UNITED STATES BANKRUPTCY COURT DISTRICT OF ... - Stretto

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UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT

HARTFORD DIVISION : In re: : Chapter 11 : CARLA’S PASTA, INC., et al., : Case No. 21-20111 :

Debtors.1 : (Jointly Administered) :

DEBTORS’ APPLICATION FOR ENTRY OF AN ORDER

(I) AUTHORIZING THE DEBTOR TO EMPLOY AND RETAIN PHOENIX EXECUTIVE SERVICES, LLC AS THEIR FINANCIAL

ADVISORS AND JOSEPH C. NAPPI AS THEIR CHIEF RESTRUCTURING OFFICER PURSUANT TO 11 U.S.C. § 327(a), AND (II) GRANTING RELATED RELIEF

Carla’s Pasta, Inc. (“Carla’s Pasta”) and Suri Realty, LLC (“Suri”), debtors and debtors-

in-possession in the above-captioned chapter 11 cases (together, the “Debtors”), hereby submit

this application (this “Application”), pursuant to section 327(a) of title 11 of the United States

Code (the “Bankruptcy Code”), Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy

Procedure (the “Bankruptcy Rules”), Local Bankruptcy Rule 2014-1, for entry of an order

substantially in the form attached hereto as Exhibit A (the “Order”): (i) authorizing the Debtors to

employ and retain Phoenix Executive Services, LLC (“Phoenix”) as their financial advisors and

naming Joseph C. Nappi (“Nappi”) of Phoenix as the Debtors’ chief restructuring officer (as

defined in the Engagement Letter, the “CRO”), effective as of the Petition Date (defined herein),

and (ii) granting related relief. In support of this Application, the Debtors submit the declaration

of Joseph C. Nappi of Phoenix (the “Nappi Declaration”) annexed hereto as Exhibit B. In further

support of this Application, the Debtors state as follows:

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are Carla’s Pasta, Inc. (5847) and Suri Realty, LLC (5847). The Debtors’ corporate headquarters and service address is 50 Talbot Lane, South Windsor, Connecticut 06074.

Case 21-20111 Doc 194 Filed 03/01/21 Entered 03/01/21 16:00:38 Page 1 of 12

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JURISDICTION

1. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157(b)

and 1334. This proceeding is core pursuant to 28 U.S.C. § 157(b).

2. Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

3. The statutory predicates for the relief requested herein are Bankruptcy Code

sections 327(a), Bankruptcy Rules 2014 and 2016, and Local Bankruptcy Rule 2014-1.

PRELIMINARY STATEMENT

4. The Debtors require the services of an experienced CRO and financial advisors to

help the Debtors navigate through chapter 11 and restructure the Debtors’ business and operations.

In addition, the Debtors’ access to DIP financing is dependent upon retaining a CRO reasonably

acceptable to the Lenders. Through March 1, 2021, the Debtors engaged Novo Advisors, LLC

(“Novo”) as their financial advisors and Mr. Sandeep Gupta as their CRO. Recently, the Debtors

determined that there may exist a potential conflict of interest that may preclude Novo from being

“disinterested” pursuant to Bankruptcy Code section 328(a). While the Debtors outlined certain

actions that could be taken to maintain their existing advisors, to avoid and/or minimize any

disruptions and additional administrative expenses in the Chapter 11 Cases (defined herein), Novo

tendered their resignation, effective March 1, 2021. Immediately thereafter, the Company retained

Phoenix and Nappi as CRO, as of February 28, 2021, subject to this Court’s approval.2 Prior to

retaining Phoenix, the Company provided a list of all creditors and other parties in interest to

Phoenix to review for conflicts and connections. Phoenix has unequivocally stated, and confirmed

in the attached Nappi Declaration, that neither Phoenix nor Nappi has any institutional

2 As set forth in the Engagement Letter (defined below) Nappi’s role as CRO is further subject to the Debtors including Nappi on their existing director and officer liability insurance policy, and until such time Nappi will serve as an advisor to the Debtors.


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relationships with any material creditors in these Chapter 11 Cases and has not done work in any

matter involving either of the senior secured lenders for over eight (8) years. The Company is

confident that Phoenix and Nappi hold no interest adverse to the Company and their estates, and

are otherwise disinterested persons.

BACKGROUND

A. The Chapter 11 Case

5. On October 29, 2020, an involuntary petition for relief under chapter 7 of the

Bankruptcy Code was filed against Suri Realty, LLC. See Case No. 20-21270 at Dkt. No. 1. An

order converting the involuntary chapter 7 bankruptcy case to a voluntary case under chapter 11

of the Bankruptcy Code was entered on December 17, 2020. See Case No. 20-21270 at Dkt. No.

30 (the “Suri Chapter 11 Case”).

6. On February 8, 2021 (the “Petition Date”), Carla’s Pasta commenced this case by

filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code (“Carla’s Pasta’s

Chapter 11 Case”, and together with the Suri Chapter 11 Case, the “Chapter 11 Cases”).

7. The Debtors continue to operate and manage their businesses as debtors-in-

possession pursuant to Bankruptcy Code sections 1107(a) and 1108.

8. No trustee or examiner has been appointed in these Chapter 11 Cases.

9. On February 18, 2021, the Office of the United States Trustee appointed an Official

Committee of Unsecured Creditors in the Carla’s Pasta Chapter 11 Case (the “Committee”).

10. Additional factual background relating to the Debtors’ business and the

commencement these Chapter 11 Cases is set forth in detail in the Amended Declaration of Sandeep

Gupta, Chief Restructuring Officer, in Support of Debtors’ First Day Pleadings [see Dkt. 48] (the

“First Day Declaration”).


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RELIEF REQUESTED

11. The Debtors seek an order of this Court authorizing the employment and retention

of Phoenix as their financial advisors, and designating Joseph C. Nappi as its CRO for the Chapter

11 Cases and all related matters, effective as of February 8, 2021. Accordingly, the Debtors

respectfully request that the Court enter an order pursuant to section 327(a) of the Bankruptcy

Code and Bankruptcy Rule 2014(a) authorizing the Debtors to employ and retain Phoenix as their

financial advisors and Nappi as CRO to perform any financial advisory services that will be

necessary during the Chapter 11 Cases.

PHOENIX’S QUALIFICATIONS

12. Phoenix is a highly qualified and respected full service financial advisory firm

comprised of seasoned professionals providing financial advisory and corporate restructuring

services primarily related to companies in financial distress or undergoing a purchase/sale

transaction.

13. The Debtors have selected Phoenix to serve as their financial advisor because

Phoenix’s professionals have extensive experience and knowledge in analyzing, structuring,

negotiating and effecting restructuring and recapitalization transactions, evaluating business

operations, properties, financial conditions and prospects, developing strategies for accomplishing

proposed transactions, assessing valuations, providing expert testimony, and other support related

to reorganization and sales of assets.

14. Joseph C. Nappi, a Senior Managing Director of Phoenix, will lead all of the day-

to-day aspects of this assignment and will serve as CRO. Mr. Nappi is well suited to provide the

services required by the Debtors, and his advisory experience extends across many industries,

including food services, as referenced in the Nappi Declaration.


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15. The Debtors believe Phoenix is well suited to provide the financial advisory

services required by the Debtors. The Debtors believe that Phoenix’s general accounting and

financial advisory experience and expertise, along with its ability to provide asset evaluation and

analysis and expert testimony, if necessary, will inure to the benefit of the Debtors.

16. In addition, Phoenix and Mr. Nappi are capable and willing to undertake the

challenge of coming in to these pending Chapter 11 Cases in order to provide financial advisory

services and leadership, while reducing any disruptions inherent in a change of management and

advisory services to a debtor in bankruptcy. Mr. Nappi and his team at Phoenix are seasoned

professionals, and anticipate that the transition into their respective CRO and financial advisor

roles will be smooth under the circumstances of these Chapter 11 Cases. The Debtors believe that

Mr. Nappi and Phoenix are well qualified to represent them in these Chapter 11 Cases in an

efficient and effective manner.

SERVICES TO BE RENDERED

17. During the pendency of the Chapter 11 Cases, the Debtors contemplate that Phoenix

will provide the following services:

a. Provide the necessary oversight and assistance to the Board of Directors and the Debtors in the preparation of the various financial reporting requirements in these Chapter 11 Cases;

b. Meet regularly with the Debtors’ Board of Directors (the “Board”) and senior management (i) to receive updates on any and all action items implemented by agreement between senior management and the CRO and Phoenix personnel, (ii) to be updated on any and all recommendations of senior management and/or the CRO and Phoenix personnel as to future action items, and (iii) to address any other matters that senior management and/or the CRO believe should be brought to the attention of the Board;

c. Assist the Debtors in their communications and negotiations with Bank of Montreal and People’s United Bank (collectively the “Lenders”), as well as any other secured and unsecured creditors, including the Committee, and their related legal and financial advisor professionals;


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d. Oversee and as need be prepare and/or monitor, and modify the Debtors’ cash flow forecasts and bankruptcy related budgets on a periodic basis in order to determine and/or validate the sources and uses of cash, borrowing availability (if applicable), and the timing and magnitude of financing necessary to support the Debtors during these Chapter 11 Cases;

e. Develop and maintain a “Scorecard” to monitor and report to the various constituents the key value drivers of the cash flow;

f. Oversee the preparation, monitoring and periodically modify the Debtors’ business plan, the actual monthly and YTD GAAP results vs. the budget, monthly financial projections and normalized TTM EBITDA and projected pro forma EBITDA;

g. Provide oversight with regard to daily cash management activities, including maximizing and forecasting collections and availability, and assisting the Debtor with prioritizing disbursements within the Debtors’ availability constraints;

h. Review and approve disbursements made by the Debtors, with the exception of Phoenix’s invoices, which authority for payment will remain with either the President or the Board of Directors, however neither the CRO and Phoenix shall become signatories to any checking or disbursement account. The CRO and Phoenix personnel will also have authority to review and approve all requested borrowings under any DIP facility during the Chapter 11 Cases;

i. Work with restructuring counsel to assist management in the preparation of the post filing Monthly Operating Reports (MORs) and assist with statements and schedules that are typical in any bankruptcy proceeding;

j. Provide the necessary oversight to assure all parties that the efforts of Cowen and Company, LLC to identify and solicit interest from interested parties are sufficient to conduct a far reaching and effective auction process;

k. Provide testimony in any Chapter 11 proceeding as needed; and

l. Provide such other support as may be reasonably requested by the Debtors or Debtors’ counsel that fall within Phoenix’s expertise, experience, and capabilities that are mutually agreeable.


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DISINTERESTEDNESS OF PHOENIX

18. To the best of the Debtors’ knowledge, Phoenix and its respective employees have

no connections with creditors, parties-in-interest, their respective attorneys and accountants, or the

United States Trustee, or any persons employed by the United States Trustee, except as disclosed

in the Nappi Declaration.

19. In late February 2021, the Debtors determined it would be in their best interests to

engage Phoenix, and Nappi as CRO, to represent the Debtors as replacement financial advisors

and CRO. Given Phoenix’s financial advisory and restructuring qualifications and Phoenix’s

familiarity with industries in line with the Debtors’ business, the Debtors subsequently retained

Phoenix to assist with their restructuring efforts.

20. Accordingly, the Debtors submit that (i) Phoenix and its employees are

“disinterested persons” as that phrase is defined in Section 101(14) of the Bankruptcy Code, and

(ii) Phoenix neither represents nor holds an interest adverse to the interest of the Debtors’ estate

with respect to the matter on which Phoenix is to be employed.

21. As set forth in the Nappi Declaration, there is no agreement or understanding

between Phoenix and any other entity, other than an employee of Phoenix, for the sharing of

compensation received or to be received for services rendered in connection with these cases.

22. The Debtors believe that the retention of Phoenix is in the best interests of the

Debtors and the Debtors’ estates.

COMPENSATION OF PHOENIX

23. As compensation for services to be rendered to the Debtors, and consistent with the

compensation terms set forth in the Engagement Letter attached as Exhibit 2 to the Nappi

Declaration (the “Engagement Letter”), Phoenix intends to charge the Debtors a flat-rate monthly

fee of $100,000 for the provision of both financial advisory and CRO services (the “Monthly


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Fee”).3 The agreement to provide a flat rate was a material concession by Phoenix as the Debtors

require an advisor that will operate within the strict budget approved by the Lenders, yet anticipate

that if engaged at their hourly rates, they would likely exceed the Monthly Fee. Although Phoenix

will be paid at the Monthly Fee, they will continue to track their time and services as outlined

herein.

24. By this Application, the Debtors request that Phoenix be permitted to record its

time in quarter-hour increments, as is customary in Phoenix’s industry, and that Phoenix be

excused from the typical requirement to bill in increments of one-tenth of an hour. In addition,

Phoenix will bill for all out of pocket expenses reasonably incurred by Phoenix in connection with

the matters contemplated by this Application. Travel time, normally billed at 50%, has been

waived as an additional courtesy to the Debtors. As compensation for the administrative and

support time and expenses typically required (e.g. computer, e-mail, administrative staff time, etc.)

Phoenix will bill $300 each month, which is in addition to the Monthly Fee .

25. Phoenix intends to apply for compensation for professional services rendered and

reimbursement of its actual expenses incurred in connection with these Chapter 11 Cases, subject

to the Court’s approval and in compliance with applicable provisions of the Bankruptcy Code, the

Bankruptcy Rules, the Local Bankruptcy Rules, any interim professional compensation order that

may be entered by this Court, and any other applicable procedures and orders established by this

Court, and consistent with the proposed compensation set forth in the Engagement Letter. Pursuant

to the Engagement Letter, upon Court approval of this Application, the Debtors will forward

$50,000 to Phoenix to be held as a retainer. Unless otherwise agreed by the parties, this retainer

will not to be applied or credited to amounts due from the Debtors but will be returned to the

3 Phoenix’s customary hourly rates range from $150 to $795 per hour.


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Debtors once all amounts due to Phoenix are paid in full subject to a holdback to fund any

indemnification claims.

26. The Debtors believe the overall compensation structure set forth in the Engagement

Letter is comparable to those generally charged by corporate financial consulting firms of similar

stature to Phoenix for comparable engagements, both in and out of bankruptcy proceedings.

27. Additionally, as set forth in the Engagement Letter, Phoenix seeks a limited

indemnity from the Debtors for any claims against Phoenix relating to the services it provides to

the Debtors in these Chapter 11 Cases; provided the Debtors shall not be obligated to indemnify

or hold Phoenix for any gross negligence or willful misconduct by Phoenix. The Debtors believe

such limited indemnities are quite common and customary for financial advisory firms and

requests that the Court approve such terms as part of Phoenix’s engagement.

28. Lastly, as set forth in the Engagement Letter, either party may immediately

terminate the engagement with or without cause upon delivery of written notice.

BASIS FOR RELIEF

29. The Debtors submit that the retention of Phoenix under the terms described herein

is appropriate under sections 327(a), 328, and 1107 of the Bankruptcy Code.

30. Section 327(a) empowers a debtor, with the Court’s approval, to employ

professionals “that do not hold or represent an interest adverse to the estate, and that are

disinterested persons, to represent or assist the trustee in carrying out the trustee’s duties under this

title.” 11 U.S.C. § 327(a).

31. Section 101(14) of the Bankruptcy Code defines “disinterested person” as a person

that:

(A) Is not a creditor, an equity security holder, or an insider;


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(B) Is not and was not, within two years before the date of the filing of the petition, a director, officer, or employee of the debtor; and

(C) Does not have an interest materially adverse to the interests of the estate or of any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the debtor, or for any other reason.

11 U.S.C. § 101(14)(A)-(C).

32. Section 1107(b) of the Bankruptcy Code provides that “a person is not disqualified

for employment under section 327 of this title by a debtor in possession solely because of such

person’s employment by or representation of the debtor before the commencement of the case.”

11 U.S.C. § 1107(b).

33. To the best of the Debtors’ knowledge, the partners and associates of Phoenix do

not have any connection with the Debtors, their creditors, or any other party in interest, or their

attorneys, except to the extent set forth in the Nappi Declaration. Accordingly, the Debtors believe

Phoenix is “disinterested” and does not hold or represent an interest adverse to the Debtors’ estates.

34. Section 328(a) of the Bankruptcy Code authorizes the employment of a professional

person “on any reasonable terms and conditions of employment, including on a retainer . . .” 11

U.S.C. § 328(a).

35. The Debtors believe the terms and conditions of the Engagement Letter are fair,

reasonable and market-based terms that should be approved pursuant to section 328(a) of the

Bankruptcy Code, including the monthly flat fee rate structure that Phoenix has agreed upon.

36. Subject to this Court’s approval and in accordance with section 328 of the

Bankruptcy Code, the applicable Bankruptcy Rules, the Local Rules, any interim professional

compensation order and any other procedures that may be entered by this Court, the Debtors

request that Phoenix receive reimbursement of actual and necessary expenses incurred in

connection with their representation of the Debtors in this case.

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37. Lastly, the Engagement Letter provides that Phoenix personnel will be entitled to

the benefit of the most favorable indemnities provided by the Debtors to their officers and

directors. In addition, the Engagement Letter provides that the Debtors agree to indemnify and

release Phoenix from any claims “arising under or in any way related to the [Engagement Letter].”

Ex. 2 at p. 6. The Engagement Letter further provides that “[t]he foregoing release and indemnity

shall not apply if it is judicially determined that such claims, damages, liabilities and expenses

resulted from the willful misconduct or gross negligence of the [i]ndemnified [p]arty.” Id. Courts

have approved indemnification provisions for financial advisors similar to those contained in the

Engagement Letter. See United Artists Theatre Co. v. Walton, 315 F.3d 217, 225 (3d Cir. 2003)

(holding “agreements to indemnify financial advisors for their negligence [as opposed gross

negligence or willful misconduct] are reasonable under § 328(a) of the Bankruptcy Code.”).

38. The Debtors anticipate that it will require Phoenix to render extensive financial

advisory services, the cost of which may not be estimable, which is why the parties agreed to the

Monthly Fee structure. Subject to this Court’s approval, and in accordance with sections 330 and

331 of the Bankruptcy Code, the applicable Bankruptcy Rules, the Local Rules, and other

procedures that may be fixed by the Court, the Debtors request that Phoenix be compensated the

Monthly Fee (i.e., $100,000), keep track of its time for services rendered in quarter-hour

increments, and that Phoenix receive reimbursement of actual and necessary expenses incurred in

connection with its representation of the Debtors in this case.

NOTICE

39. Notice of this Application will be provided to (a) the U.S. Trustee; (b) counsel for

the Committee; (c) the Internal Revenue Service; (d) the United States Attorney’s Office for the

District of Connecticut; (e) counsel for the Lenders; and (f) any other party that has requested


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service pursuant to Bankruptcy Rule 2002 as of the time of service (collectively, the “Notice

Parties”). The Debtors believe that no further notice is required under the circumstances.

NO PRIOR REQUEST

40. No previous request for the relief sought herein has been made by the Debtors in

this or in any other court.

WHEREFORE, the Debtors respectfully requests entry of the Proposed Order granting the

relief requested herein and such other and further relief as the Court may deem just and proper.

Dated: March 1, 2021 Carla’s Pasta, Inc. and Suri Realty, LLC,

/s/ Carla Squatrito Carla Squatrito, Chief Executive Officer


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Exhibit A

Proposed Order

Case 21-20111 Doc 194-1 Filed 03/01/21 Entered 03/01/21 16:00:38 Page 1 of5

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ORDER AUTHORIZING THE DEBTORS (I) TO EMPLOY

AND RETAIN PHOENIX EXECUTIVE SERVICES, LLC AS THEIR FINANCIAL ADVISORS AND JOSEPH C. NAPPI AS CHIEF RESTRUCTURING OFFICER PURSUANT TO 11 U.S.C. §§ 327(a), AND (II) GRANTING RELATED RELIEF

Upon consideration of the Debtors’ Application for Entry of an Order Authorizing the

Debtors (I) To Employ and Retain Phoenix Executive Services, LLC as their Financial Advisors

and Joseph C. Nappi as Chief Restructuring Advisor Pursuant to 11 U.S.C. §§ 327(a), and

(II) Granting Related Relief (the “Application”)2 and the Nappi Declaration and any response(s)

to the Application; and due and proper notice of the Application having been given; and it

appearing that no other or further notice of the Application is required; and the Court having

jurisdiction to consider the Application in accordance with 28 U.S.C. §§ 157 and 1334; and

consideration of the Application and the requested relief being a core proceeding pursuant to 28

U.S.C. § 157(b)(2); and venue being proper before this Court pursuant to 28 U.S.C. §§ 1408 and

1409; and the relief requested in the Application and provided for herein being in the best interest

of the Debtors, their estates, and creditors; and after due deliberation and sufficient cause appearing


2 Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Application.


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therefor, and due and proper notice of the Application having been provided to the Notice Parties;

and it appearing that no other or further notice need be provided; and the Court having held one or

more hearings to consider the relief requested in the Application and all of the proceedings had

before this Court; and all objections to the Application having been withdrawn, resolved, or

overruled; and the Court having determined that the legal and factual bases set forth in the

Application and the Nappi Declaration establish just cause for the relief granted herein; and after

due deliberation and sufficient cause appearing therefor

IT IS HEREBY ORDERED THAT:

1. The Application is GRANTED as provided herein.

2. Pursuant to sections 327(a), 328, and 1107(b) of the Bankruptcy Code, the Debtors

are hereby authorized to retain Phoenix as their financial advisors and Joseph C. Nappi as their

chief restructuring officer (as defined in the Engagement Letter, the “CRO”) in the Chapter 11

Cases, and Phoenix is authorized to perform any and all financial advisory services for the Debtors

that are necessary and appropriate in connection with these cases, including those services

described in the Application and the Nappi Declaration.

3. Phoenix does not hold or represent any interest adverse to the Debtors’ estates with

respect to the matters upon which it is to be employed and is a “disinterested person” as that term

is defined in section 101(14) of the Bankruptcy Code.

4. Phoenix shall be compensated in accordance with the terms set forth in the

Application and in the Engagement Letter, including the monthly $100,000 flat fee (and pro rated

for any partial monthly period) for the combined provision of financial advisory and CRO services.

Phoenix will file interim and final fee applications for allowance of its compensation and

reasonable and necessary expenses and shall be subject to sections 330 and 331 of the Bankruptcy

Code, the Bankruptcy Rules, and the Local Bankruptcy Rules, and such other procedures as may


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be fixed by order of this Court, to the extent such compensation and expenses are to be paid from

the Debtors’ estates. The Debtors are authorized to pay to Phoenix the $50,000 retainer provided

for in the Engagement Letter.

5. In light of services to be provided by Phoenix and the structure of Phoenix’s

compensation pursuant to the Engagement Letter, Phoenix and its professionals shall be excused

from maintaining time records as set forth in the Bankruptcy Rules, the Local Rules, and the Fee

Guidelines promulgated by the Office of the United States Trustee for Region 2 in connection with

the services to be rendered pursuant to the Engagement Letter; that Phoenix shall instead present

to this Court reasonably detailed time records in one-quarter (0.25) hour increments containing

descriptions of those services provided on behalf of the Debtors, the approximate time expended

in providing those services, and the identity of the individuals providing those services.

6. The indemnification provisions in the Engagement Letter are approved; provided,

however, that all requests by Phoenix for the payment of indemnification as set forth in the

Engagement Letter shall be made by means of an application to this Court and shall be subject to

review by this Court to ensure that payment of such indemnity conforms to the terms of the

Engagement Letter and is reasonable under the circumstances of the litigation or settlement in

respect of which indemnity is sought; provided, further, however, that in no event shall Phoenix

be indemnified in the case of its own bad faith, self-dealing, breach of fiduciary duty (if any), gross

negligence, or willful misconduct.

7. Phoenix shall provide written notice to the Debtors and the United States Trustee

prior to any increases in any of Phoenix’s rates for services provided to the Debtors.

8. The Debtors are authorized and empowered to take all actions necessary to

implement the relief granted in this Order in accordance with the Application.


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9. The terms and conditions of this Order shall be immediately effective and

enforceable upon its entry.

10. This Court shall retain jurisdiction with respect to all matters arising from or related

to the implementation or interpretation of this Order.

Dated: _______________, 2021

______________________________________ JAMES J. TANCREDI

UNITED STATES BANKRUPTCY JUDGE


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Exhibit B

Nappi Declaration


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DECLARATION OF JOSEPH C. NAPPI

IN SUPPORT OF DEBTORS’ APPLICATION FOR ENTRY OF AN ORDER AUTHORIZING THE

DEBTORS (I) TO EMPLOY AND RETAIN PHOENIX EXECUTIVE SERVICES, LLC AS THEIR FINANCIAL ADVISORS AND JOSEPH C.

NAPPI AS CHIEF RESTRUCTURING OFFICER PURSUANT TO 11 U.S.C. § 327(a), AND (II) GRANTING RELATED RELIEF

Pursuant to 28 U.S.C. § 1746, I, Joseph C. Nappi, hereby declare as follows under the

penalty of perjury to the best of my knowledge, information, and belief:

1. I am a Senior Managing Director of Phoenix Executive Services, LLC (“Phoenix”).

I am authorized to make this declaration on Phoenix’s behalf (the “Declaration”). This Declaration

is submitted pursuant to Rule 2014(a) of the Federal Rules of Bankruptcy Procedure (the

“Bankruptcy Rules”) and Local Bankruptcy Rule 2014-1 in support of the application of the

Debtors in the above-captioned chapter 11 cases (the “Chapter 11 Cases”) for an order pursuant to

section 327(a) of title 11 of the United States Code (the “Bankruptcy Code”) authorizing the

employment and retention of Phoenix as their financial advisors and naming Joseph C. Nappi



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(“Nappi”) of Phoenix as the chief restructuring advisor (as defined in the Engagement Letter, the

“CRO”) for the Debtors (the “Application”).2

SERVICES TO BE RENDERED

2. At the request of the Debtors, Phoenix will render general financial advisory and

restructuring services to the Debtors as needed throughout the course of the Chapter 11 Cases. In

addition, and subject to approval of the Application, I will serve as the Debtors’ CRO. In that role,

I will advise and assist the Debtors in a variety of restructuring efforts.

3. During these Chapter 11 Cases, it is anticipated that the financial advisory services

Phoenix will render may include, but shall not be limited to, the following:

a. Provide the necessary oversight and assistance to the Board of Directors and the Debtors in the preparation of the various financial reporting requirements in these Chapter 11 Cases;

b. Meet regularly with the Debtors’ Board of Directors (the “Board”) and senior management (i) to receive updates on any and all action items implemented by agreement between senior management and the CRO and Phoenix personnel, (ii) to be updated on any and all recommendations of senior management and/or the CRO and Phoenix personnel as to future action items, and (iii) to address any other matters that senior management and/or the CRO believe should be brought to the attention of the Board;

c. Assist the Debtors in their communications and negotiations with Bank of Montreal and People’s United Bank (collectively the “Lenders”), as well as any other secured and unsecured creditors, including the Committee, and their related legal and financial advisor professionals;

d. Oversee and as need be prepare and/or monitor, and modify the Debtors’ cash flow forecasts and bankruptcy related budgets on a periodic basis in order to determine and/or validate the sources and uses of cash, borrowing availability (if applicable), and the timing and magnitude of financing necessary to support the Debtors during these Chapter 11 Cases;

2 Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Application.


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e. Develop and maintain a “Scorecard” to monitor and report to the various constituents the key value drivers of the cash flow;

f. Oversee the preparation, monitoring and periodically modify the Debtors’ business plan, the actual monthly and YTD GAAP results vs. the budget, monthly financial projections and normalized TTM EBITDA and projected pro forma EBITDA;

g. Provide oversight with regard to daily cash management activities, including maximizing and forecasting collections and availability, and assisting the Debtor with prioritizing disbursements within the Debtors’ availability constraints;

h. Review and approve disbursements made by the Debtors, with the exception of Phoenix’s invoices, which authority for payment will remain with either the President or the Board of Directors, however neither the CRO and Phoenix shall become signatories to any checking or disbursement account. The CRO and Phoenix personnel will also have authority to review and approve all requested borrowings under any DIP facility during the Chapter 11 Cases;

i. Work with restructuring counsel to assist management in the preparation of the post filing Monthly Operating Reports (MORs) and assist with statements and schedules that are typical in any bankruptcy proceeding;

j. Provide the necessary oversight to assure all parties that the efforts of Cowen and Company, LLC to identify and solicit interest from interested parties are sufficient to conduct a far reaching and effective auction process;

k. Provide testimony in any Chapter 11 proceeding as needed; and

l. Provide such other support as may be reasonably requested by the Debtors or Debtors’ counsel that fall within Phoenix’s expertise, experience, and capabilities that are mutually agreeable.

3. Phoenix is prepared, if necessary, to work closely with any other professional

retained by the Debtors to ensure there is no duplication of effort or cost.

DISINTERESTEDNESS OF PROFESSIONALS

4. Based on Phoenix’s conflicts search conducted to date and described herein, to the

best of my knowledge, neither I, Phoenix, nor any member or associate thereof, insofar as I have

been able to ascertain, has any connection with, or holds an interest adverse to, the Debtors, its


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creditors or any other parties in interest, or their respective attorneys and accountants, the United

States Trustee or any person employed in the office of the United States Trustee, except as

disclosed or as otherwise described immediately below. Moreover, neither Phoenix nor myself

have any institutional relationships with any material creditors in these Chapter 11 Cases and have

not done work in any matter involving either of the senior secured Lenders for over eight (8) years.

5. There is no agreement or understanding between Phoenix and any other entity,

other than an employee of Phoenix, for the sharing of compensation received or to be received for

services rendered in connection with these cases. Accordingly, Phoenix submits that (i) Phoenix

and its employees are “disinterested persons” as that phrase is defined in Section 101(14) of the

Bankruptcy Code, as modified by section 1107(b) of the Bankruptcy Code, and (ii) Phoenix

neither represents nor holds an interest adverse to the interest of the Debtors’ estate with respect

to the matter on which Phoenix is to be employed, in that Phoenix, its members and associates:

A. Is not a creditor, an equity security holder, or an insider;

B. Is not and was not, within two years before the date of the filing of the petition, a director, officer, or employee of the debtors, except to the extent that I have served as the Debtors’ chief restructuring officer as an independent contractor, subject to the terms and conditions of the Engagement Letter; and

C. Does not have an interest materially adverse to the interests of the estates or of any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the debtors, or for any other reason.

6. I am not related, and to the best of my knowledge, no member or associate at

Phoenix is related, to any United States Bankruptcy Judge in this District or to the United States

Trustee for this District or any employee thereof.


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7. As of the Petition Date and the date of the Application, the Debtors do not currently

owe Phoenix any amounts for any services rendered prior to such dates.3 In the one-year period

prior to the Petition Date, Phoenix did not perform any services for the Debtors.

8. Phoenix and certain of its members and associates may have in the past represented,

may currently represent, and may in the future represent, parties in interest, including creditors of

the Debtors in connection with matters unrelated to the Debtors and the Chapter 11 Cases. Phoenix

has conducted a search of its electronic database utilizing the company’s e-mail conflict reporting

system (the “Conflict Check System”) for its connection to the entities listed on the Exhibit 1

attached to this Declaration. The information listed on Schedule 1 may be updated or may change

during the pendency of these cases. I will update this Declaration when necessary and when I

become aware of additional material information.

9. Except as disclosed herein, Phoenix has not and will not advise any party identified

on Schedule 1 in any matters related to these Chapter 11 Cases. Moreover, Phoenix presently or

in the past has served as a professional person in other matters, wholly unrelated to the Debtors or

these Chapter 11 Cases, in which other attorneys, accountants and other professionals of the

Debtors, their creditors, or other parties in interest also may have served or serve as professional

persons.

10. None of the representations described above are materially adverse to the interests

of the Debtors’ estates or any class of creditors or equity security holders. Moreover, pursuant to

section 327(c) of the Bankruptcy Code, Phoenix is not disqualified from acting as financial

3 Upon application and subject to approval of this Bankruptcy Court, it is anticipated that any amounts due Phoenix from either Debtor during the Chapter 11 Cases will be paid by the cash of Carla’s Pasta or the proceeds of the Debtors’ assets.


6

advisors to the Debtors merely because it represents creditors, equity holders and/or other parties

in interest in unrelated matters.

11. Phoenix will periodically review its files during the pendency of the Chapter 11

Cases to ensure that no conflicts or other disqualifying circumstances exist or arise. I shall amend

this statement immediately upon my learning that (a) any of the representations herein are incorrect

or (b) there is any change of circumstances relating thereto. If any new, relevant facts or

relationships are discovered or arise, Phoenix will use reasonable efforts to identify such further

developments, and I will promptly file a supplement to this Declaration, as Bankruptcy Rule

2014(a) requires.

PROFESSIONAL COMPENSATION

12. Prior to the Petition Date, Phoenix has not received any fees from Carla’s Pasta.

As of the Petition Date, the Debtors do not owe Phoenix any amounts for services rendered before

such date. Payment of the $50,000 retainer contemplated in the Engagement Letter is expressly

conditioned upon Court approval of the Application.

13. Phoenix intends to apply for compensation for professional services rendered in

connection with the Chapter 11 Cases subject to approval of this Court, and consistent with the

proposed Monthly Fee set forth in the Engagement Letter attached hereto as Exhibit 2, and in

compliance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local

Bankruptcy Rules, the United States Trustee Guidelines for Reviewing Applications for

Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. § 330, and any additional

procedures that may be established by the Court. Pursuant to the Engagement Letter, Phoenix will

charge the Monthly Fee, consisting of a monthly flat-rate of $100,000 (pro rated for any partial

month), plus reimbursement of actual, necessary expenses and other charges that Phoenix incurs;


7

provided, however, that fees and expenses for both Debtors may be funded by Debtor Carla’s

Pasta. The Phoenix members and associates who are likely to represent the Debtors in these

Chapter 11 Cases have current hourly rates ranging between $150 and $795, but as mentioned

Phoenix will be charging the Debtors the Monthly Fee. In addition, pursuant to the Engagement

Letter, the Debtors are to forward $50,000 to Phoenix to be held as a retainer. Unless otherwise

agreed by the parties, this retainer is not to be applied or credited to amounts due from the Debtors

but will be returned to the Debtors once all amounts due hereunder are paid in full subject to a

holdback to fund any indemnification claims.

14. Subject to this Court’s approval, Phoenix will charge the Debtors for expenses in a

manner and at rates consistent with charges made generally to Phoenix’s other clients, including a

$300 monthly fee for the administrative and support time and expenses typically required (e.g.

computer, e-mail, administrative staff time, etc.) for Phoenix’s services.

15. Additionally, as set forth in the Engagement Letter and referenced in the

Application, Phoenix seeks a limited indemnity from the Debtors for any claims against Phoenix

relating to the services it provides to the Debtors in these Chapter 11 Cases; provided the Debtors

shall not be obligated to indemnify or hold Phoenix for any gross negligence or willful misconduct

by Phoenix. Such limited indemnities are quite common and customary for financial advisory

firms.

16. No promises have been received by Phoenix nor by any partner, counsel or

associate thereof as to compensation in connection with these cases other than in accordance with

the provisions of the Bankruptcy Code. The firm has no agreement with any other entity to share

with such entity any compensation received by Phoenix in connection with the Chapter 11 Cases.


8

17. Phoenix further states pursuant to Bankruptcy Rule 2016(b) that it has not shared,

nor agreed to share (a) any compensation it has received or may receive with another party or

person, other than with the members and associates of Phoenix, or (b) any compensation another

person or party has received or may receive.

Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true

and correct to the best of my knowledge.

Date: March 1, 2021 /s/ Joseph C. Nappi Joseph C. Nappi, Managing Partner Phoenix Executive Services, LLC


Exhibit 1 to Nappi Declaration


Debtors and Affiliates:

Carla’s Pasta, Inc. Suri Realty LLC

Secured Creditors and Asserted Secured Creditors, and Known Counsel to Creditors

People’s United Bank, NA Cohn, Birnbaum & Shea, P.C. (Counsel to People’s United Bank, NA) BMO Harris Bank, N.A. Chapman and Cutler LLP (Counsel to BMO Harris Bank, N.A.) The Dennis Engineering Group Lewis Brisbois (Counsel to Dennis Engineering Group) Town of South Windsor, Connecticut Elm Electrical, Inc. (asserted secured creditor)

Shatz, Schwartz and Fentin (Counsel to Elm Electrical, Inc.)

Professional Advisors

Phoenix Advisors Cowen and Company Bankruptcy Management Solutions, Inc. (trade name “Stretto”) Court Clerk and US Trustee’s Office Staff

Kim L. McCabe Holley Claiborn Joseph H. Flamini William Harrington Erin Hogan Steven Mackey Frank Marino Kari Mitchell Jennifer J. Morey Nicole Neely Sharon Warner

Pietro Cicolini, Clerk of the United States Bankruptcy Court for the District of Connecticut

Unsecured Creditors and Other Parties in Interest

3M

A. Fiorillo and Co., Inc.

Abel Womack Inc. A-C Motor Express LLC

Acosta Sales & Marketing

Acosta Sales & Marketing -FL

Acosta Sales & Marketing -GA

Acosta Sales & Marketing- IA

Acosta Sales & Marketing_IND

Acosta Sales & Marketing-IL


Acosta Sales & Marketing-KEN

Acosta Sales & Marketing-WIS

Acosta Sales & Mktg - Dakota

Acosta, Inc. - Kansas

Acosta, Inc. - MIS

Acosta, Inc. - Missouri

Acosta, Inc. - Nebraska

ADM/Eatem Foods

Advantage Solutions/New Engl

Advantage Solutions/NY Metro

Aercon corp.

Aerotek, Inc.

Affinity Sales Group

AFS Technologies, Inc.

Agility Logistics Corp

AirGas USA LLC

Albertsons Companies

Allegiance Retail Services,

Alliant Food Safety Labs LLC

All-Phase Electric Supply Co

Ambriola Company Inc.

American Key Food Products

American Metallizing & Mach

American Refrigeration Co.

AmeriCold Logistics, LLC

Aramark Food & Support Service

Arbon Equipment Corp

Ardent Mills, LLC

Arrive Logistics

Asiago Foods

AT&T

Barry Group Inc

Bay State Bearing Service

Bay Valley Foods, LLC

Ben E Keith Albuquerque

Ben E Keith Amarillo

Ben E Keith Arkansas

Ben E Keith Corp

Ben E Keith San Antonio

Ben E. Keith Ft Worth

Ben E. Keith Houston

Big Y Foods, Inc.

Blount Seafood

Blue Earth Compost, Inc.

Blum Shapiro

Bonduelle USA Inc

Bozzuto's

Bunzl Processor Distribution

Burke Corporation

Burris Logistics

C.H Robinson Worldwide, Inc

Capital Ingredients Corp

Catania Oils

CBS

Chase Card Services

Cheese Merchants of America

Chep USA

City Line Distributors

CMA/Brand Presence and Desig

Concentra

Connecticut Valley Rubber

Controlled Environment Struc

Creative Financial Staffing

Cremosa Food Co. LLC

Daniels Equipment Co Inc

Datasite LLC

Dave's Marketplace

Deb El Food Products

Decian, Inc.

Dempsey (US) Corporation

Deville Technologies

Dittman & Greer, Inc.

Diversified Avocado Products

Doerle Food Services, LLC

Domino Amjet Inc.

Dongsheng Foods USA Inc

Doosan Energy Solutions Amer

Driscol Foods

Dubaldo Security Systems

Dumouchel Paper Company


Eagle Consulting & Dev. Corp

Eagle Leasing Company

Eastern Industrial Auto.

Echo Global Logistics Inc

Ecolab Inc

Edict Systems, Inc.

EGGB

EiserLoh Company

Electrical Systems Inc.

Elite & Spice

Employment Solutions

Endress+Hauser, Inc.

Environmental Services, Inc.

Erb Group

Essex Food Ingredients

Eversource - Electricity

Eversource - Gas

Fallas Automation

Farnell Packaging, Ltd.

Favorite Foods

Federal Express

Federated Foodservice Inc.

First Choice Ingredients

Fluid Dynamics

Food Sales East (FSE)

Frontier Communications

Frosty Acres

FSA Billings

FSA Boise

FSA Everett

FSA Fargo

FSA Seattle

FSA Spokane

FSA Woodburn

Fuss & O'Neill, Inc.

Galler Wholesale

Geissler's Supermarkets

Glanbia Nutritionals, Inc.

Global Industrial

Globele Energy, LLC

Golbon

Grainger

Great Lakes Cheese Co., Inc.

Group Purchasing Alliance

Hamilton Connections, Inc.

Hampton & Associates

Hanks Brokerage, Inc.

Heat and Control Inc.

HESCO

Hettrick, Cyr & Assoc., Inc.

Hillyard

Hinckley, Allen & Snyder LLP

HJ Norris, LLC (asserted creditor)

Hoosier Logistics Inc.

HPC Foodservice

IFC Solutions Inc.

IFM Efector

Independent Marketing All.

Industrial Handling Systems,

InterSource Inc.

Interstate Logistics Systems

Interstate Warehousing

iTradeNetwork, Inc. Jamestown Technologies

Jear Logistics, LLC

Judge Inc.

Kaman Industrial Technology

Karen Rossetti

Karn Meats

Kasheta Farms, Inc.

Keeney Rigging

KerrySelect

Key Foods King Kullen Grocery Co., Inc

Kustom Paks Food , Ltd

Lactalis Culinary

Lakeland Brokerage

Lakeland Marketing

Larry Aleksandrich

Latina Food Service


Legacy Fire Protection, Inc.

Lentz Milling Company

Linde Inc

Lineage Logistics, PFS Chica

Lyman Sheet Metal Co.

Maine Oxy

Manchester Wine & Liquors LL

Mandlik & Rhodes

Map Foodservice

Markem Imaje Corporation

Martin Preferred Foods

Marzetti Frozen Pasta, Inc.

Mason Packaging Corp.

Massman Automation Designs

Maybury Associates, Inc.

MBC Food Machinery Corp

McCormick & Co Inc

McMaster-Carr

Mennekes Electrical Products

Metropolitan District, The

Mettler Toledo Inc

Mettler Toledo-Safeline

Micreos Food Safety B.V.

Miura America Co., Ltd

NALCO Water

Nasoya Foods USA LLC

Necoding, Inc.

Nelson Jameson, Inc

Neogen Corporation

Nestle Quality Assurance

Nestle USA Inc.

New England Drives & Control

New Wave Industries, Inc.

Newly Weds Foods, Inc.

Nicholas & Company

Northeast Marketing Co.

Northern Food I/E Inc.

PHOENIX ADVISORS

Ohio Transmission Corporatio

Ornua Ingredients North Amer

Packers Sanitation Services

Palnet USA

Pasta Technologies

Pavan S.p.A.

Pearse Bertram LLC

Pearson Packaging System

PFG Broadline

PFG Springfield

Phillips Gourmet Inc.

Praxair

Premier Healthcare Alliance

Providence Specialty Product

Provimi Foods Inc

Quadient Leasing

Radwell International, Inc.

Raymond Leasing Corporation

Red River Foods, Inc.

Reiser, Robert & Co., Inc.

Religious & Kitchen Superv

Renaissance Builders, Inc. (asserted Suri creditor) Doherty Wallace Pillsbury Murphy P.C. (Counsel to Renaissance Builders, Inc.) Renzi

REV Foodservice ULC

RLS Distribution

Roland Foods, LLC

Sardilli Produce & Dairy Co

Schindler Elevator Corp.

Sensient Colors LLC

Silva International, Inc.

Smartsheet Inc.

Sogelco International Inc.

South Windsor, Town of

Specialty Food Sales

Specialty Packaging, LLC

Sprague Operating Resources

Stahlbush Island Farms

Staples Advantage

Strategic Information Group


Superior Natural Foods

System Logistics Corporation

T Fresh Foods

Tasty Mix Products

The Connecticut Light and Power Company The CORE Group Idaho

The Core Group of Arizona

The Core Group-Colorado

The Core Group-Montana

The Core Group-N. California

The Core Group-Oregon

The Core Group-S. California

The Core Group-UTAH

The Core Group-Washington

The Spicemill

Total Communications

Total Quality Logistics

Triangle Package Machinery

Trinity Logistics, Inc,

Turri's Italian Foods, Inc.

U.S. Dept of Agriculture

U.S. Durum Milling

Uline

Unipro Foodservice

Unipro Foodservice Inc.

United Rentals

Univar USA

Universal Pure Holdings LLC

Updike, Kelly & Spellacy, PC

USA Hauling & Recycling

USDA, AMS, DAIRY

USDA, AMS, Poultry

Van Drunen Farms

Verizon Wireless

Wade's Dairy

Waltham Services, Inc.

Waypoint

Wells Fargo Equipment Finance

WSHM-CBS3

Yankee Gas Services Company

Zeisler & Zeisler PC

Insurers and Brokers

ARC Excess & Surplus of New England, LLC

Aspen American Insurance Company

Chubb Insurance

Smith Brothers Insurance LLC


Exhibit 2 to Nappi Declaration

Engagement Letter





4

provide such report together with the total amount of fees and expenses to be paid. Our monthly invoice should be paid via ACH or wire transfer.

Notwithstanding anything herein to the contrary, failure of the Company to promptly pay

the Monthly Fee or to pay for reimbursement of expenses shall constitute justification for Phoenix to terminate this Agreement upon five days’ written notice. ACH & Wire transfer instructions are as follows:

Truist Bank 150 S. Warner Road, King of Prussia, PA 19406 Telephone: 800-222-3321 Phoenix Executive Services, LLC Account 7432 ABA 9123

Expenses

The Company shall pay all expenses incurred in connection with services related to the engagement (e.g. actual out-of-pocket expenses such as travel and meals incurred in connection with the engagement). In addition, as compensation for the administrative and support time and expenses typically required (e.g. computer, e-mail, administrative staff time, etc.) we will bill a monthly fee of $300. The weekly invoices referred to above will include such reimbursable expenses. Project Deposit

Upon Bankruptcy Court approval, the Company shall pay to PES Fifty Thousand Dollars ($50,000) via ACH or wire transfer as a retainer (the “Deposit”). This Deposit is not to be applied or credited to amounts due from the Company but will be returned to the Company once all amounts due hereunder are paid in full subject to a holdback to fund any indemnification claims. PES reserves the right to require that the Deposit be increased on a periodic basis to match actual levels of work activity. The Company hereby grants a security interest in the Deposit to PES to secure payment of all amounts due or which become due hereunder and expressly authorizes PES to pay itself any amounts past due from the Deposit. The Company acknowledges and agrees that this security interest is perfected by virtue of PES’s possession of the Deposit.

PES is prepared to begin this Project immediately upon receipt of a signed copy of this letter and a signed copy of our standard indemnification agreement (which is attached hereto). By signing below, the Company also acknowledges that PES’s Standard Terms, Conditions and Disclosure Agreement (which is attached hereto) is hereby incorporated by reference and made part of this Agreement.

This letter contains the entire Agreement among the parties relating to the subject herein.

Any modification or other changes to the terms contained herein or therein must be in writing and signed by the parties hereto to be enforceable.















Documents

UNITED STATES BANKRUPTCY COURT DISTRICT OF ... - Stretto