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UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT
HARTFORD DIVISION : In re: : Chapter 11 : CARLA’S PASTA, INC., et al., : Case No. 21-20111 :
Debtors.1 : (Jointly Administered) :
DEBTORS’ APPLICATION FOR ENTRY OF AN ORDER
(I) AUTHORIZING THE DEBTOR TO EMPLOY AND RETAIN PHOENIX EXECUTIVE SERVICES, LLC AS THEIR FINANCIAL
ADVISORS AND JOSEPH C. NAPPI AS THEIR CHIEF RESTRUCTURING OFFICER PURSUANT TO 11 U.S.C. § 327(a), AND (II) GRANTING RELATED RELIEF
Carla’s Pasta, Inc. (“Carla’s Pasta”) and Suri Realty, LLC (“Suri”), debtors and debtors-
in-possession in the above-captioned chapter 11 cases (together, the “Debtors”), hereby submit
this application (this “Application”), pursuant to section 327(a) of title 11 of the United States
Code (the “Bankruptcy Code”), Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy
Procedure (the “Bankruptcy Rules”), Local Bankruptcy Rule 2014-1, for entry of an order
substantially in the form attached hereto as Exhibit A (the “Order”): (i) authorizing the Debtors to
employ and retain Phoenix Executive Services, LLC (“Phoenix”) as their financial advisors and
naming Joseph C. Nappi (“Nappi”) of Phoenix as the Debtors’ chief restructuring officer (as
defined in the Engagement Letter, the “CRO”), effective as of the Petition Date (defined herein),
and (ii) granting related relief. In support of this Application, the Debtors submit the declaration
of Joseph C. Nappi of Phoenix (the “Nappi Declaration”) annexed hereto as Exhibit B. In further
support of this Application, the Debtors state as follows:
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are Carla’s Pasta, Inc. (5847) and Suri Realty, LLC (5847). The Debtors’ corporate headquarters and service address is 50 Talbot Lane, South Windsor, Connecticut 06074.
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JURISDICTION
1. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157(b)
and 1334. This proceeding is core pursuant to 28 U.S.C. § 157(b).
2. Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
3. The statutory predicates for the relief requested herein are Bankruptcy Code
sections 327(a), Bankruptcy Rules 2014 and 2016, and Local Bankruptcy Rule 2014-1.
PRELIMINARY STATEMENT
4. The Debtors require the services of an experienced CRO and financial advisors to
help the Debtors navigate through chapter 11 and restructure the Debtors’ business and operations.
In addition, the Debtors’ access to DIP financing is dependent upon retaining a CRO reasonably
acceptable to the Lenders. Through March 1, 2021, the Debtors engaged Novo Advisors, LLC
(“Novo”) as their financial advisors and Mr. Sandeep Gupta as their CRO. Recently, the Debtors
determined that there may exist a potential conflict of interest that may preclude Novo from being
“disinterested” pursuant to Bankruptcy Code section 328(a). While the Debtors outlined certain
actions that could be taken to maintain their existing advisors, to avoid and/or minimize any
disruptions and additional administrative expenses in the Chapter 11 Cases (defined herein), Novo
tendered their resignation, effective March 1, 2021. Immediately thereafter, the Company retained
Phoenix and Nappi as CRO, as of February 28, 2021, subject to this Court’s approval.2 Prior to
retaining Phoenix, the Company provided a list of all creditors and other parties in interest to
Phoenix to review for conflicts and connections. Phoenix has unequivocally stated, and confirmed
in the attached Nappi Declaration, that neither Phoenix nor Nappi has any institutional
2 As set forth in the Engagement Letter (defined below) Nappi’s role as CRO is further subject to the Debtors including Nappi on their existing director and officer liability insurance policy, and until such time Nappi will serve as an advisor to the Debtors.
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relationships with any material creditors in these Chapter 11 Cases and has not done work in any
matter involving either of the senior secured lenders for over eight (8) years. The Company is
confident that Phoenix and Nappi hold no interest adverse to the Company and their estates, and
are otherwise disinterested persons.
BACKGROUND
A. The Chapter 11 Case
5. On October 29, 2020, an involuntary petition for relief under chapter 7 of the
Bankruptcy Code was filed against Suri Realty, LLC. See Case No. 20-21270 at Dkt. No. 1. An
order converting the involuntary chapter 7 bankruptcy case to a voluntary case under chapter 11
of the Bankruptcy Code was entered on December 17, 2020. See Case No. 20-21270 at Dkt. No.
30 (the “Suri Chapter 11 Case”).
6. On February 8, 2021 (the “Petition Date”), Carla’s Pasta commenced this case by
filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code (“Carla’s Pasta’s
Chapter 11 Case”, and together with the Suri Chapter 11 Case, the “Chapter 11 Cases”).
7. The Debtors continue to operate and manage their businesses as debtors-in-
possession pursuant to Bankruptcy Code sections 1107(a) and 1108.
8. No trustee or examiner has been appointed in these Chapter 11 Cases.
9. On February 18, 2021, the Office of the United States Trustee appointed an Official
Committee of Unsecured Creditors in the Carla’s Pasta Chapter 11 Case (the “Committee”).
10. Additional factual background relating to the Debtors’ business and the
commencement these Chapter 11 Cases is set forth in detail in the Amended Declaration of Sandeep
Gupta, Chief Restructuring Officer, in Support of Debtors’ First Day Pleadings [see Dkt. 48] (the
“First Day Declaration”).
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RELIEF REQUESTED
11. The Debtors seek an order of this Court authorizing the employment and retention
of Phoenix as their financial advisors, and designating Joseph C. Nappi as its CRO for the Chapter
11 Cases and all related matters, effective as of February 8, 2021. Accordingly, the Debtors
respectfully request that the Court enter an order pursuant to section 327(a) of the Bankruptcy
Code and Bankruptcy Rule 2014(a) authorizing the Debtors to employ and retain Phoenix as their
financial advisors and Nappi as CRO to perform any financial advisory services that will be
necessary during the Chapter 11 Cases.
PHOENIX’S QUALIFICATIONS
12. Phoenix is a highly qualified and respected full service financial advisory firm
comprised of seasoned professionals providing financial advisory and corporate restructuring
services primarily related to companies in financial distress or undergoing a purchase/sale
transaction.
13. The Debtors have selected Phoenix to serve as their financial advisor because
Phoenix’s professionals have extensive experience and knowledge in analyzing, structuring,
negotiating and effecting restructuring and recapitalization transactions, evaluating business
operations, properties, financial conditions and prospects, developing strategies for accomplishing
proposed transactions, assessing valuations, providing expert testimony, and other support related
to reorganization and sales of assets.
14. Joseph C. Nappi, a Senior Managing Director of Phoenix, will lead all of the day-
to-day aspects of this assignment and will serve as CRO. Mr. Nappi is well suited to provide the
services required by the Debtors, and his advisory experience extends across many industries,
including food services, as referenced in the Nappi Declaration.
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15. The Debtors believe Phoenix is well suited to provide the financial advisory
services required by the Debtors. The Debtors believe that Phoenix’s general accounting and
financial advisory experience and expertise, along with its ability to provide asset evaluation and
analysis and expert testimony, if necessary, will inure to the benefit of the Debtors.
16. In addition, Phoenix and Mr. Nappi are capable and willing to undertake the
challenge of coming in to these pending Chapter 11 Cases in order to provide financial advisory
services and leadership, while reducing any disruptions inherent in a change of management and
advisory services to a debtor in bankruptcy. Mr. Nappi and his team at Phoenix are seasoned
professionals, and anticipate that the transition into their respective CRO and financial advisor
roles will be smooth under the circumstances of these Chapter 11 Cases. The Debtors believe that
Mr. Nappi and Phoenix are well qualified to represent them in these Chapter 11 Cases in an
efficient and effective manner.
SERVICES TO BE RENDERED
17. During the pendency of the Chapter 11 Cases, the Debtors contemplate that Phoenix
will provide the following services:
a. Provide the necessary oversight and assistance to the Board of Directors and the Debtors in the preparation of the various financial reporting requirements in these Chapter 11 Cases;
b. Meet regularly with the Debtors’ Board of Directors (the “Board”) and senior management (i) to receive updates on any and all action items implemented by agreement between senior management and the CRO and Phoenix personnel, (ii) to be updated on any and all recommendations of senior management and/or the CRO and Phoenix personnel as to future action items, and (iii) to address any other matters that senior management and/or the CRO believe should be brought to the attention of the Board;
c. Assist the Debtors in their communications and negotiations with Bank of Montreal and People’s United Bank (collectively the “Lenders”), as well as any other secured and unsecured creditors, including the Committee, and their related legal and financial advisor professionals;
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d. Oversee and as need be prepare and/or monitor, and modify the Debtors’ cash flow forecasts and bankruptcy related budgets on a periodic basis in order to determine and/or validate the sources and uses of cash, borrowing availability (if applicable), and the timing and magnitude of financing necessary to support the Debtors during these Chapter 11 Cases;
e. Develop and maintain a “Scorecard” to monitor and report to the various constituents the key value drivers of the cash flow;
f. Oversee the preparation, monitoring and periodically modify the Debtors’ business plan, the actual monthly and YTD GAAP results vs. the budget, monthly financial projections and normalized TTM EBITDA and projected pro forma EBITDA;
g. Provide oversight with regard to daily cash management activities, including maximizing and forecasting collections and availability, and assisting the Debtor with prioritizing disbursements within the Debtors’ availability constraints;
h. Review and approve disbursements made by the Debtors, with the exception of Phoenix’s invoices, which authority for payment will remain with either the President or the Board of Directors, however neither the CRO and Phoenix shall become signatories to any checking or disbursement account. The CRO and Phoenix personnel will also have authority to review and approve all requested borrowings under any DIP facility during the Chapter 11 Cases;
i. Work with restructuring counsel to assist management in the preparation of the post filing Monthly Operating Reports (MORs) and assist with statements and schedules that are typical in any bankruptcy proceeding;
j. Provide the necessary oversight to assure all parties that the efforts of Cowen and Company, LLC to identify and solicit interest from interested parties are sufficient to conduct a far reaching and effective auction process;
k. Provide testimony in any Chapter 11 proceeding as needed; and
l. Provide such other support as may be reasonably requested by the Debtors or Debtors’ counsel that fall within Phoenix’s expertise, experience, and capabilities that are mutually agreeable.
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DISINTERESTEDNESS OF PHOENIX
18. To the best of the Debtors’ knowledge, Phoenix and its respective employees have
no connections with creditors, parties-in-interest, their respective attorneys and accountants, or the
United States Trustee, or any persons employed by the United States Trustee, except as disclosed
in the Nappi Declaration.
19. In late February 2021, the Debtors determined it would be in their best interests to
engage Phoenix, and Nappi as CRO, to represent the Debtors as replacement financial advisors
and CRO. Given Phoenix’s financial advisory and restructuring qualifications and Phoenix’s
familiarity with industries in line with the Debtors’ business, the Debtors subsequently retained
Phoenix to assist with their restructuring efforts.
20. Accordingly, the Debtors submit that (i) Phoenix and its employees are
“disinterested persons” as that phrase is defined in Section 101(14) of the Bankruptcy Code, and
(ii) Phoenix neither represents nor holds an interest adverse to the interest of the Debtors’ estate
with respect to the matter on which Phoenix is to be employed.
21. As set forth in the Nappi Declaration, there is no agreement or understanding
between Phoenix and any other entity, other than an employee of Phoenix, for the sharing of
compensation received or to be received for services rendered in connection with these cases.
22. The Debtors believe that the retention of Phoenix is in the best interests of the
Debtors and the Debtors’ estates.
COMPENSATION OF PHOENIX
23. As compensation for services to be rendered to the Debtors, and consistent with the
compensation terms set forth in the Engagement Letter attached as Exhibit 2 to the Nappi
Declaration (the “Engagement Letter”), Phoenix intends to charge the Debtors a flat-rate monthly
fee of $100,000 for the provision of both financial advisory and CRO services (the “Monthly
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Fee”).3 The agreement to provide a flat rate was a material concession by Phoenix as the Debtors
require an advisor that will operate within the strict budget approved by the Lenders, yet anticipate
that if engaged at their hourly rates, they would likely exceed the Monthly Fee. Although Phoenix
will be paid at the Monthly Fee, they will continue to track their time and services as outlined
herein.
24. By this Application, the Debtors request that Phoenix be permitted to record its
time in quarter-hour increments, as is customary in Phoenix’s industry, and that Phoenix be
excused from the typical requirement to bill in increments of one-tenth of an hour. In addition,
Phoenix will bill for all out of pocket expenses reasonably incurred by Phoenix in connection with
the matters contemplated by this Application. Travel time, normally billed at 50%, has been
waived as an additional courtesy to the Debtors. As compensation for the administrative and
support time and expenses typically required (e.g. computer, e-mail, administrative staff time, etc.)
Phoenix will bill $300 each month, which is in addition to the Monthly Fee .
25. Phoenix intends to apply for compensation for professional services rendered and
reimbursement of its actual expenses incurred in connection with these Chapter 11 Cases, subject
to the Court’s approval and in compliance with applicable provisions of the Bankruptcy Code, the
Bankruptcy Rules, the Local Bankruptcy Rules, any interim professional compensation order that
may be entered by this Court, and any other applicable procedures and orders established by this
Court, and consistent with the proposed compensation set forth in the Engagement Letter. Pursuant
to the Engagement Letter, upon Court approval of this Application, the Debtors will forward
$50,000 to Phoenix to be held as a retainer. Unless otherwise agreed by the parties, this retainer
will not to be applied or credited to amounts due from the Debtors but will be returned to the
3 Phoenix’s customary hourly rates range from $150 to $795 per hour.
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Debtors once all amounts due to Phoenix are paid in full subject to a holdback to fund any
indemnification claims.
26. The Debtors believe the overall compensation structure set forth in the Engagement
Letter is comparable to those generally charged by corporate financial consulting firms of similar
stature to Phoenix for comparable engagements, both in and out of bankruptcy proceedings.
27. Additionally, as set forth in the Engagement Letter, Phoenix seeks a limited
indemnity from the Debtors for any claims against Phoenix relating to the services it provides to
the Debtors in these Chapter 11 Cases; provided the Debtors shall not be obligated to indemnify
or hold Phoenix for any gross negligence or willful misconduct by Phoenix. The Debtors believe
such limited indemnities are quite common and customary for financial advisory firms and
requests that the Court approve such terms as part of Phoenix’s engagement.
28. Lastly, as set forth in the Engagement Letter, either party may immediately
terminate the engagement with or without cause upon delivery of written notice.
BASIS FOR RELIEF
29. The Debtors submit that the retention of Phoenix under the terms described herein
is appropriate under sections 327(a), 328, and 1107 of the Bankruptcy Code.
30. Section 327(a) empowers a debtor, with the Court’s approval, to employ
professionals “that do not hold or represent an interest adverse to the estate, and that are
disinterested persons, to represent or assist the trustee in carrying out the trustee’s duties under this
title.” 11 U.S.C. § 327(a).
31. Section 101(14) of the Bankruptcy Code defines “disinterested person” as a person
that:
(A) Is not a creditor, an equity security holder, or an insider;
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(B) Is not and was not, within two years before the date of the filing of the petition, a director, officer, or employee of the debtor; and
(C) Does not have an interest materially adverse to the interests of the estate or of any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the debtor, or for any other reason.
11 U.S.C. § 101(14)(A)-(C).
32. Section 1107(b) of the Bankruptcy Code provides that “a person is not disqualified
for employment under section 327 of this title by a debtor in possession solely because of such
person’s employment by or representation of the debtor before the commencement of the case.”
11 U.S.C. § 1107(b).
33. To the best of the Debtors’ knowledge, the partners and associates of Phoenix do
not have any connection with the Debtors, their creditors, or any other party in interest, or their
attorneys, except to the extent set forth in the Nappi Declaration. Accordingly, the Debtors believe
Phoenix is “disinterested” and does not hold or represent an interest adverse to the Debtors’ estates.
34. Section 328(a) of the Bankruptcy Code authorizes the employment of a professional
person “on any reasonable terms and conditions of employment, including on a retainer . . .” 11
U.S.C. § 328(a).
35. The Debtors believe the terms and conditions of the Engagement Letter are fair,
reasonable and market-based terms that should be approved pursuant to section 328(a) of the
Bankruptcy Code, including the monthly flat fee rate structure that Phoenix has agreed upon.
36. Subject to this Court’s approval and in accordance with section 328 of the
Bankruptcy Code, the applicable Bankruptcy Rules, the Local Rules, any interim professional
compensation order and any other procedures that may be entered by this Court, the Debtors
request that Phoenix receive reimbursement of actual and necessary expenses incurred in
connection with their representation of the Debtors in this case.
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37. Lastly, the Engagement Letter provides that Phoenix personnel will be entitled to
the benefit of the most favorable indemnities provided by the Debtors to their officers and
directors. In addition, the Engagement Letter provides that the Debtors agree to indemnify and
release Phoenix from any claims “arising under or in any way related to the [Engagement Letter].”
Ex. 2 at p. 6. The Engagement Letter further provides that “[t]he foregoing release and indemnity
shall not apply if it is judicially determined that such claims, damages, liabilities and expenses
resulted from the willful misconduct or gross negligence of the [i]ndemnified [p]arty.” Id. Courts
have approved indemnification provisions for financial advisors similar to those contained in the
Engagement Letter. See United Artists Theatre Co. v. Walton, 315 F.3d 217, 225 (3d Cir. 2003)
(holding “agreements to indemnify financial advisors for their negligence [as opposed gross
negligence or willful misconduct] are reasonable under § 328(a) of the Bankruptcy Code.”).
38. The Debtors anticipate that it will require Phoenix to render extensive financial
advisory services, the cost of which may not be estimable, which is why the parties agreed to the
Monthly Fee structure. Subject to this Court’s approval, and in accordance with sections 330 and
331 of the Bankruptcy Code, the applicable Bankruptcy Rules, the Local Rules, and other
procedures that may be fixed by the Court, the Debtors request that Phoenix be compensated the
Monthly Fee (i.e., $100,000), keep track of its time for services rendered in quarter-hour
increments, and that Phoenix receive reimbursement of actual and necessary expenses incurred in
connection with its representation of the Debtors in this case.
NOTICE
39. Notice of this Application will be provided to (a) the U.S. Trustee; (b) counsel for
the Committee; (c) the Internal Revenue Service; (d) the United States Attorney’s Office for the
District of Connecticut; (e) counsel for the Lenders; and (f) any other party that has requested
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service pursuant to Bankruptcy Rule 2002 as of the time of service (collectively, the “Notice
Parties”). The Debtors believe that no further notice is required under the circumstances.
NO PRIOR REQUEST
40. No previous request for the relief sought herein has been made by the Debtors in
this or in any other court.
WHEREFORE, the Debtors respectfully requests entry of the Proposed Order granting the
relief requested herein and such other and further relief as the Court may deem just and proper.
Dated: March 1, 2021 Carla’s Pasta, Inc. and Suri Realty, LLC,
/s/ Carla Squatrito Carla Squatrito, Chief Executive Officer
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Exhibit A
Proposed Order
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UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT
HARTFORD DIVISION : In re: : Chapter 11 : CARLA’S PASTA, INC., et al., : Case No. 21-20111 :
Debtors.1 : (Jointly Administered) :
ORDER AUTHORIZING THE DEBTORS (I) TO EMPLOY
AND RETAIN PHOENIX EXECUTIVE SERVICES, LLC AS THEIR FINANCIAL ADVISORS AND JOSEPH C. NAPPI AS CHIEF RESTRUCTURING OFFICER PURSUANT TO 11 U.S.C. §§ 327(a), AND (II) GRANTING RELATED RELIEF
Upon consideration of the Debtors’ Application for Entry of an Order Authorizing the
Debtors (I) To Employ and Retain Phoenix Executive Services, LLC as their Financial Advisors
and Joseph C. Nappi as Chief Restructuring Advisor Pursuant to 11 U.S.C. §§ 327(a), and
(II) Granting Related Relief (the “Application”)2 and the Nappi Declaration and any response(s)
to the Application; and due and proper notice of the Application having been given; and it
appearing that no other or further notice of the Application is required; and the Court having
jurisdiction to consider the Application in accordance with 28 U.S.C. §§ 157 and 1334; and
consideration of the Application and the requested relief being a core proceeding pursuant to 28
U.S.C. § 157(b)(2); and venue being proper before this Court pursuant to 28 U.S.C. §§ 1408 and
1409; and the relief requested in the Application and provided for herein being in the best interest
of the Debtors, their estates, and creditors; and after due deliberation and sufficient cause appearing
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are Carla’s Pasta, Inc. (5847) and Suri Realty, LLC (5847). The Debtors’ corporate headquarters and service address is 50 Talbot Lane, South Windsor, Connecticut 06074.
2 Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Application.
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therefor, and due and proper notice of the Application having been provided to the Notice Parties;
and it appearing that no other or further notice need be provided; and the Court having held one or
more hearings to consider the relief requested in the Application and all of the proceedings had
before this Court; and all objections to the Application having been withdrawn, resolved, or
overruled; and the Court having determined that the legal and factual bases set forth in the
Application and the Nappi Declaration establish just cause for the relief granted herein; and after
due deliberation and sufficient cause appearing therefor
IT IS HEREBY ORDERED THAT:
1. The Application is GRANTED as provided herein.
2. Pursuant to sections 327(a), 328, and 1107(b) of the Bankruptcy Code, the Debtors
are hereby authorized to retain Phoenix as their financial advisors and Joseph C. Nappi as their
chief restructuring officer (as defined in the Engagement Letter, the “CRO”) in the Chapter 11
Cases, and Phoenix is authorized to perform any and all financial advisory services for the Debtors
that are necessary and appropriate in connection with these cases, including those services
described in the Application and the Nappi Declaration.
3. Phoenix does not hold or represent any interest adverse to the Debtors’ estates with
respect to the matters upon which it is to be employed and is a “disinterested person” as that term
is defined in section 101(14) of the Bankruptcy Code.
4. Phoenix shall be compensated in accordance with the terms set forth in the
Application and in the Engagement Letter, including the monthly $100,000 flat fee (and pro rated
for any partial monthly period) for the combined provision of financial advisory and CRO services.
Phoenix will file interim and final fee applications for allowance of its compensation and
reasonable and necessary expenses and shall be subject to sections 330 and 331 of the Bankruptcy
Code, the Bankruptcy Rules, and the Local Bankruptcy Rules, and such other procedures as may
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be fixed by order of this Court, to the extent such compensation and expenses are to be paid from
the Debtors’ estates. The Debtors are authorized to pay to Phoenix the $50,000 retainer provided
for in the Engagement Letter.
5. In light of services to be provided by Phoenix and the structure of Phoenix’s
compensation pursuant to the Engagement Letter, Phoenix and its professionals shall be excused
from maintaining time records as set forth in the Bankruptcy Rules, the Local Rules, and the Fee
Guidelines promulgated by the Office of the United States Trustee for Region 2 in connection with
the services to be rendered pursuant to the Engagement Letter; that Phoenix shall instead present
to this Court reasonably detailed time records in one-quarter (0.25) hour increments containing
descriptions of those services provided on behalf of the Debtors, the approximate time expended
in providing those services, and the identity of the individuals providing those services.
6. The indemnification provisions in the Engagement Letter are approved; provided,
however, that all requests by Phoenix for the payment of indemnification as set forth in the
Engagement Letter shall be made by means of an application to this Court and shall be subject to
review by this Court to ensure that payment of such indemnity conforms to the terms of the
Engagement Letter and is reasonable under the circumstances of the litigation or settlement in
respect of which indemnity is sought; provided, further, however, that in no event shall Phoenix
be indemnified in the case of its own bad faith, self-dealing, breach of fiduciary duty (if any), gross
negligence, or willful misconduct.
7. Phoenix shall provide written notice to the Debtors and the United States Trustee
prior to any increases in any of Phoenix’s rates for services provided to the Debtors.
8. The Debtors are authorized and empowered to take all actions necessary to
implement the relief granted in this Order in accordance with the Application.
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9. The terms and conditions of this Order shall be immediately effective and
enforceable upon its entry.
10. This Court shall retain jurisdiction with respect to all matters arising from or related
to the implementation or interpretation of this Order.
Dated: _______________, 2021
______________________________________ JAMES J. TANCREDI
UNITED STATES BANKRUPTCY JUDGE
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Exhibit B
Nappi Declaration
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UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT
HARTFORD DIVISION : In re: : Chapter 11 : CARLA’S PASTA, INC., et al., : Case No. 21-20111 :
Debtors.1 : (Jointly Administered) :
DECLARATION OF JOSEPH C. NAPPI
IN SUPPORT OF DEBTORS’ APPLICATION FOR ENTRY OF AN ORDER AUTHORIZING THE
DEBTORS (I) TO EMPLOY AND RETAIN PHOENIX EXECUTIVE SERVICES, LLC AS THEIR FINANCIAL ADVISORS AND JOSEPH C.
NAPPI AS CHIEF RESTRUCTURING OFFICER PURSUANT TO 11 U.S.C. § 327(a), AND (II) GRANTING RELATED RELIEF
Pursuant to 28 U.S.C. § 1746, I, Joseph C. Nappi, hereby declare as follows under the
penalty of perjury to the best of my knowledge, information, and belief:
1. I am a Senior Managing Director of Phoenix Executive Services, LLC (“Phoenix”).
I am authorized to make this declaration on Phoenix’s behalf (the “Declaration”). This Declaration
is submitted pursuant to Rule 2014(a) of the Federal Rules of Bankruptcy Procedure (the
“Bankruptcy Rules”) and Local Bankruptcy Rule 2014-1 in support of the application of the
Debtors in the above-captioned chapter 11 cases (the “Chapter 11 Cases”) for an order pursuant to
section 327(a) of title 11 of the United States Code (the “Bankruptcy Code”) authorizing the
employment and retention of Phoenix as their financial advisors and naming Joseph C. Nappi
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are Carla’s Pasta, Inc. (5847) and Suri Realty, LLC (5847). The Debtors’ corporate headquarters and service address is 50 Talbot Lane, South Windsor, Connecticut 06074.
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(“Nappi”) of Phoenix as the chief restructuring advisor (as defined in the Engagement Letter, the
“CRO”) for the Debtors (the “Application”).2
SERVICES TO BE RENDERED
2. At the request of the Debtors, Phoenix will render general financial advisory and
restructuring services to the Debtors as needed throughout the course of the Chapter 11 Cases. In
addition, and subject to approval of the Application, I will serve as the Debtors’ CRO. In that role,
I will advise and assist the Debtors in a variety of restructuring efforts.
3. During these Chapter 11 Cases, it is anticipated that the financial advisory services
Phoenix will render may include, but shall not be limited to, the following:
a. Provide the necessary oversight and assistance to the Board of Directors and the Debtors in the preparation of the various financial reporting requirements in these Chapter 11 Cases;
b. Meet regularly with the Debtors’ Board of Directors (the “Board”) and senior management (i) to receive updates on any and all action items implemented by agreement between senior management and the CRO and Phoenix personnel, (ii) to be updated on any and all recommendations of senior management and/or the CRO and Phoenix personnel as to future action items, and (iii) to address any other matters that senior management and/or the CRO believe should be brought to the attention of the Board;
c. Assist the Debtors in their communications and negotiations with Bank of Montreal and People’s United Bank (collectively the “Lenders”), as well as any other secured and unsecured creditors, including the Committee, and their related legal and financial advisor professionals;
d. Oversee and as need be prepare and/or monitor, and modify the Debtors’ cash flow forecasts and bankruptcy related budgets on a periodic basis in order to determine and/or validate the sources and uses of cash, borrowing availability (if applicable), and the timing and magnitude of financing necessary to support the Debtors during these Chapter 11 Cases;
2 Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Application.
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e. Develop and maintain a “Scorecard” to monitor and report to the various constituents the key value drivers of the cash flow;
f. Oversee the preparation, monitoring and periodically modify the Debtors’ business plan, the actual monthly and YTD GAAP results vs. the budget, monthly financial projections and normalized TTM EBITDA and projected pro forma EBITDA;
g. Provide oversight with regard to daily cash management activities, including maximizing and forecasting collections and availability, and assisting the Debtor with prioritizing disbursements within the Debtors’ availability constraints;
h. Review and approve disbursements made by the Debtors, with the exception of Phoenix’s invoices, which authority for payment will remain with either the President or the Board of Directors, however neither the CRO and Phoenix shall become signatories to any checking or disbursement account. The CRO and Phoenix personnel will also have authority to review and approve all requested borrowings under any DIP facility during the Chapter 11 Cases;
i. Work with restructuring counsel to assist management in the preparation of the post filing Monthly Operating Reports (MORs) and assist with statements and schedules that are typical in any bankruptcy proceeding;
j. Provide the necessary oversight to assure all parties that the efforts of Cowen and Company, LLC to identify and solicit interest from interested parties are sufficient to conduct a far reaching and effective auction process;
k. Provide testimony in any Chapter 11 proceeding as needed; and
l. Provide such other support as may be reasonably requested by the Debtors or Debtors’ counsel that fall within Phoenix’s expertise, experience, and capabilities that are mutually agreeable.
3. Phoenix is prepared, if necessary, to work closely with any other professional
retained by the Debtors to ensure there is no duplication of effort or cost.
DISINTERESTEDNESS OF PROFESSIONALS
4. Based on Phoenix’s conflicts search conducted to date and described herein, to the
best of my knowledge, neither I, Phoenix, nor any member or associate thereof, insofar as I have
been able to ascertain, has any connection with, or holds an interest adverse to, the Debtors, its
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creditors or any other parties in interest, or their respective attorneys and accountants, the United
States Trustee or any person employed in the office of the United States Trustee, except as
disclosed or as otherwise described immediately below. Moreover, neither Phoenix nor myself
have any institutional relationships with any material creditors in these Chapter 11 Cases and have
not done work in any matter involving either of the senior secured Lenders for over eight (8) years.
5. There is no agreement or understanding between Phoenix and any other entity,
other than an employee of Phoenix, for the sharing of compensation received or to be received for
services rendered in connection with these cases. Accordingly, Phoenix submits that (i) Phoenix
and its employees are “disinterested persons” as that phrase is defined in Section 101(14) of the
Bankruptcy Code, as modified by section 1107(b) of the Bankruptcy Code, and (ii) Phoenix
neither represents nor holds an interest adverse to the interest of the Debtors’ estate with respect
to the matter on which Phoenix is to be employed, in that Phoenix, its members and associates:
A. Is not a creditor, an equity security holder, or an insider;
B. Is not and was not, within two years before the date of the filing of the petition, a director, officer, or employee of the debtors, except to the extent that I have served as the Debtors’ chief restructuring officer as an independent contractor, subject to the terms and conditions of the Engagement Letter; and
C. Does not have an interest materially adverse to the interests of the estates or of any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the debtors, or for any other reason.
6. I am not related, and to the best of my knowledge, no member or associate at
Phoenix is related, to any United States Bankruptcy Judge in this District or to the United States
Trustee for this District or any employee thereof.
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7. As of the Petition Date and the date of the Application, the Debtors do not currently
owe Phoenix any amounts for any services rendered prior to such dates.3 In the one-year period
prior to the Petition Date, Phoenix did not perform any services for the Debtors.
8. Phoenix and certain of its members and associates may have in the past represented,
may currently represent, and may in the future represent, parties in interest, including creditors of
the Debtors in connection with matters unrelated to the Debtors and the Chapter 11 Cases. Phoenix
has conducted a search of its electronic database utilizing the company’s e-mail conflict reporting
system (the “Conflict Check System”) for its connection to the entities listed on the Exhibit 1
attached to this Declaration. The information listed on Schedule 1 may be updated or may change
during the pendency of these cases. I will update this Declaration when necessary and when I
become aware of additional material information.
9. Except as disclosed herein, Phoenix has not and will not advise any party identified
on Schedule 1 in any matters related to these Chapter 11 Cases. Moreover, Phoenix presently or
in the past has served as a professional person in other matters, wholly unrelated to the Debtors or
these Chapter 11 Cases, in which other attorneys, accountants and other professionals of the
Debtors, their creditors, or other parties in interest also may have served or serve as professional
persons.
10. None of the representations described above are materially adverse to the interests
of the Debtors’ estates or any class of creditors or equity security holders. Moreover, pursuant to
section 327(c) of the Bankruptcy Code, Phoenix is not disqualified from acting as financial
3 Upon application and subject to approval of this Bankruptcy Court, it is anticipated that any amounts due Phoenix from either Debtor during the Chapter 11 Cases will be paid by the cash of Carla’s Pasta or the proceeds of the Debtors’ assets.
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advisors to the Debtors merely because it represents creditors, equity holders and/or other parties
in interest in unrelated matters.
11. Phoenix will periodically review its files during the pendency of the Chapter 11
Cases to ensure that no conflicts or other disqualifying circumstances exist or arise. I shall amend
this statement immediately upon my learning that (a) any of the representations herein are incorrect
or (b) there is any change of circumstances relating thereto. If any new, relevant facts or
relationships are discovered or arise, Phoenix will use reasonable efforts to identify such further
developments, and I will promptly file a supplement to this Declaration, as Bankruptcy Rule
2014(a) requires.
PROFESSIONAL COMPENSATION
12. Prior to the Petition Date, Phoenix has not received any fees from Carla’s Pasta.
As of the Petition Date, the Debtors do not owe Phoenix any amounts for services rendered before
such date. Payment of the $50,000 retainer contemplated in the Engagement Letter is expressly
conditioned upon Court approval of the Application.
13. Phoenix intends to apply for compensation for professional services rendered in
connection with the Chapter 11 Cases subject to approval of this Court, and consistent with the
proposed Monthly Fee set forth in the Engagement Letter attached hereto as Exhibit 2, and in
compliance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local
Bankruptcy Rules, the United States Trustee Guidelines for Reviewing Applications for
Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. § 330, and any additional
procedures that may be established by the Court. Pursuant to the Engagement Letter, Phoenix will
charge the Monthly Fee, consisting of a monthly flat-rate of $100,000 (pro rated for any partial
month), plus reimbursement of actual, necessary expenses and other charges that Phoenix incurs;
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provided, however, that fees and expenses for both Debtors may be funded by Debtor Carla’s
Pasta. The Phoenix members and associates who are likely to represent the Debtors in these
Chapter 11 Cases have current hourly rates ranging between $150 and $795, but as mentioned
Phoenix will be charging the Debtors the Monthly Fee. In addition, pursuant to the Engagement
Letter, the Debtors are to forward $50,000 to Phoenix to be held as a retainer. Unless otherwise
agreed by the parties, this retainer is not to be applied or credited to amounts due from the Debtors
but will be returned to the Debtors once all amounts due hereunder are paid in full subject to a
holdback to fund any indemnification claims.
14. Subject to this Court’s approval, Phoenix will charge the Debtors for expenses in a
manner and at rates consistent with charges made generally to Phoenix’s other clients, including a
$300 monthly fee for the administrative and support time and expenses typically required (e.g.
computer, e-mail, administrative staff time, etc.) for Phoenix’s services.
15. Additionally, as set forth in the Engagement Letter and referenced in the
Application, Phoenix seeks a limited indemnity from the Debtors for any claims against Phoenix
relating to the services it provides to the Debtors in these Chapter 11 Cases; provided the Debtors
shall not be obligated to indemnify or hold Phoenix for any gross negligence or willful misconduct
by Phoenix. Such limited indemnities are quite common and customary for financial advisory
firms.
16. No promises have been received by Phoenix nor by any partner, counsel or
associate thereof as to compensation in connection with these cases other than in accordance with
the provisions of the Bankruptcy Code. The firm has no agreement with any other entity to share
with such entity any compensation received by Phoenix in connection with the Chapter 11 Cases.
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17. Phoenix further states pursuant to Bankruptcy Rule 2016(b) that it has not shared,
nor agreed to share (a) any compensation it has received or may receive with another party or
person, other than with the members and associates of Phoenix, or (b) any compensation another
person or party has received or may receive.
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true
and correct to the best of my knowledge.
Date: March 1, 2021 /s/ Joseph C. Nappi Joseph C. Nappi, Managing Partner Phoenix Executive Services, LLC
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Exhibit 1 to Nappi Declaration
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Debtors and Affiliates:
Carla’s Pasta, Inc. Suri Realty LLC
Secured Creditors and Asserted Secured Creditors, and Known Counsel to Creditors
People’s United Bank, NA Cohn, Birnbaum & Shea, P.C. (Counsel to People’s United Bank, NA) BMO Harris Bank, N.A. Chapman and Cutler LLP (Counsel to BMO Harris Bank, N.A.) The Dennis Engineering Group Lewis Brisbois (Counsel to Dennis Engineering Group) Town of South Windsor, Connecticut Elm Electrical, Inc. (asserted secured creditor)
Shatz, Schwartz and Fentin (Counsel to Elm Electrical, Inc.)
Professional Advisors
Phoenix Advisors Cowen and Company Bankruptcy Management Solutions, Inc. (trade name “Stretto”) Court Clerk and US Trustee’s Office Staff
Kim L. McCabe Holley Claiborn Joseph H. Flamini William Harrington Erin Hogan Steven Mackey Frank Marino Kari Mitchell Jennifer J. Morey Nicole Neely Sharon Warner
Pietro Cicolini, Clerk of the United States Bankruptcy Court for the District of Connecticut
Unsecured Creditors and Other Parties in Interest
3M
A. Fiorillo and Co., Inc.
Abel Womack Inc. A-C Motor Express LLC
Acosta Sales & Marketing
Acosta Sales & Marketing -FL
Acosta Sales & Marketing -GA
Acosta Sales & Marketing- IA
Acosta Sales & Marketing_IND
Acosta Sales & Marketing-IL
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Acosta Sales & Marketing-KEN
Acosta Sales & Marketing-WIS
Acosta Sales & Mktg - Dakota
Acosta, Inc. - Kansas
Acosta, Inc. - MIS
Acosta, Inc. - Missouri
Acosta, Inc. - Nebraska
ADM/Eatem Foods
Advantage Solutions/New Engl
Advantage Solutions/NY Metro
Aercon corp.
Aerotek, Inc.
Affinity Sales Group
AFS Technologies, Inc.
Agility Logistics Corp
AirGas USA LLC
Albertsons Companies
Allegiance Retail Services,
Alliant Food Safety Labs LLC
All-Phase Electric Supply Co
Ambriola Company Inc.
American Key Food Products
American Metallizing & Mach
American Refrigeration Co.
AmeriCold Logistics, LLC
Aramark Food & Support Service
Arbon Equipment Corp
Ardent Mills, LLC
Arrive Logistics
Asiago Foods
AT&T
Barry Group Inc
Bay State Bearing Service
Bay Valley Foods, LLC
Ben E Keith Albuquerque
Ben E Keith Amarillo
Ben E Keith Arkansas
Ben E Keith Corp
Ben E Keith San Antonio
Ben E. Keith Ft Worth
Ben E. Keith Houston
Big Y Foods, Inc.
Blount Seafood
Blue Earth Compost, Inc.
Blum Shapiro
Bonduelle USA Inc
Bozzuto's
Bunzl Processor Distribution
Burke Corporation
Burris Logistics
C.H Robinson Worldwide, Inc
Capital Ingredients Corp
Catania Oils
CBS
Chase Card Services
Cheese Merchants of America
Chep USA
City Line Distributors
CMA/Brand Presence and Desig
Concentra
Connecticut Valley Rubber
Controlled Environment Struc
Creative Financial Staffing
Cremosa Food Co. LLC
Daniels Equipment Co Inc
Datasite LLC
Dave's Marketplace
Deb El Food Products
Decian, Inc.
Dempsey (US) Corporation
Deville Technologies
Dittman & Greer, Inc.
Diversified Avocado Products
Doerle Food Services, LLC
Domino Amjet Inc.
Dongsheng Foods USA Inc
Doosan Energy Solutions Amer
Driscol Foods
Dubaldo Security Systems
Dumouchel Paper Company
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Eagle Consulting & Dev. Corp
Eagle Leasing Company
Eastern Industrial Auto.
Echo Global Logistics Inc
Ecolab Inc
Edict Systems, Inc.
EGGB
EiserLoh Company
Electrical Systems Inc.
Elite & Spice
Employment Solutions
Endress+Hauser, Inc.
Environmental Services, Inc.
Erb Group
Essex Food Ingredients
Eversource - Electricity
Eversource - Gas
Fallas Automation
Farnell Packaging, Ltd.
Favorite Foods
Federal Express
Federated Foodservice Inc.
First Choice Ingredients
Fluid Dynamics
Food Sales East (FSE)
Frontier Communications
Frosty Acres
FSA Billings
FSA Boise
FSA Everett
FSA Fargo
FSA Seattle
FSA Spokane
FSA Woodburn
Fuss & O'Neill, Inc.
Galler Wholesale
Geissler's Supermarkets
Glanbia Nutritionals, Inc.
Global Industrial
Globele Energy, LLC
Golbon
Grainger
Great Lakes Cheese Co., Inc.
Group Purchasing Alliance
Hamilton Connections, Inc.
Hampton & Associates
Hanks Brokerage, Inc.
Heat and Control Inc.
HESCO
Hettrick, Cyr & Assoc., Inc.
Hillyard
Hinckley, Allen & Snyder LLP
HJ Norris, LLC (asserted creditor)
Hoosier Logistics Inc.
HPC Foodservice
IFC Solutions Inc.
IFM Efector
Independent Marketing All.
Industrial Handling Systems,
InterSource Inc.
Interstate Logistics Systems
Interstate Warehousing
iTradeNetwork, Inc. Jamestown Technologies
Jear Logistics, LLC
Judge Inc.
Kaman Industrial Technology
Karen Rossetti
Karn Meats
Kasheta Farms, Inc.
Keeney Rigging
KerrySelect
Key Foods King Kullen Grocery Co., Inc
Kustom Paks Food , Ltd
Lactalis Culinary
Lakeland Brokerage
Lakeland Marketing
Larry Aleksandrich
Latina Food Service
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Legacy Fire Protection, Inc.
Lentz Milling Company
Linde Inc
Lineage Logistics, PFS Chica
Lyman Sheet Metal Co.
Maine Oxy
Manchester Wine & Liquors LL
Mandlik & Rhodes
Map Foodservice
Markem Imaje Corporation
Martin Preferred Foods
Marzetti Frozen Pasta, Inc.
Mason Packaging Corp.
Massman Automation Designs
Maybury Associates, Inc.
MBC Food Machinery Corp
McCormick & Co Inc
McMaster-Carr
Mennekes Electrical Products
Metropolitan District, The
Mettler Toledo Inc
Mettler Toledo-Safeline
Micreos Food Safety B.V.
Miura America Co., Ltd
NALCO Water
Nasoya Foods USA LLC
Necoding, Inc.
Nelson Jameson, Inc
Neogen Corporation
Nestle Quality Assurance
Nestle USA Inc.
New England Drives & Control
New Wave Industries, Inc.
Newly Weds Foods, Inc.
Nicholas & Company
Northeast Marketing Co.
Northern Food I/E Inc.
PHOENIX ADVISORS
Ohio Transmission Corporatio
Ornua Ingredients North Amer
Packers Sanitation Services
Palnet USA
Pasta Technologies
Pavan S.p.A.
Pearse Bertram LLC
Pearson Packaging System
PFG Broadline
PFG Springfield
Phillips Gourmet Inc.
Praxair
Premier Healthcare Alliance
Providence Specialty Product
Provimi Foods Inc
Quadient Leasing
Radwell International, Inc.
Raymond Leasing Corporation
Red River Foods, Inc.
Reiser, Robert & Co., Inc.
Religious & Kitchen Superv
Renaissance Builders, Inc. (asserted Suri creditor) Doherty Wallace Pillsbury Murphy P.C. (Counsel to Renaissance Builders, Inc.) Renzi
REV Foodservice ULC
RLS Distribution
Roland Foods, LLC
Sardilli Produce & Dairy Co
Schindler Elevator Corp.
Sensient Colors LLC
Silva International, Inc.
Smartsheet Inc.
Sogelco International Inc.
South Windsor, Town of
Specialty Food Sales
Specialty Packaging, LLC
Sprague Operating Resources
Stahlbush Island Farms
Staples Advantage
Strategic Information Group
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Superior Natural Foods
System Logistics Corporation
T Fresh Foods
Tasty Mix Products
The Connecticut Light and Power Company The CORE Group Idaho
The Core Group of Arizona
The Core Group-Colorado
The Core Group-Montana
The Core Group-N. California
The Core Group-Oregon
The Core Group-S. California
The Core Group-UTAH
The Core Group-Washington
The Spicemill
Total Communications
Total Quality Logistics
Triangle Package Machinery
Trinity Logistics, Inc,
Turri's Italian Foods, Inc.
U.S. Dept of Agriculture
U.S. Durum Milling
Uline
Unipro Foodservice
Unipro Foodservice Inc.
United Rentals
Univar USA
Universal Pure Holdings LLC
Updike, Kelly & Spellacy, PC
USA Hauling & Recycling
USDA, AMS, DAIRY
USDA, AMS, Poultry
Van Drunen Farms
Verizon Wireless
Wade's Dairy
Waltham Services, Inc.
Waypoint
Wells Fargo Equipment Finance
WSHM-CBS3
Yankee Gas Services Company
Zeisler & Zeisler PC
Insurers and Brokers
ARC Excess & Surplus of New England, LLC
Aspen American Insurance Company
Chubb Insurance
Smith Brothers Insurance LLC
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Exhibit 2 to Nappi Declaration
Engagement Letter
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provide such report together with the total amount of fees and expenses to be paid. Our monthly invoice should be paid via ACH or wire transfer.
Notwithstanding anything herein to the contrary, failure of the Company to promptly pay
the Monthly Fee or to pay for reimbursement of expenses shall constitute justification for Phoenix to terminate this Agreement upon five days’ written notice. ACH & Wire transfer instructions are as follows:
Truist Bank 150 S. Warner Road, King of Prussia, PA 19406 Telephone: 800-222-3321 Phoenix Executive Services, LLC Account 7432 ABA 9123
Expenses
The Company shall pay all expenses incurred in connection with services related to the engagement (e.g. actual out-of-pocket expenses such as travel and meals incurred in connection with the engagement). In addition, as compensation for the administrative and support time and expenses typically required (e.g. computer, e-mail, administrative staff time, etc.) we will bill a monthly fee of $300. The weekly invoices referred to above will include such reimbursable expenses. Project Deposit
Upon Bankruptcy Court approval, the Company shall pay to PES Fifty Thousand Dollars ($50,000) via ACH or wire transfer as a retainer (the “Deposit”). This Deposit is not to be applied or credited to amounts due from the Company but will be returned to the Company once all amounts due hereunder are paid in full subject to a holdback to fund any indemnification claims. PES reserves the right to require that the Deposit be increased on a periodic basis to match actual levels of work activity. The Company hereby grants a security interest in the Deposit to PES to secure payment of all amounts due or which become due hereunder and expressly authorizes PES to pay itself any amounts past due from the Deposit. The Company acknowledges and agrees that this security interest is perfected by virtue of PES’s possession of the Deposit.
PES is prepared to begin this Project immediately upon receipt of a signed copy of this letter and a signed copy of our standard indemnification agreement (which is attached hereto). By signing below, the Company also acknowledges that PES’s Standard Terms, Conditions and Disclosure Agreement (which is attached hereto) is hereby incorporated by reference and made part of this Agreement.
This letter contains the entire Agreement among the parties relating to the subject herein.
Any modification or other changes to the terms contained herein or therein must be in writing and signed by the parties hereto to be enforceable.
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