debtors’ (i) memorandum of law in support of …

IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

§ In re § Chapter 11 § NPC INTERNATIONAL, INC., § Case No. 20–33353 (DRJ) et al., § Debtors.1 § (Jointly Administered) §

DEBTORS’ (I) MEMORANDUM OF LAW IN SUPPORT OF CONFIRMATION OF THE SECOND

AMENDED JOINT CHAPTER 11 PLAN OF NPC INTERNATIONAL, INC. AND ITS AFFILIATED DEBTORS AND (II) OMNIBUS REPLY TO OBJECTIONS THERETO

WEIL, GOTSHAL & MANGES LLP Alfredo R. Pérez 700 Louisiana Street, Suite 1700 Houston, Texas 77002 Telephone: (713) 546-5000 Facsimile: (713) 224-9511

WEIL, GOTSHAL & MANGES LLP Ray C. Schrock, P.C. (admitted pro hac vice) Kevin Bostel (admitted pro hac vice) Natasha Hwangpo (admitted pro hac vice) 767 Fifth Avenue New York, New York 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007

Attorneys for Debtors and Debtors in Possession

January 27, 2021 Houston, Texas

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification

number, are NPC International, Inc. (7298); NPC Restaurant Holdings I LLC (0595); NPC Restaurant Holdings II LLC (0595); NPC Holdings, Inc. (6451); NPC International Holdings, LLC (8234); NPC Restaurant Holdings, LLC (9045); NPC Operating Company B, Inc. (6498); and NPC Quality Burgers, Inc. (6457). The Debtors’ corporate headquarters and service address is 4200 W. 115th Street, Suite 200, Leawood, KS 66211.

Case 20-33353 Document 1487 Filed in TXSB on 01/27/21 of 125

i

TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT .....................................................................................................1

BACKGROUND AND RELEVANT FACTS ................................................................................5

A. Entry into the RSA and RSA Amendment No. 1.....................................................6

B. Approval of the Disclosure Statement .....................................................................7

C. Solicitation of Votes on the Plan .............................................................................7

D. Voting Results ..........................................................................................................9

E. Sale Process ...........................................................................................................10

F. Driver Claimants Settlement ..................................................................................13

G. Standing & UCC Settlement ..................................................................................16

ARGUMENT .................................................................................................................................17

I. The Plan Satisfies Section 1129 of the Bankruptcy Code and Should be Approved ........17

A. Section 1129(a)(1): The Plan Complies with All Applicable Provisions of the Bankruptcy Code..............................................................................................18

a. Section 1122: The Plan’s Classification of Claims and Interests is Proper .........................................................................................................18

b. Section 1123(a): The Plan’s Content is Appropriate .................................20

c. Section 1123(b): The Plan’s Content is Permitted .....................................22

Settlements and Compromises Embodied in the Plan are Integral Components of the Plan and Should be Approved............................................................................23

a. Driver Claimants Settlement ..............................................................................23

A Class Should be Approved for Settlement Purposes Only ...........................24

Approval of Settlement is Warranted under Bankruptcy Rule 9019 ...............26

Settlement is Favorable to the Debtors Under the Circumstances of these Chapter 11 Cases ....................................................................................27

Settlement is Favorable to the Debtors Given the Complexity and Likely Duration of the Litigation .....................................................................29

Other Factors Bearing on the Wisdom of the Compromise Support Approving the Settlement ................................................................................30

The Notice to the Driver Claimants of the Settlement is Appropriate Under the Circumstances Here ........................................................................33

b. Second Lien Settlement .....................................................................................33

c. UCC Settlement .................................................................................................35


ii

The Plan’s Releases, Injunction, and Exculpation Provisions Should Be Approved ......................................................................................................................37

The Debtors’ Releases Are Appropriate and Should Be Approved ......................38

The Non-Debtor Releases Are Consensual, Appropriate and Should Be Approved................................................................................................................42

Third Party Releases ..............................................................................................44

Driver Claimants Releases .....................................................................................47

The Exculpation Provision is Appropriate and Should Be Approved ...................49

The Injunction Provision is Necessary and Customary .........................................53

Section 1123(c) of the Bankruptcy Code Does Not Apply to the Debtors ............54

Plan Complies with Section 1123(d) of the Bankruptcy Code ..............................54

B. Section 1129(a)(2): Debtors Have Complied with the Provisions of the Bankruptcy Code ...................................................................................................55

a. Section 1125: Postpetition Disclosure and Solicitation .............................55

b. Section 1126: Acceptance or Rejection of the Plan ...................................56

C. Section 1129(a)(3): Plan Has Been Proposed in Good Faith and Not by Any Means Forbidden by Law ..............................................................................58

D. Section 1129(a)(4): Plan Provides that Professional Fees and Expenses Are Subject to Court Approval ..............................................................................60

E. Section 1129(a)(5): The Debtors Have Disclosed All Necessary Information Regarding Directors, Managers, Officers, and Insiders .....................61

F. Section 1129(a)(6): The Plan Does Not Contain Any Rate Changes ....................61

G. Section 1129(a)(7): Plan Is in the Best Interests of All Holders of Claims and Interests in Each Debtor ..................................................................................62

H. Section 1129(a)(8): Plan Has Been Accepted by Impaired Classes Entitled to Vote or Can Otherwise Be Confirmed Notwithstanding the Requirements of Section 1129(a)(8) ......................................................................67

I. Section 1129(a)(9): Plan Provides for Payment in Full of All Allowed Priority Claims .......................................................................................................68

J. Section 1129(a)(10): At Least One Class of Impaired Claims Has Accepted the Plan ..................................................................................................69

K. Section 1129(a)(11): The Plan Is Feasible .............................................................69

L. Section 1129(a)(12): All Statutory Fees Have Been Paid or Will Be Paid ...........74

M. Sections 1129(a)(13), 1129(a)(14), 1129(a)(15), and 1129(a)(16): Not Applicable to the Plan ............................................................................................75


iii

N. Section 1129(b): Plan Satisfies the “Cram Down” Requirements Under the Bankruptcy Code ...................................................................................................75

a. Section 1129(b)(1): Plan Does Not Discriminate Unfairly........................76

b. Section 1129(b)(2): Plan Is Fair and Equitable..........................................78

O. Section 1129(c): Plan Is the Only Plan ..................................................................79

P. Section 1129(d): Principal Purpose of the Plan Is Not for the Avoidance of Taxes 80

Q. Section 1129(e): Chapter 11 Cases Are Not Small Business Cases ......................80

II. The Modifications of the Plan are Proper ..........................................................................80

III. Reply to Objections............................................................................................................81

IV. Cause Exists to Waive the Stay of the Proposed Confirmation Order ..............................82

CONCLUSION ..............................................................................................................................83


iv

TABLE OF AUTHORITIES

Page(s)

Cases

Ad Hoc Grp. of Vitro Noteholders v. Vitro S.A.B. de CV (In re Vitro S.A.B. de CV), 701 F.3d 1031 (5th Cir. 2012) .................................................................................................48

In re Adelphia Commc’ns Corp., 368 B.R. 140 (Bankr. S.D.N.Y. 2007), appeal dismissed, 371 B.R. 660 (S.D.N.Y. 2007), aff’d, 544 F.3d 420 (2d Cir. 2008) ...........................................................................................63

Al’s Pals Pet Care v. Woodforest Nat’l Bank, NA, No. 4:17-cv-3852, 2019 WL 387409 (S.D. Tex. Jan. 30, 2019)..............................................24

In re Allied Props., LLC, No. 06-33754, 2007 WL 1849017 (Bankr. S.D. Tex. June 25, 2007) ...............................29, 39

In re Ameriforge Grp., Inc., No. 17-32660 (DRJ) (Bankr. S.D. Tex. May 22, 2017) ..........................................................42

In re AOV Indus., Inc., 792 F.2d 1140 (D.C. Cir. 1986) ...............................................................................................18

In re Armstrong World Indus., Inc., 348 B.R. 111 (D. Del. 2006) ....................................................................................................75

In re ASARCO LLC, No. 05–21207, 2009 WL 8176641 (Bankr. S.D. Tex. June 5, 2009) ................................27, 31

In re Aztec Co., 107 B.R. 585 (Bankr. M.D. Tenn. 1989) .................................................................................75

Bank of Am. Nat’l Tr. v. 203 N. LaSalle St. P’Ship, 526 U.S. 434. (1999) ..........................................................................................................60, 61

Bank of N.Y. Tr. Co. v. Official Unsecured Creditors’ Comm. (In re Pac. Lumber Co.), 584 F.3d 229 (5th Cir. 2009) .............................................................................................48, 49

In re Beef Indus. Antitrust Litig., 607 F.2d 167 (5th Cir. 1979) ...................................................................................................24

In re Bigler LP, 442 B.R. 537 (Bankr. S.D. Tex. 2010) ..............................................................................25, 37

Brite v. Sun Country Dev., Inc. (In re Sun Country Dev., Inc.), 764 F.2d 406 (5th Cir. 1985) ...................................................................................................56


v

In re Buttonwood Partners Ltd., 111 B.R. 57 (Bankr. S.D.N.Y. 1990) .......................................................................................76

Cadle Co. v. Mims (In re Moore), 608 F.3d 253 (5th Cir. 2010) .......................................................................................26, 30, 38

In re Cajun Elec. Power, 150 F.3d at 519 ..................................................................................................................56, 58

Cantu v. Schmidt (In re Cantu), 784 F.3d 253 (5th Cir. 2015) ...................................................................................................61

In re CEC Ent., Inc., No. 20-33163 (MI) (Bankr. S.D. Tex. Dec. 15, 2020).......................................................48, 52

In re Chemtura Corp., 439 B.R. 561 (Bankr. S.D.N.Y. 2010) .....................................................................................58

In re Coastal Broad. Sys., Inc., 570 F. App’x 188 (3d Cir. 2014) .............................................................................................17

Collins v. NPC International, Inc., No. 17-cv-312 (S.D. Ill. Mar. 24, 2017) .......................................................................... passim

Conn. Gen. Life Ins. Co. v. United Cos. Fin. Corp. (In re Foster Mortg. Corp.), 68 F.3d 914 (5th Cir. 1995) .........................................................................................26, 30, 38

In re Copsync, Inc., No. 17-12625, 2018 Bankr. LEXIS 2879 (Bankr. E.D. La. Sept. 21, 2018) ...........................69

In re Cypresswood Land Partners, I, 409 B.R. 396 (Bankr. S.D. Tex. 2009) ..............................................................................57, 75

Davis v. Jackson (In re Transcon. Energy Corp.), 764 F.2d 1296 (9th Cir. 1985) .................................................................................................30

In re Deepwater Horizon, 739 F.3d 790 (5th Cir. 2014) ...................................................................................................25

In re Derosa-Grund, 567 B.R. 773 (Bankr. S.D. Tex. 2017) ............................................................................ passim

In re EP Energy Corp., No. 19-35654 (MI) (Bankr. S.D. Tex. Aug. 27, 2020) ......................................................48, 52

In re Exco Res. Inc., No. 18-30155 (MI) (Bankr. S.D. Tex. June 18, 2019) .............................................................48


vi

In re Expro Holdings US Inc., Case No. 17-60179 (DRJ) (Bankr. S.D. Tex. Jan. 25, 2018) ...................................................48

Feld v. Zale Corp. (In re Zale Corp.), 62 F.3d 746 (5th Cir. 1995) .....................................................................................................42

Fin. Sec. Assurance v. T-H New Orleans L.P. (In re T-H New Orleans L.P.), 116 F.3d 790 (5th Cir. 1997) .............................................................................................56, 68

FOM P.R. S.E. v. Dr. Barnes Eyecenter Inc., 255 F. App’x 909 (5th Cir. 2007) ............................................................................................41

Frost v. Oil States Energy Servs, L.L.C., No. 4:15–cv–1100, 2015 WL 12780763 (S.D. Tex Nov. 19, 2015) ........................................23

Garza v. Sporting Goods Props., No. SA–93–CA–108, 1996 WL 56247 (W.D. Tex. Feb. 6, 1996) ..........................................24

In re Gen. Homes Corp., 134 B.R. 853 (Bankr. S.D. Tex. 1991) ..............................................................................37, 39

In re GenOn Energy, Inc., No. 17-33695 (DRJ) (Bankr. S.D. Tex. Dec. 12, 2017) ....................................................42, 48

In re Goodrich Petroleum Corp., No. 16-31975 (MI) (Bankr. S.D. Tex. Sept. 28, 2016) ............................................................52

In re Halcón Res. Corp., No. 19-34446 (DRJ) (Bankr. S.D. Tex. Sept. 24, 2019) ..........................................................52

Heartland Fed. Sav. & Loan Ass’n v. Briscoe Enters., Ltd., II (In re Briscoe Enters., Ltd., II) 994 F.2d 1160 (5th Cir. 1993) .....................................................................................16, 61, 67

In re Heritage Org., LLC, 375 B.R. 230 (Bankr. N.D. Tex. 2007) ........................................................................37, 38, 68

Hernandez v. Larry Miller Roofing, Inc., 628 F. App’x 281 (5th Cir. 2016) ............................................................................................41

Hinojosa Eng’g, Inc. v. Lopez (In re Treyson Dev., Inc)., No. 14-70256, 2016 WL 1604347 (Bankr. S.D. Tex. Apr. 19, 2016) .....................................42

In re Idearc Inc., 423 B.R. 138 (Bankr. N.D. Tex. 2009), subsequently aff’d sub nom. 662 F.3d 315 (5th Cir. 2011) ........................................................................................................18, 39, 68, 75

In re J. C. Penney Co., No. 20-20182 (DRJ) (Bankr. S.D. Tex. Dec. 16, 2020) ....................................................48, 52


vii

In re Johns-Manville Corp., 68 B.R. 618 (Bankr. S.D.N.Y. 1986), aff’d, 78 B.R. 407 (S.D.N.Y. 1987) ............................75

See JPMorgan Chase Bank, N.A. v. Charter Commc’ns Operating, LLC (In re Charter Commc’ns) 419 B.R. 221, 264 (Bankr. S.D.N.Y. 2009) .............................................................................19

Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636 (2d Cir. 1988)...............................................................................................17, 75

Lack’s Valley Stores, Ltd. v. Smith (In re Smith), 541 B.R. 629 (Bankr. S.D. Tex. 2015) ....................................................................................28

In re Lakeside Glob. II, Ltd., 116 B.R. 499 (Bankr. S.D. Tex. 1989) ..............................................................................67, 68

In re Landing Assocs., Ltd., 157 B.R. 791 (Bankr. W.D. Tex. 1993) ...................................................................................67

In re Lernout & Hauspie Speech Prod., N.V., 301 B.R. 651 (Bankr. D. Del. 2003), aff’d, 308 B.R. 672 (D. Del. 2004) ...............................75

Liberty Nat’l Enters. v. Ambanc La Mesa L.P. (In re Ambanc La Mesa L.P.), 115 F.3d 650 (9th Cir. 1997) ...................................................................................................75

In re Lincolnshire Campus, LLC, 441 B.R. 524 (Bankr. N.D. Tex. 2010) ....................................................................................58

Lovett v. Homrich Inc. (In re Philip Servs. Corp.), 359 B.R. 616 (Bankr. S.D. Tex. 2006) (Steen, J.) ...................................................................61

Marshall v. Weber et al., No. 20-00757-cv-W-NKL (W.D. Mo.) ............................................................................ passim

In re MCorp Fin., Inc., 160 B.R. 941 (S.D. Tex. 1993) ..........................................................................................25, 63

In re MetroCorp Bancshares, Inc., S’holders Litig., No. 4:13-cv-03198, 2014 WL 12599395 (S.D. Tex. Oct. 23, 2014) .......................................23

In re Mirant Corp., 348 B.R. 725 (Bankr. N.D. Tex. 2006) ..............................................................................38, 76

In re Moody Nat’l SHS Hous. H, LLC, 2010 WL 5116872 (Bankr. S.D. Tex. June 30, 2010) .............................................................43


viii

Official Comm. of Unsecured Creditors v. Cajun Elec. Power Coop., Inc. (In re Cajun Elec. Power Coop.), 119 F.3d 349 (5th Cir. 1997) ........................................................................................... passim

Official Comm. Of Unsecured Creditors v. Moeller (In re Age Ref., Inc.), 801 F.3d 530 (5th Cir. 2015) .......................................................................................26, 28, 38

Ohio Pub. Emps. Ret. Sys. v. Gen. Reinsurance Corp. (In re Am. Int’l Grp., Inc. Sec. Litig.), 689 F.3d 229 (2d Cir. 2012).....................................................................................................24

In re Oil Spill by Oil Rig Deepwater Horizon in Gulf of Mexico, 910 F. Supp. 2d 891 (E.D. La. 2012) .......................................................................................25

In re Palacios, No. 14-70076, 2016 WL 361569 (Bankr. S.D. Tex. Jan. 27, 2016) ..................................26, 28

In re Parker Drilling Co., No. 18-36958 (MI) (Bankr. S.D. Tex. Mar. 7, 2019) ........................................................48, 49

In re Petrobras Sec. Litig., 317 F. Supp. 3d 858 (S.D.N.Y. 2018), aff’d, 784 F. App’x 10 (2d Cir. 2019) ........................24

In re Pilgrim’s Pride, No. 08–45664–DML–11, 2010 WL 200000 (Bankr. N.D. Tex. Jan. 14, 2010) ......................50

In re Pisces Energy, LLC, No. 09-36591-HS, 2009 WL 7227880 (Bankr. S.D. Tex. Dec. 21, 2009) ..................18, 61, 63

Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414 (1968) .................................................................................................................37

In re PWS Holding Corp., 228 F.3d 224 (3d Cir. 2000)...............................................................................................48, 49

Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir. 1987) .................................................................................................42

Rivercity v. Herpel (In re Jackson Brewing Co.), 624 F.2d 599 (5th Cir. 1980) .................................................................................26, 28, 29, 37

Ronit, Inc. v. Stemson Corp. (In re Block Shim Dev. Co.-Irving), 939 F.2d 289 (5th Cir. 1991) .............................................................................................57, 61

In re Roqumore, 393 B.R. 474 (Bankr. S.D. Tex. 2008) ........................................................................32, 38, 39

In re SandRidge Energy, Inc., Case No. 16-32488 (DRJ) (Bankr. S.D. Tex. Sept. 20, 2016) .................................................52


ix

In re Sandy Ridge Dev. Corp., 881 F.2d 1346 (5th Cir. 1989) .................................................................................................68

In re Sea Trail Corp., No. 11-07370-8, 2012 WL 5247175 (Bankr. E.D.N.C. Oct. 23, 2012) ...................................75

In re Sentry Operating Co. of Tex., Inc., 264 B.R. 850 (Bankr. S.D. Tex. 2001) ....................................................................................18

Slipchenko v. Brunel Energy, Inc., No. H-11-1465, 2015 WL 338358 (S.D. Tex. Jan. 23, 2015) ..................................................24

Smith v. Crystian, 91 F. App’x. 952 (5th Cir. 2004) .............................................................................................25

In re Southcross Holdings, LP, No. 16-20111 (MI) (Bankr. S.D. Tex. Apr. 11, 2016) .............................................................42

In re Star Ambulance Serv., LLC, 540 B.R. 251 (Bankr. S.D. Tex. 2015) ..............................................................................56, 57

Strong v. BellSouth Telecomms. Inc., 137 F.3d 844 (5th Cir. 1998) ...................................................................................................24

Tittle v. Enron Corp. (In re Enron Corp. Sec., Derivative & “ERISA” Litig.), 228 F.R.D. 541 (S.D. Tex. 2005) .............................................................................................25

In re Tribune Co., 476 B.R. 843 (Bankr. D. Del. 2012), aff’d as modified, Case No. 12-CV-1072 GMS, 2014 WL 2797042 (D. Del. June 18, 2014), aff’d in part, rev’d in part, 799 F.3d 272 (3d Cir. 2015) ...........................................................................................................................18

In re Tribune Co., 972 F.3d 228 (3d Cir. 2020).....................................................................................................75

In re Ultra Petrol. Corp., No. 16-32202 (MI) (Bankr. S.D. Tex. Mar. 14, 2017) ......................................................42, 48

In re Vanguard Nat. Res., LLC, No. 17-30560 (MI) (Bankr. S.D. Tex. July 18, 2017) .............................................................49

W. Real Estate Equities L.L.C. v. Vill. At Camp Bowie I, L.P. (In re Vill. at Camp Bowie I, L.P.), 710 F.3d 239 (5th Cir. 2013) ...................................................................................................56

In re Warren Res., Inc., No. 16-32760 (MI) (Bankr. S.D. Tex. Sept. 14, 2016) ............................................................43


x

In re Waters Retail TPA, LLC, No. 20-30644, 2020 Bankr. LEXIS 2965 (Bankr. N.D. Tex. Oct. 16, 2020) ..........................68

In re Weatherford Int’l PLC, No. 19-33694 (DRJ) (Bankr. S.D. Tex. Sept. 11, 2019) ..........................................................52

Whitney Bank v. SCC Kyle Partners, Ltd. (In re SCC Kyle Partners, Ltd.), 518 B.R. 393 (W.D. Tex. 2014) ...............................................................................................67

Wolfe v. Anchor Drilling Fluids USA Inc., No. 4:15-cv-1344, 2015 WL 12778393 (S.D. Tex. Dec. 7, 2015) ..........................................23

In re Wool Growers Cent. Storage Co., 371 B.R. 768 (Bankr. N.D. Tex. 2007) ..............................................................................41, 42

In re Worldcom, Inc., No. 02–13533(AJG), 2003 WL 23861928 (Bankr. S.D.N.Y. Oct. 31, 2003) .........................75

In re Wright, 545 B.R. 541 (Bankr. S.D. Tex. 2016) ..............................................................................29, 31

Statutes

11 U.S.C. § 101(51C) ....................................................................................................................78

11 U.S.C. § 327 ..............................................................................................................................59

11 U.S.C. § 328 ..............................................................................................................................59

11 U.S.C. § 330 ..............................................................................................................................59

11 U.S.C. § 331 ..............................................................................................................................59

11 U.S.C. § 363(f) ..........................................................................................................................21

11 U.S.C. § 365(b)(1) ....................................................................................................................52

11 U.S.C. § 503(b) .........................................................................................................................59

11 U.S.C. § 507 ..............................................................................................................................72

11 U.S.C. § 721 ..............................................................................................................................63

11 U.S.C. § 1107(a) .........................................................................................................................5

11 U.S.C. § 1108 ..............................................................................................................................5

11 U.S.C. § 1114 ............................................................................................................................73


xi

11 U.S.C. § 1122 ........................................................................................17, 18, 19, 20, 52, 78, 79

11 U.S.C. § 1123(a) .....................................................................................................19, 20, 21, 43

11 U.S.C. § 1123(b) .....................................................................................................20, 21, 37, 41

11 U.S.C. § 1123(c) .......................................................................................................................52

11 U.S.C. § 1123(d) .................................................................................................................52, 53

11 U.S.C. § 1124 ............................................................................................................................20

11 U.S.C. § 1125 ..............................................................................................49, 50, 53, 54, 78, 79

11 U.S.C. § 1126 ....................................................................................................53, 54, 55, 56, 65

11 U.S.C. § 1127 ......................................................................................................................78, 79

11 U.S.C. § 1129(a)(1) .............................................................................................................17, 52

11 U.S.C. § 1129(a)(2) ...................................................................................................................53

11 U.S.C. § 1129(a)(3) .............................................................................................................56, 58

11 U.S.C. § 1129(a)(4) .............................................................................................................58, 59

11 U.S.C. § 1129(a)(5) .............................................................................................................59, 60

11 U.S.C. § 1129(a)(6) ...................................................................................................................60

11 U.S.C. § 1129(a)(7) .............................................................................................................60, 64

11 U.S.C. § 1129(a)(8) .............................................................................................................65, 74

11 U.S.C. § 1129(a)(9) .............................................................................................................66, 67

11 U.S.C. § 1129(a)(10) ...........................................................................................................56, 67

11 U.S.C. § 1129(a)(11) ...............................................................................................67, 68, 69, 72

11 U.S.C. § 1129(a)(12) .................................................................................................................72

11 U.S.C. § 1129(a)(13) .................................................................................................................73

11 U.S.C. § 1129(a)(14) .................................................................................................................73

11 U.S.C. § 1129(a)(15) .................................................................................................................73

11 U.S.C. § 1129(a)(16) .................................................................................................................73


xii

11 U.S.C. § 1129(b) ............................................................................................................... passim

11 U.S.C. § 1129(c) .......................................................................................................................77

11 U.S.C. § 1129(d) .......................................................................................................................78

11 U.S.C. § 1129(e) .......................................................................................................................78

28 U.S.C. § 157(b) .........................................................................................................................49

29 U.S.C. § 201 ........................................................................................................................45, 46

Other Authorities

Fed. R. Bankr. P. 1015(b) ................................................................................................................5

Fed. R. Bankr. P. 3019 .............................................................................................................78, 79

Fed. R. Bankr. P. 3020(e) ..................................................................................................16, 80, 81

Fed. R. Bankr. P. 9019 .................................................................................................22, 23, 25, 32

Fed. R. Bankr. P. 7023 .............................................................................................................13, 23

Fed. R. Bankr. P. 9014 ...................................................................................................................13

Fed. R. Civ. P. 23 ...............................................................................................................13, 23, 24

Local Rule 1015-1............................................................................................................................5


TO THE HONORABLE DAVID R. JONES, UNITED STATES BANKRUPTCY JUDGE:

NPC International, Inc. and its debtor affiliates, as debtors and debtors in possession

in the above-captioned chapter 11 cases (collectively, the “Debtors”), respectfully submit this

memorandum of law and omnibus reply to the Confirmation Objections2 (the “Memorandum”)

in support of confirmation of the Second Amended Joint Chapter 11 Plan of NPC International,

Inc. and its Affiliated Debtors [Docket No. 1477] (and as may be further modified, amended, or

supplemented from time to time, and together with all exhibits and schedules thereto, the “Plan”)3

including the agreements and other documents set forth in the plan supplement [Docket Nos. 1288,

1457, 1486] (and as may be further amended, modified, supplemented, or restated, the “Plan

Supplement”), pursuant to section 1129 of title 11 of the United States Code (the “Bankruptcy

Code”)4 and represent as follows:

PRELIMINARY STATEMENT

1. The widespread level of consensus reached in these chapter 11 cases is a

testament to the tireless efforts of the Debtors, all of the Debtors’ key stakeholders, and their

respective professionals. As the Court is aware, these chapter 11 cases were commenced in the

middle of a pandemic with a great deal of uncertainty regarding the path forward for the Debtors’

business and with ongoing litigation and/or negotiations with many of their key stakeholders,

including, among other parties, McLane—the Debtors’ largest Pizza Hut vendor—the Second Lien

2 Objections to confirmation of the Plan (collectively, the “Confirmation Objections”) are listed in the response

chart attached hereto as Exhibit A (the “Response Chart”).

3 As stated in the Plan, the Debtors are at this time seeking confirmation of the Plan solely with respect to the Sale Transaction with the Successful Bidders and in the event the Debtors seek confirmation of the Plan with respect to the Reorganization Transaction, the Debtors will seek separate Court approval and all parties in interests’ rights with respect to the Reorganization Transaction are reserved.

4 Capitalized terms used but not otherwise herein defined shall have the meaning ascribed to such terms in the Plan, the Plan Supplement, or the Disclosure Statement (each as defined herein).


2

Lenders, the Creditors’ Committee, the Driver Claimants, and most notably the Debtors’ two

franchisors—Pizza Hut and Wendy’s (together, the “Franchisors”). Given the complexity of the

issues at hand and the number of parties in interest, the Debtors filed these chapter 11 cases with

an RSA (as defined below) with the Ad Hoc Priority/1L Group, which RSA contains a “toggle”

structure, specifically designed to provide the Debtors with the necessary flexibility to maximize

value on an expedited timeline—whether through a sale process or a reorganization and

equitization of certain of the claims held by the Debtors’ First Lien Lenders. Utilizing the complex

and transparent Court-approved sale process the Debtors ran during these cases, the Debtors were

able to secure the support of their key stakeholders and, with the cooperation of such parties, the

Debtors are able to present a largely consensual chapter 11 Plan, only seven (7) months after the

Petition Date. This support is further reflected in the voting results; the Plan has been

overwhelmingly supported by voting creditors—every Class entitled to vote to accept or reject the

Plan has accepted the Plan.

2. The Plan and the underlying Sale Transactions that this Court approved on

January 25, 2021, provides a viable going concern path for the Debtors’ businesses, retains tens of

thousands of jobs, seeks to minimize any disruption to customers, vendors, and other constituents,

while providing for an orderly wind down of the remaining estates. As this Court is aware, the

Debtors ran a rigorous sale process leading up to the ultimate approval of the Sale Transactions

that involved a myriad of different issues, which included, among others, extensive coordination

with the Debtors’ franchisors and potential bidders, the approval of Flynn (defined below) by this

Court as the Stalking Horse Bidder, significant negotiations among the Debtors, Flynn, the Ad

Hoc Priority/1L Group, the Creditors’ Committee, and the Franchisors, including a mediation in

connection with the Wendy’s Franchisor’s consent of Flynn as a purchaser of the Debtors’


3

Wendy’s assets, and the ultimate consents by both Franchisors of the Sale Transactions as

embodied in the Sale Documents. The Debtors have also resolved many of the cure objections

raised in connection with the Sale Transaction and are continuing to work through the remaining

cure issues.

3. In addition, the Plan incorporates hard fought settlements with the

Creditors’ Committee and the Driver Claimants Group pursuant to the UCC Settlement and Driver

Claimants Settlement, respectively, which were each reached after months of rigorous

negotiations, motion-practice, and for the Driver Claimants Settlement, weeks of mediation. The

UCC Settlement provides value for junior unsecured creditors that would otherwise not be entitled

to receive any distributions under the Plan and resolves their assertions regarding the scope and

value of the Debtors’ unencumbered assets. The Driver Claimants Settlement resolves the delivery

driver proofs of claim, based on a longstanding prepetition litigation, and a recently filed action

against certain of the Debtors’ officers based on the same allegations and claims, while also

providing value for the Debtors’ delivery drivers they would otherwise not have received if the

Court estimated their claims at zero.5 The Plan also implements the agreements made pursuant to

the RSA that provides the support of substantially all of the Debtors’ funded debt holders. The

transactions and settlements embodied in the Plan provide a direct benefit to—and maximize the

value distributable to—all creditors by preserving the Debtors’ economic resources and avoiding

costly and time-consuming litigation that would unnecessarily delay consummation of the Plan

and the Sale Transactions.

5 See Statement The Driver Class Claimants’ Statement in Support of and Reservation of Rights Concerning

Confirmation of the Second Amended Joint Chapter 11 Plan of NPC International, Inc. and its Affiliated Debtors [Docket No. 1463].


4

4. While the Plan provides for a “toggle” structure, at this time the Debtors

seek confirmation of the Plan solely with respect to the Sale Transactions with the Successful

Bidders. The Debtors believe the Plan—including the settlements and compromises embodied

therein—achieves the purposes of chapter 11 and satisfies the requirements of section 1129 of the

Bankruptcy Code and the Debtors respectfully request that this Court approve the Plan.

5. Excluding objections related to assumption or rejection of unexpired

executory contracts and executory leases, only 9 parties submitted informal or formal objections

to confirmation of the Plan.6 Of the 9 objections, 6 objections have been resolved by changes

reflected in the Plan or Confirmation Order (as defined below). The Debtors believe that the

remaining Confirmation Objections should be overruled. This Memorandum addresses the

requirements for confirmation of the Plan under the Bankruptcy Code and demonstrates that the

Plan satisfies each confirmation requirement set forth in section 1129 of the Bankruptcy Code.

For the reasons stated in this Memorandum and that will be put into the record at the confirmation

hearing, the Court should confirm the Plan. A proposed order confirming the Plan has been filed

contemporaneously herewith [Docket No. 1482] (the “Proposed Confirmation Order”).

6. Except as set forth herein, the pertinent facts relating to the chapter 11 cases

and the Plan are set forth in the Declaration of Eric Koza in Support of Debtors’ Chapter 11

Petitions and First Day Relief [Docket No. 4] (the “First Day Declaration”), the Disclosure

Statement, the Plan, and the Plan Supplement. In addition, the following documents have been or

will be filed in support of confirmation of the Plan:

6 The Debtors have received limited objections related to assumption or rejection of executory contracts and

executory leases that will be resolved or deferred as necessary, and accordingly are not discussed in this Memorandum.


5

a. Declaration of Neil Augustine in Support of Confirmation of Second Amended Joint Chapter 11 Plan of NPC International, Inc. and its Affiliated Debtors (the “Augustine Declaration”);

b. Declaration of Eric Koza in Support of Confirmation of Second Amended Joint Chapter 11 Plan of NPC International, Inc. and its Affiliated Debtors (the “Koza Declaration”);

c. Declaration of Richard W. Slack in Support of Confirmation of Second Amended Joint Chapter 11 Plan of NPC International, Inc. and its Affiliated Debtors (the “Slack Declaration”);

d. Declaration of Neil A. Augustine in Support of the Sale of Substantially All of the Debtors’ Assets Free and Clear of Liens, Claims, Encumbrances, and Interests and Granting Related Relief [Docket No. 1441] (the “Augustine Sale Declaration”); and

e. Declaration of Jane Sullivan of Epiq Corporate Restructuring, LLC, Regarding Voting and Tabulation of Ballots Cast on the Second Amended Joint Chapter 11 Plan of NPC International, Inc. and its Affiliated Debtors (the “Voting Certification”).

7. All facts referenced in the First Day Declaration, Augustine Declaration,

Koza Declaration, Slack Declaration, and Augustine Sale Declaration (together, the

“Confirmation Declarations”), and the Voting Certification are incorporated herein as though set

forth fully at length. Certain additional facts may be provided by live testimony at the confirmation

hearing, if necessary.

BACKGROUND AND RELEVANT FACTS

8. On July 1, 2020 (the “Petition Date”), the Debtors each commenced with

this Court a voluntary case under chapter 11 of the Bankruptcy Code. The Debtors continue to

operate their businesses and manage their properties as debtors in possession pursuant to sections

1107(a) and 1108 of the Bankruptcy Code. The Debtors’ chapter 11 cases are being jointly

administered for procedural purposes only pursuant to Rule 1015(b) of the Bankruptcy Rules and

Rule 1015-1 of the Local Rules.


6

9. On July 13, 2020, the United States Trustee for Region 7 (the “U.S.

Trustee”) appointed an official committee of unsecured creditors (the “Creditors’ Committee”).

No trustee or examiner has been appointed in these chapter 11 cases.

A. Entry into the RSA and RSA Amendment No. 1

10. On July 1, 2020, before commencing these chapter 11 cases, the Debtors

entered into a Restructuring Support Agreement (the “RSA”) with certain consenting creditors,

pursuant to which such creditors agreed to support an expedited restructuring to ensure a viable

enterprise and maximize stakeholder recoveries by, among other things:

• timely voting to accept the Plan;

• agreeing to provide and not opt-out of the releases contemplated by the restructuring term sheet;

• using commercially reasonable efforts to support and take all actions reasonably requested by the Debtors to facilitate the solicitation of the Plan, obtain approval of the Disclosure Statement, and obtain confirmation and consummation of the Plan and the restructuring;

• refraining from taking any action that would delay or impede the solicitation, approval of the Disclosure Statement, or the confirmation and consummation of the Plan and the consummation of the restructuring; and

• supporting and effectuating the documentation within the timeframes contemplated by the RSA and Plan term sheet.

11. Since the beginning of the chapter 11 cases, certain of the second lien

lenders (the “Second Lien Lenders”) have been engaged in active discussions with the Debtors

and the Ad Hoc Priority/1L Group, which after months of good faith, arm’s-length negotiations,

resulted in the parties agreeing to the Second Lien Settlement (as defined in the Plan) as reflected

in the Plan and Amendment No. 1 to the RSA (the “RSA Amendment”). The Second Lien

Settlement provides for an ad hoc group of holders of Second Lien Secured Claims (the “Ad Hoc

Second Lien Group”) to support the Plan in exchange for, among other things, (i) under a Sale

Transaction, the remaining Sale Proceeds after the Allowed Priority Term Loan Secured Claims


7

and the Allowed First Lien Claims are satisfied in full and the Wind Down Budget has been fully

funded, and (ii) under a Reorganization Transaction, new warrants to be allocated between holders

of Second Lien Secured Claims and General Unsecured Claim pro rata based on their respective

Allowed Claims. The RSA is currently supported by over 92% of the Debtors’ Priority First Lien

Lenders, over 86% percent of their First Lien Lenders, and over 80% of their Second Lien Lenders

(each as defined in the RSA or the RSA Amendment).

B. Approval of the Disclosure Statement

12. On October 30, 2020, this Court entered an order [Docket No. 947] (the

“Disclosure Statement Order”) approving the Disclosure Statement for First Amended Joint

Chapter 11 Plan of NPC International, Inc. and Its Affiliated Debtors (as amended, the

“Disclosure Statement”) [Docket No. 922].

13. Pursuant to the Disclosure Statement Order, the Court, among other things,

(a) established certain solicitation procedures with respect to the Plan (the “Solicitation

Procedures”); (b) established notice and objection procedures with respect to the Plan (the

“Notice and Objection Procedures”); (c) set the voting deadline (the “Voting Deadline”); (d) set

the deadline for parties to object to confirmation of the Plan; and (e) scheduled the confirmation

hearing. The Disclosure Statement Order established October 27, 2020 as the Voting Record Date

for determining which holders of claims were entitled to vote on the Plan. On January 20, 2020,

the Debtors filed the Notice of Filing of (I) Revised Exhibits to the Disclosure Statement for First

Amended Joint Chapter 11 Plan of NPC International, Inc. and its Affiliated Debtors [Docket

1458], including the Summary of Implied Value, the Wind Down Budget, and Recovery Analysis.

C. Solicitation of Votes on the Plan

14. On November 5, 2020, in accordance with the Disclosure Statement Order,

the Debtors commenced the solicitation of votes to accept or reject the First Amended Joint


8

Chapter 11 Plan of NPC International, Inc. and its Affiliated Debtors filed on October 31, 2020

[Docket No. 951] (the “Solicitation Plan”). Specifically, the Debtors caused Epiq Corporate

Restructuring, LLC, their solicitation agent, to distribute copies of the Disclosure Statement, the

Solicitation Plan, and the applicable form of ballot with voting instructions (the “Ballot”) to the

holders of Claims entitled to vote on the Solicitation Plan. See Solicitation Affidavit (as defined

below).

15. Pursuant to the Solicitation Procedures, the Debtors were not required to

solicit votes from the holders of Claims and Interests, as applicable, in Class 1 (Other Secured

Claims), Class 2 (Other Priority Claims), Class 3 (Priority Term Loan Secured Claims), Class 7

(Intercompany Claims), and Class 10 (Intercompany Interests) as each such class is unimpaired by

the Plan and is conclusively presumed to accept the Plan under section 1126(f) of the Bankruptcy

Code. Further, the Debtors were not required to solicit votes from the holders of Claims in

Class 2A (Driver Claimant Priority T1 Claims) and Class 2B (Driver Claimant Priority T2 Claims)

as each such Class is unimpaired and conclusively presumed to accept the Plan pursuant to the

Driver Claimants Settlement.7 Furthermore, the Debtors were not required to solicit votes from

the holders of Claims or Interests, as applicable, in Class 8 (Subordinated Claims) and Class 9

(Existing Equity Interests) as each such class will not receive or retain any property under the Plan

and is deemed to reject the Plan under section 1126(g) of the Bankruptcy Code. The Debtors did

however, distribute notices of non-voting status (the “Non-Voting Status Notices”) to the

members of the above-listed classes (excluding Classes 2A and 2B) whose votes to accept or reject

7 After entry of the Confirmation Order, the Debtors shall serve the Driver Claimants Settlement Election and

Participation Form on the Driver Claimants Certified Class (as defined in the Plan).


9

the Plan were not solicited pursuant to the Disclosure Statement Order’s notice and objection

procedures. Disclosure Statement Order ¶ I; Solicitation Affidavit [Docket No. 1057].

16. In addition, the Debtors published notice of the confirmation hearing in The

New York Times, as evidenced by the Proof of Publication filed on November 20, 2020

[Docket No. 1241].

D. Voting Results

17. Pursuant to the Notice of Amended Confirmation Deadlines, the Voting

Deadline was January 5, 2021.8 Contemporaneously herewith, the Debtors filed the Voting

Certification that reflects the results of voting on the Plan. As set forth in the Voting Certification,

and as summarized in the following chart, the Plan is supported by all classes entitled to vote on

the Plan (the “Voting Classes”).

8 Per the Notice of Filing of Proposed Order Amending Hearing Dates and Certain Deadlines Under the (I) Bid

Procedures Order, (II) Disclosure Statement Order, and (III) Scheduling Order [Docket No. 1168] (the “Notice of Amended Confirmation Deadlines”), the Voting Deadline was extended from December 17, 2020 to January 5, 2021.


10

Classes Debtors

Accept Reject

Outcome PERCENT (Vote %)

AMOUNT (Amount

%)

PERCENT (Vote %)

AMOUNT (Amount

%)

Class 4 (First Lien Secured

Claims) Loan Debtors9 100% 100% 0% 0% Accept

Class 5 (Second Lien

Secured Claims) Loan Debtors Tabulated in Class 6

Class 6 (General Unsecured

Claims) 10

NPC International, Inc. 59.24% 97.46% 40.76% 2.54% Accept

NPC Restaurant Holdings I LLC Presumed Acceptance11 NPC Restaurant Holdings II LLC Presumed Acceptance

NPC Holdings, Inc. Presumed Acceptance NPC International Holdings, LLC Presumed Acceptance NPC Restaurant Holdings, LLC 99.28% 99.99% .72% .01% Accept

NPC Operating Company B, Inc. 99.28% 99.99% .72% .01% Accept

NPC Quality Burgers, Inc. 87.78% 99.95% 12.22% .05% Accept

E. Sale Process

18. Since early July 2020 with respect to the Debtors’ Wendy’s business and

the end of August 2020 with respect to the Debtors’ Pizza Hut business, the Debtors have been

engaged in a comprehensive sale process to sell substantially all of the Debtors’ assets for the

highest or otherwise best value for the benefit of all stakeholders while, pursuant to the Plan,

maintaining the ability to pivot to a standalone reorganization process if the sale process failed to

generate sufficient value for the assets. In accordance with the Bid Procedures approved by the

Court, the Debtors, with the assistance of their advisors and the Cypress Group retained by the Ad

9 The “Loan Debtors,” which are the parties to the Debtors’ funded debt, are: NPC Restaurant Holdings, LLC, NPC

International, Inc., NPC Quality Burgers, Inc., NPC Operating Company B, Inc. 10 Class 5 (Second Lien Secured Claims) Deficiency Claims and Class 4 (First Lien Secured Claims) Deficiency

Claims were tabulated in Class 6 (General Unsecured Claims) for voting purposes only pursuant to the Disclosure Statement Order.

11 With respect to each Debtor, if a Class contained Claims eligible to vote and no holder of Claims eligible to vote in such Class voted to accept or reject the Plan, the Plan was presumed accepted by the holders of such Claims in such Class. See Plan § 3.7.


11

Hoc Priority/1L Group, conducted an extensive marketing process that involved solicitations of

interest from a diverse set of potential strategic and financial parties. The Debtors, their advisors,

and the Cypress Group, engaged in active discussions with numerous third-party bidders that

expressed interest in acquiring some or all of the Debtors assets, including Flynn Restaurant Group

(“Flynn”). In August, in conjunction with its submission of a non-binding indication of interest

for the Wendy’s business, Flynn notified the Debtors that it was interested in pursuing a stalking

horse bid for the entire business (i.e., the Wendy’s and Pizza Hut businesses). The parties

subsequently engaged in rigorous negotiations whereby Flynn emerged as the most competitive

bidder for the Assets. Flynn and the Debtors agreed to the Stalking Horse APA on November 5,

2020, which was approved by the Court on November 14, 2020 [Docket No. 1051]. In the weeks

following the Court’s approval of Flynn as the Stalking Horse Bidder, Flynn continued to work

closely with the Debtors’ franchisor partners, Pizza Hut and Wendy’s, to secure their consents to

the sale.

19. In October 2020, Wendy’s had separately expressed interest to the Debtors

in submitting a consortium bid to acquire the Debtors’ Wendy’s assets with a group of pre-

qualified franchisees.12 On November 18, 2020, in advance of the Wendy’s auction, Wendy’s

submitted a bid, which contemplated at closing, the transfer of certain of the Debtors’ Wendy’s

assets to select bidding partners (the “Wendy’s Bid”). Despite the Debtors’ best efforts to secure

additional bids from potential third-party purchasers, the Debtors did not receive any other bids

outside of the Wendy’s Bid by the Wendy’s bid deadline for the Wendy’s assets (with the

exception of the Stalking Horse Bid). As such, the Debtors indefinitely adjourned the Wendy’s

12 This interest was later made public with an 8-K filing on November 2, 2020. See The Wendy’s

Company Form 8- K dated November 2, 2020.


12

auction. The Debtors continued to actively solicit bids for the Pizza Hut assets (on a region-by-

region basis and in its entirety) and for the business as a whole to ensure the Debtors considered

and evaluated all viable bids for the assets. In advance of the Pizza Hut and Whole Co auctions,

certain potential bidders expressed interest in acquiring either the Pizza Hut assets or the Whole

Co Assets, but were ultimately unable to produce viable competing bids (on a standalone or

aggregate basis) to the Stalking Horse Bid. In light of the foregoing, and despite the Debtors’ best

efforts to derive value and remedy any potential deficiencies from the proposed alternative bids,

the Stalking Horse Bid remained the highest or otherwise best offer for the Assets. As a result of

these developments, on November 29, 2020, the Debtors filed a Notice of Cancellation of Auctions

[Docket No. 1127], thereby notifying all parties in interest that the Wendy’s, Pizza Hut, and Whole

Co auctions would be cancelled. At that time, the Debtors, with the support of the Ad Hoc

Priority/1L Group and Creditors’ Committee, decided to delay the Sale Hearing to allow Flynn

and Wendy’s to continue their negotiations in an effort to reach a consensual resolution related to

Wendy’s consent. In early December, the principal stakeholders reached an impasse related to the

consent issue and agreed to conduct mediation before Judge Marvin Isgur. As a result of a

successful mediation, the principal stakeholders agreed to a modified sale transaction under which

Flynn would acquire substantially all of the Debtors’ Pizza Hut assets and approximately half of

the Debtors’ Wendy’s restaurants located in the Baltimore South, Baltimore North, Central

Maryland, and Salt Lake City markets while Wendy’s would acquire the Debtors’ remaining

restaurants located in the Pennsylvania, Kansas City, Raleigh and Greensboro markets and assign

certain of its rights and obligations to eligible assignees at or prior to closing (together, the “Sale


13

Transactions”).13 On January 7, 2021, the Debtors filed a Notice of Designation of Successful

Bids [Docket No. 1366].

20. The Sale Transactions represent a value-maximizing alternative to the

Stalking Horse Bid—despite a purchase price approximately $15 million below the Stalking Horse

Bid—as Flynn and the Wendy’s Eligible Assignees each obtained affirmative consents from

Wendy’s and Pizza Hut (as applicable) thereby eliminating material contingencies, and avoiding

a contested sale process. Absent obtaining Franchisor consent, the process of seeking Court

approval of the Stalking Horse Bid, or alternatively, to pivot from the Sale Transactions to a

Reorganization Transaction (and the equitization of certain of the First Lien Lenders’ claims),

would have potentially contained complex and protracted litigation, with attendant expenses, the

prospect of unnecessary risk on the business, and delay to the detriment of all stakeholders.

Importantly, the Sale Transactions also provide continued employment at closing for substantially

all of NPC’s employees employed at the acquired restaurants or who directly supervise day-to-day

operations at the acquired restaurants. As such, the Sale Transactions currently represent the

highest or otherwise best value for the Assets and are in the best interest of the Debtors’ estates,

creditors and other parties in interest. On January 25, 2021, the Court entered orders approving

the Sale Transactions [Docket Nos. 1474, 1475] (the “Sale Orders”). The Sale Transactions are

expected to close by the end of the second quarter 2021.

F. Driver Claimants Settlement

21. In 2017, certain delivery drivers for NPC brought an action against the

company entitled Collins v. NPC International, Inc., No. 17-cv-312 (S.D. Ill. Mar. 24, 2017) (the

13 The Wendy’s Eligible Assignees include: (1) Delight Restaurant Group to acquire the 54 Raleigh area restaurants,

(2) Legacy Restaurant Group to acquire the 35 Kansas City area restaurants, (3) Yellow Cab Holdings to acquire the 54 Pennsylvania area restaurants, and (4) Schmidt Family Restaurant Group & Superior Restaurant Group to each acquire approximately half of the 51 restaurants in the Greensboro area.


14

“Collins Action”), which was stayed as a result of the automatic stay in these chapter 11 cases.

Approximately 1,300 NPC delivery drivers filed proofs of claim in the chapter 11 cases (the

“Driver Claimants Group”), which largely adopted the allegations of the Collins Action. On

August 25, 2020 the Driver Claimants filed the Motion of the Driver Class Claimants for Leave to

File Class Proofs of Claim [Docket No. 507], pursuant to Rules 7023 and 9014 of the Bankruptcy

Code, requesting to treat the proofs of claim as class proofs of claim (the “7023 Motion”). The

Debtors filed an objection to the 7023 Motion on October 6, 2020, arguing that the Court should

not apply Rule 7023 to the proofs of claim filed by the Driver Claimants and that the Driver

Claimants failed to establish the elements for class certification under Rule 23 of the Federal Rules

of Civil Procedure. See Debtors’ Opposition to Motion of the Driver Class Claimants for Leave

to File Class Proofs of Claim [Docket No. 770].

22. On September 23, 2020, one of the same named plaintiffs in the Collins

Action commenced Marshall v. Weber et al., Case No. 20-00757-cv-W-NKL (W.D. Mo.) (the

“Marshall Action”) against certain of the Debtors’ officers raising the same claims as those first

asserted in the Collins Action. Because of the duplicative nature of the Marshall Action, on

October 12, 2020, the Debtors filed the Emergency Motion of the Debtors for Entry of an Order

Extending the Automatic Stay to Certain of Debtors’ Officers [Docket No. 789] (the “Motion to

Extend the Stay”), which was granted by the Court on October 20, 2020 [Docket No. 827]. In

addition, the Debtors filed an estimation motion [Docket No. 912] (the “Estimation Motion”),

seeking to estimate the Driver Claimants’ claims in the amount of zero dollars for all purposes,

including allowance, voting, reserves, and distributions under the Plan.

23. Over the past few months, the Debtors have engaged in both extensive

litigation and extensive negotiations with the Driver Claimants to resolve consensually their


15

prepetition and postpetition claims. After agreeing to an expedited estimation schedule, the parties

exchanged of a large number of documents, expert reports and rebuttal reports, and took more than

a dozen fact and expert depositions. Contemporaneously, the parties agreed to mediate before

Judge Marvin Isgur [Docket No. 1108] in an effort to consensually resolve all issues, including

the estimation of the Driver Claimants’ claims, and the claims asserted against certain of NPC’s

officers in the Marshall Action. As a result of over four weeks of mediation, which included the

submission of confidential mediation documents, in-person mediation sessions, and subsequent

phone and email conversations between the parties and the mediator, the mediator made a

comprehensive mediator’s settlement proposal. The Debtors and the Driver Claimants agreed to

accept the proposal and that proposal is now memorialized in the Plan (the “Driver Claimants

Settlement”), which provides for, among other terms: (i) class certification of the Driver

Claimants Certified Class solely for settlement purposes; (ii) treatment of the Driver Claimants’

administrative, priority, and general unsecured claims subject to certain specified caps; (iii)

amounts held by the Wind Down Co for distribution in accordance with the Driver Claimants

Settlement (the “Driver Claimants Recovery Reserve”); (iv) notice to all persons in the Driver

Claimants Certified Class in a form mutually agreed upon by the Debtors and the Driver Claimants

Group Counsel (the “Driver Claimants Settlement Election and Participation Form”), and an

administrative expense claims bar date forty-five (45) days following the date of filing a notice of

occurrence of the Effective Date; (v) payment in the amount of $2,250,000 on account of fees and

expenses incurred by the Driver Claimants’ counsel; (vi) express provisions that the settlement

cannot be used as precedent; (vii) releases of the Debtors’ current and former directors, officers,

employees, and managing agents (including the named defendants in the Marshall Action); and

(viii) dismissal of the Collins and Marshall actions.


16

G. Standing & UCC Settlement

24. On October 29, 2020, the Creditors’ Committee filed Motion of the Official

Committee of Unsecured Creditors for an Order Granting Leave, Standing and Authority to

Commence, Prosecute and Settle Claims on Behalf of the Debtors’ Estates [Docket Nos. 928

(redacted) and 931 (sealed)] (the “Standing Motion”). In the Standing Motion, the Creditors’

Committee sought derivative standing in order to bring claims on the Debtors’ estates behalf

against various of the Debtors’ creditors.14 In response, the Debtors submitted Debtors’

Opposition to Motion of the Official Committee of Unsecured Creditors for an Order Granting

Leave, Standing and Authority to Commence, Prosecute and Settle Claims on Behalf of the

Debtors’ Estates [Docket No. 1292 (redacted) and 1305 (sealed)] (the “Debtors’ Standing

Opposition”) among other responsive pleadings demonstrating that the claims alleged in the

Standing Motion would result in no material benefits to the Debtors’ estates, and the Debtors’

decision to not pursue the lien challenge litigation was well reasoned and in the best interest of the

Debtors’ estates.

25. In order to avoid undue delay in prosecuting confirmation of the Plan, the

parties maintained an expedient discovery and briefing schedule, while dual-tracking settlement

discussions in an attempt to allow for a consensual resolution of the Standing Motion and related

confirmation concerns raised by the Creditors’ Committee. After hard-fought negotiations, which

included the exchange of multiple term sheets and several rounds of iterative discussions regarding

the underlying issues between the Debtors, the Creditors’ Committee, the Ad Hoc Priority/1L

Group and their respective advisors, the parties agreed to a settlement memorialized in the Section

14 The parties agreed and stipulated to a briefing and discovery schedule in advance of the hearing on the Standing

Motion, which was set to be heard contemporaneously with confirmation on December 15, 2020. See Docket No. 1035.


17

5.2(b) of the Plan (the “UCC Settlement”), which provides for, among other terms, (i) $3 million,

which constitutes proceeds of the collateral securing the First Lien Secured Claims, to be funded

and administered pursuant to a trust (the “GUC Trust”)15 in accordance with applicable trust

documents; (ii) non-waived, non-sponsor litigation claims will be transferred into the GUC Trust

(the “GUC Trust Causes of Action”); (iii) $500,000 in funding for the administration of the GUC

Trust (the “GUC Trust Reserve”); and (iv) (a) the abeyance of the Standing Motion until the

Effective Date and (b) on the Effective Date, if the Sale Transactions have occurred, the Standing

Motion shall be deemed resolved and withdrawn with prejudice and the Challenge Period (as

defined in the Cash Collateral Order) shall be deemed expired.

ARGUMENT

26. This Memorandum is divided into four parts. Part I addresses the

requirements for confirmation of the Plan under section 1129 of the Bankruptcy Code and

demonstrates the satisfaction of each such requirement and the achievement of the objectives of

chapter 11 of the Bankruptcy Code. Part II addresses certain modifications to the Plan. Part III

responds to certain limited outstanding objections to confirmation of the Plan. Part IV addresses

the entry of the Proposed Confirmation Order and the Debtors’ request for a waiver of the 14-day

stay imposed by operation of Bankruptcy Rule 3020(e).

I. THE PLAN SATISFIES SECTION 1129 OF THE BANKRUPTCY CODE AND SHOULD BE APPROVED

27. To achieve confirmation of the Plan, the Debtors must demonstrate by a

preponderance of the evidence that the Plan satisfies section 1129(a) of the Bankruptcy Code.

15 Pursuant to the Plan, holders of First Lien Deficiency Claims and Second Lien Deficiency Claims shall not be

entitled to receive beneficial interests in the GUC Trust to be distributed on a Pro Rata basis to holders of Allowed General Unsecured Claims. However, holders of Second Lien Deficiency Claims that are not Crossholder Claim Holders (as defined in the Plan) shall be entitled to the proceeds, if any, from the GUC Trust Causes of Action, on a Pro Rata Basis. See Plan §§ 1.34-1.37.


18

Heartland Fed. Sav. & Loan Ass’n v. Briscoe Enters., Ltd., II (In re Briscoe Enters., Ltd., II) 994

F.2d 1160, 1165 (5th Cir. 1993) (“The combination of legislative silence, Supreme Court holdings,

and the structure of the [Bankruptcy] Code leads this Court to conclude that preponderance of the

evidence is the debtor’s appropriate standard of proof both under § 1129(a) and in a cramdown.”).

Through filings with the Court and the evidence to be presented at the confirmation hearing,

including the Confirmation Declarations, the Voting Certification, and any testimony that may be

adduced at the confirmation hearing, the Debtors will demonstrate, by a preponderance of the

evidence, that all of the applicable subsections of section 1129 of the Bankruptcy Code have been

satisfied with respect to the Plan, and, therefore, the Plan should be confirmed.

A. Section 1129(a)(1): The Plan Complies with All Applicable Provisions of the Bankruptcy Code

28. Pursuant to section 1129(a)(1) of the Bankruptcy Code, a plan must comply

with the applicable provisions of the Bankruptcy Code. The legislative history of

section 1129(a)(1) of the Bankruptcy Code explains that this provision encompasses the

requirements of sections 1122 and 1123 of the Bankruptcy Code governing the classification of

claims and the contents of the plan, respectively. See S. REP. NO. 95-989, at 126 (1978); H.R. REP.

NO. 95-595, at 412 (1977); see also Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.),

843 F.2d 636, 648-49 (2d Cir. 1988). As demonstrated below, the Plan fully complies with the

requirements of sections 1122 and 1123 of the Bankruptcy Code, as well as with all other

applicable provisions of the Bankruptcy Code and thereby satisfies section 1129(a)(1) of the

Bankruptcy Code.

a. Section 1122: The Plan’s Classification of Claims and Interests is Proper

29. Section 1122 of the Bankruptcy Code provides that “a plan may place a

claim or an interest in a particular class only if such claim or interest is substantially similar to the


19

other claims or interests of such class.” 11 U.S.C. § 1122(a). In accordance with this section, a

plan may provide for multiple classes of claims or interests so long as each claim or interest within

a class is substantially similar to the other claims or interests in that class and no party has asserted

the Plan provides otherwise. See In re Coastal Broad. Sys., Inc., 570 F. App’x 188, 193 (3d Cir.

2014); see also In re Idearc Inc., 423 B.R. 138, 160 (Bankr. N.D. Tex. 2009) (“[A] plan may

provide for multiple classes of claims or interests so long as each claim or interest within a class

is substantially similar to other claims or interests in that class.”), subsequently aff’d sub nom. 662

F.3d 315 (5th Cir. 2011). It is well established that a “plan proponent is afforded significant

flexibility in classifying claims under section 1122(a) of the Bankruptcy Code provided there is a

reasonable basis for the classification scheme and all claims within a particular class are

substantially similar.” In re Pisces Energy, LLC, No. 09-36591-HS, 2009 WL 7227880, at *8

(Bankr. S.D. Tex. Dec. 21, 2009); see also In re Sentry Operating Co. of Tex., Inc., 264 B.R. 850,

860 (Bankr. S.D. Tex. 2001) (“Most of the commentators agree that §1122 is permissive of any

classification scheme that is not proscribed.”). To determine whether claims are “substantially

similar,” courts have held that the proper focus is on “the legal character of the claim as it relates

to the assets of the debtor.” In re AOV Indus., Inc., 792 F.2d 1140, 1150-51 (D.C. Cir. 1986)

(emphasis in original); see also In re Tribune Co., 476 B.R. 843, 855 (Bankr. D. Del. 2012)

(concluding that phrase “substantially similar” reflects “the legal attributes of the claims, not who

holds them” (internal quotation marks omitted)), aff’d as modified, Case No. 12-CV-1072 GMS,

2014 WL 2797042 (D. Del. June 18, 2014), aff’d in part, rev’d in part, 799 F.3d 272 (3d Cir.

2015).


20

30. The Plan designates the following classes of Claims and Interests:

Class Designation Treatment Entitled to Vote 1 Other Secured Claims Unimpaired No (Presumed to accept) 2 Other Priority Claims Unimpaired No (Presumed to accept)

2A Driver Claimant Priority T1 Claims Unimpaired No (Presumed to accept pursuant to Driver Claimants Settlement)

2B Driver Claimant Priority T2 Claims Unimpaired No (Presumed to accept pursuant to Driver Claimants Settlement)

3 Priority Term Loan Secured Claims Unimpaired No (Presumed to accept) 4 First Lien Secured Impaired Yes 5 Second Lien Secured Claims Impaired Yes 6 General Unsecured Claims Impaired Yes 7 Intercompany Claims Unimpaired No (Presumed to accept) 8 Subordinated Claims Impaired No (Deemed to reject) 9 Existing Equity Interests Impaired No (Deemed to reject)

10 Intercompany Interests Unimpaired No (Presumed to accept) See Plan § 3.3. Generally, the Plan incorporates a “waterfall” classification and distribution

arrangement that follows the statutory priorities prescribed by the Bankruptcy Code. The Plan

permissibly provides for the separate classification of Claims against and Interests in the Debtors

based upon differences in the legal nature or priority of such Claims and Interests in accordance

with applicable law, generally grouping secured claims based on the particular priority of the debt

facilities or instruments that created the secured obligations underlying such claims and unsecured

claims separately. See JPMorgan Chase Bank, N.A. v. Charter Commc’ns Operating, LLC (In re

Charter Commc’ns), 419 B.R. 221, 264 n.35 (Bankr. S.D.N.Y. 2009) (explaining that debtors

“enjoy considerable discretion when classifying similar claims in different classes”). The Plan’s

classifications were not implemented for improper purposes, and its Classes do not unfairly

discriminate between holders of Claims and Interests.

b. Section 1123(a): The Plan’s Content is Appropriate

31. Section 1123(a) of the Bankruptcy Code sets forth seven requirements with

which the proponent of every chapter 11 plan, other than individual debtors, must comply. See


21

11 U.S.C. § 1123(a)(1)–(7). As demonstrated herein, the Plan fully complies with each of these

enumerated requirements.

• Pursuant to 11 U.S.C. § 1123(a)(1): Section 3.3 of the Plan designates the separate Classes of Claims and Interests.

• Pursuant to 11 U.S.C. § 1123(a)(2): Articles III and IV of the Plan specify any Class of Claims or Interests that is unimpaired under the Plan. Class 1 (Other Secured Claims), Class 2 (Other Priority Claims), Class 2A (Driver Claimant Priority T1 Claims), Class 2B (Driver Claimant Priority T2 Claims), Class 3 (Priority Term Loan Secured Claims), Class 7 (Intercompany Claims) and Class 10 (Intercompany Interests) are unimpaired under the Plan within the meaning of section 1124 of the Bankruptcy Code (collectively, the “Unimpaired Classes”).

• Pursuant to 11 U.S.C. § 1123(a)(3): Articles III and IV of the Plan specify any Class of Claims or Interests that is impaired under the Plan. Class 4 (First Lien Secured Claims), Class 5 (Second Lien Secured Claims), Class 6 (General Unsecured Claims), Class 8 (Subordinated Claims), and Class 9 (Existing Equity Interests) are impaired under the Plan within the meaning of section 1124 of the Bankruptcy Code (collectively, the “Impaired Classes”).

• Pursuant to 11 U.S.C. § 1123(a)(4): Article IV of the Plan specifies, except as a holder of a particular Claim or Interest may agree to less favorable treatment, the treatment of each Claim or Interest in a particular Class is the same as the treatment of each other Claim or Interest in such Class.

• Pursuant to 11 U.S.C. § 1123(a)(5): Article V of the Plan and the various documents and agreements set forth in the Plan Supplement provides adequate means for the Plan’s implementation, including (a) the sources of consideration for Plan distributions, see Plan § 5.3; (b) the wind down and dissolution of the Debtors and the establishment of a Wind Down Co, including the authority of the Plan Administrator to carry out and implement all provisions of the Plan, see Plan § 5.4; and (c) the cancellation of liens, see Plan § 5.11.

• 11 U.S.C. § 1123(a)(6) does not apply because the Plan provides for the dissolution of the Debtors.

• Pursuant to 11 U.S.C. § 1123(a)(7): Section 1.157 of the Plan specifies Redan Advisors, LLC shall be appointed as Plan Administrator, whose appointment and designation is consistent with the interests of creditors and equity security holders and with public policy. In addition, Section 5.18 of the Plan provides for the manner in which the GUC Trustee will be selected in accordance with the GUC Trust Agreement.


22

32. Moreover, no party has objected to confirmation on the basis that the

Debtors have failed to satisfy section 1123(a) of the Bankruptcy Code. In light of the foregoing,

the Debtors respectfully submit that the Plan satisfies section 1123(a) of the Bankruptcy Code.

c. Section 1123(b): The Plan’s Content is Permitted

33. Section 1123(b) of the Bankruptcy Code sets forth the permissive

provisions that may be incorporated into a chapter 11 plan. See 11 U.S.C. § 1123(b)(1)–(6). As

demonstrated below, the Plan complies with section 1123(b) of the Bankruptcy Code.

• Pursuant to 11 U.S.C. § 1123(b)(1): Articles III and IV of the Plan classify and describe the treatment of each Impaired and Unimpaired Class, as discussed above. Both Impaired and Unimpaired Classes are receiving appropriate treatment under the Plan.

• Pursuant to 11 U.S.C. § 1123(b)(2): Article VIII of the Plan provides for the rejection of all executory contracts and unexpired leases as of the Effective Date unless otherwise provided in the Plan. In accordance with the Disclosure Statement Order, the Debtors filed and served, as Exhibit D to the Plan Supplement, the Schedule of Assumed Contracts. With respect to the Sale Transactions, all unexpired leases identified on the Schedule of Assumed Contracts to which any of the Debtors are parties shall be deemed assumed upon entry of the Confirmation Order, and the unexpired leases to which any of the Debtors are parties shall subsequently be deemed assigned and executory contracts shall be deemed assumed and assigned in accordance with the Bid Procedures, the A&R Flynn APA and the Wendy’s APA, as applicable, and Sale Orders.

• Pursuant to 11 U.S.C. § 1123(b)(3)(A): The settlements and compromises contemplated by Section 5.2 of the Plan represent a good faith compromise of Claims, Interests, and controversies relating to the contractual, legal, and subordination rights that a Claim or Interest holder may have with respect to any Allowed Claim or Interest or any distribution to be made on account of such Allowed Claim or Interest. In addition, Section 10.7(a) of the Plan provides for the release of claims and Causes of Actions owned by the Debtors.

• Pursuant to 11 U.S.C. § 1123(b)(3)(B): Section 5.13 of the Plan preserves for the GUC Trust the right to pursue any Retained Causes of Action, including any actions specifically enumerated in the Schedule of Retained Causes of Action, other than Avoidance Actions and the Causes of Action released by the Debtors pursuant to the releases and exculpations contained in the Plan. The Retained Causes of Action do not include any causes of action transferred to any of the Successful Bidders.

• Pursuant to 11 U.S.C. § 1123(b)(4): The Debtors separately sought approval to proceed with the Sale Transactions to sell their Assets free and clear of any and all liens, claims, and encumbrances in accordance with sections 363(f) of the Bankruptcy Code, therefore,


23

section 1123(b)(4) of the Bankruptcy Code is not applicable. On January 25, 2021, the Court approved the Sale Transactions. See Sale Orders at [Docket Nos. 1474, 1475].

• Pursuant to 11 U.S.C. § 1123(b)(5): Article IV of the Plan modifies the rights of holders of Claims and Interests in the Impaired Classes and leaves unaffected the rights of holders of Claims and Interests in the Unimpaired Classes.

• Pursuant to 11 U.S.C. § 1123(b)(6): The Plan contains certain provisions for, among other things: (a) distributions to holders of Claims and Interests; (b) the resolution of Disputed Claims; (c) the allowance of certain claims; (d) the release, injunction, and exculpation provisions set forth in Article X of the Plan; and (e) the retention of this Court’s jurisdiction for any matter arising in or under, or related to, the chapter 11 cases, in each case consistent with the applicable provisions of the Bankruptcy Code and the law of the United States Court of Appeals for the Fifth Circuit (the “Fifth Circuit”).

34. As discussed below, these provisions of the Plan are appropriate and comply

with applicable law.

Settlements and Compromises Embodied in the Plan are Integral Components of the Plan and Should be Approved

35. Section 5.2 of the Plan provides that, in consideration for the distributions

and other benefits provided pursuant to the Plan, the Plan includes a good-faith compromise and

settlement of all Claims, Interests, and controversies relating to the contractual, legal, and

subordination rights that a creditor or an interest holder may have with respect to any Allowed

Claim or Allowed Interest, or any distribution to be made on account of such Allowed Claim or

Allowed Interest. Here, the settlements and compromises embodied in the Plan should be

approved because they are fair and equitable and in the best interest of the Debtors’ estates.

a. Driver Claimants Settlement

36. The Driver Claimants Settlement was the product of extensive arm’s-length

negotiations, aided by an experienced mediator, after extensive litigation and discovery between

the parties, which included the exchange of relevant documents and expert reports, and the taking

of more than a dozen depositions. The parties ultimately agreed on a compromise embodied in a

comprehensive and detailed mediator’s proposal.


24

37. The Court should approve the Driver Claimants Settlement and find that (i)

class certification solely for the purposes of settlement is appropriate based on the consent of the

parties; (ii) the Driver Claimants Settlement is appropriate under Bankruptcy Rule 9019 as it is a

fair and reasonable settlement for the Debtors under the circumstances of these chapter 11 cases;

and (iii) the Driver Claimants Settlement is approved on a preliminary and final basis pursuant to

Rule 23 of the Federal Rules of Civil Procedure (“Civil Rule 23”), as made applicable herein by

Bankruptcy Rule 7023.16

A Class Should be Approved for Settlement Purposes Only

38. As discussed infra, the Debtors and the Driver Claimants have reached a

class-wide settlement agreement. The Court has not yet ruled on the Driver Claimants’ 7023

Motion, and for settlement purposes only, the Debtors withdraw their opposition to the Driver

Claimants’ 7023 Motion and consent to a settlement class as follows:

All delivery drivers who were employed by the Debtors in the Pizza Hut Business after (i) January 1, 2014, through the date that the Debtors’ Second Amended Joint Chapter 11 Plan, which was filed in the Bankruptcy Court on January 18, 2021 (the “Plan”) becomes effective (the “Effective Date”) or (ii) January 1, 2007 solely in the States of Illinois, Kentucky, Oklahoma, Oregon, or Florida through the Effective Date.17

39. Courts in this Circuit routinely certify classes based on consent of the parties

for settlement purposes only. See Frost v. Oil States Energy Servs, L.L.C., No. 4:15–cv–1100,

2015 WL 12780763, at *1 (S.D. Tex Nov. 19, 2015) (“The Court orders that the Settlement Class

is certified for settlement purposes only. The fact that the parties were willing to stipulate to

16 The Driver Claimants will be filing a separate brief in support of the settlement under Civil Rule 23. This

Memorandum appropriately focuses on approving the Driver Claimants Settlement under Bankruptcy Rule 9019.

17 The Debtors reserve their rights to oppose the Driver Claimants’ 7023 Motion and any motions for class or collective action certification should the Driver Claimants Settlement fail to obtain approval from this Court.


25

class/collective action certification for settlement purposes shall have no bearing on, and will not

be admissible in connection with, the issue of whether a class/collective action is properly certified

in any non-settlement context.”); see also Wolfe v. Anchor Drilling Fluids USA Inc., No. 4:15-cv-

1344, 2015 WL 12778393, at *2 (S.D. Tex. Dec. 7, 2015) (“The Court orders that the classes are

certified for settlement purposes only.”); In re MetroCorp Bancshares, Inc., S’holders Litig., No.

4:13-cv-03198, 2014 WL 12599395, at *1 (S.D. Tex. Oct. 23, 2014) (“The Court hereby certifies

for settlement purposes only, pursuant to Rules 23(a), 23(b)(1) and 23(b)(2) of the Federal Rules

of Civil Procedure”); Al’s Pals Pet Care v. Woodforest Nat’l Bank, NA, No. 4:17-cv-3852, 2019

WL 387409, at *3 (S.D. Tex. Jan. 30, 2019) (“The Court specifically determines that, for

settlement purposes only, the class meets all the requirements of Federal Rule of Procedure Rule

23(a) and (b)(3)”).

40. Indeed, Courts routinely certify classes for settlement purposes despite

parties’ history of contesting class certification prior to settlement. See Strong v. BellSouth

Telecomms. Inc., 137 F.3d 844, 847 (5th Cir. 1998) (certifying a class for settlement purposes

despite the parties’ previously contesting class certification); In re Beef Indus. Antitrust Litig., 607

F.2d 167, 170 (5th Cir. 1979) (affirming the district court’s certification of a settlement class; the

parties reached a settlement before the district court had the opportunity to rule on named

plaintiffs’ class certification motion); Garza v. Sporting Goods Props., No. SA–93–CA–108, 1996

WL 56247, at *2 (W.D. Tex. Feb. 6, 1996) (the parties briefed a class certification motion before

the court but “[p]rior to [the] Court’s determination of the [class certification] issue, the parties

reached the proposed settlement, and the defendants agreed to class certification for settlement

purposes only”); Slipchenko v. Brunel Energy, Inc., No. H-11-1465, 2015 WL 338358 (S.D. Tex.

Jan. 23, 2015) (approving a settlement after initial opposition to merits-based classwide


26

certification); In re Petrobras Sec. Litig., 317 F. Supp. 3d 858, 864 (S.D.N.Y. 2018), aff’d, 784 F.

App’x 10 (2d Cir. 2019) (same); Ohio Pub. Emps. Ret. Sys. v. Gen. Reinsurance Corp. (In re Am.

Int’l Grp., Inc. Sec. Litig.), 689 F.3d 229, 234-38 (2d Cir. 2012) (vacating the district court’s order

denying motion to certify a settlement class; defendant initially contested class certification but

later agreed for settlement purposes).

41. The Fifth Circuit has expressly recognized an “overriding public interest in

favor of settlement . . . [p]articularly in class action suits.” In re Deepwater Horizon, 739 F.3d 790,

807 (5th Cir. 2014); see also Smith v. Crystian, 91 F. App’x. 952, 955 (5th Cir. 2004)

(acknowledging the “strong judicial policy favoring the resolution of disputes through settlement”

and affirming both class certification and settlement approval); Tittle v. Enron Corp. (In re Enron

Corp. Sec., Derivative & “ERISA” Litig.), 228 F.R.D. 541, 559 (S.D. Tex. 2005) (“settlements are

favored and encouraged in federal court”); In re Oil Spill by Oil Rig Deepwater Horizon in Gulf

of Mexico, 910 F. Supp. 2d 891, 930-31 (E.D. La. 2012) (“because the public interest strongly

favors the voluntary settlement of class actions there is a strong presumption in favor of finding

the settlement fair, reasonable, and adequate”). In light of these considerations, the proposed

Driver Claimants settlement class should be certified on a conditional and final basis, for

settlement purposes only.

Approval of Settlement is Warranted under Bankruptcy Rule 9019

42. Bankruptcy Rule 9019 empowers courts to approve settlements or

compromises within chapter 11. The standard for evaluating the validity of a settlement contained

in a chapter 11 plan is the same as the standard for evaluating a settlement between a debtor and

another party outside the context of a plan as long as the plan settlement does not violate statutory

priority. Stated differently, settlement provisions in a chapter 11 plan must satisfy the standards

used to evaluate compromises under Bankruptcy Rule 9019. See In re Bigler LP, 442 B.R. 537,


27

543 n.6 (Bankr. S.D. Tex. 2010) (citing, inter alia, In re MCorp Fin., Inc., 160 B.R. 941, 951 (S.D.

Tex. 1993)). “Approval should only be given if the settlement is ‘fair and equitable and in the best

interest of the estate.’” Official Comm. of Unsecured Creditors v. Cajun Elec. Power Coop., Inc.

(In re Cajun Elec. Power Coop.), 119 F.3d 349, 355 (5th Cir. 1997) (quoting Conn. Gen. Life Ins.

Co. v. United Cos. Fin. Corp. (In re Foster Mortg. Corp.), 68 F.3d 914, 917 (5th Cir. 1995)).

43. “In determining whether a settlement is fair and equitable, [courts] apply

[a] three-part test . . . with a focus on comparing ‘the terms of the compromise with the likely

rewards of litigation.’” Official Comm. Of Unsecured Creditors v. Moeller (In re Age Ref., Inc.),

801 F.3d 530, 540 (5th Cir. 2015) (quoting Rivercity v. Herpel (In re Jackson Brewing Co.), 624

F.2d 599, 602 (5th Cir. 1980) (internal quotation marks omitted)). Specifically,

[a] bankruptcy court must evaluate: (1) the probability of success in litigating the claim subject to settlement, with due consideration for the uncertainty in fact and law; (2) the complexity and likely duration of litigation and any attendant expense, inconvenience, and delay; and (3) all other factors bearing on the wisdom of the compromise. These “other” factors—the so-called Foster Mortgage factors—include: (i) “the best interests of the creditors, ‘with proper deference to their reasonable views’”; and (ii) “‘the extent to which the settlement is truly the product of arms-length bargaining, and not of fraud or collusion.’”

Id. (citing Jackson Brewing, 599 F.2d at 602 and quoting Cajun Elec. Power Coop., 119 F.3d at

356; Foster Mortg., 68 F.3d at 917–18). “[I]t is unnecessary to conduct a mini-trial to determine

the probable outcome of any claims waived in the settlement.” Cajun Elec. Power Coop., 119

F.3d at 356.

Settlement is Favorable to the Debtors Under the Circumstances of these Chapter 11 Cases

44. The first Jackson Brewing factor evaluates the probability of success of

litigation giving due consideration for the uncertainty in both fact and law. See Cadle Co. v. Mims

(In re Moore), 608 F.3d 253, 263 (5th Cir. 2010). In re Age Ref., Inc., 801 F.3d at 540 (finding


28

that the first Jackson Brewing factor is satisfied because of the Court’s prediction that “the success

of the Committee's position would [ultimately] rest on an appeal”); In re Palacios, No. 14-70076,

2016 WL 361569, at *12 (Bankr. S.D. Tex. Jan. 27, 2016) (finding the first Jackson Brewing factor

satisfied because the success of litigation was “risky” and the settlement agreement appropriately

considered the interests of the class at large); In re Derosa-Grund, 567 B.R. 773, 787 (Bankr. S.D.

Tex. 2017) (“the probability of the Trustee ultimately prevailing . . . is less than fifty percent”).

45. Here, the parties’ respective positions on liability and various procedural

complexities create ample uncertainty concerning the ultimate outcome of an estimation hearing.

The Driver Claimants have asserted that on a class-wide basis, pre-petition damages exceed $320

million, priority claims amount to $25.6 million, and administrative expenses through the end of

2020 equal approximately $34 million.18 Although the Debtors remain confident in their position

and the prospects of success on the merits, ongoing litigation would carry significant risk and cost

for the Debtors. The controversies subject to estimation are “sufficiently substantial and the

resolution of the controversies sufficiently uncertain to support the reasonableness” of the Driver

Claimants Settlement. In re ASARCO LLC, No. 05–21207, 2009 WL 8176641, at *13 (Bankr.

S.D. Tex. June 5, 2009). The Driver Claimants Settlement, which is at a substantial discount to

these amounts, takes the probabilities of success into account.

46. Furthermore, if the parties were to move forward with an estimation

hearing, the Debtors risk the Court estimating the Driver Claimants’ claims at a value incompatible

with the confirmation of a Plan, which is overwhelmingly supported by voting creditors, the

18 See Objection of the Driver Class Claimants to Motion of Debtors For Entry of an Order (I) Approving Proposed

Disclosure Statement; (II) Establishing Solicitation and Voting Procedures; (III) Scheduling Confirmation Hearing; (IV) Establishing Notice and Objection Procedures For Confirmation of the Proposed Plan; and (V) Approving Notice and Objection Procedures For the Assumption of Executory Contracts and Unexpired Leases, dated Oct. 14, 2020 [Docket No. 798] ¶¶ 37-39 (the “Driver Claimants’ DS Objection”).


29

significant majority of the holders of the Debtors’ funded debt and the Creditors’ Committee,

thereby frustrating the consensus the Debtors have worked to achieve over the past several months.

In addition, the Driver Claimants Settlement resolves potential indemnification claims from

officers arising from the defense by the Debtors’ officers of the Marshall action.

47. This settlement is preferable to litigation over the proofs of claim, in light

of the myriad litigation risks and uncertainties that remain. The Driver Claimants Settlement

provides certainty to the Debtors and the estates, and avoids a tangible threat to the feasibility of

the Debtors’ Plan and consensual restructuring. Although the Debtors continue to believe that the

Driver Claimants’ claims are without merit, the Driver Claimants Settlement is at a level that takes

those probabilities into account in the Debtors’ reasonable business judgment.

Settlement is Favorable to the Debtors Given the Complexity and Likely Duration of the Litigation

48. The second Jackson Brewing factor evaluates the complexity and likely

duration of the litigation and any attendant expense, inconvenience, and delay. Compare Official

Comm. Of Unsecured Creditors v. Moeller (In re Age Ref., Inc.), 801 F.3d 530, 540 (5th Cir. 2015)

(approving bankruptcy decision finding in favor of settlement where trial and potential for appeal

“would be costly, and would seriously delay the resolution of [the] case.”) with Lack’s Valley

Stores, Ltd. v. Smith (In re Smith), 541 B.R. 629, 638 (Bankr. S.D. Tex. 2015) (“The litigation

would consequently not be expected to last for a lengthy period of time, given the low complexity

of the case and given the parties' previously demonstrated willingness to compromise. A

compromise would therefore not be expected to save the estate from great expense and

inconvenience.”); see also In re Palacios, 2016 WL 361569, at *12 (the second Jackson Brewing

factor is satisfied in part because litigation had been ongoing for a period of years before entering

bankruptcy).


30

49. Although the proofs of claim filed by the delivery drivers have been on this

Court’s docket only for a short period of time, the Collins Action has been pending in the United

States District Court for the Southern District of Illinois since early 2017. Furthermore, one of the

same named plaintiffs in the Collins Action filed a separate action, the Marshall Action, raising

the same issues as those brought in the Collins Action, against three senior officers of NPC. The

Driver Claimants Settlement proposes to resolve not only the proofs of claim in the chapter 11

cases but also the Marshall Action and the potential indemnity claims by these officers against the

Debtors in connection with the Marshall action.

50. Without a settlement, the complexity of this dispute is two-fold: (1) a threat

to the current chapter 11 proceedings, as previously discussed, and (2) the potential for new

litigation against officers of NPC in the Western District of Missouri, with corresponding claims

by officers for indemnity. See also In re Derosa-Grund, 567 B.R. at 788 (considering expense of

litigation, possibility of appeal, and burden to both the estate the courts to find the second Jackson

Brewery factor satisfied). As such, the Driver Claimants Settlement is favorable to the Debtors as

it avoids the risks and burdens of additional potential litigation.

Other Factors Bearing on the Wisdom of the Compromise Support Approving the Settlement

51. The third factor under Jackson Brewing asks the court to evaluate “[a]ll

other factors bearing on the wisdom of the compromise.” In re Jackson Brewing, 624 F.2d at

602 (citations omitted); In re Allied Props., LLC, No. 06-33754, 2007 WL 1849017, at *4 (Bankr.

S.D. Tex. June 25, 2007). These “other” factors—the so-called Foster Mortgage factors—include:

(i) “the best interests of the creditors, ‘with proper deference to their reasonable views’”; and

(ii) “‘the extent to which the settlement is truly the product of arms-length bargaining, and not of

fraud or collusion.’” Cajun Elec. Power Coop., 119 F.3d at 356; In re Wright, 545 B.R. 541, 563


31

(Bankr. S.D. Tex. 2016). The Driver Claimants Settlement is in the best interests of the creditors

and is the product of arm’s-length bargaining.

The Debtors’ Key Creditor Constituencies Support the Driver Claimants Settlement

52. Courts recognize “the paramount interest of creditors and a proper

deference to their respective views.” In re Moore, 608 F.3d at 263; In re Foster Mortg. Corp., 68

F.3d 914 at 917 (“While the desires of the creditors are not binding, a court ‘should carefully

consider the wishes of the majority of the creditors.’”) (quoting Davis v. Jackson (In re Transcon.

Energy Corp.), 764 F.2d 1296 (9th Cir. 1985)). Here, the Creditors’ Committee was provided

frequent updates on the status of the mediation and monitored the significant discovery and

pleadings filed in the estimation process and is supportive of the Debtors’ Plan, including the

settlements therein. Moreover, the Ad Hoc Priority/1L Group, who also monitored the pleadings

filed in connection with the Estimation Motion, participated in, and were consulted by the Debtors

with respect to the mediation, are also supportive of the Driver Claimants Settlement. As such,

the Driver Claimants Settlement is supported by key creditor constituencies as in the best interests

of the estates.

The Settlement was the Result of Good Faith, Arm’s-Length Negotiations Informed by Substantial Discovery

53. The Driver Claimants Settlement is the result of good faith, arm’s-length

negotiations informed by significant discovery. There is no evidence of any fraud or collusion in

reaching the Driver Claimants Settlement—the settlement was reached after a weeks-long court-

supervised mediation, and the meditator’s comprehensive and detailed proposal formed the basis

of the agreement among the parties. See In re Derosa-Grund, 567 B.R. at 792 (noting that where

a proposed settlement is negotiated through counsel, there is little reason to believe it is not arm’s-

length).


32

54. Although discovery in advance of an estimation hearing was conducted on

an expedited timeline, the parties were well-informed and had extensive appreciation of the merits

prior to settlement. Indeed, the underlying action here began in 2017, with many of the same

attorneys litigating since that time on both sides. With respect to discovery conducted in advance

of the estimation hearing, by December 31, 2020, the parties had completed: (i) the production of

numerous documents; (ii) exchange of interrogatory responses; (iii) 17 fact and expert depositions;

and (iv) the exchange of expert reports and expert rebuttal reports. See Slack Decl. at ¶¶ 4-10. An

agreement to settle was reached just over twenty-four (24) hours before the parties’ direct

declarations providing direct testimony for fact and expert witnesses were due in connection with

the estimation hearing.

55. Further, the mediation involved a significant further exchange of

information among the parties (with the mediator as a go-between), including financial and other

information, to aid the parties in reaching a settlement. The parties to the mediation also shared

mediation briefs and engaged with the mediator in a series of meetings, phone calls and emails

over a nearly four week period. It was only after these various exchanges that the mediator

presented a detailed mediator’s proposal that both the Debtors and the Driver Claimants accepted

on New Year’s Eve. See Slack Decl. at ¶13.

56. In light of this procedural history, the Debtors possessed sufficient

information to evaluate the merits of the claims. See In re ASARCO LLC, 2009 WL 8176641, at

*11 (settlement agreements were approved following both formal and informal negotiation,

extensive expert analysis, and a formal mediation); In re Wright, 545 B.R. 541 at 564 (where

“there is no evidence to conclude that the Settlement was anything but arms-length in its bargain”

and “[a]ll parties at the Settlement were represented by counsel” this factor is easily satisfied).


33

57. The Driver Claimants Settlement clearly satisfies the requirements under

Bankruptcy Rule 9019. The Driver Claimants Settlement, agreed to by the Debtors and the Driver

Claimants, and supported by the Debtors’ key stakeholders, was reached after extensive

negotiation aided by an experienced mediator and a comprehensive mediator’s settlement

proposal. The Driver Claimants Settlement should be approved because the Debtors have

established that it “falls within the range of reasonable litigation alternatives.” In re Roqumore,

393 B.R. 474, 80 (Bankr. S.D. Tex. 2008).

The Notice to the Driver Claimants of the Settlement is Appropriate Under the Circumstances Here

58. The Driver Claimants Settlement requires the Debtors to serve the Driver

Claimants Settlement Election and Participation Form on members of the proposed Driver

Claimants Class, informing them of the ability to participate in the settlement consideration or to

decide not to participate in the settlement and not be bound by the releases in favor of the officers,

including those in the Marshall action.19 A copy of the proposed Notice of Settlement of Class

Action and Settlement Election and Participation Form is attached hereto as Exhibit B (with the

Driver Claimants Settlement Election and Participation Form attached as Exhibit 2 thereto).

b. Second Lien Settlement

59. By virtue of the Second Lien Settlement set forth in the RSA Amendment,

the Debtors have agreed to the treatment of Second Lien Claims under the Plan by a substantial

majority of the Second Lien Lenders in exchange for, among other terms, their vote to accept the

Plan, their support of the Plan, and agreement to not take any action that would hinder or delay the

19 The Debtors will use reasonable commercial efforts to provide appropriate notice to the Driver Claimants. In using

reasonable efforts with respect to providing notice, the Debtors will review and use where appropriate the Debtors’ current books and records or information provided to the Debtors by counsel for the Driver Claimants.


34

restructuring. Specifically, pursuant to the Plan and in accordance with the terms of the Second

Lien Settlement, under a Sale Transaction, holders of Second Lien Secured Claims shall receive

the remaining Sale Proceeds (if any) after the Allowed Priority Term Loan Secured Claims and

the Allowed First Lien Secured Claims are satisfied in full, the UCC Settlement Amount and GUC

Trust Reserve are funded to the GUC Trust, and the Wind Down Fund has been fully funded.20

As discussed below, the Debtors respectfully submit that the Second Lien Settlement satisfies the

requirements of Bankruptcy Rule 9019 and the settlement standard applied by courts in the Fifth

Circuit.

60. First, the Second Lien Settlement provides for certain treatment of Allowed

Second Lien Secured Claims. Absent a settlement, the Debtors would likely have faced

contentious litigation from multiple creditor constituencies, including the Ad Hoc Second Lien

Group at confirmation. In reaching the settlement, the Debtors balanced the risks associated with

potential litigation with the Ad Hoc Second Lien Group with the benefit of obtaining their support

for the Plan. Second, litigating the treatment of claims resolved by the Second Lien Settlement

would have prolonged these chapter 11 cases and substantially delayed or precluded the Debtors’

ability to successfully consummate the Plan and Sale Transactions. Given the Debtors’ limited

resources, any litigation would directly impact the Sale Proceeds available for distribution under

the Waterfall. Indeed, the Debtors and their estates have already avoided significant costs by

agreeing to the settlement terms nearly three (3) months ago. Moreover, by gaining the Ad Hoc

Second Lien Group’s support for the Plan, the Debtors were able to position themselves to in turn,

20 However, by virtue of the UCC Settlement, the Consenting First Lien Lenders retain the right to receive Plan

Distributions that would otherwise be made on account of any Second Lien Deficiency Claims from any source other than the GUC Trust Causes of Action pursuant to the 1L/2L Intercreditor Agreement including, without limitation, the turnover provisions. See Plan § 4.8; 1L/2L Intercreditor Agreement §§ 2.01, 6.04, 6.05.


35

engage in settlement discussions with the Creditors’ Committee in advance of confirmation. Third,

the Second Lien Settlement is in the best interest of the Debtors’ creditors. Two of the Debtors’

significant stakeholders—the Ad Hoc Priority/1L Group and the Ad Hoc Second Lien Group—

participated in rigorous settlement discussions and ultimately agreed that the treatment embodied

in the Plan fairly addressed their respective claims and was in their best interests. This fair

treatment is further evidenced by creditors’ overwhelming support for the Plan. See Exhibit B,

Voting Certification. Lastly, the Debtors and the Ad Hoc Second Lien Group are represented by

competent and experienced professionals and the Second Lien Settlement is the product of

vigorous, arm’s-length negotiations by such sophisticated parties.

61. On this record, the Second Lien Settlement is fair and equitable and should

be approved.

c. UCC Settlement

62. Throughout these chapter 11 cases, the Debtors have worked

collaboratively to resolve the issues raised by the Creditors’ Committee, and to the extent possible,

agree on a consensual path forward. To be clear, the UCC Settlement was hard-fought and is the

successful result of rigorous negotiations and discussions over the course of several months. And

through the UCC Settlement, the Debtors have gained the support of the Creditors’ Committee—

no doubt a key constituency—which the Debtors believe is critical to efficiently consummating

the Plan and closing these chapter 11 cases. The UCC Settlement has resulted in, among other

things, (i) the establishment of the GUC Trust, which will be funded with $3 million in cash (from

Sale Proceeds) and be administered by the GUC Trustee; (ii) each holder of an Allowed General

Unsecured Claim (other than First Lien and Second Lien Deficiency Claims) will receive its Pro

Rata Share of the GUC Trust Assets; (iii) the payment of certain reasonable expenses of the GUC

Trust, first from the GUC Trust Reserve, and second, from the GUC Trust Assets; (iv) proceeds,


36

on a Pro Rata Basis, of any litigation of any GUC Trust Causes of Action,21 which may include

the prosecution, settlement, abandonment or dismissal of any such Causes of Action; (v)

distributions to holders of Allowed General Unsecured Claims as provided in the Plan and in the

GUC Trust Agreement; and (vi) the Creditors’ Committee supporting and not objecting to the

Plan. Moreover, on the Effective Date, if the Sale Transactions have occurred, the Creditors’

Committee’s Standing Motion shall be deemed resolved and withdrawn with prejudice and the

Challenge Period shall be deemed expired. As discussed below, the Debtors respectfully submit

that the UCC Settlement satisfies the requirements set forth under Bankruptcy Rule 9019 and

applicable law in the Fifth Circuit.

63. First, the UCC Settlement delivers significant value to the Debtors’ estates

and all creditors. The UCC Settlement resolves a host of alleged claims and causes of action that

would have resulted in costly litigation that could have depleted estate assets and likely caused

significant delays in reaching confirmation. Even if the Creditors’ Committee was entirely

successful in its challenge, the relief sought would not have resulted in any incremental value for

the Debtors’ estates, but rather merely the reallocation of value from secured creditors to unsecured

creditors (including to the same secured creditors, in their capacities as holders of unsecured

deficiency claims) at a significant cost. Accordingly, when taking into account the nature of the

claims asserted (which the Debtors believe are meritless) compared to the value that would be

drained from the estates based on the cost of pursuing the Creditors’ Committee’s claims, the

limited value that would be transferred to unsecured creditors even if the Creditors’ Committee

were successful, and the risk to general unsecured creditors of an adverse ruling on the Standing

21 Holders of Second Lien Deficiency Claims that are not holders of Crossholder Claims (as defined in the Plan) shall

be entitled to their Pro Rata share of the proceeds, if any, from the GUC Trust Causes of Action.


37

Motion, in which case holders of General Unsecured Claims would receive no recovery under the

Waterfall, the settlement delivers significant value to unsecured creditors and eliminates the

administrative expense the litigation would generate, benefiting all parties.

64. Second, pursuant to the UCC Settlement, the Creditors’ Committee has

agreed to support the Plan, thereby removing any barriers the Creditors’ Committee could have

interposed to confirmation of the Plan. Without the UCC Settlement and the compromises

contained therein, the Debtors would have faced a litigious confirmation process, with the

possibility of jeopardizing consummation of Plan to the detriment of all stakeholders.

65. Third, the UCC Settlement is the result of vigorous good-faith, arm’s length

negotiations between the Debtors, the Ad Hoc Priority/1L Group, and the Creditors’ Committee

represented by able counsel and financial advisors. On this record, the UCC Settlement is fair and

equitable and should be approved.

66. Importantly, no party has objected to the settlements embodied in the Plan.

As reflected by the largely consensual nature of the Plan and the overwhelming support from

creditors, the settlements are in the best interest of creditors and all parties in interest. In fact, the

Ad Hoc Priority/1L Group, the Driver Claimants Group, and the Creditors’ Committee all filed

statements in support of the Plan.

The Plan’s Releases, Injunction, and Exculpation Provisions Should Be Approved

67. The Plan provides for the release and discharge of certain claims by the

Debtors and their estates (the “Debtors’ Releases”) and the release of certain claims held by

certain holders of Claims and Interests (the “Third-Party Releases”), the release of certain claims

held by the Driver Claimants (the “Driver Claimants Releases” and together with the Third-Party

Releases, the “Non-Debtor Releases”), as well as for the exculpation of the Exculpated Parties

(as defined below). The Debtors’ Releases, the Third-Party Releases, the Injunction Provisions


38

(as defined below), and the Exculpation Provision (as defined below) are integral components of

the Plan, consistent with the Bankruptcy Code, and compliant with the applicable case law and

precedent in the Fifth Circuit. Moreover, the Debtors’ Releases, the Non-Debtor Releases, the

Injunction Provisions, and the Exculpation Provision are the product of extensive, arm’s-length

negotiations with key stakeholders conducted in good faith. And importantly, the Debtors have

resolved all objections to the Plan on the basis of such provisions. As such, and for the reasons set

forth below, the Debtors’ Releases, the Non-Debtor Releases, the Injunction Provisions, and the

Exculpation Provision should be approved.

The Debtors’ Releases Are Appropriate and Should Be Approved

68. Under section 1123(b)(3)(A) of the Bankruptcy Code, a chapter 11 plan

may provide for the “settlement or adjustment of any claim or interest belonging to the debtor or

to the estate.” See, e.g., Bigler, 442 B.R. at 547 (plan release provision “constitutes an acceptable

settlement under § 1123(b)(3) because the Debtors and the Estate are releasing claims that are

property of the Estate in consideration for funding of the Plan”); In re Heritage Org., LLC, 375

B.R. 230, 308 (Bankr. N.D. Tex. 2007) (“[T]he plain language of § 1123(b)(3) provides for the

inclusion in a plan of a settlement of claims belonging to the debtor or to the estate . . . .”)

(emphasis omitted); In re Gen. Homes Corp., 134 B.R. 853, 861 (Bankr. S.D. Tex. 1991) (“To the

extent that . . . the plan purports to release any causes of action against the [creditor] which the

Debtor could assert, such provision is authorized by § 1123(b)(3)(A) . . . .”). In considering the

appropriateness of such releases, courts consider whether the release is (i) “fair and equitable” and

(ii) “in the best interest of the estate.” See Jackson Brewing, 624 F.2d at 602 (citing Protective

Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424–25

(1968)); Bigler, 442 B.R. at 543 n.6; In re Derosa-Grund, 567 B.R. 773, 784–85 (Bankr. S.D. Tex.


39

2017); see also In re Mirant Corp., 348 B.R. 725, 738 (Bankr. N.D. Tex. 2006); Heritage, 375

B.R. at 259.

69. The “fair and equitable” prong is generally interpreted, consistent with that

term’s usage in section 1129(b) of the Bankruptcy Code, to require compliance with the

Bankruptcy Code’s absolute priority rule. See Cajun Elec. Power, 119 F.3d at 355–56 (“The words

‘fair and equitable’ are terms of art—they mean that senior interests are entitled to full priority

over junior ones”) (citations omitted); see also Mirant, 348 B.R. at 738 (“‘[F]air and equitable’

translates to the absolute priority rule”). Additionally, courts generally determine whether a

release is “in the best interests of the estate” by reference to the following factors:

• The probability of success of litigation, with due consideration for the uncertainty in fact and law;

• The complexity and likely duration of the litigation and any attendant expense, inconvenience, and delay, including the difficulties, if any, to be encountered in the matter of collection;

• The paramount interest of the creditors and a proper deference to their respective views;

• The extent to which the settlement is truly the product of arm’s length bargaining and not fraud or collusion; and

• All other factors bearing on the wisdom of the compromise.

See Moore, 608 F.3d at 263; Foster Mortg., 68 F.3d at 917–18; see also Derosa-Grund, 567 B.R.

at 784-85; Roqumore, 393 B.R. at 479-80.

70. In determining whether a settlement is appropriate and should be approved,

“a bankruptcy court need not ‘conduct a mini-trial’ [but] [r]ather . . . must ‘apprise [itself] of the

relevant facts and law so that [it] can make an informed and intelligent decision.’” See Age Refin.,

801 F.3d at 541 (citations omitted). Although the debtor bears the burden of establishing that a

settlement is fair and equitable based on the balance of the above factors, “the [debtor’s] burden is

not high.” See Roqumore, 393 B.R. at 480. Indeed, the court need only determine that the


40

settlement does not “fall beneath the lowest point in the range of reasonableness.” See Idearc, 423

B.R. at 182, subsequently aff’d sub nom. 662 F.3d 315 (5th Cir. 2011) (citations omitted);

Roqumore, 393 B.R. at 480 (“The Trustee need only show that his decision falls within the ‘range

of reasonable litigation alternatives.’”); In re Allied Props., LLC, No. 06-33754, 2007 WL

1849017, at *4–5 (Bankr. S.D. Tex. June 25, 2007) (same). Ultimately, courts afford debtors some

discretion in determining for themselves the appropriateness of granting plan releases of estate

causes of action. See Gen. Homes, 134 B.R. at 861 (“The court concludes that such a release is

within the discretion of the Debtor.”).

71. The Debtors’ Releases22 meet the controlling standard. The Plan is fair and

equitable because it complies with the Bankruptcy Code’s absolute priority rule as described in

more detail in Section I.N.b, infra. No Class of Claims or Interests junior to the Classes that are

deemed to reject the Plan—Class 8 (Subordinated Claims) and Class 9 (Existing Equity

Interests)—will receive a recovery under the Plan on account of such Claims or Interests.

Accordingly, the Plan is “fair and equitable” and, therefore, consistent with the requirements of

section 1129(b) of the Bankruptcy Code.

72. In addition to being fair and equitable, the Debtors’ Releases are in the best

interest of the estates. First, the Debtors do not believe that there exists any material claims against

the Released Parties.23 As the Court is aware, while the Creditors’ Committee previously asserted

22 The Debtors’ Releases are set forth in Section 10.7(a) of the Plan, which provides for a release of Certain Claims

and Causes of Action by the Debtors, the Wind Down Co, the Reorganized Debtors, and the Estates against the Released Parties (including any derivative claims, asserted or assertable on behalf of the Debtors, the Wind Down Co, the Reorganized Debtors, or their Estates), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, existing or hereinafter arising, in law, equity, contract, tort, or otherwise, by statute, violations of federal or state securities laws or otherwise.

23 “Released Parties” means (i) the Debtors, (ii) the Reorganized Debtors (if applicable), (iii) the Wind Down Co and Plan Administrator, (iv) Priority Lenders, First Lien Lenders, and Second Lien Lenders, in each case, which comprise Consenting Creditors, (v) the Sponsors, (vi) the Agents, (vii) the Creditors Committee and each of its members in their capacity as such, (viii) in the event of a consummated Sale Transaction, the Successful Bidders, and (ix) with respect to each of the foregoing Persons, in clauses (i) through (viii), all Related Parties.


41

certain estate claims against the Released Parties, the UCC Settlement resolves the claims and no

party has asserted otherwise. Moreover, there is no probability of success to litigating these claims.

As described in the Debtors’ Opposition to the Standing Motion, in NPC’s evaluation of strategic

alternatives in response to the NPC’s constricting liquidity position, at the direction of the Debtors’

independent special committee (the “Special Committee”), Weil investigated, among other

things, events related to the Sponsors’ control of the company since the merger in January 2018.

After reviewing certain material transactions and potential causes of action, Weil determined there

we no colorable claims against the Sponsors. This conclusion weighs heavily on the first factor,

which focuses on the probability of success and risks of litigation vis-à-vis settlement.

73. Second, any such potential claims against the Released Parties would be

subject to all defenses and would involve protracted litigation even if successful in this Court, thus

making collection difficult. The drain on estate resources based on unsubstantiated claims would

significantly outweigh any potential recovery (which the Debtors think would be zero) that could

be received. Third, all Voting Classes voted overwhelmingly in favor of the Plan, thus

demonstrating creditors’ approval of the Debtors’ Releases in the Plan. Fourth, the Plan, including

the Debtors’ Releases, were heavily negotiated pre- and postpetition by sophisticated parties that

were represented by able counsel and financial advisors. The result is an integrated compromise

that reflects true arm’s-length negotiations. Finally, in consideration of the Debtors’ Releases, the

Released Parties have, among other things (and as applicable): loaned approximately $40 million

to the Debtors on an emergency basis prior to the Petition Date; backstopped up to $150 million

of exit financing early in the chapter 11 cases, at a time when the Sale Transaction was not a certain

Notwithstanding the foregoing, any Person that opts out of the releases set forth in Section 10.7(b) of the Plan shall not be deemed a Released Party thereunder.


42

outcome; voted to accept the Plan pursuant to the RSA; consented to the use hundreds of millions

of dollars of postpetition cash collateral usage; supported key employee retention plans (“KERP”)

and key employee incentive plans (“KEIP”) for the Debtors’ management; negotiated in good

faith with the Debtors regarding disputed issues; provided postpetition services to the Debtors in

their capacity as officers or directors; and/or guided the Debtors through the sale of the Debtors’

assets and through the chapter 11 cases. Specifically, the Debtors’ officers and directors and

executive management team have managed multiple simultaneous sale processes and the demands

associated therewith, while maintaining their regular operational duties and the challenges

associated with managing the business in the midst of a global pandemic. The Debtors’ officers

and directors and executive management team were able to stabilize the Debtors’ operations during

the course of these chapter 11 cases in addition to ensuring the preservation of the Debtors’

business as a going concern and, by extension, the value of the Debtors’ estates.

74. Accordingly, the Debtors’ Releases are fair, equitable, and in the interest of

the estates, are consistent with prevailing Fifth Circuit law, and should be approved.

The Non-Debtor Releases Are Consensual, Appropriate and Should Be Approved

75. Under section 1123(b)(6) of the Bankruptcy Code, a chapter 11 plan may

“include any other appropriate provision not inconsistent with the applicable provisions of [the

Bankruptcy Code].” In addition to the Debtors’ Releases, Section 10.7(b) of the Plan provides for

certain Third-Party Releases and Section 10.7(c) of the Plan provides for Driver Claimant

Releases. Under Fifth Circuit law, third-party releases that are, as here, (i) consensual, (ii) specific

in language, (iii) integral to the Plan, (iv) a condition of the settlement, and (v) given for

consideration, do not violate the Bankruptcy Code and should be allowed and included in the Plan.

See In re Wool Growers Cent. Storage Co., 371 B.R. 768, 776 (Bankr. N.D. Tex. 2007)


43

(“Consensual nondebtor releases that are specific in language, integral to the plan, a condition of

the settlement, and given for consideration do not violate section 524(e).”); see also Hernandez v.

Larry Miller Roofing, Inc., 628 F. App’x 281, 286–88 (5th Cir. 2016) (discussing the specificity

requirement for third-party releases in Fifth Circuit); FOM P.R. S.E. v. Dr. Barnes Eyecenter Inc.,

255 F. App’x 909, 912 (5th Cir. 2007) (enforcing a nondebtor release where “the release of claims

was an integral part of the bankruptcy order [and] was not simply boilerplate language that was

inserted into the [reorganization plan], but rather a necessary part of the [reorganization plan]

itself”); Republic Supply Co. v. Shoaf, 815 F.2d 1046, 1050 (5th Cir. 1987) (upholding a third-

party release that was specifically provided for in confirmed plan); Hinojosa Eng’g, Inc. v. Lopez

(In re Treyson Dev., Inc)., No. 14-70256, 2016 WL 1604347, at *15–17 (Bankr. S.D. Tex. Apr.

19, 2016) (noting that “the Fifth Circuit require[s] that the language in the plan must be specific

as to the parties involved and the claim(s) released in order to be sufficient”).

76. The critical factor in determining whether a release is consensual is

whether—after the Debtors’ due process obligations of providing appropriate notice—“the

affected creditor timely objects to the provision.” See In re Wool Growers, 371 B.R. at 776 (citing

Feld v. Zale Corp. (In re Zale Corp.), 62 F.3d 746, 760–61 (5th Cir. 1995)) (emphasis added); see

also In re GenOn Energy, Inc., No. 17-33695 (DRJ) (Bankr. S.D. Tex. Dec. 12, 2017) [Docket

No. 1250] (approving third-party releases as consensual over objections from parties in interest,

including U.S. Trustee); In re Ameriforge Grp., Inc., No. 17-32660 (DRJ) (Bankr. S.D. Tex. May

22, 2017) [Docket No. 142] (overruling U.S. Trustee objection and confirming chapter 11 plan

where general unsecured creditors were deemed to have consented to third-party release provisions

unless they opted out of the same); In re Ultra Petrol. Corp., No. 16-32202 (MI) (Bankr. S.D. Tex.

Mar. 14, 2017) [Docket No. 1324] (confirming chapter 11 plan where general unsecured creditors


44

were unimpaired and deemed to have consented to third-party release provisions unless they opted

out of the same); In re Southcross Holdings, LP, No. 16-20111 (MI) (Bankr. S.D. Tex. Apr. 11,

2016), Conf. Hr’g Tr. at 42 [Docket No. 191] (debtors correctly characterized that release was

consensual as debtors provided extensive notice of plan and confirmation hearing and no party

specifically objected to plan’s release provisions). See, e.g., In re Warren Res., Inc., No. 16-32760

(MI) (Bankr. S.D. Tex. Sept. 14, 2016), Conf. Hr’g Tr. at 14 [Docket No. 352] (“If there are third-

party releases that are negotiated between the Debtor and third parties as part of their deal, that

doesn’t seem to me to really run afoul of anything.”). The release should be approved because it

is “an essential means of implementing [a p]lan pursuant to Section 1123(a)(5) of the Bankruptcy

Code.” In re Moody Nat’l SHS Hous. H, LLC, Ch. 11 Case No. 10-30172 (MI), 2010 WL 5116872,

at *5 (Bankr. S.D. Tex. June 30, 2010) (approving consensual nondebtor release).

77. Further, the Procedures for Complex Cases in the Southern District of Texas

(the “Complex Rules”) provide:

If a proposed plan seeks consensual releases with respect to claims that creditors may hold against non-debtor parties, then a ballot must be sent to creditors entitled to vote on the proposed plan and notices must be sent to non-voting creditors and parties in interest. The ballot and the notice must inform the creditors of such releases and provide a box to check to indicate assent or opposition to such consensual releases together with a method for returning the ballot or notice.

Complex Rules ¶ 36.

Third Party Releases

78. The Third-Party Releases24 are entirely consensual and satisfy the standard

for approval of third-party releases established by courts in the Fifth Circuit and should be

24 The Third Party Releases are set forth in Section 10.7(b) of the Plan, which provides the Released Parties will be

deemed conclusively, absolutely, unconditionally, irrevocably, and forever released and discharged, to the maximum extent permitted by law, by the Releasing Parties, in each case from any and all Claims and Causes of


45

approved. First, in soliciting votes on the Plan, the Debtors provided the Releasing Parties with

ample opportunity to opt-out of the releases:

• Ballots sent to all holders of Impaired Claims or Interests entitled to vote (as approved by the Court), stated in bold letters that certain releases were contained in the Plan and Disclosure Statement, restated the text of the releases in their entirety, and provided instructions for how to opt out of such releases. The Ballots clearly indicated that a vote in favor of the Plan constituted consent to the Third-Party Releases. The Ballots also indicated that Releasing Parties entitled to vote on the Plan who abstained from voting are deemed to have consented to the Third-Party Releases unless they affirmatively opted-out as explicitly stated on the Ballots.

• With respect to holders of Claims or Interests not entitled to vote on the Plan (and, therefore did not receive a Ballot), those holders received a Non-Voting Status Notice and Opt-Out Election Form (as approved by the Court). The Non-Voting Status Notice and Opt-Out Election Form clearly identified the releases and also provided recipients with ample opportunity to opt-out of the Third-Party Releases.

Therefore, all affected parties received sufficient notice of the Third-Party Releases and have had

ample time to raise any objections or opt-out. The Third-Party Releases apply only to holders of

Claims and Interests who, with full and proper notice, voted to accept the Plan or consented to

such releases by electing not to opt-out of the releases (as permitted on the Ballots and the Non-

Voting Status Notices). Accordingly, the Third-Party Releases are consensual as applied to

holders of Claims that did not opt-out, whether or not such holders cast a vote with respect to the

Plan and the Court should approve the Third-Party Releases.

Action whatsoever (including any derivative claims, asserted or assertable on behalf of the Debtors, the Wind Down Co, the Reorganized Debtors, or their Estates; such Claims or Causes of Action, (the “Additional Debtor Claims”), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, asserted or unasserted, accrued or unaccrued, existing or hereinafter arising, whether in law or equity, whether sounding in tort or contract, whether arising under federal or state statutory or common law, or any other applicable international, foreign, or domestic law, rule, statute, regulation, treaty, right, duty, requirement or otherwise. Notwithstanding the foregoing, the Third Party Releases do not release any individual from any claim related to an act or omission that is determined by a court of competent jurisdiction to have constituted a criminal act, intentional fraud, gross negligence or willful misconduct.


46

79. Second, the Third-Party Releases are sufficiently specific to put the

Releasing Parties on notice of the claims being released. The Third-Party Releases describe the

nature and type of claims being released, including any and all Claims and Causes of Action,

including those related to the restructuring of Claims and Interests before or during the chapter 11

cases, the Plan, and related agreements, instruments or other documents, and the negotiation,

formulation, preparation, execution, filing, and/or consummation of the Plan, the solicitation of

votes with respect to the Plan, and any other related act or omission.

80. Third, the Third-Party Releases are an integral part of the Plan and a

condition of the settlements set forth therein. The Third-Party Releases facilitated participation in

both the Plan and the chapter 11 process by the Released Parties and were critical in gaining their

support for the Plan and RSA, and the settlements embodied therein. Such participation and

support resulted in, among other matters, consensual use of cash collateral to fund these chapter

11 cases, support for the Debtors’ KERP and KEIP, backstop commitments of up to $150 million

in exit financing in the event of certain restructuring transactions, and a consensual confirmation

process. As such, the Third-Party Releases were a core negotiation point and appropriately offer

certain protections to parties that constructively participated in the chapter 11 cases.

81. Fourth, the Third-Party Releases are given for consideration. As noted in

Section I.A.c, supra, the Released Parties have played an extensive and integral role in the Debtors’

chapter 11 cases, including, among other matters, providing the Debtors with a $40 million

prepetition emergency loan, agreeing to the consensual use of cash collateral, negotiating the

Second Lien Settlement and UCC Settlement in good faith, agreeing to backstop up to $150 million

in exit financing early in these chapter 11 cases (and at a time when the results of the sale process

was uncertain), and agreeing to support the Plan and the confirmation thereof. These contributions


47

have, among other things, resulted in the largely consensual sale of substantially all of the Debtors’

assets and a consensual confirmation process. All parties in interest benefit from the transactions

contemplated by the Plan and the significant contributions of the Released Parties in furtherance

thereof.

Driver Claimants Releases

82. The Driver Claimants Releases25 are entirely consensual and satisfy the

standard for approval of third-party releases established by courts in the Fifth Circuit and should

be approved. First, the Driver Claimants Releases also operate as a consensual release as the

Driver Claimant Group affirmatively consented to the Driver Claimants Settlement, which

provides for the Driver Claimants Releases, and all Driver Claimants (except members of the

Driver Claimants Group) may decline to participate in the Driver Claimants Settlement after

receiving the Driver Claimants Settlement Election and Participation Form, thereby also not

providing the Driver Claimants Releases. In other words, Driver Claimants may voluntarily

choose to continue to litigate their claims against certain of the Debtors’ officers rather than

agreeing to the Driver Claimants Settlement. Furthermore, all Driver Claimants (other than the

Driver Claimants Group) will be served the Driver Claimants Settlement Election and Participation

25 The Driver Claimants’ Releases are set forth in Section 10.7(c) of the Plan, which provides for a release of all

claims arising out of or relating to, in whole or in part, the employment of the Driver Claimants by the Debtors through the Effective Date, including any Claims arising under or related to the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq., or any related or similar state wages and labor laws, and any Claims arising under or related to the Collins Action and the Marshall Action and the underlying facts that were or could have been pled in those actions in favor of all current and former directors, officers, employees, and managing agents of the Debtors, including, for the avoidance of doubt, the named defendants in the Marshall Action by the Driver Claimants (except any Driver Claimants that elect not to participate in the Driver Claimants Settlement), from any and all Claims and Causes of Action whatsoever, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, asserted or unasserted, accrued or unaccrued, existing or hereinafter arising, whether in law or equity, whether sounding in tort or contract, whether arising under federal or state statutory or common law, or any other applicable international, foreign, or domestic law, rule, statute, regulation, treaty, right, duty, requirement or otherwise, including, for the avoidance of doubt, any and all Claims and Causes of Action under the Collins Action and the Marshall Action.


48

Form, mutually agreed upon by the Driver Claimants Group that includes the specific terms of the

Driver Claimants Settlement, including the Driver Claimants Releases under Section 10.7(c) of

the Plan, which the Driver Claimant would be providing if the Driver Claimant does not

affirmatively decline to participate in the Driver Claimants Settlement. Accordingly, the Driver

Claimants Releases are consensual as applied to holders of Claims that fail to opt-out with respect

to the settlement.

83. Second, the Driver Claimant Releases are sufficiently specific to put the

Driver Claimants on notice of the claims being released. The Driver Claimants Releases describe

the nature and type of claims being released—including any claims against the Debtors’ officers

relating to, in whole, or in part, the employment of the Driver Claimants by the Debtors, including

any Claims arising under or related to 11 the Fair Labor Standards Act of 1938, 29 U.S.C. § 201

et seq., or any related or similar state wages and labor laws, and any claims arising under or related

to the Collins Action and the Marshall Action and the underlying facts that were or could have

been plead in those actions. Thus, the Driver Claimants will be put on notice of the released claims.

84. Third, the Driver Claimant Releases are an integral component of the Driver

Claimants Settlement Agreement. The settlement consensually and comprehensively resolves all

issues, including all alleged under reimbursement claims, the estimation process, the Collins

Action, the Marshall Action, and the 7023 Motion before this Court in addition to providing for

certain treatment of the Driver Claimants’ claims in the chapter 11 cases. The parties only agreed

to a consensual resolution after many months of rigorous negotiations and substantial concessions

made by each party as a result of the mediator’s settlement proposal, which entailed the release

provision (including the release of certain of Debtors’ officers who are defendants in the Marshall

Action) as an integral component.


49

85. Fourth, the Driver Claimants Releases are given for consideration. Absent

the Driver Claimants Settlement, the parties would likely have engaged in protracted and

expensive litigation to the detriment of all stakeholders. During the course of attempting to

consensually resolve the Driver Claimant’s claims, the Debtors were engaged in a comprehensive

sale process to sell substantially all of their assets—and any unresolved litigation (and attendant

expenses) posed potential risks to the sale process and confirmation of the Plan.

86. For all of these reasons, the Non-Debtor Releases are appropriate, consistent

with the case law and the precedent in the Fifth Circuit, and should be approved.

The Exculpation Provision is Appropriate and Should Be Approved

87. Section 10.8 of the Plan also contains a release and exculpation for the

Exculpated Parties26 (the “Exculpation Provision”). Under the Exculpation Provision, the

Exculpated Parties are exculpated from claims arising out of or relating to the Debtors’

restructuring, these chapter 11 cases, and the negotiations and agreements made in connection

therewith, with the exception for acts or omissions that are a criminal act or constitute intentional

fraud, gross negligence, or willful misconduct as determined by a Final Order.

88. Although the Fifth Circuit has limited parties’ use of exculpatory provisions

in certain circumstances, see, e.g., Bank of N.Y. Tr. Co. v. Official Unsecured Creditors’ Comm.

(In re Pac. Lumber Co.), 584 F.3d 229, 237, 251–52 (5th Cir. 2009) (contested plan confirmation

in “freefall” bankruptcy cases with five competing plans); Ad Hoc Grp. of Vitro Noteholders v.

26 “Exculpated Parties” means, collectively and in each case in their capacity as such during the chapter 11 cases:

(a) (i) the Debtors, (ii) the Reorganized Debtors, (iii) the Creditors’ Committee and each of its members in their capacity as such, and (iv) with respect to each of the foregoing Persons in clauses (a)(i) through (iii), such Persons’ Related Persons and their respective heirs, executors, estates, and nominees; (b) the Stalking Horse Purchaser and the Wendy’s Purchaser and their Related Parties; and (c) (i) the Consenting Creditors, (ii) each of the Agents (solely in their capacity as such), and (iii) with respect to each of the foregoing Persons in clauses (c) (i) and (ii), such Persons’ Related Persons, and their respective heirs, executors, estates, and nominees.


50

Vitro S.A.B. de CV (In re Vitro S.A.B. de CV), 701 F.3d 1031, 1061, 1068-69 (5th Cir. 2012)

(chapter 15 case seeking contested discharge of nondebtor guarantors based on insider votes to

accept Mexican concurso plan), provisions substantially similar to the Plan’s Exculpation

Provision have been approved in similarly complex chapter 11 cases in the Southern District of

Texas.27

89. Unlike the Non-Debtor Releases, the Exculpation Provision does not affect

the liability of third parties per se, but rather sets a standard of care of gross negligence, fraud, or

willful misconduct in hypothetical future litigation against an exculpated party for acts arising out

of the chapter 11 cases. See, e.g., In re PWS Holding Corp., 228 F.3d 224, 245 (3d Cir. 2000)

(holding that an exculpation provision “is apparently a commonplace provision in Chapter 11

plans, [and] does not affect the liability of these parties, but rather states the standard of liability

under the Code.”).

90. An exculpation provision represents a legal determination that flows from

several findings a court must reach in confirming a plan, as well as the exculpation in section

1125(e) of the Bankruptcy Code. See 28 U.S.C. § 157(b)(2)(L); 11 U.S.C. § 1125(e). Once the

court makes a good-faith finding, it is appropriate to set the standard of care of the parties involved

in the formulation of that plan. See In re PWS Holding, 228 F.3d at 246, 247 (observing that

27 See, e.g., In re Chesapeake Energy Co., Case No. 20-33233 (DRJ) (Bankr. S.D. Tex. Jan. 16, 2021) [Docket No.

2915] (order confirming chapter 11 plan and approving similar exculpation provision); In re J. C. Penney Co., Case No. 20-20182 (DRJ) (Bankr. S.D. Tex. Dec. 16, 2020) [Docket No. 2190] (order confirming chapter 11 plan and approving similar exculpation provision, including for purchasers among other non-estate fiduciaries); In re CEC Ent., Inc., Case No. 20-33163 (MI) (Bankr. S.D. Tex. Dec. 15, 2020) [Docket No. 1495] (order confirming chapter 11 plan and approving similar exculpation provision); In re EP Energy Corp., Case No. 19-35654 (MI) (Bankr. S.D. Tex. Aug. 27, 2020) [Docket No. 1411] (same); In re Exco Res. Inc., Case No. 18-30155 (MI) (Bankr. S.D. Tex. June 18, 2019) [Docket No. 2128] (same); In re Parker Drilling Co., Case No. 18-36958 (MI) (Bankr. S.D. Tex. Mar. 7, 2019) [Docket No. 459] (same); In re Expro Holdings US Inc., Case No. 17-60179 (DRJ) (Bankr. S.D. Tex. Jan. 25, 2018) [Docket No. 212] (same); In re GenOn Energy, Inc., No. 17-33695 (DRJ) (Bankr. S.D. Tex. Dec. 12, 2017) [Docket No. 1250] (same); In re Ultra Petrol. Corp., Case No. 16-32202 (MI) (Bankr. S.D. Tex. Mar. 14, 2017) [Docket No. 1324] (same).


51

creditors providing services to debtors are entitled to a “limited grant of immunity . . . for actions

within the scope of their duties . . . .”). As such, exculpation provisions prevent future collateral

attacks against estate fiduciaries and others that participate actively in the Debtors’ restructuring.

Here, the Exculpation Provision is appropriate as it provides protection to those parties, and each

of the Exculpated Parties has participated in the Debtors’ restructuring in good faith. Further,

granting such relief falls within the “fresh start” principles underlying the Bankruptcy Code.

See In re Pac. Lumber, 584 F.3d at 252-53. Indeed, courts in this circuit that have cast doubt on

plan exculpation provisions have done so only where the provision at issue exculpates non-debtor-

affiliated parties. See, e.g., id. at 251, 252. Nevertheless, such courts have still permitted

exculpatory relief for non-debtor parties where such parties owe duties in favor of the debtors or

their estates and act within the scope of those duties (excluding acts of fraud or gross negligence)

and others that participate actively in the Debtors’ restructuring. See In re Parker Drilling Co.,

Ch. 11 Case No. 18-36958 (MI) (Bankr. S.D. Tex. Mar. 7, 2019) [Docket No. 459] (confirmed

plan defining “exculpated parties” to include the indenture trustee); In re Vanguard Nat. Res., LLC,

Ch. 11 Case No. 17-30560 (MI) (Bankr. S.D. Tex. July 18, 2017) [Docket No. 1109] (same); In re

PWS Holding, 228 F.3d at 246, 247 (observing that creditors providing services to debtors are

entitled to a “limited grant of immunity . . . for actions within the scope of their duties . . . .”).

91. Here, the Exculpated Parties include fiduciaries of the Debtors’ estates. The

directors, officers, and advisors that have acted on the Debtors’ behalf in these cases owe duties to

the Debtors, and, therefore, exculpation for them, and for similar fiduciaries acting on behalf of

the Creditors’ Committee, is appropriate. See In re Pilgrim’s Pride, Ch. 11 Case No. 08–45664–

DML–11, 2010 WL 200000, at *5 (Bankr. N.D. Tex. Jan. 14, 2010) (“Debtors, serving through

their management and professionals as debtors in possession, acted in the capacity of trustees for


52

the benefit of their creditors . . . [t]o the extent Debtors acted in the Chapter 11 Cases, other than

in bad faith, pursuant to the authority granted by the Code or as directed by court order, Debtors’

management and professionals presumptively should not be subject to liability.”). While certain

of the Exculpated Parties—the Section 1125(e) Parties28 and the Successful Bidders—are not

fiduciaries of the Debtors’ estates, such parties provided substantial contributions to the Debtors’

estates during the restructuring and the protections afforded to them by the Exculpation Provision

is, therefore, reasonable and appropriate given the circumstances. Since the Successful Bidders

emerged as potential purchasers, such parties’ concerted efforts to consummate a sale transaction

have been instrumental to the restructuring process and generating support of the Plan from the

Debtors’ key stakeholders. In addition, without the support of the Section 1125(e) Parties, the

Debtors would not have been able to execute their chapter 11 strategy, consensually use cash

collateral during the chapter 11 cases, thereby avoiding a litigious process, and ultimately propose

and confirm a plan supported by virtually all creditor constituencies. The Exculpation Provision

provides necessary and customary protections to the Exculpated Parties, is narrowly tailored to

protect the Exculpated Parties from inappropriate litigation arising out of the administration of the

chapter 11 cases and does not release any claim based on any act or omission that is a criminal act

or constitutes intentional fraud, gross negligence or willful misconduct as determined by a Final

Order. The principal stakeholders (whether estate fiduciaries or otherwise) should not face

potential entanglement with meritless litigation for their willingness to engage in the restructuring

transactions and these chapter 11 cases. Failure to approve the Exculpation Provision would

28 “Section 1125(e) Parties” means, collectively, (i) the Consenting Creditors, (ii) each of the Agents (solely in their

capacity as such), and (iii) with respect to each of the foregoing Persons in clauses (i) and (ii), such Persons’ Related Persons, and their respective heirs, executors, estates, and nominees, each in their capacity as such.


53

undermine the purpose of the Plan and the settlements embodied therein by allowing parties to

pursue claims post-bankruptcy that are otherwise fully and finally resolved by the Plan.

92. Accordingly, the Exculpation Provision is an integral part of the Plan,

satisfies the governing standards in the Fifth Circuit and should be approved.

The Injunction Provision is Necessary and Customary

93. The injunction provisions set forth in Sections 10.6 and 10.9 of the Plan

include customary injunctions (the “Injunction Provisions”). The Injunction Provisions are

critical to the Plan because they provide certainty to the Debtors or the Plan Administrator, and

other parties in interest that the Plan will be enforceable in accordance with its terms. Moreover,

the Injunction Provisions are essential to protect the assets of the Debtors’ estates from potential

litigation from prepetition creditors on and after the Effective Date. Any such litigation would

hinder the Plan Administrator’s abilities to effectively fulfill its responsibilities as contemplated

by the Plan.

94. The Injunction Provisions are necessary to implement the discharges,

releases, and other provisions of the Plan, and for such reasons, similar Injunction Provisions have

been approved in other, similarly complex chapter 11 cases in the Southern District of Texas.29

29 See, e.g., Chesapeake Energy Co., Case No. 20-33233 (DRJ) (Bankr. S.D. Tex. Jan. 16, 2021) [Docket No. 2915]

(approving substantially similar injunction provision); J. C. Penney Co., Case No. 20-20182 (DRJ) (Bankr. S.D. Tex. Dec. 16, 2020) [Docket No. 2190] (same); In re CEC Ent., Inc., Case No. 20-33163 (MI) (Bankr. S.D. Tex. Dec. 15, 2020) [Docket No. 1495] (same); In re EP Energy Corp., Case No. 19-35654 (MI) (Bankr. S.D. Tex. Aug. 27, 2020) [Docket No. 1411] (same); In re Weatherford Int’l PLC, at ¶ 28, Case No. 19-33694 (DRJ) (Bankr. S.D. Tex. Sept. 11, 2019) [Docket No. 343] (same); In re Halcón Res. Corp., Case No. 19-34446 (DRJ) (Bankr. S.D. Tex. Sept. 24, 2019) [Docket No. 321] (same); In re Goodrich Petroleum Corp., ¶¶ 29, 108, Case No. 16-31975 (MI) (Bankr. S.D. Tex. Sept. 28, 2016) [Docket No. 531] (approving substantially similar injunction as being “necessary to implement, preserve, and enforce the Debtors’ discharge, the Debtor Releases, the Third-Party Release, and the Exculpation, and . . . narrowly tailored to achieve this purpose”); In re SandRidge Energy, Inc., ¶¶ 43, 88, Ch. 11 Case No. 16-32488 (DRJ) (Bankr. S.D. Tex. Sept. 20, 2016) [Docket No. 901] (approving substantially similar “injunction provisions [as being] essential to the Plan and are necessary to implement the Plan and to preserve and enforce the discharge, Debtor Release, the Third Party Release, and the exculpation provisions . . . .”).


54

To the extent the Court finds that the release provisions are appropriate, the Debtors respectfully

request that the Injunction Provisions be approved as well.

95. Based upon the foregoing, the Plan complies fully with the requirements of

sections 1122 and 1123 of the Bankruptcy Code. Accordingly, the Plan satisfies the requirements

of section 1129(a)(1) of the Bankruptcy Code.

Section 1123(c) of the Bankruptcy Code Does Not Apply to the Debtors

96. The Debtors are not individuals in these chapter 11 cases. Accordingly,

section 1123(c) of the Bankruptcy Code is not applicable to the Plan.

Plan Complies with Section 1123(d) of the Bankruptcy Code

97. Article VIII of the Plan provides for the cure of any default for each

executory contract and unexpired lease to be assumed pursuant to the Plan in accordance with

section 365(b)(1) of the Bankruptcy Code and for the amount necessary to cure any such default

in accordance with the underlying executory contract and unexpired lease and applicable

nonbankruptcy law. In accordance with Section 8.2 of the Plan and the Disclosure Statement

Order, the Debtors filed the Notice of Cure Amounts with Respect to Executory Contracts and

Unexpired Leases of Debtors in Connection with the Plan [Docket No. 1286]. All executory

contracts and unexpired leases that could potentially be assumed as of the Effective Date were

listed thereto with the applicable proposed cure costs. Notice of the specified cure costs was

provided to the applicable counterparty to each of the executory contracts and unexpired leases to

be assumed based on the Debtors’ books and records. Parties wishing to object to the assumption

of an executory contract and unexpired lease had until January 7, 2021 at 5:00 p.m. (Prevailing


55

Central Time) to object.30 If any such objection could not be resolved by the parties, the Debtors

adjourned their request to assume the executory contract or unexpired lease pending resolution.

Accordingly, the Plan complies with section 1123(d) of the Bankruptcy Code.

B. Section 1129(a)(2): Debtors Have Complied with the Provisions of the Bankruptcy Code

98. Section 1129(a)(2) of the Bankruptcy Code requires that the plan proponent

comply with the applicable provisions of the Bankruptcy Code. The legislative history for

section 1129(a)(2) of the Bankruptcy Code reflects that this provision is intended to encompass

the disclosure and solicitation requirements provided under sections 1125 and 1126 of the

Bankruptcy Code. See H.R. REP. NO. 95-595, at 412 (1977); S. REP. NO. 95-989, at 126 (1978)

As demonstrated below, the Debtors have complied with the applicable provisions of the

Bankruptcy Code, including the provisions of sections 1125 and 1126 of the Bankruptcy Code, as

well as with the Disclosure Statement Order, regarding disclosure and Plan solicitation.

a. Section 1125: Postpetition Disclosure and Solicitation

99. Section 1125(b) of the Bankruptcy Code provides, in pertinent part, that:

An acceptance or rejection of a plan may not be solicited after the commencement of [a] case under [the Bankruptcy Code] from a holder of a claim or interest with respect to such claim or interest, unless, at the time of or before such solicitation, there is transmitted to such holder the plan or a summary of the plan, and a written disclosure statement approved, after notice and a hearing, by the court as containing adequate information.

11 U.S.C. § 1125(b).

100. After notice and a hearing and pursuant to the Disclosure Statement Order

entered on October 30, 2020, the Court approved the Disclosure Statement as containing adequate

30 Notwithstanding anything in the Plan, in the event of a Sale Transaction, the terms of the Bid Procedures, Sale

Documents, and any other related orders of the Bankruptcy Court to the extent inconsistent with the terms of the Plan, shall govern the assumption of executory contracts and unexpired leases with respect to the Sale Transaction.


56

information of a kind and in sufficient detail to enable hypothetical, reasonable investors typical

of the Debtors’ holders of Claims to make an informed judgment regarding whether to vote to

accept or reject the Plan, as required pursuant to section 1125(b) of the Bankruptcy Code.

101. As set forth in the Voting Certification, each holder of a Claim or Interest

was sent the solicitation materials required by the Disclosure Statement Order, including, with

respect to holders of Claims entitled to vote, the Disclosure Statement, the Plan, the notice of the

confirmation hearing, and an applicable form of ballot and return envelope. See Voting

Certification at ¶9. Those holders of Claims and Interests who were not entitled to vote received

the Disclosure Statement Order, the notice of the confirmation hearing, and the applicable Non-

Voting Status Notice. Id. at ¶14. The solicitation materials were transmitted in compliance with

section 1125 of the Bankruptcy Code and the Disclosure Statement Order.

b. Section 1126: Acceptance or Rejection of the Plan

102. As set forth in the Voting Certification and above, the Debtors solicited

votes to accept or reject the Plan from the holders of claims in each of the Impaired Classes entitled

to receive distributions pursuant to the Plan in accordance with section 1126 of the Bankruptcy

Code. The Impaired Classes entitled to vote to accept or reject the Plan were: Class 4 (First Lien

Secured Claims), Class 5 (Second Lien Secured Claims), and Class 6 (General Unsecured Claims).

103. The Debtors did not solicit votes to accept or reject the Plan from any

holders of claims and interests in Class 1 (Other Secured Claims), Class 2 (Other Priority Claims),

Class 3 (Priority Term Loan Secured Claims), Class 7 (Intercompany Claims), and Class 10

(Intercompany Interests), as such classes are unimpaired and, therefore, deemed to have accepted

the Plan pursuant to section 1126(f) of the Bankruptcy Code. In addition, the Debtors did not

solicit votes to accept or reject the Plan from any holders of claims in Class 2A (Driver Claimant

Priority T1 Claims) and Class 2B (Driver Claimant Priority T2 Claims) as each such Class is


57

unimpaired and conclusively presumed to accept the Plan pursuant to the Driver Claimants

Settlement.

104. The Debtors also did not solicit votes to accept or reject the Plan from any

holders of Claims and Interests in Class 8 (Subordinated Claims) and Class 9 (Existing Equity

Interests) as such classes do not receive or retain any distribution or property on account of their

Claims and Interests and, therefore, are conclusively deemed to have rejected the Plan pursuant to

section 1126(g) of the Bankruptcy Code.

105. Section 1126(c) of the Bankruptcy Code specifies the requirements for the

acceptance of a plan by impaired classes of claims and interests entitled to vote to accept or reject

such plan:

A class of claims has accepted a plan if such plan has been accepted by creditors, other than any entity designated under subsection (e) of this section, that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors, other than any entity designated under subsection (e) of this section, that have accepted or rejected such plan.

11 U.S.C. § 1126(c).

106. As evidenced by the Voting Certification, the holders of claims in Class 4

(First Lien Secured Claims) and Class 6 (General Unsecured Claims) have voted to accept the Plan

in accordance with section 1126 of the Bankruptcy Code (together, the “Accepting Classes”).31

All claims in Class 5 (Second Lien Secured Claims) were tabulated in Class 6 (General Unsecured

Claims) for voting purposes only pursuant to the Disclosure Statement Order. However, as

discussed below, the Debtors have satisfied the requirements of section 1129(a)(10) of the

31 Under the Sale Transactions, the First Lien Deficiency Claims amount to $88 million and the Second Lien

Deficiency Claims amount to $160 million. In accordance with the Disclosure Statement Order, the First Lien Deficiency Claims and the Second Lien Deficiency Claims (which amount to the entirety of the Second Lien Secured Claims) were temporarily allowed for voting purposes only in Class 6 (General Unsecured Claims). See Disclosure Statement Order ¶14-16.


58

Bankruptcy Code, and will be able to “cram down” Class 8 (Subordinated Claims) and Class 9

(Existing Equity Interests) under section 1129(b) of the Bankruptcy Code.

C. Section 1129(a)(3): Plan Has Been Proposed in Good Faith and Not by Any Means Forbidden by Law

107. Section 1129(a)(3) of the Bankruptcy Code requires that a plan be

“proposed in good faith and not by any means forbidden by law.” 11 U.S.C. § 1129(a)(3). “The

requirement of good faith must be viewed in light of the totality of the circumstances surrounding

establishment of a Chapter 11 plan, keeping in mind the purpose of the Bankruptcy Code is to give

debtors a reasonable opportunity to make a fresh start.” Fin. Sec. Assurance v. T-H New Orleans

L.P. (In re T-H New Orleans L.P.), 116 F.3d 790, 802 (5th Cir. 1997); W. Real Estate Equities

L.L.C. v. Vill. At Camp Bowie I, L.P. (In re Vill. at Camp Bowie I, L.P.), 710 F.3d 239, 247 (5th

Cir. 2013) (“Good faith should be evaluated ‘in light of the totality of the

circumstances’ . . . mindful of the purposes underlying the Bankruptcy Code.”) (citing In re Cajun

Elec. Power, 150 F.3d at 519). “Where the plan is proposed with the legitimate and honest purpose

to reorganize and has a reasonable hope of success, the good faith requirement of § 1129(a)(3) is

satisfied.” T-H New Orleans, 116 F.3d at 802; Brite v. Sun Country Dev., Inc. (In re Sun Country

Dev., Inc.), 764 F.2d 406, 408 (5th Cir. 1985); In re Star Ambulance Serv., LLC, 540 B.R. 251,

262 (Bankr. S.D. Tex. 2015). “[T]o be proposed in good faith, a plan must fairly achieve a result

consistent with the [Bankruptcy] Code.” In re Cypresswood Land Partners, I, 409 B.R. 396, 425

(Bankr. S.D. Tex. 2009) (quoting Ronit, Inc. v. Stemson Corp. (In re Block Shim Dev. Co.-Irving),

939 F.2d 289, 292 (5th Cir. 1991)). “It does not require the bankruptcy judge to determine whether

the ends achieved in the plan contravene non-bankruptcy law.” Star Ambulance, 540 B.R. at 263.

108. Here, in satisfaction of their fiduciary duties, the Debtors and their advisors,

under the supervision and direction of the Debtors’ independent Special Committee, have proposed


59

the Plan in good faith and for the legitimate and honest purposes of maximizing recoveries to their

creditors. The Plan is the culmination of months of rigorous negotiations—both before and after

the Petition Date—to successfully develop a viable path to restructure the Debtors’ business. The

Debtors initially negotiated the toggle Plan structure with the support of the Consenting Creditors

to provide flexibility and to best position the Debtors’ efforts to maximize value on an efficient

timeline. After conducting a robust and competitive marketing and sale process, pursuant to the

Court approved Bid Procedures and with the oversight of the Debtors’ independent Special

Committee, the Debtors in their business judgement and in consultation with the Consenting

Creditors and with the ultimate consent of the Franchisors, decided the Sale Transactions

maximized value and was in the best interest of all stakeholders. Now, the Debtors seek

confirmation of the Plan, solely with respect to the Sale Transactions,32 to maximize value and

efficiently and effectively wind down the remaining estates pursuant to the liquidating trust

agreement.

109. The Plan is the successful culmination of, extensive arm’s-length settlement

negotiations between the Debtors and a number of their key economic stakeholders, including the

Ad Hoc Priority/1L Group, the Ad Hoc Second Lien Group, the Creditors’ Committee and the

Driver Claimants. With each settlement embodied in the Plan, the Debtors’ Plan gained further

consensus and support. The result is a largely consensual and confirmable Plan overwhelmingly

supported by the Debtors’ creditors, including the Creditors’ Committee in lieu of a Plan opposed

by those same parties and subject to protracted and expensive litigation. These facts are the

hallmarks of good faith. See In re Lincolnshire Campus, LLC, 441 B.R. 524, 530 (Bankr. N.D.

32 In the event the Debtors seek confirmation of this Plan with respect to the Reorganization Transaction, the Debtors

will seek separate Court approval.


60

Tex. 2010) (holding that a plan was proposed in good faith where plan was developed and

negotiated at arm’s length among representatives of debtors and other major parties in interest); In

re Chemtura Corp., 439 B.R. 561, 608–09 (Bankr. S.D.N.Y. 2010) (finding that a plan was

proposed in good faith where, among other things, the debtor negotiated and reached agreements

with several parties in interest to put forward a chapter 11 plan which “in the aggregate . . .

demonstrate[d] a good faith effort on the part of the debtor to consider the needs and concerns of

all major constituencies” in case).

110. Accordingly, the Plan satisfies the requirements of section 1129(a)(3) of the

Bankruptcy Code.

D. Section 1129(a)(4): Plan Provides that Professional Fees and Expenses Are Subject to Court Approval

111. Under section 1129(a)(4) of the Bankruptcy Code, “[a]ny payment made or

to be made by the proponent . . . for services or for costs and expenses in or in connection with the

case, or in connection with the plan and incident to the case, has been approved by, or is subject

to the approval of, the court as reasonable.” 11 U.S.C. § 1129(a)(4); see Mabey v. Sw. Elec. Power

Co. (In re Cajun Elec. Power Coop.), 150 F.3d 503, 514–15 (5th Cir. 1998) (explaining that section

1129(a)(4) ensures that payments for professional services connected with a chapter 11 case will

be subject to court’s approval as being reasonable). “What constitutes a reasonable payment will

clearly vary from case to case and, among other things, will hinge to some degree upon who makes

the payments at issue, who receives those payments, and whether the payments are made from

assets of the estate.” Id. at 517–18.

112. Here, section 2.2 of the Plan provides that Professionals seeking approval

by the Court of compensation for services rendered or reimbursement of expenses incurred after

the Petition Date through the Effective Date under sections 327, 328, 330, 331, 503(b)(2),


61

503(b)(3), 503(b)(4), 503(b)(5), or 1103 of the Bankruptcy Code (“Fee Claims”) must file final

applications no later than 30 days after the Effective Date, thereby giving interested parties

adequate time to review the Fee Claims. Plan § 2.2. Further, section 11.1(i) of the Plan provides

that the Court will retain jurisdiction to “hear and determine all Fee Claims.” Accordingly, the

Plan complies with section 1129(a)(4) of the Bankruptcy Code.

E. Section 1129(a)(5): The Debtors Have Disclosed All Necessary Information Regarding Directors, Managers, Officers, and Insiders

113. Section 1129(a)(5) of the Bankruptcy Code requires that the plan proponent

disclose the identity and affiliations of the proposed officers and directors of the reorganized

debtors, that the appointment or continuance of such officers and directors be consistent with the

interests of creditors and equity security holders and with public policy, and, to the extent there

are any insiders that will be retained or employed by the debtors, that there be disclosure of the

identity and the nature of any compensation for such insiders to the extent known.

114. In accordance with Article 5.4 of the Plan, on the Effective Date, NPC’s

then existing board of directors or managers shall be dissolved and discharged of their duties, and

any remaining officers and directors, managers, or managing members of NPC shall be dismissed.

Further, on and after the Effective Date, the Plan Administrator shall be the sole representative of,

and shall act for, the Wind Down Co. The Debtors have disclosed the identity of the Plan

Administrator in Section 1.157 of the Plan.

115. Accordingly, the Debtors have satisfied the requirements of section

1129(a)(5) of the Bankruptcy Code, and no party has asserted otherwise.

F. Section 1129(a)(6): The Plan Does Not Contain Any Rate Changes

116. Section 1129(a)(6) of the Bankruptcy Code provides that “[a]ny

governmental regulatory commission with jurisdiction, after confirmation of the plan, over the


62

rates of the debtor has approved any rate change provided for in the plan, or such rate change is

expressly conditioned on such approval.” 11 U.S.C. § 1129(a)(6). The Plan does not provide for

any rate changes by the Debtors, and, therefore, section 1129(a)(6) of the Bankruptcy Code is

inapplicable to the Plan.

G. Section 1129(a)(7): Plan Is in the Best Interests of All Holders of Claims and Interests in Each Debtor

117. Section 1129(a)(7) of the Bankruptcy Code provides, in relevant part:

[w]ith respect to each impaired class of claims or interests[,] (A) each holder of a claim or interest of such class (i) has accepted the plan; or (ii) will receive or retain under the plan . . . property of a value . . . that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under chapter 7 of [the Bankruptcy Code] . . .

11 U.S.C. § 1129(a)(7).

118. Section 1129(a)(7) of the Bankruptcy Code requires that a plan be in the

best interests of creditors and equity holders for each debtor, and is commonly referred to as the

“best interests test.” The best interests test requires that “if the holder of a claim impaired under a

plan of reorganization has not accepted the plan, then such holder must ‘receive on account of such

claim property of a value, as of the effective date of the plan, that is not less than the amount that

such holder would so receive if the debtor were liquidated under chapter 7 on such date.’ Bank of

Am. Nat’l Tr. v. 203 N. LaSalle St. P’Ship, 526 U.S. 434, 441 n.13. (1999) (quoting 11 U.S.C.

§ 1129(a)(7)). “The ‘best interests’ test applies to individual creditors holding impaired claims,

even if the class as a whole votes to accept the plan.” Id. Moreover, “the inquiry is what would

the creditor receive from the debtor’s estate if the debtor were to liquidate under chapter 7 of the

Bankruptcy Code, not what the creditor would have received from a third party.” Lovett v.

Homrich Inc. (In re Philip Servs. Corp.), 359 B.R. 616, 630 (Bankr. S.D. Tex. 2006) (Steen, J.).

The value of plan distributions is measured “in present value terms.” Heartland Fed. Sav. & Loan


63

Ass’n v. Briscoe Enters., Ltd. II (In re Briscoe Enters., Ltd., II), 994 F.2d 1160, 1167 (5th Cir.

1993); In re Pisces Energy, LLC, Ch. 11 Case Nos. 09-36591-H5-11, 09-36593-H5-11, 2009 WL

7227880, at *12 (Bankr. S.D. Tex. Dec. 21, 2009) (Brown, J.). “Although creditors being ‘at least

as well off’ is the statutory requirement for plan confirmation, ordinarily creditors are better off

when the debtor is reorganized into a going concern than when a liquidation occurs.” Cantu v.

Schmidt (In re Cantu), 784 F.3d 253, 262 (5th Cir. 2015). A party’s speculation that it would fare

better in a hypothetical chapter 7 liquidation is insufficient to challenge a plan proponent’s

liquidation analysis. Block Shim Dev. Co.-Irving, 939 F.2d at 292.

119. Here, the relative recoveries of holders of Claims or Interests under the Plan

and in a hypothetical chapter 7 liquidation are set forth in Exhibit D to the Disclosure Statement

(the “Liquidation Analysis”). They demonstrate that the holders in each Class of Claims and

Interests will receive at least as much value under the Plan as they would in a hypothetical

liquidation of the Debtors on the Effective Date. Specifically, the Debtors determined that the

gross proceeds available for distribution in a hypothetical chapter 7 liquidation would be between

$93.5 to $117.6 million, resulting in the following projected recoveries to each Class:33

33 The following summary is provided for convenience purposes only. To the extent any of the terms described above

are inconsistent with the Liquidation Analysis, the Liquidation Analysis shall control in all respects. Plan recoveries under a Reorganization Transaction were excluded based on the Debtors’ intent to go forward with the Sale Transactions.


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Class Class Liquidation Recovery Plan Recovery

1 Other Secured Claims N/A N/A 2 Other Priority Claims N/A N/A

2A Driver Claimant Priority T1 Claims N/A N/A 2B Driver Claimant Priority T2 Claims N/A N/A 3 Priority Term Loan Secured Claims 100% 100% 4 First Lien Secured Claims 5%-8% 88% 5 Second Lien Secured Claims 0% 0% 6 General Unsecured Claims 0% 7% 7 Intercompany Claims N/A N/A 8 Subordinated Claims N/A N/A 9 Existing Equity Interests Claims N/A N/A

10 Intercompany Interests N/A N/A 120. The best interests test does not apply to the holders of Claims or Interests in

Classes 1-3, Class 7, and Class 10 because each holder of Claims and Interests in such classes is

Unimpaired under the Plan, deemed to accept the Plan, and will either receive payment in full, in

Cash, be reinstated and paid in the ordinary course, or otherwise its legal, equitable, or contractual

rights will not be altered. Accordingly, the holders of Claims or Interests in Class Classes 1-3,

Class 7, and Class 10 are receiving or retaining under the Plan the maximum recovery to which

they are entitled and, as a result, could not receive greater recovery under chapter 7. As set forth

in the Liquidation Analysis, the best interests test is satisfied as to every holder of a Claim or an

Interest in Classes 4-6 and Classes 8-9. Specifically, the Liquidation Analysis and the Koza

Declaration demonstrate that, pursuant to the Plan, all Classes of Claims or Interests will recover

value equal to or in excess of what such Claims or Interests would receive in a hypothetical chapter

7 liquidation.

121. Further, the Liquidation Analysis is sound and reasonable and incorporates

justified assumptions and estimates regarding the Debtors’ assets and claims. These projections

are based on reasonable, justified, and widely accepted assumptions regarding a chapter 7 trustee’s

ability to liquidate the Debtors’ assets and the values that such sales would be likely to produce.

As Judge Hughes has reasoned:


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The additional costs of three chapter 7 trustees, the short time allowed a plain liquidation, the potential for more claims to be filed against the estates, and the loss of knowledge and momentum . . . about the management of these assets would combine to reduce significantly the cash to be realized by the estates from these assets. The lower prices from the liquidation are reasonable.

MCorp Fin., 160 B.R. at 961 (confirming chapter 11 plans). And as Judge Brown has explained:

a chapter 7 liquidation would increase the administrative costs of the Bankruptcy Cases and adversely affect the ultimate proceeds available for distribution to all holders of Allowed Claims in the Bankruptcy Cases and the Debtors’ [post-effective] date operations. Moreover, the increased costs associated with a liquidation under chapter 7 would further reduce the proceeds available for distribution. These costs would include, among other things, administrative fees and costs payable to a trustee in bankruptcy and professional advisors to such trustee. . . .

The Bankruptcy Court here considers, inter alia: (1) the problems associated with the quick sale of assets as contemplated in chapter 7; (2) the limitations of section 721 of the Bankruptcy Code; and (3) loss of value through passage of time.

Pisces Energy, 2009 WL 7227880, at *12 & n.7 (holding that plan satisfied best interests test);

accord In re Adelphia Commc’ns Corp., 368 B.R. 140, 252–58 (Bankr. S.D.N.Y. 2007)

(considering, among other things, costs of regulatory compliance, administrative costs of one or

more chapter 7 trustees and their professionals; a trustee’s lack of familiarity with debtors’

business; potential for delays in claim and interest holders’ receipt of distributions; and likelihood

that chapter 7 trustees would adopt settlements embodied in plan), appeal dismissed, 371 B.R. 660

(S.D.N.Y. 2007), aff’d, 544 F.3d 420 (2d Cir. 2008).

122. Here, the Debtors have assumed, among other things, that (i) a process of

three (3) months from the Conversion Date34 to conduct the orderly disposition of substantially all

34 Defined in the Liquidation Analysis as December 16, 2020, the day after the outside date for effectiveness of the

Plan, as contemplated under the RSA. Although this deadline was further extended, the Debtors do not believe there would be any material change to analysis if it was updated through the Outside Dates contemplated in the A&R Flynn APA and the Wendy’s APA.


66

of the Debtors’ assets, which is expected to be the minimal amount of time required to

expeditiously wind down the Debtors’ estates; (ii) a chapter 7 trustee would choose to retain,

among other professionals, counsel and a financial advisor to provide expertise and assistance in

the liquidation of the Debtors and would employ or otherwise retain certain of the Debtors’ current

employees; (iii) the chapter 7 trustee would require fees necessary to facilitate the sale of the

Debtors’ business, which would likely be approximately two to three percent (2-3%) of the

available liquidation proceeds excluding cash; (iv) the cessation of business in a chapter 7

liquidation could cause additional Claims to be asserted against the Debtors’ estates, including

administrative expenses and priority unsecured claims, that otherwise may not exist absent such a

liquidation (i.e., employee-related Claims, tax liability Claims, Claims related to the rejection of

unexpired leases and executory contracts, superpriority adequate protection Claims, and litigation

Claims); (v) no recovery or related litigation costs attributable to any potential avoidance actions

under the Bankruptcy Code and additional recovery or claims that may arise from the outcome of

current or potential actions by or against the Debtors; (vi) due to the highly perishable and

unsaleable nature, and wide geographic dispersion of the Debtors’ food products, a substantial

amount of the Debtors’ inventory at their restaurant locations would not generate any value in a

chapter 7 liquidation; and (vii) the chapter 7 trustee would not be able to obtain value for the

franchise rights. These assumptions are consistent with Mr. Koza’s extensive experience as a

financial advisor are appropriate for and tailored to the Debtors’ specific business and assets.

123. Moreover, no party has objected to confirmation on the basis that the

Debtors have failed to satisfy section 1129(a)(7). Accordingly, the Debtors submit the Plan

complies with section 1129(a)(7) of the Bankruptcy Code.


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H. Section 1129(a)(8): Plan Has Been Accepted by Impaired Classes Entitled to Vote or Can Otherwise Be Confirmed Notwithstanding the Requirements of Section 1129(a)(8)

124. Section 1129(a)(8) of the Bankruptcy Code requires that each class of

impaired claims or interests accept a plan, as follows: “[w]ith respect to each class of claims or

interests – (A) such class has accepted the plan; or (B) such class is not impaired under the plan.”

11 U.S.C. § 1129(a)(8). Pursuant to section 1126(c) of the Bankruptcy Code, a class of claims

accepts a plan if holders of at least two-thirds in amount and more than one-half in number of the

allowed claims in that class who actually vote on such plan vote to accept it.

125. As evidenced by the Voting Certification, the Plan has been accepted by

creditors in excess of two-thirds in amount and one-half in number of holders of Claims who timely

voted to accept or reject the Plan in all of the Impaired Classes entitled to vote to accept or reject

the Plan. See Exhibit B, Voting Certification. Accordingly, as to such Classes, the requirements

of section 1129(a)(8) of the Bankruptcy Code have been satisfied. In addition, as set forth above,

holders of claims and interests in the Unimpaired Classes are unimpaired under the Plan and are,

therefore, conclusively deemed to have accepted the Plan pursuant to section 1126(f) of the

Bankruptcy Code.

126. Holders of Claims and Interests in Class 8 (Subordinated Claims) and Class

9 (Existing Equity Interests) are not receiving or retaining any distribution or property on account

of their claims and interests and, as such, are conclusively deemed to have rejected the Plan

pursuant to section 1126(g) of the Bankruptcy Code. As to these classes, the Plan may be similarly

confirmed under the cram down provisions of section 1129(b) of the Bankruptcy Code. See

Section I.N, supra.


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I. Section 1129(a)(9): Plan Provides for Payment in Full of All Allowed Priority Claims

127. Section 1129(a)(9) of the Bankruptcy Code requires that persons holding

allowed claims entitled to priority under section 507(a) receive specified cash payments under a

plan. Unless the holder of a particular claim agrees to a different treatment with respect to such

claim, section 1129(a)(9) of the Bankruptcy Code sets forth the specified treatment that a plan

must provide.

128. The Plan satisfies the requirements of section 1129(a)(9) of the Bankruptcy

Code. Article II of the Plan provides for all Allowed Administrative Expense Claims be treated in

compliance with section 1129(a)(9). Additionally, pursuant to Section 2.3 of the Plan, except to

the extent that a holder of an Allowed Priority Tax Claim agrees to a different treatment, each

holder of an Allowed Priority Tax Claim shall receive, in full and final satisfaction, settlement,

release, and discharge of, and in exchange for, such Allowed Priority Tax Claim, at the sole option

of the Reorganized Debtors, (i) Cash in an amount equal to such Allowed Priority Tax Claim on,

or as soon thereafter as is reasonably practicable, the later of (a) the Effective Date, to the extent

such Claim is an Allowed Priority Tax Claim on the Effective Date, (b) the first business day after

the date that is 30 calendar days after the date such Priority Tax Claim becomes an Allowed

Priority Tax Claim, and (c) the date such Allowed Priority Tax Claim is due and payable in the

ordinary course or (ii) such other treatment consistent with the provisions of section 1129(a)(9) of

the Bankruptcy Code. As demonstrated by the Wind Down Budget [Docket 1486], the Plan

Administrator has or will have sufficient cash to pay Driver Claimant Priority T1/T2 Claims in

accordance with the Driver Claimants Settlement and unpaid Allowed Administrative Expense

Claims, Fee Claims, and Priority Tax Claims. Accordingly, the Plan satisfies the requirements of

section 1129(a)(9) of the Bankruptcy Code.


69

J. Section 1129(a)(10): At Least One Class of Impaired Claims Has Accepted the Plan

129. Section 1129(a)(10) of the Bankruptcy Code requires the affirmative

acceptance of the Plan by at least one class of impaired claims, “determined without including any

acceptance of the plan by any insider.” 11 U.S.C. § 1129(a)(10). As set forth above and in the

Voting Certification, Classes 4 and 6 are impaired and have voted to accept the Plan. Accordingly,

the Plan satisfies section 1129(a)(10) of the Bankruptcy Code.

K. Section 1129(a)(11): The Plan Is Feasible

130. Section 1129(a)(11) of the Bankruptcy Code requires that the Court

determine that the Plan is feasible as a condition precedent to confirmation. Specifically, it

requires that confirmation is not likely to be followed by liquidation of the debtor, unless such

liquidation is proposed in the plan. 11 U.S.C. § 1129(a)(11). The court “need not require a

guarantee of success . . . [o]nly a reasonable assurance of commercial viability is required.”

Briscoe Enters., 994 F.2d at 1165–66; In re Landing Assocs., Ltd., 157 B.R. 791, 820 (Bankr. W.D.

Tex. 1993) (stating that section 1129(a)(11) only requires a finding that a plan offers “a reasonable

probability of success”); In re Lakeside Glob. II, Ltd., 116 B.R. 499, 506 (Bankr. S.D. Tex. 1989)

(finding that feasibility “contemplates whether the debtor can realistically carry out its plan and

whether the plan offers a reasonable prospect of success and is workable”) (citations omitted). As

a matter of law, “the mere prospect of financial uncertainty cannot defeat confirmation on

feasibility grounds since a guarantee of the future is not required.” Whitney Bank v. SCC Kyle

Partners, Ltd. (In re SCC Kyle Partners, Ltd.), 518 B.R. 393, 406 (W.D. Tex. 2014) (internal

quotation marks omitted). The key element of feasibility is whether there is a reasonable

probability that the provisions of the plan can be performed. In re Lakeside Glob. II, 116 B.R. at

507 (“The purpose of the feasibility requirement is ‘to prevent confirmation of visionary schemes


70

which promise creditors and equity security holders more under a proposed plan than the debtor

can possibly attain after confirmation.’”) (citations omitted). Specifically, “[w]here the projections

are credible, based upon the balancing of all testimony, evidence, and documentation, even if the

projections are aggressive, the court may find the plan feasible.” In re T-H New Orleans, 116 F.3d

at 802. Furthermore, “[t]o establish the feasibility of a plan, [a] debtor must present proof through

reasonable projections that there will be sufficient cash flow to fund the plan” and “[s]uch

projections cannot be speculative, conjectural or unrealistic.” In re Idearc Inc., 423 B.R. at 167.

131. The feasibility standard is greatly simplified where, as here, the Plan

contemplates the sale of substantially all of the Debtors’ assets and the establishment of a Wind

Down Co for the distribution of proceeds in a manner consistent with the Plan and the priorities

set forth therein, in the form of a liquidating trust as set forth in a liquidating trust agreement. In

the context of a liquidating plan, the emphasis on future performance after the plan becomes

effective is diminished. See In re T-H New Orleans Ltd. P’ship, 116 F.3d at 802 (citing In re Sandy

Ridge Dev. Corp., 881 F.2d 1346 (5th Cir. 1989)). To demonstrate that a liquidating plan is

feasible, a plan proponent need only show that “the successful performance of [the plan’s] terms

is not dependent or contingent upon any future, uncertain event.” In re Heritage Org., L.L.C., 375

B.R. 230, 311 (N.D. Tex. Aug. 31, 2007) (holding that the creation of a creditor trust with res

consisting of estate cash and the proceeds of any future successful litigation in addition to a fixed

trust governance mechanism qualified as feasible); In re Waters Retail TPA, LLC, Case No. 20-

30644, 2020 Bankr. LEXIS 2965, at *15-16 (Bankr. N.D. Tex. Oct. 16, 2020) (finding that the

debtor’s liquidating plan satisfied section 1129(a)(11) of the Bankruptcy Code and was feasible

because the plan provided for the liquidation and distribution of the debtors’ assets); In re Copsync,

Inc., Case No. 17-12625, 2018 Bankr. LEXIS 2879, at *17 (Bankr. E.D. La. Sept. 21, 2018)


71

(finding that the plan satisfies the requirements of section 1129(a)(11) of the Bankruptcy Code

because the evidence presented shows that liquidation is the purpose of the plan).

132. The Debtors are confident that they are, and will be, able to fulfill their

obligations under the Plan and satisfy their estimated administration costs. First and foremost, the

Plan is straightforward: it provides for the payment of the Driver Claimant Admin/Priority Claims

in accordance with the Driver Claimants Settlement, and payment in full of all Allowed

Administrative Expense Claims, Priority Tax Claims, Other Secured Claims, Allowed Other

Priority Claims, and Allowed Priority Term Loan Secured Claims. The Plan incorporates a

“waterfall” classification and distribution scheme that strictly follows the statutory priorities

prescribed by the Bankruptcy Code with the addition of $3 million from Sale Proceeds funded to

the GUC Trust as part of an integrated settlement agreement.

133. As set forth in the Koza Declaration, the Debtors, with the assistance of

their financial advisors, have analyzed the claims register and reviewed the Debtors’ books and

records, with a particular focus on the 100-cent claims required to be paid in full under the Plan.

The Debtors’ ongoing claims analysis has provided significant visibility into the amounts of

priority, administrative claims and other secured claims at each of the Debtors. Although the

allowed amounts of certain claims will ultimately be determined through the claims reconciliation

process, the resolution of significant claims under the Plan pursuant to the settlements embodied

therein, has greatly simplified the estimation process. In addition, postpetition administrative and

tax claims, have been paid in the ordinary course throughout these chapter 11 cases. As such, the

likelihood of unanticipated administrative or tax claims accruing during the late stages of these

cases, and following the closing of the Sale Transactions, is small given the Debtors will have few

financial obligations apart from the distribution obligations to holders of Allowed Claims and the


72

administration of the Wind Down of the chapter 11 cases, for which there is an established fund

(the “Wind Down Fund”). Moreover, further claims analysis and diligence will be conducted in

light of the proration provisions between the Debtors and the Successful Bidders under the APAs

in advance of closing.

134. Notwithstanding the anticipation of minimal ongoing obligations after the

Effective Date, the Debtors, in consultation with their professionals, have spent significant time

analyzing the breadth and amount of such obligations. In furtherance of this effort, the Debtors

prepared a comprehensive Wind Down Budget which was first filed on December 21, 2020 and a

further revised version was filed on January 27, 2021 to reflect the modifications to the Plan and

the Sale Proceeds on account of the approved Sale Transactions. See Notice of Filing of Second

Amended Plan Supplement for Second Amended Joint Chapter 11 Plan of NPC International, Inc.

and Its Affiliated Debtors, Exhibit B [Docket No. 1486]; Notice of Filing of (i) Exhibits to

Disclosure Statement for First Amended Joint Chapter 11 Plan of NPC International, Inc. and its

Debtors, and (ii) Revised Recovery Analysis, Exhibit B [Docket No. 1295]. The Wind Down

Budget assumes the sale of all or substantially all of the Debtors’ assets to Flynn and Wendy’s

pursuant to the A&R Flynn APA and Wendy’s APA and the efficient wind down of the remaining

estates. Specifically, the Debtors and their professionals estimated among other things (a) the

amount of Administrative Expense Claims, Priority Tax Claims, Other Secured Claims, and Other

Priority Claims, and (b) the Debtors’ post-Effective Date obligations, including for the avoidance

of doubt, obligations pursuant to the A&R Flynn APA and Wendy’s APA (e.g., the separate

reserve with respect to Transferred Leases on account of any unpaid monthly payments for the

month in which the Closing occurs and any unpaid non-monthly real estate related payments

attributable to any period on or prior to the Closing Date, not covered in the Seller Proration


73

Amount). Based on the foregoing analysis, the Debtors expect the Wind-Down Fund will be

sufficient to satisfy the Debtors’ limited post-Effective-Date obligations, including, but not limited

to, the costs associated with the Plan Administrator and Disbursing Agent’s administration and

implementation of the Plan. See Koza Declaration.

135. On the Effective Date, the Debtors shall fund Plan Distributions and satisfy

applicable Allowed Claims under the Plan using Cash on hand and the Sale Proceeds. In addition,

the Debtors will fund the Wind Down Fund with approximately $9.7 million to fund the Wind

Down expenses, $59.4 million will be used to fund Administrative Expense Claims and Priority

Claims, $0.1 million will be used to fund the Prorated Annual Lease Costs Reserve, $10 million

will be used to fund insurance and Benefit Programs, and $55 million will be used to satisfy any

outstanding tax obligations.35 Id. The Debtors have discussed the Wind Down Budget and

supporting detail with the Ad Hoc Priority/1L Group and the Creditors’ Committee, to ensure that

the Wind Down Co will have sufficient funding to carry out its purposes.

136. In addition, the Plan establishes and appoints post-Effective Date entities

and fiduciaries to carry out the Plan and complete the Wind Down of the Debtors’ estates. The

Plan provides that the Plan Administrator and GUC Trustee will complete the claims reconciliation

process and monetize any remaining non-cash assets of the Debtors. The Plan and the various

administration agreements contained in the Plan Supplement outline the rights, duties and powers

of the applicable administrators and entities, which were negotiated at arms’ length by the various

stakeholders. See Plan Supplement, Exhibit A: Wind Down Co. Liquidating Trust Agreement;

Exhibit E: GUC Trust Agreement [Docket No. 1457]. Lastly, the Debtors have estimated

35 For the avoidance of doubt, pursuant to Section 9.1(m) of the Plan, it is a condition precedent to the occurrence of

the Effective Date that the Wind Down Fund be fully funded.


74

recoveries for holders of Claims and have not promised a specific amount of payment;36 thus, all

that is required of the Debtors to satisfy their obligations under the Plan is to distribute Cash on

hand and Sale Proceeds in accordance with the provisions therein. See Exhibit C, Docket No.

1458.

137. In summary, the information in the Disclosure Statement and the Koza

Declaration establish that the Plan is feasible and provides adequate and appropriate means for its

implementation and an orderly wind down and liquidation of the Debtors’ remaining estates.

Accordingly, the Plan has more than a reasonable likelihood of success and satisfies the feasibility

requirements of section 1129(a)(11) of the Bankruptcy Code.

L. Section 1129(a)(12): All Statutory Fees Have Been Paid or Will Be Paid

138. Section 1129(a)(12) of the Bankruptcy Code requires the payment of “[a]ll

fees payable under section 1930 of title 28, as determined by the court at the hearing on

confirmation of the plan.” 11 U.S.C. § 1129(a)(12). Section 507 of the Bankruptcy Code provides

that “any fees and charges assessed against the estate under [section 1930] of title 28” are afforded

priority as administrative expenses. 11 U.S.C. § 507(a)(2). In accordance with sections 507 and

1129(a)(12) of the Bankruptcy Code, Section 12.1 of the Plan provides that on the Effective Date,

the Reorganized Debtors shall pay all fees incurred pursuant to section 1930 of chapter 123 of title

28 of the United States Code, together with interest, if any, pursuant to section 3717 of title 31 of

the United States Code. Accordingly, the Plan satisfies all applicable requirements of section

1129(a)(12) of the Bankruptcy Code.

36 For the avoidance of doubt, the $3 million in cash to fund the GUC Trust is on account of Sale Proceeds pursuant

to the UCC Settlement.


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M. Sections 1129(a)(13), 1129(a)(14), 1129(a)(15), and 1129(a)(16): Not Applicable to the Plan

139. Section 1129(a)(13) of the Bankruptcy Code provides that a plan must

provide for continued, post-confirmation payments of all retiree benefits at the levels established

in accordance with section 1114 of the Bankruptcy Code. The Debtors do not have any obligations

on account of retiree benefits (as such term is used in section 1114 of the Bankruptcy Code) and,

therefore, section 1129(a)(13) of the Bankruptcy Code is inapplicable.

140. Sections 1129(a)(14) through 1129(a)(16) of the Bankruptcy Code are

inapplicable to the Debtors. Section 1129(a)(14) relates to the payment of domestic support

obligations. See 11 U.S.C. § 1129(a)(14). The Debtors are not subject to any domestic support

obligations, and, thus, this subsection of section 1129(a) is inapplicable.

141. Section 1129(a)(15) of the Bankruptcy Code applies only in cases in which

the debtor is an “individual” (as that term is defined in the Bankruptcy Code). See 11 U.S.C. §

1129(a)(15). None of the Debtors is an “individual,” and, accordingly, section 1129(a)(15) is

inapplicable.

142. Finally, section 1129(a)(16) of the Bankruptcy Code provides that property

transfers by a corporation or trust that is not a moneyed, business, or commercial corporation or

trust must be made in accordance with any applicable provisions of nonbankruptcy law. See 11

U.S.C. § 1129(a)(16). Each Debtor is a moneyed, business, or commercial corporation; therefore,

section 1129(a)(16) is inapplicable.

N. Section 1129(b): Plan Satisfies the “Cram Down” Requirements Under the Bankruptcy Code

143. Section 1129(b) of the Bankruptcy Code provides a mechanism (known

colloquially as “cram down”) for the confirmation of a chapter 11 plan in circumstances where not


76

all impaired classes of Claims and Interests accept such chapter 11 plan, as required by section

1129(a)(8) of the Bankruptcy Code.

144. Section 1129(b) of the Bankruptcy Code states in relevant part:

[I]f all of the applicable requirements of subsection (a) of this section other than paragraph (8) are met with respect to a plan, the court, on request of the proponent of the plan, shall confirm the plan notwithstanding the requirements of such paragraph if the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.

11 U.S.C. § 1129(b)(1).

145. Accordingly, the court may “cram down” a plan over the dissenting vote of

impaired classes of claims or interests so long as the plan does not “discriminate unfairly” and is

“fair and equitable” with respect to such dissenting class or classes. 11 U.S.C. § 1129(b)(1).

146. By its express terms, section 1129(b) of the Bankruptcy Code is only

applicable to a class that rejects a plan. See 11 U.S.C. § 1129(b)(1) (“[T]he court . . . shall confirm

the plan notwithstanding the requirements of [§ 1129(a)(8)] if the plan does not discriminate

unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired

under, and has not accepted, the plan.”).

a. Section 1129(b)(1): Plan Does Not Discriminate Unfairly

147. The unfair discrimination standard of section 1129(b) of the Bankruptcy

Code ensures that a plan does not unfairly discriminate against a dissenting class with respect to

the value the dissenting class will receive under a plan when compared to the value given to all

other similarly situated classes. Section 1129(b)(1) of the Bankruptcy Code, however, does not

prohibit discrimination between classes under a plan of reorganization; it only prohibits

discrimination that is “unfair.” See 11 U.S.C. § 1129(b)(1).


77

148. The Bankruptcy Code does not set forth the standard for determining when

“unfair” discrimination exists. See In re Idearc Inc., 423 B.R. at 171; In re Tribune Co., 972 F.3d

228, 241-43 (3d Cir. 2020) (summarizing the various standards applied to unfair discrimination

and affirming under de novo review the Delaware Bankruptcy Court’s application of the rebuttable

presumption test); In re Sea Trail Corp., No. 11-07370-8, 2012 WL 5247175, at *7 (Bankr.

E.D.N.C. Oct. 23, 2012) (“Courts have developed different tests for determining whether a

reorganization plan unfairly discriminates against a class in violation of Section 1129(b)(1). . . .

These tests range from a rigid, mechanical approach in which almost any form of discriminatory

treatment violates Section 1129(b)(1) to a broad, flexible one in which the outcome depends

heavily on the facts and circumstances of each case.”).

149. Generally, courts have found that a plan unfairly discriminates where

similarly situated classes are treated differently without a reasonable basis for the disparate

treatment. Cypresswood Land, 409 B.R. at 434; In re Armstrong World Indus., Inc., 348 B.R. 111,

121 (D. Del. 2006) (noting that “hallmarks of the various tests have been whether there is a

reasonable basis for the discrimination, and whether the debtor can confirm and consummate a

plan without the proposed discrimination.”) (citing In re Lernout & Hauspie Speech Prod., N.V.,

301 B.R. 651, 656-57 (Bankr. D. Del. 2003), aff’d, 308 B.R. 672 (D. Del. 2004)). A plan does not

unfairly discriminate where it provides different treatment to two or more classes that are comprised

of dissimilar claims or interests. See Liberty Nat’l Enters. v. Ambanc La Mesa L.P. (In re Ambanc La

Mesa L.P.), 115 F.3d 650, 655 (9th Cir. 1997); In re Aztec Co., 107 B.R. 585, 589-91 (Bankr. M.D.

Tenn. 1989); In re Johns-Manville Corp., 68 B.R. 618, 636 (Bankr. S.D.N.Y. 1986), aff’d, 78 B.R. 407

(S.D.N.Y. 1987); aff’d sub nom., Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988).

Likewise, there is no unfair discrimination if, taking into account the particular facts and circumstances

of the case, there is a reasonable basis for the disparate treatment. See In re Worldcom, Inc., No. 02–


78

13533(AJG), 2003 WL 23861928, at *59 (Bankr. S.D.N.Y. Oct. 31, 2003) (citing In re Buttonwood

Partners Ltd., 111 B.R. 57, 63 (Bankr. S.D.N.Y. 1990)) (“[I]f under the facts and circumstances of a

particular case, there is a reasonable basis for disparate treatment of two similarly situated classes of

claims or two similarly situated classes of equity interests, there is no unfair discrimination.”).

150. With respect to the Classes that are deemed to have rejected the Plan, Class

8 (Subordinated Claims) or Class 9 (Existing Equity Interests), no class of equal priority is

receiving more favorable treatment, and no Class that is junior to the rejecting Classes will receive

or retain any property on account of the Claims or Interests in such junior Class. Moreover, no

party has asserted otherwise.

b. Section 1129(b)(2): Plan Is Fair and Equitable

151. Section 1129(b)(2) of the Bankruptcy Code sets forth the requirements for

a plan to be fair and equitable with respect to a class. The definition of “fair and equitable” varies

based on the priority of the claims or interests of such class.

152. To be fair and equitable as to holders of unsecured claims,

section 1129(b)(2)(B) of the Bankruptcy Code requires a plan to provide either (a) that each holder

of a non-accepting class of unsecured claims will receive or retain on account of such claim

property of a value equal to the allowed amount of such claim, or (b) that a holder of a claim or

interest that is junior to the non-accepting class of unsecured claims will not receive or retain any

property under such plan. The “fair and equitable” prong is generally interpreted, consistent with

that term’s usage in section 1129(b) of the Bankruptcy Code, to require compliance with the

Bankruptcy Code’s absolute priority rule. See Cajun Elec., 119 F.3d at 355 (“The words ‘fair and

equitable’ are terms of art—they mean that senior interests are entitled to full priority over junior

ones”) (citations omitted); see also In re Mirant Corp., 348 B.R. 725, 738 (Bankr. N.D. Tex. 2006)

(“‘[F]air and equitable’ translates to the absolute priority rule”), aff’d sub nom. Objecting Class 3


79

Claimholders v. New Mirant Entities, No. 4:06-CV-744-A, 2006 WL 3780884 (N.D. Tex. Dec.

26, 2006).

153. To be “fair and equitable” as to holders of interests, section 1129(b)(2)(C)

of the Bankruptcy Code requires a plan to provide either (i) that each holder of an equity interest

will receive or retain under the plan property of a value equal to the greatest of the fixed liquidation

preference to which such holder is entitled, the fixed redemption price to which such holder is

entitled or the value of the interest or (ii) that a holder of an interest that is junior to a non-accepting

class will not receive or retain any property under the plan.

154. The Plan does not violate the absolute priority rule. There are no Claims

against or Interests in the Debtors junior to Class 8 that are receiving a recovery on account of such

Claims or Interests. Specifically, the absolute priority rule is satisfied as to Class 8 (Subordinated

Claims), and Class 9 (Existing Equity Interests), which may be deemed to reject the Plan because

no claims or interests junior to such classes will receive or retain any property under the Plan.

155. The Plan also satisfies the corollary to the absolute priority rule because no

class of Claims that is senior to Class 8 is receiving more than a 100 percent recovery under the

Plan. In fact, holders of Claims in Class 4 are receiving less than 100 percent recovery on their

Claims based on the distribution of Sale Proceeds under the priority waterfall. Absent the

Consenting First Lien Lenders’ agreement to gift some of their recovery to junior creditors, there

would be no distributable value available beyond the first lien debt.

156. Accordingly, the Plan is “fair and equitable” and satisfies the requirements

of section 1129(b) of the Bankruptcy Code.

O. Section 1129(c): Plan Is the Only Plan

157. The Plan is the only plan filed in these chapter 11 cases. Accordingly,

section 1129(c) of the Bankruptcy Code is not applicable in the consideration of the Plan.


80

P. Section 1129(d): Principal Purpose of the Plan Is Not for the Avoidance of Taxes

158. The principal purpose of the Plan is to facilitate distributions to holders of

Claims, and is not for the avoidance of taxes or the avoidance of the application of Section 5 of

the Securities Act of 1933. Accordingly, the Plan satisfies the requirements of section 1129(d) of

the Bankruptcy Code.

Q. Section 1129(e): Chapter 11 Cases Are Not Small Business Cases

159. The provisions of section 1129(e) of the Bankruptcy Code apply only to

small business cases. These chapter 11 cases are not “small business cases” as that term is defined

in section 101(51C) of the Bankruptcy Code. Accordingly, section 1129(e) of the Bankruptcy

Code is not applicable to the Plan.

II. THE MODIFICATIONS OF THE PLAN ARE PROPER

160. Pursuant to section 1127 of the Bankruptcy Code, a plan proponent may

modify a plan at any time before its confirmation so long as the plan, as modified, satisfies the

requirements of sections 1122 and 1123 of the Bankruptcy Code and the plan proponent making

the modification complies with section 1125 of the Bankruptcy Code. In addition, with respect to

any modifications made after votes have been solicited to vote to accept or reject such plan, but

prior to the confirmation of such plan, Bankruptcy Rule 3019 provides, in relevant part:

[A]fter a plan has been accepted and before its confirmation, the proponent may file a modification of the plan. If the court finds after hearing on notice to the trustee, any committee appointed under the Code, and any other entity designated by the court that the proposed modification does not adversely change the treatment of the claim of any creditor or the interest of any equity security holder who has not accepted in writing the modification, it shall be deemed accepted by all creditors and equity security holders who have previously accepted the plan.


81

Fed. R. Bankr. P. 3019(a). Here, the Debtors modified the Plan on January 18, 2021, after votes

had been solicited, to among other things:

• reflect the establishment and funding of the GUC Trust and the GUC Trust Reserve pursuant to the GUC Trust Agreement, in accordance with the UCC Settlement with the Creditors’ Committee;

• reflect the establishment of the Wind Down Co for the benefit of holders of Claims against the Debtors in connection with the distribution of proceeds from the Sale Transactions and any other assets of the Debtors;

• reflect the appointment of the Plan Administrator;

• reflect the Driver Claimants Settlement, including the certification of the Driver Claimant Class, the establishment of the Driver Claimant Admin Claim Bar Date, and amounts held on account of the Driver Claimants Recovery Reserve;

• reflect additional resolutions with parties to resolve formal and informal objections to confirmation of the Plan; and

• reflect that the Plan is only going forward at this time with respect to the Sale Transactions (not the Reorganization Transaction).

161. As described above, the Plan, as modified, complies with sections 1122 and

1123 of the Bankruptcy Code, and the Debtors have complied with section 1125 of the Bankruptcy

Code. Accordingly, the requirements of section 1127 of the Bankruptcy Code have been satisfied.

The Plan modifications (in accordance with the settlements embodied therein) provide for

enhanced recoveries to creditors on account of their claims. As such, Bankruptcy Rule 3019 is

satisfied because the modifications to the Plan do not materially adversely affect “the treatment of

the claim of any creditor or the interest of any equity security holder who has not accepted in

writing the modification.” Fed. R. Bankr. P. 3019(a).

III. REPLY TO OBJECTIONS

162. As of the date hereof, 3 Objections37 have not been withdrawn from the

docket or otherwise resolved. The Debtors continue to work with the objectors and expect to

37 Total excludes objections related to assumption or rejection of unexpired executory contracts and executory leases.


82

resolve the remaining outstanding Objections in advance of the Confirmation Hearing. A

summary of the Objections and the Debtors’ responses thereto are set forth on the Response Chart

annexed hereto as Exhibit A.

163. For the reasons set forth herein, the Debtors respectfully request that the

Court overrule each such unresolved objection.

IV. CAUSE EXISTS TO WAIVE THE STAY OF THE PROPOSED CONFIRMATION ORDER

164. The Debtors respectfully request that this Court direct that the order

confirming the Plan shall be effective immediately upon its entry, notwithstanding the 14-day stay

imposed by the operation of Bankruptcy Rule 3020(e). Bankruptcy Rule 3020(e) provides

that “[a]n order confirming a plan is stayed until the expiration of 14 days after the entry of the

order, unless the court orders otherwise.” Fed. R. Bankr. P. 3020(e). As such, and as the Advisory

Committee Notes to Bankruptcy Rule 3020(e) state, “the court may, in its discretion, order that

Rule 3020(e) is not applicable so that the plan may be implemented and distributions may be made

immediately.” Fed. R. Bankr. P. 3020(e), Adv. Comm. Notes, 1999 Amend.

165. Under the circumstances, including in light of the support for the Plan and

benefit of halting the incurrence of further administrative and professional costs, it is appropriate

for the Court to exercise its discretion to order that Bankruptcy Rule 3020(e) is not applicable so

as to permit the Debtors to consummate the Plan and commence the Plan’s implementation without

delay following the entry of the Proposed Confirmation Order. Such relief is in the best interests

of the Debtors’ estates, creditors, and other parties in interest, and will not prejudice the rights of

any of the Debtors’ parties in interest.


83

CONCLUSION

166. The Plan represents the culmination of good faith, arm’s-length, and highly

negotiated restructuring efforts by the Debtors and their principal stakeholders to implement the

best outcome possible from a difficult situation resulting from external market factors. The Plan

satisfies all of the requirements of section 1129 of the Bankruptcy Code. The Debtors respectfully

request that the Court overrule any remaining Objections, waive the stay imposed by Bankruptcy

Rule 3020(e), confirm the Plan, and grant any such other and further relief as is just and proper.

Dated: January 27, 2021 New York, New York

/s/ Alfredo R. Pérez WEIL, GOTSHAL & MANGES LLP Alfredo R. Pérez (15776275) 700 Louisiana Street, Suite 1700 Houston, Texas 77002 Telephone: (713) 546-5000 Facsimile: (713) 224-9511 Email: [email protected] – and – WEIL, GOTSHAL & MANGES LLP Ray C. Schrock, P.C. (admitted pro hac vice) Kevin Bostel (admitted pro hac vice) Natasha Hwangpo (admitted pro hac vice) 767 Fifth Avenue New York, New York 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 Attorneys for Debtors and Debtors in Possession


Certificate of Service

I hereby certify that on January 27, 2021, a true and correct copy of the foregoing document was served by the Electronic Case Filing System for the United States Bankruptcy Court for the Southern District of Texas.

/s/ Alfredo R. Pérez Alfredo R. Pérez


Exhibit A

Response Chart


WEIL:\97758693\10\65961.0004

IN RE NPC INTERNATIONAL, INC., ET AL.

CASE NO. 20-33353 (DRJ)

SUMMARY CHART OF CONFIRMATION OBJECTIONS1

Docket

No. Objecting Party Summary of Objection Debtors’ Response

I. Unresolved Objections (Excluding Objections As To Cure Amount Only)

1. 1468;

1479 Jacob Roe (“Mr. Roe”)

Mr. Roe, a personal injury claimant, objects to confirmation

to the Plan on the following bases:

1. The Plan impermissibly impairs Mr. Roe’s ability

to pursue claims against the insurer under the

Policy.

2. The Plan is unclear as to whether the automatic

stay is lifted upon confirmation (and, even if the

stay is lifted, it is replaced with the objectionable

Plan Injunction).

Pending.2

1. Paragraph 32(i) of the Proposed Confirmation Order

states that the Debtors and the Creditors’ Committee will

file a motion (“ADR Motion”) seeking approval of

alternative dispute resolution procedures with regard to

unliquidated personal injury tort and/or wrongful death

Claims (the “ADR Procedures”). The Debtors submit

that the ADR Procedures will be a streamlined process

and provide claimants with an opportunity to efficiently

liquidate their claim. Importantly, the ADR Motion will

be filed within 30 days of entry of the confirmation order

and in place prior to the Effective Date.

2. Section 10.4 of the Plan clearly sets forth that “. . . all

injunctions and stays arising under or entered during the

Chapter 11 Cases . . . and in existence on the date of entry

of the Confirmation Order, shall remain in full force and

effect until the later of the Effective Date and the date

1 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Second Amended Joint Chapter 11 Plan of NPC

International, Inc. and Its Affiliated Debtors (Docket No. 1477) (the “Plan”), the applicable Objection, or the Disclosure Statement, as applicable. This chart

summarizes certain key issues raised in the Objections. To the extent that an Objection or a specific point raised in an Objection is not addressed herein, the

Debtors reserve the right to respond to such Objection up to and at the Confirmation Hearing.

2 Given the ongoing discussions between Mr. Roe and the Debtors and the withdrawal filed at [Docket No. 1476], Mr. Roe has, for the avoidance of doubt, filed

a second objection at [Docket No. 1479] which is identical to [Docket No. 1468].


2 WEIL:\97758693\10\65961.0004

Docket


indicated in the order providing for such injunction or

stay.”

2. 1470 Sara Garrison (“Garrison”)

Garrison, a personal injury claimant, objects to

confirmation on the following basis:

1. The Plan impermissibly impairs Garrison’s ability


Policy.




Plan Injunction).

Pending.



file the ADR Motion seeking approval of the ADR

Procedures. The Debtors submit that the ADR

Procedures will be a streamlined process and provide

claimants with an opportunity to efficiently liquidate their

claim. Importantly, the ADR Motion will be filed within

30 days of entry of the confirmation order and in place

prior to the Effective Date.







stay.”

3. 1484 Kenneth Hunsinger

(“Hunsinger”)

Hunsinger, a personal injury claimant, objects to

confirmation on the following basis:

1. The Plan impermissibly impairs Garrison’s ability


Policy.

Pending; the Hunsinger objection was late filed on

January 27, 2021 (past the January 22, 2021 objection

deadline).



file the ADR Motion seeking approval of the ADR

Procedures. The Debtors submit that the ADR

Procedures will be a streamlined process and provide

claimants with an opportunity to efficiently liquidate their

claim. Importantly, the ADR Motion will be filed within

30 days of entry of the confirmation order and in place

prior to the Effective Date.


3 WEIL:\97758693\10\65961.0004

Docket





Plan Injunction).







stay.”

II. Adjourned Objections (Regarding Cure and Assumption and Assignment)

4. 1408 OLP Pawendy L.P.

(“OLP”)

1. Cure Objection. OLP objects because their property,

consisting of six stores, will be divided between the

stores going to Flynn, and those going to Wendy’s.

They believe that their property cannot be severed

because the Lease treats them as a single property and

the Code does not allow such actions since the property

must assume the entire contract in full.

2. Adequate Assurance Objection. OLP objects on the

basis that it has not received sufficient adequate

assurance.

Pending. The Debtors and OLP are finalizing amended lease

agreements and have agreed to adjourn this matter until

February 12, 2021 without prejudice to further extension.

See Proposed Confirmation Order footnote 4.

5. 1369

Comcast Cable

Communications

Management, LLC and

certain of its affiliates and

subsidiaries (collectively,

“Comcast”)

Cure Objection. Comcast alleges that the Debtors owe

$105,036.46 in cure, and the Debtors’ currently listed cure

at $4,816.

In process. The Debtors and Comcast are continuing discussions

regarding the appropriate cure amount.

6. 1399

7 Mach, LLC and Diamond

W, LLC (together,

“Diamond W”)

1. Cure Objection. Diamond W objects to the proposed

Cure Amount and asserts that the total Cure Amount

is $33,774.90.

2. Service. Diamond W asserts that it has not been

served with any sort of notice about the objection

1. Adjourned. A settlement has been reached in principle,

pending finalization of documents.

2. Resolved. The Debtors have confirmed that the service

address is the same address to which the Debtors have


4 WEIL:\97758693\10\65961.0004

Docket


deadline, the exhibits to the various notices did not list

the proper address, and its discovery of the objection

deadline was coincidental.

3. Adequate Assurance Objection. Diamond W has

not yet received an adequate assurance package and

requests that it be provided.

historically mailed the rent check, and the Debtors have

confirmed with Epiq that all pleading have been served to such

address.

3. Resolved.

III. Resolved Confirmation Objections

7. 1377 Alabama Power Company

(“Alabama Power”)

Cure Objection. Alabama Power “does not object to the

Plan as a whole” but only to the extent that it seeks to

assume or assign Alabama Power’s contract with an

incorrect cure.

Moot. The Alabama Power contract will not be assumed or

assumed and assigned, therefore the cure objection is now moot.

8. 1331

Constellation New Energy,

Inc. (“CNE”)

Assumption and Assignment Objection. CNE requested

an order:

1. Removing all contracts between NPC International and

CNE from Exhibit A to the Plan Cure Notice;

2. Requiring the Debtors to identify with greater clarity

the Electric Agreement(s) it is seeking to potentially

assume and/or assign;

3. Requiring, as a condition to the Debtors’ assumption

and/or assignment of any of the Electric Agreements

that the Debtors pay all unpaid prepetition and post-

petition amounts accrued thereunder through the

effective date of assumption, including the cure

Moot. The CNE contracts will not be assumed or assumed and

assigned, therefore the cure objection is now moot.


5 WEIL:\97758693\10\65961.0004

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amounts set forth in the Schedule of Assumed

Contracts.3

9. 1370

Comcast Cable

Communications

Management, LLC and

certain of its affiliates and

subsidiaries (collectively,

“Comcast”)

Limited Objection. Comcast objects to confirmation of

the Plan to the extent the Debtors seek to have any of the

Comcast equipment revest in the Debtors free and clear of

Comcast’s ownership interests therein. Comcast requests

that the Plan make clear that Comcast’s ownership interest

in its equipment will continue after confirmation and

provide for the return of its equipment at rejected locations

before possession of those premises are surrendered.

Resolved. The Debtors have resolved this objection through

language included in the Proposed Confirmation Order. See

Proposed Confirmation Order ¶ 32(e).

10. 1446 JEM Investments, LTD.

(“JEM”)

Assumption and Assignment Objection. JEM objects

because the confirmation order will not be entered prior to

January 27, which is the deadline to assume or assign leases

based on the Assumption Deadline Extension Order. JEM

believes that further extension of the deadline to assume or

reject the lease would require the written consent of the

landlord, which has not been given by the landlord.

Because assumption will occur, at the earliest, January 29,

the day of the confirmation hearing, the Debtors will have

missed the deadline by which to assume or assign the lease,

in violation of 365(d)(4).

Resolved. JEM’s objection has been withdrawn. See Docket

No. 1465.

11. 1447 Gay R. Gipe Family Trust

(“Gay R. Gipe”)

Assumption and Assignment Objection. Gay R. Gipe

objects because the confirmation order will not be entered

prior to January 27, which is the deadline to assume or

assign leases based on the Assumption Deadline Extension

Order. Gay R. Gipe believes that further extension of the

deadline to assume or reject the lease would require the

written consent of the landlord, which has not been given

by the landlord. Because assumption will occur, at the

Resolved. Gay R. Gipe’s objection has been withdrawn. See

Docket No. 1466.

3 “Schedule of Assumed Contracts” means the Schedule of Assumed Contracts filed as Exhibit D to the Notice of Filing of Plan Supplement in Connection with

First Amended Joint Chapter 11 Plan of NPC International, Inc. and Its Affiliated Debtor [Docket No. 1288].


6 WEIL:\97758693\10\65961.0004

Docket


earliest, January 29, the day of the confirmation hearing, the

Debtors will have missed the deadline by which to assume

or assign the lease, in violation of 365(d)(4).

12. 1368 1380 SW Canal Blvd., LLC

1. Cure Objection. 1380 SW Canal objects to the

proposed Cure Amount and asserts that the total Cure

Amount is $11,461.92, including without limitation the

remaining balance of the “Deferral Amount” and the

1380 SW Canal’s attorneys’ fees and costs.

2. Assumption & Assignment Objection. 1380 SW

Canal objects on the basis that Exhibit A of the Cure

Notices and any order authorizing assumption or

assignment of the Amended Lease should:

i. Clarify that the lease at issue is the Amended

Lease and be revised to refer to the correct

name of the Landlord, which is 1380 SW

Canal Blvd., LLC, and

ii. Require the Debtors or the applicable

assignee, following assumption and

assignment, to pay for all accrued but unbilled

charges under the Amended Lease.

Resolved. 1380 SW Canal’s objection has been withdrawn. See

Docket No. 1448.

13. 1364 Westview Village Center

LLC

Cure Objection. Westview asserts that they are owed

$57,180.85, including a $9,803.37 payment for January,

2021, which NPC states was sent to Westview.

Resolved.

14. 1371 Donelson Corner, LLC

Cure Objection. Requests full payment of property taxes

in the amount of $11,194.09 by no later than January 15,

2021 or an update to the cure amount owed. These are for

2020 property taxes.

Resolved.

15. 1064

The County of Hardin,

Texas and the County of

Jasper, Texas (collectively

Confirmation Objection. The Texas Taxing Authorities

object to confirmation of the Plan as it fails to provide for

(1) payment of interest on their secured claims, (2) retention

Resolved. The Texas Taxing Authority Objection #1 has been

withdrawn. See Docket No. 1485.


7 WEIL:\97758693\10\65961.0004

Docket


with the other authorities in

Texas Taxing Authority

Objection #2 and Texas

Taxing Authority Objection

#3, the “Texas Taxing

Authorities”)

This objection is referred to

as the “Texas Taxing

Authority Objection #1”

of liens that secure all base tax, penalties, and interest that

may accrue, (3) retention of liens against their collateral,

and (4) specify when the Texas Taxing Authorities will

receive payment of their claims.

16. 1332

The City of Jasper, Houston

County, Tyler ISD,

Montague County, and

Montague County Appraisal

District (collectively with

the other authorities in


Objection #1 and Texas

Taxing Authority Objection

#3, the “Texas Taxing

Authorities”)




Confirmation Objection. The City of Jasper, Houston

County, Tyler ISD, Montague County, and Montague

County Appraisal District, join in and incorporate the

objection filed at Docket No. 1064. They also further object

because the Plan (1) fails to provide for the retention of their

pre-petition and post-petition liens on its collateral; (2) fails

to provide for the payment of interest on their claims; (3)

provides Debtors an option to return collateral securing the

claims in their class, which would result in preferential

treatment; (4) fails to provide for regular installment

payments as they allege is a requirement under section

11219(a)(9)(C) of the Bankruptcy Code; and (5) unfairly

discriminates in the treatment of similarly situated creditors.

Resolved. The Debtors have resolved this objection through

language included in the Proposed Confirmation Order. See

Proposed Confirmation Order ¶ 32(d).

17. 1422

Angelina County, Houston

CAD, Jefferson County,

Orange County, Silsbee ISD

and Smith County

(collectively with the other

authorities in Texas Taxing

Authority Objection #1 and


Confirmation Objection. The Texas Taxing Authorities

hold secured claims of $34,908.27. They object on the

following grounds:

1. their senior secured tax claims for 2020 ad valorem

taxes should be paid from the sale proceeds no

later than January 31, 2021;

Resolved. The Debtors have confirmed that the 2020 ad valorem

taxes were paid on January 26, 2021, and resolved this objection

through language included in the Proposed Confirmation Order.

See Proposed Confirmation Order ¶ 32(d).


8 WEIL:\97758693\10\65961.0004

Docket


Objection #3, the “Texas

Taxing Authorities”)




2. Plan fails to provide for payment of interest on

their claims, which would be at a rate of 12% per

annum should the taxes become delinquent after

January 31, 2021; and

3. Plan fails to provide for the retention of the Taxing

Authorities’ liens on the collateral, or proceeds of

such collateral, and the liens must remain on the

collateral, or proceeds of such collateral, until the

claims are paid in full.

18. 1467 Arch Insurance Company

(“Arch”)

1. Arch withdrew its limited objection related to the

Sale Transaction on the condition that the

negotiated language found in the Proposed Orders

would be included in the final orders approving the

Sale Transaction and seeks to preserve the

language included in the Proposed Sale Orders via

this objection.

2. Arch also seeks the inclusion of language in the

Confirmation Order that appropriately treats and

preserves Arch’s rights and interests under the

Arch Bonds, the Arch Indemnity Agreement and

the Arch letters of credit since the Plan currently

does not address or treat these interests. The Plan

also impermissibly treats or modifies Arch’s rights

under the letters of credit (see Section 5.10) and

Arch is unclear if the provisions in 5.10 apply to it.

Arch also would like language in the Confirmation

Order making it clear that none of its rights and

interests are released, enjoined or affected by the

Plan’s releases. Arch proposed language that it

would like included in the Confirmation Order to

resolve its concerns.

1. Resolved. The negotiated language was reflected in the

Sale Orders. See [Docket Nos. 1474 and 1475].

2. Resolved. The Debtors have resolved this objection

through language included in the Proposed Confirmation

Order. See Proposed Confirmation Order ¶ 32(f).

19. 1469 Acadia Realty Limited

Partnership, Brixmor

Various Landlords object to the Plan on the following

bases: Resolved.


9 WEIL:\97758693\10\65961.0004

Docket


Operating Partnership LP,

CenterCal Properties LLC,

Edens Investment Trust,

PGIM Real Estate, Realty

Income Corporation, Realty

Income Illinois Properties 2,

LLC, Realty Income Illinois

Properties 4, LLC, Realty

Income Properties 13, LLC,

RI CS 4 LLC and Westfield

LLC (collectively, the

“Various Landlords”)

1. The Plan automatically disallows claims where (1)

a rejection damages claim is not timely filed, and

(2) an Unexpired Lease has been assumed

pursuant to section 8.3(b) and 8.4.

2. The Plan contemplates that an unexpired lease can

be assumed, if previously listed as rejected, or

rejected if previously listed as assumed, until ten

(10) days prior to the Effective Date. See Plan,

section 8.1(e).

3. The releases, waivers, discharge, exculpation and

injunction provisions of the Plan are overbroad

and ambiguous. See Plan, section 10.3 10.6,

10.7(b), 10.8, and 10.9. Specifically, they do not

provide for preservation of setoff and recoupment

rights for landlords and do not account for

protections under the leases that arise prior to

confirmation but continue post-confirmation.

1. The Debtors have deleted the relevant language in 8.3(b),

and the Various Landlords have confirmed they are

resolved on this issue. See Plan, § 8.3(b).

2. At the request of the Various Landlords, the Debtors

have included clarifying language that section 8.1(e) of

the Plan only applies to the removal or addition of

executory contracts from or to the Schedule of Assumed

Contracts: “For the avoidance of doubt, unexpired

leases of non-residential real property listed on the

Schedule of Assumed Contracts shall not be removed

from the Schedule of Assumed Contracts after entry

of the Confirmation Order absent consent of the

relevant counterparty.” See Plan, § 8.1(e).

3. The Debtors have explained to the Various Landlords

that section 8.3(b) already includes the following

language preserving setoff and recoupment rights for

landlords: “Notwithstanding anything to the contrary

in this Plan, nothing shall modify the rights, if any, of

any holder of a Claim, to assert any right of setoff or

recoupment that such party may have under

applicable bankruptcy or non-bankruptcy law,

including, but not limited to, (i) the ability, if any, of

such parties to setoff or recoup a security deposit held

pursuant to the terms of their unexpired lease(s) with

the Debtors, the Reorganized Debtors, the Wind

Down Co or any successors to the Debtors, under the

Plan; (ii) assertion of rights of setoff or recoupment, if

any, in connection with Claims reconciliation; or (iii)

assertion of setoff or recoupment as a defense, if any,

to any claim or action by the Debtors, the Reorganized

Debtors, the Estates, the Wind Down Co or any

successors of the Debtors, as applicable. The Debtors


10 WEIL:\97758693\10\65961.0004

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reserve all rights to object with respect to the

foregoing.” See Plan, § 8.3(b).

20. 1374 Westgate, L.L.C.

1. Cure Objection. Westgate is the owner of a

shopping center and the Debtors are the lessees of

property located there. Westgate objects to the

proposed Cure Amount and asserts that the total Cure

Amount is $11,491.00. This figure includes three

months of rent, late fees for missed payments, and

interest on the balance of the outstanding rent.

2. Assumption and Assignment Objection. Westgate

objects to any assumption or assignment that would

modify or extinguish any provision of the lease

related to the use of the applicable shopping center.

Westgate further objects to any assumption or

assignment to the extent it would result in Westgate

being in violation or breach of the restrictions,

exclusive use rights or terms and obligations

contained in any other lease of the shopping center.

Additionally, Westgate objects to any assumption or

assignment of the lease to a party that would

materially harm the tenant mix of the shopping center

or any other tenant of the shopping center.

Resolved.

21. 1415

Publix Super Markets, Inc.,

PSM Alabama Holdings,

LLC, Real Sub, LLC, PSM

Shops at Verandah, LLC,

and Publix Alabama, LLC

(collectively, “Publix”)

Cure Objection.

1. Publix objects to the cure amounts as set forth by

the Debtor with respect to the leases sought to be

assumed and assigned to purchasers.

2. Publix also states that any order approving

assumption and assignment of the lease include

language that the debtors will remain liable for all

accrued but unbilled charges under the leases.

Resolved.


11 WEIL:\97758693\10\65961.0004

Docket


3. Publix also asserts that the adequate assurance

package was insufficient.


Exhibit B

Notice of Settlement of Class Action and Settlement Election and Participation Form


IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

§ In re § Chapter 11 § NPC INTERNATIONAL, INC., § Case No. 20–33353 (DRJ) et al., § Debtors.9 § (Jointly Administered) §

NOTICE OF SETTLEMENT OF CLASS ACTION AND SETTLEMENT ELECTION AND PARTICIPATION FORM

A Federal Court authorized this notice. This is not a solicitation from a lawyer.

PLEASE READ THIS NOTICE CAREFULLY. THIS NOTICE EXPLAINS IMPORTANT RIGHTS YOU MAY HAVE, INCLUDING THE RELEASE OF CERTAIN CLAIMS. YOUR LEGAL RIGHTS MAY BE AFFECTED. IF YOU HAVE ANY QUESTIONS ABOUT THIS NOTICE, THE SETTLEMENT, OR YOUR PARTICIPATION IN THE SETTLEMENT, PLEASE DO NOT CONTACT THE COURT, THE DEBTORS, OR THEIR COUNSEL. ALL QUESTIONS SHOULD BE DIRECTED TO THE SETTLEMENT ADMINISTRATOR.

THIS IS AN OFFICIAL NOTICE SENT TO YOU UNDER COURT ORDER BY THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS, TO INDIVIDUALS ELIGIBLE TO PARTICIPATE IN THE SETTLEMENT, DEFINED AS:

All delivery drivers who were employed by the Debtors in the Pizza Hut Business after (i) January 1, 2014, through the date that the Debtors’ Second Amended Joint Chapter 11 Plan, which was filed in the Bankruptcy Court on January 18, 2021 (the “Plan”) becomes effective (the “Effective Date”) or (ii) January 1, 2007 solely in the States of Illinois, Kentucky, Oklahoma, Oregon, or Florida, through the Effective Date.

More information can be found on the website established for communications about this settlement at https://dm.epiq11.com/NPC.

9 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification

number, are NPC International, Inc. (7298); NPC Restaurant Holdings I LLC (0595); NPC Restaurant Holdings II LLC (0595); NPC Holdings, Inc. (6451); NPC International Holdings, LLC (8234); NPC Restaurant Holdings, LLC (9045); NPC Operating Company B, Inc. (6498); and NPC Quality Burgers, Inc. (6457). The Debtors’ corporate headquarters and service address is 4200 W. 115th Street, Suite 200, Leawood, KS 66211.


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The United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”) authorized this notice (the “Notice”). This is not a solicitation from a lawyer. The purpose of this Notice is to advise you that:

(a) The Bankruptcy Court has approved a settlement, in which you may be entitled to participate if you were a delivery driver for NPC International, Inc.’s Pizza Hut business after (i) January 1, 2014, through the Effective Date or (ii) January 1, 2007 solely in the States of Illinois, Kentucky, Oklahoma, Oregon, or Florida, through the Effective Date.

(b) This settlement allows individuals who were drivers for the Debtors’ Pizza Hut business to participate in the settlement proceeds, as set forth below, subject to the conditions and qualifications set forth in the settlement.

TO OBTAIN THE BENEFITS OF THIS SETTLEMENT, YOU MUST COMPLETE THE ATTACHED SETTLEMENT ELECTION

AND PARTICIPATION FORM

I. SUMMARY OF THE CLAIMS SUBJECT TO THE SETTLEMENT

Prior to the September 28, 2020 deadline, established by the Bankruptcy Court, certain delivery drivers of NPC International, Inc. (“NPC”) submitted proofs of claim in the chapter 11 cases which alleged that they were under-reimbursed for out-of-pocket costs associated with using their vehicles to deliver pizzas on behalf of NPC, and, as a result, that this under-reimbursement led to delivery drivers receiving less than minimum wage in violation of the Fair Labor Standards Act and various state minimum wage laws. These proofs of claim largely adopted the allegations of a lawsuit filed by certain of these same delivery drivers in an action entitled Collins v. NPC International, Inc., No. 17-cv-312 (the “Collins Action”) which is pending in the Southern District of Illinois.

Additionally, during the chapter 11 cases, one of the delivery drivers who filed a proof of claim and who is also a named plaintiff in the Collins Action filed an action entitled Marshall v. Weber, et al., No. 4:20-cv-00757 (the “Marshall Action”) in the Western District of Missouri against three current senior officers of NPC. The Marshall Action raises the same issues as set forth in the proofs of claim and the Collins Action.

On August 25, 2020, after the bankruptcy filing, the delivery drivers who had filed proofs of claim in the chapter 11 cases filed a motion in the Bankruptcy Court for leave to have their proofs of claim treated as class proofs of claim on behalf of all delivery drivers of NPC employed after January 1, 2014 (or January 1, 2007 in the States of Illinois, Kentucky, Oklahoma, Oregon, or Florida). The motion, in effect, sought to assert claims by all delivery drivers employed by NPC in the above period even if drivers did not file a timely proof of claim in the chapter 11 cases.

NPC expressly denies the allegations set forth in the proofs of claim and in the Collins and Marshall actions and believes those actions are wholly without merit. Specifically, NPC believes that it fairly and adequately reimburses expenses to its delivery drivers and that it pays its delivery drivers more than minimum wages. NPC therefore filed a motion in the Bankruptcy Court seeking


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to have the proofs of claim filed by delivery drivers estimated at zero value. The delivery drivers who had filed proofs of claim in the chapter 11 cases opposed that motion and the parties engaged in significant discovery concerning those claims.

In December 2020, while the motion to estimate was pending, the Debtors engaged in settlement negotiations with delivery drivers who had filed proofs of claim in the chapter 11 cases and their counsel. With the help of an experienced mediator, current United States Bankruptcy Judge Marvin Isgur, the parties reached a comprehensive settlement on behalf of the class of delivery drivers employed by NPC during the period set forth above. As part of the settlement, a class has been certified and delivery drivers employed by NPC during the class period described above have the ability to participate in the settlement. By choosing to participate in the settlement, you may be entitled to receive monetary consideration.

As part of the Plan, the parties to the settlement jointly sought approval of the settlement and approval of the process by which notice would be provided to members of the settlement class. On January [29], 2021, the Court approved the settlement and the manner in which the notice would be provided.

By giving this notice, the Court is not expressing any opinion regarding the merits of either the claims or defenses. Nothing contained in this notice should be construed as suggesting the Court’s view as to which side might prevail should this matter proceed to class certification and trial on the merits.

II. THE SETTLEMENT AND DISTRIBUTION OF SETTLEMENT TO CLASS MEMBERS

A summary of the terms of the settlement are set forth below. The settlement provides that delivery drivers employed by NPC during the class period described above will be eligible to receive certain and differing amounts of compensation depending on (i) what time period each delivery driver was employed by NPC; (ii) how many miles driven while delivering pizza for NPC; (iii) whether each delivery driver already submitted a timely proof of claim in the chapter 11 cases; and (iv) the total number of delivery drivers who decide to return a Settlement Election and Participation Form.

1. Delivery drivers who were employed by NPC after July 1, 2020 are entitled to compensation based on how many miles they drove while delivering pizza for NPC, during the period beginning on July 1, 2020 through the Effective Date. The bar date by which claims arising after July 1, 2020 must be filed is [the first Business Day that is forty-five (45) days following the Effective Date] (the “Administrative Expense Claims Bar Date”). Those delivery drivers who were employed by NPC after July 1, 2020 and who want to participate in the settlement will have the opportunity to file an administrative claim before the Administrative Expense Claims Bar Date. Any such administrative claim will be entitled to receive the difference between the per mile reimbursement actually received from NPC and a hypothetical 48-cent reimbursement for each mile driven after July 1, 2020, subject to a total cap of $1,200,000 for all such claims. If the aggregate amount of claims by delivery drivers employed by NPC after July 1, 2020 (based on miles driven


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after July 1, 2020) exceeds the cap, then each delivery driver will be entitled to a pro rata share of the settlement proceeds.

2. Delivery drivers who were employed by NPC in the 180 days prior to the bankruptcy filing – between January 1, 2020 and July 1, 2020 – and who have already timely filed proofs of claim in the bankruptcy are entitled to compensation based on how many miles they drove while delivering pizza for NPC during that 180-day period. Delivery drivers who have already filed proofs of claim do not need to submit a Settlement Election and Participation Form as they have already been deemed to participate in the settlement through their counsel who negotiated the settlement. Any such claim will be entitled to receive the difference between the per mile reimbursement actually received from NPC and a hypothetical 48-cent reimbursement for each mile driven between January 1, 2020 and July 1, 2020, subject to a total cap of $1,450,000 (plus any unused portion of the $1,200,000 cap for administrative claims discussed in number 1 above) for all such claims.

3. Delivery drivers who were employed by NPC in the 180 days prior to the bankruptcy filing – between January 1, 2020 and July 1, 2020 – and who have not already timely filed proofs of claim in the bankruptcy also are entitled to compensation based on how many miles they drove while delivering pizza for NPC during that 180-day period if those individuals timely submit the Settlement Election and Participation Form. Any such claim will be entitled to receive 10% of the difference between the per mile reimbursement actually received from NPC and a hypothetical 48-cent reimbursement for each mile driven between January 1, 2020 and July 1, 2020, subject to a total cap of $1,150,000 (plus any unused portions of the $1,200,000 administrative claims cap and the $1,450,000 cap discussed in numbers 1 and 2 above) for all such claims.

4. Delivery drivers who were employed by NPC after January 1, 2014 (or after January 1, 2007 solely in the States of Illinois, Kentucky, Oklahoma, Oregon, or Florida) but before January 1, 2020, and who have already timely filed proofs of claim in the chapter 11 cases also are entitled to compensation based on how many miles they drove while delivering pizza for NPC during the periods they drove prior to January 1, 2020. Delivery drivers who have already filed proofs of claim do not need to submit a Settlement Election and Participation Form as they have already been deemed to participate in the settlement through their counsel who negotiated the settlement. Such delivery drivers will receive an allowed general unsecured claim based on the difference between the per mile reimbursement actually received from NPC and a hypothetical 48-cent reimbursement for each mile driven after January 1, 2014 (or after January 1, 2007 solely in the States of Illinois, Kentucky, Oklahoma, Oregon, or Florida) but before January 1, 2020. The amount of the allowed general unsecured claim is subject to a total cap of $5,000,000 for all such claims. If the aggregate amount of these claims exceeds the cap, then each individual will be entitled to an allowed claim based on their pro rata share of the $5,000,000.


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5. Delivery drivers who were employed by NPC after January 1, 2014 (or after January 1, 2007 solely in the States of Illinois, Kentucky, Oklahoma, Oregon, or Florida) but before January 1, 2020, and who have not already timely filed proofs of claim in the chapter 11 cases also are entitled to compensation based on how many miles they drove while delivering pizza for NPC during the periods they drove prior to January 1, 2020 if those individuals timely submit the Settlement Election and Participation Form. Such delivery drivers will receive an allowed general unsecured claim based on the difference between the per mile reimbursement actually received from NPC and a hypothetical 48-cent reimbursement for each mile driven after January 1, 2014 (or after January 1, 2007 solely in the States of Illinois, Kentucky, Oklahoma, Oregon, or Florida) but before January 1, 2020. The amount of the allowed general unsecured claim is subject to a total cap of $5,000,000 less the amount of the allowed claims granted to delivery drivers with general unsecured claims who timely filed proofs of claim in the chapter 11 cases as set forth in number 4 above (the “Unsecured Claim Cap Amount”). If the aggregate amount of these claims exceeds the cap, then each individual will be entitled to an allowed claim based on their pro rata share of the Unsecured Claim Cap Amount.

Pursuant to the Plan, any person, including a delivery driver, who has not filed a timely proof of claim asserting a claim arising prior to July 1, 2020 against the debtors or who does not file a postpetition administrative expense claim arising after July 1, 2020 by the Administrative Expense Claims Bar Date will have those claims released as set forth in the Plan. Further, as set forth in the Plan, the settlement provides that upon the Effective Date, all delivery drivers who do not submit a Settlement Election and Participation Form choosing not to participate in the settlement shall fully release the Debtors’ current and former directors, officers, employees, and managing agents of the Debtors, including, for the avoidance of doubt, the named defendants in the Marshall Action, and will be deemed conclusively, absolutely, unconditionally, irrevocably, and forever to release such persons from any and all claims and causes of Action whatsoever, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, asserted or unasserted, accrued or unaccrued, existing or hereinafter arising, whether in law or equity, whether sounding in tort or contract, whether arising under federal or state statutory or common law, or any other applicable international, foreign, or domestic law, rule, statute, regulation, treaty, right, duty, requirement or otherwise, that any driver claimant has, had or would have been legally entitled to assert arising out of or relating to, in whole or in part, the employment of such driver claimant by the Debtors, including any claims arising under or related to the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq., or any related or similar state wages and labor laws, and any claims arising under or related to the Collins Action and the Marshall Action and the underlying facts that were or could have been pled in those actions.

Further, any person who does not properly or fully submit information as requested in the Settlement Election and Participation Form cannot be assured to receive compensation under the settlement, in items 1-5 set forth above. In addition, the delivery drivers and their counsel have agreed to take steps necessary to dismiss with prejudice the Collins and Marshall actions.


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The Bankruptcy Court has ordered that this settlement and its terms are not precedent, and are not to be used as precedent in any other action or proceeding and shall not be used, construed as, or deemed to be evidence of an admission or concession of liability of any kind by the Debtors or any of its officers, and shall not be offered into evidence, received into evidence, or deemed to be evidence in any proceeding in any court, administrative agency, or other tribunal except in an action brought to enforce the terms of the settlement. Nor shall this settlement be construed as a finding or conclusion of the Bankruptcy Court with respect to the merit of any claim or defense asserted in the action.

III. WHAT ARE YOUR OPTIONS AS A SETTLEMENT CLASS MEMBER?

6. Delivery drivers who have already filed proofs of claim with respect to a prepetition claim – those arising before July 1, 2020 – do not need to submit a Settlement Election and Participation Form as they have already been deemed to participate in the settlement through their counsel who negotiated the settlement.

7. Delivery drivers who were employed by NPC after July 1, 2020, must file an administrative claim before the Administrative Expense Claims Bar Date, which is [the first Business Day that is forty-five (45) days following the Effective Date].

8. Delivery Drivers other than those in categories A and B above can participate in the settlement consideration by returning the attached form.

9. You may decline to receive settlement consideration by completing the attached form.

Unless you have already filed a timely proof of claim in the chapter 11 cases or have a claim, which arose after July 1, 2020, by returning the attached Settlement Election and Participation Form within 120 days from the date of service, you will be entitled to share in the settlement. You will be entitled to payment as set forth above.

If you do not wish to be part of and be bound by the settlement, you must return the attached form within 120 days from the date of service to the Settlement Administrator at the address provided below:

If sent by first-class mail:

NPC International, Inc. Settlement Forms Processing Center c/o Epiq Corporate Restructuring, LLC P.O. Box 4420 Beaverton, OR 97076-4420

If by Hand Delivery or Overnight Mail:

NPC International, Inc.


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Settlement Forms Processing Center c/o Epiq Corporate Restructuring, LLC 10300 SW Allen Blvd. Beaverton, OR 97005

IN ORDER TO BE VALID, YOUR RESPONSE MUST BE RECEIVED BY THE SETTLEMENT ADMINISTRATOR ON OR BEFORE 5:00 P.M. (CST) ON [•], 2021. IF YOU DO NOT RETURN THE SETTLEMENT ELECTION AND PARTICIPATION FORM BY THIS DATE YOU WILL BE DEEMED TO BE BOUND BY THE SETTLEMENT TERMS.

IV. SCOPE OF NOTICE AND ADDITIONAL INFORMATION

This Notice of Settlement contains only a summary of the claims in the relevant proofs of claim and the Settlement. The pleadings and other papers filed in the Debtors’ chapter 11 cases are available for review at https://dm.epiq11.com/NPC or the Court’s website at www.txs.uscourts.gov/bankruptcy.

You also may receive status updates on this case, from the following website: https://dm.epiq11.com/NPC. You may also contact the Settlement Administrator, Epiq Corporate Restructuring, LLC at [email protected] or 855-917-3563.

DO NOT CALL OR WRITE THE COURT, THE OFFICE OF THE CLERK OF THE COURT, THE DEBTORS, OR THEIR COUNSEL REGARDING THIS NOTICE.

ALL INQUIRIES SHOULD BE MADE TO THE SETTLEMENT ADMINISTRATOR.


Exhibit 1

Form of Notice of Settlement for Publication


If You Are or Were a Delivery Driver for NPC International, Inc.’s Pizza Hut Business, You May Be Entitled To Compensation as Part of a Settlement

Go to https://dm.epiq11.com/NPC. for more information, including the Second Amended Joint Chapter 11 Plan of NPC International, Inc., which contains a description of the relevant settlement.

The settlement class includes the following individuals:

All delivery drivers who were employed by the Debtors in the Pizza Hut Business after (i) January 1, 2014, through the date that the Debtors’ Second Amended Joint Chapter 11 Plan, which was filed in the Bankruptcy Court on January 18, 2021 (the “Plan”) becomes effective (the “Effective Date”) or (ii) January 1, 2007 solely in the States of Illinois, Kentucky, Oklahoma, Oregon, or Florida, through the Effective Date.

The settlement relates to claims brought in the chapter 11 case of NPC that NPC delivery drivers were under-reimbursed for out-of-pocket costs associated with using their vehicles to deliver pizzas on behalf of NPC, and, as a result, that this under-reimbursement led to delivery drivers receiving less than minimum wage in violation of the Fair Labor Standards Act and various state minimum wage laws. These claims largely adopt the allegations of a lawsuit filed by certain of these same delivery drivers in an action entitled Collins v. NPC International, Inc., No. 17-cv-312 (the “Collins Action”) which is pending in the Southern District of Illinois.

The Debtors have denied, and continue to deny, that these claims have any merit and have vigorously defended against them. Nothing contained in this notice should be construed as suggesting the Court’s view as to the merits of these allegations.

On January [29], 2021, the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”) approved a settlement, in which the Debtors have agreed to pay or give delivery drivers an allowed claim in the bankruptcy, as more fully described in the Plan. This amount will be based on (i) what time period each delivery driver was employed by NPC; (ii) how many miles driven while delivering pizza for NPC; (iii) whether each delivery driver already submitted a timely proof of claim in the chapter 11 cases; and (iv) the total number of delivery drivers who decide to return a form which would allow them to participate in the settlement.

Complete information about the settlement can be found in the Second Amended Joint Chapter 11 Plan of NPC International, Inc., available at https://dm.epiq11.com/NPC. Pursuant to the Plan, any person, including a delivery driver, who has not filed a timely proof of claim asserting a claim arising prior to July 1, 2020 against the debtors or who does not file a postpetition administrative expense claim arising after July 1, 2020 by the Administrative Expense Claims Bar Date will have those claims released as set forth in the Plan. Further, as set forth in the Plan, the settlement provides that upon the Effective Date, all delivery drivers who do not submit a Settlement Election and Participation Form choosing not to participate in the settlement shall fully release the Debtors’ current and former directors, officers, employees, and managing agents of the Debtors, including, for the avoidance of doubt, the named defendants in Marshall v. Weber, et al., No. 4:20-cv-00757 (the “Marshall Action”), and will be deemed conclusively, absolutely, unconditionally, irrevocably, and forever to release such person from any and all claims and causes of Action whatsoever, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, asserted or unasserted, accrued or unaccrued, existing or hereinafter arising, whether in law or equity, whether sounding in tort or contract, whether arising under federal or state statutory or common law, or any other applicable international, foreign, or domestic law, rule, statute, regulation, treaty, right, duty, requirement or otherwise, that any driver claimant, has, had or would have been legally entitled to assert arising out of or relating to, in whole or in part, the employment of such driver


claimant by the Debtors, including any claims arising under or related to the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq., or any related or similar state wages and labor laws, and any claims arising under or related to the Collins Action and the Marshall Action and the underlying facts that were or could have been pled in those actions.

What Are My Legal Rights as a Settlement Class Member?

• Participate in the Settlement Class, and Receive Benefits of the Settlement: If you return a Settlement Election and Participation Form (which can be found at https://dm.epiq11.com/NPC), you may be eligible to receive consideration as a result of the settlement.

• Decline to Participate in the Settlement Class: To exclude yourself from the settlement, you must submit a written Settlement Election Form to the Settlement Administrator at the following address:




NPC International, Inc. Settlement Forms Processing Center c/o Epiq Corporate Restructuring, LLC 10300 SW Allen Blvd. Beaverton, OR 97005 You cannot decline to participate through the website, by telephone, or by e-mail.

This notice provides only a summary of the settlement. For more detailed information regarding the rights and obligations of members of the certified class, visit the following website (https://dm.epiq11.com/NPC), or contact the Settlement Administrator through the “Contact Us” page on the website or at 855-917-3563.


Exhibit 2

Settlement Election and Participation Form


SETTLEMENT ELECTION AND PARTICIPATION FORM

• You Can Participate in the Settlement by Completing this Form:

You must return this Settlement Election and Participation Form by [120 days of mailing] if you wish to participate in the settlement and receive settlement consideration.

If you have already submitted a timely proof of claim in the bankruptcy and/or were employed as a delivery driver by NPC after July 1, 2020, you do not need to submit the Settlement Election and Participation Form in order to participate in the settlement.

(a) I elect to participate in the settlement. I understand that this will release any of the claims that I may have against the Debtors and Officers and Directors.

(b) Name (at the time of working for NPC): __________________________________

Last four digits of Social Security Number: ___________________________________________

My last address while working for NPC was: __________________________________________

My NPC employee ID (if available) was: _____________________________________________

If your NPC employee ID is not available, please provide the information requested in parts (c) and (d) below:

(c) Please list each of the time periods during which you worked as a delivery driver full time or part time for NPC:

Employment start date (month / year) Employment end date (month / year)

1. 1.

2. 2.

3. 3.

4. 4.

5. 5.

(d) Please list the location of the Pizza Hut store for which you delivered pizzas for each of the periods in (c) above:

Employment period Store Location (City/Town, State)

1.



2.

3.

4.

5.

(e) Your signature

_______________________________

Dated: _________________________

Your current address: ____________________________________________________

Your current email address:________________________________________________

IN ORDER TO BE VALID, YOUR RESPONSE MUST BE RECEIVED BY THE SETTLEMENT ADMINISTRATOR ON OR BEFORE 5:00 P.M. (CST) ON [•], 2021. PLEASE MAIL YOUR RESPONSE TO THE FOLLOWING ADDRESS:




NPC International, Inc. Settlement Forms Processing Center c/o Epiq Corporate Restructuring, LLC 10300 SW Allen Blvd. Beaverton, OR 97005


• You May Decline to Receive Consideration as part of and Decide to Exclude yourself from being Bound by the Settlement by Providing the Following Information:

(a) I elect not to participate in the settlement. I understand that this will release any of the claims that I may have against the Debtors and I will not receive any consideration that I may be entitled to under the settlement, but claims against the Officers and Directors will be preserved.

(b) Name (at the time of working for NPC): _________________________________

Last four digits of Social Security Number: ___________________________________________

My last address while working for NPC was: __________________________________________

My NPC employee ID (if available) was: _____________________________________________

If your NPC employee ID is not available, please provide the information requested in parts (c) and (d) below:

(c) Please list each of the time periods during which you worked as a delivery driver full time or part time for NPC:

Employment start date (month / year) Employment end date (month / year)

1. 1.

2. 2.

3. 3.

4. 4.

5. 5.

(d) Please list the location of the Pizza Hut store for which you delivered pizzas for each of the periods in (c) above:


1.

2.

3.



4.

5.

(e) Your signature

_______________________________

Dated: _________________________

Your Current Address: ____________________________________________________

Your current email address:________________________________________________

IN ORDER TO VALIDLY EXCLUDE YOURSELF FROM BEING BOUND BY THE SETTLEMENT, YOUR RESPONSE MUST BE RECEIVED BY THE SETTLEMENT ADMINISTRATOR ON OR BEFORE 5:00 P.M. (CST) ON [•], 2021. PLEASE MAIL YOUR RESPONSE TO THE FOLLOWING ADDRESS:




NPC International, Inc. Settlement Forms Processing Center c/o Epiq Corporate Restructuring, LLC 10300 SW Allen Blvd. Beaverton, OR 97005
