT shall be entitled to receive
compensation for services rendered on behalf of PCT.
(b) The PCT Assets shall be subject to the claims of the
PCT Representative, and the PCT Representative shall be entitled to
reimburse himself out of any available cash in the PCT, for his actual
out-of-pocket expenses and against and from any and all loss,
liability, expense, or damage which the PCT Representative may sustain
in good faith and without willful misconduct, gross negligence, or
fraud in the exercise and performance of any of the powers and duties
of the PCT Representative.
(c) All compensation and other amounts payable to the PCT
Representative shall be paid from the assets of the PCT. If the cash in
the PCT shall be insufficient to compensate and reimburse the PCT
Representative, as the case may be, for any amounts to which they are
entitled hereunder, then the PCT Representative is hereby authorized to
reduce to cash that portion of the PCT Assets necessary so as to effect
such compensation and reimbursement. Notwithstanding anything to the
contrary contained herein, if the assets of the PCT are insufficient to
fully satisfy the amounts payable to, or other obligations owing to the
PCT Representative or otherwise due under this Agreement, the
Beneficiaries shall be required to disgorge their pro rata share of
distributions received from the PCT until all such amounts have been
fully paid to the PCT Representative and all such obligations owing to
the PCT Representative or otherwise due under this Agreement have been
fully satisfied.
1.13 Exculpation and Indemnification.
(a) Exculpation. The PCT Representative, the PCT
Representative's employees and the PCT's employees and each of their
professionals and representatives shall be and hereby are exculpated by
all Entities, including, without limitation, holders of Claims and
other parties in interest, from any and all claims, causes of action
and other assertions of liability arising out of the discharge of the
powers and duties conferred upon such PCT Representative by the Plan or
any Order of the Bankruptcy Court entered pursuant to or in furtherance
of the Plan, applicable law or otherwise, except only for actions or
omissions to act, only to the extent determined by a Final Order to be
due to their own respective gross negligence or willful misconduct
after the Effective Date.
7
No holder of a Claim or other party in interest will have or be permitted to
pursue any claim or cause of action against the PCT Representative, the PCT or
the employees, professionals or representatives of either the PCT Representative
or the PCT for making payments in accordance with the Plan or for implementing
the provisions of the Plan.
(b) Indemnification. The PCT shall indemnify, defend and
hold harmless the PCT Representative, the PCT Representative's
employees and the PCT' s employees and any of their professionals or
representatives from and against any and all claims, causes of action,
liabilities, obligations, losses, damages or expenses (including
attorneys' fees) (other than those determined by a Final Order to be
due to their own respective gross negligence or willful misconduct
after the Effective Date) to the fullest extent permitted by applicable
law. [The obligations of the Debtors to indemnify and reimburse the D&O
Releasees against and for any obligations pursuant to articles of
incorporation, codes of regulations, bylaws, applicable state law, or
specific agreement, or any combination of the foregoing with respect to
postpetition acts or omissions, shall be assumed by the PCT.] Any
action taken or omitted to be taken with the approval of the Bankruptcy
Court or the PCT Board will conclusively be deemed not to constitute
gross negligence or willful misconduct.
1.14 Termination. The duties, responsibilities and powers of the
PCT Representative will terminate on the date the PCT is dissolved under
applicable law in accordance with the Plan, or by an Order of the Bankruptcy
Court or by entry of a final decree closing the Chapter 11 Cases; provided that
Sections 1.12 and 1.13. above shall survive such termination, dissolution and
entry.
1.15 No Bond. The PCT Representative shall serve without bond.
1.16 Confidentiality. The PCT Representative shall, during the
period that he serves as PCT Representative under this Agreement hold strictly
confidential and not use for personal gain any material, non-public information
of or pertaining to any entity to which any of the PCT Assets relates or of
which he has become aware in his capacity as PCT Representative.
ARTICLE II
ESTABLISHMENT OF THE PCT
2.1 Transfer of Assets to the PCT. Pursuant to the Plan, on the
Effective Date or as soon as practicable thereafter, the Debtors, the
Reorganized Debtors and Core-Mark Newco, as applicable, shall transfer, assign
and deliver to the PCT, on behalf of the Beneficiaries, all right, title and
interest in and to the PCT Assets. The PCT Assets shall consist of all of the
following assets of the Debtors:
(a) trade accounts receivables, including credits for
post-petition deductions, other than the pre-petition and post-petition
trade accounts receivables and post-petition deductions of the
continuing Fleming Convenience business;
8
(b) royalty payments owing to the Debtors related to the
sale of the Fleming wholesale operations;
(c) litigation Claims which consist primarily of
vendor-related receivables, primarily for uncollected promotional
allowances (e.g. rebates, discounts, price reductions), unreimbursed
funds related to military receivables and funds wired in advance for
inventory for which invoices were not processed and inventory not
shipped, but not including vendor deductions incurred in the ordinary
course of business of the Fleming Convenience business which shall
remain with Core-Mark Newco;
(d) vendor-related avoidance actions, especially
preference actions as outlined in section 547 of the Bankruptcy Code;
(e) restricted cash, including the PACA account and the
FSA reserves;
(f) available cash in an amount necessary to fund certain
payments required to be made by the PCT under the Plan and PCT
Agreement; and
(g) any and all other Claims and Causes of Action of the
Debtors, including but not limited to, those outlined in section VI of
the Plan, Exhibit A to the Plan and section VII of the Disclosure
Statement, other than Causes of Action related to the fire loss at the
Denver warehouse occurring in December 2002 which shall be transferred
to Core-Mark Newco and other than Claims and Causes of Action waived,
exculpated or released in accordance with the provisions of the Plan;
(h) any of the remaining assets of the Debtors, other
than the assets of the Reorganized Debtors and the assets of the
continuing Fleming Convenience businesses which are to be transferred
to Core-Mark Newco.
provided however, the PCT Assets do not include: (1) any of the assets of the
continuing Fleming Convenience businesses which are to be transferred to
Core-Mark Newco; (2) the stock of Core-Mark Newco and the stock of the
Reorganized Debtors; and (3) the Professional Fee Escrow Account.
The PCT Assets shall be held by the PCT for the beneficiaries of the
PCT subject to the terms and conditions of the Plan and the PCT Agreement.
2.2 Title to Assets.
(a) The transfer of the PCT Assets to the PCT shall be
made for the benefit of the Holders of all Allowed Claims other than
the Holders of Allowed Administrative Claims of Professionals and in
accordance with the Plan. On the Effective Date, and after the Debtors'
funding of the Professional Fee Escrow Account, the Debtors shall
transfer title to all PCT Assets to the PCT. Upon the transfer of the
PCT Assets to the PCT, the Debtors shall have no interest in or with
respect to such PCT Assets or the PCT.
(b) For all federal income tax purposes, all parties
(including, without limitation, the Debtors, the PCT Representative,
and the Beneficiaries) shall treat the
9
transfer of the PCT Assets by the Debtors to the PCT, as set forth in
this Section 2.2, as a transfer to the Holders of Allowed Claims other
than the Holders of Allowed Administrative Claims of Professionals,
followed by a transfer by such Holders to the PCT. Thus, the
Beneficiaries shall be treated as the grantors and owners of a grantor
trust for federal income tax purposes.
2.3 Assignment and Assumption of Liabilities. In accordance with
the provisions of Section 2.2 hereof, the Debtors hereby transfer and assign,
and the PCT hereby assumes and agrees that all PCT Assets will be transferred to
the PCT and the PCT will assume all liabilities to the Holders of Allowed
Claims, other than Holders of Allowed Administrative Claims of Professionals,
which are to be paid by the PCT pursuant to the terms of the Plan.
2.4 Preferred Interests/Lien in Favor of Class 3(B) Claims. On the
Effective Date, or as soon as practicable thereafter, the PCT shall issue the
Class 3B Preferred Interests in favor of the Holders of Allowed Approved Trade
Creditor Reclamation Lien Claims in the estimated aggregate amount of such
Allowed Claims under the terms and conditions of the Class 3B Preferred Interest
Term Sheet and grant a first priority lien to such Holders on the Post
Confirmation Trust Distributable Assets (the "PCT Distributable Assets"),
entitling each Holder of an Allowed Approved Trade Creditor Reclamation Lien
Claim to its Ratable Proportion of PCT Distributable Assets up to the total
amount of each Holders' Allowed Approved Trade Creditor Reclamation Lien Claim,
in full satisfaction, settlement, release and discharge of each Allowed Approved
Trade Creditor Reclamation Lien Claim, unless such Holder agrees to other
treatment, and subject at the Debtors' option, to reduction for unpaid
post-petition deductions, preference payments and other applicable setoff
rights. As additional security for the Cass 3B Preferred Interests, Core-Mark
Newco shall provide a junior secured guarantee under the terms outlined in the
Class 3B Preferred Interest Term Sheet.
2.5 Preferred Interests/Lien in Favor of Class 5 Claims. To the
extent the Court determines that the Holders of Reclamation Claims that are not
Class 3(B) Claims are entitled to priority treatment, on the Effective Date, or
as soon as practicable thereafter, the PCT, shall issue the Class 5 Preferred
Interests in favor of such Holders in the estimated aggregate amount of their
Allowed Claims under the terms and conditions of the Class 5 Preferred Interests
Term Sheet and grant a second priority lien on the PCT Distributable Assets
entitling each Holder to its Ratable Proportion of the Post Confirmation Trust
Distributable Assets, after all Class 3(B) Claims are paid in full. As
additional security for the Class 5 Preferred Interests in the event the Court
determines that the Holders of Class 5 Claims are entitled to priority
treatment, Core-Mark Newco shall provide a junior secured guarantee under the
terms outlined in the Class 5 Preferred Interest Term Sheet. In the event the
Court denies the Holders of Reclamation Claims that are not Class 3(B) Claims
priority treatment, such Reclamation Claims shall be treated as Class 6 General
Unsecured Claims under the Plan.
2.6 Post Confirmation Trust Distributable Assets. The PCT
Distributable Assets are the PCT Assets, net of expenses, reserves and the
payment of all Allowed Administrative Claims (other than Allowed Administrative
Claims of Professionals), Priority Tax Claims, Class 1(A) Claims, Class 1(B)
Claims, Class 3(A) Claims, Class 3(C) Claims and Class 4 Claims.
10
2.7 Funding of PCT. On the Effective Date or as soon thereafter as
it practicable, the Debtors, the Reorganized Debtors and Core-Mark Newco will
transfer to the PCT on behalf of the Beneficiaries all right, title and interest
in and to certain cash on hand and/or certain proceeds from the Exit Financing
Facility and the Tranche B Loan necessary for the PCT to make the payments
required on Allowed Claims pursuant to the Plan and this Agreement. In addition,
the PCT shall have available for funding the proceeds from the prosecution of
Causes of Action. Core-Mark Newco shall retain the remainder of the cash and/or
proceeds from the Exit Financing Facility and the Tranche B Loan to operate its
businesses.
2.8 Valuation of Assets. As soon as practicable after the
Effective Date, the PCT Representative shall apprise the Beneficiaries of the
value of the PCT Assets by filing such valuation with the Bankruptcy Court in
form and substance reasonably acceptable to the PCT Representative. The
valuation shall be used consistently by all Parties (including the Debtors, the
PCT Representative and the Beneficiaries) for all federal income tax purposes.
2.9 Post-Confirmation Trust Advisory Board.
(a) Board Members. The Post Confirmation Trust Advisory
Board ("the PCT Board") shall be formed on the Effective Date of the
Plan or as soon as practicable thereafter and shall consist of the
following initial four members plus the PCT Representative:
(i) Two members to be designated by Core-Mark
Newco (the "Core-Mark Members"), each of
whom shall (1) be a member of the Board of
Directors of Core-Mark Newco, (2) not be or
have been an officer or employee of the
Debtors or Core-Mark Newco, and (3) not be
the Holder (or an employee, agent or
representative of a Holder) of a Claim
against the Debtors;
(ii) One member to be designated by the members
of the Committee other than the trade
members and the PBGC (the "Bondholder
Member), who shall be a Bondholder (or
representative of a Bondholder) that (i)
received equity securities in Core-Mark
Newco as a result of distributions of such
equity securities to Holders of Class 6
Claims under the Plan, (ii) when designated,
holds in excess of [3.5%] or greater of the
total outstanding equity securities of
Core-Mark Newco, and (iii); thereafter does
not hold less than [2%] of the total
outstanding equity securities of Core-Mark
Newco; and
(iii) One member to be designated by the trade
members of the Committee and the PBGC (the
"Trade Creditor Member"), who, when
designated and thereafter, shall be a Holder
(or a representative of a Holder) (i) of a
Class 6 Claim other than with respect to the
Old Notes, (ii) against which there is not
pending (or against which the Debtors or the
Post-Confirmation Trust do not
11
reasonably contemplate bringing) a Cause of
Action, and (iii) that is not the Holder of
a Class 3(B) or Class 5 Claim.
(b) PCT Board Bylaws. The PCT Board shall adopt its own
bylaws, provided that such bylaws shall contain the following
provisions and other provisions not inconsistent with this Agreement:
(i) If, for any reason, a Core-Mark Member of
the PCT Board resigns from, or ceases to be
qualified to be a member of, the PCT Board
or dies, Core-Mark Newco shall select a
successor to that Core-Mark Member meeting
the requirements in (a)(i) above.
(ii) If for any reason the Bondholder Member
resigns from, or ceases to be qualified to
be a member of, the PCT Board or dies, a new
Bondholder Member meeting the requirements
of (a)(ii) above shall be selected by the
remaining members of the PCT Board as the
successor to the Bondholder Member.
(iii) If for any reason the Trade Creditor Member
resigns from, or ceases to be qualified to
be a member of, the PCT Board or dies, a new
Trade Creditor Member meeting the
requirements of (a)(iii) above shall be
selected by the remaining members of the PCT
Board as the successor to the Trade Creditor
Member.
(c) Requisite Vote. The PCT Representative shall not be
required to obtain Bankruptcy Court approval with respect to any
proposed action or inaction to which the PCT Board has consented. The
PCT Board shall be deemed to have consented to a proposed action or
inaction by the PCT Representative if the majority of the PCT Board
members provide their written consent. With respect to any litigation
directly or indirectly involving any member of the PCT Board, such PCT
Board member(s) shall recuse themselves from any decision affecting
such litigation.
(d) Reporting. The PCT Representative shall submit such
reports as it deems reasonable to the PCT Board, including, without
limitation, reports on the commencement and prosecution of Bankruptcy
Causes of Action and the proceeds of liquidation of the PCT Assets.
(e) Reimbursement. The PCT shall reimburse each member of
the PCT Board for the actual out-of-pocket PCT Board expenses incurred
by such member, including without limitation, necessary travel,
lodging, postage, telephone and facsimile charges upon receipt of
periodic billings. [The PCT shall also reimburse the members of the PCT
Board for the reasonable fees and expenses of one financial advisor and
one legal advisory firm selected by a majority of such members.]
All amounts payable pursuant to the above paragraph (e) shall be paid from the
assets of the PCT. If the cash in the PCT shall be insufficient to effect such
reimbursement, then the PCT Representative is hereby authorized to reduce to
cash that portion of the PCT Assets necessary so as to effect such
reimbursement.
12
(f) Exculpation. From and after the Effective Date, the
PCT Board members and their professionals and representatives (or their
designees) (in such capacities) shall be and hereby are exculpated by
all Entities, including, without limitation, holders of Claims and
other parties in interest, from any and all claims, causes of action
and other assertions of liability arising out of the discharge of the
powers and duties conferred upon such members by the Plan or any Order
of the Bankruptcy Court entered pursuant to or in furtherance of the
Plan, or applicable law or otherwise, except only for actions or
omissions to act only to the extent determined by a Final Order to be
due to their own respective gross negligence or willful misconduct
after the Effective Date. No holder of a Claim or other party in
interest will have or be permitted to pursue any claim or cause of
action against the PCT Board members or their respective professionals
or representatives (in such capacities) for making a decision or
casting a vote in implementing the provisions of the Plan.
ARTICLE III
BENEFICIARIES
3.1 Identification of Beneficiaries. In order to determine the
actual names, addresses and tax identification numbers of the Beneficiaries, the
PCT shall be entitled to conclusively rely on the names, addresses and tax
identification numbers set forth in the Debtors' Schedules or filed proofs of
claim. Each Beneficiary's right to distribution from the PCT, which is dependent
upon such Beneficiary's classification under the Plan, shall be that accorded to
such Beneficiary under the Plan. Each distribution by the PCT to the
Beneficiaries shall be made in accordance with the terms set forth herein.
ARTICLE IV
PURPOSE, AUTHORITY, LIMITATIONS, AND DISTRIBUTIONS
4.1 Purpose of the PCT. The PCT shall be established for the
primary purpose of liquidating its assets, in accordance with Treasury
Regulation Section 301.7701-4(d), with no objective to continue or engage in the
conduct of a trade or business except to the extent reasonably necessary to, and
consistent with, the liquidating purpose of the PCT. Accordingly, the PCT shall,
in an expeditious but orderly manner, liquidate and convert to cash the PCT
Assets, make timely distributions and not unduly prolong the duration of the
PCT. The liquidation of the PCT Assets may be accomplished either through the
prosecution, compromise and settlement, abandonment or dismissal of any or all
claims, rights or causes of action, or otherwise.
13
4.2 Resolution of PCT Assets by the PCT Representative.
(a) The PCT Representative shall be empowered to and, in
his sole discretion (subject to the provisions hereto), may take all
appropriate action with respect to the prosecution, settlement or other
resolution of the PCT Assets. The PCT Representative shall deal with
all collections and settlements within the normal course of his duties.
(b) Notwithstanding anything contained in this Agreement
to the contrary, the PCT may, but is not required to, submit a proposed
settlement to the Bankruptcy Court or such other court of competent
jurisdiction for its approval.
4.3 Books and Records. The PCT shall maintain, in respect of the
Post Confirmation Trust and the Beneficiaries, books and records relating to the
assets and income of the PCT and the payment of expenses of, and liabilities of,
claims against or assumed by, the PCT in such detail and for such period of time
as may be necessary to enable it to make full and proper accounting in respect
thereof in accordance with Article VIII hereof and to comply with applicable
provisions of law. Except as provided in Section 7.1 hereof, nothing in this
Agreement requires the PCT to file any accounting or seek approval of any court
with respect to the administration of the PCT, or as a condition for making any
payment or distribution out of the PCT Assets. Beneficiaries shall have the
right, upon thirty (30) days' prior written notice delivered to the PCT
Representative, to inspect such books and records, provided that, if so
requested, such Beneficiary shall have entered into a confidentiality agreement
satisfactory in form and substance to the PCT Representative.
4.4 Application of PCT Assets. The PCT shall apply all PCT Assets,
and any proceeds therefrom, as follows:
(a) The PCT shall apply all cash constituting PCT Assets
and any proceeds therefrom in the order and reflecting the priorities
set forth below:
FIRST, to pay all the costs and expenses of the PCT including,
without limitation, the compensation of the PCT Representative and
reimbursement of the PCT Representative for any and all costs, expenses
and liabilities incurred by him in connection with the performance of
his duties under this PCT Agreement, as well as the costs of the PCT
Board as set forth herein.
SECOND, to the holders of Allowed Administrative Claims (other
than Allowed Administrative Claims of Professionals), Priority Tax
Claims, Class 1(A) Claims, Class 1(B) Claims, Class 3(A) Claims, Class
3(C) Claims and Class 4 Claims. All distributions to the holders of
Allowed Claims shall be in accordance with the terms of the Plan.
THIRD, to the Holders of Allowed Class 3(B) Claims in
accordance with the terms of the Plan.
FOURTH, to the extent the Court determines that the Holders of
Class 5 Claims are entitled to priority treatment, to the Holders of
Allowed Class 5 Claims in accordance with the terms of the Plan.
14
Notwithstanding anything to the contrary in this Section
4.4(a), prior to making any distribution pursuant to paragraphs SECOND
through FOURTH hereof, the PCT Representative may retain such amounts
(i) as are necessary to meet contingent liabilities and to maintain the
value of the assets of the PCT during liquidation, (ii) to pay
estimated expenses of administration (including any taxes imposed on
the PCT or in respect of the assets of the PCT, and (iii) to satisfy
other liabilities incurred or assumed by the PCT (or to which the
assets are otherwise subject), all for the term of the PCT and in
accordance with this Agreement or the Plan; provided, however, that,
from the net amount distributable, the PCT Representative shall
reserve, in accordance with the provisions of Section 6.1 hereof, such
amounts as would be distributable in respect of Disputed Claims
(treating such Claims for this purpose, as if they were Allowed
Claims).
The PCT hereby grants to the PCT Representative and the PCT
Board a first-priority lien on and security interest in the PCT Assets
which lien shall be superior to those liens granted to the Holders of
Class 3(B) and Claim 5 Claims respectively, as outlined in Sections 2.4
and 2.5 herein, to secure the payment of all amounts owed to, accrued
or reserved on account of the PCT Representative or the PCT Board or to
be retained by the PCT Representative hereunder or otherwise due
hereunder. The PCT agrees to take such actions and execute such
documents as the PCT Representative and the PCT Board deem appropriate
to perfect the PCT Representative's and the PCT Board's liens and
security interests hereunder. The PCT Representative is authorized to
execute and deliver all documents on behalf of the PCT and the PCT
Representative to accomplish the purposes of this Agreement and the
Plan.
(b) Excess Proceeds. In the event that proceeds remain in
the PCT after all of the distributions outlined in Section 4.4(a)
herein have been made by the PCT from liquidation of the PCT Assets and
Core-Mark Newco has been repaid on any obligations it was required to
pay on the guarantees of the Class 3(B) and Class 5 Preferred Interests
(the "Excess Proceeds"), each Holder of an Allowed Class 6 Claim shall
be entitled to a Ratable Proportion of the Excess Proceeds, up to the
amount necessary to pay the Allowed Class 6 Claim of each such Holder
in full. Excess proceeds thereafter shall be transferred to Core-Mark
Newco.
(c) Distribution and Withholding. Subject to the
provisions of Section 4.4( a) hereof, the PCT shall distribute to the
holders of Allowed Claims all net cash income plus all net cash
proceeds from the liquidation of the PCT Assets (including as cash for
this purpose, all cash equivalents) at such time intervals as decided
by the PCT in accordance with the terms of the Plan, provided that the
PCT shall make distributions no less frequently than on an annual
basis, except that the PCT may retain an amount of net cash proceeds or
net cash income reasonably necessary to maintain the value of its
assets or to meet claims and contingent liabilities (including Disputed
Claims).
15
4.5 Compliance with Laws. Any and all distributions of PCT Assets
shall be in compliance with applicable laws, including, but not limited to,
applicable federal and state securities laws.
ARTICLE V
SUCCESSOR PCT REPRESENTATIVE
5.1 The PCT Representative may be removed by the PCT Board
pursuant to an unanimous vote.
5.2 Resignation. The PCT Representative may resign by giving not
less than thirty (30) days prior written notice thereof to the Bankruptcy Court.
5.3 Acceptance of Appointment by Successor PCT Representative. Any
successor PCT Representative shall be chosen by the PCT Board or, if the PCT
Board fails to timely appoint such successor, the Bankruptcy Court. Any
successor PCT Representative appointed hereunder shall execute an instrument
accepting such appointment and shall file such acceptance with the PCT records.
Thereupon, such successor PCT Representative shall, without any further act,
become vested with all the estates, properties, rights, powers, trusts and
duties of his predecessor in the PCT with like effect as if originally named
herein; provided, however, that a removed or resigning PCT Representative shall,
nevertheless, when requested in writing by the successor PCT Representative,
execute and deliver an instrument or instruments conveying and transferring to
such successor PCT Representative under the PCT all the estates, properties,
rights, powers, and trusts of such predecessor PCT Representative.
ARTICLE VI
DISPUTED CLAIM RESERVE
6.1 Disputed Claim Reserve The PCT Representative shall maintain,
in accordance with the PCT Representative's powers and responsibilities under
the Plan and this Agreement, a reserve for any distributable amounts required to
be set aside on account of Disputed Claims. Such amounts (net of any expenses,
including any taxes, of the escrow relating thereto) shall be distributed, as
provided herein and in the Plan, as such Disputed Claims are resolved by Final
Order, and shall be distributable in respect of such Disputed Claims as such
amounts would have been distributable had the Disputed Claims been Allowed
Claims as of the Effective Date. The PCT will pay taxes on the taxable net
income or gain allocable to holders of Disputed Claims on behalf of such
holders, if applicable, and, when such Disputed Claims are ultimately resolved,
holders whose Disputed Claims are determined to be Allowed Claims will receive
distributions from the PCT net of taxes which the PCT had previously paid on
their behalf.
ARTICLE VII
REPORTING
7.1 Tax and Other Reports. As soon as practicable following the
end of each calendar year, and as soon as practicable upon termination of the
PCT, the PCT Representative shall
16
submit to the Bankruptcy Court a written report including: (i) financial
statements of the PCT at the end of such calendar year or period and the
receipts and disbursements of the PCT for such period; (ii) a description of any
action taken by the PCT Representative in the performance of his duties which
materially and adversely affects the PCT and of which notice has not previously
been given to the Beneficiaries, and (iii) to the extent determinable and
subject to Section 7.2(a), a separate statement for each Beneficiary setting
forth the holder's share of items of income, gain, loss, deduction or credit and
instructions to all such holders to report such items on their federal income
tax returns. The PCT Representative shall promptly submit additional reports to
the Bankruptcy Court whenever an adverse material event or change occurs which
effects either the PCT or the Beneficiaries' rights, hereunder.
7.2 Federal Income Tax.
(a) Grantor Trust Status. Subject to definitive guidance
from the IRS or a court of competent jurisdiction to the contrary
(including the issuance of applicable Treasury Regulations, the receipt
by the PCT of a private letter ruling if the PCT so requests one, or
the receipt of an adverse determination by the IRS upon audit if not
contested by the PCT, the PCT Representative shall file returns for the
PCT as a grantor trust pursuant to Treasury Regulation Section
1.671-4(a).
(b) Allocations of PCT Taxable Income. Subject to the
provisions of Section 7.2(a) hereof, allocations of PCT taxable income
shall be determined by reference to the manner in which an amount of
cash equal to such taxable income would be distributed (without regard
to any restriction on distributions described herein) if, immediately
prior to such deemed distribution, the PCT had distributed all of its
other assets (valued for this purpose at their tax book value) to
Beneficiaries (treating any holder of a Disputed Claim, for this
purpose, as a current Beneficiary entitled to distributions), taking
into account all prior and concurrent distributions from the PCT
(including all distributions held in reserve pending the resolution of
Disputed Claims). Similarly, taxable losses of the PCT will be
allocated by reference to the manner in which an economic loss would be
borne immediately after a liquidating distribution of the remaining PCT
Assets. The tax book value of the PCT Assets for this purpose shall
equal their fair market value on the Effective Date or, if later, the
date such assets were acquired by the PCT, adjusted in either case in
accordance with tax accounting principles prescribed by the IRC, the
regulations and other applicable administrative and judicial
authorities and pronouncements.
7.3 Other. The PCT Representative shall also file (or cause to be
filed) any other statements, returns or disclosures relating to the PCT, that
are required by any governmental unit.
ARTICLE VIII
TRANSFER OF BENEFICIARY'S INTERESTS
8.1 Transfer of Beneficial Interests. The interests of the
Beneficiaries in the PCT, which are reflected only on the records of the PCT
maintained by the PCT Representative, are not negotiable and shall be
transferable after written notice to the PCT Representative only: (a)
17
pursuant to applicable laws of descent and distribution (in the case of a
deceased individual Beneficiary); or (b) by operation of law. The PCT
Representative shall not be required to record any transfer in favor of any
transferee which, in the sole discretion of the PCT Representative, is or might
be construed to be ambiguous or to create uncertainty as to the holder of the
interest in the PCT. Until a transfer is in fact recorded on the books and
records maintained by the PCT Representative for the purpose of identifying
Beneficiaries, the PCT Representative, whether or not in receipt of documents of
transfer or other documents relating to the transfer, may nevertheless make
distributions and send communications to Beneficiaries, as though it has no
notice of any such transfer, and in so doing the PCT Representative shall be
fully protected and incur no liability to any purported transferee or any other
Entity.
ARTICLE IX
TERMINATION OF PCT
9.1 Termination of PCT. The PCT will terminate no later than the
sixth (6th) anniversary of the Effective Date; provided, however, on or prior to
the date six (6) months prior to such termination, the Bankruptcy Court, upon
motion by a party in interest, may extend the term of the PCT for a finite
period if it is necessary to the liquidating purpose thereof. Multiple
extensions can be obtained so long as Bankruptcy Court approval is obtained at
least six (6) months prior to the expiration of each extended term; provided,
however, that the PCT receives a favorable opinion of counselor ruling from the
IRS stating that any further extension would not adversely affect the status of
the trust as a grantor trust for federal income tax purposes. The PCT
Representative shall not unduly prolong the duration of the PCT and shall at all
times endeavor to resolve, settle or otherwise dispose of any claims that
constitute PCT Assets and to effect the distribution of the PCT Assets to the
Beneficiaries in accordance with the terms hereof and terminate the PCT as soon
as practicable. Prior to and upon termination of the PCT, the PCT Assets will be
distributed to the Beneficiaries in accordance with their distribution rights
under the Plan, subject to the provisions set forth herein. If any distributions
of the PCT are not duly claimed, such distributions will be disposed of in
accordance with the Plan. Notwithstanding anything contained herein to the
contrary, if the value of the PCT Assets is less than $250,000 at any given
time, the PCT Representative with the consent of the PCT Board may contribute
such assets to the charity of his choosing.
ARTICLE X
AMENDMENT AND WAIVER
10.1 Amendment and Waiver. Any substantive provision of this
Agreement may be amended or waived with the approval of the Bankruptcy Court;
provided, however, that no change shall be made to this Agreement that would
adversely affect the federal income tax status of the PCT as a "grantor trust"
(in accordance with Section 7.2 hereof), if applicable or, unless agreed to in
writing by the affected PCT Representative. Technical amendments to this
Agreement may be made, as necessary, to clarify this Agreement or enable the PCT
to effectuate the terms of this Agreement with the consent of the PCT
Representative.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Intention of Parties to Establish Grantor Trust. This
Agreement is intended to create a grantor trust for United States federal income
tax purposes and, to the extent provided by law, shall be governed and construed
in all respects as a grantor trust.
11.2 Preservation of Privilege. In connection with the rights,
claims, and causes of action that constitute the PCT Assets, any attorney-client
privilege, work-product privilege, or other privilege or immunity attaching to
any documents or communications (whether written or oral) transferred to the
PCT, shall vest in the PCT and its representatives, and the Debtors and the PCT
Representative are authorized to take all necessary actions to effectuate the
transfer of such privileges. For the avoidance of doubt, neither the PCT
Representative nor the PCT shall be treated as a successor for any purpose to
the Debtors or their estates.
11.3 Cooperation. The Debtors shall provide the PCT Representative
with copies of such of their books and records as the PCT Representative shall
reasonably require for the purpose of performing his duties and exercising his
powers hereunder.
11.4 Prevailing Party. If the PCT Representative or the PCT, as the
case may be, is the prevailing party in a dispute regarding the provisions of
this Agreement or the enforcement thereof, the PCT Representative or the PCT, as
the case may be, shall be entitled to collect any and all costs, expenses and
fees, including attorneys' fees, from the non-prevailing party incurred in
connection with such dispute or enforcement action.
11.5 Laws as to Construction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to rules governing the conflict of Law.
11.6 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be finally determined by
a court of competent jurisdiction to be invalid or unenforceable to any extent,
the remainder of this Agreement, or the application of such provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and such provision of this
Agreement shall be valid and enforced to the fullest extent permitted by law.
11.7 Notices. Any notice or other communication hereunder shall be
in writing and shall be deemed to have been sufficiently given, for all
purposes, if deposited, postage prepaid, in a post office or letter box
addressed to the person for whom such notice is intended at such address as set
forth below or such other address as filed with the Bankruptcy Court:
19
If to the Debtors, the PCT or the PCT Representative:
Fleming Post Confirmation Trust
(insert address)
Attention: PCT Representative
Fax:
Telephonic Confirmation:
With a copy to:
KIRKLAND & ELLIS LLP
200 East Randolph Drive
Chicago, IL 60601
Attention: James H.M. Sprayregen
Fax: (312) 861-2200
Telephonic Confirmation: (312) 861-2000
-and
PACHULSKI, STANG, ZIEHL, YOUNG, JONES & WEINTRAUB PC
919 North Market St., 16th Floor
P.O. Box 8705
Wilmington, DE 19899-8705
Attention: Laura Davis Jones
Fax: (302) 652-4400
Telephonic Confirmation: (302) 652-4100
11.8 Notices to a Beneficiary. Any notice or other communication
hereunder shall be in writing and shall be deemed to have been sufficiently
given, for all purposes, if deposited, postage prepaid, in a post office or
letter box addressed to the person for whom such notice is intended to the name
and address set forth on the Debtors' Schedules or such Beneficiary's proof of
claim, such other notice filed with the Bankruptcy Court and the PCT or such
other means reasonably calculated to apprise the Beneficiary.
11.9 Headings. The section headings contained in this PCT Agreement
are solely for convenience of reference and shall not affect the meaning or
interpretation of this Agreement or of any term or provision hereof.
20
IN WITNESS WHEREOF, the parties hereto have either executed and
acknowledged this Agreement or caused it to be executed and acknowledged on
their behalf by their duly authorized officers as of the date first above
written.
Fleming Companies, Inc.
By:_____________________________
Official Committee of Unsecured Creditors
By:______________________________
Post Confirmation Representative
By:______________________________
21
EXHIBIT 10
INDICATIVE TERM SHEET
SECURED PREFERRED INTEREST
WITH JUNIOR SECURED GUARANTEE
MARCH 2004
ISSUER The Post Confirmation Trust.
PREFERRED INTERESTS Secured Preferred Interests issued by the
Post Confirmation Trust (the "Class 3(B)
Preferred Interests").
PREFERRED INTEREST HOLDERS / Approved Trade Creditor Reclamation Lien
BENEFICIARIES Claims (Class 3(B)).
SECURITY The Class 3(B) Preferred Interests shall
be secured by a lien on substantially all
assets of the Post Confirmation Trust.
GUARANTOR Core-Mark Newco, as reorganized under
Chapter 11 of the U.S. Bankruptcy Code,
shall be the provider of a junior secured
guarantee (the "JSG").
PRIORITY The Class 3(B) Preferred Interests shall
be junior to all Allowed Administrative
Claims, Priority Tax Claims, Class 1(A)
Claims, Class 1(B) Claims, Class 3(A)
Claims, Class 3(C) Claims and Class 4
Claims (collectively, the "Senior
Claims"), but senior to Valid Reclamation
Claims that are not Class 3(B) Claims
(i.e., which are Class 5 Claims).
MATURITY The Class 3(B) Preferred Interests shall
mature four (4) years from the date of
issuance (the "Maturity Date").
MANDATORY PREPAYMENT Semi-annually, the Class 3(B) Preferred
Interests shall be prepaid with the net
proceeds of cash receipts of the Post
Confirmation Trust to the extent that the
Post Confirmation Trust's cash balances
are in excess of the sum of (i)
outstanding Senior Claims, (ii) accrued
expenses and reserves and (iii)
$10,000,000 (such excess, "Excess Cash
Flow").
OPTIONAL EARLY PREPAYMENT The Class 3(B) Preferred Interests may be
repaid by the Post Confirmation Trust or
Core-Mark Newco at any time without
premium or penalty.
INTEREST RATE The Class 3(B) Preferred Interests shall
bear interest at a per annum rate equal
to Prime plus 1% on all outstanding
principal amounts, payable quarterly in
arrears to the extent that there is
available Excess Cash Flow.
GUARANTEE TERMS To the extent that the Class 3(B)
Preferred Interests are not paid within
ten (10) days of the Maturity Date, the
holders of the Class 3(B) Preferred
Interests shall have the right to demand
payment of the Class 3(B) Preferred
Interests from Core-Mark Newco, and
Core-Mark Newco shall be obligated to
repay the Class 3(B) Preferred Interests
to the extent that they remain unpaid.
Page 1
GUARANTEE SECURITY The JSG shall be secured by a junior
security interest in and liens upon
substantially all present and future
assets of Core-Mark Newco, including
accounts receivable, general intangibles,
inventory, equipment, fixtures and real
property, and products and proceeds
thereof (which collateral package shall
be the same as that securing Core-Mark
Newco's senior secured Exit Financing
Facility (the "Exit Facility") and the
Tranche B notes (the "Tranche B Notes")).
GUARANTEE PRIORITY The JSG will be subordinate only to the
Exit Facility and the Tranche B Notes.
INTERCREDITOR ARRANGEMENTS The relative rights of the JSG
beneficiaries versus the Tranche B Note
holders shall be substantially similar,
in all material respects, to the relative
rights of the Tranche B Note holders
versus the Exit Facility creditors.
ADDITIONAL CONDITIONS The tax and accounting treatment of the
Class 3(B) Preferred Interests shall be
acceptable to the Post
Confirmation Trust.
Page 2
EXHIBIT 11
INDICATIVE TERM SHEET
JUNIOR SECURED PREFERRED INTEREST
WITH JUNIOR SECURED GUARANTEE
MARCH 2004
ISSUER The Post Confirmation Trust.
PREFERRED INTERESTS Junior Secured Preferred Interests
issued by the Post Confirmation Trust
(the "Class 5 Preferred Interests").
PREFERRED INTEREST HOLDERS / Valid Reclamation Claims that are not
BENEFICIARIES Class 3(B) Claims (i.e., which are
Class 5 Claims).
SECURITY The Class 5 Preferred Interests shall be
secured by a junior lien on
substantially all assets of the Post
Confirmation Trust.
GUARANTOR Core-Mark Newco, as reorganized under
Chapter 11 of the U.S. Bankruptcy Code,
shall be the provider of a junior
secured guarantee (the "JG").
PRIORITY The Class 5 Preferred Interests shall be
junior to all Allowed Administrative
Claims, Priority Tax Claims, Class 1(A)
Claims, Class 1(B) Claims, Class 3(A)
Claims, Class 3(C) Claims, Class 4
Claims and Approved Trade Creditor
Reclamation Lien Claims (Class 3(B))
(collectively, the "Senior Claims").
MATURITY The Class 5 Preferred Interests shall
mature ten (10) years from the date of
issuance (the "Maturity Date").
MANDATORY PREPAYMENT After the payment in full of all
outstanding secured preferred interests
issued to the holders of Approved Trade
Creditor Reclamation Lien Claims (Class
3(B)) (the "Class 3(B) Preferred
Interests"), semi-annually, the Class 5
Preferred Interests shall be prepaid
with the net proceeds of cash receipts
of the Post Confirmation Trust to the
extent that the Post Confirmation
Trust's cash balances are in excess of
the sum of (i) outstanding Senior
Claims, (ii) accrued expenses and
reserves and (iii) $10,000,000 (such
excess, "Excess Cash Flow").
AMORTIZATION If any Class 5 Preferred Interests are
outstanding four (4) years after the
date of issuance, the outstanding Class
5 Preferred Interests shall be repaid as
follows (each such payment, an
"Amortization Payment"):
-- With respect to the fifth year
following the date of issuance, in an
amount equal to one-sixth of the
outstanding amount of the Class 5
Preferred Interests, payable in two
equal semi-annual installments.
-- With respect to the sixth year
following the date of issuance, in an
amount equal to one-fifth of the
outstanding amount of the Class 5
Preferred Interests, payable in two
equal semi-annual installments.
-- With respect to the seventh year
following the date of issuance, in an
amount equal to one-quarter of the
outstanding amount of the
Page 1
Class 5 Preferred Interests, payable in
two equal semi-annual installments.
-- With respect to the eighth year
following the date of issuance, in an
amount equal to one-third of the
outstanding amount of the Class 5
Preferred Interests, payable in two
equal semi-annual installments.
-- With respect to the ninth year
following the date of issuance, in an
amount equal to one-half of the
outstanding amount of the Class 5
Preferred Interests, payable in two
equal semi-annual installments.
-- Six months prior to the Maturity
Date, in an amount equal to one-half of
the outstanding amount of the Class 5
Preferred Interests.
-- On the Maturity Date, in an amount
equal to the outstanding amount of the
Class 5 Preferred Interests.
OPTIONAL EARLY PREPAYMENT The Class 5 Preferred Interests may be
repaid by the Post Confirmation Trust or
Core-Mark Newco at any time without
premium or penalty.
INTEREST RATE The Class 5 Preferred Interests shall
bear interest at a per annum rate equal
to Prime plus 1% on all outstanding
principal amounts, payable with Excess
Cash Flow only after the payment in full
of all outstanding Class 3(B) Preferred
Interests.
GUARANTEE TERMS To the extent that any Amortization
Payment is not paid within ten (10) days
of the date due, the holders of the
Class 5 Preferred Interests shall have
the right to demand payment of such
Amortization Payment from Core-Mark
Newco, and Core-Mark Newco shall be
obligated to pay such Amortization
Payment to the extent that it remains
unpaid.
GUARANTEE SECURITY The JG shall be secured by a junior
security interest in and liens upon
substantially all present and future
assets of Core-Mark Newco, including
accounts receivable, general
intangibles, inventory, equipment,
fixtures and real property, and products
and proceeds thereof (which collateral
package shall be the same as that
securing the guarantee by Core-Mark
Newco (the "JSG") of the Class 3(B)
Preferred Interests).
GUARANTEE PRIORITY The JG will be subordinate only to Core-
Mark Newco's senior secured Exit
Financing Facility, the Tranche B notes
(the "Tranche B Notes") and the JSG.
INTERCREDITOR ARRANGEMENTS The relative rights of the JG
beneficiaries versus the JSG
beneficiaries shall be substantially
similar, in all material respects, to
the relative rights of the JSG
beneficiaries versus the Tranche B Note
holders.
ADDITIONAL The tax and accounting treatment of the
CONDITIONS Class 5 Preferred Interests shall be
acceptable to the Post Confirmation
Trust.
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