Exhibit 99.1
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)
)
THIRD AMENDED AND REVISED DISCLOSURE STATEMENT IN SUPPORT OF DEBTORS' AND
OFFICIAL COMMITTEE OF UNSECURED CREDITORS' THIRD AMENDED AND REVISED JOINT
REORGANIZATION OF FLEMING COMPANIES, INC. AND ITS FILING PLAN OF SUBSIDIARIES
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
IMPORTANT DATES
- - Date by which Ballots must be received: July 2, 2004
- - Date by which objections to Confirmation of the Plan must be filed and
served: July 2, 2004
- - Hearing on Confirmation of the Plan: July 26, 2004
- - First Substantial Contribution Claims Bar Date: June 28, 2004
KIRKLAND & ELLIS LLP PACHULSKI, STANG, ZIEHL, YOUNG,
James H. M. Sprayregen, P.C. JONES & WEINTRAUB P.C.
(ARDC No. 6190206)
Richard L. Wynne (CA Bar- Laura Davis Jones (Bar No. 2436)
No. 120349)
Janet S. Baer (ARDC No.- Ira D. Kharasch (CA Bar No. 109084)
6182994)
Geoffrey A. Richards Robert M. Saunders (CA Bar No. 226172)
(ARDC No. 6230120)
Shirley S. Cho Scotta E. McFarland (Bar No. 4184)
(CA Bar No. 192616)
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: May 25, 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.
THIS DISCLOSURE STATEMENT SUMMARIZES CERTAIN PROVISIONS OF THE DEBTORS'
AND OFFICIAL COMMITTEE OF UNSECURED CREDITORS' THIRD AMENDED AND REVISED 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.
ii
ALL CAPITALIZED TERMS IN THIS DISCLOSURE STATEMENT THAT ARE NOT OTHERWISE
DEFINED HEREIN HAVE THE MEANINGS GIVEN TO THEM IN THE PLAN.
iii
TABLE OF CONTENTS
I. SUMMARY...................................................................................... 1
A. Plan Overview....................................................................... 2
1. Purpose - Reorganization................................................... 2
2. Substantive Consolidation.................................................. 2
3. Creation of Core-Mark Newco, the PCT and the RCT........................... 2
4. Summary of Plan Treatment.................................................. 3
5. Executory Contracts and Unexpired Leases................................... 10
B. Voting and Confirmation............................................................. 11
C. Risk Factors........................................................................ 11
D. Disclaimer.......................................................................... 11
1. Read This Disclosure Statement And The Plan Carefully...................... 11
II. RECOMMENDATIONS.............................................................................. 13
A. The Debtors, the Committee, and the OCRC Strongly Recommend That You
Vote In Favor Of The Plan.................................................................... 13
III. VOTING ON AND CONFIRMATION OF THE PLAN....................................................... 13
A. Deadline for Voting For or Against the Plan......................................... 13
B. Confirmation Hearing For The Plan................................................... 14
C. Any Objections To Confirmation Of The Plan.......................................... 14
D. Questions About The Disclosure Statement, Plan Or Ballots........................... 15
IV. ORGANIZATION AND ACTIVITIES OF THE DEBTORS................................................... 17
A. Operations.......................................................................... 17
B. Debt Structure...................................................................... 17
1. Debt....................................................................... 17
2. Secured Debt............................................................... 17
3. Unsecured Debt............................................................. 18
4. Trade Debt................................................................. 18
5. Potential Environmental Liabilities........................................ 19
C. Pre-Petition Operational Restructuring Efforts...................................... 19
V. THE CASES.................................................................................... 20
A. Events Leading to the Chapter 11 Cases.................................................... 20
B. The Auction and Sale Process For the Wholesale Distribution Assets and Plans for
Fleming Convenience Assets................................................................... 20
1. Auction and Sale Process for Wholesale Distribution Assets................. 20
2. Operations of Fleming Convenience Businesses and Plans for Assets.......... 21
C. Significant Case Events............................................................. 21
1. Summary of Significant Motions............................................. 21
2. Retention of Professionals................................................. 25
3. Appointment of Committee, OCRC and Retention of Professionals.............. 25
4. Asset Sales and Other Dispositions......................................... 26
5. Debtor in Possession Operating Reports..................................... 28
6. Pending Litigation And The Automatic Stay.................................. 29
7. Claims Bar Date and Review Process......................................... 41
VI. SUMMARY OF THE PLAN OF REORGANIZATION........................................................ 43
A. Overview of Chapter 11.............................................................. 43
B. Generally........................................................................... 44
1. Structure of Reorganizing Plan................................................... 44
2. Creation of Core-Mark Newco...................................................... 44
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3. Exit Financing Facility, Obtaining Cash for Plan Distributions and Transfers
of Funds Among the Debtors and the Reorganized Debtors..................... 45
4. Tranche B Loan............................................................. 45
5. Sale of Assets............................................................. 45
C. Classification And Treatment Of Claims And Equity Interests......................... 46
1. Summary of Unclassified Claims............................................. 46
2. Classification and Treatment of Classified Claims.......................... 48
D. Additional Provisions Governing Reclamation Claims.................................. 53
E. Additional Explanation of Provisions Concerning Senior Note Claims and Senior
Subordinated Note Claims............................................................ 53
F. Special Provision Governing Unimpaired Claims....................................... 54
G. Acceptance And Rejection Of The Plan................................................ 54
1. Voting Classes............................................................. 54
2. Acceptance by Impaired Classes............................................. 54
3. Presumed Acceptance of Plan................................................ 54
4. Presumed Rejection of Plan................................................. 54
5. Non-Consensual Confirmation................................................ 54
H. Plan Implementation................................................................. 54
1. Substantive Consolidation.................................................. 54
2. Continued Corporate Existence and Vesting of Assets in the
Reorganized Debtors........................................................ 59
3. Cancellation of Old Notes, Old Stock and Other Equity Interests............ 59
4. Issuance of New Securities; Execution of Related Documents................. 59
5. Restructuring Transactions................................................. 59
6. Corporate Governance, Directors and Officers, and Corporate Action......... 60
7. Reclamation Claims......................................................... 61
8. The PCT.................................................................... 63
9. RCT........................................................................ 66
I. Creation of Professional Fee Escrow Account......................................... 68
J. Executory Contracts................................................................. 68
1. Assumption/Rejection of Executory Contracts and Unexpired Leases........... 68
2. Claims Based on Rejection of Executory Contracts or Unexpired Leases....... 68
3. Cure of Defaults for Executory Contracts and Unexpired Leases Assumed...... 68
4. Indemnification of Directors, Officers and Employees....................... 69
5. Compensation and Benefit Programs.......................................... 69
6. Insured Claims............................................................. 69
K. Distributions....................................................................... 75
1. Distributions for Claims Allowed as of the Effective Date.................. 75
2. Distributions by Core-Mark Newco, the PCT and the RCT...................... 75
3. Interest on Claims......................................................... 75
4. Compliance with Tax Requirements/Allocations............................... 75
L. Delivery of Distributions and Undeliverable or Unclaimed Distributions.............. 76
1. Delivery of Distributions in General....................................... 76
2. Undeliverable Distributions................................................ 76
3. Distribution Record Date................................................... 76
4. Timing and Calculation of Amounts to be Distributed........................ 77
5. Minimum Distribution....................................................... 77
6. Setoffs.................................................................... 77
7. Old Notes.................................................................. 77
8. Failure to Surrender Canceled Instruments.................................. 78
9. Lost, Stolen, Mutilated or Destroyed Debt Securities....................... 78
10. Share Reserve.............................................................. 78
11. Settlement of Claims and Controversies..................................... 78
M. Resolution of Disputed Claims....................................................... 78
1. Prosecution of Objections to Claims........................................ 78
2. Estimation of Claims....................................................... 78
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3. Payments and Distributions on Disputed Claims.............................. 79
4. Allowance of Claims........................................................ 79
5. Controversy Concerning Impairment.......................................... 79
N. Retention Of Jurisdiction........................................................... 79
O. Release, Injunctive And Related Provisions.......................................... 80
1. Subordination.............................................................. 80
2. MUTUAL RELEASES BY RELEASEES............................................... 81
3. RELEASES BY HOLDERS OF CLAIMS.............................................. 81
4. INDEMNIFICATION............................................................ 82
5. EXCULPATION................................................................ 82
6. DISCHARGE OF CLAIMS AND TERMINATION OF EQUITY INTERESTS.................... 82
7. INJUNCTION................................................................. 82
8. Police and Regulatory Powers............................................... 83
9. Impact of Plan on Pending Litigation; Pension Plans........................ 83
10. Consideration for Releases, Indemnification and Exculpation................ 85
P. Special Provisions Regarding Reclamation Claims..................................... 86
1. TLV Reclamation Claims..................................................... 86
2. Non-TLV Reclamation Claims................................................. 86
3. General Unsecured Claims of Reclamation Creditors.......................... 86
4. Expected Reconciliation Rules of RCT....................................... 87
5. Surplus Contingency from RCT............................................... 87
Q. Conditions Precedent to Plan Consummation........................................... 88
R. Conditions Precedent to Occurrence of the Effective Date............................ 88
S. Waiver of Conditions................................................................ 89
T. Effect of Non-occurrence of Conditions to Occurrence of the Effective Date.......... 89
U. Severability Of Plan Provisions..................................................... 89
V. Miscellaneous Provisions............................................................ 89
1. Effectuating Documents, Further Transactions and Corporation Action........ 89
2. Dissolution of Committee................................................... 89
3. Payment of Statutory Fees.................................................. 89
4. Modification of Plan....................................................... 90
5. Revocation of Plan......................................................... 90
6. Environmental Liabilities.................................................. 90
7. Successors and Assigns..................................................... 90
8. Reservation of Rights...................................................... 90
9. Section 1146 Exemption..................................................... 91
10. Further Assurances......................................................... 91
11. Service of Documents....................................................... 91
12. Filing of Additional Documents............................................. 91
13. Transactions on Business Days.............................................. 92
14. Post-Effective Date Fees and Expenses...................................... 92
15. Conflicts.................................................................. 92
16. Term of Injunctions or Stays............................................... 92
17. Entire Agreement........................................................... 92
18. Closing of the Chapter 11 Cases............................................ 92
VII. DEBTORS' RETAINED CAUSES OF ACTION........................................................... 93
A. Maintenance of Causes of Action..................................................... 93
B. Preservation of Causes of Action.................................................... 93
C. Preservation of All Causes of Action Not Expressly Settled or Released.............. 96
VIII. FEASIBILITY OF THE PLAN AND THE BEST INTERESTS TEST.......................................... 97
A. Feasibility of the Plan............................................................. 97
B. Best Interests Test................................................................. 100
1. Generally.................................................................. 100
2. Debtors' Best Interests Test............................................... 100
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C. Estimated Valuation of the Reorganized Debtors.......................................... 101
D. Confirmation Without Acceptance by All Impaired Classes: The `Cramdown' Alternative..... 104
IX. IMPORTANT CONSIDERATIONS AND RISK FACTORS........................................................ 106
A. The Debtors Have No Duty To Update...................................................... 106
B. No Representations Outside The Disclosure Statement Are Authorized...................... 106
C. Information Presented Is Based On The Debtors' Books And Records, And No Audit Was
Performed............................................................................... 106
D. All Information Was Provided by Debtors And Was Relied Upon By Professionals............ 106
E. Projections And Other Forward Looking Statements Are Not Assured, And Actual Results
Will Vary............................................................................... 106
1. Claims Could Be More Than Projected............................................ 106
2. Projections.................................................................... 106
F. This Disclosure Statement Was Not Approved By The Securities And Exchange Commission.... 107
G. No Legal Or Tax Advice Is Provided To You By This Disclosure Statement.................. 107
H. No Admissions Made...................................................................... 107
I. No Waiver Of Right To Object Or Right To Recover Transfers And Estate Assets............ 107
1. Business Factors and Competitive Conditions.................................... 107
2. Access to Financing and Trade Terms............................................ 108
3. Market for New Securities...................................................... 108
4. Impact of Interest Rates....................................................... 109
J. Bankruptcy Law Risks and Considerations................................................. 109
1. Confirmation of the Plan is Not Assured........................................ 109
2. The Plan May Be Confirmed Without the Approval of All Creditors Through
So-Called "Cramdown"........................................................... 109
3. The Effective Date Might Be Delayed or Never Occur............................. 109
4. The Projected Value of Estate Assets Might Not Be Realized..................... 109
5. Allowed Claims in the Various Classes May Exceed Projections................... 110
K. Tax Considerations...................................................................... 110
X. EFFECT OF CONFIRMATION........................................................................... 111
A. Binding Effect of Confirmation.......................................................... 111
B. Vesting Of Assets Free And Clear Of Liens, Claims And Interests......................... 111
C. Good Faith.............................................................................. 111
D. Discharge of Claims..................................................................... 111
E. Judicial Determination of Discharge..................................................... 111
XI. CERTAIN SECURITIES LAW CONSIDERATIONS............................................................ 112
A. Exemptions from Registration under Securities Act....................................... 112
B. Applicability Of Certain Canadian Securities Laws....................................... 112
XII. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN......................................... 114
A. Certain U.S. Federal Income Tax Consequences To U.S. Holders Of Claims And Equity Interests... 114
1. Consequences to Holders of Prepetition Lenders' Secured Claims................. 115
2. Consequences to Holders of Other Secured Claims that are not Class
1(B) Claims, DSD Trust Claims, PACA/PASA Claims and Convenience Claims......... 115
3. Consequences to Holders of TLV Reclamation Claims.............................. 115
4. Consequences to Holders of Non-TLV Reclamation Claims.......................... 115
5. Consequences to Holders of General Unsecured Claims (Other
Than Convenience Claims and Senior Subordinated Note Claims)................... 116
6. Consequences to Holders of Senior Subordinated Note Claims..................... 117
7. Consequences to Holders of Equity Interests.................................... 119
8. Receipt of Interests in PCT and in the RCT..................................... 119
9. Treatment of Subsequent Distributions on New Common Stock...................... 119
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10. Accrued Interest, Market Discount and Capital Losses....................... 121
B. Certain U.S. Federal Income Tax Consequences to Non-U.S. Holders of Claims.......... 122
C. Certain U.S. Federal Income Tax Consequences To Reorganized Debtors................. 122
1. Transfer of Business Assets................................................ 122
2. Cancellation of Indebtedness and Reduction of Tax Attributes............... 123
3. Limitation of Net Operating Loss Carryovers and Other Tax Attributes....... 124
D. Backup Withholding.................................................................. 124
XIII. CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF CONSUMMATION OF THE PLAN................. 126
A. General............................................................................. 126
B. Settlement of Debt.................................................................. 126
C. Resident Holders.................................................................... 126
1. is or is deemed to be a resident of Canada; and............................ 126
2. deals at arm's length and is not affiliated with the Debtors (a "Resident
Holder")................................................................... 127
D. Non-Resident Holders................................................................ 127
1. is not and is not deemed to be a resident of Canada;....................... 127
2. deals at arm's length and is not affiliated with the Debtors; and.......... 127
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")................. 127
E. Interests in PCT and the RCT........................................................ 127
1. Resident Holders........................................................... 127
2. Non-Resident Holders....................................................... 128
XIV. ALTERNATIVES TO PLAN......................................................................... 129
A. Liquidation Under Chapter 7......................................................... 129
B. Dismissal........................................................................... 129
C. Alternative Plan.................................................................... 129
XV. CONCLUSION................................................................................... 130
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 -- PCT Financial Projections
3D -- RCT Financial Projections
Exhibit 4 Best Interests Analysis
Exhibit 5 None
Exhibit 6 CUSIP Numbers of Old Notes
Exhibit 7 Exit Facility Commitment Letter
Exhibit 8 Tranche B Put Agreement
Exhibit 9 Draft PCT Agreement
Exhibit 10 None Exhibit 11 None
Exhibit 12 Draft RCT Agreement
Exhibit 13 Revised Term Sheet
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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 Third Amended and Revised 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
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.G.1
hereof.
3. Creation of Core-Mark Newco, the PCT and the RCT
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 (i) the PCT, 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.H.8 herein and (ii) the RCT which will have certain
responsibilities and rights with respect to Reclamation Creditors and otherwise
as outlined in more detail in Section VI.H.9. herein.
2
4. Summary of Plan Treatment
UNCLASSIFIED
CLAIMS PLAN TREATMENT
------ --------------
Administrative Subject to the provisions of sections 330(a) and 331 of
Claims:(2) 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
PCT or RCT, as applicable 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, the Reorganized Debtors, the PCT, the RCT and their
successors, their assigns or their property.(3) 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, PCT
- ----------------------------
(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) Those professionals not retained by the Debtors, the Committee or the OCRC
under section 327 or 363 of the Bankruptcy Code filing a Claim for fees
alleged to be beneficial or necessary towards completion of the Chapter 11
Cases as outlined in section 330 of the Bankruptcy Code, or any other
party making a Claim for fees for allegedly making a substantial
contribution under section 503(b) of the Bankruptcy Code, are bound by the
First and Second Substantial Contribution Claims' Bar Dates
3
UNCLASSIFIED
CLAIMS PLAN TREATMENT
------ --------------
Representative and the RCT 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 PCT. 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. Any liability for Professional Fees
above the amount of the Professional Fee Escrow Account,
including amounts awarded to a professional not retained
by the Debtors, the Committee or the OCRC under sections
327 or 363 of the Bankruptcy Code for services alleged
to be necessary or beneficial toward completion of the
case as outlined in section 330 of the Bankruptcy Code
or to any other party in allegedly making a substantial
contribution under section 503(b) of the Bankruptcy Code
or otherwise, shall be a liability of the PCT and shall
be paid by the PCT as an Administrative Claim.(4)
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(5), 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
- -----------------------
(4) The Professional Fee Escrow Account shall be held and administered by the
PCT, and any excess amount remaining in the Professional Fee Escrow
Account after all appropriate Professional Fee Claims have been paid shall
be retained by the PCT.
(5) The financial projections attached as Exhibit 3 assume an interest rate of
5%.
4
UNCLASSIFIED
CLAIMS PLAN TREATMENT
------ --------------
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(A) Claim and shall be paid in accordance with
section III.B.9. 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.4. 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.(6)
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.
PLAN TREATMENT
CLASS CLAIM OF CLASS
----- ----- --------
1(A) Other Priority In full satisfaction, settlement, release, and
Non-Tax Claims discharge of, and in exchange for, Non-Tax
Claims 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. 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) Priority Property In full satisfaction, settlement, release, and
Tax Claims discharge of, and in exchange for, Tax Claims
each Allowed Priority on or prior to
Property Tax Claim that is due and payable
the Effective Date, commencing on the
Effective Date or as soon as practicable
thereafter, the Holder of such Allowed
Priority 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 practic-
Lender's Secured able thereafter unless such Holder Lenders'
Secured consents to other treatment, each
Holder of an Allowed Pre-Petition Lenders'
- -----------------
(6) 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.
5
PLAN TREATMENT
CLASS CLAIM OF CLASS
----- ----- --------
Claims
Secured Claim shall be paid in full in Cash
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. The Exit
Financing Facility and the Tranche B Loan
shall not be secured by the assets
transferred to the PCT or the RCT. 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 practica-
Claims that are ble thereafter, each Holder of an that are not
not Class 1(B) Class Allowed Other Secured Claim that is not
Claims a Class 1(B) Claim (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.
3(B) TLV Reclamation On the Effective Date, or as soon as
claims practicable thereafter, the RCT, shall issue
Claims the Class 3B Preferred Interests in
favor of the Holders of Allowed TLV
Reclamation Claims in the estimated aggregate
amount of such Allowed Claims under the terms
and conditions outlined in the Revised 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 RCT Assets entitling each
Holder of an Allowed TLV Reclamation Claim to
its Ratable Proportion of the RCT Assets up to
the total amount of each Holder's Allowed TLV
Reclamation Claim, in full satisfaction,
settlement, release and discharge of each
Allowed TLV Reclamation Claim against the RCT
Assets. Reconciliation of Class 3(B) Claims
shall be done in accordance with section
III.C. of the Plan. The Class 3B Preferred
Interests shall earn interest which shall
begin to accrue 60 days after the Effective
Date at the Wall Street Journal listed prime
rate.
As additional security for the Class 3B
Preferred Interests, Core-Mark Newco shall
provide a junior secured guarantee under the
terms outlined in the Revised Term Sheet.
THE CLASS IS IMPAIRED AND ENTITLED TO VOTE.
ASSUMING THE TREATMENT OUTLINED IN THE REVISED
TERM SHEET IS APPROVED BY THE COURT, ALLOWED
CLASS 3(B) CLAIMS ARE CURRENTLY ESTIMATED TO
BE IN THE RANGE OF $43 TO $60 MILLION AS OF
THE EFFECTIVE DATE PRIOR TO GIVING EFFECT TO
ANY OF THE DEDUCTIONS ASSERTED BY THE DEBTORS
WHICH SHALL BE TRANSFERRED TO THE RCT AND WILL
BE PAID IN FULL UNDER THE PLAN BY THE RCT OR
CORE-MARK NEWCO AS OUTLINED IN THE REVISED
TERM SHEET.
6
PLAN TREATMENT
CLASS CLAIM OF CLASS
----- ----- --------
3(C) DSD Trust Each Holder of an Allowed DSD
Claims 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:(7) 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.
- ------------------------
(7) Includes claims asserted pursuant to the Perishable Agricultural
Commodities Act, 7 U.S.C. Section 499a et seq ("PACA"),the Packets and
Stockyard Act,7 U.S.C Section 181 et seq.("PASA"),or state statutes or
similar import.
7
PLAN TREATMENT
CLASS CLAIM OF CLASS
----- ----- --------
5 Non-TLV On the Effective Date, or as soon as
Reclamation Claims practicable thereafter, the RCT, shall issue
Claims the Class 5 Preferred Interests in
favor of the Holders of Allowed Non-TLV
Reclamation Claims in the estimated aggregate
amounts of their Allowed Claims under the
terms and conditions outlined in the Revised
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 RCT Assets entitling each Holder to its
Ratable Proportion of the RCT Assets after (i)
all Class 3(B) Claims are paid in full; and
(ii) Core-Mark Newco is reimbursed for its
payment under the TLV Guaranty. Reconciliation
of the Class 5 Claims shall be done in
accordance with Section III.C. of the Plan.
As additional security for the Class 5
Preferred Interests Core-Mark Newco shall
provide a junior secured guarantee under the
terms outlined in the Revised Term Sheet.
THE CLASS IS IMPAIRED AND ENTITLED TO VOTE.
ASSUMING THE TREATMENT OUTLINED IN THE REVISED
TERM SHEET AND THE PLAN IS APPROVED BY THE
COURT, ALLOWED CLASS 5 CLAIMS ARE CURRENTLY
ESTIMATED TO BE IN THE RANGE OF $62-$90
MILLION AS OF THE EFFECTIVE DATE PRIOR TO
GIVING EFFECT TO ANY OF THE DEDUCTIONS
ASSERTED BY THE DEBTORS. HOLDERS OF CLASS 5
CLAIMS WILL BE PAID A RATABLE PROPORTION OF
THEIR ALLOWED NON-TLV RECLAMATION CLAIM, UP TO
THE FULL AMOUNT OF THEIR ALLOWED NET NON-TLV
RECLAMATION CLAIMS BY THE RCT OR CORE-MARK
NEWCO AS OUTLINED IN THE DISCLOSURE STATEMENT,
THE REVISED TERM SHEET AND THE REVISED TERM
SHEET. FURTHER, IN THE EVENT THE RCT HAS
PROCEEDS FOR DISTRIBUTION AFTER SATISFACTION
OF ALL ALLOWED TLV RECLAMATION CLAIMS AND NET
NON-TLV RECLAMATION CLAIMS AND REPAYMENT TO
CORE-MARK NEWCO OF ADVANCES UNDER THE TLV OR
NON-TLV GUARANTEES, THE HOLDERS OF ALLOWED
CLASS 5 CLAIMS SHALL BE ENTITLED TO BE PAID
THEIR PRO RATA SHARE OF THE REMAINING RCT
ASSETS UP TO THE FULL AMOUNT OF THEIR NON-TLV
RECLAMATION CLAIMS.
8
PLAN TREATMENT
CLASS CLAIM OF CLASS
----- ----- --------
6(A) General Unsecured On the Effective Date, or as soon as
Claims other than practicable thereafter, each Holder of an
Convenience Claims Claims other than Allowed General Unsecured
and Senior Claim other than Convenience Claims and
Subordinated Notes Senior Convenience Claims Subordinated Note
Claims Claims shall be paid in full satisfaction,
settlement, release, and Senior and
discharge of and in exchange for each and
every Allowed General Unsecured Subordinated
Notes Claim other than Convenience Claims
and Senior Subordinated Note Claims, at the
Claims Debtors' option, in one or a
combination of the following manners: (i)
issuance of a Ratable Proportion of New
Common Stock, with such Ratable Proportion
to be determined as if Classes 6(A) and 6(B)
were a single Class, and subject to dilution
from the issuance of warrants to the Tranche
B Lenders, to the Holders of Senior
Subordinated Notes 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, with such Ratable
Proportion to be determined as if Classes
6(A) and 6(B) were a single Class.
As additional consideration, each Holder of an
Allowed General Unsecured Claim in Class 6(A)
shall be entitled to a Ratable Proportion of
excess proceeds, if any, available from the
PCT after payment by the PCT of all Claims and
obligations required to be made by the PCT
under the Plan or the PCT Agreement, with such
Ratable Proportion to be determined as if
Classes 6(A) and 6(B) were a single Class.
Pursuant to the Revised Term Sheet, the RCT
shall pay any excess proceeds, if available,
after payment of all Claims and obligations of
the RCT, to the PCT.
THE CLASS IS IMPAIRED AND IS ENTITLED TO VOTE
ALLOWED CLASS 6(A) CLAIMS ARE CURRENTLY
ESTIMATED TO BE IN THE RANGE OF $1.8 - 2.6
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(A) 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(8).
6(B) Senior Subordinated On the Effective Date, or as soon as
Note Claims practicable thereafter, each Holder of an
Note Claims Allowed Senior Subordinated Note
Claim shall be paid in full satisfaction,
settlement, release, and discharge of and in
exchange for each and every Allowed Senior
Subordinated Note Claim, subject to the
contractual seniority of the Senior Notes, at
the Debtors' option, in one or a combination
of the following manners: (i) issuance of a
Ratable Proportion of New Common Stock, with
such Ratable Proportion to be determined as if
Classes 6(A) and 6(B) were a single Class, and
subject to dilution from the issuance of
warrants to the Tranche B Lenders, the Holders
of Senior Subordinated Notes 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, with such Ratable Proportion to be
determined as if Classes 6(A) and 6(B) were a
single Class. As additional consideration,
subject to the contractual seniority of the
Senior Notes, each Holder of a Senior
Subordinated Note Claim in Class 6(B) shall
- --------------
(8) Holders of Senior Notes shall receive a higher recovery due to their
contractual seniority to the Holders of Senior Subordinated Notes. Holders
of Senior Notes shall receive stock in Core-Mark Newco with a value equal
to approximately 11.5% of the Allowed amount of such Holder's Claim.
9
PLAN TREATMENT
CLASS CLAIM OF CLASS
----- ----- --------
be entitled to a Ratable Proportion of excess
proceeds, if any, available from the PCT after
payment by the PCT of all Claims and
obligations required to be made by the PCT
under the Plan or the PCT Agreement, with such
Ratable Proportion to be determined as if
Classes 6(A) and 6(B) were a single Class.
Pursuant to the Revised Term Sheet, the RCT
shall pay any excess proceeds, if available,
after payment of all Claims and obligations of
the RCT, to the PCT.
As further consideration, not subject to the
contractual seniority of the Senior Notes,
Holders of Class 6(B) Claims shall receive a
distribution of nondilutive warrants that when
struck will result in the Holders of Senior
Subordinated Notes receiving 8% of the New
Common Stock on a fully diluted basis. The
strike price of the warrants shall be
determined using Core-Mark Newco's
reorganization value, determined on a per
share basis and adding a premium equal to 35%
per share. The warrants shall expire 7 years
after the Effective Date.
CLASS 6(B) IS IMPAIRED AND HOLDERS OF CLAIMS
IN CLASS 6(B) ARE ENTITLED TO VOTE TO ACCEPT
OR REJECT THE PLAN.
ALLOWED CLASS 6(B) CLAIMS ARE CURRENTLY
ESTIMATED TO BE APPROXIMATELY $830 MILLION AS
OF THE EFFECTIVE DATE. BASED ON THIS ESTIMATE
OF ALLOWED CLAIMS, THE HOLDERS OF CLASS 6(B)
CLAIMS SHALL BE RECEIVING VALUE EQUAL TO
APPROXIMATELY .05% TO 1.0% OF THE ALLOWED
AMOUNT OF EACH SUCH HOLDER'S CLAIM.(9)
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 Interests: Receives no distribution
and 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 Interests and discharged. THE CLASS IS FULLY IMPAIRED
AND DEEMED TO REJECT.
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
- --------------
(9) These warrants will have no intrinsic value as of the Effective Date
because the strike price is in excess of Core-Mark Newco's reorganization
value per share, and are valued at approximately $5-6 million using a
warrant valuation model based on Black-Scholes.
10
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
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(A), 6(B) and 7
will be entitled to vote either to accept or reject the Plan. Classes 1(B),
3(B), 3(C), 5, 6(A), 6(B) 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 July 26, 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 May 25, 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.
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.
11
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, THE PCT,
OR THE RCT, AS APPLICABLE, 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.
12
II. RECOMMENDATIONS
A. The Debtors, the Committee, and the OCRC Strongly Recommend That You
Vote In Favor Of The Plan
The Debtors and the 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 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.
The OCRC believes the Plan, which incorporates the Revised Term Sheet, is
in the best interest of Reclamation Creditors, and the OCRC encourages those
creditors holding Class 3(B) and Class 5 Reclamation Claims to vote in favor of
the Plan.
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
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 JULY 2, 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 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
13
discretion of the Debtors and the 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 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 Committee filed their Third Amended and Revised Joint
Plan of Reorganization of Fleming Companies, Inc. and its Filing Subsidiaries
Under Chapter 11 of the United States Bankruptcy Code 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 May 25, 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 COMMITTEE BELIEVE THAT THE PLAN IS IN THE BEST
INTEREST OF ALL OF THEIR CREDITORS AS A WHOLE. THE DEBTORS AND THE 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 9:30 A.M., PREVAILING EASTERN TIME on JULY 26, 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 JULY 2, 2004 AT 5:00 P.M., PREVAILING EASTERN
TIME. Bankruptcy Rule 3020 governs the form of any such objection.
14
COUNSEL ON WHOM OBJECTIONS MUST BE SERVED ARE:
Counsel for the Debtors: Pachulski, Stang, Ziehl, Young, Jones &
Weintraub P.C.
Kirkland & Ellis LLP 919 N. Market Street, Sixteenth Floor
200 E. Randolph Drive Post Office Box 8705
Chicago, Illinois 60601 Wilmington, Delaware 19899-8705
(Courier 19801)
Attn: Geoffrey A. Richards, Esq. Attn: Laura Davis Jones, Esq.
Janet S. Baer, Esq. Christopher J. Lhulier, Esq.
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 Pepper Hamilton LLP
Unsecured Creditors 100 Renaissance Center
Detroit, Michigan 48243
Milbank, Tweed, Hadley & McCloy Attn: I. William Cohen, Esq.
1 Chase Manhattan Plaza Robert Hertzberg, Esq.
New York, New York 10005
Attn: Dennis Dunne, Esq.
Paul S. Aronzon, Esq.
Counsel for the Official Committee Klehr Harrison Harvey Branzburg
of Reclamation Creditors & Ellers LLP
260 South Broad Street
Piper Rudnick LLP Philadelphia, PA 19102
6225 Smith Avenue Attn: Morton R. Branzburg, Esq.
Baltimore, MD 21209-3600
Attn: Mark J. Friedman, 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 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
15
Reclamation creditors may address any questions they may have to counsel for
the OCRC:
Counsel for the Official Committee of Reclamation Creditors
Piper Rudnick LLP
6225 Smith Avenue
Baltimore, MD 21209-3600
Attn: Mark J. Friedman, Esq.
(410) 580-4153 (410) 580-3001 (fax)
mark.friedman@piperrudnick.com
16
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
17
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,
18
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. 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(A) 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.
19
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(10) 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.
- -----------------------
(10) 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.
20
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.G.5
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 $142.65 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).
21
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
22
Agreement, as defined in that Motion and Order. 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).
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 $56.5 million in PACA Claims
have been asserted in these Cases. Of the asserted PACA Claims, the Debtors have
paid $43.2 million and $6.3 million has been disallowed pursuant to the
PACA/PASA Order. With respect to thr remaining $7 million of asserted PACA
Claims, the Debtors are seeking to disallow such claims as invalid PACA Claims,
but the applicable claimants are contesting such disallowance. The Debtors' will
file their Final Supplemental PACA Report on or about May 25, 2004. All numbers
in this paragraph have been rounded to the
23
nearest hundred thousand, exact figures are contained in the Supplemental
Reports. The Debtors do not believe there are any valid PASA Claims in these
Chapter 11 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).(11) 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.
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 June 1, 2004 and the hearing on the
Consolidation Motion is currently scheduled for May 25, 2004.
On February 2, 2004, the Court, on request of various
reclamation claimants, ordered the appointment of an Official Committee of
Reclamation Creditors ("OCRC") 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 OCRC. The members currently are: The
Procter & Gamble Distributing Company, Mead Johnson Nutritionals, Swift Company,
DelMonte Corporation, Sara Lee Corp. and The Clorox Sales Company. The OCRC was
permitted by the Bankruptcy Court to intervene as a party in the Reclamation
Adversary Proceedings.
On May 3, 2004, the Debtors, the Committee, and the OCRC
signed a term sheet which outlines an agreement in principle to resolve
objections to the Plan and Disclosure Statement related to the treatment of
Reclamation Claims (the "Revised Term Sheet"). Pursuant to the Revised Term
Sheet, the Debtors shall establish a Reclamation Creditors Trust for the primary
benefit of the Reclamation Claim Holders to be funded by the Debtors with at
least $3 million in Cash as well as deductions, over-wires, preference claims,
Causes of Action and other rights of the Debtors against Reclamation Creditors
all as more specifically provided in the Revised Term Sheet, a
- -------------------------
(11) 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.
24
copy of which is attached hereto as Exhibit 13. Further, certain guarantees from
Core-Mark Newco are provided. The Revised Term Sheet also calls for the stay of
the Reclamation Adversary Proceedings pending the Effective Date of the Plan.
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 Committee, OCRC 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).
The Bankruptcy Court ordered the appointment of the OCRC on February
2, 2004. The Bankruptcy Court approved the retention of Piper Rudnick LLP and
Klehr Harrison Harvey Branzburg & Ellers LLP as co-counsel (Docket Nos. 7728 and
7729, respectively) and J.H. Cohn LLP, as accountants and advisors (Docket No.
7730) to the OCRC.
25
4. Asset Sales and Other Dispositions
The Debtors have filed several motions for the sale of disposal of
the Debtors' assets as follows:
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. FSA 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 were not executory contracts or integrated parts of executory
contracts.
By motion dated September 12, 2003 (Docket No. 3667), the
Debtors sought to reduce the amount of the FSA 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 FSA Reserve and further allowing the Debtors to reduce the FSA
Reserve by any settlements made on note balances. Currently, the FSA Reserve is
approximately $29 million. Upon approval of pending settlements of note
balances, the Debtors estimate that the amount of the FSA 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).
26
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 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).
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 are 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
27
assets at the closed locations. If no timely objections are filed, the Debtors
may abandon the assets without further order of the Court.
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 thirteen Monthly Operating Reports 12 and will continue to
file such Monthly
- ------------------------
(12) 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
(Continued)
28
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 (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.
- -------------------------
amended by Docket No. 6969]; 1/1/04-1/31/04 [Docket No. 7188]; 2/1/04 -
2/29-04 [Docket No. 7612]; 3/1/04 - 3/31/03 [Docket No. 8048].
29
See Article VI.N.9. herein for a discussion of the effects the
Plan and certain provisions therein will have on the directors and officers
litigation.
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
30
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 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 filed 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 will 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-
31
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
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.
32
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 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
this case which is up for approval before the
Bankruptcy Court on June 1, 2004.
(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
33
by agreeing to mutual releases. The Bankruptcy
Court approved the settlement by order entered
February 13, 2004.
(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 judgment
in favor of Betterman. Fleming does not anticipate
any further appeals.
34
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,
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 V.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
35
Claimant. Many of the 575 adversary proceedings
include causes of actions related to preferential
transfers, other avoidance powers, set off rights
or actions based on breach of contract. The OCRC
has been granted the right by the Court to
intervene in the adversary proceedings. The
Debtors have requested a stay of the adversary
proceedings as part of the settlement with the
Reclamation Committee discussed in section VI.H.7.
herein.
(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
36
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 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
37
Hague Convention on Service
of Process Abroad. That service
has been made, but Starr has not
yet responded to the complaint.
The parties have agreed 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.
(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. ss. 105 to
prevent class actions against
present and former directors.
38
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.
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
39
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 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
40
under the TRO, including
Fleming's obligation to
segregate funds for the benefit
of SLBG. Each party bore its own
costs and attorneys' fees.
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 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
41
(a) eliminate duplicative or erroneous Claims and (b) ensure that the Bankruptcy
Court allows only valid Claims. If the Debtors, Core-Mark Newco, the PCT, or the
RCT, 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
applicable Claim. If the Debtors, Core-Mark Newco, the PCT, or the RCT, 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, the PCT, or the RCT, 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. In that regard, the Debtors have filed their First through Fourteenth
Omnibus Objections, which include objections to 3,640 Claims asserted in a face
amount of excess of $4.6 billion. These Omnibus Objections include objections to
approximately $1.1 million of SAP Claims.
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.
42
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 debtor 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 Committee and the OCRC (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
43
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 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.H.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 the PCT and the
RCT as more fully explained herein 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.
44
[GRAPHIC OMITTED]
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 the PCT and the RCT, 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 so long as such sale is not inconsistent with
the Revised Term Sheet. 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 and the Tranche B Loan shall not be secured by the
assets transferred to the PCT or to RCT. The Exit Financing Facility shall be on
substantially the terms set forth in the Exit Facility Commitment Letter
attached hereto as Exhibit 7. The Exit Financing Facility agreement will be
included in the Plan Supplement.
4. Tranche B Loan
The Tranche B Loan shall be a term credit facility in the amount of
up to $70 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 PCT and the RCT,
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 Tranche B Put Agreement attached hereto
as Exhibit 8. The Tranche B Loan agreement will be included in the Plan
Supplement.
5. Sale of Assets
In the event that the Debtors do not have sufficient Cash from (i)
their 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 as available to the Debtors 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 so long as such sale is not
inconsistent with the Revised Term Sheet.
45
C. Classification And Treatment Of Claims And Equity Interests
1. Summary of 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 PCT or RCT, as
applicable, 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 to the Plan
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,
the Reorganized Debtors, the PCT, the RCT and their successors, their assigns or
their property.(13) 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 OCRC; (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, the PCT Representative, and the RCT 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 PCT. 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. Any liability for Professional Fees above the amount in the
Professional Fee Escrow Account including amounts awarded to a professional not
retained by the Debtors, the Committee, or the OCRC under
- --------------------------
(13) Those professionals not retained by the Debtors, the Committee or the OCRC
under section 327 or 363 of the Bankruptcy Code filing a Claim for fees
alleged to be beneficial or necessary towards completion of the Chapter 11
Cases as outlined in section 330 of the Bankruptcy Code, or any other
party making a Claim for fees for allegedly making a substantial
contribution under section 503(b) of the Bankruptcy Code, are bound by the
First and Second Substantial Contribution Claims Bar Dates.
46
sections 327 or 363 of the Bankruptcy Code for services alleged to be necessary
or beneficial toward completion of the case as outlined under section 330 of the
Bankruptcy Code or to any other party in allegedly making a substantial
contribution under section 503(b) of the Bankruptcy Code or otherwise, shall be
a liability of the PCT and shall be paid by the PCT as an Administrative
Claim.(14)
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.
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(15), in equal
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,
commencing on, or as soon as practicable after,
the Effective Date, 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
- ----------------------------
(14) The Professional Fee Escrow shall be held and administered by Core-Mark
Newco, and any excess amount remaining in the Professional Fee Escrow
Account after all appropriate Professional Fee Claims have been paid shall
be retained by Core-Mark Newco.
(15) The financial projections attached as Exhibit 3 assume an interest rate of
5%.
47
security for its surety
obligations, it shall have a Class 6(A) Claim and
shall be paid in accordance with section III.B.9.
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.4. 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 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) -- Priority 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 Priority 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
Priority 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.
48
(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. The Exit Financing
Facility and the Tranche B Loan shall not be
secured by the assets transferred to the PCT or
the RCT.
Any default with respect to any Class 2 Claim th-
at 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.
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) -- TLV Reclamation Claims
(1) Classification: Class 3(B) consists of all Allowed
TLV Reclamation Claims.
(2) Treatment: On the Effective Date, or as soon as
practicable thereafter, the RCT, shall issue the
Class 3B Preferred Interests in favor of the
Holders of Allowed TLV Reclamation Claims in the
estimated aggregate amount of such Allowed Claims
under the terms and conditions outlined in the
Revised 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 RCT Assets entitling each
Holder of an Allowed TLV Reclamation Claim to its
Ratable Proportion of the RCT Assets up to the
total amount of each Holder's Allowed TLV
Reclamation Claim, in full satisfaction,
settlement,
49
release and discharge of each Allowed
TLV Reclamation Claim against the RCT Assets.
Reconciliation of Class 3(B) Claims shall be done
in accordance with section III.C. of the Plan. The
Class 3B Preferred Interests shall earn interest
which shall begin to accrue 60 days after the
Effective Date at the Wall Street Journal listed
prime rate.
As additional security for the Class 3B Preferred
Interests, Core-Mark Newco shall provide a junior
secured guarantee under the terms outlined in the
Revised 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.
(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, 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 -- Non-TLV Reclamation Claims
(1) Classification: Class 5 consists of Non-TLV
Reclamation Claims.
(2) Treatment: On the Effective Date, or as soon as
practicable thereafter, the RCT, shall issue the
Class 5 Preferred Interests in favor of the
Holders of Allowed Non-TLV Reclamation Claims in
the estimated aggregate amounts of their Allowed
Claims under the terms and conditions outlined in
the Revised 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 RCT Assets entitling each Holder to its
Ratable Proportion of the RCT Assets after (i) all
Class 3(B) Claims are paid in full; and (ii)
Core-Mark Newco is reimbursed for its
50
payment under the TLV Guaranty. Reconciliation of
Class5 Claims shall be done in accordance with
Section III.C. of the Plan.
As additional security for the Class 5 Preferred
Interests Core-Mark Newco shall provide a junior
secured guarantee under the terms outlined in the
Revised Term Sheet.
(3) Voting: Class 5 is impaired and Holders of Allowed
Claims in Class 5 are entitled to vote to accept
or reject the Plan.
i. Class 6(A) -- General Unsecured Claims other than
Convenience Claims and Senior Subordinated Note Claims
(1) Classification: Class 6(A) consists of all Allowed
General Unsecured Claims other than Convenience
Claims and Senior Subordinated Note 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 and Senior Subordinated Note 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 and Senior Subordinated Note
Claims, at the Debtors' option, in one or a
combination of the following manners: (i) issuance
of a Ratable Proportion of New Common Stock, with
such Ratable Proportion to be determined as if
Classes 6(A) and 6(B) were a single Class, and
subject to dilution from the issuance of warrants
to the Tranche B Lenders, to the Holders of Senior
Subordinated Notes 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, with such Ratable Proportion to
be determined as if Classes 6(A) and 6(B) were a
single Class.
As additional consideration, each Holder of an
Allowed General Unsecured Claim in Class 6(A)
shall be entitled to a Ratable Proportion of
excess proceeds, if any, available from the PCT
after payment by the PCT of all Claims and
obligations required to be made by the PCT under
the Plan or the PCT Agreement, with such Ratable
Proportion to be determined as if Classes 6(A) and
6(B) were a single Class. Pursuant to the Revised
Term Sheet, the RCT shall pay any excess proceeds,
if available, after payment of all Claims and
obligations of the RCT, to the PCT.
(3) Voting: Class 6(A) is impaired and Holders of
Claims in Class 6(A) are entitled to vote to
accept or reject the Plan.
j. Class 6(B) -- Senior Subordinated Note Claims
(1) Classification: Class 6(B) consists of all Allowed
Senior Subordinated Note Claims.
51
(2) Treatment: On the Effective Date, or as soon as
practicable thereafter, each Holder of an Allowed
Senior Subordinated Note Claim shall be paid in
full satisfaction, settlement, release, and
discharge of and in exchange for each and every
Allowed Senior Subordinated Note Claim, subject to
the contractual seniority of the Senior Notes, at
the Debtors' option, in one or a combination of
the following manners,: (i) issuance of a Ratable
Proportion of New Common Stock, with such Ratable
Proportion to be determined as if Classes 6(A) and
6(B) were a single Class, and subject to dilution
from the issuance of warrants to the Tranche B
Lenders, the Holders of Senior Subordinated Notes
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, with such Ratable
Proportion to be determined as if Classes 6(A) and
6(B) were a single Class. As additional
consideration, subject to the contractual
seniority of the Senior Notes, each Holder of a
Senior Subordinated Note Claim in Class 6(B) shall
be entitled to a Ratable Proportion of excess
proceeds, if any, available from the PCT after
payment by the PCT of all Claims and obligations
required to be made by the PCT under the Plan or
the PCT Agreement, with such Ratable Proportion to
be determined as if Classes 6(A) and 6(B) were a
single Class. Pursuant to the Revised Term Sheet,
the RCT shall pay any excess proceeds, if
available, after payment of all Claims and
obligations of the RCT, to the PCT.
As further consideration, not subject to the
contractual seniority of the Senior Notes, Holders
of Class 6(B) Claims shall receive a distribution
of nondilutive warrants that when struck will
result in the Holders of Senior Subordinated Notes
receiving 8% of the New Common Stock on a fully
diluted basis. The strike price of the warrants
shall be determined using Core-Mark Newco's
reorganization value, determined on a per share
basis and adding a premium equal to 35% per share.
The warrants shall expire 7 years after the
Effective Date.
(3) Voting: Class 6(B) is impaired and Holders of
Claims in Class 6(B) are entitled to vote to
accept or reject the Plan.
k. 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.
52
(3) Voting: Class 7 is impaired, and Holders of Class
7 Claims are entitled to vote to accept or reject
the Plan.
l. Class 8 -- Equity Interests
(1) Classification: Class 8 consists of all Equity
Interests.
(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
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.
m. 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.
n. 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. Additional Provisions Governing Reclamation Claims
The total amount of Allowed Reclamation Claims to be satisfied by the RCT
shall be reconciled pursuant to the methodology described in Exhibit A attached
to the Revised Term Sheet, but in any event shall not exceed $150 million prior
to the application of any reduction including the Prepetition Non-TLV
Reclamation Claim Reduction. In the event the Allowed Reclamation Claims exceed
$150 million, the Allowed Non-TLV Reclamation Claims shall be reduced pro rata.
E. Additional Explanation of Provisions Concerning Senior Note Claims
and Senior Subordinated Note Claims
Due to the contractual seniority of the Senior Notes with respect to the
Senior Subordinated Notes, the distributions made to Holders of Senior
Subordinated Note Claims in Class 6(B) will be immediately reallocated to
53
the Holders of Senior Note Claims in Class 6(A), provided, however, that the
nondilutive warrants issued to Holders of Senior Subordinated Notes in Class
6(B) are not subject to the contractual seniority of the Senior Notes and are
solely for the benefit of the Holders of Senior Subordinated Note Claims.
F. 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.
G. 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(A), 6(B) and 7 shall be entitled to vote to accept or reject the Plan.
2. Acceptance by Impaired Classes
An Impaired Class of Claims will 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.
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.
H. 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
54
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.
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.
55
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'.
- 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.
56
- 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. 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.
57
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 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.
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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
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 reasonable
compensation, fees, expenses or disbursements due to any of the Old Notes
Trustees, agent or servicer pursuant to the Indentures and the Plan, including,
without limitation, attorneys' and agents' fees, expenses and disbursements
incurred by the Old Notes Trustees and their predecessors, 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
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. Fleming will then transfer to Core-Mark Holding
III a portion
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of Core-Mark Newco's stock to satisfy Disputed Claims and Core-Mark Holdings III
will hold such stock, not for its own account, but rather in trust in its role
as fiduciary for the benefit of holders of Disputed Claims in Classes 6(A) and
6(B). Fleming will distribute the Core-Mark Newco stock received from Core-Mark
Holdings III and not transferred to Core-Mark Holdings III pursuant to the
proceeding sentence to its creditors in accordance with the Plan of
Reorganization. Core-Mark Holdings III, as fiduciary for Holders of Disputed
Claims in Classes 6(A) and 6(B), will transfer stock of Core-Mark Newco to
Holders of Classes 6(A) and 6(B) 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.
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.
60
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 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
After months of negotiations, including virtually weekly
meeting and conference calls with members of the OCRC with respect to the
Reclamation Claims, their treatment under the First and Second Amended Plan and
the related Reclamation Adversaries, the Debtors, the OCRC and the Committee
entered into the Term Sheet to Resolve Objections to the Debtors' Chapter 11
Plan and for Treatment of Reclamation Claims on April 16, 2004. After additional
negotiations, the Debtors, the OCRC and the Committee entered into the Revised
Term Sheet to Resolve Objections to the Debtors Chapter 11 Plan and for
Treatment of Reclamation Claims on May 3, 2004. The Plan is consistent with the
terms set forth in the Revised Term Sheet.
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, 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, including
holders of deficiency Claims as outlined in the Final DIP Order, are Holders of
TLV Reclamation Claims designated as Class 3(B) Claims under the Plan. Other
creditors alleging Reclamation Claims that did not participate in the Debtors'
Trade Credit Program (or did not comply with the terms of such program) are
Holders of Non-TLV Reclamation Claims designated as 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 PCT and the RCT while certain
other assets are being retained by the Reorganized Debtors or transferred to
Core-Mark Newco. The Plan replaces the lien currently held by the Class 3(B)
Claim Holders with a first priority lien on the RCT Assets. In addition,
Core-Mark Newco is providing a secured guarantee of the RCT's obligation to the
Class 3(B) creditors under the terms outlined in the Class 3(B) Preferred
Interests Term Sheet and the Revised Term Sheet in order to assure that Allowed
Class 3(B) Claims are paid in full.
The Debtors estimate that, as of the Effective Date, assuming
the treatment outlined in the Revised Term Sheet and Plan is approved by the
Court, the aggregate amount of the Class 3(B) Claims is in the range of $43 to
$60 million, prior to giving effect to any deductions asserted by the Debtors
and transferred to the RCT. 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 or other deductions
against liabilities owed by the Debtors to such claimants. The Debtors believe
that the RCT will be able to effect application of such amounts due to the
Debtors in full or in part against the Class 3(B) Claims. The treatment
61
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 RCT, or in the
event that the RCT does not have sufficient assets, from Core-Mark Newco as a
result of the secured guaranty provided to such Holders.
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. 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 currently
set for hearing on May 25, 2004. The answer date for the Reclamation Complaints
has been extended by agreement to June 1, 2004 for all defendants. The OCRC,
with Court approval, has intervened in the Reclamation Complaints. As part of
the resolution reached by the Debtors, the Committee and the OCRC as outlined in
the Revised Term Sheet and reflected in the Plan, the Debtors, the Committee and
the OCRC will seek a stay of the Reclamation Adversary Proceedings pending
confirmation of the Plan, at which time the RCT will assume responsibility for
the Reclamation Adversary Proceedings.
Consistent with the Revised Term Sheet, the Plan provides that
on the Effective Date, or as soon as practicable thereafter, the RCT, shall
issue Preferred Interests in favor of the Holders of Non-TLV Reclamation Claims
(Class 5 Claims) in the estimated aggregate amounts of their Allowed Claims and
grant them a second priority lien on the RCT Assets entitling each Holder of a
Class 5 Claim to its Ratable Proportion of the RCT Assets after (a) all Class
3(B) Claims are paid in full and (b) Core-Mark Newco is reimbursed for any
payment made toward the TLV Guaranty. As additional security for the Class 5
Preferred Interests, Core-Mark Newco shall provide a junior secured guarantee
under the terms outlined in the Revised Term Sheet attached to this Disclosure
Statement as Exhibit 11.
The Debtors estimate that, as of the Effective Date, assuming
the treatment outlined in the Revised Term Sheet and Plan is approved by the
Court, the aggregate amount of Class 5 Claims is in the range of $62 to $90
million prior to giving effect to any deductions asserted by the Debtors and
transferred to the RCT. 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 or other deductions
against liabilities owed by the Debtors to such claimants. The Debtors believe
that the RCT will be able to effect application of such amounts due to the
Debtors in full or in part against the Class 5 Claims. 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 as
outlined in the Revised Term Sheet.
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. On April 12, 2004 the OCRC filed an objection to the Disclosure
Statement. Collectively, the 29 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 TLV Reclamation Claims
and some do not. Pursuant to the Revised Term Sheet, the OCRC's Objection to the
Disclosure Statement has been resolved. The Debtors, likewise believe the vast
majority of the Reclamation Objections have been resolved. However, since the
individual Reclamation Objectors were not parties to the Revised Term Sheet and
have not formally withdrawn their objections at this time, the Debtors address
such Reclamation Objections herein.
The Reclamation Objections are primarily plan objections
specifically to the treatment afforded to the Reclamation Claims under the Plan.
Therefore, they are not proper objections to the Disclosure Statement. Further,
the Revised Term Sheet resolves such objections, However, 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.
62
The Preferred Interests and guarantees provided to the Holders
of Class 3(B) and Class 5 Claims 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 them
thereunder. In addition, the Preferred Interests and guarantees assure the
feasibility of the Plan. To the extent the RCT does not have sufficient funds to
pay the Class 3(B) or Class 5 Claims as required under the Plan and the Revised
Term Sheet, Core-Mark Newco will assume that responsibility to the extent
provided therein. Thus, the financial strength of Core-Mark Newco will also
assure payment and thus, feasibility of the Plan.
Hershey alleges that the treatment of TLV Reclamation Claims
in the Plan violates the Debtors' Trade Credit Program and that the Plan
discriminates against the TLV Reclamation Claims by treating only
non-reclamation Trade Lien Claims as Administrative Claims. The Debtors
disagree. The treatment of the TLV Reclamation Claims is completely consistent
with the Final DIP Order and the Trade Credit Program. The 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 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 TLV Reclamation Claims, their treatment is completely consistent
with the Final DIP Order and, by granting a lien in both the RCT 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 PCT
a. Formation/Purpose
On the Effective Date or as soon as practicable thereafter, the Debtors
and the Committee will form the PCT 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 other than those which are RCT Assets and
the reconciliation and payment of Claims, other than Reclamation Claims (the
reconciliation of Class 6(A) Claims of Reclamation Creditors, but not the
payment of such Claims, shall be the responsibility of the RCT).
b. Powers
The powers, authority, responsibilities and duties of the PCT and the
allocation of such powers, authority, responsibilities and duties between
Core-Mark Newco and the PCT, shall be set forth and governed by the PCT
Agreement to be mutually agreed upon by the Debtors and the Committee. A copy of
the draft PCT Agreement is attached to the Disclosure Statement as Exhibit 9.
The Debtors and the Committee shall also mutually agree upon appointment of the
PCT Representative who shall have the power to administer the PCT and will be
advised by the PCT Advisory Board as specified in the PCT Agreement. The PCT
Advisory Board shall consist of four members plus the PCT 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(A) Claims under the Plan and one member to be designated
mutually by the trade members of the Committee and the OCRC, which member shall
be a Holder of a Class 6(A) Claim, other than with respect to the Old Notes,
against which there is not pending (or against which the Debtors or the PCT do
not reasonably contemplate bringing) a Cause of Action other than a Cause of
Action which is an RCT Asset.
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 PCT Advisory Board
as well as the identity and affiliations of the PCT 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 PCT
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, the PCT Assets (the "PCT Assets") as
63
outlined in the PCT Agreement. The PCT Assets do not include any RCT Assets.
Subject to the preceding exclusion of all RCT Assets, the PCT Assets shall
consist of all of the following assets of the Debtors:
(1) cash balances sufficient to pay the estimated
Administrative Claims that are the responsibility
of the PCT;
(2) 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;
(3) royalty payments owing to the Debtors related to
the sale of the Fleming wholesale operations;
(4) 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;
(5) Avoidance Actions, especially preference actions
as outlined in section 547 of the Bankruptcy Code;
(6) restricted cash, including the PACA account, the
FSA Reserves and the Professional Fee Escrow
Account;
(7) all other Claims and Causes of Action of the
Debtors, including but not limited to those
outlined in section VII hereof, Exhibit A hereto
and section VI of the Plan, 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;
(8) any assets of the RCT referred or assigned to the
PCT whether vendor deductions, preference claims
or otherwise (on terms that have been mutually
agreed upon by the RCT and the PCT);
(9) any cash proceeds of settlements for customer
accounts receivables, vendor deductions,
over-wires and preferences (exclusive of those
related to either Fleming Convenience or the RCT
Assets) in excess of $9 million collected by the
Debtors from April 1, 2004 to the Effective Date
which are being held in an escrow account;
(10) $3.0 million in cash for administration of the
PCT; and
(11) all of the remaining assets of the Debtors, other
than the assets of the Reorganized Debtors and the
assets of Fleming Convenience which will have been
transferred to Core-Mark Newco and the Reorganized
Debtors.
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The PCT Assets do not include: (1) any of the RCT Assets; (2) any of the
assets of the continuing Fleming Convenience businesses which are to be
transferred to Core-Mark Newco and the Reorganized Debtors; and (3) the stock of
Core-Mark Newco and the stock of the Reorganized Debtors.
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. The PCT
shall administer the directors and officers insurance policies maintained
pursuant to section XII.D. of the Plan and all proceeds of such policies shall
benefit the D&O Releasees and the prepetition directors and officers of the
Debtors who are covered by the directors and officers insurance policies as well
as the PCT to the extent the PCT or other Party has a valid Claim against a D&O
Releasee or a prepetition director of officer of the Debtors who is covered by
the director and officer insurance policies.
d. Liabilities of the PCT
The liabilities transferred to the PCT shall include, but not necessarily
be limited to, Priority Tax Claims, Other Priority Non-Tax Claims, Property Tax
Claims, Other Secured Claims, PACA/PASA Claims, FSA liability, General Unsecured
Claims (solely for purposes of resolution), Convenience Claims and certain
Administrative Claims that have not been satisfied on the Effective Date of the
Plan, other than the Administrative Claims of Fleming Convenience and
Professional Fees incurred prior to the Effective Date which are paid by the
funds in the Professional Fee Escrow Account. Notwithstanding the foregoing, to
the extent any amounts currently budgeted by the Debtors as tax payments to be
paid prior to the Effective Date are not so paid by the Effective Date and the
liabilities for such taxes are assumed by the PCT, the budgeted amount of such
taxes not paid by the Debtors shall be contributed to the PCT to pay such taxes.
e. Funding
On the Effective Date, or as soon as practicable thereafter, the Debtors,
the Reorganized Debtors and Core-Mark Newco will transfer to the PCT 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 the PCT Agreement. In addition, the PCT 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 PCT on the Effective Date are outlined on Exhibit 3 to the
Disclosure Statement.
f. Administrative Claims Guaranty
As set forth in the estimates included on Exhibit 3 of the Disclosure
Statement, the Debtors currently estimate that, on the Effective Date,
administrative claims (other than Professional Fees) transferred to the PCT will
total $52 million, consisting of General accounts payable of $3 million, Health
and welfare benefits of $5 million, Severance and stay program of $27 million
and Other administrative claims of $17 million (collectively, the "relevant
administrative claims"). In the event that the relevant administrative claims
that are ultimately paid by the PCT after the Effective Date exceed the above
referenced estimated amounts by more than $4 million, such amounts over the $4
million shall be reimbursed by Core-Mark Newco (the "Administrative Claim
Guaranty"). In the event any of the relevant administrative claims against the
Debtors currently anticipated to be satisfied post-Effective Date through the
PCT are, instead, settled through entry of an Order of the Bankruptcy Court
approving such settlement pre-Effective Date at a level lower than currently
budgeted in the PCT projections, then, in such event, 50% of the net savings
from any such Court approved settlement below current budgeted levels (after
reasonable deduction for legal fees and other resolution costs) shall be paid to
the RCT on the Effective Date (the "Administrative Claims Savings"). Once the
aggregate distributions from the PCT to the RCT (inclusive of any Administrative
Savings paid to the RCT), have reached $10 million, then, in such event, any
additional distributions to the RCT shall effect a reduction of the maximum
amount of the Non-TLV Guaranty by an amount equal to 50% of any such aggregate
additional distributions. Notwithstanding the forgoing, the parties recognize
that the Bankruptcy Court could ultimately determine that certain of the
relevant administrative claims which are subject to the Administrative Claim
Guaranty may be reclassified by the Court as priority claims and
correspondingly, certain priority claims may be reclassified as relevant
administrative claims. Irrespective of such reclassification by the Bankruptcy
Court, for
65
purposes of calculating the amount which may be owed, if any, on the
Administrative Claim Guaranty, the classification assigned to those claims as
outlined in Exhibit 3 of the Disclosure Statement shall govern.
g. PCT Beneficiaries
The beneficiaries of the PCT, after satisfaction of all liabilities to be
satisfied by the PCT as outlined in the Plan including Administrative Claims,
Priority Tax Claims, Other Priority Non-Tax Claims, Property Tax Claims,
PACA/PASA Claims, FSA liabilities, Convenience Claims and all PCT expenses,
shall be (i) Core-Mark Newco, in the amount necessary to reimburse Core-Mark
Newco for any payments made on the TLV Guaranty or Non-TLV Guaranty as outlined
herein; (ii) the RCT, in the event all Reclamation Claims and interest thereon
as applicable together with the Prepetition Non-TLV Reclamation Claim Reduction,
have not been paid in full by the RCT,(16) (iii) Core-Mark Newco in the amount
necessary to reimburse Core-Mark Newco for any payments made on the
Administrative Claims Guaranty in the event the Reclamation Claims and the
Prepetition Non-TLV Reclamation Claim Reduction have been paid in full by the
RCT and (iv) thereafter the Class 6(A) General Unsecured Creditors, at which
time the RCT will terminate with any remaining assets delivered to the PCT.
h. Good Faith
Each of the PCT Representative and the PCT Advisory Board shall act in
good faith in carrying out its duties and responsibilities and use its best
efforts to liquidate and resolve claims, disputes and maximize the value of the
PCT's assets and minimize claims against the PCT.
9. RCT
a. Formation/Purpose
On the Plan Effective Date or as soon as practicable thereafter, the
Debtors, the OCRC and the Committee will form the RCT to administer the
post-confirmation responsibilities under the Plan associated with the pursuit
and collection of the RCT Assets and payment of Reclamation Claims.
b. Assets of the RCT
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 RCT the RCT Assets as outlined in the RCT Agreement or
the Revised Term Sheet. The RCT Assets shall include assets of the Debtors (more
specifically set forth in the Revised Term Sheet) as follows:
(1) Vendor Deductions, over-wires, preference claims,
Causes of Action and other rights of the Debtors
as against the Reclamation Creditors, other than
the post-petition deductions and post-petition
over-wires with respect to Fleming Convenience
which shall be transferred to Core-Mark Newco;
(2) $3.0 million in cash for administration of the
RCT; and
(3) Any cash proceeds which are collected by the
Debtors from Reclamation Creditors for payment of
preference liability, deduction liability and
over-wire liability (except for post-petition
vendor
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(16) Holders of Class 5 Claims shall not be entitled to a double distribution
on account of any Non-TLV Reclamation Claims Reduction related payments
and the PCT shall establish its holdbacks or the RCT shall otherwise
adjust its distributions accordingly.
66
deductions and post-petition over-wire liability
related to Fleming Convenience) from and after
March 23, 2004 to the Effective Date which are
being held in an escrow account.
c. Liabilities of the RCT
The Reclamation Liabilities transferred to the RCT shall include any and
all claims asserted against the Debtors by the Reclamation Creditors, including
Administrative Claims (other than Administrative Claims against Fleming
Convenience), Priority Claims, TLV Reclamation Claims and Non-TLV Reclamation
Claims, but not including any DSD Trust Claims, PACA/PASA Claims(17) or General
Unsecured Claims held by Reclamation Creditors.
d. Powers
The Powers, authority, responsibilities and duties of the RCT and the
allocation of such powers, authority, responsibilities and duties shall be set
forth and governed by the Revised Term Sheet and set forth more fully in the RCT
Agreement which shall be consistent with the Revised Term Sheet. A copy of the
draft RCT Agreement is attached to the Disclosure Statement as Exhibit 12. The
RCT shall be administered by the RCT Representative, to be selected by the OCRC.
In order to facilitate the claims reconciliation process and asset
liquidation, the PCT and the RCT shall enter into a transition services
agreement whereby the PCT shall provide resources to the RCT related to
effecting the Claims reconciliation process. Such resources shall include, but
not be limited to, access to the professional staff and employees of the PCT,
computer systems, data bases and other relevant information. The RCT shall
reimburse the PCT for the direct costs (e.g., professional staff and employee
expense) and allocation of the indirect costs (e.g., facilities, computers, data
storage facilities) with an allocation methodology to be agreed upon.
Notwithstanding the foregoing, the RCT shall have no obligation to reimburse the
PCT for indirect costs for the first 3 months after the Effective Date, or for
(i) direct costs for the first six months after the Effective Date and (ii)
indirect costs for months 4-6 after the Effective Date, up to an aggregate cap
of $1 million. On the Effective Date, the Debtors and the Committee shall, at
their option, either (i) have the Debtors provide an additional $1 million to
the RCT for administrative expenses of the RCT or (ii) have the PCT provide the
RCT with additional resources and services pursuant to the transition services
agreement with a value of up to an additional $1 million. However, once the RCT
has received aggregate distributions of $10 million from the PCT, inclusive of
any amounts paid to the RCT with respect to the Administrative Claims Savings
outlined in paragraph V.G.6. herein, the next $1 million in Cash otherwise to be
distributed by the PCT to the RCT shall, instead, be paid to Core-Mark Newco.
The RCT Representative shall be advised by an advisory board selected by
the OCRC with representation by Holders of TLV Reclamation Claims (but only
until TLV Reclamation Claims have been paid in full) and Holders of Non-TLV
Reclamation Claims
The TLV Reclamation Creditors shall be the primary beneficiaries of the
RCT and shall be entitled to be paid in full out of the first distributions to
be made by the RCT before the Non-TLV Reclamation Creditors are entitled to any
payment by the RCT.
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(17) The liability for DSD Trust Claims held by Reclamation Creditors shall
remain with the DSD Trust and such claims shall be reconciled and paid, if
Allowed, by the DSD Trust. The liability for PACA/PASA Claims held by
Reclamation Creditors shall remain with the PCT and such claims shall be
reconciled and paid, if Allowed, by the PCT.
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e. Good Faith
Each of the RCT Trustee and the RCT Advisory Board shall act in good faith
in carrying out its duties and responsibilities and use its reasonable best
efforts to liquidate and resolve claims, disputes and maximize the value of the
RCT's assets and minimize claims against the RCT.
I. Creation of Professional Fee Escrow Account
On or before the Effective Date, the Debtors shall establish the
Professional Fee Escrow Account and fund such Professional Fee Escrow at an
appropriate level based upon the most current information available on the date
the account is established. The Professional Fee Escrow Account will include a
Cash reserve of $1.1 million for the projected fees of the ad hoc reclamation
committee, as well as sufficient funds to cover any professional fee claims that
may be asserted based on substantial contribution, provided, however, the
Debtors' reservation of such amounts shall in no way constitute an admission of
liability for, or the validity of, any such fees.
J. 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 the PCT and the RCT 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
68
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
As further described in section XII.D of the Plan, the D&O Releasees
shall be indemnified through the Debtors' directors and officers insurance
policies up to a collective limit equal to the amount of the Debtors' directors
and officers insurance proceeds, net of all defense costs and fees, actually
payable in Cash, to pay claims against the D&O Releasees.
5. Compensation and Benefit Programs
Except as otherwise expressly provided herein and excluding the
Remaining Pension Plans, 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 that (i) the Reorganized
Debtors will maintain as specifically designated on the Reorganized Debtors'
Benefits Schedule and (ii) the PCT will maintain as specifically designated on
the PCT Benefit Schedule, both of which are to be filed 15 days prior to the
Voting Deadline. In addition, except as set forth on the Reorganized Debtors'
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 subject to section 4225(b) of ERISA.
Notwithstanding the termination or rejection of the Company Benefit Plans
hereunder, vested retiree medical benefits of Fleming, if any, under applicable
Company Benefit Plans shall be obligations of the PCT after the Effective Date
until terminated, unless terminated pursuant to section 1114 of the Bankruptcy
Code prior to the Effective Date. The Debtors believe the PCT may decide to
terminate retiree medical benefits after the Effective Date and expect the PCT
will incur substantial litigation costs if it attempts 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 Post-Effective Date, the Reorganized Debtors will continue to pay
premiums, deductibles, and any other payments that the Debtors 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.
69
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 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(18)
and National Union Fire Insurance Company ("National Union"), the Reorganized
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 Reorganized 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
- ----------
(18) ACE American Insurance Company (f/k/a CIGNA Insurance Company), ACE
Insurance Company of Texas (f/k/a CIGNA Insurance Company of Texas),
Insurance Company of North America, Pacific Employers Insurance Company,
Indemnity Insurance Company of North America, Illinois Union Insurance
Company, Bankers Standard Insurance Company and Atlantic Employers
Insurance Company ("ACE").
70
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(A)
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.
(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(A) 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(A) 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(A) General Unsecured Claim or Class 7
Convenience Claim, as appropriate, under the Plan,
and the Insured Claim shall be paid in the
71
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 (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
72
(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 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.
(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) 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.
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(A) General Unsecured Claim for the
Allowed Defense Costs.
f. Loss Portfolio Transfers
73
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.
g. ACE Objections
On February 12, 2004, ACE filed an Objection contending that
the Debtors must disclose all payments that they expect to be made under the
Plan that will be covered by insurance and disclose the material risk of lack of
insurance coverage for these claims due to potential violation of ACE's
insurance contracts. The Debtors do not believe that they have violated the
contractual rights of ACE or any other similarly situated party; nor do they
believe the treatment called for in this Plan violates such rights. The Debtors
have substantially enhanced the Disclosure Statement herein to detail their
insurance coverage and the treatment of insurance contracts, insured claims and
insurance carriers under the Plan. Nevertheless, ACE still believes that there
are certain risks inherent in the Debtors' treatment of the ACE insurance
contracts.
As outlined above, ACE issued certain insurance policies to
one or more Debtors (collectively, the "ACE USA Policies") which may provide
workers' compensation, automobile liability and general liability coverage for
certain Insured Claims. In connection with the ACE USA Policies, ACE and certain
Debtors have also entered into various related agreements (together with the ACE
USA Policies, collectively, the "ACE USA Agreements"). ACE has asserted that the
ACE USA Agreements are executory contracts pursuant to section 365 of the
Bankruptcy Code and that the ACE USA Agreements must be assumed as a condition
to ACE's continuing obligation to provide insurance coverage. Although the Plan
provides for the assumption of all insurance polices under Debtors' Workers'
Compensation Program, Debtors have indicated that they do not presently intend
to assume any of the polices that make up their Casualty Insurance Program,
including any ACE USA Agreements that may provide coverage for general or
automobile liability. Because the Plan does not require the Debtors to assume
all of the ACE USA Agreements and require the Debtors, the Reorganized Debtors
and/or the PCT Representative to provide adequate assurance of future
performance of the insureds' obligations under the ACE USA Agreements, ACE does
not believe that the Plan complies with section 365 of the Bankruptcy Code.
Moreover, although the Plan purports to assume the benefits of those ACE USA
Agreements that are included in Debtors' Workers' Compensation Program, the Plan
purports to specifically reject the insureds' continuing reciprocal obligations
under those same ACE USA Agreements. The Plan does not otherwise require that
Debtors, Reorganized Debtors and/or the PCT Representative satisfy any of the
insureds' continuing obligations under the ACE USA Agreements including, but not
limited to the payment of all continuing financial obligations as Administrative
Claims. Instead, the Plan calls for the payment of such financial obligation out
of the Insurance Security, but only until such Insurance Security is exhausted.
As a result, ACE contends that the Plan does not satisfy section 365 of the
Bankruptcy Code with respect to the ACE USA Agreements.
ACE believes that the failure of the Plan to require Debtors,
Reorganized Debtors and/or the PCT Representative to satisfy all of their
continuing contractual obligations under the ACE USA Agreements will void any
otherwise available insurance coverage under the ACE USA Agreements. ACE further
believes that the Plan seeks to provide Debtors, Reorganized Debtors and/or the
PCT Representative with certain injunctive relief that alters their ongoing
contractual obligations under the ACE USA Agreements that would also vitiate any
otherwise available insurance coverage. In particular, and not by way of
limitation, ACE believes that the Plan violates their rights (i) to control the
defense, investigation and/or settlement of certain Disputed Insured Claims
including, without limitation, those Disputed Insured Claims for which liability
may be determined by estimation; (ii) to require Debtors, Reorganized Debtors
and/or the PCT Representative to cooperate in the defense and investigation of
Disputed Insured Claims; (iii) to require Debtors', Reorganized Debtors' and/or
the PCT Representative's compliance with all the terms and conditions of the ACE
USA Agreements; (iv) to assert certain subrogation rights available to the ACE
USA Companies under the ACE USA Agreements; (v) to assert any claims for setoff,
contribution and/or recoupment; (vi) to deny coverage for certain Claims based
upon the attempted assignment of the ACE USA Agreements without ACE's express
consent; (vii) to require payment of any deductibles and/or self-insured
retentions with respect to Insured Claims; (viii) to require Debtors,
Reorganized Debtors and/or the PCT Representative to maintain collateral in
amounts sufficient to secure their continuing financial obligation under the ACE
USA Agreements; and (ix) to enforce performance of all Debtors', Reorganized
Debtors' and/or the PCT Representative's other continuing contractual
obligations under the ACE USA
74
Agreements. As such, holders of Claims that may otherwise be Insured Claims
covered under the ACE USA Agreements may not be able to receive any insurance
proceeds in full or partial satisfaction of their Claims.
ACE has reserved all of its rights, claims and defenses under
the ACE USA Agreements including, but not limited to, its rights to deny
coverage if and/or when certain Insured Claims are tendered under the ACE USA
Agreements because the Plan fails to require Debtors, Reorganized Debtors and/or
the PCT Representative to satisfy all of the insureds' continuing obligations
under the ACE USA Agreements and otherwise prejudices ACE's rights, claims and
defenses. Based on the foregoing, ACE has indicated that it may object to
confirmation of the Plan and/or seek declaratory relief in a court of competent
jurisdiction that the alleged improper treatment of the ACE USA Agreements under
the Plan relieves it of any further obligation to provide insurance coverage
thereunder.
K. 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.J. 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.
2. Distributions by Core-Mark Newco, the PCT and the RCT
Except as otherwise provided herein, Core-Mark Newco, the PCT, or
the RCT, 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 the PCT reasonable compensation for such services and
reimbursement of reasonable expenses incurred in connection with such services
upon the presentation of invoices to the PCT. 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 under 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
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.
4. Compliance with Tax Requirements/Allocations
In connection with the Plan, to the extent applicable, the
Reorganized Debtors, the PCT, and the RCT shall comply with all tax withholding
and reporting requirements imposed on them by any governmental unit, and all
distributions pursuant to the Plan 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.
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L. 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 claims based on Old
Notes, distributions with respect to such Claims will be made to the appropriate
Old Notes Trustee which will make distributions to Holders of Old Notes at the
address contained in the official record of the appropriate Old Note Trustee. To
the extent the Old Notes 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. The
Debtors, the Reorganized Debtors, Core-Mark Newco, the PCT, and/or the RCT shall
have no liability for any action pertaining to the distributions made by the Old
Notes Trustees.
2. Undeliverable Distributions
(a) Holding of Undeliverable Distributions. If any distribution to
a Holder of an Allowed Claim is returned to Core-Mark Newco, the PCT, the RCT or
an Old Notes Trustee as undeliverable, no further distributions shall be made to
such Holder unless and until Core-Mark Newco, the PCT, the RCT or an Old Notes
Trustee is notified in writing of such Holder's then-current address.
Undeliverable distributions shall be returned to Core-Mark Newco, the PCT or the
RCT and shall remain in the possession of Core-Mark Newco, the PCT or the RCT
subject to Section VI.L.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, the PCT, or the RCT, as applicable, 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 PCT 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, the PCT, or the RCT, 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, the PCT, the RCT,
or the appropriate Old Notes Trustee 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.
3. Distribution Record Date
As of the close of business on the Distribution Record Date, the
transfer register for all Claims except Old Note Claims, as maintained by the
Debtors or their agents, shall be closed, and there shall be no further changes
in the record Holders of any such Claims. Moreover, the Reorganized Debtors
shall have no obligation to recognize the transfer of any such Claims 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. There shall be no Distribution Record
Dates for Old Note Claims.
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4. 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, the PCT, and
the RCT, 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, the PCT, and the RCT, 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 to the Plan, to Holders of formerly Disputed Claims in
any Class whose Claims were Allowed during the preceding month.
5. 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 Classes 6(A) and 6(B) 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.
6. Setoffs
The Reorganized Debtors, the PCT or the RCT, as applicable, in accordance
with the Revised Term Sheet, 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, the Reorganized Debtors, the PCT or the
RCT 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, the Reorganized Debtors, the PCT
or the RCT of any such Claims, rights and Causes of Action that the Debtors, the
Reorganized Debtors, the PCT or the RCT may possess against such Holder, except
as specifically provided in the Plan.
7. 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.L. 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.
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8. 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.
9. 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.
10. 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.
11. 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.
M. 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, and in accordance with the Revised Term Sheet
and the Plan, the PCT 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 as such actions relate
to all Claims not falling under the authority of the RCT Representative pursuant
to the Revised Term Sheet and the Plan. The RCT Representative shall have
exclusive authority to file objections, settle, compromise, withdraw or litigate
to judgment objections to claims on behalf of the Debtors and Reorganized
Debtors as such actions relate to Claims that fall under the RCT
Representative's authority pursuant to the Revised Term Sheet. From and after
the Effective Date, the PCT Representative may settle or compromise any Disputed
Claim allocated to the PCT on behalf of the Reorganized Debtors and the RCT
Representative may settle or compromise any Disputed Claim allocated to the RCT
on behalf of the Reorganized Debtors without approval of the Bankruptcy Court.
2. Estimation of Claims
Core-Mark Newco, the PCT Representative, and the RCT 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, the PCT, or the RCT,
78
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, the PCT Representative, and
the RCT Trustee, 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, the PCT, or the RCT, as applicable,
Core-Mark Newco, the PCT, and the RCT, 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, the PCT, or the RCT, 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, the PCT, and the RCT, 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, the PCT, and the
RCT, 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.
N. 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;
79
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;
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.
O. 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 to the Plan. The Confirmation Order shall permanently enjoin, effective
as of the Effective Date, all Persons and Entities
80
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, 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, THE PCT REPRESENTATIVE ON BEHALF OF THE PCT AND THE RCT REPRESENTATIVE
ON BEHALF OF THE RCT RESERVE ALL PCT OR RCT CAUSES OF ACTION, AS APPLICABLE,
INCLUDING THEIR RIGHTS TO BRING AVOIDANCE ACTIONS, COLLECT VENDOR DEDUCTIONS, OR
ASSERT SETOFF, RECOUPMENT AND OTHER SIMILAR DEFENSES OR CLAIMS AGAINST MEMBERS
OF THE COMMITTEE AND/OR THE OCRC WITH RESPECT TO DEBTORS' ORDINARY COURSE
BUSINESS DEALINGS WITH SUCH COMMITTEE AND/OR OCRC MEMBERS.
3. RELEASES BY HOLDERS OF CLAIMS
a. 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.
b. 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 D&O
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; PROVIDED, HOWEVER, THAT THE FOREGOING RELEASE SHALL AFFECT ONLY THOSE
CLAIMS, OBLIGATIONS, RIGHTS, SUITS, DAMAGES, REMEDIES AND LIABILITIES IN EXCESS
OF THE AMOUNT OF THE DEBTORS' DIRECTORS AND OFFICERS INSURANCE PROCEEDS, NET OF
ALL DEFENSE COSTS AND FEES, ACTUALLY AVAILABLE IN CASH SO THE D&O RELEASEES DO
NOT HAVE TO BEAR ANY COST TO PAY SUCH CLAIMS; AND PROVIDED FURTHER THAT THE
PRECEDING LIMITATION ON RELEASES GIVEN TO DIRECTORS AND OFFICERS SHALL NOT APPLY
TO THE CURRENT DIRECTORS AND OFFICERS OF THE DEBTORS WHO WILL SERVE AS DIRECTORS
AND OFFICERS OF CORE-MARK NEWCO OR ITS SUBSIDIARIES AFTER THE EFFECTIVE DATE.
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4. INDEMNIFICATION
ALL D&O RELEASEES AND THEIR RESPECTIVE AFFILIATES, AGENTS AND
PROFESSIONALS SHALL BE INDEMNIFIED FOR 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 THROUGH THE DEBTORS' DIRECTORS AND OFFICERS
INSURANCE POLICIES, UP TO A COLLECTIVE MAXIMUM EQUAL TO THE AMOUNT OF THE
DEBTORS' DIRECTORS AND OFFICERS INSURANCE PROCEEDS, NET OF ALL DEFENSE COST AND
FEES, ACTUALLY PAYABLE IN CASH, TO PAY CLAIMS ASSERTED AGAINST THE D&O RELEASEES
EXCEPT FOR CASES OF WILLFUL MISCONDUCT OR GROSS NEGLIGENCE; AND PROVIDED,
HOWEVER, THAT THE PRECEDING LIMITATION ON INDEMNIFICATION OF DIRECTORS AND
OFFICERS SHALL NOT APPLY TO CURRENT DIRECTORS AND OFFICERS OF THE DEBTORS WHO
WILL SERVE AS DIRECTORS AND OFFICERS OF CORE-MARK NEWCO OR ITS SUBSIDIARIES
AFTER THE EFFECTIVE DATE. 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 TRANCHE B LENDERS, THE PRE-PETITION
LENDERS, THE AGENTS, THE PRE-PETITION AGENT, THE OLD NOTES TRUSTEES, THE
COMMITTEE, THE PCT, THE PCT ADVISORY BOARD, THE PCT REPRESENTATIVE, THE RCT, THE
RCT ADVISORY BOARD AND THE RCT REPRESENTATIVE, 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.
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; AND (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.
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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.14 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 and the actions consolidated or to be consolidated with such
class action (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(A)
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 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
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higher priority than the class claimants who are not likely to be receiving full
recovery on these Claims, such as, e.g., claimants with Classes 6(A) and 6(B)
and 7 Claims.
A fundamental element of the Plan is the implementation of a
settlement and compromise among the Debtors, the Committee and the PBGC. The
Debtors believe that the compromise reached is fair and equitable and in the
best interest of the Debtors' estates and creditors. The compromise permits the
Debtors to propose the Plan with the support of the PBGC and allows the Debtors
to avoid the expense and burdens associated with litigating contested claims.
The proposed settlement and compromise is the result of extensive and
arm's-length negotiations and the legal evaluations made by counsel with respect
to potentially contested issues. The Debtors believe that the settlement reached
falls within the reasonable range of litigation possibilities.
The proposed compromise resolves various claims asserted by
the PBGC against the Debtors' estates relating to the Fleming Companies, Inc.
Pension Plan and obligations under the Remaining Pension Plans (as defined
below).
As of the Petition Date, (i) Fleming Companies, Inc. sponsored
the Fleming Companies, Inc. Pension Plan (the "Fleming Plan"), the Pension Plan
of S.M. Flickinger Co., Inc. (the "Flickinger Plan"), the Godfrey Company
Subsidiaries Pension Plan (the "Godfrey Plan") and the ABCO Markets, Inc.
Retirement Plan for Arizona Warehouse and Distribution Employees (the "AZ
Warehouse Plan") and (ii) Core-Mark International, Inc, one of the Debtors,
sponsored the Core-Mark International, Inc. Non-Bargaining Employees Pension
Plan (the "CoreMark Plan," and, together with the Flickinger Plan, the Godfrey
Plan, the AZ Warehouse Plan, the "Remaining Pension Plans").
On October 31, 2003, the Debtors filed distress termination
applications with the PBGC to terminate the Fleming Plan and the Remaining
Pension Plans. To date, only the Fleming Plan has been terminated pursuant to an
agreement between the PBGC and Fleming Companies Inc. which establishes the
Fleming Plan's termination date as January 1, 2004.
The PBGC has filed seventeen (17) proofs of claim, pursuant to
Title IV of the Employee Retirement Income Security Act of 1974, as amended,
alleging (i) unfunded benefit liabilities on plan termination, (ii) due and
unpaid minimum funding contributions and (iii) missed PBGC premium payments (the
"PBGC Claims"), fifteen (15) of which were filed on September 11, 2003 (three
(3) claims with respect to the unfunded benefit liabilities, due and unpaid
minimum funding contributions, and missed PBGC premium payments, of each of the
Fleming Plan and the Remaining Pension Plans), and two (2) of which were filed
on March 16, 2004, and amended PBGC's previously filed unfunded benefit
liabilities and due and unpaid minimum funding claims filed with respect to the
Fleming Companies, Inc. Pension Plan. On April 16, 2004, and April 17, 2004, the
Debtors filed objections to PBGC Claims.
On May 12, 2004, the Debtors filed their Motion pursuant to 11
U.S.C. Section 105(a) and Fed.R. Bank.P. 9019(a) for Court Approval of
Settlement Agreement with Pension Benefit Guaranty Corporation. The Motion is
currently scheduled for hearing on June 1, 2004. If granted, the motion will
result in a good faith compromise and settlement of claims or controversies
relating to the PBGC Claims and any distribution to be made on account of such
Claims as an Allowed Claim. The Committee supports the settlement and compromise
with the PBGC and has executed the Global Settlement and Mutual Release attached
to the motion. If the Debtors are unable to confirm the Plan or a plan of
reorganization with substantially the same terms as the Plan, the settlement
with the PBGC shall be void ab initio. The primary terms of the compromise and
settlement are set forth below and are fully contained in the Global Settlement
and Mutual Release attached to the motion:
- The PBGC's proof of claim number 18276 for alleged
missed minimum funding contributions to the Fleming Plan
shall be reduced to and reclassified as (i) an Allowed
Administrative Claim in the amount of $2,000,000 and
(ii) an Allowed Other Priority Non-Tax Claim under
section 507(a)(4) of the Bankruptcy Code in an amount up
to $750,000 (subject to the reductions set forth in
section 507(a)(4) of the Bankruptcy Code).
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- The PBGC's proof of claim number 18275 shall be reduced
to and treated as an Allowed Class 6(A) General
Unsecured Claim under the Plan in the amount of
$200,000,000.
- The remaining PBGC Claims shall be deemed withdrawn,
with prejudice, upon the Effective Date.
- The PBGC further agrees it shall vote for and otherwise
support the Plan and shall not object to the Plan.
- For purposes of voting on the Plan, PBGC's claim number
18275 will be an Allowed General Unsecured Claim in the
reduced amount of $200,000,000.
- All the Debtors' objections to the PBGC Claims shall be
deemed withdrawn, with prejudice, upon the Effective
Date.
- The Debtors agree not to file a motion with the
Bankruptcy Court seeking to terminate the Remaining
Pension Plans, and on the Plan Effective Date, the
sponsoring Debtor, as applicable, shall withdraw the
distress termination applications to terminate the
Remaining Pension Plans.
- Additionally, notwithstanding anything in the Plan or
the Confirmation Order (a) there shall be no release,
discharge, injunction, or exculpation of any entity from
any liability with respect to the Remaining Pension
Plans as to any Claim of, or cause of action by, the
PBGC and (b) there shall be no release, discharge,
injunction or exculpation of any entity, except for the
Debtor, the Reorganized Debtors, any entities created
through the merger of the Reorganized Debtors, any
members of the Reorganized Debtors' Controlled Group
(including Core-Mark Newco, Core-Mark Newco Holding I,
Core-Mark Newco Holding II, Core-Mark Newco Holding III,
the PCT and the RCT), from any liability with respect to
the Fleming Plan as to any Claim or cause of action by
the PBGC.
- The Debtors shall not seek to reject the Remaining
Pension Plans under section 365 of the Bankruptcy Code.
- The Debtors agree that the Reorganized Debtors or a
member of their Controlled Group will be the
contributing sponsors of the Remaining Pension Plans and
that each of the Reorganized Debtors and each member of
the Reorganized Debtors' Controlled Group (as defined
under 29 U.S.C. Section 1301(14)(a)) will comply with
its obligations with respect to the Remaining Pension
Plans under ERISA, any other applicable law, and the
terms of the Plans.
10. Consideration for Releases, Indemnification and Exculpation
As discussed herein, the Releases provided for in the Plan are
made in exchange for the significant contributions made by the Releasees to the
Debtors' 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 Committee, the OCRC 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 and reclamation creditors. Without these contributions, the
Debtors' reorganization certainly would have been compromised.
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P. Special Provisions Regarding Reclamation Claims
1. TLV Reclamation Claims
a. Allowance of TLV Reclamation Claims shall be determined
solely by the RCT and the affected Creditor without
standing of any other party to object (unless resolution
is referred to the PCT on such terms as the RCT and the
PCT shall determine).
b. Reconciliation of the TLV Reclamation Claims shall
consist of application of all postpetition vendor
deductions, over-wires and preferences and pre-petition
setoffs to the extent that General Unsecured Claims have
first been fully setoff through application of
pre-petition deductions. The reconciliation shall
recognize the effect of the Trade Credit Program and the
critical vendor program.
c. Allowed TLV Reclamation Claims shall earn interest which
shall begin to accrue sixty (60) days after the
Effective Date at the Wall Street Journal listed prime
rate.
d. Allowed TLV Reclamation Claims shall be paid (i) first
from the RCT; (ii) second from the PCT and (iii) third
from the Core-Mark TLV Guaranty.
2. Non-TLV Reclamation Claims
a. Allowance of Non-TLV Reclamation Claims shall be
determined solely by RCT and the affected Creditor
without standing of any other party to object (unless
resolution is referred to the PCT on such terms as the
PCT and RCT shall determine).
b. In reconciling the Non-TLV Reclamation Claims, all
post-petition vendor deductions, over-wires,
preferences, and pre-petition setoffs to the extent that
General Unsecured Claims have been fully set off, shall
be applied. In addition, Non-TLV Reclamation Claims will
first be reduced by a discount of $13 million (the
"Prepetition Non-TLV Reclamation Claim Reduction") to
calculate the net Allowed amount of pre-petition Non-TLV
Reclamation Claim ("Net Non-TLV Reclamation Claim").
c. Allowed Non-TLV Reclamation Claims shall be paid only
after satisfaction of all Allowed TLV Reclamation Claims
(i) first from the RCT, (ii) second from the PCT and
(iii) third from the Core-Mark Non-TLV Guaranty. The
timing of such distribution shall be in the discretion
of the RCT.
3. General Unsecured Claims of Reclamation Creditors
a. Allowance of General Unsecured Claims held by
Reclamation Creditors shall be determined by the RCT
pursuant to procedures established by the Court. Such
procedures shall include a mechanism for approval by the
PCT Advisory Board of settlements which represent an
increase of at least 20% from the General Unsecured
Claims scheduled by the Debtors or the proofs of claim,
whichever is less.
b. The prosecution of any objections with respect to the
General Unsecured Claims held by Reclamation Creditors
and the reconciliation of General Unsecured Claims shall
be conducted by the RCT at its expense and will be
subject to
86
setoff against any pre-petition Claims of the Debtors
against the Reclamation Creditors.
c. Allowed General Unsecured Claims of Reclamation
Creditors shall be entitled to the same treatment under
this Plan as the Allowed Class 6(A) General Unsecured
Claims of non-Reclamation Creditors and Holders of such
Claims shall receive distributions pursuant to the Plan
when Allowed.
4. Expected Reconciliation Rules of RCT
The advisory board of the RCT is expected to approve a series of
rules which can be applied in the reconciliation of Reclamation Claims and other
RCT Assets. These rules shall be applied on a consensual basis by the RCT
Representative with the Reclamation Creditors. These rules shall not be
mandatory. In the event a consensual reconciliation is not achieved by the RCT
Representative and a Reclamation Creditor, there may be alternative dispute
resolution procedures made available on terms adopted by the advisory board of
the RCT. In any event, each Reclamation Creditor reserves its rights to seek
allowance and reconciliation of its Reclamation Claim in accordance with the
Bankruptcy Code and Bankruptcy Rules process as qualified by the Plan.
Pursuant to the Revised Term Sheet, the Debtors, the OCRC, and the
Committee have requested a stay from the Bankruptcy Court of the adversary
proceedings against the Reclamation Claimants through and including the
Effective Date. In the event that the Plan is confirmed, post-Effective Date,
all claims, defenses, and other litigation rights related thereto asserted in
these adversary proceedings constitute RCT Assets, and the RCT shall be entitled
to substitute itself for the Debtors in the adversary proceedings against
Reclamation Claimants. It is the expectation of the OCRC that the advisory board
of the RCT shall seek a further stay of these adversary proceedings to the
extent necessary to, among other things, complete the development of the rules
to be applied in reconciling Reclamation Claims and in resolving the claims
asserted against Reclamation Claimants in the adversary proceedings on a
consensual basis. In the event the application of the rules does not provide a
means to resolve a particular Reclamation Claim, the RCT and the Holder of the
Reclamation Claim reserve the right to seek to terminate the stay of the
relevant adversary proceeding or through other means to seek resolution of the
Reclamation Claim through litigation or other means of dispute resolution.
Subject to Confirmation of the Plan, both in the application of the rules for
reconciliation of Reclamation Claims on a consensual basis and through any
litigation or other dispute resolution (whether through one of the adversary
proceedings or otherwise), the assertion that a Reclamation Claim is to be
eliminated, or to any extent reduced, because of any security interest having
existed in the Debtors' inventory shall be barred (a waiver of the so-called
"valueless" defense to a Reclamation Claim).
5. Surplus Contingency from RCT
In the event the RCT has or develops proceeds for distribution after
satisfaction of all Reclamation Claims, such additional proceeds shall be
applied by the RCT in an order of priority as follows:
a. To Core-Mark Newco for any advances under the TLV
Guaranty or Non-TLV Guaranty;
b. To the Prepetition Non-TLV Reclamation Claim Reduction;
c. To Core-Mark Newco for any advances under the
Administrative Claim Guaranty;
d. Any amount of "ad hoc committee" professional fees which
have not been reimbursed by allowance of an
Administrative Claim; and
e. To the PCT.
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Q. 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.
R. 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;
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 PCT and the RCT shall be established and all actions,
documents and agreements necessary to implement the PCT and the RCT shall have
been effected or executed.
88
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).
S. 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.
T. 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
December 31, 2004, unless otherwise extended by the Bankruptcy Court, 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.
U. 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 PCT Advisory Board on behalf of the
PCT, and such severance would constitute a permissible modification of the Plan
pursuant to section 1127 of the Bankruptcy Code.
V. 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 and OCRC
The Committee and the OCRC 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 and the OCRC'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
89
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, and except for a
modification that would adversely impact Reclamation Creditors in a manner
inconsistent with the Revised Term Sheet without the consent of the OCRC, (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 PCT 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 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 in the Plan, 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.
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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, the Committee, or the OCRC
shall be sent by first class U.S. mail, postage prepaid to:
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
and
Piper Rudnick LLP Klehr Harrison Harvey Branzburg & Ellers LLP
6225 Smith Ave. 260 Broad Street
Baltimore, MD 21209-3600 Philadelphia, PA 19102
Attn.: Mark J. Friedman Attn.: Morton R. Branzburg
12. Filing of Additional Documents
On or before the Effective Date, the Debtors with the consent of the
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.
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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 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.
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 PCT 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, the PCT, and the RCT, 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. of the Plan as well as those Causes of Action
listed on Exhibit A to the Plan.
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, the PCT, or the RCT, as
applicable and such vesting shall be consistent with the Revised Term Sheet.
Core-Mark Newco, the PCT, or the RCT, 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 PCT may commence, pursue and settle non-Reclamation Causes of
Action, as outlined more fully in the PCT Agreement and the RCT may commence,
pursue and settle the RCT Causes of Action as outlined more fully in the RCT
Agreement and the Revised Term Sheet. Core-Mark Newco, the PCT and the RCT, 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. Notwithstanding any of the preceding,
retention and vesting of Causes of Action shall conform to the specifications
set forth in the Revised Term Sheet.
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, the PCT, and the RCT, 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, the PCT, or the RCT, 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
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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 LLC and 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;
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- 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, except actions against the
Releasees or D&O Releasees to the extent they are released by the
Plan.
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 or D&O Releasees), is not intended to limit the rights of Core-Mark
Newco, the PCT or the RCT to pursue any Unknown Cause of Action to the extent
the facts underlying such Unknown Cause of Action become fully known to the
Debtors.
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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, the PCT, or the RCT, 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 PCT, the RCT 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, the PCT or the RCT, as applicable,
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 will determine whether
the requirements of section 1129 of the Bankruptcy Court have been satisfied. If
so, the Bankruptcy Court will 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 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 the
following financial projections: (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 sheets for Core-Mark Newco, the PCT, and the RCT (Exhibit 3A);
(e) post-Effective Date balance sheets, income statements, and statements of
cash flows for Core-Mark Newco (Exhibit 3B); (f) post- Effective Date statements
of assets and liabilities and cash receipts and disbursements for the PCT
(Exhibit 3C); and (g) post- Effective Date statements of assets and liabilities
and cash receipts and disbursements for the RCT (Exhibit 3D). EXHIBITS 3A - 3D
AND THE NOTES THERETO ARE AN INTEGRAL PART OF THIS DISCLOSURE STATEMENT AND
SHOULD BE READ IN CONJUNCTION WITH THIS DISCLOSURE STATEMENT AND THE PLAN.
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 and the Revised
Term Sheet. 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 PCT does not have sufficient funds to
pay the Class 3(B) or Class 5 Claims as required under the Plan and the Revised
Term Sheet, Core-Mark Newco will ultimately assume certain of that
responsibility. Thus, the financial strength of Core-Mark Newco will also assure
payment of the Claims of the Reclamation Creditors and thus, the feasibility of
the Plan.
The projections indicate that Core-Mark Newco and the PCT 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. Furthermore, Core Mark Newco, the PCT and
the RCT will be created on the Effective Date, thus no historical financial
information exists for these entities. To compensate for the lack of historical
data in its projections, the Debtors used management profit and loss and working
capital data at the division level that was consolidated and used to project the
business activity for the Disclosure Statement. Further, the Debtors estimated
the costs associated with being a stand alone company and certain residual costs
that would be transferred from Fleming (i.e., certain workers' compensation
liabilities and the pension liabilities for the three small pension plans not
being terminated). As disclosed in the projections, these estimates have not
been audited and may not comply with the requirements of GAAP. Fleming
Convenience's management believes these estimates are reasonable and are the
best estimate of the future operations of Core-Mark Newco. However, the actual
results can be expected to vary from the projected results and the variations
may be material and adverse.
The values of the assets contributed to the PCT and the RCT are stated on
the basis of the amount of cash the Debtors expect to be recovered from the
pursuit of the collection of these assets, based on the Debtors' review of the
underlying detail of the components of each asset category. The ultimate
recovery takes into account a number of factors, including the length of time
and amount of resources available to pursue such collections through a
combination of settlements, litigation, and arbitration. Such assumptions will
vary between pursuits of recoveries through the ongoing trust vehicles from the
conditions expected in a liquidation environment. No amounts have been included
for contingent items, such as miscellaneous causes of actions, purchase escrows,
etc. where no reliable estimate of recovery could be made. The liabilities of
the PCT and the RCT have been estimated at the amount that the Debtors expect
the PCT and the RCT will ultimately pay, using their best business judgment at
the time the estimates were made. Results between the estimated amount and the
amount the PCT and the RCT ultimately pay may be expected to vary.
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Cash transferred to the PCT and the RCT are the balances as projected in
the respective accounts on the Effective Date. The amount of cash available was
estimated by using current balances on hand for restricted, unrestricted, and
escrowed cash adjusted for receipt and disbursement activity projected to occur
prior to the Effective Date.
For the estimated proceeds from the collection of trade accounts
receivable in the amount of $15 million, the Debtors reviewed each of the over
3,000 wholesale accounts to be transferred to the PCT or the RCT with a
currently outstanding balance, which exceeds $72 million. A low and high
probability of collection was applied to each account, resulting in anticipated
collections ranging between $17 million and $25 million. The Debtors identified
the mid-range between these amounts of $21 million. The Debtors then estimated
the amount of collections that will be received prior to July 31 to be $6
million, resulting in estimated collections by the PCT or the RCT of $15
million. The Debtors project that many of these accounts will be ultimately
collected in a litigation or arbitration environment and that collection
activities will stretch into 2006.
As part of the asset purchase agreement with C&S, certain royalties
related to the continuation of service by C&S or its follow-on buyers to
previous wholesale customers of the Debtors were to be paid quarterly through
2008. The Debtors estimate, based on the retention of the Debtors' previous
customers reported to the Debtors by C&S or its follow-on buyers, that
approximately $3 million remains outstanding from one of the C&S follow-on
buyers. The Debtors negotiated prepayment of the royalties due from C&S and all
other follow-on purchasers. The projections assume that the Debtors will receive
the payments scheduled in 2004 and 2005 and will be able to negotiate a similar
prepayment for the remaining amount due in 2006.
The Debtors have certain assets that are due and payable from
non-reclamation and Reclamation Creditors. These assets include accounts
receivables from vendors for promotional activities that were earned during the
post-petition period in the normal course of operations and are due and payable.
These assets also include certain excess payments made to vendors during the
post petition period in excess of the value of product received in return from
the vendor. The Debtors also believe that vendors are holding certain funds of
the debtors that were collected by the vendors both pre-petition and
post-petition for product sold from Fleming to military commissaries. Finally,
the Debtors believe that certain vendors violated the Critical Trade Vendor
Program and, as such, amounts received by the vendors under that program are to
be repaid to the Debtors. The Debtors believe the estimated collections from the
above referenced vendor receivables will generate proceeds to the PCT of
approximately $15 million and proceeds to the RCT of approximately $84 million.
During the 90 days preceding the Debtors' bankruptcy filing, the Debtors
made payments to non-Reclamation Creditors in a total amount of $1.8 billion and
payments to Reclamation Creditors in a total amount of $2.2 billion. Such
payments are subject to recovery by the PCT and the RCT. The Debtors have
evaluated the potential defenses available to the creditors that received these
payments, including new value provided and an assessment of whether or not
payments were made in the ordinary course of business. Based on the Debtors'
analysis of such defenses, the Debtors believe that net proceeds that may be
recovered by the PCT will approximate $28 million and the net proceeds that may
be recovered by the RCT will approximate $40 million. The preceding estimates do
not include any amount for those actions for which a recovery amount cannot be
currently estimated.
The liabilities of the PCT and RCT have been estimated at the amount that
the Debtors expect to ultimately to have to be paid, using their best business
judgment at the time the estimates were made. Results between the estimated
amount and the amount that may ultimately have to be paid may be expected to
vary.
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
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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 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
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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 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.
In some cases the liquidation values of certain assets contained in
the Best Interests Analysis are more conservative than the values used for the
PCT or the RCT because of the time pressures inherent in a Chapter 7
liquidation. The liquidation analysis does not anticipate the sale of the
Debtors as a going-forward business because Chapter 7 trustees typically do not
operate businesses. Nevertheless, the range of values used in the liquidation
analysis are consistent with the range of values received by the Debtors as part
of the sale process explored in the fall of 2003. Also, although the Best
Interests 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. Furthermore, 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
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
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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's professionals have indicated they do not
agree with this valuation. The Committee's professionals indicate they believe
the enterprise value is in a range of $310 to $360 million, with a mid-point of
$335 million.
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 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
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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 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.
New Common Stock equivalent to 2% of the Core-Mark Newco Equity Value will
be issued under the Management Incentive Plan. Based upon the midpoint equity
valuation for Core-Mark Newco of $155 million, this New Common Stock grant is
valued at approximately $3 million. Also under the Management Incentive Plan,
warrants will be granted that will be convertible into approximately 9% of the
fully diluted New Common Stock outstanding. The warrants will have a maturity of
seven years and a strike price based upon Core-Mark Newco's reorganized equity
value. Using a warrant valuation model based on Black-Scholes, the Management
Incentive Plan warrants are valued at approximately $7 million. In addition,
under the terms of the Tranche B Loan, the Tranche B Lenders will receive
warrants convertible into approximately 2% of the fully diluted New Common Stock
outstanding, and will have terms substantially similar to those granted under
the Management Incentive Plan. Using a warrant valuation model based on
Black-Scholes, the warrants granted to the Tranche B Lenders are valued at
approximately $2 million. Finally, the Holders of Class 6(B) Claims shall
receive warrants equal to 8% of the fully diluted New Common Stock outstanding.
The strike price of the warrants shall be determined using Core-Mark Newco's
reorganization value on a per share basis and adding to it a premium equal to
35% per share. The warrants shall expire 7 years after the Effective Date. These
warrants will have no intrinsic value as of the Effective Date because the
strike price is in excess of Core-Mark Newco reorganization value per share, and
are valued at approximately $5-6 million using a warrant valuation model based
on Black-Scholes.
Taking into consideration the value of the New Common Stock and warrants
granted under the Management Incentive Plan and warrants granted to the Tranche
B Lenders, the Core-Mark Newco Equity Value remaining and distributable to
General Unsecured Claims other than Convenience Claims is approximately $119
million to $168 million.
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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.
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 receives or retains 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
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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,
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 Classes 6(A) and 6(B) 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 or 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.
107
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, the PCT or the RCT as provided in the Plan, free and
clear of all Liens, Claims and Interests. Thereafter, Core-Mark Newco, the PCT
or the RCT will hold these assets without further jurisdiction, restriction or
supervision of the Bankruptcy Court, except as may be provided in this
Disclosure Statement or the Plan.
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.
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; and (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. The Confirmation Order shall be a judicial determination of discharge
of all Claims against the Debtors pursuant to section 524 and 1141 of the
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.
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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, warrants (where applicable), 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 TLV Reclamation Claims
Holders of TLV Reclamation Claims will receive a first preferred
interest in the RCT entitling such Holders to their Ratable Proportion of the
RCT Assets. Accordingly, Holders of TLV Reclamation Claims will be treated as
exchanging such Claims for preferred interests in the RCT in a taxable exchange
under section 1001 of the Code. Accordingly, a Holder of TLV Reclamation Claim
should recognize gain or loss equal to the difference between (i) the fair
market value of a preferred interest in the RCT and (ii) the Holder's adjusted
basis in TLV Reclamation Claims. Such gain or loss should be capital in nature
so long as TLV Reclamation Claims were held as capital assets (subject to the
"market discount rates" described below) and should be long-term capital gain or
loss if TLV Reclamation Claims were held for more than one year. To the extent
that a portion of the preferred interest in the RCT 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.
4. Consequences to Holders of Non-TLV Reclamation Claims
Holders of Non-TLV Reclamation Claims will receive a second
preferred interest in the RCT entitling such Holders to their Ratable Proportion
of the RCT Assets after TLV Reclamation Claims are paid in full. Accordingly,
Holders of non-TLV Reclamation Claims will be treated as exchanging such Claims
for preferred interests in RCT in a taxable exchange under section 1001 of the
Code. Accordingly, a Holder of Non-TLV Reclamation Claim should recognize gain
or loss equal to the difference between (i) the fair market value of a preferred
interest in the RCT and (ii) the Holder's adjusted basis in Non-TLV Reclamation
Claims. Such gain or loss should be capital in nature so long as Non-TLV
Reclamation Claims were held as capital assets (subject to the "market discount
rates" described below) and should be long-term capital gain or loss if Non-TLV
Reclamation
115
Claims were held for more than one year. To the extent that a portion of the
preferred interest in the RCT 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.
5. Consequences to Holders of General Unsecured Claims (Other
Than Convenience Claims and Senior Subordinated Note Claims)
Holders of Allowed General Unsecured Claims, other than Convenience
Claims and Senior Subordinated Note 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 or Senior Subordinated Note Claim
shall be entitled to a Ratable Proportion of excess proceeds, if any, available
from the PCT or the RCT after payment by the PCT or the RCT of all claims and
obligations required to be made by the PCT or the RCT under the Plan, the PCT
Agreement, the RCT Agreement, the Plan Support Agreement or otherwise, as set
forth in the PCT Agreement and the RCT Agreement.
Holders of Allowed General Unsecured Claims other than Convenience
Claims will be treated as exchanging their General Unsecured Claims for New
Common Stock, PCT interests, RCT 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 or Senior Subordinated Note 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 PCT and the RCT (to the extent such New Common
Stock, Cash and interests in the PCT and in the RCT 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 and Senior Subordinated
Note 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 and Senior Subordinated Note
Claims were held for more than one year. To the extent that a portion of the New
Common Stock, Post-Confirmation Trust Interests and RCT interests and Cash
received in exchange for General Unsecured Claims other than Convenience Claims
and Senior Subordinated Notes 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, the PCT interests
and RCT interests received in exchange for the General Unsecured Claims should
equal the fair market value of the New Common Stock, the PCT interests and the
RCT interests respectively, as of the Effective Date. A Holder's holding period
for the New Common Stock, the PCT interests and RCT interests should begin on
the day following the Effective Date.
Pursuant to the Plan, any New Common Stock held by Core-Mark
Holdings III on account of disputed claims shall be treated as held in trust by
Core-Mark Holdings III as fiduciary for the benefit of holders of Disputed
Claims and any PCT Assets and RCT Assets held by the PCT and the RCT on account
of Disputed Claims shall be treated as held in trust by the PCT and the RCT as
fiduciary for the benefit of holders of Disputed Claims (each such trust
referred to as a "Disputed Claims Reserve").
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
116
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, the PCT and the RCT 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, the PCT and the RCT, in each case as fiduciary for Holders of
Disputed Claims, will report as subject to a separate entity level tax any
amounts earned by their respective Disputed Claims Reserves, except to the
extent such earnings are distributed by such fiduciary during the same taxable
year. In such event, any amount earned by a 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 a 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.
Each Holder of a Disputed /Claim 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 Senior Subordinated Note Claims
On the Effective Date, or as soon as practicable thereafter, each
Holder of an Allowed Senior Subordinated Note Claim shall be paid in full
satisfaction, settlement, release, and discharge of and in exchange for each and
every Allowed Senior Subordinated Note Claim, subject to the contractual
seniority of the Senior Notes, at the Debtors' option, in one or a combination
of the following manners,: (i) issuance of a Ratable Proportion of New Common
Stock, with such Ratable Proportion to be determined as if Classes 6(A) and 6(B)
were a single Class, and subject to dilution from the issuance of warrants to
the Tranche B Lenders, the Holders of Senior Subordinated Notes 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, with such Ratable Proportion to
be determined as if Classes 6(A) and 6(B) were a single Class. As additional
consideration, subject to the contractual seniority of the Senior Notes, each
Holder of a Senior Subordinated Note Claim in Class 6(B) shall be entitled to a
Ratable Proportion of excess proceeds, if any, available from the PCT after
payment by the PCT of all Claims and obligations required to be made by the PCT
under the Plan or the PCT Agreement, with such Ratable Proportion to be
determined as if Classes 6(A) and 6(B) were a single Class. Pursuant to the
Revised Term Sheet, the RCT shall pay any excess proceeds, if available, after
payment of all Claims and obligations of the RCT, to the PCT.
As further consideration, not subject to the contractual seniority
of the Senior Notes, Holders of Class 6(B) Claims shall receive a distribution
of nondilutive warrants that when struck will result in the Holders of Senior
Subordinated Note Claims receiving 8% of the New Common Stock on a fully diluted
basis. The strike price of the warrants shall be determined using Core-Mark
Newco's reorganization value, determined on a per share basis and adding a
premium equal to 35% per share. The warrants shall expire 7 years after the
Effective Date.
Holders of Senior Subordinated Note Claims will be treated as
exchanging their Claims for New Common Stock, warrants, PCT interests and/or
Cash in a taxable exchange under Section 1001 of the Code.
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Accordingly, a Holder of a Senior Subordinated Note Claim should recognize gain
or loss (at the time such Holder receives New Common Stock and warrants) equal
to the difference between (i) the sum of (a) the fair market value of the New
Common Stock and warrants (as of the Effective Date) received in exchange for
the Senior Subordinate Note Claims; (b) an amount of Cash received and (c) the
fair market value of any interest in the PCT (to the extent such New Common
Stock, warrants, Cash and interests in the PCT are not allocable to accrued but
unpaid interest) and (ii) the Holder's adjusted basis in the Senior Subordinated
Note Claims. Such gain or loss should be capital in nature so long as the Senior
Subordinated Note 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 Senior Subordinated Note Claims were held for more than one year. To the
extent that a portion of the New Common Stock, warrants, PCT Interests and Cash
received in exchange for the Senior Subordinated Note 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, warrants and the PCT interests received in exchange for the General
Unsecured Claims should equal the fair market value of the New Common Stock,
warrants and the PCT interests respectively, as of the Effective Date. A
Holder's holding period for the New Common Stock, warrants and the PCT interests
should begin on the day following the Effective Date.
Pursuant to the Plan, any New Common Stock and warrants held by
Core-Mark Holdings III on account of disputed claims shall be treated as held in
trust by Core-Mark Holdings III as fiduciary for the benefit of holders of
Disputed Claims and any PCT Assets held by the PCT on account of Disputed Claims
shall be treated as held in trust by the PCT as fiduciary for the benefit of
holders of Disputed Claims (each such trust referred to as a "Disputed Claims
Reserve").
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, the PCT and the RCT 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, the PCT and the RCT, in each case as fiduciary for Holders of
Disputed Claims, will report as subject to a separate entity level tax any
amounts earned by their respective Disputed Claims Reserves, except to the
extent such earnings are distributed by such fiduciary during the same taxable
year. In such event, any amount earned by a 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 a 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.
Each Holder of a Disputed /Claim 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.
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7. 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.
8. Receipt of Interests in PCT and in the RCT
On the Effective Date, the PCT and the RCT shall be settled and are
currently anticipated to exist as either a grantor trusts or partnerships, in
each case, for the benefit of certain creditors. The PCT and/or the RCT will
also make payments to Holders of Administrative Claims, Priority Tax Claims,
Other Priority Non-Tax Claims, Priority Property Tax Claims, PACA/PASA Claims,
FSA liabilities and Convenience Claims solely in satisfaction of liabilities
assumed by the PCT and/or RCT, and such claim Holders shall not be treated as
beneficiaries of the trusts for tax purposes. 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 PCT Representative or the RCT Trustee), pursuant to Treasury Regulation
Section 1.671-1(a) and/or Treasury Regulation Section 301.7701-4(d) and related
regulations, the PCT Representative and the RCT Trustee may designate and file
returns for each of the PCT and the RCT as a "grantor trust" and/or "liquidating
trust" and therefore, for federal income tax purposes, the PCT's and RCT'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 PCT and in the RCT
will be required to report on their U.S. federal income tax returns their share
of the PCT's and the RCT's items of income, gain, loss, deduction and credit in
the year recognized by the PCT and the RCT, respectively, whether or not each of
the PCT and the RCT 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 PCT's and the RCT's taxable income prior to receiving any cash
distributions from the PCT and the RCT. In general, holders of interest in the
PCT and in the RCT 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 PCT and/or in the RCT as debt (and not equity) and/or
recharacterize the PCT and the RCT 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 PCT and by the RCT. If the IRS asserts and ultimately prevails in
either of these positions with respect to either the PCT or the RCT, the
preferred interests issued by the PCT and/or the RCT 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 PCT's and/or RCT's items of income, gain, loss, deduction and credit in
the year recognized by the trust. The PCT Representative and the RCT Trustee
intend to take a position on PCT's and RCT's tax return that the PCT and the
RCT, respectively, should each 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 PCT and/or the RCT.
9. 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)
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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 whether
the Plan will be treated as a taxable exchange (or as a tax-free reorganization)
and on the particular facts relating to such Holder at the time of such sale,
redemption, or other disposition. In general, assuming that the Plan will be
treated as a taxable reorganization, a Holder of New Common Stock who holds such
stock as a capital asset will recognize capital gain or loss upon the sale,
redemption or other disposition of such stock. Whether such gain or loss will be
treated as long-term or short-term will depend on the Holder's holding period as
of the date of sale, redemption or other disposition. However, if the exchanges
accomplished pursuant to the Plan were treated as a tax-free reorganization and
not as a taxable gain, any gain recognized by a Holder could 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.
c. Subsequent Exercise, Sale or other Disposition of
Warrants
While not free from doubt, the exercise of warrants by a Holder of
such warrants should not give rise to taxable gain or loss. The holding period
of the common stock acquired upon exercise of the warrants should begin on the
date of such exercise, and should not include the period during which such
warrants were held. The holder's tax basis in the common stock acquired upon
exercise should include the holder's tax basis in the warrants increased by the
amount paid upon exercise.
In the event that a Holder sells its warrants in a taxable
transaction, the Holder will recognize gain or loss upon such sale in an amount
equal to the difference between the amount realized upon such sale and the
Holder's tax basis in the warrants. Such gain or loss shall be treated as gain
or loss from the sale or exchange of property which has the same character as
the common stock to which the warrants relates would have had in the hands of
the Holder if such stock had been acquired by the Holder upon exercise. If such
sale gives rise to capital gain or loss to the Holder, such gain or loss shall
be long-term or short-term in character based upon the length of time such
holder has held his or her warrants.
If warrants held by a Holder expire unexercised, such warrants
should be deemed to have been sold or exchanged on the day of expiration. Such
expiration should therefore in most cases give rise to a loss, unless such
holder shall have previously claimed a deduction for the worthlessness of such
warrants in a previous taxable period.
The rules applicable to the treatment of warrants are complex,
particularly in the context of warrants acquired in a complex transaction such
as this one. Holders of warrants are urged to consult their tax advisors to
review and determine the tax consequences associated with the receipt, ownership
and disposition of such warrants.
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10. 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.
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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 PCT
and/or the RCT 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 PCT and/or the RCT 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), PCT
and/or the RCT 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
PCT and/or the RCT should not be treated as engaged in a U.S. trade or business
as a result of holding interests in the PCT and/or the RCT. Such Non-U.S.
Holders should not be required to file U.S. federal income tax returns with
respect to their share of the PCT's and/or the RCT'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 each of the PCT and/or
the RCT is taxed as a partnership or a grantor trust. In general, Non-U.S.
Holders of interests, in the PCT and/or the RCT will not be subject to tax on
their receipt of distributions from each 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.
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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, PCT and the RCT 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, PCT and RCT 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 PCT and the RCT 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.
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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
4.31% for ownership changes occurring in April 2004) 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
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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.
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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
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
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 or the inclusion of an
amount in the taxable income earned in Canada of Core-Mark International. Under
the debt forgiveness 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:
1. is or is deemed to be a resident of Canada; and
126
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 PCT and the RCT (the "Trusts"), 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 PCT and the RCT
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 Trusts 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
Trusts for the Trusts' 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
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.
127
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 COUNSEL'S UNDERSTANDING OF THE PROPOSED ACTIVITIES OF THE TRUSTS
AND OF THE PROPERTY PROPOSED TO BE HELD BY THE TRUSTS RECEIVED FROM THE PCT, it
is expected that the Trusts will each be an FIE and that an interest therein
will be a participating interest in an FIE. If either of the Trusts is treated
as 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 such
Trust, unless the Resident Beneficiary makes a valid election to recognize a
share of such 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 TRUSTS.
On a disposition or deemed disposition of an interest in the Trusts, 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 Trusts and any reasonable costs of disposition.
2. Non-Resident Holders
Based on counsel's understanding of the proposed activities of the Trusts
and of the property proposed to be held by the Trusts received from the PCT
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 Trusts.
128
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.
129
XV. CONCLUSION
The Debtors, the Committee, and the OCRC 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.
130
THE DEBTORS, THE COMMITTEE, AND THE OCRC 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 JULY 2, 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
131
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 -- PCT Financial Projections
3D -- RCT Financial Projections
Exhibit 4 Best Interests Analysis
Exhibit 5 None
Exhibit 6 CUSIP Numbers of Old Notes
Exhibit 7 Exit Facility Commitment Letter
Exhibit 8 Tranche B Put Agreement
Exhibit 9 Draft PCT Agreement
Exhibit 10 None
Exhibit 11 None
Exhibit 12 Draft RCT Agreement
Exhibit 13 Revised Term Sheet
132
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' THIRD AMENDED AND
REVISED 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
James H. M. Sprayregen, P.C. Paul S. Aronzon
Richard L. Wynne Dennis F. Dunne
Janet S. Baer One Chase Manhattan Plaza
Geoffrey A. Richards New York, NY 10005
200 East Randolph Drive (212) 530-5000
Chicago, IL 60601-6436
Telephone: (312) 861-2000 and
Facsimile: (312) 861-2200
PEPPER HAMILTON LLP
and I. William Cohen
Robert S. Hertzberg
Dennis S. Kayes
PACHULSKI, STANG, ZIEHL, YOUNG, 100 Renaissance Center
JONES & WEINTRAUB P.C. Suite 3600
Laura Davis Jones Detroit, MI 48243-1157
Ira D. Kharasch (313) 259-7110
919 North Market Street, Sixteenth Floor, P.O.
Box 8705 Co-Counsel for the Official Committee of Unsecured
Wilmington, Delaware 19899-8705 (Courier No. Creditors
19801)
Telephone: (302) 652-4100
Facsimile: (302) 652-4400
Co-Counsel for the Debtors and Debtors in
Possession
Dated : May 25, 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.; PAGE 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.; iii 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 ii 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. Defined Terms........................................................................... 1
ARTICLE II. UNCLASSIFIED CLAIMS........................................................................... 13
A. Administrative Claims................................................................... 13
B. Priority Tax Claims..................................................................... 15
C. DIP Claims.............................................................................. 15
ARTICLE III. CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS....................... 15
A. Summary................................................................................. 15
B. Classification and Treatment............................................................ 16
C. Additional Provisions Governing Reclamation Claims...................................... 21
D. Special Provision Governing Unimpaired Claims........................................... 21
ARTICLE IV. ACCEPTANCE OR REJECTION OF THE PLAN........................................................... 22
A. Voting Classes.......................................................................... 22
B. Acceptance by Impaired Classes.......................................................... 22
C. Presumed Acceptance of Plan............................................................. 22
D. Presumed Rejection of Plan.............................................................. 22
E. Non-Consensual Confirmation............................................................. 22
ARTICLE V. MEANS FOR IMPLEMENTATION OF THE PLAN........................................................... 22
A. Substantive Consolidation............................................................... 22
B. Continued Corporate Existence and Vesting of Assets in the Reorganized Debtors.......... 23
C. Cancellation of Old Notes, Old Stock and Other Equity Interests......................... 23
D. Issuance of New Securities; Execution of Related Documents.............................. 23
E. Restructuring Transactions.............................................................. 23
F. Corporate Governance, Directors and Officers, and Corporate Action...................... 24
G. PCT..................................................................................... 25
H. RCT..................................................................................... 28
I. Creation of Professional Fee Escrow Account............................................. 29
ARTICLE VI. DEBTORS' RETAINED CAUSES OF ACTION............................................................ 29
A. Maintenance of Causes of Action......................................................... 29
B. Preservation of Causes of Action........................................................ 30
C. Preservation of All Causes of Action Not Expressly Settled or Released.................. 32
ARTICLE VII. FUNDING OF THE PLAN.......................................................................... 33
A. Exit Financing Facility, Obtaining Cash for Plan Distributions and Transfers of Funds
Among the Debtors and the Reorganized Debtors........................................... 33
B. Tranche B Loan.......................................................................... 33
C. Sale of Assets.......................................................................... 33
ARTICLE VIII. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES....................................... 33
A. Assumption/Rejection of Executory Contracts and Unexpired Leases........................ 33
B. Claims Based on Rejection of Executory Contracts or Unexpired Leases.................... 34
C. Cure of Defaults for Executory Contracts and Unexpired Leases Assumed................... 34
D. Indemnification of Directors, Officers and Employees.................................... 34
E. Compensation and Benefit Programs....................................................... 34
ii
PAGE
----
F. Insured Claims.......................................................................... 35
ARTICLE IX. PROVISIONS GOVERNING DISTRIBUTIONS............................................................ 36
A. Distributions for Claims Allowed as of the Effective Date............................... 36
B. Distributions by Core-Mark Newco, the PCT and the RCT................................... 36
C. Interest on Claims...................................................................... 37
D. Compliance with Tax Requirements/Allocations............................................ 37
E. Delivery of Distributions and Undeliverable or Unclaimed Distribution................... 37
F. Distribution Record Date................................................................ 38
G. Timing and Calculation of Amounts to be Distributed..................................... 38
H. Minimum Distribution.................................................................... 38
I. Allowance or Resolution Setoffs......................................................... 38
J. Old Notes............................................................................... 38
K. Failure to Surrender Canceled Instruments............................................... 39
L. Lost, Stolen, Mutilated or Destroyed Debt Securities.................................... 39
M. Share Reserve........................................................................... 39
N. Settlement of Claims and Controversies.................................................. 39
ARTICLE X. PROCEDURES FOR RESOLUTION OF DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS...................... 39
A. Resolution of Disputed Claims........................................................... 39
B. Allowance of Claims..................................................................... 40
C. Controversy Concerning Impairment....................................................... 40
D. Impact on Pending Litigation; Pension Plans............................................. 41
E. Settlement of Claims and Controversies.................................................. 41
F. Special Provisions Regarding Reclamation Claims......................................... 42
ARTICLE XI. CONDITIONS PRECEDENT TO CONFIRMATION AND OCCURRENCE OF THE EFFECTIVE DATE OF THE PLAN......... 44
A. Conditions Precedent to Confirmation.................................................... 44
B. Conditions Precedent to Occurrence of the Effective Date................................ 44
C. Waiver of Conditions.................................................................... 45
D. Effect of Non-occurrence of Conditions to Occurrence of the Effective Date.............. 45
ARTICLE XII. DISCHARGE, RELEASE, INJUNCTION AND RELATED PROVISIONS........................................ 45
A. Subordination........................................................................... 45
B. MUTUAL RELEASES BY RELEASEES............................................................ 45
C. RELEASES BY HOLDERS OF CLAIMS........................................................... 46
D. INDEMNIFICATION......................................................................... 46
E. EXCULPATION............................................................................. 46
F. DISCHARGE OF CLAIMS AND TERMINATION OF EQUITY INTERESTS................................. 47
G. INJUNCTION.............................................................................. 47
H. POLICE AND REGULATORY POWERS............................................................ 47
ARTICLE XIII. RETENTION OF JURISDICTION................................................................... 47
ARTICLE XIV. MISCELLANEOUS PROVISIONS..................................................................... 48
A. Effectuating Documents, Further Transactions and Corporation Action..................... 48
B. Dissolution of Committee................................................................ 48
C. Payment of Statutory Fees............................................................... 48
D. Modification of Plan.................................................................... 49
E. Revocation of Plan...................................................................... 49
F. Environmental Liabilities............................................................... 49
G. Successors and Assigns.................................................................. 49
H. Reservation of Rights................................................................... 49
I. Section 1146 Exemption.................................................................. 49
iii
PAGE
----
J. Further Assurances...................................................................... 50
K. Entire Agreement........................................................................ 50
L. Service of Documents.................................................................... 50
M. Filing of Additional Documents.......................................................... 51
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' THIRD AMENDED AND
REVISED JOINT PLAN OF REORGANIZATION OFFLEMING 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 Third Amended and Revised 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. Defined Terms
Unless the context requires otherwise, the following terms shall have the
following meanings when used in capitalized form herein:
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 pursuant to the 5-1/4 Convertible Senior Subordinated
Notes Indenture in the original principal amount of $150 million and guaranteed
by all of the Filing Subsidiaries.
2. "5-1/4% Convertible Senior Subordinated Notes Indenture" means that
certain indenture dated March 15, 2001, between Bank One, N.A. and any
predecessor or successor in interest, as indenture trustee, and Fleming, as
amended or supplemented.
1
3. "9-1/4% Senior Notes" means the 9-1/4% Senior Notes, CUSIP number
339130AX4, due 2010 issued by Fleming pursuant to the 9-1/4 Senior Notes
Indenture in the original principal amount of $200 million and guaranteed by all
of the Filing Subsidiaries.
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
Manufacturers and Traders Trust Company, and Fleming, as amended or
supplemented.
5. "9-7/8% Senior Subordinated Notes" means the 9-7/8% Senior
Subordinated Notes, CUSIP number 339130AW6, due 2012 issued by Fleming pursuant
to the 9-7/8% Senior Notes Indenture in the original principal amount of $260
million and guaranteed by all of the Filing Subsidiaries.
6. "9-7/8% Senior Subordinated Notes Indenture" means that certain
indenture dated April 15, 2002, between Bank One, N.A. and any predecessor or
successor in interest, as indenture trustee, and Fleming, as amended or
supplemented.
7. "10-1/8% Senior Notes" means the 10-1/8% Senior Notes, CUSIP number
339130AP1, due 2008 issued by Fleming pursuant to the 10-1/8% Senior Notes
Indenture in the original principal amount of $355 million and guaranteed by all
of the Filing Subsidiaries.
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 10-5/8%
Senior Notes, CUSIP numbers 339130AL0 and 339130AT3, due in 2007 issued by
Fleming pursuant to the 10-5/8% Senior Subordinated Notes Indenture in the
original principal amount of $400 million and guaranteed by all of the Filing
Subsidiaries.
10. "10-5/8% Senior Subordinated Notes Indenture" means that certain
indenture dated July 25, 1997, between Bank One, N.A. and any predecessor or
successor in interest 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. "Administrative Claims Guarantee" has the meaning ascribed to it in
the Revised Term Sheet.
14. "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.
15. "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.
16. "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 that either is not a Disputed Claim or has
been allowed by a Final Order; (c) a Claim that is determined by the
2
Debtors, the PCT or the RCT 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 PCT or RCT 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 PCT, the RCT 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, subject to, and as
consistent with, the treatment provided in Class 3(B) and Class 5 for the
Holders of Reclamation Claims.
17. "Allowed Claim" means an Allowed Claim in the particular Class
described.
18. "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.
19. "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.
20. "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.
21. "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.
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.
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.
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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, the Committee or the OCRC 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, the PCT or the RCT 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.
43. "Class 3B Preferred Interests" means those certain secured preferred
interests to be issued by the RCT in favor of the Holders of Allowed Class 3B
Claims pursuant to the terms of the Revised Term Sheet.
44. "Class 5 Preferred Interests" means those certain junior secured
preferred interests to be issued by the RCT in favor of the Holders of Allowed
Class 5 Claims pursuant to the terms of the Revised Term Sheet.
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45. "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.
46. "Confirmation" means the entry of the Confirmation Order.
47. "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.
48. "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.
49. "Confirmation Order" means the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code.
50. "Convenience Claims" means those General Unsecured Claims in Class 7
herein, as described in section III.B.11 herein.
51. "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.
52. "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).
53. "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.
54. "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.
55. "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, plus former director Guy Osborne,
but excluding the Excluded Releasees,.
56. "Debtors" means Fleming and its Filing Subsidiaries, as debtors in
the Chapter 11 Cases.
57. "Deductible Amount" means the per-occurrence deductible amount
payable by the applicable Debtor(s) under a respective insurance policy.
58. "DIP Claim" means a Claim arising under or as a result of the DIP
Credit Facility, including letters of credit issued thereunder.
59. "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.
60. "Disclosure Statement" means the Third Amended and Revised
Disclosure Statement in Support of Debtors' and Official Committee of Unsecured
Creditors' Third Amended and Revised Joint Plan of Reorganization of Fleming
Companies, Inc., and its Filing Subsidiaries under Chapter 11 of the Bankruptcy
Code dated May 25, 2004, as amended, supplemented, or modified from time to
time, describing the Plan, that is prepared and distributed in accordance with
the Bankruptcy Code.
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61. "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 PCT, the RCT 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.
62. "Distribution Record Date" means the Effective Date unless a
different date is ordered by the Bankruptcy Court.
63. "DSD Settlement Agreement" means that Statement of Settlement
Agreement between Debtors and DSD Class Plaintiffs dated February 5, 2004.
64. "DSD Settlement Fund" means the fund established under the DSD
Settlement Agreement in the amount of $17.5 million.
65. "DSD Trust Claims" means those Claims brought by all persons who
participated in the Drop Ship Delivery (DSD) and/or Central Billing Program
(also known as a "bill through" or "pass through" program) of the Debtors who
provided goods for non-Debtor entities prior to April 1, 2003, and for which
remittances have been collected by the Debtors but not turned over to those
persons.
66. "DTC" means The Depository Trust Company.
67. "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.
68. "Entity" means an entity as defined in section 101(15) of the
Bankruptcy Code.
69. "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.
70. "Estate" means the estate of each Debtor created by section 541 of
the Bankruptcy Code upon the commencement of the Chapter 11 Cases.
71. "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.
72. "Exchange Agent" means the institution engaged by the Debtors to
conduct the exchange of certain securities as provided for herein.
73. "Excluded Releasees" means those parties listed on Exhibit B filed
herewith, which Exhibit shall be mutually agreed upon by the Debtors and the
Committee.
74. "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.
75. "File" or "Filed" means file or filed with the Bankruptcy Court in
the Chapter 11 Cases.
76. "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
6
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.
77. "Final Decree" means the decree contemplated under Bankruptcy Rule
3022.
78. "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.
79. "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.
80. "First Administrative Bar Date" means January 15, 2004.
81. "First Substantial Contribution Claims Bar Date" means June 28,
2004, which shall be the last date by which (i) a professional not retained by
the Debtors, the Committee or the OCRC under section 327 or 363 of the
Bankruptcy Code may file a Claim for fees incurred on or before June 1, 2004,
alleged to be beneficial or necessary towards completion of the Chapter 11 Cases
as outlined in section 330 of the Bankruptcy Code and/or (ii) any other party
may file a Claim for fees incurred on or before June 1, 2004, alleged to be for
a substantial contribution under section 503(b) of the Bankruptcy Code.
82. "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 December 3, 2003.
83. "Fleming" means Fleming Companies, Inc.
84. "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.
85. "FSA Participants" means those creditors who are entitled to assert
"Offset Rights" against the FSA Reserve 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.
86. "FSA Reserve" 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. "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.
88. "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.
89. "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.
90. "Impaired Claim" means a Claim classified in an Impaired Class of
Claims.
91. "Impaired Class" means each of the Classes that is not an Unimpaired
Class.
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92. "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
105/8 % Senior Subordinated Notes Indenture.
93. "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.
94. "Insurance Security" means the certain letters of credit issued by
third-parties to secure the Debtors' liabilities to the Insurers under the
Insurance Program.
95. "Insurers" means the insurance carriers that provide insurance
policies to the Debtors pursuant to the Insurance Program.
96. "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.
97. "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.
98. "Litigation Claims" means all Avoidance Actions and Vendor
Deductions.
99. "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 shares of New Common Stock in accordance with the forthcoming term
sheet.
100. "Master Ballots" mean the master ballots accompanying the Disclosure
Statement upon which the Nominee Holders of the Old Notes shall indicate the
beneficial Holders of the Old Notes' acceptance or rejection of the Plan in
accordance with the Voting Instructions.
101. "Net Non-TLV Reclamation Claims" means total Allowed Non-TLV
Reclamation Claims reduced by $13 million.
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. "Non-TLV Guaranty" means that certain secured junior guaranty
provided by Core-Mark Newco to the Holders of Allowed Non-TLV Reclamation
Claims, the terms and conditions of which are set forth in the Revised Term
Sheet.
105. "Non-TLV Reclamation Claim" means a Claim the Holder of which (i)
did not participate in the Trade Credit Program (or failed to comply with the
terms of such program) and (ii) asserts that all, or any portion, of such Claim
is entitled to be granted priority and/or to be secured by a lien in accordance
with 546(c)(2) of the Bankruptcy Code.
106. "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, the PCT Representative or the RCT Representative, as
applicable, by which the Debtors, the PCT Representative, the RCT Representative
or any party in interest has to file an objection to any Claim not previously
allowed.
107. "OCRC" means the Official Committee of Reclamation Creditors.
8
108. "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.
109. "Old Notes Trustees" means Manufacturers and Traders Trust Company,
Bank One, N.A, The Bank of New York, Bankers Trust Company and any of their
predecessors or successors in interest.
110. "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 Insurance Company
pursuant to the Old Republic Program agreement and the Old Republic Policies
that were issued thereunder.
111. "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.
112. "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.
113. "Old Senior Notes" means the 9-1/4% Senior Notes and the 10-1/8%
Senior Notes.
114. "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.
115. "Old Stock" means all of the issued and outstanding shares of
Fleming common stock, $.01 par value per share.
116. "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.
117. "Other Secured Claims" means secured claims not in Classes 1(B), 2,
3(B) or 3(C).
118. "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.
119. "Over-Deductible Amount" means that portion of an Insured Claim that
exceeds the Deductible Amount.
120. "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.
121. "PCT Advisory Board" means that board created to advise the PCT, as
outlined in section V.G.2 herein.
122. "PCT 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 PCT Representative on or before the Effective
Date, and which shall govern the PCT.
123. "PCT Representative" means the trustee under the PCT Agreement.
9
124. "PCT" means that trust that shall be created pursuant to the Plan
and the PCT Agreement for the purposes of carrying out certain provisions of the
Plan.
125. "Person" means a person as defined in section 101(41) of the
Bankruptcy Code.
126. "Petition Date" means April 1, 2003, the date on which the Debtors
filed their petitions for relief commencing the Chapter 11 Cases.
127. "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.
128. "Plan Supplement" means the document to filed approximately seven
days prior to the Confirmation Date and will include the Exit Financing
Facility, Tranche B Loan and Management Incentive Plan agreements.
129. "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.
130. "Preference Actions" means those avoidance actions provided for in
section 547 of the Bankruptcy Code.
131. "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.
132. "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.
133. "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.
134. "Pre-Petition Lenders' Secured Claims" means the Claims arising
under the Pre-Petition Credit Agreement.
135. "Pre-Petition Non-TLV Reclamation Claim Reduction" means $13
million.
136. "Priority Property Tax Claim" 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. "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 Priority Property Tax Claims.
138. "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.
10
139. "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.
140. "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.
141. "PMSI" means a purchase money security interest as defined in
Section 9-312 of the Uniform Commercial Code.
142. "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.
143. "RCT" means that trust that shall be created pursuant to the Plan
and the RCT Agreement for the purposes of carrying out certain provisions of the
Plan.
144. "RCT Agreement" means that agreement, a draft of which is attached
to the Disclosure Statement as Exhibit 12, that shall be entered into by the
Debtors, the OCRC and the RCT Representative on or before the Effective Date and
which shall govern the RCT.
145. "RCT Assets" means deductions, over-wires, preference claims, Causes
of Action and other rights of the Debtors as against the Reclamation Creditors,
other than the post-petition deductions and post-petition overwires with respect
to the Fleming Convenience business which shall be transferred to Core-Mark
Newco.
146. "RCT Representative" means the representative selected to administer
the RCT.
147. "Reclamation Claims" means TLV Reclamation Claims and Non-TLV
Reclamation Claims.
148. "Reclamation Creditor" means any Claim Holder that asserts that all,
or any portion, of its Claim is entitled to be granted priority and/or to be
secured by a lien in accordance with 546(c)(2) of the Bankruptcy Code and also
those identified on the Reclamation Claim Summary by Claimant of the Debtors
dated November 21, 2003.
149. "Reclamation Liabilities" means any and all claims asserted against
the Debtors by the Reclamation Creditors, including Administrative Claims (other
than Administrative Claims against Fleming Convenience), Priority Claims, TLV
Reclamation Claims and Non-TLV Reclamation Claims, but not including any
PACA/PASA Claims, DSD Trust Claims or General Unsecured Claims held by
Reclamation Creditors.
150. "Record Date" means May 25, 2004.
151. "Releasees" means each of the Debtors, the Reorganized Debtors,
Core-Mark Newco, each of the Pre-Petition Lenders, the Agents, the Pre-Petition
Agents, the Old Notes Trustees, the Post-Petition Lenders, the Tranche B
Lenders, the Committee, the OCRC, each member of the Committee and the OCRC, the
PCT, the PCT Representative, the PCT Advisory Board, the RCT, the RCT
Representative and the RCT Advisory Board, and the affiliates, agents and
professionals of each of the foregoing, including, without limitation,
professionals acting as officers of the Debtors, each in their capacity as such;
provided however that Excluded Releasees shall not be Releasees.
152. "Remaining Pension Plans" means, collectively, the Pension Plan of
S.M. Flickinger Co., Inc., the Godfrey Company subsidiaries Pension Plan, the
ABComarkets, Inc. Retirement Plan for Arizona Warehouse and Distribution
Employees and Core-Mark International, Inc. Non-Bargaining Employees Pension
Plan.
153. "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.
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154. "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.
155. "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.
156. "Revised Term Sheet" means the Revised Term Sheet to Resolve
Objections to the Debtors' Chapter 11 Plan and for Treatment of Reclamation
Claims entered into on May 3, 2004 and attached as Exhibit 13 to the Disclosure
Statement.
157. "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.
158. "Second Administrative Bar Date" means that date that is forty-five
(45) days after the Effective Date.
159. "Second Substantial Contribution Claims Bar Date" means the date 45
days after the Effective Date, which shall be the last date by which (i) a
professional not retained by the Debtors, the Committee or the OCRC under
section 327 or 363 of the Bankruptcy Code may file a Claim for fees incurred
after June 1, 2004, alleged to be beneficial or necessary towards completing of
the Chapter 11 Cases as outlined in section 330 of the Bankruptcy Code and/or
(ii) any other party may file a Claim for fees incurred after June 1, 2004
alleged to be for a substantial contribution under section 503(b) of the
Bankruptcy Code.
160. "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.
161. "Senior Note Claims" means those Claims derived from or based upon
the Old Senior Notes.
162. "Senior Notes Indentures" means the 9-1/4% Senior Notes Indenture
and the 10-1/8 Senior Notes Indenture.
163. "Senior Notes Indenture Trustee" means The Bank of New York.
164. "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.
165. "TLV Guaranty" means that certain secured guaranty provided by
Core-Mark Newco to the Holders of Allowed TLV Reclamation Claims, the terms and
conditions of which are set forth in the Revised Term Sheet.
166. "TLV Reclamation Claim" means a Claim the Holder of which (i)
participated in the Trade Credit Program as outlined in the Final DIP order and
(ii) asserts that all, or any portion, of such Claim is entitled to be granted
priority and/or to be secured by a lien in accordance with 546(c)(2) of the
Bankruptcy Code.
167. "Trade Credit Program" means that program established under the
Final DIP Order providing a junior lien to Approved Trade Creditors and Holders
of TLV Reclamation Claims who made post-petition credit available to the
Debtors.
168. "Tranche B Lenders" means those lenders who are participants in the
Tranche B Loan.
169. "Tranche B Loan" means the loan of up to $70,000,000 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.
12
170. "Unclassified Claims" means those Administrative and Priority Claims
described in Article II herein.
171. "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.
172. "Unimpaired Claims" means Claims in an Unimpaired Class.
173. "Unimpaired Class" means an unimpaired Class within the meaning of
section 1124 of the Bankruptcy Code.
174. "Unsecured Claim" means any Claim against any Debtor that is not a
Secured Claim, Administrative Claim, DIP Claim, Priority Tax Claim, Other
Priority Claim, Other Secured Claim or a Class 3B or Class 5 Claim consistent
with the Revised Term Sheet.
175. "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.
176. "Voting Class" means any class of Claims entitled to vote on the
Plan.
177. "Voting Deadline" means the date stated in the Voting Instructions
by which all Ballots must be received.
178. "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.
179. "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.
180. "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 PCT or RCT, as
applicable 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 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
13
be enforceable against the Debtors, the Reorganized Debtors, the PCT, the RCT
and their successors, their assigns or their property(2). 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 OCRC; (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,
the PCT Representative and the RCT 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 PCT. 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. Any
liability for Professional Fees above the amount in the Professional Fee Escrow
Account including amounts awarded to a professional not retained by the Debtors,
the Committee, or the OCRC under section 327 or 363 of the Bankruptcy Code for
fees alleged to be necessary or beneficial toward completion of this case as
outlined in section 330 of the Bankruptcy Code or otherwise to any other party
for allegedly making a substantial contribution under section 503(b) of the
Bankruptcy Code, shall be a liability of the PCT and shall be paid by the PCT as
an Administrative Claim.(3)
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.(4)
- ----------
(2) Those professionals not retained by the Debtors, the Committee or the OCRC
under section 327 or 363 of the Bankruptcy Code filing a Claim for fees
alleged to be necessary or beneficial towards completion of the Chapter 11
Cases as outlined in section 330 of the Bankruptcy Code, or any other
party making a Claim for fees for allegedly making a substantial
contribution under section 503(b) of the Bankruptcy Code are bound by the
First and Second Substantial Contribution Claims Bar Dates.
(3) The Professional Fee Escrow Account shall be held and administered by the
PCT and any excess amount remaining in the Professional Fee Escrow Account
after all Professional Fee Claims have been paid shall be retained by the
PCT.
(4) 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.
14
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(5), in equal 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, commencing on, or as soon as practicable after, the Effective Date
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 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) -- Priority 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
Class 1(B) Claims Unimpaired -- not entitled to vote
Class 3(B) -- TLV Reclamation Claims Impaired -- entitled to vote
Class 3(C) -- DSD Trust Claims Impaired -- entitled to vote
Class 4 -- PACA/PASA Claims Unimpaired -- not entitled to vote
- ----------
(5) The financial projections attached as Exhibit 3 to the Disclosure
Statement assume an interest rate of 5%.
15
Class Status Voting Rights
Class 5 -- Non-TLV Reclamation Claims Impaired -- entitled to vote
Class 6(A) -- General Unsecured Claims other than Impaired -- entitled to vote
Convenience Claims and Senior
Subordinated Note Claims
Class 6(B) -- Senior Subordinated Note 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.
(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) -- Priority 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 Priority 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 Priority 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.
16
(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 in
Cash 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. The Exit Financing Facility and the Tranche B Loan shall not be
secured by the assets transferred to the PCT or the RCT.
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.
(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) -- TLV Reclamation Claims
(a) Classification: Class 3(B) consists of all Allowed TLV
Reclamation Claims.
(b) Treatment: On the Effective Date, or as soon as practicable
thereafter, the RCT, shall issue the Class 3B Preferred Interests in favor
of the Holders of Allowed TLV Reclamation Claims in the estimated
aggregate amount of such Allowed Claims under the terms and conditions set
forth in the Revised 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 RCT Assets entitling each Holder of
an Allowed TLV Reclamation Claim to its Ratable Proportion of the RCT
Assets up to the total amount of each Holder's Allowed TLV Reclamation
Claim, in full satisfaction, settlement, release and discharge of each
Allowed TLV Reclamation Claim against the RCT Assets. Reconciliation of
Class 3(B) Claims shall be done in accordance with section III.C. herein.
The Class 3B Preferred Interests shall earn interest which shall begin to
accrue 60 days after the Effective Date at the Wall Street Journal listed
prime rate.
As additional security for the Class 3B Preferred Interests,
Core-Mark Newco shall provide a junior secured guarantee under the terms
outlined in the Revised Term Sheet.
17
(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: Assuming the treatment outlined in the
Revised Term Sheet and herein is approved by the Court, Allowed Class 3(B)
Claims are currently estimated to be in the range of $43-$60 million as of
the Effective Date prior to giving effect to any of the deductions
asserted by the Debtors as of the Effective Date which shall be
transferred to the RCT and will be paid in full under the Plan by the RCT
or Core-Mark Newco as outlined in the Disclosure Statement and the Revised
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.
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 -- Non-TLV Reclamation Claims
(a) Classification: Class 5 consists of Non-TLV Reclamation
Claims.
(b) Treatment: On the Effective Date, or as soon as practicable
thereafter, the RCT, shall issue the Class 5 Preferred Interests in favor
of the Holders of Allowed Non-TLV Reclamation Claims in the estimated
aggregate amounts of their Allowed Claims under the terms and conditions
outlined in the Revised 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 RCT Assets entitling each Holder to its Ratable
Proportion of the RCT Assets after (i) all Class 3(B) Claims are paid in
full; and (ii) Core-Mark Newco is reimbursed for any payment under the TLV
Guaranty. Reconciliation of Class 5 Claims shall be done in accordance
with section III.C herein.
As additional security for the Class 5 Preferred Interests Core-Mark
Newco shall provide a junior secured guarantee under the terms outlined in
the Revised Term Sheet.
(c) Voting: Class 5 is impaired and Holders of Allowed Claims in
Class 5 are entitled to vote to accept or reject the Plan.
18
(d) Claims Estimate: Assuming the treatment outlined in the
Revised Term Sheet and herein is approved by the Court, Allowed Class 5
Claims are currently estimated to be in the range of $62-$90 million as of
the Effective Date prior to giving effect to any of the deductions
asserted by the Debtors. Holders of Class 5 claims will be paid a Ratable
Proportion of their Allowed Non-TLV Reclamation Claim, up to the full
amount of their Allowed Net Non-TLV Reclamation Claim by the RCT or
Core-Mark Newco as outlined in the Disclosure Statement and the Revised
Term Sheet. Further, in the event the RCT has proceeds for distribution
after satisfaction of all Allowed TLV Reclamation Claims and Net Non-TLV
Reclamation Claims and repayment to Core-Mark Newco of advances under the
TLV or Non-TLV Guarantees, the Holders of Allowed Class 5 Claims shall be
entitled to be paid their pro rata share of the remaining RCT Assets up to
the full amount of their Allowed Non-TLV Reclamation Claim.
9. Class 6(A) -- General Unsecured Claims other than Convenience Claims
and Senior Subordinated Note Claims
(a) Classification: Class 6(A) consists of all Allowed General
Unsecured Claims other than Convenience Claims and Senior Subordinated
Note Claims.
(b) Treatment: On the Effective Date, or as soon as practicable
thereafter, each Holder of an Allowed General Unsecured Claim other than
Convenience Claims and Senior Subordinated Note 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 and Senior Subordinated Note Claims, at the Debtors' option, in one
or a combination of the following manners: (i) issuance of a Ratable
Proportion of New Common Stock, with such Ratable Proportion to be
determined as if Classes 6(A) and 6(B) were a single Class, and subject to
dilution from the issuance of warrants to the Tranche B Lenders, to the
Holders of Senior Subordinated Notes 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, with such Ratable
Proportion to be determined as if Classes 6(A) and 6(B) were a single
Class.
(c) As additional consideration, each Holder of an Allowed General
Unsecured Claim in Class 6(A) shall be entitled to a Ratable Proportion of
excess proceeds, if any, available from the PCT after payment by the PCT
of all Claims and obligations required to be made by the PCT under the
Plan or the PCT Agreement, with such Ratable Proportion to be determined
as if Classes 6(A) and 6(B) were a single Class. Pursuant to the Revised
Term Sheet, the RCT shall pay any excess proceeds, if available, after
payment of all Claims and obligations of the RCT, to the PCT.
(d) Voting: Class 6(A) is impaired and Holders of Claims in Class
6(A) are entitled to vote to accept or reject the Plan.
(e) Claims Estimate: Allowed Class 6(A) Claims are currently
estimated to be in the range of $1.8-$2.6 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(A) 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(6).
10. Class 6(B) -- Senior Subordinated Note Claims
(a) Classification: Class 6(B) consists of all Allowed Senior
Subordinated Note Claims.
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(6) Holders of Senior Notes shall receive a higher recovery due to their
contractual seniority to the Holders of Senior Subordinated Notes. Holders
of Senior Notes shall receive stock in Core-Mark Newco with a value equal
to approximately 11.5% of the Allowed amount of such Holder's Claim.
19
(b) Treatment: On the Effective Date, or as soon as practicable
thereafter, each Holder of an Allowed Senior Subordinated Note Claim shall
be paid in full satisfaction, settlement, release, and discharge of and in
exchange for each and every Allowed Senior Subordinated Note Claim,
subject to the contractual seniority of the Senior Notes, at the Debtors'
option, in one or a combination of the following manners,: (i) issuance of
a Ratable Proportion of New Common Stock, with such Ratable Proportion to
be determined as if Classes 6(A) and 6(B) were a single Class, and subject
to dilution from the issuance of warrants to the Tranche B Lenders, the
Holders of Senior Subordinated Notes 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, with such Ratable
Proportion to be determined as if Classes 6(A) and 6(B) were a single
Class. As additional consideration, subject to the contractual seniority
of the Senior Notes, each Holder of a Senior Subordinated Note Claim in
Class 6(B) shall be entitled to a Ratable Proportion of excess proceeds,
if any, available from the PCT after payment by the PCT of all Claims and
obligations required to be made by the PCT under the Plan or the PCT
Agreement, with such Ratable Proportion to be determined as if Classes
6(A) and 6(B) were a single Class. Pursuant to the Revised Term Sheet, the
RCT shall pay any excess proceeds, if available, after payment of all
Claims and obligations of the RCT, to the PCT.
(c) As further consideration, not subject to the contractual
seniority of the Senior Notes, Holders of Class 6(B) Claims shall receive
a distribution of nondilutive warrants that when struck will result in the
Holders of Senior Subordinated Notes receiving 8% of the New Common Stock
on a fully diluted basis. The strike price of the warrants shall be
determined using Core-Mark Newco's reorganization value, determined on a
per share basis and adding a premium equal to 35% per share. The warrants
shall expire 7 years after the Effective Date.
(d) Voting: Class 6(B) is impaired and Holders of Claims in Class
6(B) are entitled to vote to accept or reject the Plan.
(e) Claims Estimate: Allowed Class 6(B) Claims are currently
estimated to be appoximately $830 million as of the Effective Date. Based
on this estimate of Allowed Claims, the Holders of Class 6(B) Claims shall
be receiving value equal to approximately .05% to 1.0% of the Allowed
amount of each such Holder's Claim.(7)
11. Class 7 - Convenience Claims
(a) 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.
(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.
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(7) These warrants will have no intrinsic value as of the Effective Date
because the strike price is in excess of Core-Mark Newco's reorganization
value per share, and are valued at approximately $5-6 million using a
warrant valuation model based on Black-Scholes.
20
(d) Claims Estimate: Allowed Class 7 Claims are currently
estimated to be in the range of $5-$10 million as of the Effective Date.
12. 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.
13. Class 9 - Intercompany Claims
(a) Classification: Class 9 consists of all Intercompany Claims.
(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.
14. 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. Additional Provisions Governing Reclamation Claims
The total amount of Allowed Reclamation Claims to be satisfied by the RCT
shall be reconciled pursuant to the methodology described in Exhibit A attached
to the Revised Term Sheet, but in any event shall not exceed $150 million prior
to the application of any reduction including the Prepetition Non-TLV
Reclamation Claim Reduction. In the event the Allowed Reclamation Claims exceed
$150 million, the Allowed Non-TLV Reclamation Claims shall be reduced pro rata.
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.
21
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(A), 6(B)
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.
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
22
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 reasonable compensation, fees, expenses or
disbursements due to any of the Old Notes Trustees, agent or servicer pursuant
to the Indentures and the Plan, including, without limitation, attorneys' and
agents' fees, expenses and disbursements incurred by the Old Notes Trustees and
their predecessors, shall be paid directly to the Old Note Trustees by the
Debtors and shall not be deducted from any distributions to the Holders of
Claims and Equity Interests.
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
23
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. Fleming will then transfer to Core-Mark Holding III a
portion of Core-Mark Newco's stock to satisfy Disputed Claims and Core-Mark
Holdings III will hold such stock, not for its own account, but rather in trust
in its role as fiduciary for the benefit of holders of Disputed Claims in
Classes 6(A) and 6(B). Fleming will distribute the Core-Mark Newco stock
received from Core-Mark Holdings III, and not transferred to Core-Mark Holdings
III pursuant to the preceding sentence, to its creditors in accordance with the
Plan of Reorganization. Core-Mark Holdings III, as fiduciary for holders of
Disputed Claims in Classes 6(A) and 6(B), will transfer stock of Core-Mark Newco
to Holders of Classes 6(A) and 6(B) 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, 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
24
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. PCT
1. Formation/Purpose
On the Effective Date or as soon as practicable thereafter, the Debtors
and the Committee will form the PCT 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 other than those which are RCT Assets and
the reconciliation and payment of Claims, other than Reclamation Claims (except
that reconciliation of Class 6(A) Claims of Reclamation Creditors, but not the
payment of such Claims, shall be the responsibility of the RCT).
2. Powers
The powers, authority, responsibilities and duties of the PCT and the
allocation of such powers, authority, responsibilities and duties between
Core-Mark Newco and the PCT, shall be set forth and governed by the PCT
Agreement to be mutually agreed upon by the Debtors and the Committee. A copy of
the draft PCT Agreement is attached to the Disclosure Statement as Exhibit 9.
The Debtors and the Committee shall also mutually agree upon appointment of the
PCT Representative who shall have the power to administer the PCT and will be
advised by the PCT Advisory Board as specified in the PCT Agreement. The PCT
Advisory Board shall consist of four members plus the PCT 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(A) Claims under the Plan and one member to be designated
mutually by the trade members of the Committee and the OCRC, which member shall
be a Holder of a Class 6(A) Claim, other than with respect to the Old Notes,
against which there is not pending (or against which the Debtors or the PCT do
not reasonably contemplate bringing) a Cause of Action other than a Cause of
Action which is an RCT Asset.
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 PCT Advisory Board
as well as the identity and affiliations of the PCT 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 PCT
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, the PCT Assets (the "PCT Assets") as outlined in
the PCT Agreement. The PCT Assets do not include any RCT Assets. Subject to the
preceding exclusion of all RCT Assets, the PCT Assets shall consist of all of
the following assets of the Debtors:
25
(a) cash balances sufficient to pay the estimated Administrative
Claims that are the responsibility of the PCT;
(b) non-reclamation 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;
(c) royalty payments owing to the Debtors related to the sale of
the Fleming wholesale operations;
(d) 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;
(e) Avoidance Actions, especially preference actions as outlined
in section 547 of the Bankruptcy Code;
(f) restricted cash, including the PACA account, the FSA Reserves
and the Professional Fee Escrow Account;
(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;
(h) any assets of the RCT referred or assigned to the PCT whether
vendor deductions, preference claims or otherwise (on terms that have been
mutually agreed upon by the RCT and the PCT);
(i) any cash proceeds of settlements for customer accounts
receivables, vendor deductions, over-wires and preferences (exclusive of
those related to either Fleming Convenience or the RCT Assets) in excess
of $9 million collected by the Debtors from April 1, 2004 to the Effective
Date which are being held in an escrow account;
(j) $3.0 million in cash for administration of the PCT; and
(k) all of the remaining assets of the Debtors, other than the
assets of the Reorganized Debtors and the assets of Fleming Convenience
which will have been transferred to Core-Mark Newco and the Reorganized
Debtors.
The PCT Assets do not include: (1) any of the RCT Assets; (2) any of the
assets of the continuing Fleming Convenience businesses which are to be
transferred to Core-Mark Newco and the Reorganized Debtors; and (3) the stock of
Core-Mark Newco and the stock of the Reorganized Debtors.
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. The PCT
shall administer the directors and officers insurance policies maintained
pursuant to section XII.D. and all proceeds of such policies shall benefit the
D&O Releasees and the prepetition directors and officers of the Debtors who are
covered by the directors and officers insurance policies as well as the PCT to
the extent the PCT or other Party has a valid Claim against a D&O Releasee or a
prepetition director or officer of the Debtors who is covered by the director
and officer insurance policies.
4. Liabilities of the PCT
The liabilities transferred to the PCT shall include, but not necessarily
be limited to, Priority Tax Claims, Other Priority Non-Tax Claims, Property Tax
Claims, Other Secured Claims, PACA/PASA Claims, FSA liability, General Unsecured
Claims (solely for purposes of resolution), Convenience Claims and certain
Administrative
26
Claims that have not been satisfied on the Effective Date of the Plan, other
than the Administrative Claims of Fleming Convenience.
5. Funding
On the Effective Date, or as soon as practicable thereafter, the Debtors,
the Reorganized Debtors and Core-Mark Newco will transfer to the PCT 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 the PCT Agreement. In addition, the PCT 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 PCT on the Effective Date are outlined on Exhibit 3 to the
Disclosure Statement.
6. Administrative Claims Guaranty
As set forth in the estimates included on Exhibit 3 of the Disclosure
Statement, the Debtors currently estimate that, on the Effective Date,
administrative claims (other than Professional Fees) transferred to the PCT will
total $52 million, consisting of General accounts payable of $3 million, Health
and welfare benefits of $5 million, Severance and stay program of $27 million
and Other administrative claims of $17 million (collectively, the "relevant
administrative claims"). In the event that the relevant administrative claims
that are ultimately paid by the PCT after the Effective Date exceed the above
referenced estimated amounts by more than $4 million, such amounts over the $4
million shall be reimbursed by Core-Mark Newco. In the event any of the relevant
administrative claims against the Debtors currently anticipated to be satisfied
post-Effective Date through the PCT are, instead, settled through entry of an
Order of the Bankruptcy Court approving such settlement pre-Effective Date at a
level lower than currently budgeted in the PCT projections then, in such event,
50% of the net savings from any such Court approved settlement below current
budgeted levels (after reasonable deduction for legal fees and other resolution
costs) shall be paid to the RCT on the Effective Date (the "Administrative
Claims Savings"). Once the aggregate distributions from the PCT to the RCT
(inclusive of any Administrative Claims Savings paid to the RCT), have reached
$10 million then, in such event, any additional distributions to the RCT shall
effect a reduction of the maximum amount of the Non-TLV Guaranty by an amount
equal to 50% of any such aggregate additional distributions. Notwithstanding the
forgoing, the parties recognize that the Bankruptcy Court could ultimately
determine that certain of the relevant administrative claims which are subject
to the Administrative Claim Guaranty may be reclassified by the Court as
priority claims and correspondingly, certain priority claims may be reclassified
as relevant administrative claims. Irrespective of such reclassification by the
Bankruptcy Court, for purposes of calculating the amount which may be owed, if
any, on the Administrative Claim Guaranty, the classification assigned to those
claims as outlined in Exhibit 3 of the Disclosure Statement shall govern.
7. PCT Beneficiaries
The beneficiaries of the PCT, after satisfaction of all liabilities to be
satisfied by the PCT as outlined in the Plan including Administrative Claims,
Priority Tax Claims, Other Priority Non-Tax Claims, Property Tax Claims,
PACA/PASA Claims, FSA liabilities, Convenience Claims and all PCT expenses,
shall be (i) Core-Mark Newco, in the amount necessary to reimburse Core-Mark
Newco for any payments made on the TLV Guaranty or Non-TLV Guaranty as outlined
herein; (ii) the RCT, in the event all Reclamation Claims and interest thereon
as applicable together with the Prepetition Non-TLV Reclamation Claim Reduction,
have not been paid in full by the RCT,(8) (iii) Core-Mark Newco in the amount
necessary to reimburse Core-Mark Newco for any payments made on the
Administrative Claims Guaranty in the event the Reclamation Claims and the
Prepetition Non-TLV Reclamation Claim Reduction have been paid in full by the
RCT and (iv) thereafter the Class 6(A) General Unsecured Creditors, at which
time the RCT will terminate with any remaining assets delivered to the PCT.
- ----------
(8) Holders of Class 5 Claims shall not be entitled to a double distribution
on account of any Non-TLV Reclamation Claims Reduction related payments
and the PCT shall establish its holdbacks or the RCT shall otherwise
adjust its distributions accordingly.
27
8. Good Faith
Each of the PCT Representative and the PCT Advisory Board shall act in
good faith in carrying out its duties and responsibilities and use its best
efforts to liquidate and resolve Claims, disputes and maximize the value of the
PCT's assets and minimize claims against the PCT.
H. RCT
1. Formation/Purpose
On the Plan Effective Date or as soon as practicable thereafter, the
Debtors, the OCRC and the Committee will form the RCT 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 RCT Assets and payment of Reclamation Claims.
2. Assets of the RCT
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 RCT the RCT Assets as outlined in the RCT Agreement or
the Revised Term Sheet. The RCT Assets shall include assets of the Debtors (more
specifically set forth in the Revised Term Sheet) as follows:
(a) Vendor Deductions, over-wires, preference claims, Causes of
Action and other rights of the Debtors as against Reclamation Creditors,
other than the post-petition deductions and post-petition over-wires with
respect to Fleming Convenience which shall be transferred to Core-Mark
Newco;
(b) $3.0 million in cash for administration of the RCT; and
(c) Any cash proceeds which are collected by the Debtors from
Reclamation Creditors for payment of preference liability, deduction
liability and over-wire liability (except for post-petition vendor
deductions and post-petition over-wire liability related to Fleming
Convenience) from and after March 23, 2004 to the Effective Date which are
being held in an escrow account.
3. Liabilities of the RCT
The Reclamation Liabilities transferred to the RCT shall include any and
all claims asserted against the Debtors by the Reclamation Creditors, including
Administrative Claims (other than Administrative Claims against Fleming
Convenience), Priority Claims, TLV Reclamation Claims and Non-TLV Reclamation
Claims, but not including any DSD Trust Claims, PACA/PASA Claims(9) or General
Unsecured Claims held by Reclamation Creditors.
4. Powers
The Powers, authority, responsibilities and duties of the RCT and the
allocation of such powers, authority, responsibilities and duties shall be set
forth and governed by the Revised Term Sheet and set forth more fully in the RCT
Agreement which shall be consistent with the Revised Term Sheet. A copy of the
draft RCT Agreement is attached to the Disclosure Statement as Exhibit 12. The
RCT shall be administered by the RCT Representative, to be selected by the OCRC.
In order to facilitate the claims reconciliation process and asset
liquidation, the PCT and the RCT shall enter into a transition services
agreement whereby the PCT shall provide resources to the RCT related to
effecting
- ----------
(9) The liability for DSD Trust Claims held by Reclamation Creditors shall
remain with the DSD Trust and such claims shall be reconciled and paid, if
Allowed, by the DSD Trust. The liability for PACA/PASA Claims held by
Reclamation Creditors shall remain with the PCT and such claims shall be
reconciled and paid, if Allowed, by the PCT.
28
the Claims reconciliation process. Such resources shall include, but
not be limited to, access to the professional staff and employees of the PCT,
computer systems, data bases and other relevant information. The RCT shall
reimburse the PCT for the direct costs (e.g., professional staff and employee
expense) and allocation of the indirect costs (e.g., facilities, computers, data
storage facilities) with an allocation methodology to be agreed upon.
Notwithstanding the foregoing, the RCT shall have no obligation to reimburse the
PCT for indirect costs for the first 3 months after the Effective Date, or for
(i) direct costs for the first six months after the Effective Date and (ii)
indirect costs for months 4-6 after the Effective Date, up to an aggregate cap
of $1 million. On the Effective Date, the Debtors and the Committee shall, at
their option, either (i) have the Debtors provide an additional $1 million to
the RCT for administrative expenses of the RCT or (ii) have the PCT provide the
RCT with additional resources and services pursuant to the transition services
agreement with a value of up to an additional $1 million. However, once the RCT
has received aggregate distributions of $10 million from the PCT, inclusive of
any amounts paid to the RCT with respect to the Administrative Claims Savings
outlined in paragraph V.G.6. herein, the next $1 million in Cash otherwise to be
distributed by the PCT to the RCT shall, instead, be paid to Core-Mark Newco.
The RCT Representative shall be advised by an advisory board selected by
the OCRC with representation by Holders of TLV Reclamation Claims (but only
until TLV Reclamation Claims have been paid in full) and Holders of Non-TLV
Reclamation Claims. The TLV Reclamation Creditors shall be the primary
beneficiaries of the RCT and shall be entitled to be paid in full out of the
first distributions to be made by the RCT before the Non-TLV Reclamation
Creditors are entitled to any payment by the RCT.
5. Good Faith
Each of the RCT Representative and the RCT Advisory Board shall act in
good faith in carrying out its duties and responsibilities and use its
reasonable best efforts to liquidate and resolve Claims, disputes and maximize
the value of the RCT's assets and minimize claims against the RCT.
I. Creation of Professional Fee Escrow Account
On or before the Effective Date, the Debtors shall establish the
Professional Fee Escrow Account and fund such Professional Fee Escrow at an
appropriate level based upon the most current information available on the date
the account is established. The Professional Fee Escrow Account will include a
Cash reserve of $1.1 million for the projected fees of the ad hoc reclamation
committee, as well as sufficient funds to cover any professional fee claims that
may be asserted based on substantial contribution, provided, however, the
Debtors' reservation of such amounts shall in no way constitute an admission of
liability for, or the validity of, any such fees.
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, the PCT, and the RCT, 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, the PCT, or the RCT, as
applicable and such vesting shall be consistent with the Revised Term Sheet.
Core-Mark Newco, the PCT, or the RCT, 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 PCT may commence, pursue and settle non-RCT Causes of Action, as
outlined more fully in the PCT Agreement and the RCT may commence, pursue and
settle the RCT Causes of Action as outlined more fully in the RCT Agreement and
the Revised Term Sheet. Core-
29
Mark Newco, the PCT and the RCT, 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.
Notwithstanding any of the preceding, the retention and vesting of Causes of
Action shall conform to the specifications set forth in the Revised Term Sheet.
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, the PCT, and the RCT, 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, the PCT, or the RCT, 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;
- 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;
30
- 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 LLC and 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;
- 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;
31
- 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, except actions against the
Releasees or D&O Releasees to the extent they are released by the
Plan.
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 or D&O Releasees), is not intended to limit the rights of Core-Mark
Newco, the PCT, or the RCT, as applicable, 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, the PCT, or the RCT, 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 PCT, the RCT 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, the PCT or the RCT, as applicable,
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.
32
ARTICLE VII.
FUNDING OF THE PLAN
All Cash necessary for Core-Mark Newco, the PCT and the RCT 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, so long as such
sale is not inconsistent with the Revised Term Sheet.
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, the PCT, and the RCT, 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, the PCT, and the RCT, 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. The
Exit Financing Facility and the Tranche B Loan shall not be secured by the
assets transferred to the PCT or the RCT. The Exit Financing Facility shall be
on substantially the terms set forth in the Exit Facility Commitment Letter
attached to the Disclosure Statement as Exhibit 7. The Exit Financing Facility
agreement will be included in the Plan Supplement.
B. Tranche B Loan
The Tranche B Loan shall be a term credit facility in the amount of up to
$70 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 PCT, or the RCT, 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
Tranche B Put Agreement filed with the Disclosure Statement as Exhibit 8. The
Tranche B Loan agreement will be included in the Plan Supplement.
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 the Causes of Action, available to
the Debtors 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, so long as such sale is not inconsistent with the Revised Term
Sheet.
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
33
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 PCT and the RCT 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 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
As further described in section XII.D., the D&O Releasees shall be
indemnified through the Debtors' directors and officers insurance policies up to
a collective limit equal to the amount of the Debtors' directors and officers
insurance proceeds, net of all defense costs and fees, actually payable in Cash,
to pay claims against the D&O Releasees.
E. Compensation and Benefit Programs
Except as otherwise expressly provided herein and excluding the Remaining
Pension Plans, 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 that (i) the Reorganized Debtors will maintain
as specifically designated on the Reorganized Debtors' Benefits Schedule and
(ii) the PCT will maintain as specifically designated on the PCT Benefit
Schedule, both of which are to be filed 15 days prior to the Voting Deadline. In
addition, except as set forth on the Reorganized Debtors' 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 subject to section 4225(b) of ERISA. Notwithstanding the termination or
rejection of the Company Benefit Plans hereunder, vested retiree medical
benefits of Fleming, if any, under applicable Company Benefit Plans shall be
obligations of
34
the PCT after the Effective Date until terminated, unless terminated pursuant to
section 1114 of the Bankruptcy Code prior to the Effective Date. The Debtors
believe the PCT may decide to terminate retiree medical benefits after the
Effective Date and expect the PCT will incur substantial litigation costs if it
attempts 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 Reorganized
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
Reorganized 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, Core-Mark Newco 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(A) 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(A) 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(A) 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
35
the Aggregate Limit shall be treated as a Class 6(A) 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. Core-Mark Newco 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.
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(A) 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.J 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, the PCT and the RCT
Except as otherwise provided herein, Core-Mark Newco, the PCT, or the RCT,
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 the
PCT reasonable compensation for such services and reimbursement of reasonable
expenses incurred in connection with such services upon the presentation of
invoices to the PCT. All distributions to be made herein shall be made without
any requirement for bond or surety with respect thereto.
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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, the PCT, and the RCT 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.
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 claims based on Old Notes,
distributions with respect to such Claims will be made to the appropriate Old
Notes Trustee which will make distributions to Holders of Old Notes at the
address contained in the official record of the appropriate Old Note Trustee. To
the extent the Old Notes 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. The
Debtors, the Reorganized Debtors, Core-Mark Newco, the PCT, and/or the RCT shall
have no liability for any action pertaining to the distributions made by the Old
Notes Trustees.
2. Undeliverable Distributions
(a) Holding of Undeliverable Distributions. If any distribution to a
Holder of an Allowed Claim is returned to Core-Mark Newco, the PCT, the
RCT or an Old Notes Trustee as undeliverable, no further distributions
shall be made to such Holder unless and until Core-Mark Newco, the PCT,
the RCT or an Old Notes Trustee is notified in writing of such Holder's
then-current address. Undeliverable distributions shall be returned to
Core-Mark Newco, the PCT or the RCT and shall remain in the possession of
Core-Mark Newco, the PCT or the RCT 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, the PCT, or the
RCT, as applicable, 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 PCT
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, the PCT, or the RCT, 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, the PCT, the RCT, or the appropriate Old Notes Trustee to
attempt to locate any Holder of an Allowed Claim or Allowed Equity
Interest.
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(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 all Claims except Old Note Claims maintained by the Debtors or
their agents, shall be closed, and there shall be no further changes in the
record Holders of any such Claims. Moreover, the Reorganized Debtors shall have
no obligation to recognize the transfer of any such Claims 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. There shall be no Distribution Record Date for
Old Note Claims.
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, the PCT, and the RCT, 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, the PCT, and the RCT, 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 Classes 6(A) and 6(B) 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, the PCT or the RCT, as applicable, in accordance
with the Revised Term Sheet, 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 the PCT or the
RCT 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, the Reorganized Debtors the PCT
or the RCT of any such Claims, rights and Causes of Action that the Debtors, the
Reorganized Debtors the PCT or the RCT 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
38
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.L. 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.
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, and in accordance with the Revised Term Sheet and the Plan,
the PCT 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 as such actions relate to all
Claims not falling under the authority of the RCT Representative pursuant to the
Revised Term Sheet and the Plan. The RCT Representative shall have exclusive
authority to file objections, settle, compromise, withdraw or litigate to
judgment objections to Claims on behalf of the Debtors and Reorganized Debtors
as such actions relate to Claims that fall under the RCT Representative's
39
authority pursuant to the Revised Term Sheet. From and after the Effective Date,
the PCT Representative may settle or compromise any Disputed Claim allocated to
the PCT on behalf of the Reorganized Debtors and the RCT Representative may
settle or compromise any Disputed Claim allocated to the RCT on behalf of the
Reorganized Debtors without approval of the Bankruptcy Court.
2. Estimation of Claims
Core-Mark Newco, the PCT Representative, and the RCT 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, the PCT, or the RCT, 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, the PCT Representative, and
the RCT 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 herein to the contrary, except as otherwise
agreed by Core-Mark Newco, the PCT, or the RCT, as applicable, Core-Mark Newco,
the PCT, and the RCT, 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, the PCT, or the RCT, 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, the PCT, and the RCT, 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, the PCT, and the RCT, 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.
40
D. Impact on Pending Litigation; Pension Plans
Pursuant to section III.B.10 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(A) 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.
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(A), 6(B) and 7 Claims who are not likely to be receiving full recovery
on their Claims.
E. Settlement of Claims and Controversies.
The provisions of the compromise and settlement among the Debtors, the
Committee and the PBGC as set forth in the Global Settlement Agreement and
Mutual Release, which is attached to the Motion Pursuant to 11 U.S.C. Section
105(a) and Fed. R. Bankr.P. 9019(a) for Court Approval of Settlement Agreement
with Pension Benefit
41
Guaranty Corporation [docket no. 8009] filed with the Court on May 12, 2004, and
to be approved by the Court on June 1, 2004 (the "PBGC Agreement"), are
incorporated by reference herein. The treatment of Claims in Class 6(A) reflect
the compromise and settlement set forth in the PBGC Agreement, which, upon the
Effective Date, shall be binding upon the Debtors, all Claim Holders and all
Entities receiving any payment or other distributions under the Plan.
Additionally, notwithstanding anything in the Plan or the Confirmation
Order: 1) the Debtors shall not seek to reject the Remaining Pension Plans under
section 365 of the Bankruptcy Code; 2) one of the Reorganized Debtors or a
member of their Controlled Group (as defined under 29 U.S.C. Section
1301(a)(14)) will be the contributing sponsor of the Remaining Pension Plans and
each of the Reorganized Debtors and each member of the Reorganized Debtors'
Controlled Group will comply with its obligations with respect to the Remaining
Pension Plans under ERISA, any other applicable law, and the terms of the
Remaining Pension Plans; 3) there shall be no release, discharge, injunction, or
exculpation of any entity from any liability with respect to the Remaining
Pension Plans as to any Claim of, or cause of action by, the PBGC; and 4) there
shall be no release, discharge, injunction or exculpation of any entity, except
for the Debtors, the Reorganized Debtors, any entities created through the
merger of the Reorganized Debtors, any members of the Reorganized Debtors'
Controlled Group (including Core-Mark Newco, Core-Mark Newco Holding I,
Core-Mark Newco Holding II, Core-Mark Newco Holding III, the PCT and the RCT),
from any liability with respect to the Fleming Plan as to any Claim or cause of
action by the PBGC.
F. Special Provisions Regarding Reclamation Claims
1. TLV Reclamation Claims
(a) Allowance of TLV Reclamation Claims shall be determined solely
by the RCT and the affected Creditor without standing of any other party
to object (unless resolution is referred to the PCT on such terms as the
RCT and the PCT shall determine).
(b) Reconciliation of the TLV Reclamation Claims shall consist of
application of all postpetition vendor deductions, over-wires and
preferences and pre-petition setoffs to the extent that General Unsecured
Claims have first been fully setoff through application of pre-petition
deductions. The reconciliation shall recognize the effect of the Trade
Credit Program and the critical vendor program.
(c) Allowed TLV Reclamation Claims shall earn interest which shall
begin to accrue sixty (60) days after the Effective Date at the Wall
Street Journal listed prime rate.
(d) Allowed TLV Reclamation Claims shall be paid (i) first from the
RCT; (ii) second from the PCT and (iii) third from the Core-Mark TLV
Guaranty.
2. Non-TLV Reclamation Claims
(a) Allowance of Non-TLV Reclamation Claims shall be determined
solely by RCT and the affected Creditor without standing of any other
party to object (unless resolution is referred to the PCT on such terms as
the PCT and RCT shall determine).
(b) In reconciling the Non-TLV Reclamation Claims, all post-petition
vendor deductions, over-wires, preferences, and pre-petition setoffs to
the extent that General Unsecured Claims have been fully set off, shall be
applied. In addition, the total amount of Allowed Non TLV-Reclamation
Claims will first be reduced by a discount of $13 million to calculate the
net Allowed amount of the Non-TLV Reclamation Claim.
(c) Allowed Non-TLV Reclamation Claims shall be paid only after
satisfaction of all Allowed TLV Reclamation Claims (i) first from the RCT,
(ii) second from the PCT and (iii) third from the Core-Mark Non-TLV
Guaranty. The timing of such distribution shall be in the discretion of
the RCT.
3. General Unsecured Claims of Reclamation Creditors
42
(a) Allowance of General Unsecured Claims held by Reclamation
Creditors shall be determined by the RCT pursuant to procedures
established by the Bankruptcy Court. Such procedures shall include a
mechanism for approval by the PCT Advisory Board of settlements which
represent an increase of at least 20% from the general unsecured claims
scheduled by the Debtors or the proofs of Claim, whichever is less.
(b) The prosecution of any objections with respect to the General
Unsecured Claims held by Reclamation Creditors and the reconciliation of
such General Unsecured Claims shall be conducted by the RCT at its expense
and will be subject to setoff against any pre-petition Claims of the
Debtors against the Reclamation Creditors.
(c) Allowed General Unsecured Claims of Reclamation Creditors shall
be entitled to the same treatment under this Plan as the Allowed Class
6(A) General Unsecured Claims of non-Reclamation Creditors and shall
receive distributions pursuant to the Plan when Allowed.
4. Expected Reconciliation Rules of RCT
The advisory board of the RCT is expected to approve a series of rules
which can be applied in the reconciliation of Reclamation Claims and other RCT
Assets. These rules shall be applied on a consensual basis by the RCT
Representative with the Reclamation Creditors. These rules shall not be
mandatory. In the event a consensual reconciliation is not achieved by the RCT
Representative and a Reclamation Creditor, there may be alternative dispute
resolution procedures made available on terms adopted by the advisory board of
the RCT. In any event, each Reclamation Creditor reserves its rights to seek
allowance and reconciliation of its Reclamation Claim in accordance with the
Bankruptcy Code and Bankruptcy Rules process as qualified by the Plan.
Pursuant to the Revised Term Sheet, the Debtors, the OCRC, and the
Committee have requested a stay from the Bankruptcy Court of the adversary
proceedings against the Reclamation Claimants through and including the
Effective Date. In the event that the Plan is confirmed, post-Effective Date,
all claims, defenses, and other litigation rights related thereto asserted in
these adversary proceedings constitute RCT Assets, and the RCT shall be entitled
to substitute itself for the Debtors in the adversary proceedings against
Reclamation Claimants. It is the expectation of the OCRC that the advisory board
of the RCT shall seek a further stay of these adversary proceedings to the
extent necessary to, among other things, complete the development of the rules
to be applied in reconciling Reclamation Claims and in resolving the claims
asserted against Reclamation Claimants in the adversary proceedings on a
consensual basis. In the event the application of the rules does not provide a
means to resolve a particular Reclamation Claim, the RCT and the Holder of the
Reclamation Claim reserve the right to seek to terminate the stay of the
relevant adversary proceeding or through other means to seek resolution of the
Reclamation Claim through litigation or other means of dispute resolution.
Subject to Confirmation of the Plan, both in the application of the rules for
reconciliation of Reclamation Claims on a consensual basis and through any
litigation or other dispute resolution (whether through one of the adversary
proceedings or otherwise), the assertion that a Reclamation Claim is to be
eliminated, or to any extent reduced, because of any security interest having
existed in the Debtors' inventory shall be barred (a waiver of the so-called
"valueless" defense to a Reclamation Claim).
5. Surplus Contingency from RCT
In the event the RCT has or develops proceeds for distribution after
satisfaction of all Reclamation Claims, such additional proceeds shall be
applied by the RCT in an order of priority as follows:
(a) To Core-Mark Newco for any advances under the TLV Guaranty or
Non-TLV Guaranty;
(b) To the Prepetition Non-TLV Reclamation Claim Reduction;
(c) To Core-Mark Newco for any advances under the Administrative
Claim Guaranty;
(d) Any amount of "ad hoc committee" professional fees which have
not been reimbursed by allowance of an Administrative Claim; and
43
(e) To the PCT.
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;
(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.
44
8. The PCT and the RCT shall be established and all actions, documents and
agreements necessary to implement the PCT and the RCT 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
December 31, 2004, unless otherwise extended by the Bankruptcy Court, 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.
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, THE PCT REPRESENTATIVE ON BEHALF OF THE PCT AND THE RCT REPRESENTATIVE
ON BEHALF OF THE RCT RESERVE ALL PCT OR RCT CAUSES OF ACTION, AS APPLICABLE,
INCLUDING THEIR RIGHTS TO BRING AVOIDANCE ACTIONS, COLLECT VENDOR DEDUCTIONS, OR
ASSERT SETOFF, RECOUPMENT AND OTHER SIMILAR DEFENSES OR CLAIMS AGAINST MEMBERS
OF THE COMMITTEE AND/OR THE OCRC WITH RESPECT TO DEBTORS' ORDINARY COURSE
BUSINESS DEALINGS WITH SUCH COMMITTEE AND/OR OCRC MEMBERS.
45
C. RELEASES BY HOLDERS OF CLAIMS
1. 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.
2. 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 D&O 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; PROVIDED, HOWEVER, THAT THE FOREGOING RELEASE SHALL AFFECT ONLY THOSE
CLAIMS, OBLIGATIONS, RIGHTS, SUITS, DAMAGES, REMEDIES AND LIABILITIES IN EXCESS
OF THE AMOUNT OF THE DEBTORS' DIRECTORS AND OFFICERS INSURANCE PROCEEDS, NET OF
ALL DEFENSE COSTS AND FEES, ACTUALLY AVAILABLE IN CASH SO THE D&O RELEASEES DO
NOT HAVE TO BEAR ANY COST TO PAY SUCH CLAIMS; AND PROVIDED FURTHER THAT THE
PRECEDING LIMITATION ON RELEASES GIVEN TO DIRECTORS AND OFFICERS SHALL NOT APPLY
TO THE CURRENT DIRECTORS AND OFFICERS OF THE DEBTORS WHO WILL SERVE AS DIRECTORS
AND/OR OFFICERS OF CORE-MARK NEWCO OR ITS SUBSIDIARIES AFTER THE EFFECTIVE DATE.
D. INDEMNIFICATION
ALL D&O RELEASEES AND THEIR RESPECTIVE AFFILIATES, AGENTS AND
PROFESSIONALS SHALL BE INDEMNIFIED FOR 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 THROUGH THE DEBTORS' DIRECTORS AND OFFICERS
INSURANCE POLICIES, UP TO A COLLECTIVE MAXIMUM EQUAL TO THE AMOUNT OF THE
DEBTORS' DIRECTORS AND OFFICERS INSURANCE PROCEEDS, NET OF ALL DEFENSE COST AND
FEES, ACTUALLY PAYABLE IN CASH, TO PAY CLAIMS ASSERTED AGAINST THE D&O RELEASEES
EXCEPT FOR CASES OF WILLFUL MISCONDUCT OR GROSS NEGLIGENCE; AND PROVIDED,
HOWEVER, THAT THE PRECEDING LIMITATION ON INDEMNIFICATION OF DIRECTORS AND
OFFICERS SHALL NOT APPLY TO CURRENT DIRECTORS AND OFFICERS OF THE DEBTORS WHO
WILL SERVE AS DIRECTORS AND/OR OFFICERS OF CORE-MARK NEWCO OR ITS SUBSIDIARIES
AFTER THE EFFECTIVE DATE. 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 TRANCHE B LENDERS, THE PRE-PETITION LENDERS, THE
AGENTS, THE PRE-PETITION AGENT, THE OLD NOTES TRUSTEES, THE COMMITTEE, THE PCT,
THE POST CONFIRMATION ADVISORY BOARD, THE PCT REPRESENTATIVE, THE RCT, THE RCT
ADVISORY BOARD AND THE RCT REPRESENTATIVE, 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
46
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; AND (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.
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 and shall be binding on the PBGC on the terms
identified in section X.E.
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;
47
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.
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 and OCRC
The Committee and the OCRC 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 and OCRC'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.
48
D. Modification of Plan
Subject to the limitations contained in the Plan, and except for a
modification that would adversely impact Reclamation Creditors in a manner
inconsistent with the Revised Term Sheet without the consent of the OCRC, (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 PCT 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 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.
49
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, the Committee or the OCRC shall be
sent by first class U.S. mail, postage prepaid to:
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
And
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
And
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
And
Piper Rudnick LLP
6225 Smith Avenue
Baltimore, MD 21209-3600
Attn: Mark J. Friedman
50
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/_______________________________________
Name: Rebecca A. Roof
Title: Interim Chief Financial Officer
OFFICIAL COMMITTEE OF UNSECURED CREDITORS
By: /s/_______________________________________
Name: Paul S. Aronzon
Title: Co-counsel for Official Committee
of Unsecured Creditors
51
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
THIRD AMENDED AND REVISED 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 third amended and revised 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. All objections to the Disclosure Statement are overruled, except that the
objections of Central States Pension Fund (Docket No. 6652), Zurich American
Insurance Company (Docket No. 6631), XL Specialty Insurance Company (Docket No.
6596), and Rothmans, Benson & Hedges, Inc. (Docket No. 6673) shall be treated as
objections to the Plan and addressed at the Confirmation Hearing (as defined
below) if unresolved before that time.
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 July 26, 2004 at 9:30 a.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 July 2, 2004.
8. 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 before 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 &
200 East Randolph Drive Weintraub PC
Chicago, IL 60601 919 N. Market Street
(312) 861-2000 16th Floor
Fax: (312) 861-2200 Wilmington, DE 19899
Attn: Janet S. Baer Fax: (302) 652-4400
Evan R. Gartenlaub Attn: Laura Davis Jones
Christopher J. Lhulier
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
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
Co-Counsel for the Official Co-Counsel for the Official Committee
Committee of Reclamation of Reclamation Creditors
Creditors Klehr Harrison Harvey Branzburg &
Piper Rudnick LLP Eller LLP
6225 Smith Avenue 919 Market Street
Baltimore, MD 21209-3600 Suite 1000
Fax: (410) 580-3001 Wilmington, DE 19809-3062
Attn: Mark J. Friedman Fax: (302) 426-9193
Attn: Carol Ann Slocum
9. 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 July 16, 2004.
10. The deadline for any objecting party to identify witnesses, if any,
for the Confirmation Hearing shall be July 2, 2004 at 4:00 p.m. Eastern Time
(the "Witness Identification Deadline"). The objecting party shall serve a
written list of such proposed witness by the Witness Identification Deadline on
the Notice Parties listed above. The Debtors, the Official Committee of
Unsecured Creditors and the Official Committee of Reclamation Creditors shall
identify any witnesses to be called at the Confirmation Hearing by notice on
objecting parties no later than July 7, 2004 at 4:00 p.m. Eastern Time.
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. May 25, 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, on whose behalf timely
proofs of claims have been filed, 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. 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 July 2, 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 (subject to paragraph 30(a) hereof). The
Solicitation Agent shall file with the Court a voting report (containing its
summary of the Ballots received as further required by this Order) within seven
days after the Voting Deadline.
16. The form of the Ballots, substantially in the forms attached hereto
as Exhibit A, are hereby approved.
17. The forms 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. The letters of the Official Committee of Unsecured Creditors and the
Official Committee of Reclamation Creditors in support of the Plan,
substantially in the form attached hereto as Exhibit E and Exhibit F (the
"Committee Support Letters"), are hereby approved.
24. Within ten 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(3));
(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, (f) the Committee Support Letters, and (g) 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(4); (ii) the Office of the
United States Trustee; and (iii) the Securities and Exchange Commission.
- ----------------------
(3) Due to its voluminous size, Exhibit A to the Plan will not be included in
the Solicitation Package, but, as indicated in the Plan, will be available
on the Solicitation Agent's website or by calling the Solicitation Agent
to request a copy. The Debtors shall, by separate notice, advise all
parties listed on Exhibit A that they are listed on Exhibit A.
(4) For purpose of this instruction, Claims shall include any and all demands
being recorded by the Debtors in connection with: (i) the Order Requiring
Segregation of Funds to Cover Certain PACA Claims and Authorizing
Procedures for Reconciliation and Payment of Valid Claims Under the
Perishable Agricultural Commodities
(Continued...)
25. 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.
26. Within ten days after the entry of this Order, the Debtors shall
distribute the following materials: (a) the Confirmation Hearing Notice; and (b)
the applicable 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.
27. As soon as practicable after entry of this Order, the Debtors shall
publish the Confirmation Hearing Notice once in the publications listed on
Exhibit G.
28. 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.(5) The deadline for the Debtors to file
and serve
- --------------------------
Act and the Packers and Stockyard Act dated May 6, 2003 (as evidenced by
the reports required thereunder); and (ii) any reclamation demands, as
recorded with the preface "R" by the Debtors' Claims Agent. Additionally,
DSD Class Members (as defined in the Settlement Agreement dated March 18,
2004), regardless of having filed a proof of claim, shall be entitled to
vote in Class 3(C). All Ballots to those Class Members shall be served on
the DSD Class' lead counsel, Hartley B. Martyn, Martin & Associates. The
Class Members and amount of Claim being voted in each Ballot shall be
determined in accordance with Exhibit H attached hereto. The listing of
the claims on Exhibit H does not constitute an admission by any party of
the validity or value of such claims, or otherwise.
(5) For purposes of this instruction, the adversary actions filed by the
Debtors relating to certain reclamation demands listed on Exhibit I shall
constitute objections to both classification and amount to those demand
claims. However, such claimants will not be required to file a 3018(a)
motion to vote their claim as filed. Instead, the Debtors will solicit
such claimants with Ballots reflecting their asserted claims (which are
the "high amounts" on Exhibit I); provided however, the Debtors'
Solicitation Agent will track the voting of such Ballots at both the high
value and the Debtors' reduced value as calculated by the Debtors'
understanding of the methodology contemplated by the Reclamation Committee
(which are the "low amount" on Exhibit I). If the final vote on the Plan
is affected by the difference in the high and low values of these
reclamation demands, the
(Continued...)
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 J, explaining that 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 thirty (30) 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 hearing on the 3018(a) Motions. 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
- -------------------------
Debtors reserve the right to request the Court to estimate said claims for
voting purposes. The listing of these claims in both the high and low
amounts does not constitute an admission by any party for purposes of any
such estimation process, or otherwise. Nor does the listing of the high
and low amounts alter any applicable burden of proof.
portions in addition to unliquidated, contingent or unknown
amounts that are not subject to a pending objection shall be
counted, unless otherwise agreed between the parties, 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.(6)
29. 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.
30. 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;
- -------------------------
(6) Attached hereto as Exhibit K is a list of all multi-debtor claims that
will receive only one Ballot for their identical claims asserted in the
same class of the Plan for purposes of this instruction.
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 valid Ballot or valid 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 (including identification of Ballots not
counted as a result of any defects) 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.
31. 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(A) General Unsecured
Claims or 6(B) Senior Subordinated Note 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(A) and 6(B) 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.
32. 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 as of the Voting Record Date in (a)
the claims register or (b) the Debtors' records for the Claims described in
footnote 4 hereof.
33. 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).
34. 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.
35. Claims (a) of (i) professionals not retained by the Debtors, the
Committee or the OCRC under section 327 or 363 of the Bankruptcy Code alleging
beneficial or necessary fees towards completion of these cases as outlined in
section 330 of the Bankruptcy Code and/or (ii) any other party alleging
substantial contribution claims under section 503(b) of the Bankruptcy
Code, and (b) arising on or before June 1, 2004, shall be filed no later than
5:00 p.m. Eastern Time on June 28, 2004. Any such claims arising after June 1,
2004, shall be filed no later than 45 days after the Effective Date.
36. 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 Third Amended
Plan of Reorganization (the "Plan") for Fleming Companies, Inc.(1), 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(2) ("Effective Date"), 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. Additionally, two trusts will be formed on the Effective Date; the
Post-Confirmation Trust ("PCT") and the Reclamation Creditors' Trust ("RCT").
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 sheets for Core-Mark Newco, the PCT, and the RCT (Exhibit 3A);
(e) post-Effective Date balance sheets, income statements, and statements of
cash flows for Core-Mark Newco (Exhibit 3B); (f) post- Effective Date statements
of assets and liabilities and cash receipts and disbursements for the PCT
(Exhibit 3C); and (g) post- Effective Date statements of assets and liabilities
and cash receipts and disbursements for the RCT (Exhibit 3D).
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 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, the accuracy of the Debtors' estimates with
regards to the timing and realization of the recoveries of assets and the
payments of Claims, the amount of expenses projected to recognize such
recoveries and reconcile such Claims, and the PCT's and RCT's ability to prevail
in various litigation and other adversarial matters or realize the proceeds from
the collections of various amounts outstanding. THE LIMITED NATURE OF THE DUE
DILIGENCE WHICH THE OCRC HAS CONDUCTED TO DATE DOES NOT ENABLE THE OCRC TO
CONFIRM INDEPENDENTLY THE PROJECTED RESULTS OUTLINED BY THE DEBTORS.
- ----------------------
(1) Capitalized terms not defined herein shall have the meaning set forth in
the Plan.
(2) 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 l
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)
JUL-04
FLEMING CO. INC, EMERGENCE & ESCROW FUNDING
ET AL. PRE-REORG "FRESH START" & EXIT FINANCING
(dollars in thousands) BALANCE SHEET(1) ADJUSTMENTS (2) ADJUSTMENTS
---------------- --------------- ----------------
ASSETS:
Cash & equivalents $ 108,837 $ - $ (27,837) (9)
Restricted cash 114,450 - (22,227)(10)
Trade accounts receivable & royally, net 150,216 - -
Other receivables 266,098 (15,158)(3) -
Inventories, net 180,811 - -
Other current assets 33,179 - -
---------------- -------------- ----------------
TOTAL CURRENT ASSETS $ 853,592 $ (15,158) $ (50,064)
Property plant & equipment, net 48,181 (48,181)(4) -
Reorganization value in excess of
amounts allocable to identifiable assets - - -
Other assets 38,074 (43,038)(5) 4,963 (11)
---------------- -------------- ----------------
TOTAL NON-CURRENT ASSETS 86,255 (91,219) 4,963
---------------- -------------- ----------------
TOTAL ASSETS $ 939,847 $ (106,377) $ (45,101)
================ ============== ================
LIABILITIES & SHAREHOLDERS' EQUITY/(DEFICIT):
Short-term debt $ - - 41,300 (12)
Accounts payable &, accrued liabilities 390,338 - (17,500)(13)
Cigarette & tobacco taxes payable 61,345 - -
Taxes payable & deferred taxes 6,427 (2,727)(6) -
Other current liabilities - - -
---------------- -------------- ----------------
TOTAL CURRENT LIABILITIES $ 458,109 $ (2,727) $ 23,800
Long-term debt - - 60,000 (14)
Other long-term liabilities 45,165 - -
---------------- -------------- ----------------
TOTAL LIABILITIES $ 503,274 $ (2,727) $ 83,800
TOTAL LIABILITIES SUBJECT TO COMPROMISE $ 2,186,715 (2,057,814)(7) (128,901)(15)
Shareholders' equity/(deficit) (1,750,142) 1,954,164 (8) -
---------------- -------------- ----------------
TOTAL LIABILITIES & EQUITY $ 939,847 $ (106,377) $ (45,101)
================ ============== ================
ASSETS & LIABS. ASSETS & LIABS. JUL-04
TRANSFERRED TO TRANSFERRED TO CORE-MARK
POST-CONFIRM, RECL CRED. NEWCO OPENING
(dollars in thousands) TRUST (16) TRUST (20) BALANCE SHEET (24)
--------------- --------------- ------------------
ASSETS:
Cash & equivalents $ 55,000 $ 6,000 $ 20,000
Restricted cash 64,443 - 27,780
Trade accounts receivable & royally, net 18,000 _ 132,216
Other receivables 43,000 134,000 73,940
Inventories, net - - 180,811
Other current assets - - 33,179
--------------- --------------- ------------------
TOTAL CURRENT ASSETS $ 180,443 $ 140,000 $ 467,927
Property plant & equipment, net - - -
Reorganization value in excess of
amounts allocable to identifiable assets - - -
Other assets - - -
--------------- --------------- ------------------
TOTAL NON-CURRENT ASSETS - - -
--------------- --------------- ------------------
TOTAL ASSETS $ 180,143 (17) $ 140,000 (21) $ 467,927
=============== =============== ==================
LIABILITIES & SHAREHOLDERS' EQUITY/(DEFICIT):
Short-term debt $ - - $ 41,300
Accounts payable &, accrued liabilities 144,693 120,000 108,145
Cigarette & tobacco taxes payable - - 61,345
Taxes payable & deferred taxes - - 3700
Other current liabilities - - -
--------------- --------------- ------------------
TOTAL CURRENT LIABILITIES $ 144,693 $ 120,000 $ 214,490
Long-term debt - - 60,000
Other long-term liabilities - - 45,165
--------------- --------------- ------------------
TOTAL LIABILITIES $ 144,693 (18) $ 120,000 (22) $ 319,655
TOTAL LIABILITIES SUBJECT TO COMPROMISE $ - $ - $ -
Shareholders' equity/(deficit) 35,750 (19) 20,000 (23) 148,272
--------------- --------------- ------------------
TOTAL LIABILITIES & EQUITY $ 180,443 $ 140,000 $ 467,927
=============== =============== ==================
Page 3
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 and
RCT, the value of estimated recoverable assets exceeds the estimated
liabilities transferred to the PCT and RCT. 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.
3. Pursuant to SOP 90-7, certain vendor debit balances estimated to be
uncollectable net of estimated collectable vendor litigation recoveries
are written off.
4. 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.
5. 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.
6. 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.
7. Represents the elimination of certain liabilities subject to compromise
based on the forgiveness of debt as provided for in the Plan.
8. 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.
Page 4
9. The net adjustment to cash reflects the net of the following receipts &
disbursements at confirmation:
RECEIPTS:
Tranche B proceeds $60,000
Exit Financing Facility borrowing 41,300
Return of cash collateralized for LCs 59,683
------
Total receipts 160,983
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 ($27,837)
=======
10. The adjustment to restricted cash reflects the following:
Return of cash collateral related to LCs ($59,683)
Transfer of cash to DSD settlement Trustee (17,500)
Escrow of cash related to FSA damage reserve 16,156
Escrow for professional fees 38,800
------
Net change in restricted cash $22,227
======
11. 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.
12. Represents the borrowing at emergence on the Exit Financing Facility.
13. 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.
14. Adjustment reflects the proceeds of Tranche B Loan.
15. Reflects the re-payment of the pre-petition bank debt.
16. The values of the assets contributed to the PCT are stated on the basis of
the amount of cash the Debtors expect to recover from the pursuit of the
collection of these assets, based on the Debtors' review of the underlying
detail of the components of each asset category. The ultimate recovery
takes into account a number of factors, including the length of time and
amount of resources available to pursue such collections through a
combination of settlements, litigation, and arbitration. Such assumptions
will vary between pursuits of recoveries through an ongoing trust vehicle
from the conditions expected in a liquidation environment. No amounts have
been included for contingent items, such as miscellaneous causes of
actions, purchase escrows, etc. where no reliable estimate of recovery
could be made. The liabilities of the PCT have been estimated at the
amount that the Debtors expect to ultimately pay, using their best
business judgment at the time the estimates were made. Results between the
estimated amount and the amount the Debtors ultimately pay may be expected
to vary. The limited nature of the due diligence which the OCRC has
conducted to date does not enable the OCRC to confirm independently the
projected results outlined by the Debtors.
Page 5
17. The estimated assets transferred to the PCT are as follows:
Cast & equivalents $ 55,000
Restricted cash
PACA $ 8,762
Other 725
Escrow for professional fees 38,800
-------
FSA Reserve (a) 16,156
-------
Total restricted cash 64,443
Trade accounts receivable & royalty, net
Accounts receivable (b) 15,000
Royalties due (c) 3,000
-------
Total trade accounts receivable & royalty, net 18,000
Litigation claims recovery
Vendor deduction collections (d) 15,000
Preference and litigation recoveries (e) 28,000 -
-------
Total litigation claims recovery 43,000
--------
Total assets transferred $180,443
========
(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 counter party. 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 counter
parties.
(b) The Debtors reviewed each of the over 3,000 wholesale accounts to be
transferred to the PCT with a currently outstanding balance, which
exceeds $72 million. A low and high probability of collection was
applied to each account, resulting in anticipated collections
ranging between $17 million and $325 million. The Debtors identified
the mid-range between these amounts of $21 million. The Debtors then
estimated the amount of collections that will be received prior to
July 31 to be $6 million, resulting in estimated collections by the
PCT of $15 million. The Debtors project that many of these accounts
will ultimately be collected in a litigation or arbitration
environment and that collection activities will stretch into 2006.
(c) As part of the asset purchase agreement with C&S, certain royalties
related to the continuation of service by C&S or its follow-on
buyers to previous wholesale customers of the Debtors were to be
paid quarterly through 2008. The Debtors estimate, based on the
retention of the Debtors' previous customers reported to the Debtors
by C&S or its follow-on buyers, that approximately $3 million
remains outstanding from one of the C&S follow-on buyers.
(d) The Debtors have certain assets that are due and payable from
non-reclamation creditors that the Debtors believe are not subject
to setoff against pre-petition debts. These assets include accounts
receivables from vendors for promotional activities that were earned
during the post-petition period in the normal course of operations
and are due and payable. These assets also include certain excess
payments made to vendors during the post petition period in excess
of the value of product received in return from the vendor. The
Debtors also believe that vendors are holding certain funds of the
Debtors that were collected by the vendors both pre-petition and
post-petition for product sold from Fleming to military
commissaries. Finally, the Debtors believe that certain vendors
violated the critical trade vendor program and, as such, amount
received by the vendors under that program are to be repaid to the
Debtors. The Debtors believe the estimated collections from the
above referenced vendor receivables will generate proceeds to the
PCT of approximately 15 million.
(e) During the 90 days preceding the Debtors bankruptcy filing, the
Debtors made payments to non-reclamation creditors in a total amount
of $1.8 billion. Such payments are subject to recovery and the
Debtors plan to pursue such assets through the PCT. The Debtors have
evaluated the potential defenses available to the creditors that
received these payments, including new value provided and an
assessment of whether or not payments were made in the ordinary
course of business. Based on the Debtors analysis of such defenses,
the Debtors believe net proceeds that will be recovered by the PCT
will approximate $28 million. The preceding estimate does not
include any amount for those actions for which a recovery amount
cannot be currently estimated.
Page 6
18. The estimated accounts payable and accrued liabilities to be transferred
to the PCT are as follows:
General accounts payable $ 3,000
PACA and other 9,487
Priority & property tax Claims 20,250
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
Ch. 11 professional fees 38,800
--------
Other secured Claims 1,000
--------
Total liabilities transferred $144,693
========
19. The excess of assets over liabilities transferred to the PCT is estimated
to be $35.75 million. This excess is available to pay the operating
expenses of the PCT and to accrue to the benefit of the beneficiaries of
the PCT as described in the Plan.
20. The values of the assets contributed to the RCT are stated on the basis of
the amount of cash the Debtors expect will be recovered from the pursuit
of the collection of the RCT assets, based on the Debtors' review of the
underlying detail of the components of each asset category. The ultimate
recovery takes into account a number of factors, including the length of
time and amount of resources available to pursue such collections through
a combination of settlements, litigation, and arbitration. Such
assumptions will vary between pursuits of recoveries through an ongoing
trust vehicle from the conditions expected in a liquidation environment.
The liabilities of the RCT have been estimated at the amount that the
Debtors expect will ultimately be paid, using their best business judgment
at the time the estimates were made. Results between the estimated amount
and the amount ultimately paid may be expected to vary. The limited nature
of the due diligence which the OCRC has conducted to date does not enable
the OCRC to confirm independently the projected results outlined by the
Debtors.
Page 7
21. The estimated assets transferred to the RCT are as follows:
Cash & equivalents (a) $ 6,000
Litigation claims recovery
Vendor deduction collections (b) $94,000
Preference and litigation recoveries (c) 40,000
-------
Total litigation claims recovery 134,000
--------
Total assets transferred $140,000
========
(a) Cash & equivalents is comprised of $3.0 million in cash for the
administration of the RCT and $3.0 million transferred from certain
vendor collections subsequent to march 23, 2004 which, under the
terms of the Plan, are to be held for the benefit of the RCT.
(b) The Debtors have certain assets that are due and payable from
reclamation creditors that the Debtors believe are not subject to
setoff against pre-petition debts. These assets include accounts
receivables from vendors for promotional activities that were earned
during the post-petition period in the normal course of operations
and are due and payable. These assets also include certain excess
payments made to vendors during the post petition period in excess
of the value of product received in return from the vendor. The
Debtors also believe that vendors are holding certain funds of the
Debtors that were collected by the vendors both pre-petition and
post-petition for product sold from Fleming to military
commissaries. Finally, the Debtors believe that certain vendors
violated the critical trade vendor program and, as such, amount
received by the vendors under that program are to be repaid to the
Debtors. The Debtors believe the estimated collections from the
above referenced vendor receivables will generate proceeds to the
RCT of approximately $94.0 million.
(c) During the 90 days preceding the Debtors' bankruptcy filing, the
Debtors made payments to reclamation creditors in a total amount of
$2.2 billion. Such payments are subject to recovery and the Debtors
plan to pursue such assets through the RCT. The Debtors have
evaluated the potential defenses available to the creditors that
received these payments, including new value provided and an
assessment of whether or not payments were made in the ordinary
course of business. Based on the Debtors' analysis of such defenses,
the Debtors believe net proceeds that will be recovered by the RCT
will approximate $40.0 million. The preceding estimate does not
include any amount for those actions for which a recovery amount
cannot be currently estimated.
22. The estimated accounts payable and accrued liabilities to be transferred
to the RCT are as follows:
TLV Reclamation Claims (Class 3B) (a) $ 50,000
Non-TLV Reclamation Claims (Class 5) (b) 70,000
---------
Total liabilities transferred $ 120,000
=========
(a) TLV Reclamation Claims (Class 3B) consist of those claims asserted
under 546(c)(2) of the Bankruptcy Code for those holders who
participated in the Trade Credit Program as outlined in the Final
DIP Order. Allowed TLV Reclamation Claims shall earn interest which
shall begin to accrue sixty (60) days after the Effective Date at
the Wall Street Journal listed prime rate. The Debtors estimate that
Allowed TLV Claims will total approximately $50.0 million.
(b) Non-TLV Reclamation Claims consist of those claims asserted under
546(c)(2) of the Bankruptcy Code for those holders who did not
participate in the Trade Credit Program as outlined in the Final DIP
Order. The Debtors estimate that Allowed TLV Reclamation Claims will
total approximately $70.0 million. The foregoing amount reflects the
reduction in the amount of $13.0 million for the Prepelition Non-TLV
Reclamation Claim Reduction outlined in the Revised Term Sheet.
Page 8
23. The excess of assets over liabilities transferred to the RCT is estimated
to be $20.0 million. This excess is available to pay the operating
expenses of the RCT, estimated to approximate $8.9 million from the
Effective Date through 2006. In the event that there is a surplus after
satisfaction of all Reclamation Claims, such additional proceeds shall be
applied as follows:
1. To Core-Mark Newco for any advances under the TLV or Non-TLV
Guaranty;
2. To the Prepetition Non-TLV Reclamation Claim Reduction;
3. To Core-Mark Newco for any advances under the Administrative Claim
Guaranty;
4. Any amount of "Ad Hoc Committee" professional fees which have not
been reimbursed by allowance of an Administrative Claim; and
5. To the PCT.
24. Opening Balance Sheet for Core-Mark Newco created pursuant to the Plan.
See Exhibit 3B.
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)
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 1,566,647 3,995,526 4,301,530 4,640,632 4,995,228
----------- ----------- ------------ ------------- ------------
GROSS PROFIT 100,632 251,818 273,560 294,902 317,642
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 5,017 10,496 9,136 7,780 5,947
----------- ----------- ------------ ------------- ------------
INCOME/(LOSS) BEFORE INCOME TAXES 10,828 32,733 45,127 59,012 70,002
Provision/(benefit) from income taxes 4,331 13,093 18,052 23,604 28,001
----------- ----------- ------------ ------------- ------------
NET INCOME/(LOSS) $ 6,497 $ 19,640 $ 27,076 $ 35,407 $ 42,001
=========== =========== ============ ============= ============
Page 11
EXHIBIT 3B
CORE-MARK NEWCO
PROJECTED BALANCE SHEETS
(Unaudited)
PROJECTED
----------------------------------------------------
PROJECTED DECEMBER 31,
JULY 31, ----------------------------------------------------
(dollars in thousands) 2004 2004 2005 2006 2007 2008
-------- -------- -------- -------- -------- --------
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 $ 41,300 $ 1,179 $ 12,947 $ 20,820 $ 24,005 $ 25,131
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 214,490 151,828 201,804 217,158 228,494 235,988
Long-term debt - Tranche B 60,000 50,901 35,813 27,080 12,300 -
Other long-term liabilities 45,165 44,661 34,754 27,354 21,492 15,630
-------- -------- -------- -------- -------- --------
TOTAL LIABILITIES 319,655 247,390 272,370 271,592 262,285 251,618
Shareholders' equity/(deficit) 148,272 154,769 174,408 201,485 236,892 278,893
-------- -------- -------- -------- -------- --------
TOTAL LIABILITIES & equity $467,927 $402,159 $446,779 $473,077 $499,177 $530,511
======== ======== ======== ======== ======== ========
Page 12
EXHIBIT 3B
CORE-MARK NEWCO
PROJECTED STATEMENTS OF CASH FLOW
(Unaudited)
PROJECTED
PROJECTED ---------------------------------------------
5 MOS. FOR THE 12 MONTHS ENDING DECEMBER 31,
ENDING ---------------------------------------------
(dollars in thousands) 12/31/2004 2005 2006 2007 2008
---------- --------- --------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,497 $ 19,640 $ 27,076 $ 35,407 $ 42,001
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 40,247 12,986 10,725 21,668 21,535
CASH FLOWS FROM INVESTING ACTIVITIES
Capita! 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
Short-term debt (40,122) 11,768 7,873 3,185 1,126
Long-term debt - Tranche B (9,099) (15,089) (8,732) (14,781) (12,300)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES (49,221) (3,320) (859) (11,596) (11,174)
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
======== ======== ======== ======== ========
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.
As described in the Revised Term Sheet, Core-Mark Newco will issue 3 guaranties:
- Core-Mark TLV Guaranty;
- Core-Mark Non-TLV Guaranty; and
- Administrative Claim Guaranty.
If the results assumed in the projections in Exhibits 3B, 3C, and 3D are
realized, none of the foregoing guaranties issued by Core-Mark Newco will be
called.
PROJECTED STATEMENT OF OPERATIONS
NET SALES: Sales 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 SALES: Cost of sales 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 sales 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.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES: SG&A 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.
PROVISION / (BENEFIT) FROM INCOME TAXES: The Projections assume that
income is taxed at an effective rate of 40.0% and is paid in the month
accrued.
Page 14
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.
$27.8 Million has been set-aside for this purpose.
TRADE ACCOUNTS RECEIVABLE: Trade 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.
INVENTORIES, NET: Net 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.
PROPERTY, PLANT & EQUIPMENT, NET AND OTHER 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 Projection period. The
projected cash borrowings outstanding on the Effective Date will be $41.3
million with the first $10.0 million in a Term B Loan and the remaining
$31.3 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 & ACCRUED LIABILITIES: 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 increased in accordance with the
projected sales growth creating a source of working capital.
TAXES PAYABLE & 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.
Page 15
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%
It is assumed that the balance outstanding is retired as cash in excess of
minimum working capital becomes available.
LONG-TERM DEBT - TRANCHE B: 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 float 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 16
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)
PROJECTED
-----------------------------
PROJECTED 12 MONTHS ENDING DECEMBER 31,
5 MOS. ENDING -----------------------------
(dollars in thousands) 12/31/2004 2005 2006
------------- -----------------------------
BEGINNING CASH $ 55,000 $ 1,156 $ 23,238
CASH RECEIPTS
Trade accounts receivable collections 4,167 10,000 833
Royalty payment collections 400 800 1,800
Litigation claims recovery 8,250 21,000 13,750
Release of restricted cash 53,372 2,915 8,156
------------- ---------- ----------
TOTAL CASH COLLECTIONS 66,189 34,715 24,539
DISBURSEMENTS FOR TRUST EXPENSES
Employee & payroll (1,127) - -
Lease & recurring (232) - -
Professional fees (4,150) (1,800) (750)
Other operating expenses (2,136) (1,140) (600)
Income from transition services provided to RCT 557 280 120
Interest income (expense) 12 109 364
------------- ---------- ---------
TOTAL TRUST EXPENSES (7,077) (2,551) (866)
------------- ---------- ---------
EXCESS OF CASH COLLECTIONS OVER DISBURS. FOR TRUST EXPENSES 59,112 32,163 23,673
CLAIMS & OTHER DISBURSEMENTS
Genera] accounts payable (2,500) (500) -
Health & welfare benefits (2,083) (2,917) -
Priority & property tax claims (3,000) (3,750) (3,600)
PACA & other claims (7,906) (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) - -
Ch. 1 1 professional fees (38,800) - -
FSA settlements (6,667) (1,333) -
------------- ---------- ---------
Subtotal claims & other disbursements (112,956) (10,081) (3,600)
------------- ---------- ---------
EXCESS (DEFICIT) OF CASH COLLECTIONS OVER TOTAL DISBURSEMENTS (53,844) 22,082 20,073
------------- ---------- ---------
ENDING CASH $ 1,156 $ 23,238 $ 43,312
============= ========== =========
(dollars in thousands) TOTAL
------------
BEGINNING CASH $ 55,000
CASH RECEIPTS
Trade accounts receivable collections 15,000
Royalty payment collections 3,000
Litigation claims recovery 43,000
Release of restricted cash 64,443
------------
TOTAL CASH COLLECTIONS 125,443
DISBURSEMENTS FOR TRUST EXPENSES
Employee & payroll (1,127)
Lease & recurring (232)
Professional fees (6,700)
Other operating expenses (3,876)
Income from transition services provided to RCT 957
Interest income (expense) 484
------------
TOTAL TRUST EXPENSES (10,494)
------------
EXCESS OF CASH COLLECTIONS OVER DISBURS. FOR TRUST EXPENSES 114,949
CLAIMS & OTHER DISBURSEMENTS
Genera] accounts payable (3,000)
Health & welfare benefits (5,000)
Priority & property tax claims (10,350)
PACA & other claims (9,487)
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)
Ch. 1 1 professional fees (38,800)
FSA settlements (8,000)
------------
Subtotal claims & other disbursements (126,637)
------------
EXCESS (DEFICIT) OF CASH COLLECTIONS OVER TOTAL DISBURSEMENTS (11,688)
------------
ENDING CASH $ 43,312
============
Page 18
EXHIBIT 3C
POST-CONFIRMATION TRUST
PROJECTED ASSETS & LIABILITIES
(Unaudited)
PROJECTED
----------------------------------------
PROJECTED DECEMBER 31,
JULY 31, ----------------------------------------
(dollars in thousands) 2004 2004 2005 2006
------------ --------- --------- --------
ASSETS:
Cash & equivalents $ 55,000 $ 1,156 $ 23,238 $ 43,312
Restricted cash 64,443 11,071 8,156 -
Trade accounts receivable & royalty, net 18,000 13,433 2,633 -
Other receivables 43,000 34,750 13,750 -
------------ --------- --------- --------
TOTAL CURRENT ASSETS 180,443 60,410 47,778 43,312
------------ --------- --------- --------
TOTAL ASSETS $ 180,443 $ 60,410 $ 47,778 $ 43,312
============ ========= ========= ========
LIABILITIES:
Accounts payable & accrued liabilities:
General accounts payable $ 3,000 $ 500 $ - $ -
Health & welfare benefits 5,000 2,917 - -
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 - - -
Ch. 11 professional fees 38,800 - - -
FSA reserve 16,156 9,489 8,156 -
------------ --------- --------- --------
Total current liabilities 144,693 31,737 21,656 9,900
------------ --------- --------- --------
Excess (deficit) of assets over liabilities $ 35,750 $ 28,673 $ 26,122 $ 33,412
============ ========= ========= ========
RESTRICTED CASH ACTIVITY
Beginning restricted cash $ 64,443 $ 11,071 $ 8,156
PACA & other payments (7,906) (1,581) -
FSA settlements (6,667) (1,333) -
Ch. 11 professional fee payments (38,800) - -
Release of remaining FSA reserve - - (8,156)
--------- --------- --------
Ending restricted cash $ 11,071 $ 8,156 $ -
========= ========= ========
Page 19
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 Notes 17 &
18) 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. In all periods
presented, the PCT will provide transition services to the RCT.
The beneficiaries of the PCT, after satisfaction of all liabilities to be
satisfied by the PCT as outlined in the Plan including Administrative Claims,
Priority Tax Claims, Other Priority Non-Tax Claims, Property Tax Claims,
PACA/PASA Claims, FSA liabilities, Convenience Claims and all PCT expenses,
shall be (in order of priority):
1. Core-Mark Newco, in the amount necessary to reimburse Core-Mark
Newco for any payments made on the TLV or Non-TLV Guaranty as
outlined below;
2. the RCT, in the event all Reclamation Claims and interest thereon as
applicable together with the Prepetition Non-TLV Reclamation Claim
Reduction as defined below, have not been paid in full by the RCT;
3. Core-Mark Newco in the amount necessary to reimburse Core-Mark Newco
for any payments made on the Administrative Claim Guaranty in the
event the Reclamation Claims and the Prepetition Non-TLV Reclamation
Claim Reduction, as defined below, have been paid in full by the
RCT; and
4. thereafter the Class 6 General Unsecured Creditors (as defined in
the Plan).
If the results assumed in the projections in Exhibits 3B, 3C, and 3D are
realized, no payments or reimbursements will be due to Core-Mark Newco or the
RCT and the Class 6 General Unsecured Creditors will receive the benefits of any
surplus generated by the PCT.
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. The Debtors
reviewed each of the over 3,000 wholesale accounts to be transferred
to the PCT with a currently outstanding balance, which, exceeds $72
million. A low and high probability of collection was applied to
each account, resulting in anticipated collections ranging between
$17 million and $25 million. The Debtors identified the mid-range
between these amounts of $21 million. The Debtors then estimated the
amount of collections that will be received prior to July 31 to be
$6 million, resulting in estimated collections by the PCT of $15
million. The Debtors project that many of these accounts will
ultimately be collected in a litigation or arbitration environment
and that collection activities will stretch into 2006.
Page 20
ROYALTY PAYMENTS: As part of the asset purchase agreement with C&S,
certain royalties related to the continuation of service by C&S or
its follow-on buyers to previous wholesale customers of the Debtors
were to be paid quarterly through 2008. The Debtors estimate, based
on the retention of the Debtors' previous customers reported to the
Debtors by C&S or its follow-on buyers, that approximately $3
million remains outstanding from one of the C&S follow-on buyers.
The Debtors negotiated prepayment of the royalties due from C&S and
all other follow-on buyers. The projections assume that the Debtors
will receive the payments scheduled in 2004 and 2005 and will be
able to negotiate a similar prepayment for the remaining amount due
in 2006.
LITIGATION CLAIMS: The Debtors have certain assets that are due and
payable from non-reclamation creditors that the Debtors believe are
not subject to setoff against pre-petition debts. These assets
include accounts receivables from vendors for promotional activities
that were earned during the post-petition period in the normal
course of operations and are due and payable. These assets also
include certain excess payments made to vendors during the post
petition period in excess of the value of product received in return
from the vendor. The Debtors also believe that vendors are holding
certain funds of the Debtors that were collected by the vendors both
pre-petition and post-petition for product sold from Fleming to
military commissaries. Finally, the Debtors believe that certain
vendors violated the critical trade vendor program and, as such,
amount received by the vendors under that program are to be repaid
to the Debtors. The Debtors believe the estimated collections from
the above referenced vendor receivables will generate proceeds to
the PCT of approximately $15.0 million.
Additionally, during the 90 days preceding the Debtors bankruptcy
filing, the Debtors made payments to non-reclamation creditors in a
total amount of $1.8 billion. Such payments are subject to recovery
and the Debtors plan to pursue such assets through the PCT. The
Debtors have evaluated the potential defenses available to the
creditors that received these payments, including new value provided
and an assessment of whether or not payments were made in the
ordinary course of business. Based on the Debtors' analysis of such
defenses, the Debtors believe net proceeds that will be recovered by
the PCT will approximate $28 million. The preceding estimate does
not include any amount for those actions for which a recovery amount
cannot be currently estimated.
Collections from total estimated Litigation Claims of $43.0 million
are estimated to be $8.2 million for August 2004-December 2004,
$21.0 million for 2005 and $ 13.8 million for 2006.
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.
The limited nature of the due diligence which the OCRC has conducted
to date does not enable the OCRC to confirm independently the
projected results outlined by the Debtors.
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. In addition, it is currently estimated that
$38.8 million of restricted cash will be set aside on the Effective
Date as an escrow for professional fees from the Chapter 11 cases.
The actual amount of the escrow will be calculated on the Effective
Date upon review of the most current information available with
respect to accrued and estimated fees as of that date. This amount
is assumed to be paid out at the rate of $5.0 million per month in
August and September with the balance of $28.8 million paid out in
October of 2004.
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.
Page 21
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.
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.
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.
INCOME FROM TRANSITION SERVICE PROVIDED TO THE RCT: As described in
the Revised Term Sheet, in order to facilitate the claims
reconciliation process, the PCT and the RCT shall enter into a
transition services agreement whereby the PCT shall provide
resources to the RCT, including but not limited to, access to the
professional staff and employees of the PCT, computer systems,
databases, and other relevant information, upon an allocation
methodology to be agreed upon. The amounts indicated represent the
Debtors' estimate of the allocation of such expenses to be
reimbursed to the PCT by the RCT.
INTEREST INCOME (EXPENSE): Reflects interest earned on cash
balances.
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.
PRIORITY & PROPERTY TAX PAYMENTS: The Debtors estimate that $20.2
milling 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 equal to the
rate available on ninety (90) day United States Treasuries. 'The
Debtors estimate that interest rates will increase by 100 basis
points over the term of the PCT.
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.
Page 22
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.
CHAPTER 11 PROFESSIONAL FEES: The Debtors currently estimate the
accrued and unpaid professional fees from the Chapter 11 cases to be
$38.8 million on the Effective Date. On the Effective Date, this
liability will be transferred to the PCT and a corresponding amount
of cash will be escrowed to cover these payments. The PCT is
forecast to pay $5.0 million per month in August and September with
the balance of $28.8 million paid out in October of 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 parry. 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.
PROTECTED 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 Notes 17 & 18) 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-l(a) and/or Treasury
Regulation Section 301.7701-4(d) and related regulations, the Post
Confirmation Representative may designate and file returns for the
PCT as a "grantor trust" and/or "liquidating trust" and therefore,
for federal income tax purposes, the PCT'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 PCT 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 PCT 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 PCT
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 PCT for a portion of their
Claims. Finally, a portion of any amount of property received from
the PCT 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 PCT.
Page 23
FLEMING COMPANIES, INC., ET AL.
DISCLOSURE STATEMENT
EXHIBIT 3D
RECLAMATION CREDITOR TRUST FINANCIAL PROJECTIONS
EXHIBIT 3D
RECLAMATION CREDITOR TRUST
PROJECTED STATEMENTS OF CASH RECEIPTS AND DISBURSEMENTS
(Unaudited)
PROJECTED
-----------------------------
PROJECTED 12 MONTHS ENDING DECEMBER 31,
5 MOS. ENDING -----------------------------
(dollars in thousands) 12/31/2004 2005 2006 TOTAL
------------- -------- --------- ---------
BEGINNING CASH $ 6,000 $ 3,000 $ 3,000 $ 6,000
CASH RECEIPTS
Litigation claims recovery 26,063 69,500 38,438 134,000
------------- -------- --------- ---------
TOTAL CASH COLLECTIONS 26,063 69,500 38,438 134,000
DISBURSEMENTS FOR TRUST EXPENSES
Professional fees (3,500) (1,800) (500) (5,800)
Cost of transition services provided by PCT (557) (280) (120) (957)
Interest income (expense) (807) (274) 83 (997)
------------- -------- --------- ---------
TOTAL TRUST EXPENSES (4,864) (2,354) (537) (7,754)
------------- -------- --------- ---------
EXCESS (DEFICIT) OF CASH COLLECTIONS OVER TOTAL DISBURSEMENTS 21,199 67,146 37,901 126,246
------------- -------- --------- ---------
ENDING CASH BEFORE PAYMENTS TO RECLAMATION CLAIMANTS 27,199 70,146 40,101 132,246
Minimum operating cash (3,000) (3,000) (3,000) (3,000)
------------- -------- --------- ---------
Cash available to pay reclamation claimants 24,199 67,146 37,901 129,246
RECLAMATION CLAIMS DISBURSEMENTS
TLV Reclamation Claims (Class 3B) (24,199) (25,801) - (50,000)
Non-TLV Reclamation Claims (Class 5) - (41,345) (28,655) (70,000)
------------- -------- --------- ---------
Total reclamation claim disbursements (24,199) (67,146) (28,655) (120,000)
------------- -------- --------- ---------
ENDING CASH $ 3,000 $ 3,000 $ 12,246 $ 12,246
============= ======== ========= =========
Page 25
EXHIBIT 3D
RECLAMATION CREDITOR TRUST
PROJECTED ASSETS & LIABILITIES
(Unaudited)
PROJECTED
--------------------------------------------
PROJECTED DECEMBER 31,
JULY 31, --------------------------------------------
(dollars in thousands) 2004 2004 2005 2006
--------- ---------- ----------- ------------
ASSETS:
Cash & equivalents $ 6,000 $ 3,000 $ 3,000 $ 12,246
Other receivables 134,000 107,938 38,438 -
--------- ---------- ----------- ------------
Total current assets 140,000 110,938 41,438 12,246
--------- ---------- ----------- ------------
TOTAL ASSETS $ 140,000 $ 110,938 $ 41,438 $ 12,246
========= ========== =========== ============
LIABILITIES:
Accounts payable & accrued liabilities:
TLV Reclamation Claims (Class 3B) $ 50,000 $ 25,801 $ - $ -
Non-TLV Reclamation Claims (Class 5) 70,000 70,000 28,655 -
--------- ---------- ----------- ------------
Total current liabilities 120,000 95,801 28,655 -
--------- ---------- ----------- ------------
Excess (deficit) of assets over liabilities $ 20,000 $ 15,136 $ 12,782 $ 12,246
========= ========== =========== ============
Page 26
EXHIBIT 3D
RECLAMATION CREDITOR TRUST PROJECTION ASSUMPTIONS
(UNAUDITED)
(All $$ in 000's Unless Otherwise Noted)
The Projections presented for the RCT are aggregated from the assets and
liabilities transferred from the Debtors to the RCT (see Exhibit 3A Notes 21 &
22) and the cash receipts and disbursements for the RCT operations between
August 1, 2004 and December 31,2006.
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:
LITIGATION CLAIMS RECOVERY: The Debtors have certain assets that are
due and payable from reclamation creditors that the Debtors believe
are not subject to setoff against pre-petition debts. These assets
include accounts receivables from vendors for promotional activities
that were earned during the post-petition period in the normal
course of operations and are due and payable. These assets also
include certain excess payments made to vendors during the post
petition period in excess of the value of product received in return
from the vendor. The Debtors also believe that vendors are holding
certain funds of the Debtors that were collected by the vendors both
pre-petition and post-petition for product sold from Fleming to
military commissaries. Finally, the Debtors believe that certain
vendors violated the critical trade vendor program and, as such,
amount received by the vendors under that program are to be repaid
to the Debtors. The Debtors believe the estimated collections from
the above referenced vendor receivables will generate proceeds to
the RCT of approximately $94.0 million.
Additionally, during the 90 days preceding the Debtors bankruptcy
filing, the Debtors made payments to reclamation creditors in a
total amount of $2.2 billion. Such payments are subject to recovery
and the Debtors plan to pursue such assets through the RCT. The
Debtors have evaluated the potential defenses available to the
creditors that received these payments, including new value provided
and an assessment of whether or not payments were made in the
ordinary course of business. Based on the Debtors' analysis of such
defenses, the Debtors believe net proceeds that will be recovered by
the RCT will approximate $40.0 million. The preceding estimate does
not include any amount for those actions for which a recovery amount
cannot be currently estimated.
Recoveries from total estimated Litigation Claims of $134.0 million
are estimated to be $26.1 million for August 2004-December 2004,
$69.5 million for 2005 and $38.4 million for 2006.
THE LIMITED NATURE OF THE DUE DILIGENCE WHICH THE OCRC HAS CONDUCTED
TO DATE DOES NOT ENABLE THE OCRC TO CONFIRM INDEPENDENTLY THE
PROJECTED RESULTS OUTLINED BY THE DEBTORS.
Page 27
DISBURSEMENTS FOR TRUST EXPENSES:
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.
COST OF TRANSITION SERVICE PROVIDED BY THE PCT: As described in the
Revised term Sheet, in order to facilitate the claims reconciliation
process, the PCT and the RCT shall enter into a transition services
agreement whereby the PCT shall provide resources to the RCT,
including but mot limited to, access to the professional staff and
employees of the PCT, computer systems, databases, and other
relevant information, upon an allocation methodology to be agreed
upon. The amounts indicated represent the Debtors' estimate of the
allocation of such expenses to be paid to the PCT by the RCT.
INTEREST INCOME (EXPENSE): Reflects interest paid on TLV Reclamation
claims calculated at the average rate of 5.0%.
RECLAMATION CLAIMS DISBURSEMENTS:
TLV RECLAMATION CLAIMS: Reconciliation of the TLV Reclamation Claims
shall consist of application of all postpetition vendor deductions,
over-wires and preferences and pre-petition setoffs to the extent
that general unsecured claims have first been fully setoff through
application of pre-petition deductions. The reconciliation shall
recognize the effect of the Trade Credit Program and the critical
vendor program. Allowed TLV Reclamation Claims shall earn interest
which shall begin to accrue sixty (60) days after the Effective Date
at the Wall Street Journal listed prime rate. Allowed TLV
Reclamation Claims shall be paid (i) first from the RCT; (ii) second
from the PCT and (iii) third from the Core-Mark TLV Guaranty (as
described below).
The Debtors estimate that TLV Reclamation Claims in the amount of
$24.2 million will be reconciled and settled during 2004 and $25.8
million will be reconciled and settled during 2005, at which time
all TLV Reclamation Claims will have been paid. No Non-TLV
Reclamation Claims can be paid until all TLV Reclamation Claims have
been satisfied.
The TLV Reclamation Claims shall be secured by a junior security
interest and lien in Core-Mark Newco subordinate to the Exit
Financing Facility (and any replacement facility) and any Tranche B
Loan (as described in the Plan) (the "TLV Guaranty"). The rights
provided under the TLV Guaranty will include customary
inter-creditor rights (to be defined). The maximum amount of the TLV
Guaranty shall be the total Allowed TLV Reclamation Claims inclusive
of unpaid interest.
Pursuant to the TLV Guaranty, payment shall be made by January 30,
2006 to all holders of Allowed but unpaid TLV Reclamation Claims and
unpaid interest thereon as of December 31, 2005 so long as the
Tranche B Loan is paid in full. In the event, the Tranche B Loan is
not paid in full by December 31,2005, the payment due on January
30,2006 shall be reduced by the outstanding principal amount of the
Tranche B Loan with the balance of any payment on the TLV Guaranty
due to be paid 30 days after the Tranche B Loan has been repaid in
full (to holders of unpaid TLV Reclamation Claims as of such date),
but in no event later than on January 30, 2007 to all holders of
Allowed but unpaid TLV Reclamation Claims as of December 31, 2006.
For purposes of calculating the amount of TLV Guaranty payment, the
amount shall be reduced by any escrowed funds of the RCT in excess
of reasonable expenses projected to be incurred in the
administration of the RCT. Upon a payment on the TLV Guaranty,
Core-Mark Newco shall be subrogated to the rights of the TLV
Reclamation Creditors in the RCT. In the event the payments by
Core-Mark Newco on the TLV Guaranty shall be in excess of $5
million, Core-Mark Newco shall be entitled to board representation
on the RCT advisory board equal to at least 20%. In the event
aggregate payments by Core-Mark Newco under the TLV Guaranty equal
or exceed $10 million, Core-Mark Newco shall be entitled to
representation on the RCT advisory board of at least 40%.
The Debtors believe that the TLV Reclamation Claims will be paid
from proceeds recovered by the RCT and that the Non-TLV Guaranty
will not be called.
Page 28
NON-TLV CLAIMS: In reconciling the Non-TLV Reclamation Claims, all
post-petition vendor deductions, over-wires, preferences, and
pre-petition setoffs to the extent that general unsecured claims
have been fully set off, shall be applied. In addition, the total
amount of Allowed Non-TLV Reclamation Claims shall be reduced by a
discount of $13 million (the "Prepetition Non-TLV Reclamation Claim
Reduction") to calculate the net Allowed amount of pre-petition
Non-TLV Reclamation Claims ("Net Non-TLV Reclamation Claim").
Allowed Non-TLV Reclamation Claims shall be paid only after
satisfaction of all Allowed TLV Reclamation Claims (i) first from
the RCT, (ii) second from the PCT and (iii) third from the Core-Mark
Non-TLV Guaranty (as described below). The timing of such
distribution shall be in the discretion of the RCT.
The Debtors estimate that no Non-TLV Reclamation Claims will be paid
during 2004, as there will still be TLV claims outstanding and no
Non-TLV Reclamation Claims can be paid until all TLV Reclamation
Claims have been satisfied. The Debtors estimate that, in 2005 and
2006, $41.3 million and $28.7 million respectively in Non-TLV
Reclamation Claims will be settled and paid.
The Net Non-TLV Reclamation Claims shall be secured by a junior
security interest and lien in Core-Mark Newco subordinate to the
Exit Financing Facility (and any replacement facility) any Tranche B
Loan (as described in the Plan and the TLV Guaranty) (the "Non-TLV
Guaranty"). The rights provided under the Non-TLV Guaranty will
include customary intercreditor rights (to be defined).
The maximum amount of the Non-TLV Guaranty shall be $ 15 million.
Pursuant to the Non-TLV Guaranty, payment shall be made by January
1, 2007 to all holders of Allowed but unpaid Net Non-TLV Reclamation
Claims as of December 31, 2006 so long as the Tranche B Loan is paid
in full. In the event the Tranche B Loan is not paid in full, the
payment due on January 30,2007 shall be reduced by the outstanding
principal amount of the Tranche B Loan plus amounts paid under the
TLV Guaranty and not yet reimbursed by the PCT or RCT to Core-Mark
Newco with the balance of any payment on the Non-TLV Guaranty due to
be paid to the RCT (for pro rata payment on account of unpaid Net
Non-TLV Reclamation Claims) 30 days after the Tranche B Loan has
been repaid in full but in no event later than January 1,2008 to all
holders of Allowed but unpaid Net Non-TLV Reclamation Claims as of
December 31, 2007. The amount of Non-TLV Guaranty payment, subject
to the maximum amount described above, shall be reduced by any
escrowed funds of the RCT in excess of reasonable expenses projected
to be incurred in the administration of the RCT. In the event of a
payment on the Non-TLV Guaranty, Core-Mark Newco shall be subrogated
to the rights of the Non-TLV Reclamation Creditors in the RCT. In
the event the payments by Core-Mark Newco on the Non-TLV Guaranty
shall be in excess of $5 million, Core-Mark Newco shall be entitled
to board representation on the RCT advisory board equal to 20%. In
the event aggregate payments under the Non-TLV Guaranty equal to or
exceed $10 million, Core-Mark Newco shall be entitled to
representation on the RCT advisory board of at least 40%.
The Debtors believe that the Non-TLV Reclamation Claims will be paid
from proceeds recovered by the RCT and that the TLV Guaranty will
not be called.
In the event that there is a surplus after satisfaction of all
Reclamation Claims, such additional proceeds shall be applied as
follows:
1. To Core-Mark Newco for any advances under the TLV or Non-TLV
Guaranty;
2. To the Prepetition Non-TLV Reclamation Claim Reduction;
3. To Core-Mark Newco for any advances under the Administrative
Claim Guaranty;
4. Any amount of "Ad Hoc Committee" professional fees which have
not been reimbursed by allowance of an Administrative Claim;
and
5. To the PCT.
Page 29
PROJECTED ASSETS & LIABILITIES
The Projected Assets & Liabilities included in these projections are
based on the assets and liabilities transferred to the RCT at July
31, 2004 (See Exhibit 3A Notes 21 & 22) and reflect the cash
receipts and disbursements projections discussed herein.
OTHER
ASSUMED TAX STATUS OF RCT: On the Effective Date, the RCT 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 RCT
Trustee may designate and file returns for the RCT as a "grantor
trust" and/or "liquidating trust" and therefore, for federal income
tax purposes, the RCT'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 RCT 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 RCT 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 RCT 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 RCT for a portion of their Claims. Finally, a
portion of any amount of property received from the RCT 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 RCT.
Page 30
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 1
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
1. CALCULATION OF NET ESTIMATED PROCEEDS AVAILABLE FOR ALLOCATION
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 $ 223,287 100% 100% $ 223,287 $ 223,287
Accounts Receivable 150,216 41% 61% 61,886 91,930 1
Inventories 180,811 63% 72% 114,219 130,484 2
Other Current Assets 299,277 22% 36% 66,525 106,771 3
NetPP&E 48,181 6% 12% 2,838 5,717 4
Other Non-Current Assets 38,074 0% 0% - - 5
---------- --- --- --------- ---------
Total Assets 939,847 50% 59% 468,754 558,189
B. RECOVERIES FROM EXCERCISE OF
AVOIDING POWERS
C. GROSS PROCEEDS 50,000 90,000 6
--------- ---------
518,754 648,189
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) (15,563) (19,446)
Other Professional Fees ($IMM per month for 12
months) (12,000) (12,000)
--------- ---------
(36,345) (38,909)
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 $ 426,910 $ 575,781
========= =========
- ----------------
(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 2
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
II. ALLOCATION OF NET ESTIMATED PROCEEDS TO SECURED CLAIMS
Principal
and Accrued Estimated Recovery
Interest on Secured Claims
-------- ------------------------
Low High
--- ----
NET ESTIMATED PROCEEDS AVAILABLE FOR
ALLOCATION TO SECURED CLAIMS $ 426,910 $ 575,781
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 $ 189,426 $ 338,297
========= ===========
Secured Reclamation Claims of Junior Lien
Trade Vendors (b) 60,000 43,000
Other Reclamation Claims (c) (d) 90,000 62,000
Secured Post-Petition Accounts Payable of Junior
Lien Trade Vendors 18,000 10,000
--------- -----------
NET ESTIMATED PROCEEDS AFTER JUNIOR LIENS & $ 21,426 $ 223,297
RECLAMATION CLAIMS ========= ===========
- -------------
(a) Assumes flat Letter; of Credit are cash collateralized with no recovery of
value.
(b) On May 3, 2004, the Debtors and the OCRC signed a term sheet which
outlines an agreement in principle to resolve objections to the Plan and
Disclosure Statement related to Reclamation Claims (the "Revised Term
Sheet"). For purposes of this Best Interests Test, the Debtors assume that
a Chapter 7 liquidation would result in a default under the Revised Term
Sheet and the settlement would not be consummated. In the absence of a
settlement, 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) On May 3, 2004, the Debtors and the OCRC signed a term sheet which
outlines an agreement in principle to resolve objections to the Plan and
Disclosure Statement related to Reclamation Claims (the "Revised Term
Sheet"). For purposes of this Best Interests Test the Debtors assume that
a Chapter 7 liquidation would result in a default under the Revised Term
Sheet and the settlement would not be consummated. In the absence of a
settlement, 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, wore 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) On May 3, 2004, the Debtors and the OCRC signed a term sheet which
outlines an agreement in principle to resolve objections to the plan and
Disclosure Statement related to Reclamation Claims (the "Revised Term
Sheet"). For purposes of this Best Interests Test, the Debtors assume that
a Chapter 7 liquidation would result in a default under the Revised Term
Sheet and the settlement would not be consummated. In the absence of a
settlement, 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 3
FLEMING COMPANIES, INC., ET AL.
BEST INTERESTS ANALYSIS
($ in 000s)
III. ALLOCATION OF NET ESTIMATED PROCEEDS TO ADMINISTRATIVE AND PRIORITY CLAIMS
Estimated Estimated Recovery
Allowable on Administrative and
Claims Priority Claims
------------------- ------------------------
High Low Low High
---- --- --- ----
NET ESTIMATED PROCEEDS AFTER SECURED CLAIMS $ 21,426 $223,297
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 11% 100%
---------- --------
Net Estimated Proceeds After Secured and Administrative Claims - 71,297
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 $ - $ 55,297
TAX 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)
IV. ALLOCATION OF NET ESTIMATED PROCEEDS TO UNSECURED CLAIMS
Estimated Estimated
Allowable Estimated Recovery on Recovery
Claims Unsecured Claims Range
--------------------- ---------------------- --------------
High Low Low High Low High
---- --- --- ---- --- ----
NET ESTIMATED PROCEEDS AFTER SECURED, ADMINISTRATIVE AND
PRIORITY CLAIMS $ - $ 55,297
Notes (Including pre-petition interest) - Before
Subordinated Notes Refunding
10.125% Senior Notes due April 1, 2008 $ 373,271 $ 373,271 - 8,198 0% 2%
9.250% Senior Notes due June 15, 2010 205,550 205,550 - 4,514 0% 2%
10.625% Senior Subordinated Notes due July 31 , 2007 407,674 407,674 - 8,954 0% 2%
9.875% Senior Subordinated Notes due May 1, 2012 270,841 270,841 - 5,948 0% 2%
5.250% Conv. Senior Subordinated Notes due March 15,
2009 150,380 150,380 - 3,303 0% 2%
----------- ----------- ------ --------- -- --
1,407,716 1,407,716 - 30,917 0% 2%
Notes (Including pre-petition interest) - After
Subordinated Notes Refunding
10.125% Senior Notes due April 1, 2008 373,271 373,271 - 19,937 0% 5%
9.250% Senior Notes due June 15, 2010 205,550 205,550 - 10,979 0% 5%
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 - 30,917 0% 2%
General Unsecured Claims:
PBGC 386,000 40,000 - 879 0% 2%
Severance 10,000 8,000 - 176 0% 2%
Pre-Petition Accounts Payable 675,000 600,000 - 13,177 0% 2%
Multi-Employer Pension Withdrawal 20,000 2,000 - 44 0% 2%
Claims Asserted After Preference Recoveries 90,000 50,000 - 1,098 0% 2%
Other General Unsecured Claims 200,000 160,000 - 3,514 0% 2%
Contingency 100,000 50,000 - 1,098 0% 2%
Rejection Claims 300,000 200,000 - 4,393 0% 2%
----------- ----------- ------ --------- -- --
1,781,000 1,110,000 - 24,380 0% 2%
----------- ----------- ------ --------- -- --
Total $ 3,188,716 $2,517,716 $ - $ 55,297 0% 2%
=========== ========== ====== ========= == ==
The accompanying notes are an integral part of the Best Interests Analysis
Page 5
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.
Recovery Rate Estimated Proceeds
Projected Range Range
Balance @ ---------------- -------------------
Accounts Receivable 7/31/2004 Low High Low High
- ------------------- --------- --- ---- --- ----
Fleming Convenience $ 132,216 40% 60% $ 52,887 $ 79,330
Wholesale 18,000 50% 70% 9,000 12,600
--------- ------- --------
$ 150,216 $ 61,886 $ 91,930
41% 61%
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 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.
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
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 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.
Recovery Rate Estimated Proceeds
Projected Range Range
Balance @ ------------------ -----------------------
Other Current Assets 7/31/2004 Low High Low High
-------------------- --------- --- ---- --- ----
Vendor Deductions and Other A/R $ 266,098 25% 40% $ 66,525 $ 106,439
Other Current Assets 33,179 0% 1% - 332
--------- -------- ---------
Total $ 299,277 $ 66,525 $ 106,771
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 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.
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
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 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.
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% $ - $ -
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 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.
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
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 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.
Fleming Convenience % of
--------------------------------- Retention Salaries
Run Reduction Total & Severance &
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
Corporate SG&A 6,824 10% 682 152 834 50%
------- --- ------ ------ -------- -----
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
The accompanying notes are an integral part of the Best Interests Analysis
Page 12
THERE IS NO EXHIBIT 5 TO THE DISCLOSURE STATEMENT
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
May 11, 2004
CONFIDENTIAL
Fleming Companies, Inc.
1945 Lakepointe Drive
Lewisville, TX 75057
Attn: Michael K. Scott
Re: Commitment for $250 Million Plan of Reorganization Financing
Ladies and Gentlemen:
You have advised us that Core-Mark Newco, a new Delaware corporation ("Newco"),
to be formed on the Effective Date of the Plan of Reorganization (as such terms
are defined below) and certain of its subsidiaries who will be Reorganized
Debtors (as defined in the Plan of Reorganization) under a joint plan of
reorganization (together with all exhibits and schedules thereto, the "Plan of
Reorganization") filed in Case No. 03-10945 (MFW), as administratively
consolidated, and commenced under Chapter 11 of the Bankruptcy Code (the
"Chapter 11 Case" and the "Bankruptcy Code") in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"), are seeking $250
million of financing in support of the Plan of Reorganization. General Electric
Capital Corporation ("GE Capital") is pleased to offer its commitment to provide
to Newco and certain of its subsidiaries as reorganized debtors (collectively,
"Borrowers"), up to $250 million of financing, subject to the terms and
conditions of this Commitment Letter (the "Financing"). The Financing will
consist of up to a $240 million revolving credit facility (the "Revolving Loan")
and up to a $10 million revolving FILO loan facility (the "FILO Loan").
SUMMARY OF TERMS
FOR PLAN OF REORGANIZATION EXIT FINANCING FACILITY
<Table>
BORROWERS: Newco and certain subsidiaries of Newco to
be determined.
BORROWER
REPRESENTATIVE: Each Borrower will appoint one of the
Borrowers as its agent for purposes of the
Financing.
AGENT: GE Capital.
LEAD ARRANGER: GECC Capital Markets Group, Inc. ("GECMG").
</Table>
1
<Table>
LENDERS: GE Capital and other lenders acceptable to
GE Capital and Newco (Newco's consent not to
be unreasonably withheld).
CANADIAN LENDER: General Electric Capital Canada Inc. or
another Canadian affiliate of GE Capital.
REVOLVING LOAN: Up to $240 million (including a Letter of
Credit Subfacility in an amount to be
mutually agreed by GE Capital and the
Borrowers). Letters of Credit will be issued
by a bank or by GE Capital and/or one of its
affiliates, on terms mutually acceptable to
GE Capital and the Borrowers, and will be
guaranteed or otherwise backed by all
Lenders. The Revolving Loan will include a
sublimit for Canadian borrowings (whether
such borrowings are made in U.S. dollars or
Canadian dollars) in an amount equal to $80
million or the Canadian equivalent thereof.
The Revolving Loan will also include a
swingline subfacility of up to $20 million.
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 (including Canadian
receivables), (ii) up to the lesser of (x)
65% of Borrowers' eligible inventory
(including Canadian 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 in its
reasonable discretion pursuant to the terms
of the final Financing documents. The face
amount of all outstanding letters of credit
under the Letter of Credit Subfacility will
be reserved in full against Revolving Loan
Availability. Inventory to be appraised by
an appraiser reasonably acceptable to Agent
and Newco (Newco's consent not to be
unreasonably withheld).
</Table>
2
<Table>
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.
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 (including Canadian
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 in its reasonable discretion
pursuant to the terms of the final Financing
documents. Inventory to be appraised by an
appraiser reasonably acceptable to Agent and
Newco (Newco's consent not to be
unreasonably withheld).
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.
Newco will be permitted to borrow and fund
upfront the Post Confirmation Trust and the
Reclamation Creditors' Trust (as such terms
are defined in the Plan of Reorganization)
to be established on the Effective Date of
the Plan of Reorganization or as soon as
practicable thereafter (collectively, the
"Trusts").
INTEREST: For all loans, at Borrower Representative's
option, 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
</Table>
3
<Table>
points over the federal funds rate) plus the
Applicable Index Margin. For the avoidance
of doubt, during the continuance of a
default, Borrowers may neither convert Index
Rate loans into LIBOR Rate Loans nor
continue any LIBOR Rate loan as such
following the expiration of the applicable
LIBOR period, but any existing LIBOR Rate
loans may continue as such until the
expiration of the applicable LIBOR period.
For purposes of calculating interest, good
funds will be credited to the outstanding
balance of the Loans one (1) business day
after the receipt thereof.
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). LIBOR mechanics and breakage costs
to be contained in the Financing
documentation.
APPLICABLE MARGINS: The following applicable margins will apply
so long as Revolving Loans and FILO Loans
remain outstanding:
</Table>
<Table>
<Caption>
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
</Table>
<Table>
<Caption>
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%
</Table>
<Table>
Applicable FILO Index Margin 2.75%
Applicable FILO LIBOR Margin 4.00%
Applicable Unused Facility Fee Margin 0.50%
</Table>
4
<Table>
FEES: Arrangement Fee equal to $125,000 which
shall be due upon execution of this
Commitment Letter and payable upon
Bankruptcy Court approval as provided in the
fourth-to-last paragraph of this Commitment
Letter.
Commitment Fee equal to $1,125,000 to be
paid as follows: (i) $500,000 shall be due
upon execution of this Commitment Letter and
payable upon Bankruptcy Court approval as
provided in the fourth-to-last paragraph of
this Commitment Letter and (ii) $625,000
shall be due and payable upon satisfactory
completion of GE Capital's field audit and
inventory appraisal (collectively, the
"Commitment Fee").
Closing Fee equal to $2,500,000 payable to
GE Capital on the Closing Date, against
which will be credited the prior payment of
the Commitment Fee. For the avoidance of
doubt, the undersigned Fleming Companies,
Inc., on behalf of the Borrowers,
acknowledges and agrees that Borrowers shall
not be entitled to any additional credits
toward the Commitment Fee for any fees paid
to GE Capital pursuant to any prior
agreement among the parties (including,
without limitation, that certain letter
agreement dated as of January 22, 2004 (the
"DIP Letter Agreement")).
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 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.
</Table>
5
<Table>
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) (collectively, the "Collateral").
All Collateral will be free and clear of
other liens, claims and encumbrances, except
liens and encumbrances permitted pursuant to
the final Financing documents.
In addition, Agent shall receive a pledge by
each Borrower of all of the issued and
outstanding capital stock of its
subsidiaries (including Borrowers but
excluding in excess of 65% of the stock of
foreign subsidiaries). Each Borrower will
cross-guarantee the obligations of the other
Borrowers under the Financing documents,
except to the extent any such
cross-guarantee by a foreign Borrower would
cause material adverse tax consequences to
any Borrower.
The Collateral will not include any assets
of the Trusts, and the final Financing
Documents shall specifically permit the
transfer of any assets by the Borrowers to
the Trusts as required by the Plan of
Reorganization or the trust agreements.
</Table>
6
<Table>
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, on a monthly basis, to provide to
Agent internally prepared operating reports,
unaudited balance sheets and statements of
income and cash flows. Borrowers will
provide to Agent a monthly borrowing base
certificate and other information reasonably
requested by Agent; provided that weekly
borrowing base certificates will be required
during any period in which excess
availability or total liquidity falls below
levels to be mutually acceptable to Agent
and Borrowers. All monthly financial
statements shall be prepared on a
consolidated basis. In addition, copies of
all pleadings, motions, applications,
financial information and other documents
(if any) filed by or on behalf of any
Borrower with the Bankruptcy Court or the
U.S. Trustee in the Chapter 11 Case, or
distributed by or on behalf of any Borrower
to any official committee in the Chapter 11
Case, and such other reports and information
respecting each Borrower's business,
financial condition or prospects as Agent
may, from time to time, reasonably request
shall be provided to Agent.
DOCUMENTATION: The final Financing documents will be
mutually acceptable to all parties and will
contain representations and warranties;
conditions precedent; affirmative, negative
and financial covenants; indemnities; and
events of default and remedies as reasonably
required by Agent. Relevant documents, such
as transaction documents, subordination
agreements (if any), intercreditor
agreements (if any) and other material
agreements, to be reasonably acceptable to
Agent. The Confirmation Order (as defined
below) and all motions relating thereto,
shall be in form and substance reasonably
acceptable to Agent.
SYNDICATION: Upon acceptance of this Commitment Letter,
GECMG may initiate discussions with
potential lenders regarding their
participation in the Financing. Borrowers
will agree to a
</Table>
7
<Table>
closing schedule that allows for the primary
syndication of the Financing prior to
closing. The success of such syndication
will not be a condition precedent to the
closing or funding of the Financing.
GECMG may syndicate the Financing with the
assistance of Borrowers and Borrowers'
management. Such assistance will include,
but not be limited to: (i) prompt assistance
in the preparation of an information
memorandum and verification of the accuracy
and completeness of the information
contained therein; (ii) preparation of other
information, offering materials and
projections by Borrowers (and their
advisors, if any) taking into account the
proposed financing; and (iii) participation
of Borrowers' senior management in meetings
and conference calls with potential lenders
and rating agencies, if applicable, upon
reasonable notice and at such times and
places as GECMG may reasonably request.
GECMG reserves the right to provide to
industry trade organizations, information
reasonably necessary and customary for
inclusion as Lead Arranger in league table
measurements.
</Table>
OTHER TERMS AND CONDITIONS (ALL TO BE REASONABLY ACCEPTABLE TO AGENT AND SUBJECT
TO APPROPRIATE MATERIALITY QUALIFIERS, THRESHOLDS, EXCEPTIONS AND OTHER
CUSTOMARY CARVE-OUTS TO BE MUTUALLY AGREED):
o Agent's reasonable rights of inspection; access to
facilities, management and auditors.
o Cash management system for Borrowers. Agent will have
full cash dominion by means of lock boxes and blocked
account agreements, except with respect to certain
accounts to be mutually agreed by Agent and
Borrowers. Proceeds shall be applied first, to the
Revolving Loan and second, to the FILO Loan.
o Minimum liquidity at closing equal to an amount to be
mutually agreed upon by Borrowers and Agent.
o Minimum excess availability ongoing in an amount
equal to $10 million; provided that (i) if Borrowers'
(or its predecessors') audited financial statements
for each of the fiscal years ended December 31, 2002
and December 31, 2003, in form and substance
reasonably satisfactory to Agent (the "Audited
Financials"), are
8
not delivered to Agent by September 30, 2004, minimum
excess availability ongoing shall be increased to $15
million and (ii) if the Audited Financials are not
delivered to Agent by December 1, 2004, minimum
excess availability ongoing shall be increased to $20
million; provided further, that, upon delivery to
Agent of the Audited Financials, minimum excess
availability ongoing shall be reduced to $10 million.
o Financial covenants: minimum EBITDA and maximum
capital expenditures, to be determined.
o Borrowers shall have engaged Burr, Pilger and Mayer
LLP or another auditor reasonably acceptable to
Agent.
o Commercially reasonable insurance protection for
Borrowers' industry, size, and risk and the
collateral protection (terms, underwriter, scope, and
coverage to be reasonably acceptable to Agent); Agent
named as loss payee (property/casualty) and
additional insured (liability); and
non-renewal/cancellation/amendment riders to provide
30 days advance notice to Agent.
o Reasonable access to all locations in support of the
orderly liquidation of Borrowers and the Collateral
as deemed reasonably necessary by Agent.
o Receipt of all necessary third party and governmental
waivers and consents.
o General and collateral releases from prior lenders
and customary corporate certificates;
landlord/mortgagee/bailee waivers unless such waivers
and access rights are otherwise provided for in the
Confirmation Order; and, to the extent reasonably
required by Agent, consignment or similar filings.
o Limitations on commercial transactions, management
agreements, service agreements, and borrowing
transactions between any Borrower and its officers,
directors, employees and affiliates.
o Limitations on, or prohibitions of, cash dividends,
other distributions to equity holders, payments in
respect of subordinated debt, payment of management
fees to affiliates and redemption of common or
preferred stock.
9
o Limitations on, or prohibitions of, mergers,
acquisitions, the sale of any Borrower, its stock or
a material portion of its assets.
o Prohibitions of a direct or indirect change of
control of any Borrower.
o Customary yield protection provisions, including,
without limitation, provisions as to capital
adequacy, illegality, changes in circumstances and
withholding taxes.
o Satisfactory opinions of counsel from Borrowers'
domestic and Canadian counsel (including additional
local counsel as reasonably requested by Agent)
reasonably acceptable to Agent.
o Customary events of default for transactions of this
type, with appropriate and customary notice of
default and cure periods.
o As of the Closing Date, there will have been (i)
since November 1, 2003, no material adverse change,
individually or in the aggregate, in the business,
financial or other condition of the Borrowers taken
as a whole, the industry in which any Borrower
operates, or the Collateral or in the prospects or
projections of the Borrowers taken as a whole, and
(ii) since November 1, 2003, no litigation commenced
which has not been stayed by the Bankruptcy Court and
which, if successful, will have a material adverse
impact on the Borrowers taken as a whole, their
business or ability to repay the loans, or which will
challenge the transactions under consideration, and
(iii) since the date hereof, no change in loan
syndication, financial or capital market conditions
generally that in GECMG's reasonable judgment will
materially impair syndication of the Financing.
o Compliance in all material respects with applicable
laws, decrees, and material agreements or obtaining
of applicable consents and waivers.
o Lender syndication/assignment rights.
o Governing law: New York.
o The Plan of Reorganization shall provide for the
Financing, shall contain terms and provisions
reasonably acceptable to Agent and shall otherwise be
in form and substance reasonably acceptable to Agent.
10
o The Plan of Reorganization shall have been confirmed
by an order entered by the Bankruptcy Court (the
"Confirmation Order"), in form and substance
reasonably acceptable to Agent, and which has not
been stayed by the Bankruptcy Court or by any other
court having jurisdiction to issue any such stay.
Without limiting the general applicability of the
immediately preceding sentence, the Confirmation
Order shall specifically provide that (a) the terms
and conditions of this Commitment Letter and the
Financing are approved and ratified as being entered
into in good faith, providing the most favorable
financing terms and being critical to the success and
feasibility of the Plan of Reorganization, (b) on or
prior to the Effective Date of the Plan of
Reorganization, the Borrowers are authorized to enter
into documentation evidencing the Financing and to
grant liens and security interests to Agent in
substantially all of their assets (except for any
assets to be transferred to the Trusts), and such
documents, liens and security interests are approved,
(c) all fees, costs and expenses paid by Borrowers in
connection with the Commitment Letter and the
Financing are ratified and approved, and (d) the
Commitment Letter and any or all other Financing
documents signed by the Borrowers' predecessor
debtors as debtors-in-possession shall be binding and
enforceable against the Borrowers upon and after the
Effective Date of the Plan of Reorganization as if
executed and delivered by the Borrowers
notwithstanding any provision in the Plan of
Reorganization or the Confirmation Order to the
contrary. Moreover, the time to appeal the
Confirmation Order or to seek review, rehearing, or
certiorari with respect to the Confirmation Order
must have expired, no appeal or petition for review,
rehearing, or certiorari with respect to the
Confirmation Order may be pending, and the
Confirmation Order must otherwise be a final,
non-appealable order in full force and effect.
o Completion by Agent of all business and legal due
diligence, including, without limitation, Agent's
field audit and inventory appraisals, with results
reasonably satisfactory to Agent. Without limiting
the foregoing, the corporate structure, the ownership
of Borrowers, the disclosure statement filed in
connection with the Plan of Reorganization, capital
structure, other debt and equity instruments,
material contracts, and governing documents of each
Borrower and its subsidiaries, and tax and legal
effects resulting from the Financing, must be
reasonably acceptable to Agent.
11
GE Capital's commitment hereunder is subject to execution and delivery of final
legal documentation reasonably acceptable to GE Capital and its counsel
incorporating, without limitation, the terms set forth herein. Moreover, the
preceding summary of terms and conditions is not intended to be all inclusive.
Any terms and conditions that are not specifically addressed above will be
subject to future negotiations.
You agree that GECMG will act as the sole syndication agent for the Financing
and that no additional agents, co agents or arrangers will be appointed, or
other titles conferred, without GECMG's consent. You agree that no Lender will
receive any compensation of any kind for its participation in the Financing,
except as expressly provided in this Commitment Letter or the final Financing
documents.
To ensure an orderly and effective syndication of the Financing, you agree that
until the termination of the syndication, as determined by GECMG, you will not,
and will not permit any of your subsidiaries to, syndicate or issue, or attempt
to syndicate or issue, announce or authorize the announcement of the syndication
or issuance exit debt facility or debt security (including any renewals
thereof), without the prior written consent of GECMG, except for (i) the junior
Tranche B Loan to be provided by Sankaty (as such terms are defined in the Plan
of Reorganization), (ii) certain junior secured guaranties to be provided by
Newco to the Class 3(B) and Class 5 creditors, (iii) the guaranty to be provided
by Newco to the Post Confirmation Trust with respect to the payment of
administrative claims, and (iv) as otherwise provided pursuant to the Plan of
Reorganization or as permitted pursuant to the final Financing documents.
By signing this Commitment Letter, each party acknowledges that, except as
provided herein, this Commitment Letter supersedes any and all discussions and
understandings, written or oral, between or among GE Capital (and/or GE
Corporate Financial Services, Inc.) and any other person as to the subject
matter hereof, including, without limitation, any prior commitment letters. No
amendments, waivers or modifications of this Commitment Letter or any of its
contents shall be effective unless expressly set forth in writing and executed
by the parties hereto.
This Commitment Letter is being provided to you on the condition that, except as
required by law, the ongoing Chapter 11 Case or as provided herein, none of this
Commitment Letter nor its contents will be disclosed publicly or privately
except to those individuals who are your officers, employees or advisors who
have a need to know as a result of being involved in the Financing and then only
on the condition that such matters may not be further disclosed; provided, that
this Commitment Letter may be attached as an exhibit to the Disclosure Schedule
to be filed in connection with the Plan of Reorganization. No one shall, except
as required by law, use the name of, or refer to, GE Capital, or any of its
affiliates (including GECMG), in any correspondence, discussions, advertisement
or disclosure made in connection with the Financing without the prior consent of
GE Capital.
12
Regardless of whether the commitment herein is terminated or the Financing
closes, the undersigned Fleming Companies, Inc. ("Fleming") and the Borrowers,
jointly and severally, agree to pay upon demand to GE Capital and GECMG all
reasonable out of pocket expenses (including all reasonable legal,
environmental, and other consultant costs and fees) incurred in connection with
this Commitment Letter, the Financing, and a field examination fee of $750 per
person per diem plus actual reasonable out of pocket expenses in connection with
the conduct of GE Capital's field audit and the evaluation and documentation of
the Financing.
In addition, so that we may continue our due diligence, Fleming agrees to pay to
GE Capital an expense deposit of $375,000 (the "Underwriting Deposit") upon
approval of this Commitment Letter by the Bankruptcy Court as provided in the
fourth-to-last paragraph hereof. At GE Capital's request from time to time prior
to the Closing Date, or at any time the unused balance of the Underwriting
Deposit decreases to less than $50,000, Fleming and/or the Borrowers shall
immediately increase the Underwriting Deposit by an amount such that,
immediately after giving effect to such increase, the unused balance thereof
equals an amount to by agreed upon by GE Capital and Newco. If GE Capital should
close the Financing, the remaining Underwriting Deposit (net of fees and
expenses) would be applied toward any fees due on the Closing Date. If GE
Capital should not close the Financing (for any reason other than the Borrowers'
acceptance of financing from another lender or the Borrowers' termination of GE
Capital's efforts hereunder), then the balance of the Underwriting Deposit (net
of fees and expenses) shall be returned. In all other circumstances, GE Capital
will retain the remaining Underwriting Deposit.
Regardless of whether the commitment herein is terminated or the Financing
closes, Fleming and the Borrowers, jointly and severally, agree to indemnify and
hold GE Capital, its affiliates (including GECMG), and the directors, officers,
employees, and representatives of any of them (each, an "Indemnified Person"),
harmless from and against all suits, actions, proceedings, claims, damages,
losses, liabilities and expenses (including, but not limited to, reasonable
attorneys' fees) of any kind which may be incurred by, or asserted against, any
such person in connection with, or arising out of, this Commitment Letter, the
Financing, any other related financing, documentation, disputes or environmental
liabilities, or any related investigation, litigation, or proceeding.
Notwithstanding the preceding sentence, the indemnitors under this paragraph
shall not be liable for any indemnification to any Indemnified Person to the
extent that any such suit, action, proceeding, claim, damage, loss, liability or
expense results from such Indemnified Person's bad faith, gross negligence or
willful misconduct. Under no circumstances shall GE Capital or any of its
affiliates (including GECMG) be liable for any punitive, exemplary,
consequential or indirect damages which may be alleged to result in connection
with this Commitment Letter, the Financing, the documents related thereto, or
any other financing, regardless of whether the commitment herein is terminated
or the Financing closes.
13
By signing this Commitment Letter, Fleming agrees to proceed in good faith and
expeditiously to obtain, as soon as reasonably possible, all necessary
Bankruptcy Court approval in connection with Fleming's and Borrowers' execution
hereof and its obligations hereunder, if any.
This Commitment Letter is governed by and shall be construed in accordance with
the laws of the State of New York applicable to contracts made and performed in
that State.
GE Capital shall have reasonable access to all of Borrowers' relevant
facilities, personnel and accountants, and copies of all documents of Borrowers
that GE Capital may reasonably request, including business plans, financial
statements (actual and pro forma), book, records and other documents.
This Commitment Letter shall be of no force and effect unless and until (a) this
Commitment Letter is executed and delivered to GE Capital on or before 5:00 p.m.
(New York Time) on May 11, 2004, (b) the Bankruptcy Court shall have approved an
order, in form and substance reasonably satisfactory to GE Capital, on or prior
to June 2, 2004, authorizing Fleming's and Borrowers' acceptance of, and
performance under, this Commitment Letter, which order shall specifically
provide that GE Capital's right to receive the fees and deposits referenced
herein (including, without limitation, the Commitment Fee) and reimbursement of
all reasonable costs and expenses incurred in connection with consideration of
the Financing as described herein shall be entitled to priority as
administrative expense claims under section 503(b)(1) of the Bankruptcy Code,
without further order of the Bankruptcy Court, and (c) Fleming and/or Borrowers
shall have paid the Commitment Fee and any other fees or deposits due and
payable to GE Capital hereunder on or prior to June 3, 2004.
Once effective, GE Capital's commitment to provide financing in accordance with
the terms of this Commitment Letter shall cease if the Financing does not close,
or the Financing is not funded for any reason, on or before September 30, 2004
(the "Termination Date") and, notwithstanding any further discussions,
negotiations or other actions taken after such date, neither GE Capital nor any
of its affiliates shall have any liability to any person in connection with its
refusal to fund the Financing or any portion thereof after such date; provided,
however, in the event the Financing does not close, or the Financing is not
funded for any reason, on or before the Termination Date, GE Capital agrees to
extend its commitment until October 31, 2004 upon payment by Fleming and/or
Borrowers to GE Capital of a non-refundable cash extension fee (the "Extension
Fee") equal to 0.25% of the Commitment Fee prior to the Termination Date. If the
commitment is extended pursuant to the immediately preceding sentence, the
Extension Fee would be applied toward any fees due on the Closing Date.
Fleming hereby acknowledges and agrees that GE Capital satisfied the condition
precedent set forth in the DIP Letter Agreement, by delivering to Fleming a POR
commitment letter prior to February 18, 2004, and as a result GE Capital has the
exclusive right to provide the financing of the Borrowers' Plan or
Reorganization.
14
EACH PARTY HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY CLAIM OR CAUSE OF
ACTION ARISING IN CONNECTION WITH THIS COMMITMENT LETTER, THE FINANCING OR ANY
OTHER RELATED FINANCING, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.
15
Our business is helping yours. We look forward to continuing to work with you
toward completing this transaction.
Sincerely,
GENERAL ELECTRIC CAPITAL CORPORATION
/s/ Douglas A. Kelly
-------------------------------------
By: Douglas A. Kelly
Title: Its Duly Authorized Signatory
Agreed and accepted this ___ day of May, 2004.
Fleming Companies, Inc., on its behalf and
each of the Borrowers
By: /s/ Michael K. Scott
---------------------------------------------
Its: Treasurer
--------------------------------------------
16
EXHIBIT 8
Execution Copy
SANKATY HIGH YIELD ASSET PARTNERS, L.P.
SANKATY HIGH YIELD PARTNERS II, L.P.
SANKATY HIGH YIELD PARTNERS III, L.P.
SANKATY CREDIT OPPORTUNITIES, L.P.
PROSPECT HARBOR CREDIT PARTNERS, L.P.
111 HUNTINGTON AVENUE
BOSTON, MA 02199
May 18, 2004
Fleming Companies, Inc.
1945 Lakepointe Drive
Lewisville, TX 75057
Attn: Michael K. Scott, Treasurer
Re: Put Agreement for Tranche B Notes
Mr. Scott:
Reference is made to the Chapter 11 bankruptcy cases (the "Bankruptcy
Cases") currently pending before the United States Bankruptcy Court for the
District of Delaware (together with any District Court or appellate court having
jurisdiction over the Bankruptcy Cases, the "Bankruptcy Court"), in which
Fleming Companies, Inc. and certain of its affiliates are debtors (collectively,
the "Debtors" or the "Company"), as Chapter 11 case nos. 03-10945 et al.
Reference is further made to the Third Amended Disclosure Statement in Support
of Debtors and Official Committee of Unsecured Creditors' Third Amended Joint
Plan of Reorganization of Fleming Companies, Inc. and its Filing Subsidiaries
under Chapter 11 of the United States Bankruptcy Code to be filed with the
Bankruptcy Court on May 11, 2004 (the "Disclosure Statement") and to the Debtors
and Official Committee of Unsecured Creditors' Third Amended Joint Plan of
Reorganization of Fleming Companies, Inc. and its Filing Subsidiaries under
Chapter 11 of the United States Bankruptcy Code attached to the Disclosure
Statement as Exhibit 1 (the "Proposed Plan"). Capitalized terms used in this
letter agreement (this "Letter Agreement") and not otherwise defined shall have
the meanings provided in the Proposed Plan.
You have requested that the undersigned funds which are advised by Sankaty
Advisors, LLC (collectively, the "Sankaty Funds") grant to the Debtors the right
(a "Put Right") to put to the Sankaty Funds up to Seventy Million Dollars
($70,000,000) of second lien secured notes of Core-Mark Newco ("Tranche B
Notes") with the terms described on Exhibit A hereto (the
Fleming Companies, Inc., et al -2- May 18, 2004
"Tranche B Notes Term Sheet"), and each Sankaty Fund is pleased to grant its
proportionate share of such a Put Right on the terms set forth herein and in the
Tranche B Notes Term Sheet.
In consideration for granting the Put Right, the Company will pay to the
Sankaty Funds, upon the Effective Date of the Plan, an amount in cash equal to
$1,750,000 (the "Put Consideration"). The Put Consideration shall be due and
payable on the Effective Date regardless whether any Tranche B Notes are issued;
provided, that in the event that Tranche B Notes are issued on the Effective
Date, the Put Consideration may, at the Company's option, be paid through the
issuance of additional Tranche B Notes to the Sankaty Funds. The Put
Consideration shall be paid to the order of the Sankaty Funds in proportion to
the percentages specified for each Sankaty Fund on Schedule B hereto. In the
event that any Put Consideration is paid-in-kind, each Sankaty Fund shall
receive the same proportion of cash pay and pay-in-kind consideration.
Various terms essential to the proposed financing in addition to those set
forth in the Tranche B Notes Term Sheet must still be developed and agreed upon,
and we specifically reserve the right to approve all terms and conditions and to
propose additional terms. In particular, the Tranche B Notes Term Sheet does not
purport to include all of the conditions, covenants, closing conditions,
representations, warranties, defaults, definitions and other terms that would be
contained in the definitive documents for the Tranche B Notes. Our acceptance of
the Tranche B Notes upon exercise of the Put Right is subject to the
negotiation, execution and delivery by the Sankaty Funds and Core-Mark Newco of
definitive documentation of all the final terms and conditions for the proposed
Tranche B Notes, all of which definitive documentation must be in customary form
and reasonably satisfactory in form and substance to the Sankaty Funds,
Core-Mark Newco and their respective counsel. Furthermore, all matters relating
to the confirmation and consummation of the Proposed Plan, including, without
limitation, the form of the Debtors' plan of reorganization as ultimately
confirmed by the Bankruptcy Court and the terms of the Exit Facility and of any
guarantees and intercreditor arrangements relating to other indebtedness of
Core-Mark Newco must be in form and substance reasonably satisfactory to the
Sankaty Funds and their counsel.
The agreement of the Sankaty Funds to grant the Put Right hereunder is
further conditioned upon: (a) by not later than May 11, 2004, the filing with
the Bankruptcy Court of a motion, in form and substance reasonably satisfactory
to the Sankaty Funds and their counsel (the "Approval Motion") seeking approval
of this Letter Agreement, including the payment of the Put Consideration and
expenses pursuant to the expense reimbursement provisions provided in this
Letter Agreement; and (b) by not later than June 4, 2004, the entry of an order
of the Bankruptcy Court, in form and substance reasonably satisfactory to the
Sankaty Funds and their counsel, (an "Approval Order") granting the Approval
Motion, and which becomes a final order not subject to stay, appeal or
modification by not later than June 15, 2004.
Fleming Companies, Inc., et al -3- May 18, 2004
The obligation of the Sankaty Funds to purchase the Tranche B Notes upon
exercise of the Put Right is conditioned on the terms and conditions set forth
in the Tranche B Notes Term Sheet, as well as: (a) the entry by the Bankruptcy
Court of an order confirming the Proposed Plan (with such changes as are
reasonably satisfactory to the Sankaty Funds) (the Proposed Plan in the form
confirmed by the Bankruptcy Court, the "Confirmed Plan"), which order shall be
in form and substance reasonably satisfactory to the Sankaty Funds and shall
have become a final order; (b) the consummation of the Confirmed Plan on or
before October 31, 2004; and (d) the closing of the Exit Facility on
substantially the terms described in the Commitment Letter dated May 11, 2004
delivered by General Electric Capital Corporation to the Debtors, including,
without limitation, the satisfaction or waiver of the conditions to funding set
forth therein.
The obligation of the Sankaty Funds to purchase the Tranche B Notes upon
exercise of the Put Right is further conditioned upon the absence, at Closing,
of: (a) any material adverse change in the business, assets, financial
condition, income or prospects of the Company and its subsidiaries, taken as a
whole, since December 31, 2003; (b) any material misstatements in or omissions
from the materials that have previously been, or may hereafter be, furnished by
the Debtors to the Sankaty Funds for their review; (c) the Sankaty Funds'
reasonable satisfaction with the financial results of the Company and its
subsidiaries for the period from January 1, 2004 through the Closing, including
that such financial results are consistent in all material respects with the
income statement projections for Core-Mark Newco and its subsidiaries that were
provided to the Sankaty Funds on March 25, 2004; or (d) any material adverse
change in governmental regulation or policy affecting the Sankaty Funds or any
material disruption or material adverse change in financial, banking or capital
markets since the date hereof which, in each case described in this clause (d),
in the reasonable judgment of the Sankaty Funds makes it impracticable to
proceed with the transactions contemplated hereby.
It is contemplated that this Letter Agreement and the attached Tranche B
Notes Term Sheet will be filed with the Bankruptcy Court in connection with the
Approval Motion, that the Tranche B Notes Term Sheet will be filed in connection
with the motions seeking approval of the Disclosure Statement and confirmation
of the Proposed Plan and that the Tranche B Notes Term Sheet will form part of
the package mailed to parties in interest in the Bankruptcy Cases in connection
with the approval process for the Proposed Plan.
Whether or not the transactions contemplated hereby are consummated, the
Company agrees: (a) to pay the reasonable and documented fees, disbursements and
charges of the Sankaty Funds' counsel incurred previously or in the future
relating to the exploration and discussion of alternative financing structures
to the Tranche B Notes or to the preparation and negotiation of this Letter
Agreement, the Tranche B Notes Term Sheet and the proposed Tranche B Notes
documentation and the transactions contemplated hereby and thereby; (b) to
reimburse the Sankaty Funds (and their respective advisors) from time to time
within 20 days of demand for reasonable and documented out-of-pocket expenses
(including, but not limited to, reasonable expenses of our due diligence
investigation, reasonable syndication expenses, reasonable travel expenses and
reasonable fees, disbursements and other charges of counsel), in each case
incurred
Fleming Companies, Inc., et al -4- May 18, 2004
in connection with the matters described in clause (a) and regardless of whether
incurred prior to or following the date of this Letter Agreement; and (c) to
indemnify and hold harmless the Sankaty Funds and their respective general
partners and the respective officers, employees, affiliates, advisors, agents,
attorneys, accountants, consultants of each such entity and to hold the Sankaty
Funds and such other persons and entities (each an "Indemnified Person")
harmless from and against any and all losses, claims, damages, liabilities and
expenses, joint or several, which any such person or entity may incur, have
asserted against it or be involved in as a result of or arising out of or in any
way related to this letter, the matters referred to herein, the Tranche B Notes
Term Sheet, the proposed purchase of Tranche B Notes contemplated hereby, the
use of proceeds of the Tranche B Notes thereunder or any related transaction or
any claim, litigation, investigation or proceeding relating to any of the
foregoing, regardless of whether any of such indemnified persons is a party
thereto, and to reimburse each of such indemnified persons upon 20 days of
demand for any legal or other expenses incurred in connection with any of the
foregoing; provided, however, that the foregoing indemnity will not, as to any
indemnified person, apply to losses, claims, damages, liabilities or related
expenses to the extent they have resulted from the bad faith, willful misconduct
or gross negligence of such indemnified person. Notwithstanding any other
provision of this letter, no Indemnified Person will be liable for any special,
indirect, consequential or punitive damages in connection with its activities
related to the proposed issuance of Tranche B Notes. The terms set forth in this
paragraph shall survive the termination or withdrawal of the Put Right provided
hereby or the failure of a condition to the obligation of the Sankaty Funds to
purchase Tranche B Notes, and shall remain in full force and effect regardless
of whether the documentation for the Tranche B Notes is executed and delivered
and whether or not any Tranche B Notes are put to the Sankaty Funds.
Without limiting the foregoing paragraph, regardless of whether the
Approval Order is entered, the Debtors acknowledge and agree that the Sankaty
Funds' granting of the Put Right on the terms specified herein constitutes a
substantial contribution in the Bankruptcy Cases within the meaning of Section
503(b) of the Bankruptcy Code, and has conferred and will confer a substantial
benefit on the Debtors' bankruptcy estates. In the event that the Approval Order
is not entered or is subsequently modified, reversed or vacated such that the
indemnification and expense reimbursement provisions of this Letter Agreement
are not approved by the Bankruptcy Court, the Debtors agree that they will use
their best efforts to support, and will not object to, any motion by the Sankaty
Funds or their counsel seeking reimbursement of their expenses and counsel fees
for the matters described herein. The Creditors' Committee by its written
acknowledgement below makes the same acknowledgements and agreements as are made
by the Debtors in this paragraph.
This letter (a) is not assignable by the Company without the prior written
consent of the Sankaty Funds (and any purported assignment without such consent
shall be null and void), and (b) is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties hereto. Notwithstanding
the foregoing, the Sankaty Funds may assign all or any portion of their
Fleming Companies, Inc., et al -5- May 18, 2004
obligations hereunder to one or more financial institutions reasonably
acceptable to the Company (provided, that no Company consent shall be required
for such an assignment to a fund affiliated with the Sankaty Funds). Upon such
assignment, the obligations of the Sankaty Funds in respect of the portion of
their obligations so assigned shall terminate.
This Letter Agreement sets forth the agreement of the Sankaty Funds to
grant the Put Right on the terms described herein and shall be considered
withdrawn if we have not received the enclosed copy of this Letter Agreement
signed by the Company and the Creditors' Committee by 5:00 p.m. on May 19, 2004
and if the fully executed Letter Agreement shall not have been filed with the
Bankruptcy Court on or before May 20, 2004.
This Letter Agreement will be governed by, and construed and interpreted
in accordance with, the laws of the State of New York.
This Letter Agreement may not be amended or waived except in writing
signed by the Company and the Sankaty Funds. This Letter Agreement may be
executed in any number of counterparts, each of which will be an original, and
all of which, when taken together, will constitute one agreement. Delivery of an
executed counterpart of this Letter Agreement by facsimile will be effective as
delivery of a manually executed counterpart of this letter.
This Letter Agreement constitutes the entire understanding among the
parties hereto with respect to the subject matter hereof and replaces and
supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof.
[The remainder of this page is intentionally blank.]
Fleming Companies, Inc., et al -6- May 18, 2004
If the foregoing is in accordance with your understanding of our
agreement, please sign this letter in the space indicated below and return it to
us.
Very truly yours,
SANKATY HIGH YIELD ASSET PARTNERS I, L.P.
/s/ Jonathan Levine
----------------------------------------
Name : Jonathan Levine
Title: Managing Director
SANKATY HIGH YIELD PARTNERS II, L.P.
/s/ Jonathan Levine
----------------------------------------
Name : Jonathan Levine
Title: Managing Director
SANKATY HIGH YIELD PARTNERS III, L.P.
/s/ Jonathan Levine
-----------------------------------------
Name : Jonathan Levine
Title: Managing Director
SANKATY CREDIT OPPORTUNITIES,L.P.
/s/ Jonathan Levine
-----------------------------------------
Name : Jonathan Levine
Title: Managing Director
PROSPECT HARBOR CREDIT PARTNERS, L.P.
/s/ Jonathan Levine
-----------------------------------------
Name : Jonathan Levine
Title: Managing Director
Fleming Companies, Inc., et al -7- May 18, 2004
The foregoing is hereby
agreed to and accepted:
FLEMING COMPANIES, INC.,
on its behalf and on behalf of each of the Debtors
By /s/ Michael K. Scott
---------------------------
Title: Treasurer
Dated: May 19, 2004
The undertakings set forth in the penultimate paragraph of page 4 are hereby
agreed to and accepted:
OFFICIAL COMMITTEE OF UNSECURED CREDITORS
By /s/ Robert S. Hertzberg
----------------------------
Title: Partner
Dated: May 19, 2004
SCHEDULE A
TRANCHE B NOTES TERM SHEET
$70,000,000 Tranche B Notes
Summary of Proposed Terms and Conditions
May 18, 2004
THIS TERM SHEET DOES NOT INCLUDE DESCRIPTIONS OF ALL OF THE TERMS,
CONDITIONS AND OTHER PROVISIONS THAT ARE TO BE CONTAINED IN THE DEFINITIVE
DOCUMENTATION RELATING TO THE PROPOSED TRANCHE B NOTES AND IS NOT INTENDED TO
LIMIT THE SCOPE OF DISCUSSION AND NEGOTIATION OF ANY MATTERS NOT CONSISTENT WITH
THE SPECIFIC MATTERS SET FORTH HEREIN.
ISSUERS Core-Mark Newco, as reorganized under Chapter 11 of the
U.S. Bankruptcy Code, and such of its subsidiaries as are
co-borrowers or guarantors under the Exit Facility (the
"Issuers"). The date as of which definitive documentation
for the Tranche B Notes will be executed and delivered,
which shall be the Effective Date of the Debtors'
confirmed Plan of Reorganization, shall be defined as the
"Closing Date".
PURCHASERS The Sankaty Funds and their assignees (the "Purchasers")
AMOUNT The Issuers shall have the right, on and after the Closing
Date, subject to payment of the Put Consideration to the
Sankaty Funds at Closing as provided in the Letter
Agreement, to put to each Purchaser, such Purchaser's
Applicable Percentage of up to $70,000,000 (with respect
to each Purchaser, such Purchaser's "Commitment") in
original principal amount of Tranche B Notes (excluding
any Tranche B Notes issued in respect of PIK interest or
in payment of the Put Consideration (as provided in the
Letter Agreement) and any Additional Put Consideration (as
provided below)). "Applicable Percentage" shall mean, for
each Purchaser, the percentage specified next to such
Purchaser's name on Schedule B.
To the extent that the Sankaty Funds assign any portion of
the put right described in the preceding paragraph to a
third party as contemplated under the Letter Agreement,
each Sankaty Funds' Commitment will be reduced pro rata as
among the Sankaty Funds.
The definitive documents relating to the transactions
described herein shall provide that each exercise by the
Issuers of the put right described herein shall put Notes
to all of the Purchasers in proportion to their Applicable
Percentages.
1
Fleming Companies, Inc., et al -2- May 18, 2004
ISSUANCES OF TRANCHE Core-Mark Newco's right to put Tranche B Notes to the
B NOTES FOLLOWING Purchasers shall terminate at Closing, except that Tranche
THE CLOSING B Notes may be put to the Purchasers following the Closing
to reimburse the issuers of Eligible Letters of Credit for
drawings under such Eligible Letters of Credit.
An "Eligible Letter of Credit" shall mean a letter of
credit of Core-Mark Newco outstanding at Closing and not
otherwise collateralized and shall include any letter of
credit that amends, replaces or renews an Eligible Letter
of Credit and is not otherwise collateralized and which
does not increase the amount that may be drawn on such
prior Eligible Letter of Credit immediately prior to the
issuance of the amended, replaced or renewed letter of
credit.
The obligations of the Purchasers to purchase Tranche B
Notes to reimburse draws on Eligible Letters of Credit
following the Closing shall be irrevocable and
unconditional, subject to the aggregate limitation of
$70,000,000 on the aggregate amount of Tranche B Notes
that may be put to the Purchasers. Without limiting the
foregoing, the pendency of an Event of Default shall not
affect the Issuers' right to put Tranche B Notes to the
Purchasers following the Closing.
USE OF PROCEEDS The proceeds of the Tranche B Notes shall be used for the
purposes of providing cash collateral for letters of
credit or funding other cash requirements of Core-Mark
Newco at Closing, or following the Closing, for providing
funds to reimburse issuers of Eligible Letters of Credit
for drawings thereunder.
COLLATERAL All obligations under the Tranche B Notes shall be secured
by second priority security interests in and liens upon
substantially all present and future assets of Core-Mark
Newco, including accounts receivable, general intangibles,
inventory, equipment, furniture, 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 facility (the "Exit
Facility ")). The collateral package will not include any
assets of the Post-Confirmation Trust or the Reclamation
Creditors' Trust (collectively, the "Trusts "), and the
Sankaty Funds specifically consent to the transfers of
assets to the Trusts that are required by the Plan to
occur at or as soon as practicable after the Effective
Date.
INTEREST RATE The Tranche B Notes shall bear interest at a per annum
rate equal to LIBOR + 12% on all outstanding principal
amounts, payable monthly in arrears. All such interest
except for interest at a rate of 3% per annum will be
payable in cash on each monthly payment date. The
remaining 3% per annum may be paid in kind ("PIK") and, if
not paid in cash on the applicable monthly payment date,
shall be deemed to be added to principal of the Tranche B
Notes as of such date, and shall be treated as
Fleming Companies, Inc., et al -3- May 18, 2004
part of principal for all purposes thereafter. Default
interest shall be 2% per annum above the otherwise
applicable rate, payable monthly, in cash.
ADDITIONAL PUT In consideration of the Purchasers providing Core-Mark
CONSIDERATION Newco with the right to put to the Purchasers Tranche B
Notes from time to time on and after the Closing Date,
consideration shall be payable to the Purchaser (the
"Additional Put Consideration") equal to 12% per annum of
the total principal amount of Tranche B Notes which remain
put-able to the Purchasers from time to time (excluding
Tranche B Notes issued in respect of PIK interest or
Additional Put Consideration). Core-Mark Newco may, at any
time and from time to time, reduce in whole or in part the
total principal amount of Tranche B Notes which remain
put-able to the Purchasers from time to time; provided,
that no such reduction in put-able Tranche B Notes may be
subsequently reinstated by Core-Mark Newco.
For the avoidance of doubt, for purposes of calculating
the Additional Put Consideration, the amount of Tranche B
Notes put-able at any given date cannot exceed the total
then outstanding Eligible Letters of Credit, since Tranche
B Notes are only put-able following the Closing to
reimburse draws on Eligible Letters of Credit and
accordingly any excess of the aggregate $70,000,000
commitment that is not either drawn at Closing or
represented by Eligible Letters of Credit will have
terminated at Closing.
The Additional Put Consideration shall be payable monthly,
in arrears. A portion of the Additional Put Consideration
equal to 9% per annum of the total amount of then put-able
Tranche B Notes shall be payable in cash on each monthly
payment date. The remaining 3% per annum of Additional Put
Consideration may be paid through the issuance of Tranche
B Notes or the increase of the principal amount of Tranche
B Notes then outstanding, each as of such monthly payment
date. The Additional Put Consideration shall be increased
by 2% per annum during any period in which default rate
interest is accruing on the Tranche B Notes.
Each Purchaser shall receive a portion of all payments of
Additional Put Consideration equal to such Purchaser's
Applicable Percentage and in equal ratios of cash pay and
pay-in-kind consideration.
WARRANTS On the Closing Date, the Purchasers will be granted
warrants for 2.0% of the fully-diluted equity of Core-Mark
Newco (the "Warrants"), taking into account all warrant,
options, convertible securities and rights to acquire the
same that have been issued, granted or as to which a
commitment for the same exists as of the Closing Date. The
Warrants will have a strike price consistent with the
valuation of the common equity in connection with the
confirmation of the Plan of Reorganization. Each Purchaser
shall receive a number of warrants in proportion to their
Applicable
Fleming Companies, Inc., et al -4- May 18, 2004
Percentage.
TERM The Tranche B Notes will have an initial term of 5 years
from the Closing Date. The Tranche B Notes maturity shall
be no earlier than the maturity of the Exit Facility.
REDEMPTION FEATURES The Tranche B Notes shall be subject to optional
redemption at par plus accrued and unpaid interest at any
time. Optional redemptions on the Tranche B Notes will
carry call protection at 112 in the first year and 106 in
the second year, except that the Issuers may redeem at
par, out of excess cash flow, (A) on or before the first
anniversary of the Closing, up to 25% of the Tranche B
Notes issued at Closing (plus any Tranche B Notes issued
as PIK interest with respect to such Tranche B Notes), and
(B) following the first anniversary of the Closing, up to
50% of the Tranche B Notes issued at Closing (plus any
Tranche B Notes issued as PIK interest with respect to
such Tranche B Notes) (taking into account any Tranche B
Notes redeemed at par pursuant to clause (A)). From and
after the second anniversary of the Closing, optional
redemptions will be at par.
The Tranche B Notes shall be subject to mandatory
redemption out of the proceeds of extraordinary asset
sales and casualty events, and other customary mandatory
redemption events consistent with, and subject to the
prior rights of, the Exit Facility. There shall be no
other required mandatory redemptions of the Tranche B
Notes. All mandatory redemptions or payments on
acceleration of the Tranche B Notes after default will be
at the premiums applicable to optional redemptions -- that
is, 112 in year one and 106 in year two.
Optional redemptions shall be in minimum increments of $1
million.
All redemptions of the Tranche B Notes shall be done, as
among the Purchasers, pro rata based on the outstanding
principal amount of such notes then held by the
Purchasers.
INTERCREDITOR The Tranche B Notes will contain anti-layering provisions
ARRANGEMENTS such that only the Exit Facility will be senior to them in
priority. The Tranche B Notes shall be junior to the Exit
Facility and shall be senior to any liabilities of the
Issuers pursuant to the Trade Credit Program and to any
future liabilities of the Issuers pursuant to any
guarantees of liabilities of, the Trusts, including any
guarantees or other evidences of indebtedness issued by
the Issuers in respect of Class 3(B) or Class 5 Claims
pursuant to the Debtors' confirmed Plan of Reorganization
(collectively, the "Junior Debt").
The relative rights of the lenders under the Exit Facility
and the holders of
Fleming Companies, Inc., et al -5- May 18, 2004
the Tranche B Notes shall be set forth in a mutually
agreeable intercreditor agreement to be negotiated between
the respective creditors and Core-Mark Newco. The Tranche
B facility will contain an option to cure any Exit
Facility covenant defaults if necessary through the
issuance of additional Tranche B Notes.
The subordination of the Junior Debt, and the liens with
respect to the same, to the Tranche B Notes shall be set
forth in mutually acceptable subordination and
intercreditor agreements; provided, that if the Approval
Order contains a specific finding that the Tranche B Notes
shall constitute "Senior Obligations" for purposes of the
Trade Credit Program, no subordination and intercreditor
agreement shall be required to evidence the subordination
of the claims of Approved Trade Creditors which were
granted junior liens pursuant to the Trade Credit Program.
COVENANTS Covenant package to be reasonably satisfactory to the
Purchasers and the Company. The covenants benefiting the
Tranche B Notes that are consistent with those benefiting
the Exit Facility, including maintenance financial
covenants, shall be no more restrictive in terms of
baskets and levels than those contained in the Exit
Facility.
EXPENSE The reasonable and documented expenses of the Tranche B
REIMBURSEMENT Noteholders in administering the facility will be paid by
the Company, as well as other customary expense
reimbursement and indemnification.
Fleming Companies, Inc., et al -6- May 18, 2004
SCHEDULE B
Sankaty High Yield Asset Partners, L.P. 3.1%
Sankaty High Yield Partners II, L.P. 12.9%
Sankaty High Yield Partners III, L.P. 19.4%
Sankaty Credit Opportunities, L.P. 45.2%
Prospect Harbor Credit Partners, L.P. 19.4%
EXHIBIT 9
DRAFT
FOR DISCUSSION PURPOSES ONLY
5/26/2004
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] ("__________________"(together with
any successors, the "PCT Representative").
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 (the
"Bankruptcy Court"); and
B. By order, dated ________________________2004, the Bankruptcy Court
confirmed the Debtors' and the Official Committee of Unsecured Creditors' Third
Amended Joint Plan of Reorganization of Fleming Companies, Inc. and Its Filing
Subsidiaries Under Chapter 11 of the Bankruptcy Code (as the same may be
amended, the "Plan"); and
C. In accordance with the Plan, a Post-Confirmation Trust (the "PCT") is
being established hereby for the primary purpose of liquidating the assets
transferred to it under the Plan (the "PCT Assets") for the benefit of the
Beneficiaries (as defined herein); and
D. The Plan provides for, among other things, the distribution to the
Beneficiaries of, in the aggregate, one hundred percent (100%) of the beneficial
interests in the PCT; and
E. The PCT is created on behalf of, and for the sole benefit of, the
Beneficiaries; and
F. The PCT is established as a liquidating trust, in accordance with
Treasury Regulation Section 301.770 1-4(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
G. 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
- -------------------
(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. Capitalized terms used herein without definition shall have the
respective meanings assigned to such terms in the Plan.
I. 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 REPRESENTATIVE
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 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 Powers.
(a) The powers of the PCT Representative shall, without any further
Bankruptcy Court approval, include (i) the power to invest and withdraw
funds, make distributions and pay taxes and other obligations owed by the
PCT from funds held by the PCT in accordance with this Agreement and 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 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 or proper to carry out the
provisions of this Agreement and the Plan. Except as expressly set forth
herein, subject to section 2.6(b), the PCT Representative shall have
absolute discretion to pursue or not to pursue any and all claims, rights,
Causes of Action, as he 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 his decision. The PCT
2
Representative 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 Representative
is authorized to perform any and all acts necessary or desirable to
accomplish the purposes of the PCT. Without limiting, but subject to, the
foregoing, the PCT Representative shall be expressly authorized, but shall
not be required, to:
(i) hold legal title to the PCT Assets and 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 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) invest any moneys held as part of the PCT Assets in
accordance with the terms of Section 1.10 hereof.
(iv) liquidate the PCT Assets and calculate and effect the
distribution of the net proceeds thereof to the
Beneficiaries in accordance with the provisions of the
Plan;
(v) 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;
(vi) determine and satisfy any and all liabilities created,
incurred or assumed by the PCT;
(vii) file, if necessary, any and all tax and information
returns with respect to the PCT, pay taxes properly
payable by the PCT, if any, and furnish to the
Beneficiaries all necessary tax forms;
(viii) pay all expenses and make all other payments relating
to the PCT Assets;
(ix) 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);
(x) obtain insurance coverage with respect to real and
personal property which may be or may become PCT
Assets, if any;
3
(xi) retain and pay law firms as counsel to the PCT to aid
in the prosecution of any claims that constitute the
PCT Assets, and to perform such other functions as may
be appropriate. The PCT Representative may commit the
PCT to, and the PCT shall pay, such law firm's
compensation for services rendered and expenses
incurred;
(xii) 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. The PCT
Representative may commit the PCT to, and the PCT
shall, pay such accounting firm's reasonable
compensation for services rendered and expenses
incurred;
(xiii) retain and pay such third parties as the PCT
Representative may deem necessary or appropriate to
assist the PCT Representative in carrying out his
powers and duties under this Agreement and in
accordance with the Plan. The PCT Representative may
commit the PCT to, and the PCT shall pay, all such
person's or entity's 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;
(xiv) 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;
(xv) provide periodic reporting to the Bankruptcy Court and
parties in interest of the status of the Claims
resolution process, distributions to the Beneficiaries
and prosecution of Causes of Action;
(xvi) manage the wind-down of the Debtors' non-Fleming
Convenience operations; and
(xvii) 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 this Agreement or of the Plan.
1.4 Authority. 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
in connection with the protection, conservation or disposition of the PCT
Assets.
1.5 Cooperation with Reclamation Creditors' Trust ("RCT"). To facilitate
the Claims reconciliation process and asset liquidation, the PCT and the RCT
shall enter into a transition services agreement, substantially in the form
attached hereto as Exhibit A, whereby the PCT shall provide resources to the RCT
related to effecting the reconciliation of claims by and against
4
the RCT. Such resources shall include, but not be limited to, access to the
professional staff and employees of the PCT, computer systems, data bases and
other relevant information. The RCT shall reimburse the PCT for the direct costs
(e.g., professional staff and employee expense) and allocation of the indirect
costs (e.g., facilities, computers, data storage facilities) with an allocation
methodology to be agreed upon. Notwithstanding the foregoing, the RCT shall have
no obligation to reimburse the PCT for indirect costs for the first three months
after the Effective Date, or for (i) direct costs for the first six months after
the Effective Date and (ii) indirect costs for months four through six after the
Effective Date, up to an aggregate cap of $1 million. In addition, on the
Effective Date, the Debtors and the Committee may elect that either: (i) the
Debtors shall provide the RCT with an additional $1 million for administrative
expenses of the RCT or (ii) the PCT shall provide the RCT with additional
resources and services pursuant to the transition services agreement with a
value of up to an additional $1 million. However, once the RCT has received
aggregate distributions of $10 million from the PCT, inclusive of any amounts
paid to the RCT with respect to the Administrative Claims Saving, the next $1
million in cash to be distributed by the PCT to the RCT shall instead be paid to
Core-Mark Newco.
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 his 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 in the Plan.
(b) The scope of the PCT Representative's power and authority shall
be determined by the PCT Board (as defined herein).
(c) 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 301.770
1-4(d), and such actions permitted herein.
1.8 Liability of PCT, PCT Representative and Professionals. 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
5
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 is determined by a
Final Order to be due to their own respective gross negligence or willful
misconduct.
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 PCT Assets shall, until
distributed or paid over as herein provided, be held in trust for the benefit of
the Beneficiaries. The PCT Representative shall have 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. 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 Budget ("Budget") to be prepared by the PCT Representative on the Effective
Date and approved by the PCT Board or as otherwise ordered by the Bankruptcy
Court, the PCT Representative may expend the PCT Assets (i) as necessary to meet
contingent liabilities and to maintain the value of the PCT Assets , (ii) to pay
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 PCT Assets are
otherwise subject) in
6
accordance with this Agreement or the Plan. The PCT Representative may, as
required, seek permission from the PCT Board to expend additional funds not in
the Budget 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
and reasonable 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 to the 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 and
reasonable 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, for any amounts to which he is entitled hereunder, then
the PCT Representative is hereby authorized to reduce to cash that portion
of the PCT Assets necessary to effect such compensation and reimbursement.
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, PCT employee and each of their
professionals and representatives 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.
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 this Agreement and 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)
7
(other than those determined by a Final Order to be due to their own
respective gross negligence or willful misconduct) to the fullest extent
permitted by applicable law. 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 this Agreement or the Plan, or by an Order of the
Bankruptcy Court or 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 relate or of which he
has become aware in his capacity as PCT Representative.
1.17 [Add a provision regarding sharing of privilege]
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, free and clear of all liens but subject to the next sentence, title to all
PCT Assets for the benefit of the Holders of Allowed Class 6 Claims
(collectively, the "Beneficiaries"). The PCT will also make payments to Holders
of Allowed Administrative Claims, Priority Tax Claims, Other Priority Non-Tax
Claims, Property Tax Claims, PACA/PASA Claims, FSA Liabilities and Convenience
Claims solely in satisfaction of liabilities assumed by the PCT and such Claim
Holders shall not be treated as beneficiaries of the PCT for any purpose. Upon
the transfer of the PCT Assets to the PCT, the Debtors shall have no interest in
or with respect to the PCT Assets. The PCT Assets do not include any RCT Assets.
Subject to the preceding exclusion of all RCT Assets, the PCT Assets shall
consist of all of the following assets of the Debtors:
(a) cash balances sufficient to pay the estimated Administrative
Claims that are the responsibility of the PCT;
(b) non-reclamation 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 Fleming
Convenience;
(c) royalty payments owing to the Debtors related to the sale of the
Fleming wholesale operations;
8
(d) Litigation Claims which consist primarily of (i) Avoidance
Actions available pursuant to Chapter 5 of the Bankruptcy Code, and (ii)
Vendor Deductions including 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;
(e) restricted cash, including the PACA account, the FSA Reserves
and the Professional Fee Escrow Account;
(f) any and all other Claims and Causes of Action of the Debtors,
including but not limited to those outlined in Article VI of the Plan,
Exhibit A to the Plan and Article 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;
(g) any assets of the RCT referred or assigned to the PCT, whether
vendor deductions, preference claims or otherwise (on terms that have been
mutually agreed upon by the RCT and the PCT);
(h) any cash proceeds of settlements for customer accounts
receivables, vendor deductions, over-wires and preferences (exclusive of
those related to either Fleming Convenience or the Reclamation Assets) in
excess of $9 million which were collected by the Debtors from April 1,
2004 to the Effective Date which are being held in an escrow account;
(i) $3.0 million in cash for administration of the PCT;
(j) any distributions from the RCT in accordance with Section VII.E
of the Revised Term Sheet; and
(k) all of the remaining assets of the Debtors, other than the
assets of the Reorganized Debtors and the assets of Fleming Convenience
which will have been transferred to Core-Mark Newco and the Reorganized
Debtors.
The PCT Assets do not include: (1) any of the Reclamation Assets; (2) any
of the assets of Fleming Convenience which are to be transferred to Core-Mark
Newco and the Reorganized Debtors; or (3) the stock of Core-Mark Newco and the
stock of the Reorganized Debtors.
The PCT Assets shall be held by the PCT in trust for the Beneficiaries,
subject to the terms and conditions of the Plan and this Agreement.
The PCT shall administer the directors and officers insurance policies
maintained pursuant to section XII.D. of the Plan and all proceeds of such
policies shall benefit the D&O Releasees and the prepetition directors and
officers of the Debtors who are covered by the directors and officers insurance
policies as well as the PCT to the extent the PCT or other party
9
has a valid Claim against a D&O Releasee or a prepetition director or officer of
the Debtors who is covered by the directors and officer insurance policies.
2.2 Title to Assets. For all federal income tax purposes, all parties
(including, without limitation, the Debtors, the PCT Representative, and the
Beneficiaries) shall treat the 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 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 2.1 hereof, the Debtors hereby transfer and assign, and
the PCT hereby assumes and agrees that all PCT Assets will be transferred to the
PCT for the benefit of the Beneficiaries but subject to the payment of the
Claims set forth in the second sentence of Section 2.1.
2.4 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 Board. The valuation shall be used consistently
by all parties (including the Debtors, the PCT Representative and the
Beneficiaries) for all federal income tax purposes.
2.5 Post-Confirmation Trust Advisory Board.
(a) Board Members. The PCT 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 a 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 or
shall be entitled to receive equity securities in
Core-Mark Newco as a result of distributions or
anticipated 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 OCRC (the "Trade Creditor Member"),
who, when designated and thereafter, shall be a Holder
(or a
10
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, the
RCT or the PCT do not reasonably contemplate bringing) a
Cause of Action other than a Reclamation Claim.
(b) Delegation to the PCT Representative. The PCT Board shall
establish the scope and parameters of discretion of the PCT
Representative. 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.
(c) 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.
(d) Requisite Vote. 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 (including, but not limited to, by
way of employment) involving any member of the PCT Board, such PCT Board
member(s) shall recuse himself from any decision affecting such
litigation.
(e) Reporting. The PCT Representative shall submit such reports to
the PCT Board as the PCT Board deems reasonable , including, without
limitation, reports on the commencement and prosecution of Causes of
Action and the proceeds of liquidation of the PCT Assets. The PCT
Representative upon reasonable request, shall also provide a copy of any
report it submits to the PCT Board to the RCT Board.
(f) Reimbursement. The PCT shall reimburse each member of the PCT
Board for the actual out-of-pocket expenses related to the PCT Board
activities incurred by such member, including without limitation,
necessary travel, lodging, postage, telephone and facsimile charges upon
receipt of periodic billings.
11
All amounts payable pursuant to the above paragraph (f) shall be paid from the
PCT Assets. 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 to effect such reimbursement.
(g) 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, filed proofs of
claim or ballots cast with respect to the Plan. To the extent tax identification
numbers of Beneficiaries are unknown, the PCT shall take whatever action is
reasonably necessary to contact the Beneficiaries in order to obtain such tax
identification numbers. 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 301.770 1-4(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.
12
4.2 Resolution of PCT Assets by the PCT Representative.
(a) The PCT Representative shall be empowered to and 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 or the Plan
to the contrary, the PCT Representative 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 books and records relating
to the PCT 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 VII 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, 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
members as set forth herein;
SECOND, to the Holders of Allowed Administrative Claims, Priority
Tax Claims, Class 1(A) Claims, Class 1(B) Claims, Class 3(A) Claims, Class
4 Claims and Convenience Claims;
THIRD, to Core-Mark Newco, in the amount necessary to reimburse
Core-Mark Newco for any payments made on the TLV Guaranty or Non-TLV
Guaranty;
FOURTH, to the RCT, in the event all Allowed Reclamation Claims and
interest thereon, as applicable, together with the Prepetition Non-TLV
Reclamation Claim Reduction has not been paid in full by the RCT;
FIFTH, to Core-Mark Newco in the amount necessary to reimburse
Core-Mark Newco for any payments made on the Administrative Claims
Guaranty in the event the Allowed Reclamation Claims and the Prepetition
Non-TLV Reclamation Claim Reduction have been paid in full by the RCT; and
13
SIXTH, to the extent there are any excess proceeds after the Claims
and obligations specified in the SECOND through FIFTH paragraphs above
have been satisfied in full, to the Holders of Allowed Class 6 Claims, pro
rata.
Notwithstanding anything to the contrary in this Section 4.4, prior to
making any distribution pursuant to the SECOND through FIFTH paragraphs hereof,
the PCT Representative may retain such amounts (i) as are necessary to meet
contingent liabilities and to maintain the value of the PCT Assets, (ii) to pay
estimated expenses of administration (including any taxes imposed on the PCT or
in respect of the PCT Assets, 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 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.
4.5 Distribution and Withholding. Subject to the provisions of Section 4.4
hereof, the PCT shall distribute to the Beneficiaries 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 Representative 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 the PCT Assets or to meet claims
and contingent liabilities (including Disputed Claims).
4.6 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.
5.2 Resignation. The PCT Representative may resign by giving not less than
thirty (30) days prior written notice thereof to the PCT Board.
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
14
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 the 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 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's 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
15
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 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 fifth
(5th) 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 of the PCT. Multiple extensions can be
obtained so long as Bankruptcy Court approval is obtained at least six (6)
16
months prior to the expiration of each extended term; provided, however, that
the PCT receives a favorable opinion of counselor or 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
Representative to effectuate the terms of this Agreement with the consent of the
PCT Board.
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.
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 is the prevailing party in a dispute
regarding the provisions of this Agreement or the enforcement thereof, the PCT
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.
17
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:
18
If to the Debtors, The Committee, the PCT or the PCT Representative:
Fleming PCT
(insert address)
Attention: PCT Representative
Fax:
Telephonic Confirmation:
With a copy to:
KIRKLAND & ELLIS LLP MILBANK TWEED HADLEY
James H. M. Sprayregen, P.C. & MCCLOY LLP
200 East Randolph Drive Paul S. Aronzon
Chicago, IL 60601-6436 Dennis F. Dunne
Telephone:(312) 861-2000 One Chase Manhattan Plaza
Facsimile:(312) 861-2200 New York, NY 10005
(212) 530-5000
and
and
PACHULSKI, STANG, ZIEHL, YOUNG,
JONES & WEINTRAUB P.C. PEPPER HAMILTON LLP
Laura Davis Jones I. William Cohen
Ira D. Kharasch Robert S. Hertzberg
919 North Market Street, 100 Renaissance Center
Sixteenth Floor, Suite 3600
P.O. Box 8705 Detroit, MI 48243-1157
Wilmington, Delaware (313) 259-7110
19899-8705 (Courier
No. 19801) Co-Counsel for the
Telephone:(302) 652-4100 Official Committee of
Facsimile:(302) 652-4400 Unsecured Creditors
Co-Counsel for the Debtors
and Debtors in Possession
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 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.
19
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 Trust Representative
By:______________________________
20
THERE IS NO EXHIBIT 10 TO THE DISCLOSURE STATEMENT
THERE IS NO EXHIBIT 11 TO THE DISCLOSURE STATEMENT
EXHIBIT 12
DRAFT
5/26/04
RECLAMATION CREDITORS' TRUST AGREEMENT
This AGREEMENT is made this ____ day of ______________, 2004, by and among
the Official Committee of Reclamation Creditors (the "OCRC") of Fleming
Companies, Inc. and its subsidiaries and affiliates who are Chapter 11 debtors
(collectively the "Debtors")(1), the Debtors (solely for purposes of Sections
1.2 and 1.3) and _____________________ (the "RCT Representative").
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.
B. On May 3, 2004, the Debtors, the OCRC and the Official Committee of
Unsecured Creditors (OCUC") entered into that certain Revised Term Sheet to
Resolve Objections to Debtors' Chapter 11 Plan and For Treatment of Reclamation
Claims (the "Reclamation Agreement").
C. By order, dated ________________________2004, the Bankruptcy Court
confirmed the Debtors' and the Official Committee of Unsecured Creditors' Third
Amended and Revised 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").
D. The Plan provides for, among other things, the distribution to the
holders of Allowed Reclamation Claims (the "Beneficiaries") of, in the
aggregate, one hundred percent (100%) of the beneficial interests of the
Reclamation Creditors' Trust (the "RCT") created hereby.
E. An advisory board (the "RCT Board") shall be established and
constituted as set forth herein to establish policies, rules and procedures to
govern the RCT and to delegate powers and assign duties to the RCT
Representative, as the RCT Board, in its sole discretion, shall determine for
the implementation of such RCT policies, rules and procedures.
F. In accordance with the Plan and as established by the RCT Board,
certain duties and responsibilities shall be borne by the RCT Representative.
- ---------------
(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.
G. The RCT is created pursuant to, and to effectuate, the Plan.
H. The RCT is created on behalf of, and for the sole benefit of, the
Beneficiaries.
I. The RCT is established for the primary purpose of liquidating the
assets transferred to it (the "RCT Assets") for the benefit of the Beneficiaries
as a liquidating trust, 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 RCT.
J. The RCT 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.
K. Capitalized terms used herein without definition shall have the
respective meanings assigned to such terms in the Plan.
L. 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 OCRC, the Debtors (solely
for Sections 1.2 and 1.3) and the RCT Representative agree as follows:
ARTICLE I
ESTABLISHMENT OF THE RCT
1.1 RCT Board.
(a) Board Members. The RCT Board shall be formed on the Effective
Date of the Plan or as soon as practicable thereafter and shall consist of
the RCT Representative and members selected by the OCRC with
representation by TLV (but only until TLV Reclamation Claims have been
paid in full) and Non-TLV Members.
(b) RCT Board Bylaws. The RCT Board shall adopt its own bylaws,
provided that such bylaws shall not be inconsistent with this Agreement.
(c) Reporting. The RCT Representative shall submit such reports as
directed by the RCT Board, including, without limitation, reports on the
reconciliation of Reclamation Claims, distributions to Reclamation
Creditors, commencement and prosecution of Causes of Action that are RCT
Assets, and the proceeds of liquidation of the RCT Assets.
(d) Reimbursement. The RCT shall reimburse each member of the RCT
Board for the actual out-of-pocket RCT Board expenses incurred by such
member, including without limitation, necessary travel, lodging, postage,
telephone and facsimile charges upon receipt of periodic billings. If the
RCT has an independent member (not a TLV or Non-TLV Member), the RCT may
compensate such member for time devoted to RCT Board duties.
-2-
All amounts payable pursuant to the above paragraph (d) shall be paid from the
assets of the RCT. If the cash in the RCT shall be insufficient to effect such
reimbursement, then the RCT is hereby authorized to reduce to cash that portion
of the RCT Assets necessary so as to effect such reimbursement.
1.2 Transfer of Assets to the RCT. Pursuant to the Plan, on the Effective
Date or as soon as practicable thereafter, the Debtors shall, and shall have the
Reorganized Debtors and Core-Mark Newco, as applicable, transfer, assign and
deliver to the RCT, on behalf of the Beneficiaries, all right, title and
interest in and to the RCT Assets. The RCT Assets shall include assets of the
Debtors (more specifically set forth in the Reclamation Agreement) as follows:
(a) deductions, over-wires, preference claims, Causes of Action and
other rights of the Debtors as against Reclamation Creditors, other than
the post-petition deductions and post-petition over-wires with respect to
Fleming Convenience, which shall be transferred to Core-Mark Newco.
(b) $3.0 million in cash for administration of the RCT.
(c) any cash proceeds (i) which are collected by the Debtors from
Reclamation Creditors for payment of preference liability, deduction
liability and over-wire liability (except for post-petition vendor
deductions and post-petition over-wire liability related to Fleming
Convenience) from and after March 23, 2004 to the Effective Date, having
been held in an escrow account by the Debtors or (ii) which constitute
Administrative Claims Savings under the Plan.
1.3 Title to Assets.
(a) The transfer of the RCT Assets to the RCT shall be made for the
benefit of the Beneficiaries. On the Effective Date, the Debtors shall
transfer title to all RCT Assets to the RCT. Upon the transfer of the RCT
Assets to the RCT, the Debtors shall have no interest in or with respect
to such RCT Assets or the RCT.
(b) For all federal income tax purposes, all parties (including,
without limitation, the Debtors, the RCT Representative, and the
Beneficiaries) shall treat the transfer of the RCT Assets by the Debtors
to the RCT, as set forth in this Section 1.2, as a transfer to the
Beneficiaries, followed by a transfer by the Beneficiaries to the RCT.
Thus, the Beneficiaries shall be treated as the grantors and owners of a
grantor trust for federal income tax purposes.
(c) The Debtors shall provide the RCT with copies of such of their
books and records as the RCT shall reasonably require for the purpose of
performing its functions and exercising its rights and powers.
1.4 Assignment and Assumption of Liabilities. Pursuant to the Plan, the
RCT hereby assumes all Reclamation Liabilities which consist of any and all
claims asserted against the Debtors by the Reclamation Creditors, including
Administrative Claims, Priority Claims, TLV Reclamation Claims, and Non-TLV
Reclamation Claims, but not including, (i) Administrative Claims against Fleming
Convenience, (ii) PACA/PASA Claims and DSD Trust Claims and (iii) the General
Unsecured Claims, each as may be held by Reclamation Creditors.
-3-
1.5 Preferred Interests/Lien in Favor of Class 3(B) Claims. As further
described in the Plan, on the Effective Date, or as soon as practicable
thereafter, the RCT shall issue the Class 3(B) Preferred Interests in favor of
the Holders of Allowed TLV Reclamation Claims in the estimated aggregate amount
of such Allowed Claims under the terms and conditions of the Plan and grant a
first priority lien to such Holders on the RCT Assets, entitling each Holder of
an Allowed TLV Reclamation Claim to its Ratable Proportion of RCT Assets up to
the total amount of each Holder's Allowed TLV Reclamation Claim, in full
satisfaction, settlement, release and discharge of each Allowed TLV Reclamation
Claim. The Class 3(B) Claims shall earn interest which shall begin to accrue
sixty (60) days after the Effective Date at the Wall Street Journal listed prime
rate.
1.6 Preferred Interests/Lien in Favor of Class 5 Claims. As further
described in the Plan, on the Effective Date, or as soon as practicable
thereafter, the RCT shall issue the Class 5 Preferred Interests in favor of the
Holders of Non-TLV Reclamation Claims in the estimated aggregate amount of their
Allowed Claims under the terms and conditions of the Plan and grant a second
priority lien on the RCT Assets entitling each Holder to its Ratable Proportion
of the RCT Assets, after all Class 3(B) Claims are paid in full.
1.7 Powers of RCT Advisory Board.
Except as expressly set forth herein, the RCT shall have absolute
discretion in the reconciliation of Reclamation Claims and otherwise to pursue
or not to pursue any and all claims, rights, or Causes of Action, as it
determines is in the best interests of the Beneficiaries and consistent with the
purposes of the RCT, and shall have no liability for the outcome of its
decision. The RCT may incur any reasonable and necessary expenses in liquidating
and converting the RCT Assets to cash.
In connection with the administration of the RCT, except as otherwise set
forth in this Agreement or the Plan, the RCT is authorized to perform any and
all acts necessary and desirable to accomplish the purposes of the RCT. Without
limiting, but subject to, the foregoing, the RCT shall be expressly authorized,
but shall not be required, to:
(i) hold legal title to the RCT Assets, any and all rights
of the Beneficiaries in or arising from the RCT Assets,
including, but not limited to, the right to vote any
claim or interest held by the RCT Assets in a case under
the Bankruptcy Code and receive any distribution
therein;
(ii) protect and enforce the rights to the RCT Assets vested
in the RCT 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 RCT as the RCT
shall deem advisable;
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(iv) determine and satisfy any and all liabilities created,
incurred or assumed by the RCT;
(v) retain and pay such law firms as counsel to the RCT or
the RCT Representative as the RCT, in its sole
discretion, may select to aid in the prosecution of any
claims that constitute the RCT Assets, and to perform
such other functions as may be appropriate;
(vi) retain and pay a public accounting firm to perform such
reviews and/or audits of the financial books and records
of the RCT as may be appropriate in the RCT and to
prepay and file any tax returns or informational returns
for the RCT as may be required; and
(vii) retain and pay such third parties as the RCT, in its
sole discretion, may deem necessary or appropriate to
assist the RCT in carrying out its powers and duties
under this Agreement. (The RCT may commit to indemnify
any such parties in connection with the performance of
services).
1.8 Additional Powers of the RCT Board. 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 RCT may control and exercise authority over the RCT Assets
and over the protection, conservation and disposition thereof. No person dealing
with the RCT shall be obligated to inquire into the authority of the RCT in
connection with the protection, conservation or disposition of RCT Assets.
1.9 Cooperation with PCT. To facilitate the claims reconciliation process
and asset liquidation, the PCT and the RCT shall enter into a Transition
Services Agreement, substantially in the form attached hereto as Exhibit A,
whereby the PCT shall provide resources and services to the RCT related to
effecting the claims reconciliation process. Such resources shall include, but
not be limited to, access to the professional staff and employees of the PCT,
computer systems, data bases and other relevant information. The RCT shall
reimburse the PCT for the direct costs (e.g., professional staff and employee
expense) and allocation of the indirect costs (e.g., facilities, computers, data
storage facilities) with an allocation methodology to be agreed upon.
Notwithstanding the foregoing, the RCT shall have no obligation to reimburse the
PCT for indirect costs for the first 3 months after the Effective Date, or for
(i) direct costs for the first six months after the Effective Date and (ii)
indirect costs for months 4-6 after the Effective Date, up to an aggregate cap
of $1 million. In addition, at the option of the Debtors and the OCUC, on the
Effective Date, either (i) the Debtors shall provide the RCT with an additional
$1 million for administrative expenses of the RCT or (ii) the PCT shall provide
the RCT with additional resources and services pursuant to the Transition
Services Agreement with a value of up to an additional $1 million. However, once
the RCT has received aggregate distributions of $10 million from the PCT as
outlined in the Plan and Reclamation Agreement, inclusive of any amounts paid to
the RCT with respect to the Administrative Claims Savings outlined in paragraph
II.B. of the Reclamation Agreement, the next $1 million in cash to be
distributed by the PCT to the RCT shall instead be paid to Core-Mark Newco.
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1.10 Valuation of Assets. As soon as practicable after the Effective Date,
the RCT Representative shall apprise the Beneficiaries of the value of the RCT
Assets by filing such valuation with the Bankruptcy Court in form and substance
reasonably acceptable to the RCT Board and by sending to the Beneficiaries
notice of their applicable shares of such value as soon as practicable. The
valuation shall be used consistently by all Parties (including the Debtors, the
RCT and the Beneficiaries) for all federal income tax purposes.
1.11 Exculpation. From and after the Effective Date, the RCT 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 RCT 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 II
RCT REPRESENTATIVE
2.1 Appointment. The OCRC hereby appoints _________________ to serve as
the initial RCT 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 RCT Representative shall be
appointed by the OCRC in the event that, prior to the Effective Date, the RCT
Representative is removed or resigns pursuant to this Agreement or the RCT
Representative otherwise vacates the position, and if not so appointed, shall be
appointed by the Bankruptcy Court. Subsequent to the Effective Date, such right
of removal or appointment shall be exercised by the RCT Board.
2.2 RCT Representative as Fiduciary. The RCT Representative's powers are
exercisable solely in a fiduciary capacity consistent with, and in furtherance
of, the purposes of the RCT and not otherwise, except that the RCT
Representative may deal with the RCT Assets for his own account as permitted by
the RCT Board. The RCT Representative shall for all purposes hereunder be acting
in the capacity as RCT Representative and not individually. Notwithstanding
anything to the contrary contained herein or in the Plan, the RCT Representative
shall not be required to take any action or omit to take any action if, after
the advice of counsel, the RCT Representative believes such action or omission
is not consistent with the RCT Representative's fiduciary duties to the
Beneficiaries.
2.3 Scope of Duties. The duties and responsibilities of the RCT
Representative shall include (a) facilitating the reconciliation of Claims of
Reclamation Claim Holders, (b) calculating and implementing all distributions to
Reclamation Claim Holders in accordance with the Plan, (c) filing all required
tax returns and paying taxes and all-other obligations on behalf of the RCT from
funds held by the RCT, (d) periodic reporting to the Bankruptcy Court
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and parties in interest of the status of the reconciliation of Reclamation
Claims, distributions on Allowed Reclamation Claims, and prosecution of Causes
of Action, (e) liquidating the RCT Assets and providing for the distribution of
the net proceeds thereof in accordance with the provisions of the Plan, and (f)
such other responsibilities as may be vested in the RCT Representative by the
RTC Board, pursuant to the Plan or Bankruptcy Court Order or as may be necessary
and proper to carry out the provisions of the Plan including:
(i) filing, if necessary, any and all tax and information
returns with respect to the RCT and pay taxes properly
payable by the RCT, if any;
(ii) paying all expenses and make all other payments relating
to the RCT Assets;
(iii) obtaining insurance coverage with respect to the
liabilities and obligations of the RCT Representative
and the RCT (in the form of an errors and omissions
policy, fiduciary policy or otherwise);
(iv) obtaining insurance coverage with respect to real and
personal property which may be or may become RCT Assets,
if any;
(v) investing any moneys held as part of the RCT Assets in
accordance with the terms of Section 2.9 hereof;
(vi) engaging in any transaction material to the foregoing,
including, but not limited to, opening bank accounts in
the name of the RCT and entering into contracts and
leases on behalf of the RCT; and
(vii) performing such other powers as may be vested in the RCT
Representative by the RCT Board.
2.4 Powers of RCT Representative.
The powers of the RCT Representative shall, without any further Bankruptcy
Court approval and subject to limitation by the RCT Board, in each of the
following cases, include (i) the power to invest and withdraw funds, make
distributions and pay taxes and other obligations owed by the RCT from funds
held by the RCT Representative and/or the RCT in accordance with the Plan, (ii)
the power to engage employees and professional persons to assist the RCT and/or
the RCT Representative with respect to its or his responsibilities subject to
RCT Board authority, (iii) the power to effect the reconciliation, compromise
and settlement of claims and Causes of Action as approved by the RCT Board, and
(iv) such other powers as may be vested in the RCT Representative by the RCT
Board.
2.5 Other Activities. The RCT Representative shall be entitled to perform
services for and be employed by third parties; provided, however, that such
performance or employment affords the RCT Representative sufficient time to
carry out its responsibilities as RCT Representative. Subject to limitation by
the RCT Board, the RCT Representative may delegate the performance of services
and the fulfillment of responsibilities to other persons. Such persons
-7-
shall be entitled to be compensated and to be reimbursed for out-of-pocket
disbursements in the same manner as the RCT Representative.
2.6 Limitation of RCT Representative's Authority.
(a) The RCT Representative shall have no power or authority except
as set forth in this Agreement, the Plan or as conferred by the RCT Board.
(b) The RCT Representative shall not and shall not be authorized to
engage in any trade or business with respect to the RCT Assets or any
proceeds therefrom except to the extent reasonably necessary to, and
consistent with, the liquidating purpose of the RCT, and shall take
actions consistent with the prompt and orderly liquidation of the RCT
Assets as are required by applicable law and consistent with the treatment
of the RCT as a liquidating trust under Treasury Regulation Section
301.7701-4(d), and such actions permitted herein.
2.7 Liability of RCT Representative. In no event shall the RCT
Representative, the RCT Representative's employees, the RCT's employees or any
of the RCT Representative's or RCT's professionals or representatives be held
personally liable for any claim asserted against the RCT, the RCT
Representative, the RCT Representative's employees, the RCT's employees or any
of the RCT Representative's or RCT's professionals or representatives.
Specifically, the RCT Representative, the RCT Representative's employees, the
RCT's employees and any of the RCT Representative's or RCT'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 RCT Representative, the RCT Representative's employees, the RCT's
employees or any of the RCT Representative's or RCT's professionals or
representatives are determined by a Final Order to be due to their own
respective gross negligence or willful misconduct.
2.8 Reliance by RCT Representative. Except as otherwise provided herein:
(a) the RCT 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 RCT Representative may consult with legal counsel, financial
or accounting advisors and other professionals to be selected by the RCT
Board, and the RCT 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 RCT Representative shall look only to
the RCT Assets to satisfy any liability incurred by the RCT Representative
to such person in carrying out the terms of this Agreement, and the RCT
Representative shall have no personal obligation to satisfy any such
liability.
2.9 Investment and Safekeeping of RCT Assets. All moneys and other assets
received by the RCT 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 RCT Assets, unless and to
-8-
the extent required by the Plan or by law. The RCT Representative shall be under
no liability for interest or producing income on any moneys received by the RCT
hereunder and held for distribution or payment to the Beneficiaries, except as
such interest shall actually be received by the RCT Representative. Investments
of any moneys held by the RCT 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 RCT Representative to invest the RCT Assets, the proceeds thereof, or any
income earned by the RCT, 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.
2.10 Authorization to Expend RCT Assets. Subject to a budget or other
authorization from the RCT Board (it being understood that the RCT
Representative shall be entitled to make such modifications as to timing and
expense category as may be approved by the RCT Board), the RCT Representative
may expend the assets of the RCT (i) as necessary to meet contingent liabilities
and to maintain the value of the assets of the RCT during liquidation, (ii) to
pay administrative expenses of the RCT (including, but not limited to, any taxes
imposed on the RCT or fees and expenses in connection with litigation), and
(iii) to satisfy other liabilities incurred or assumed by the RCT (or to which
the assets are otherwise subject) in accordance with the RCT Agreement or the
Plan. The RCT Representative shall expend funds in accordance with budgets or on
any other basis that has been approved by the RCT Board and the RCT
Representative or as otherwise ordered by the Bankruptcy Court. The RCT
Representative may, as required, request additional funds from the RCT Board or
authority to borrow additional funds if supported and necessary to exercise the
duties of the RCT Representative.
2.11 Compensation of the RCT Representative.
(a) The RCT shall reimburse the RCT Representative for the actual
out-of-pocket expenses incurred by the RCT Representative, including,
without limitation, necessary travel, lodging, postage, telephone and
facsimile charges upon receipt of periodic billings. The RCT
Representative and employees of the RCT and the RCT Representative who
perform services for the RCT shall be entitled to receive compensation for
services rendered on behalf of the RCT as agreed to by the RCT Board.
(b) The RCT Assets shall be subject to the claims of the RCT
Representative, and the RCT Representative shall be entitled to reimburse
himself out of any available cash in the RCT, for his actual out-of-pocket
expenses and against and from any and all loss, liability, expense, or
damage which the RCT 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 RCT Representative.
-9-
(c) All compensation and other amounts payable to the RCT
Representative shall be paid from the assets of the RCT. If the cash in
the RCT shall be insufficient to compensate and reimburse the RCT
Representative, as the case may be, for any amounts to which they are
entitled hereunder, then the RCT Representative is hereby authorized to
reduce to cash that portion of the RCT Assets necessary so as to effect
such compensation and reimbursement.
2.12 Exculpation and Indemnification.
(a) Exculpation. The RCT Representative, the RCT Representative's
employees and the RCT'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 RCT 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.
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 RCT Representative, the RCT or
the employees, professionals or representatives of either the RCT Representative
or the RCT for making payments in accordance with the Plan or for implementing
the provisions of the Plan.
(b) Indemnification. The RCT shall indemnify, defend and hold
harmless the RCT Representative, the RCT Representative's employees and
the RCT' 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. Any action taken
or omitted to be taken with the approval of the Bankruptcy Court or the
RCT Board will conclusively be deemed not to constitute gross negligence
or willful misconduct.
2.13 Termination. The duties, responsibilities and powers of the RCT
Representative will terminate on the date the RCT 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
2.11 and 2.12. above shall survive such termination, dissolution and entry.
2.14 No Bond. The RCT Representative shall serve without bond.
2.15 Confidentiality. The RCT Representative shall, during the period that
he serves as RCT 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 RCT Assets relates or of which he
has become aware in his capacity as RCT Representative.
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ARTICLE III
BENEFICIARIES
3.1 Identification of Beneficiaries. In order to determine the actual
names, addresses and tax identification numbers of the Beneficiaries, the RCT
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. To the extent tax identification numbers of Beneficiaries are unknown,
the RCT shall take whatever action is reasonably necessary to contact the
Beneficiaries in order to obtain such tax identification numbers. Each
Beneficiary's right to distribution from the RCT, 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 RCT 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 RCT. The RCT 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 RCT. Accordingly, the RCT shall, in an
expeditious but orderly manner, liquidate and convert to cash the RCT Assets,
make timely distributions and not unduly prolong the duration of the RCT. The
liquidation of the RCT 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.
4.2 Resolution of RCT Assets by the RCT.
(a) The RCT Representative at the direction of the RCT Board and
subject to its control shall be empowered to (subject to the provisions
hereto) take all appropriate action with respect to the reconciliation,
prosecution, settlement or other resolution of the RCT Assets and
Reclamation Claims. The RCT 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 RCT 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 RCT shall maintain, in respect of the
Beneficiaries, books and records relating to the assets and income of the RCT
and the payment of expenses of, and liabilities of, claims against or assumed
by, the RCT 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 RCT to
file any accounting or seek approval of any court with respect to the
administration of the RCT, or as a condition for making any payment or
distribution out of the RCT Assets. Beneficiaries shall have the right, upon
thirty (30) days' prior written notice delivered to the RCT Representative, to
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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 RCT Representative.
4.4 Claims Treatment for Reclamation Claims.
Reclamation Claims under the Plan and this Agreement shall be defined as
TLV Reclamation Claims and Non-TLV Reclamation Claims. The total amount of
Reclamation Claims to be satisfied by the RCT shall be reconciled pursuant to
the methodology described in Exhibit A to the Reclamation Agreement, but in any
event shall not exceed $150 million prior to the application of any setoff
including the Prepetition Non-TLV Reclamation Claim Reduction (as defined
herein). In the event Reclamation Claims exceed $150 million, the Non-TLV
Reclamation Claims shall be reduced pro rata. The pursuit and collection of any
and all Causes of Action with respect to Reclamation Claims and the
reconciliation and payment of all Reclamation Claims shall be solely the
responsibility of the RCT and shall generally be pursuant to the following terms
and conditions.
(a) TLV Reclamation Claims
(i) Allowance shall be determined solely by the RCT and the
affected creditor without standing of any other party to
object (unless resolution is referred to the PCT on such
terms as the RCT and the PCT shall determine),
(ii) Reconciliation of the TLV Reclamation Claims shall
consist of application of all postpetition vendor
deductions, over-wires and preferences and pre-petition
setoffs to the extent that general unsecured claims have
first been fully setoff through application of
pre-petition deductions. The reconciliation shall
recognize the effect of the Trade Credit Program and the
critical vendor program.
(iii) Allowed TLV Reclamation Claims shall earn interest which
shall begin to accrue sixty (60) days after the
Effective Date at the Wall Street Journal listed prime
rate.
(iv) Allowed TLV Reclamation Claims shall be paid (i) first
from the RCT; (ii) second from the PCT and (iii) third
from the Core-Mark TLV Guaranty (as described below).
(b) Non-TLV Reclamation Claims
(i) Allowance shall be determined solely by the RCT and the
affected creditor without standing of any other party to
object (unless resolution is referred to the PCT on such
terms as the PCT and the RCT shall determine).
(ii) Non-TLV Reclamation Claims are defined as reclamation
claims held by Reclamation Creditors who did not
participate in the Trade
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Credit Program. In reconciling the Non-TLV Reclamation
Claims, all post-petition vendor deductions, over-wires,
preferences, and pre-petition setoffs to the extent that
general unsecured claims have been fully set off, shall
be applied. In addition, the total amount of Allowed
Non-TLV Reclamation Claims shall be reduced by a
discount of $13 million (the "Prepetition Non-TLV
Reclamation Claim Reduction") to calculate the net
Allowed amount of pre-petition Non-TLV Reclamation
Claims ("Net Non-TLV Reclamation Claims").
(iii) Allowed Non-TLV Reclamation Claims shall be paid only
after satisfaction of all Allowed TLV Reclamation Claims
(i) first from the RCT, (ii) second from the PCT and
(iii) third from the Core-Mark Non-TLV Guaranty (as
described in the Reclamation Agreement). The timing of
such distribution shall be in the discretion of the RCT.
(c) General Unsecured Claims of Reclamation Creditors
(i) Allowance of general unsecured claims held by
Reclamation Creditors shall be determined by the RCT
pursuant to procedures agreed to mutually by the RCT and
the PCT or as otherwise established by the Court. Such
procedures shall include a mechanism for approval by the
PCT Board of settlements which represent an increase of
at least 20% from the general unsecured claims scheduled
by the Debtors or the proofs of claim, whichever is
less.
(ii) The prosecution of any objections with respect to the
general unsecured claims held by Reclamation Creditors
and the reconciliation of general unsecured claims shall
be conducted by the RCT, at its expense and will be
subject to setoff against any pre-petition claims of the
Debtors against the vendors, including pre-petition
vendor deductions if not previously applied as outlined
in Section (b)(ii) above.
(iii) Allowed general unsecured claims of Reclamation
Creditors shall be entitled to the same treatment under
the Plan as the Allowed General Unsecured Claims of
non-reclamation creditors and shall receive
distributions pursuant to the Plan upon Allowance.
(d) DSD Trust/PACA/PASA Claims
The liability for DSD Trust Claims held by Reclamation
Creditors shall remain with the DSD Trust and such claims
shall be reconciled and paid, if Allowed, by the DSD Trust.
The liability for PACA/PASA Claims held by Reclamation
Creditors shall remain with the PCT and such claims shall be
reconciled and paid, if Allowed, by the PCT.
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4.5 Application of RCT Assets. The RCT shall apply all RCT Assets, and any
proceeds therefrom as follows:
(a) The RCT shall apply all RCT Assets and any proceeds in the order
and reflecting the priorities set forth below:
FIRST, to pay all the costs and expenses of the RCT including,
without limitation, the compensation of the RCT Representative and
reimbursement of the RCT Representative for any and all costs, expenses
and liabilities incurred by him in connection with the performance of his
duties under this RCT Agreement, as well as the costs of the RCT Board as
set forth herein.
SECOND, to the holders of Allowed Reclamation Claims in Class 3(B)
of the Plan. All distributions to the holders of Allowed Class 3(B) Claims
shall be in accordance with the terms of the Plan.
THIRD, to the holders of Allowed Reclamation Claims in Class 5 of
the Plan. All distributing to the holders of Allowed Class 5 Claims shall
be in accordance with the terms of the Plan.
Notwithstanding anything to the contrary in this Section 4.5(a),
prior to making any distribution pursuant to the SECOND and THIRD
paragraphs hereof, the RCT Representative with the approval of the RCT
Board may retain such amounts (i) as are necessary to meet contingent
liabilities and to maintain the value of the assets of the RCT during
liquidation, (ii) to pay estimated expenses of administration (including
any taxes imposed on the RCT or in respect of the assets of the RCT, and
(iii) to satisfy other liabilities incurred or assumed by the RCT (or to
which the assets are otherwise subject), all for the term of the RCT and
in accordance with this Agreement or the Plan; provided, however, that,
from the net amount distributable, the RCT 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).
(b) Excess Proceeds. In the event that proceeds remain in the RCT
after all of the distributions outlined in Section 4.4(a) herein have been
made by the RCT from liquidation of the RCT Assets, the RCT shall
distribute its remaining assets in the following order of priority:
(i) to Core-Mark Newco for any advances made under the TLV
or Non-TLV Guarantee;
(ii) to the Prepetition Non-TLV Reclamation Claim Reduction;
(iii) to Core-Mark Newco for any advances under the
Administrative Claim Guaranty;
(iv) any amount of "Ad Hoc Committee" professional fees which
have not been reimbursed by allowance of an
Administrative Claim;
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(v) to the PCT.
(c) Distribution and Withholding. Subject to the provisions of
Section 4.4(a) hereof, the RCT shall distribute to the holders of Allowed
Reclamation Claims all net cash income plus all net cash proceeds from the
liquidation of the RCT Assets (including as cash for this purpose, all
cash equivalents) at such time intervals as decided by the RCT in
accordance with the terms of the Plan, provided that the RCT shall make
distributions no less frequently than on an annual basis, except that the
RCT may retain an amount of net cash proceeds or net cash income
reasonably necessary to maintain the value of the RCT Assets or to meet
claims and contingent liabilities (including Disputed Claims).
4.6 Reconciliation Rules of RCT
The RCT Board shall adopt a series of rules which can be applied in the
reconciliation of Reclamation Claims and other RCT Assets. These rules shall be
applied on consensual basis by the RCT Representative with the Reclamation
Creditors. These rules shall not be mandatory. In the event a consensual
reconciliation is not achieved by the RCT Representative (as approved by the RCT
Board) and a Reclamation Creditor, there may be alternative dispute resolution
procedures made available on terms adopted by the advisory board of the RCT. In
any event, each Reclamation Creditor shall have the right to seek allowance and
reconciliation of its Reclamation Claim in accordance with the Bankruptcy Code
and Bankruptcy Rules process as qualified by the Plan.
4.7 Pending Adversary Proceedings Against Reclamation Creditors.
The RCT shall substitute itself for the Debtors in the adversary
proceedings against Reclamation Claimants. The RCT shall seek a further stay of
these adversary proceedings to the extent necessary to, among other things,
complete the development of the rules to be applied in reconciling Reclamation
Claims and in resolving the claims asserted against Reclamation Claimants in the
adversary proceedings on a consensual basis. In the event the application of the
rules does not provide a means to resolve a particular Reclamation Claim, the
RCT and the Holder of the Reclamation Claim reserve the right to seek to
terminate the stay of the relevant adversary proceeding or through other means
to seek resolution of the Reclamation Claim through litigation or other means of
dispute resolution. Both in the application of the rules for reconciliation of
Reclamation Claims on a consensual basis and through any litigation or other
dispute resolution (whether through one of the adversary proceedings or
otherwise), the assertion that a Reclamation Claim is to be eliminated, or to
any extent reduced, because of any security interest having existed in the
Debtors' inventory shall be barred (a waiver of the so-called "valueless"
defense to a Reclamation Claim).
4.8 Compliance with Laws. Any and all distributions of RCT Assets shall be
in compliance with applicable laws, including, but not limited to, applicable
federal and state securities laws.
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ARTICLE V
SUCCESSOR RCT REPRESENTATIVE
5.1 The RCT Representative may be removed by the RCT Board pursuant to a
majority vote.
5.2 Resignation. The RCT 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 RCT Representative. Any
successor RCT Representative shall be chosen by the RCT Board or, if the RCT
Board fails to timely appoint such successor, the Bankruptcy Court. Any
successor RCT Representative appointed hereunder shall execute an instrument
accepting such appointment and shall file such acceptance with the RCT records.
Thereupon, such successor RCT Representative shall, without any further act,
become vested with all the estates, properties, rights, powers, trusts and
duties of his predecessor in the RCT with like effect as if originally named
herein; provided, however, that a removed or resigning RCT Representative shall,
nevertheless, when requested in writing by the successor RCT Representative,
execute and deliver an instrument or instruments conveying and transferring to
such successor RCT Representative under the RCT all the estates, properties,
rights, powers, and trusts of such predecessor RCT Representative.
ARTICLE VI
DISPUTED CLAIM RESERVE
6.1 Disputed Claim Reserve The RCT Representative shall maintain, in
accordance with the RCT 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 RCT 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 RCT net of taxes which the RCT 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 RCT, the
RCT Representative shall submit to the Bankruptcy Court a written report
including: (i) financial statements of the RCT at the end of such calendar year
or period and the receipts and disbursements of the RCT for such period; (ii) a
description of any action taken by the RCT Representative in the performance of
his duties which materially and adversely affects the RCT 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),
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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 RCT
Representative shall promptly submit additional reports to the Bankruptcy Court
whenever an adverse material event or change occurs which effects either the RCT
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 RCT of a
private letter ruling if the RCT so requests one, or the receipt of an
adverse determination by the IRS upon audit if not contested by the RCT,
the RCT Representative shall file returns for the RCT as a grantor trust
pursuant to Treasury Regulation Section 1.671-4(a).
(b) Allocations of RCT Taxable Income. Subject to the provisions of
Section 7.2(a) hereof, allocations of RCT 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 RCT 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 RCT (including all distributions held in
reserve pending the resolution of Disputed Claims). Similarly, taxable
losses of the RCT will be allocated by reference to the manner in which an
economic loss would be borne immediately after a liquidating distribution
of the remaining RCT Assets. The tax book value of the RCT 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 RCT, 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 RCT Representative shall also file (or cause to be filed)
any other statements, returns or disclosures relating to the RCT that are
required by any governmental unit and serve upon the Beneficiaries such forms as
required by applicable law.
ARTICLE VIII
TRANSFER OF BENEFICIARY'S INTERESTS
8.1 Transfer of Beneficial Interests. The interests of the Beneficiaries
in the RCT, which are reflected only on the records of the RCT maintained by the
RCT Representative, are not negotiable and shall be transferable after written
notice to the RCT Representative only: (a) pursuant to applicable laws of
descent and distribution (in the case of a deceased individual Beneficiary); or
(b) by operation of law. The RCT Representative shall not be required to record
any transfer in favor of any transferee which, in the sole discretion of the RCT
Representative, is or might be construed to be ambiguous or to create
uncertainty as to the holder of the interest in the RCT. Until a transfer is in
fact recorded on the books and records maintained by the RCT
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Representative for the purpose of identifying Beneficiaries, the RCT
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 RCT Representative shall be fully protected and
incur no liability to any purported transferee or any other Entity.
ARTICLE IX
TERMINATION OF RCT
9.1 Termination of RCT. The RCT will terminate no later than the fifth
(5th) 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 RCT 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 RCT 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 RCT Representative shall
not unduly prolong the duration of the RCT and shall at all times endeavor to
resolve, settle or otherwise dispose of any claims that constitute RCT Assets
and to effect the distribution of the RCT Assets to the Beneficiaries in
accordance with the terms hereof and terminate the RCT as soon as practicable.
Prior to and upon termination of the RCT, the RCT 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 RCT are
not duly claimed, such distributions will be disposed of in accordance with the
Plan.
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 RCT as a "grantor trust" (in
accordance with Section 7.2 hereof), if applicable or, unless agreed to by the
RCT Board. Technical amendments to this Agreement may be made, as necessary, to
clarify this Agreement or enable the RCT to effectuate the terms of this
Agreement with the consent of the RCT Board.
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 RCT Assets, any attorney-client privilege,
work-product privilege, or other privilege or immunity attaching to any
documents or communications (whether written or
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oral) transferred to the RCT, shall vest in the RCT and its representatives, and
the Debtors and the RCT Representative are authorized to take all necessary
actions to effectuate the transfer of such privileges.
11.3 Prevailing Party. If the RCT Representative or the RCT, as the case
may be, is the prevailing party in a dispute regarding the provisions of this
Agreement or the enforcement thereof, the RCT Representative or the RCT, 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.
11.4 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.
11.5 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.
11.6 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:
If to the Debtors, the PCT or the PCT Representative:
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
PACHULSKl, 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
If to the RCT or the RCT Representative:
[INSERT]
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11.7 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 RCT or such other means
reasonably calculated to apprise the Beneficiary.
11.8 Headings. The section headings contained in this RCT 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.
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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.
Official Committee of Reclamation Creditors
By:______________________________
RCT Representative
By:______________________________
Fleming Companies, Inc. (solely for Sections 1.2 and 1.3)
By:______________________________
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EXHIBIT 13
REVISED TERM SHEET
TO RESOLVE OBJECTIONS TO DEBTORS' CHAPTER 11 PLAN
AND FOR TREATMENT OF RECLAMATION CLAIMS
This Revised Term Sheet ("Agreement") is made and entered into this ____ day of
May, 2004 by and among the Debtors, the Official Committee of Reclamation
Creditors ("OCRC") and the Official Committee of Unsecured Creditors ("OCUC").
This Term Sheet represents an agreement to settle the outstanding issues among
the parties with respect to the Debtors' and OCUC's Joint Chapter 11 Plan
("Plan") and the treatment of Reclamation Claims under the Plan (defined herein
as TLV Reclamation Claims and Non-TLV Reclamation Claims). This Agreement
supercedes and replaces the Term Sheet among the parties dated April 16, 2004
("Term Sheet"). The general terms and conditions of this Agreement are as
follows.
I. STRUCTURE
A. Establishment of a Reclamation Creditors' Trust ("RCT")
1. On the Plan Effective Date1 and pursuant to the Plan, the Debtors, the
OCRC and the OCUC shall establish the RCT and the Debtors, the
Reorganized Debtors and Core-Mark Newco, as applicable, shall convey
and deliver to the RCT the following.
a. All of the Debtors' Reclamation Assets and Reclamation
Liabilities.
Reclamation Assets are defined to include deductions, over-wires,
preference claims, Causes of Action and other rights of the Debtors as
against the holders of Reclamation Claims (as defined below) (the
"Reclamation Creditors"), other than the post-petition deductions and
post-petition over-wires with respect to the Fleming Convenience
business which shall be transferred to Core-Mark Newco.
The Reclamation Liabilities are defined as any and all claims
asserted against the Debtors by the Reclamation Creditors, including
Administrative Claims, Priority Claims, trade creditor reclamation lien
claims (including deficiency claims as outlined in the Final DIP Order)
("TLV Reclamation Claims"), but not including any general unsecured
claims held by Reclamation Creditors.
b. $3.0 million in cash for administration of the RCT; and
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(1) Capitalized terms not otherwise defined shall have the meaning set forth in
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 Code, as amended.
c. Any cash proceeds which are collected by the Debtors from
Reclamation Creditors for payment of preference liability,
deduction liability and over-wire liability (except for
post-petition vendor deductions and post-petition over-wire
liability related to the Fleming Convenience business) from and
after March 23, 2004 shall be placed into an escrow account
pending the Effective Date of the Plan consistent with the terms
of this Agreement. Such escrowed funds shall be transferred to the
RCT on the Effective Date of the Plan. From and after the date of
this Agreement, the Debtors shall be prohibited from soliciting or
negotiating any further settlements with reclamation creditors,
except with the consent and participation of the OCRC.
B. The RCT shall be administered by a Trustee selected by the OCRC (the "RCT
Trustee"). The RCT Trustee's responsibilities and authority shall include,
but not be limited to, facilitating the prosecution and settlement of
objections to Reclamation Claims and the general unsecured claims of
Reclamation Creditors, liquidating assets, prosecuting litigation
establishing appropriate reserves and escrows, and implementing
distributions.
C. In order to facilitate the claims reconciliation process and asset
liquidation, the PCT (as defined below) and the RCT shall enter into a
transition services agreement whereby the PCT shall provide resources to the
RCT related to effecting the claims reconciliation process. Such resources
shall include, but not be limited to, access to the professional staff and
employees of the PCT, computer systems, data bases and other relevant
information. The RCT shall reimburse the PCT for the direct costs (e.g.,
professional staff and employee expense) and allocation of the indirect costs
(e.g., facilities, computers, data storage facilities) with an allocation
methodology to be agreed upon. Notwithstanding the foregoing, the RCT shall
have no obligation to reimburse the PCT for indirect costs for the first 3
months after the Effective Date, or for (i) direct costs for the first six
months after the Effective Date and (ii) indirect costs for months 4-6 after
the Effective Date, up to an aggregate cap of $1 million. In addition, at the
option of the Debtors and the OCUC, on the Effective Date, either (i) the
Debtors shall provide the RCT with an additional $1 million for
administrative expenses of the RCT or (ii) the PCT shall provide the RCT with
additional resources and services pursuant to the transition services
agreement with a value of up to an additional $1 million. However, once the
RCT has received aggregate distributions of $10 million from the PCT,
inclusive of any amounts paid to the RCT with respect to the Administrative
Claims Savings outlined in paragraph II.B. below, the next $1 million in cash
to be distributed by the PCT to the RCT shall instead be paid to Core-Mark
Newco.
D. The RCT Trustee shall be advised by an advisory board selected by the OCRC
with representation by TLV (but only until TLV Reclamation Claims have been
paid in full) and Non-TLV Members. The TLV Reclamation Creditors shall be the
primary beneficiaries of the RCT and shall be entitled to be paid in full out
of the first distributions to be made by the RCT before the Non-TLV
Reclamation Creditors are entitled to any payment by the RCT.
2
E. Each of the RCT Trustee and the RCT advisory board shall act in good faith in
carrying out their duties and responsibilities and use their reasonable best
efforts to liquidate and resolve claims, disputes and maximize the value of
the RCT's assets and minimize claims against the RCT.
II. ESTABLISHMENT OF THE POST CONFIRMATION TRUST ("PCT")
A. On the Plan Effective Date and as outlined in the Plan, the Debtors and the
OCUC shall form the PCT and the Debtors, the Reorganized Debtors and
Core-Mark Newco, as applicable, shall transfer the following to the PCT:
1. All of the PCT assets and liabilities as outlined in the Plan that are
not to be transferred to the RCT as outlined herein;
The assets transferred to the PCT shall include, but are not
necessarily limited to, cash balances sufficient to pay the estimated
Administrative Claims that are the responsibility of the PCT, restricted
cash balances (e.g. PACA and FSA but not including the Professional Fee
Escrow Account), customer accounts receivable (other than those of the
Fleming Convenience business) non-reclamation vendor assets including
preference actions, vendor deductions, over-wires (other than the
post-petition deductions and post-petition over-wires of the Fleming
Convenience business) and other causes of action, but in any event shall not
include the Reclamation Assets.
The liabilities transferred to the PCT shall include, but not necessarily be
limited to, Priority Tax Claims, Other Priority Non-Tax Claims, Property Tax
Claims, Other Secured Claims, PACA/PASA Claims, FSA liability, General
Unsecured Claims (solely for purposes of resolution), Convenience Claims and
certain Administrative Claims that have not been satisfied on the Effective
Date of the Plan, other than the Administrative Claims of the Fleming
Convenience business and Professional Fees incurred prior to the Effective
Date which are paid by the funds in the Professional Fee Escrow Account (all
as defined in the Debtors' Second Amended Plan).
2. Any assets and/or liabilities of the RCT referred or assigned to the
PCT whether vendor deductions, preference claims or otherwise (on terms
that have been mutually agreed upon by the RCT and the PCT); and
3. $3.0 million in cash for administration of the PCT.
B. As set forth in the estimates included on Exhibit 3 of the Disclosure
Statement, the Debtors currently estimate that on the Effective Date
administrative claims transferred to the PCT shall total $52 million,
consisting of General accounts payable of $3 million, Health and welfare
benefits of $5 million, Severance and stay program of $27 million and Other
administrative claims of $17 million. In the event that such administrative
claims which are ultimately paid by the PCT after the Effective Date, exceed
the above referenced estimated amounts by $4 million, such amounts over the
$4 million shall be reimbursed by Core-Mark Newco (the "Administrative Claim
Guaranty"). In the event
3
such administrative claims against the Debtors currently anticipated to be
satisfied post-Effective Date through the PCT, are instead settled through
entry of an Order of the Bankruptcy Court approving such settlement
pre-Effective Date at a level lower than currently budgeted in the PCT
projections then, in such event, 50% of the net savings from any such Court
approved settlement below current budgeted levels (after reasonable deduction
for legal fees and other resolution costs) shall be paid to the RCT on the
Effective Date (the "Administrative Claims Savings"). Once the aggregate
distributions from the PCT to the RCT (inclusive of any Administrative
Savings paid to the RCT), have reached $10 million then, in such event, any
additional distributions to the RCT shall effect a reduction of the maximum
amount of the Non-TLV Guaranty by an amount equal to 50% of any such
aggregate additional distributions. Notwithstanding the forgoing, the parties
recognize that the Bankruptcy Court could ultimately determine that certain
of the administrative claims which are subject to the Administrative Claim
Guaranty may be reclassified by the Court as priority claims and
correspondingly, certain priority claims may be reclassified as
administrative claims. Irrespective of such reclassification by the
Bankruptcy Court, for purposes of calculating the amount which may be owed,
if any, on the Administrative Claim Guaranty, the classification assigned to
those claims as outlined in Exhibit 3 of the Disclosure Statement shall
govern.
C. From and after April 1, 2004, all proceeds of settlements for customer
accounts receivables, vendor deductions, over-wires and preferences
(exclusive of those related to either the Fleming Convenience business or the
Reclamation Assets) in excess of $9 million shall be placed into an escrow
account pending the Effective Date of the Plan and shall be transferred to
the PCT on the Effective Date of the Plan.
D. The PCT shall be administered by the Post Confirmation Representative who
shall be mutually agreed upon by the Debtors and the OCUC.
E. The PCT Representative shall be advised by the PCT Advisory Board which shall
include: (i) the PCT Representative; (ii) two members designated by Core-Mark
Newco; (iii) one member designated by the OCUC, other than trade members and
the PBGC, who shall be an Old Noteholder that holds in excess of 3.5% or
greater of the total outstanding equity securities of Core-Mark Newco
received as a result of distribution of such equity to Holders of Class 6
Claims under the Plan; and (iv) one member to be designated mutually by the
trade members of the OCUC and the OCRC.
F. The beneficiaries of the PCT, after satisfaction of all liabilities to be
satisfied by the PCT as outlined in the Plan including Administrative Claims,
Priority Tax Claims, Other Priority Non-Tax Claims, Property Tax Claims,
PACA/PASA Claims, FSA liabilities, Convenience Claims and all PCT expenses,
shall be (i) Core-Mark Newco, in the amount necessary to reimburse Core-Mark
Newco for any payments made on the TLV or Non-TLV Guaranty as outlined
herein; (ii) the RCT, in the event all Reclamation Claims and interest
thereon as applicable together with the Prepetition Non-TLV Reclamation Claim
Reduction as defined herein, have not been paid in full by the RCT, (iii)
Core-Mark Newco in the amount necessary to reimburse Core-Mark Newco for any
payments made on the Administrative Claim Guaranty in the event the
Reclamation Claims and the Prepetition Non-TLV Reclamation Claim Reduction
have been paid in full by the RCT
4
and (iv) thereafter the Class 6 General Unsecured Creditors (as defined in
the Debtors' Second Amended Plan) at which time the RCT should terminate with
any remaining assets delivered to the PCT.
G. Each of the PCT Representative and the PCT Advisory Board shall act in good
faith in carrying out their duties and responsibilities and use their best
efforts to liquidate and resolve claims, disputes and maximize the value of
the PCT's assets and minimize claims against the PCT.
III. CLAIMS TREATMENT FOR RECLAMATION CREDITORS
Reclamation Claims under the Plan and this Agreement shall be defined as TLV
Reclamation Claims, and Non-TLV Reclamation Claims. The total amount of
Reclamation Claims to be satisfied by the RCT shall be reconciled pursuant to
the methodology described in Exhibit A attached hereto, but in any event shall
not exceed $150 million prior to the application of any setoff including the
Prepetition Non-TLV Reclamation Claim Reduction (as defined herein). In the
event Reclamation Claims exceed $150 million, the Non-TLV Reclamation Claims
shall be reduced pro rata. The pursuit and collection of any and all Causes of
Action with respect to Reclamation Claims and the reconciliation and payment of
all Reclamation Claims shall be solely the responsibility of the RCT and shall
generally be pursuant to the following terms and conditions.
IV. TLV RECLAMATION CLAIMS
A. Allowance shall be determined solely by the RCT and the affected creditor
without standing of any other party to object (unless resolution is referred
to the PCT on such terms as the RCT and the PCT shall determine),
B. Reconciliation of the TLV Reclamation Claims shall consist of application of
all postpetition vendor deductions, over-wires and preferences and
pre-petition setoffs to the extent that general unsecured claims have first
been fully setoff through application of pre-petition deductions. The
reconciliation shall recognize the effect of the Trade Credit Program and the
critical vendor program.
C. Allowed TLV Reclamation Claims shall earn interest which shall begin to
accrue sixty (60) days after the Effective Date at the Wall Street Journal
listed prime rate.
D. Allowed TLV Reclamation Claims shall be paid (i) first from the RCT; (ii)
second from the PCT and (iii) third from the Core-Mark TLV Guaranty (as
described below).
V. NON-TLV RECLAMATION CLAIMS
A. Allowance shall be determined solely by RCT and affected creditor without
standing of any other party to object (unless resolution is referred to the
PCT on such terms as the PCT and RCT shall determine).
5
B. Non-TLV Reclamation Claims are defined as reclamation claims held by
Reclamation Creditors who did not participate in the Trade Credit Program. In
reconciling the Non-TLV Reclamation Claims, all post-petition vendor
deductions, over-wires, preferences, and pre-petition setoffs to the extent
that general unsecured claims have been fully set off, shall be applied. In
addition, the total amount of Allowed Non-TLV Reclamation Claims shall be
reduced by a discount of $13 million (the "Prepetition Non-TLV Reclamation
Claim Reduction") to calculate the net Allowed amount of pre-petition Non-TLV
Reclamation Claims ("Net Non-TLV Reclamation Claims").
C. Allowed Non-TLV Reclamation Claims shall be paid only after satisfaction of
all Allowed TLV Reclamation Claims (i) first from the RCT, (ii) second from
the PCT and (iii) third from the Core-Mark Non-TLV Guaranty (as described
below). The timing of such distribution shall be in the discretion of the
RCT.
VI. GENERAL UNSECURED CLAIMS OF RECLAMATION CREDITORS
A. Allowance of general unsecured claims held by Reclamation Creditors shall be
determined by the RCT pursuant to procedures established by the Court. Such
procedures shall include a mechanism for approval by the PCT Board of
settlements which represent an increase of at least 20% from the general
unsecured claims scheduled by the Debtors or the proofs of claim, whichever
is less.
B. The prosecution of any objections with respect to the general unsecured
claims held by Reclamation Creditors and the reconciliation of general
unsecured claims shall be conducted by the RCT, at its expense and will be
subject to setoff against any pre-petition claims of the Debtors against the
vendors, including pre-petition vendor deductions if not previously applied
as outlined in Section V(B) above.
C. Allowed general unsecured claims of Reclamation Creditors shall be entitled
to the same treatment under the Plan as the Allowed general unsecured claims
of non-reclamation creditors and shall receive distributions pursuant to the
Plan upon Allowance.
VII. SURPLUS CONTINGENCY FROM RCT
In the event the RCT has or develops proceeds for distribution after
satisfaction of all Reclamation Claims, such additional proceeds shall be
applied by the RCT in an order of priority as follows:
A. To Core-Mark Newco for any advances under the TLV or Non-TLV Guaranty;
B. To the Prepetition Non-TLV Reclamation Claim Reduction;
C. To Core-Mark Newco for any advances under the Administrative Claim Guaranty;
D. Any amount of "Ad Hoc Committee" professional fees which have not been
reimbursed by allowance of an Administrative Claim;
6
E. To the PCT.
VIII. CORE-MARK GUARANTY TO TLV RECLAMATION CREDITORS AND
CORE-MARK GUARANTY TO NON-TLV RECLAMATION CREDITORS
A. Core-Mark TLV Guaranty
1. The TLV Reclamation Claims shall be secured by a junior security
interest and lien in Core-Mark Newco subordinate to the Exit Financing
Facility (and any replacement facility) and any Tranche B Loan (as
described in the Plan)(the "TLV Guaranty"). The rights provided under
the TLV Guaranty will include customary inter-creditor rights (to be
defined).
2. The maximum amount of the TLV Guaranty shall be the total Allowed TLV
Reclamation Claims inclusive of unpaid interest. Interest will be
calculated from the Effective Date of the Plan at Prime plus 1%.
3. Pursuant to the TLV Guaranty, payment shall be made by January 30, 2006
to all holders of Allowed but unpaid TLV Reclamation Claims and unpaid
interest thereon as of December 31, 2005 so long as the Tranche B Loan
is paid in full. In the event, the Tranche B Loan is not paid in full
by December 31, 2005, the payment due on January 30, 2006 shall be
reduced by the outstanding principal amount of the Tranche B Loan with
the balance of any payment on the TLV Guaranty due to be paid 30 days
after the Tranche B Loan has been repaid in full (to holders of unpaid
TLV Reclamation Claims as of such date), but in no event later than on
January 30, 2007 to all holders of Allowed but unpaid TLV Reclamation
Claims as of December 31, 2006. For purposes of calculating the amount
of TLV Guaranty payment, the amount shall be reduced by any escrowed
funds of the RCT in excess of reasonable expenses projected to be
incurred in the administration of the RCT. Upon a payment on the TLV
Guaranty, Core-Mark Newco shall be subrogated to the rights of the TLV
Reclamation Creditors in the RCT. In the event the payments by
Core-Mark Newco on the TLV Guaranty shall be in excess of $5 million,
Core-Mark Newco shall be entitled to board representation on the RCT
advisory board equal to at least 20%. In the event aggregate payments
by Core-Mark Newco under the TLV Guaranty equal or exceed $10 million,
Core-Mark Newco shall be entitled to representation on the RCT advisory
board of at least 40%.
B. Core-Mark Non-TLV Guaranty
1. The Net Non-TLV Reclamation Claims shall be secured by a junior
security interest and lien in Core-Mark Newco subordinate to the Exit
Financing Facility (and any replacement facility) any Tranche B Loan
(as described in the Plan and the TLV Guaranty)( the "Non-TLV
Guaranty"). The rights provided under the Non-TLV Guaranty will include
customary intercreditor rights (to be defined).
2. The maximum amount of the Non-TLV Guaranty shall be $15 million.
7
3. Pursuant to the Non-TLV Guaranty, payment shall be made by January 1,
2007 to all holders of Allowed but unpaid Net Non-TLV Reclamation
Claims as of December 31, 2006 so long as the Tranche B Loan is paid in
full. In the event the Tranche B Loan is not paid in full, the payment
due on January 30, 2007 shall be reduced by the outstanding principal
amount of the Tranche B Loan plus amounts paid under the TLV Guaranty
and not yet reimbursed by the PCT or RCT to Core-Mark Newco with the
balance of any payment on the Non-TLV Guaranty due to be paid to the
RCT (for pro rata payment on account of unpaid Net Non-TLV Reclamation
Claims) 30 days after the Tranche B Loan has been repaid in full but in
no event later than January 1, 2008 to all holders of Allowed but
unpaid Net Non-TLV Reclamation Claims as of December 31, 2007. The
amount of Non-TLV Guaranty payment, subject to the maximum amount
described above, shall be reduced by any escrowed funds of the RCT in
excess of reasonable expenses projected to be incurred in the
administration of the RCT. In the event of a payment on the Non-TLV
Guaranty, Core-Mark Newco shall be subrogated to the rights of the
Non-TLV Reclamation Creditors in the RCT. In the event the payments by
Core-Mark Newco on the Non-TLV Guaranty shall be in excess of $5
million, Core-Mark Newco shall be entitled to board representation on
the RCT advisory board equal to 20%. In the event aggregate payments
under the Non-TLV Guaranty equal to or exceed $10 million, Core-Mark
Newco shall be entitled to representation on the RCT advisory board of
at least 40%.
C. In the event of an 80% change in ownership of Core-Mark Newco (excluding
shareholders who are shareholders on the Effective Date) whereby the
Core-Mark Newco shareholders are paid cash for their shares, the Core-Mark
Newco Guaranties outlined above shall be immediately triggered and the
obligations under the Guaranties shall be immediately due and payable.
IX. COORDINATION PENDING CONFIRMATION
Upon execution of this Agreement, the parties shall do the following:
1. Agree to a continuance of the May 4, 2004 Disclosure Statement hearing,
the related Exclusivity Motion, and related contested motions in the
Reclamation Adversary Proceedings ("Reclamation Motions") to the May
18, 2004 Omnibus hearing.
2. Agree to an extension of the date to file a responsive pleading to the
Reclamation Count of the Reclamation Adversary Proceedings to June 1,
2004.
3. File with the Court no later than May ___, 2004 an amended Disclosure
Statement and Plan, Settlement Agreement, Motion for Approval of
Settlement Agreement and related documents consistent with the terms of
this Agreement ("Agreement Documents"). The Plan shall provide that the
Reclamation Claims shall be satisfied as outlined in this Agreement and
the RCT, as provided herein, shall be the sole source of payment for
Allowed Reclamation Claims.
8
4. Seek a stay of the Reclamation Adversary Proceedings, and proceed
towards facilitating a consensual confirmation of the Plan of
Reorganization, subject to the approval of the Bankruptcy Court
By execution of this Agreement, the OCRC specifically waives the Due Diligence
Contingency contained in the Term Sheet of April 16, 2004.
9
The Official Committee of Fleming Companies, Inc., et al.
Reclamation Creditors Debtors and Debtors in Possession
By: /s/ S. Curtis Marshall By: /s/ Edward Stenger
---------------------------------- -----------------------------------
S. Curtis Marshall Edward Stenger
Chairperson Chief Restructuring Officer
The Official Committee of
Unsecured Creditors
By: /s/ Paul S. Aronzon
----------------------------------
Paul S. Aronzon, Esq.
Co-Counsel
10
EXHIBIT A
METHODOLOGY FOR ALLOWANCE OF RECLAMATION CLAIMS
1. The methodology for applying the valid reclamation window shall be consistent
with the attached chart.
2. Those reclamation claims whose date of delivery has been marked "P.O. not
identified" by the Debtors will be reconciled.
3. Consumption will be treated as follows:
(a) Allowed reclamation claims for product shipped to Fleming-owned stores
during the valid reclamation period shall be allowed at 100% less 50% for
presumed consumption of goods;
(b) For all valid reclamation claims (exclusive of Fleming convenience) a
reduction to the valid claims shall be made in the amount equal to, allowed
Fleming reclamation claims less 17% of such claim for presumed consumption of
goods;
(c) Consumption of reclamation goods for the Fleming Convenience business
and Dunigan business shall be calculated using the methodology utilized by
the Debtors in the November 21, 2003 reclamation report.
FLEMING
RECLAMATION
METHODOLOGY
ADJUSTED ASSERTION
DATE CHART
<Table>
<Caption>
ASSERTION DATE RECEIVING WINDOW
- -------------- ----------------
3/20/2003 3/10/03 through 3/20/03
3/21/2003 3/11/03 through 3/21/03
3/22/2003 3/12/03 through 3/22/03
3/23/2003 3/13/03 through 3/23/03
3/24/2003 3/14/03 through 3/24/03
3/25/2003 3/15/03 through 3/25/03
3/26/2003 3/16/03 through 3/26/03
3/27/2003 3/17/03 through 3/27/03
3/28/2003 3/18/03 through 3/28/03
3/29/2003 3/19/03 through 3/29/03
3/30/2003 3/20/03 through 3/30/03
3/31/2003 3/21/03 through 3/31/03
4/1/2003 3/22/03 through 3/31/03
4/2/2003 3/22/03 through 3/31/03
4/3/2003 3/22/03 through 3/31/03
4/4/2003 3/22/03 through 3/31/03
4/5/2003 3/22/03 through 3/31/03
4/6/2003 3/22/03 through 3/31/03
4/7/2003 3/22/03 through 3/31/03
4/8/2003 3/22/03 through 3/31/03
4/9/2003 3/22/03 through 3/31/03
4/10/2003 3/22/03 through 3/31/03
4/11/2003 3/23/03 through 3/31/03
4/12/2003 3/24/03 through 3/31/03
4/13/2003 3/25/03 through 3/31/03
4/14/2003 3/26/03 through 3/31/03
4/15/2003 3/27/03 through 3/31/03
4/16/2003 3/28/03 through 3/31/03
4/17/2003 3/29/03 through 3/31/03
4/18/2003 3/30/03 through 3/31/03
4/19/2003 3/31/03 through 3/31/03
All other dates N/A
</Table>