Case BLS Doc 5 Filed 05/04/17 Page 1 of 31 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

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1 Case BLS Doc 5 Filed 05/04/17 Page 1 of 31 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE x In re : Chapter 11 : CENTRAL GROCERS, INC., et al., : Case No. 17 ( ) : : Debtors. 1 : (Joint Administration Requested) x MOTION OF DEBTORS FOR INTERIM AND FINAL AUTHORIZATION TO (I) APPROVE DEBTORS PROPOSED FORM OF ADEQUATE ASSURANCE OF PAYMENT TO UTILITY PROVIDERS, (II) ESTABLISH PROCEDURES FOR DETERMINING ADEQUATE ASSURANCE OF PAYMENT FOR FUTURE UTILITY SERVICES, AND (III) PROHIBIT UTILITY PROVIDERS FROM ALTERING, REFUSING, OR DISCONTINUING UTILITY SERVICE Central Grocers, Inc. and its debtor affiliates, including Strack and Van Til Super Market, Inc. as debtors and debtors in possession in the above-captioned chapter 11 cases (collectively, the Debtors ), respectfully represent as follows in support of this motion (the Motion ): Background 1. On the date hereof (the Commencement Date ), the Debtors each commenced with this Court a voluntary case under chapter 11 of title 11 of the United States Code (the Bankruptcy Code ). The Debtors are authorized to continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory committee of creditors has been appointed in these chapter 11 cases. 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are Central Grocers, Inc. (3170), CGI Joliet, LLC (7014), Currency Express, Inc. (2650), Raceway Central, LLC (2161), Raceway Central Calumet Park LLC (2161), Raceway Central Chicago Heights LLC (2161), Raceway Central Downers Grove LLC (2161), Raceway Central Joliet North LLC (2161), Raceway Central LLC North Valpo (2161), Raceway Central Wheaton LLC (2161), Strack and Van Til Super Market, Inc. (2184), and SVT, LLC (1185).

2 Case BLS Doc 5 Filed 05/04/17 Page 2 of Contemporaneously herewith, the Debtors have filed a motion requesting joint administration of their chapter 11 cases pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ). 3. Additional information regarding the Debtors businesses, capital structure, and the circumstances leading to the commencement of these chapter 11 cases is set forth in the Declaration of Donald E. Harer in Support of the Debtors Chapter 11 Petitions and First Day Relief, sworn to on the date hereof (the Harer Declaration ), which has been filed with the Court contemporaneously herewith and is incorporated by reference herein. 2 Jurisdiction 4. The Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 157 and 1334, and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated February 29, This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper before the Court pursuant to 28 U.S.C and Pursuant to Rule (f) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the Local Rules ), the Debtors consent to the entry of a final order by the Court in connection with this Motion to the extent that it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments consistent with Article III of the United States Constitution. 2 Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Harer Declaration. 2

3 Case BLS Doc 5 Filed 05/04/17 Page 3 of 31 Relief Requested 6. By this Motion, pursuant to sections 105(a) and 366 of the Bankruptcy Code and Bankruptcy Rule 6003, the Debtors request entry of an interim and final order (i) approving the Debtors proposed form of adequate assurance of payment to utility providers, (ii) establishing procedures for determining adequate assurance of payment for future utility services, and (iii) prohibiting utility providers from altering or discontinuing utility service on account of outstanding prepetition invoices. A propose form of order granting the relief requested herein on an interim basis is annexed hereto as Exhibit A (the Proposed Interim Order ). Debtors Utilities A. Utility Providers 7. In the ordinary course of their businesses, the Debtors incur utility expenses, including those relating to electricity, natural gas, water, sewage, and telecommunications. Approximately 50 utility providers (collectively, the Utility Providers ) provide services to the Debtors. A non-exhaustive list of the Debtors Utility Providers (the Utility Service List ) is attached hereto as Exhibit B On average, the Debtors spend approximately $1.2 million each month on utility costs and estimate that, as of the Commencement Date, approximately $1.2 million of utility costs are outstanding. 9. Preserving utility services on an uninterrupted basis is essential to the Debtors ongoing operations and restructuring process. Indeed, any interruption in utility 3 The Debtors reserve the right to amend or supplement the Utility Service List to include any Utility Provider omitted. The inclusion of any entity on the Utility Service List is not an admission that such entity is a utility within the meaning of section 366 of the Bankruptcy Code, and the Debtors reserve the right to contest any such characterization in the future. 3

4 Case BLS Doc 5 Filed 05/04/17 Page 4 of 31 services even for a brief period of time would disrupt the Debtors ability to continue operations and service their customers. This disruption would adversely impact customer relationships, compromise the Debtors asset sales, and would result in a decline in the Debtors revenues. It also would affect the value of inventory particularly items like perishable goods and frozen food. Such a result could seriously jeopardize the Debtors restructuring efforts and, ultimately, creditor recoveries. Therefore, it is critical that utility services continue uninterrupted during these chapter 11 cases. B. Proposed Adequate Assurance 10. The Debtors intend to pay postpetition obligations owed to the Utility Providers in a timely manner. The Debtors expect that their cash on hand, plus cash flows from operations and their anticipated use of debtor-in-possession financing will be sufficient to pay the Utility Providers in the ordinary course of business. 11. Pursuant to section 366(c)(2) of the Bankruptcy Code, a utility may alter, refuse, or discontinue a debtor s utility service if the utility does not receive adequate assurance of payment for postpetition utility services from the debtor within thirty (30) days after the commencement of the debtor s chapter 11 case. Section 366(c)(1) of the Bankruptcy Code defines assurance of payment of postpetition charges as (i) a cash deposit; (ii) a letter of credit; (iii) a certificate of deposit; (iv) a surety bond; (v) a prepayment of utility consumption; or (vi) another form of security that is mutually agreed on between the utility and the debtor or the trustee. 12. The Debtors intend to pay all postpetition obligations owed to the Utility Providers in a timely manner and have sufficient funds to do so. Nevertheless, to provide the Utility Providers with adequate assurance pursuant to section 366 of the Bankruptcy Code, the 4

5 Case BLS Doc 5 Filed 05/04/17 Page 5 of 31 Debtors propose depositing cash in an amount equal to two (2) weeks payment for utility services, calculated using the historical average for such payments during the past twelve (12) months (the Adequate Assurance Deposit ) into a newly created segregated account for the benefit of the Utility Providers (the Adequate Assurance Account ). The Adequate Assurance Deposit may be adjusted by the Debtors if the Debtors terminate any of the utility services provided by a Utility Provider, make other arrangements with certain Utility Provider for adequate assurance of payment, determine that an entity listed on the Utility Service List is not a utility provider as defined by section 366 of the Bankruptcy Code, or supplement the Utility Service List to include additional Utility Providers. The Adequate Assurance Deposit will be placed into the Adequate Assurance Account within twenty (20) days after the Commencement Date. The amount allocated for, and payable to, each Utility Provider will be equal to the amount set forth on Exhibit B as to each Utility Provider or as otherwise agreed with such Utility Provider. 13. Based on the foregoing, the Debtors estimate that the total amount of the Adequate Assurance Deposit will be approximately $550,000 as of the Commencement Date. The Adequate Assurance Deposit will be held by the Debtors in the Adequate Assurance Account for the benefit of the Utility Providers on the Utility Service List during the pendency of these chapter 11 cases. 14. The Debtors further request that the Adequate Assurance Account will be closed automatically, and any Adequate Assurance Deposit be returned to the Debtors upon the effective date of a chapter 11 plan for the Debtors without further Court order. Additionally, if the Debtors terminate any of the utility services provided by a Utility Provider, the Debtors 5

6 Case BLS Doc 5 Filed 05/04/17 Page 6 of 31 request that they immediately be permitted to reduce the Adequate Assurance Deposit to reflect the termination of such Utility Provider. 15. The Adequate Assurance Deposit, in conjunction with the anticipated use of debtor-in-possession financing, cash flow from operations, and cash on hand, demonstrates the Debtors ability to pay for future utility services in the ordinary course of business (collectively, the Adequate Assurance ) and constitutes sufficient adequate assurance to the Utility Providers. C. Proposed Adequate Assurance Procedures 16. If any Utility Provider believes it is entitled to additional Adequate Assurance based on individualized circumstances, it may follow the procedures described below and set forth in more detail on Exhibit 1 annexed to the Proposed Order (the Adequate Assurance Procedures ): 4 a. The Debtors will fax, , serve by overnight mail, or otherwise expeditiously send a copy of this Motion and Proposed Order, which includes the proposed Adequate Assurance Procedures, to each Utility Provider within two (2) business days after entry of the Proposed Order by the Court. b. Any Utility Provider desiring additional assurances of payment in the form of deposits, prepayments, or otherwise must serve a request for additional assurance (an Additional Assurance Request ) so that it is received by the Debtors at the following addresses: (a) Central Grocers, Inc., 2600 West Haven Avenue, Joliet, Illinois (Attn: Donald E. Harer and Kenneth W. Nemeth); (b) Strack and Van Til Super Market, Inc., th Street, Highland, Indiana (Attn: Alpesh A. Almin and Phillip Latchford; (c) Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York (Attn.: Ray C. Schrock, P.C., Stephen Karotkin, Esq., and Sunny Singh, Esq.) and Richards, Layton & Finger, P.A., 920 North King Street, Wilmington, Delaware (Attn: Mark D. Collins, Esq. and Paul N. Heath, Esq.); and (d) the Office of the United States 4 If there are any discrepancies between this Motion and the Adequate Assurance Procedures as set forth on Exhibit 1 to the Proposed Order, the Adequate Assurance Procedures control in all respects. Capitalized terms used but not otherwise defined in the following summary shall have the meanings ascribed to such terms in the Adequate Assurance Procedures set forth on Exhibit 1. 6

7 Case BLS Doc 5 Filed 05/04/17 Page 7 of 31 Trustee for the District of Delaware, 844 King Street, Suite 2207, Wilmington, Delaware (collectively, the Adequate Assurance Notice Parties ). c. Any Additional Assurance Request must (i) be made in writing, (ii) set forth the location where utility services are provided, (iii) include a summary of the Debtors payment history relevant to the affected account(s), including the amounts of any security deposits, and (iv) set forth why the Utility Provider believes the proposed Adequate Assurance Deposit is insufficient adequate assurance of future payment. d. If the Debtors, in their sole discretion, determine that an Adequate Assurance Request or any consensual agreement reached in connection therewith is reasonable, the Debtors, without further order of the Court, may enter into agreements granting additional Adequate Assurance to the Utility Provider serving such Adequate Assurance Request and, in connection with such agreements, provide the Utility Provider with Additional Adequate Assurance, including payments on prepetition amounts owing, cash deposits, prepayments, or other forms of security. e. If the Debtors, in their sole discretion, determine that an Adequate Assurance Request is unreasonable, then they shall, within thirty (30) days after receipt of such Adequate Assurance Request, or such longer period as may be agreed to between the Debtors and the Utility Provider, file a motion (a Determination Motion ) pursuant to section 366(c)(3) of the Bankruptcy Code seeking a determination from the Court that the proposed Adequate Assurance, plus any additional consideration offered by the Debtors, constitutes adequate assurance of payment. Pending notice and a hearing on the Determination Motion, the Utility Provider that is the subject of the unresolved Adequate Assurance Request may not alter, refuse, or discontinue services to the Debtors; provided, however, that, while such Determination Motion is pending, at any time after twenty (20) days after entry of the Interim Order or Final Order, such Utility Provider may file a motion seeking a determination that the proposed Adequate Assurance does not constitute adequate assurance of payment. f. Absent compliance with the procedures set forth in the Motion and the Proposed Order, the Debtors Utility Providers are prohibited from altering, refusing, or discontinuing service on account of any unpaid prepetition charges and are deemed to have received adequate assurance of payment in compliance with section 366 of the Bankruptcy Code. 17. The Debtors request that the proposed Adequate Assurance be deemed adequate assurance of payment for any Utility Provider that fails to make a Request. Any Utility Provider that does not make an Adequate Assurance Request or otherwise comply with the 7

8 Case BLS Doc 5 Filed 05/04/17 Page 8 of 31 Adequate Assurance Procedures will be prohibited from altering, refusing, or discontinuing utility services, including as a result of the Debtors failure to pay charges for prepetition utility services or on account of any perceived inadequacy of the proposed Adequate Assurance. D. Subsequent Modifications 18. The Debtors have made an extensive and good-faith effort to identify all of their Utility Providers and include them on the Utility Service List. Nonetheless, if the Debtors subsequently identify additional Utility Providers, the Debtors seek authority, in their sole discretion, to amend the Utility Service List to add or remove any Utility Provider before or after entry of the Proposed Order by the Court. The Debtors will promptly file amendments to the Utility Service List. The Debtors further request that the Court s order be deemed to apply to any such subsequently identified Utility Provider, regardless of when such Utility Provider is added to the Utility Service List. The Debtors will serve a copy of this Motion and any order entered with respect thereto on any such Utility Provider subsequently added to the Utility Service List and deposit two weeks worth of estimated utility costs in the Adequate Assurance Account for the benefit of such Utility Provider. The Debtors may amend the Utility Service List to delete a Utility Provider only if it has provided two (2) weeks advance notice to such Utility Provider, and has not received any objection from such Utility Provider. If an objection is received, the Debtors will request a hearing before the Court at the next omnibus hearing date, or such other date that the Debtors and the Utility Provider may agree. 19. The Debtors request that all Utility Providers, including Utility Providers subsequently added to the Utility Service List, be prohibited from altering, refusing, or discontinuing utility services to the Debtors absent further order of the Court. 8

9 Case BLS Doc 5 Filed 05/04/17 Page 9 of 31 Relief Requested Should Be Granted 20. The relief requested will ensure the continuation of the Debtors business at this critical juncture as the Debtors transition into chapter 11. The relief requested also provides the Utility Providers with a fair and orderly procedure for determining requests for additional adequate assurance, without which the Debtors could be forced to address multiple requests by Utility Providers in a disorganized manner when the Debtors efforts should be more productively focused on restructuring their business for the benefit of all parties in interest. A. The Proposed Adequate Assurance Deposit Is Sufficient 21. Section 366 of the Bankruptcy Code is designed with the dual purpose of protecting debtors from being cut off from utility services and providing utility companies with adequate assurance that the debtor will be able to pay for postpetition services. See H.R. Rep. No , at 350 (1978), reprinted in 1978 U.S.C.C.A.N 5963, To that end, pursuant to section 366(c), during the first thirty (30) days of a chapter 11 case, a utility company may not alter, refuse, or discontinue service to a debtor solely because of unpaid prepetition amounts, but after the first thirty (30) days, the utility company may alter, refuse, or discontinue service if a debtor does not provide adequate assurance of payment for postpetition services in satisfactory form. Section 366(c)(3)(B) of the Bankruptcy Code provides a list of factors that courts are not to consider when evaluating whether a proposed adequate assurance payment is in fact adequate. These factors not to be considered are: (i) the absence of security before the petition date; (ii) the debtor s history of timely payments; and (iii) the availability of an administrative expense priority. Although section 366(c) clarifies what does and does not constitute assurance of payment and what can be considered in determining whether such assurance is adequate, Congress, in enacting that section, did not divest this Court of its power to determine what 9

10 Case BLS Doc 5 Filed 05/04/17 Page 10 of 31 amount, if any, is necessary to provide adequate assurance of payment to a Utility Provider. See 11 U.S.C. 366(c)(3)(A). Specifically, section 366(c)(3)(A) states that, [o]n request of a party in interest and after notice and a hearing, the court may order modification of the amount of an assurance of payment.... Thus, there is nothing to prevent a court from deciding that, on the facts of the case before it, the amount required of the debtor to provide adequate assurance of payment to a utility company should be nominal or even zero. See, e.g., In re Pac-West Telecomm., Inc., Case No (BLS) (Bankr. D. Del. May 2, 2007) [ECF No. 39] (approving adequate assurance in the form of one-time supplemental prepayment to each utility company equal to prorated amount of one week s charges). 22. Although section 366(c)(2) of the Bankruptcy Code allows a utility provider to take action if the debtor fails to provide adequate assurance of payment that is satisfactory to the utility, it is the Court and not the utility provider that is the ultimate arbiter of what is satisfactory assurance after taking into consideration the needs of the debtor as well as the utility``. See, e.g., In re Penn. Cent. Transp. Co., 467 F.2d 100, (3d Cir. 1972) (affirming the bankruptcy court s decision that no utility deposit was necessary if such deposit would jeopardize the continuing operation of the [debtor] merely to give further security to suppliers who already [were] reasonably protected ). Indeed, section 366 only requires that assurance of payment be adequate and courts have not construed section 366 to require an absolute guarantee of the debtor s ability to pay. See, e.g., In re Caldor, Inc. N.Y., 199 B.R. 1, 3 (S.D.N.Y. 1996) ( Section 366(b) requires the Bankruptcy Court to determine whether the circumstances are sufficient to provide a utility with adequate assurance of payment. The statute does not require an absolute guarantee of payment. (citation omitted)), aff d sub nom. Va. Elec. & Power Co. v. Caldor, Inc. N.Y., 117 F.3d 646 (2d Cir. 1997); In re New Rochelle 10

11 Case BLS Doc 5 Filed 05/04/17 Page 11 of 31 Tel. Corp., 397 B.R. 633, 639 (Bankr. E.D.N.Y. 2008) ( Adequate assurance, however, is not a guarantee of payment; rather, it is intended to guard against the utility assuming an unreasonable risk of non-payment. ) (citation omitted); In re Adelphia Bus. Solutions, Inc., 280 B.R. 63, 80 (Bankr. S.D.N.Y. 2002) ( In determining adequate assurance, a bankruptcy court is not required to give a utility company the equivalent of a guaranty of payment.... ). 23. Furthermore, courts consider what is need[ed] of the utility for assurance, and... require that the debtor supply no more than that, since the debtor almost perforce has a conflicting need to conserve scarce financial resources. Va. Elec. & Power Co. v. Caldor, Inc. N.Y., 117 F.3d at 650 (emphasis in original); see also In re Penn Central, 467 F.2d at Indeed, [c]ourts will approve an amount that is adequate enough to insure against unreasonable risk of nonpayment, but are not required to give the equivalent of a guaranty of payment in full. In re The Great Atl. & Pac. Tea Co., Case No. 11-CV-1338 (CS), 2011 WL , at *5 (S.D.N.Y. Nov. 14, 2011) (citations omitted). 24. Courts in this District have consistently entered orders establishing adequate assurance deposits at fifty percent (50%) of a debtor s estimated monthly cost. See, e.g., In re Offshore Grp. Inv. Ltd., Case No (BLS) (Bankr. D. Del. Jan. 5, 2016) [ECF No. 134] (approving adequate assurance where debtors deposited cash equal to two weeks estimated cost of utilities); In re Magnum Hunter Res. Corp., Case No (KG) (Bankr. D. Del. Jan. 1, 2016) [ECF No. 252] (approving adequate assurance where debtors established segregated account with one half of debtors average monthly cost of utility services); In re Samson Res. Corp., Case No (CSS) (Bankr. D. Del. Oct. 14, 2015) [ECF No. 190] (same); In re Millennium Lab Holdings II, LLC, Case No (LSS) (Bankr. D. Del. Nov. 12, 2015) [ECF No. 61] (approving adequate assurance where debtors established segregated 11

12 Case BLS Doc 5 Filed 05/04/17 Page 12 of 31 account with two weeks estimated cost of utilities); In re Dendreon Corp., Case No (LSS) (Bankr. D. Del. Nov. 12, 2014) [ECF No. 56] (same). 25. In light of the foregoing, the proposed Adequate Assurance Deposit is reasonable. B. The Objection Procedures Are Reasonable and Appropriate 26. If a Utility Provider does not believe the proposed Adequate Assurance Deposit is satisfactory, such Utility Provider may file an objection pursuant to the Adequate Assurance Procedures described above. The proposed Adequate Assurance Procedures are reasonable because they will ensure that the Debtors utility services continue while providing a streamlined process for Utility Providers to challenge the adequacy of the proposed Adequate Assurance Deposit or seek an alternative form of adequate assurance. 27. The Court has the power to approve these Adequate Assurance Procedures pursuant to section 105(a) of the Bankruptcy Code, which provides that a bankruptcy court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of the Bankruptcy Code. The Adequate Assurance Procedures are necessary for the Debtors to carry out their fiduciary duties under section 1107(a) of the Bankruptcy Code without prejudicing the Utility Providers. Section 1107(a) of the Bankruptcy Code contains an implied duty of the debtor-in-possession to protect and preserve the estate, including an operating business going-concern value, on behalf of a debtor s creditors and other parties in interest. In re CEI Roofing, Inc., 315 B.R. 50, 59 (Bankr. N.D. Tex. 2004) (quoting In re CoServ, L.L.C., 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002)); see also Unofficial Comm. of Equity Holders v. McManigle (In re Penick Pharm., Inc.), 227 B.R. 229, (Bankr. S.D.N.Y. 1998) ( [U]pon 12

13 Case BLS Doc 5 Filed 05/04/17 Page 13 of 31 filing its petition, the Debtor became debtor in possession and, through its management... was burdened with the duties and responsibilities of a bankruptcy trustee. ). 28. The relief requested by this Motion represents a sound exercise of the Debtors business judgment, and is justified under sections 105(a) and 366 of the Bankruptcy Code. Accordingly, the proposed relief with respect to the proposed Adequate Assurance Deposit and the Adequate Assurance Procedures are warranted in these chapter 11 cases. Debtors Have Satisfied Bankruptcy Rule 6003(b) 29. Bankruptcy Rule 6003(b) provides that, to the extent relief is necessary to avoid immediate and irreparable harm, a Bankruptcy Court may issue an order granting a motion to use, sell, lease, or otherwise incur an obligation regarding property of the estate, including a motion to pay all or part of a claim that arose before the filing of the petition before twenty-one (21) days after the Commencement Date. Fed. R. Bankr. P As described herein and in the Harer Declaration, the Debtors require the utility services to maintain their business operations. Any lapse in utility services could severely disrupt the Debtors business operations, essentially bringing their operations to a standstill, and thus seriously jeopardize the Debtors ability to successfully reorganize. If any Utility Provider refuse or discontinue service, even for a brief period, the Debtors estates would suffer immediate and irreparable harm if the relief sought herein is not promptly granted. Accordingly, the Debtors submit that the relief requested herein is necessary to avoid immediate and irreparable harm, and, therefore, Bankruptcy Rule 6003 is satisfied. Bankruptcy Rules 6004(a) and (h) 30. To implement the foregoing successfully, the Debtors request that the Court find that notice of the Motion is adequate under Bankruptcy Rule 6004(a) under the circumstances, and waive the fourteen (14) day stay of an order authorizing the use, sale, or lease 13

14 Case BLS Doc 5 Filed 05/04/17 Page 14 of 31 of property under Bankruptcy Rule 6004(h). As explained above and in the Harer Declaration, the relief requested herein is necessary to avoid immediate and irreparable harm to the Debtors. Accordingly, ample cause exists to justify finding that the notice requirements under Bankruptcy Rule 6004(a) have been satisfied and to grant a waiver of the fourteen (14) day stay imposed by Bankruptcy Rule 6004(h), to the extent such notice requirements and such stay apply. Reservation of Rights 31. Nothing contained herein is intended or shall be construed as (i) an admission as to the validity of any claim against the Debtors; (ii) a waiver of the Debtors or any appropriate party in interest s rights to dispute the amount of, basis for, or validity of any claim against the Debtors; (iii) a waiver of any claims or causes of action which may exist against any creditor or interest holder; or (iv) an approval, assumption, adoption, or rejection of any agreement, contract, lease, program, or policy between the Debtors and any third party under section 365 of the Bankruptcy Code. Likewise, if the Court grants the relief sought herein, any payment made pursuant to the Court s order is not intended to be and should not be construed as an admission to the validity of any claim or a waiver of the Debtors rights to dispute such claim subsequently. Notice 32. Notice of this Motion will be provided to (i) the Office of the United States Trustee for the District of Delaware; (ii) the Debtors twenty (20) largest unsecured creditors on a consolidated basis; (iii) counsel to the administrative agent under the Prepetition Revolving Credit Facility, (a) Blank Rome LLP, 1201 Market Street, Suite 800, Wilmington, Delaware (Attn: Regina S. Kelbon, Esq. and Victoria A. Guilfoyle. Esq.), and (b) Blank Rome LLP, One Logan Square 130, North 18th Street, Philadelphia, Pennsylvania (Attn: Mark I. Rabinowitz, Esq.); (iv) counsel to the administrative agent under the Prepetition Term 14

15 Case BLS Doc 5 Filed 05/04/17 Page 15 of 31 Loan Facility, (a) Thompson Coburn LLP, One US Bank Plaza, St. Louis, Missouri (Attn: Mark V. Bossi, Esq.), and (b) Thompson Coburn LLP, 55 E. Monroe St., 37 th Floor, Chicago, Illinois (Attn: Victor A. Des Laurier, Esq. and Diona Rogers, Esq.); (v) the United Food and Commercial Workers Union International, Local 1546, 1649 West Adams Street, 2nd Floor, Chicago, Illinois (Attn: Kenneth R. Boyd and Bob O Toole); (vi) the United Food and Commercial Workers Union International, Local 881, W. Higgins Road, Suite 500, Rosemont, Illinois (Attn: Ronald E. Powell and Steven Powell); (vii) the United Food and Commercial Workers International Union, Local 700, 3950 Priority Way S. Drive, Suite 100, Indianapolis, Indiana (Attn: Scott Barnett); (viii) counsel to the Teamsters Union Local No. 142, Law Offices of Dowd, Bloch, Bennett, Cervone, Auerbach & Yokich, 8 South Michigan Avenue, 19 th Floor, Chicago, Illinois (Attn: Robert Cervone, Esq.); (ix) Independent Employees Union, 1201 Hickey Street, Hobart, Indiana (Attn: Cindy Rongers); (x) the Internal Revenue Service; (xi) the United States Attorney s Office for the District of Delaware; (xii) the Banks; (xiii) the Utility Providers; and (xiv) any other party entitled to notice pursuant to Local Rule (m) (collectively, the Notice Parties ). 33. The Debtors respectfully submit that no further notice is required. No previous request for the relief sought herein has been made by the Debtors to this or any other court. 15

16 Case BLS Doc 5 Filed 05/04/17 Page 16 of 31 WHEREFORE the Debtors respectfully request entry of the Proposed Order granting the relief requested herein and such other and further relief as the Court may deem just and appropriate. Dated: May 4, 2017 Wilmington, Delaware /s/ Mark D. Collins RICHARDS, LAYTON & FINGER, P.A. Mark D. Collins (No. 2981) Paul N. Heath (No. 3704) Brett M. Haywood (No. 6166) David T. Queroli (No. 6318) One Rodney Square 920 North King Street Wilmington, Delaware Telephone: (302) Facsimile: (302) and- WEIL, GOTSHAL & MANGES LLP Ray C. Schrock, P.C. (pro hac vice admission pending) Stephen Karotkin (pro hac vice admission pending) Sunny Singh (pro hac vice admission pending) 767 Fifth Avenue New York, New York Telephone: (212) Facsimile: (212) Proposed Attorneys for Debtors and Debtors in Possession 16

17 Case BLS Doc 5 Filed 05/04/17 Page 17 of 31 Exhibit A Proposed Interim Order

18 Case BLS Doc 5 Filed 05/04/17 Page 18 of 31 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE x In re : Chapter 11 : CENTRAL GROCERS, INC., et al., : Case No. 17 ( ) : : Debtors. 1 : (Joint Administration Requested) x INTERIM ORDER (I) APPROVING DEBTORS PROPOSED FORM OF ADEQUATE ASSURANCE OF PAYMENT TO UTILITY PROVIDERS, (II) ESTABLISHING PROCEDURES FOR DETERMINING ADEQUATE ASSURANCE OF PAYMENT FOR FUTURE UTILITY SERVICES, AND (III) PROHIBITING UTILITY PROVIDERS FROM ALTERING, REFUSING, OR DISCONTINUING UTILITY SERVICE Upon the motion (the Motion ) 2 of Central Grocers, Inc. and its debtor affiliates, including Strack and Van Til Super Market, Inc., as debtors and debtors in possession in the above-captioned chapter 11 cases (collectively, the Debtors ), pursuant to sections 105(a) and 366 of title 11 of the United States Code (the Bankruptcy Code ), for an interim and final order (i) approving the Debtors proposed form of adequate assurance of payment to utility providers, (ii) establishing procedures for determining adequate assurance of payment for future utility services, and (iii) prohibiting utility providers from altering or discontinuing utility service, all as more fully set forth in the Motion; and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 157 and 1334, and the Amended Standing Order of Reference from the United States District Court for the District of 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are Central Grocers, Inc. (3170), CGI Joliet, LLC (7014), Currency Express, Inc. (2650), Raceway Central, LLC (2161), Raceway Central Calumet Park LLC (2161), Raceway Central Chicago Heights LLC (2161), Raceway Central Downers Grove LLC (2161), Raceway Central Joliet North LLC (2161), Raceway Central LLC North Valpo (2161), Raceway Central Wheaton LLC (2161), Strack and Van Til Super Market, Inc. (2184), and SVT, LLC (1185). 2 Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Motion.

19 Case BLS Doc 5 Filed 05/04/17 Page 19 of 31 Delaware, dated February 29, 2012; and consideration of the Motion and the requested relief being a core proceeding pursuant to 28 U.S.C. 157(b); and venue being proper before the Court pursuant to 28 U.S.C and 1409; and due and proper notice of the Motion having been provided to the Notice Parties; and such notice having been adequate and appropriate under the circumstances, and it appearing that no other or further notice need be provided; and the Court having reviewed the Motion; and the Court having held a hearing to consider the relief requested in the Motion on an interim basis (the Hearing ); and upon the Harer Declaration, filed contemporaneously with the Motion, and the record of the Hearing; and the Court having determined that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and it appearing that the relief requested in the Motion is in the best interests of the Debtors, their estates, creditors, and all parties in interest; and upon all of the proceedings had before the Court and after due deliberation and sufficient cause appearing therefor, IT IS HEREBY ORDERED THAT 1. The Motion is granted on an interim basis to the extent set forth herein. 2. Absent compliance with the procedures set forth in the Motion and this interim order, the Debtors utility providers (the Utility Providers ), including without limitation those listed on Exhibit B to the Motion, are prohibited from altering, refusing, or discontinuing utility services or otherwise discriminating against the Debtors on account of any unpaid prepetition charges or any perceived inadequacy of the Debtors proposed Adequate Assurance and are deemed to have received adequate assurance of payment in compliance with section 366 of the Bankruptcy Code. 2

20 Case BLS Doc 5 Filed 05/04/17 Page 20 of As adequate assurance, the Debtors shall deposit the amount set forth in Exhibit B to the Motion (as may be amended or modified in accordance with the procedures described herein and in the Adequate Assurance Procedures, attached as Exhibit 1 to the Proposed Order) (the Adequate Assurance Deposit ) into a segregated account (the Adequate Assurance Account ), and such amount shall be allocated for, and payable to, each Utility Provider in the amount set forth in Exhibit B; provided that if any Utility Provider receives any other value from the Debtors on account of adequate assurance, the Debtors may reduce the Adequate Assurance Deposit maintained in the Adequate Assurance Account by such amount. 4. The Adequate Assurance Account will automatically be closed, and the Adequate Assurance Deposit returned to the Debtors upon the effective date of a chapter 11 plan for the Debtors without further Court order; provided, however, that there are no outstanding disputes related to postpetition payments due. 5. The Adequate Assurance Deposit, in conjunction with the anticipated use of debtor-in-possession financing, cash flow from operations, and cash on hand, demonstrates the Debtors ability to pay for future utility services in the ordinary course of business (together, the Adequate Assurance ) and constitutes sufficient adequate assurance to the Utility Providers. 6. The proposed Adequate Assurance Deposit is hereby approved and is deemed adequate assurance of payment as the term is used in section 366 of the Bankruptcy Code, absent further order from the Court. 7. Any Utility Provider that does not make an Adequate Assurance Request or otherwise comply with the Adequate Assurance Procedures shall be prohibited from altering, refusing, or discontinuing utility services, including as a result of the Debtors failure to pay 3

21 Case BLS Doc 5 Filed 05/04/17 Page 21 of 31 charges for prepetition utility services or on account of any perceived inadequacy of the proposed Adequate Assurance. 8. The inclusion of any entity in, as well as any omission of any entity from, the Utility Service List shall not be deemed an admission by the Debtors that such entity is, or is not, a utility within the meaning of section 366 of the Bankruptcy Code, and the Debtors reserve all rights and defenses with respect thereto. 9. The Debtors are authorized, in their sole discretion, to amend the utility service list attached as Exhibit B to the Motion (the Utility Service List ) to add or delete any Utility Provider, and the interim order shall apply to any Utility Provider that is subsequently added to the Utility Service List. 10. The Debtors shall increase the amount of the Adequate Assurance Deposit in the event an additional Utility Provider is added to the Utility Service List by an amount equal to two (2) weeks of utility services provided by such additional Utility Provider, calculated using the historical average for such payments during the past twelve (12) months. 11. The Debtors shall serve a copy of this interim order and the Motion upon any Utility Provider added to the Utility Service List. 12. The Debtors may terminate the services of any Utility Provider and are immediately authorized to reduce the Adequate Assurance Deposit by the amount held on account of such terminated Utility Provider; provided, however, that there are no outstanding disputes related to postpetition payments due. The Debtors may amend the Utility Service List to delete a Utility Provider only if it has provided two (2) weeks advance notice to such Utility Provider, and has not received any objection from such Utility Provider. If an objection is 4

22 Case BLS Doc 5 Filed 05/04/17 Page 22 of 31 received, the Debtors shall request a hearing before this Court at the next omnibus hearing date, or such other date that the Debtors and the Utility Provider may agree. 13. Nothing contained in the Motion or this interim order, nor any payment made pursuant to the authority granted by this interim order, is intended to be or shall be construed as (i) an admission as to the validity of any claim against the Debtors, (ii) a waiver of the Debtors or any appropriate party in interest s rights to dispute the amount of, basis for, or validity of any claim against the Debtors, (iii) a waiver of any claims or causes of action which may exist against any creditor or interest holder, or (iv) an approval, assumption, adoption, or rejection of any agreement, contract, lease, program, or policy between the Debtors and any third party under section 365 of the Bankruptcy Code. 14. Notwithstanding entry of this interim order, nothing herein shall create, nor is intended to create, any rights in favor of or enhance the status of any claim held by, any party. 15. The requirements of Bankruptcy Rule 6003(b) have been satisfied. 16. Under the circumstances of these chapter 11 cases, notice of the Motion is adequate under Bankruptcy Rule 6004(a). 17. Notwithstanding Bankruptcy Rule 6004(h), this interim order shall be immediately effective and enforceable upon its entry. 18. The Debtors are authorized to take all action necessary to effectuate the relief granted in this interim order. 19. The Court shall retain jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, and/or enforcement of this interim order. 20. The Debtors shall serve this interim order within forty-eight (48) hours of its entry via first class U.S. mail on the Notice Parties. 5

23 Case BLS Doc 5 Filed 05/04/17 Page 23 of A final hearing to consider the relief requested in the Motion shall be held on, 2017, at (Prevailing Eastern Time) and any objections or responses to the Motion shall be in writing, filed with the Court, and served upon (i) the proposed attorneys for the Debtors, (a) Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York (Attn: Ray C. Schrock, P.C.; Stephen Karotkin, Esq.; and Sunny Singh, Esq.), and (b) Richards, Layton & Finger, P.A., One Rodney Square, 920 North King Street, Wilmington, Delaware (Attn: Mark D. Collins, Esq.; Paul N. Heath, Esq.; Brett M. Haywood, Esq.; and David T. Queroli, Esq.); (ii) counsel to the administrative agent under the Prepetition Revolving Credit Facility, (a) Blank Rome LLP, 1201 Market Street, Suite 800, Wilmington, Delaware (Attn: Regina S. Kelbon, Esq. and Victoria A. Guilfoyle. Esq.), and (b) Blank Rome LLP, One Logan Square 130, North 18th Street, Philadelphia, Pennsylvania (Attn: Mark I. Rabinowitz, Esq.); and (iii) counsel to the administrative agent under the Prepetition Term Loan Facility, (a) Thompson Coburn LLP, One US Bank Plaza, St. Louis, Missouri (Attn: Mark V. Bossi, Esq.), and (b) Thompson Coburn LLP, 55 E. Monroe St., 37 th Floor, Chicago, Illinois (Attn: Victor A. Des Laurier, Esq. and Diona Rogers, Esq.), in each case, so as to be actually received on or prior to 4:00 p.m. (Prevailing Eastern Time) on Dated:, 2017 Wilmington, Delaware UNITED STATES BANKRUPTCY JUDGE 6

24 Case BLS Doc 5 Filed 05/04/17 Page 24 of 31 Exhibit 1 Adequate Assurance Procedures

25 Case BLS Doc 5 Filed 05/04/17 Page 25 of 31 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE x In re : Chapter 11 : CENTRAL GROCERS, INC., et al., : Case No. 17 ( ) : : Debtors. 1 : (Joint Administration Requested) x ADEQUATE ASSURANCE PROCEDURES On [ ] (the Commencement Date ), Central Grocers, Inc. and its debtor affiliates, including Strack and Van Til Super Market, Inc. as debtors and debtors in possession in the above-captioned chapter 11 cases (collectively, the Debtors ) filed voluntary petitions commencing cases under chapter 11 of title 11 of the United States Code (the Bankruptcy Code ), in the United States Bankruptcy Court in the District of Delaware (the Bankruptcy Court ). On the Commencement Date, the Debtors filed their Motion of Debtors to (i) Approve Debtors Proposed Form of Adequate Assurance of Payment to Utility Providers, (ii) Establish Procedures for Determining Adequate Assurance of Payment for Future Utility Services, and (iii) Prohibit Utility Providers From Altering, Refusing, or Discontinuing Utility Service (ECF No. [ ]) (the Motion ). On [ ] the Bankruptcy Court entered an order granting the relief requested in the Motion (ECF No. [ ]) (the Order ), which is summarized herein. Absent compliance with the procedures set forth in the Motion and this Order, the Debtors utility providers (the Utility Providers ) are prohibited from altering, refusing, or discontinuing service on account of any unpaid prepetition charges and are deemed to have received adequate assurance of payment in compliance with section 366 of the Bankruptcy Code. A. Proposed Adequate Assurance 1. The Debtors will deposit the amount set forth in Exhibit B to the Motion (as may be amended or modified in accordance with the procedures described herein or in the Order) (the Adequate Assurance Deposit ) into a segregated account (the Adequate Assurance Account ). This amount represents a sum equal to approximately the cost of two weeks worth of the estimated aggregate monthly amount of utility services provided by all of the Utility Providers set forth on the Utility Service List, based on the Debtors average usage for the fiscal year 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are Central Grocers, Inc. (3170), CGI Joliet, LLC (7014), Currency Express, Inc. (2650), Raceway Central, LLC (2161), Raceway Central Calumet Park LLC (2161), Raceway Central Chicago Heights LLC (2161), Raceway Central Downers Grove LLC (2161), Raceway Central Joliet North LLC (2161), Raceway Central LLC North Valpo (2161), Raceway Central Wheaton LLC (2161), Strack and Van Til Super Market, Inc. (2184), and SVT, LLC (1185).

26 Case BLS Doc 5 Filed 05/04/17 Page 26 of 31 ending 2016 (less any amounts on deposit with any Utility Providers that exceed outstanding prepetition amounts) 2 ; provided that if any Utility Provider receives any other value from the Debtors as adequate assurance of payment, the Debtors may reduce the Adequate Assurance Deposit maintained in the Adequate Assurance Account by such amount. The amount allocated for and payable to each Utility Provider shall be equal to the amount set forth on Exhibit B as to each Utility Provider or as otherwise agreed. B. Adequate Assurance Procedures 2. The portion of the Adequate Assurance Deposit attributable to each Utility Provider will be returned to the Debtors on the earlier of (a) after the Debtors have satisfied in full all postpetition obligations due and owing to the applicable Utility and (b) the effective date of the Debtors plan Any Utility Provider desiring additional assurances of payment in the form of deposits, prepayments, or otherwise must serve a request for additional assurance (an Additional Assurance Request ) so that it is received by the Debtors at the following addresses: (a) Central Grocers, Inc., 2600 West Haven Avenue, Joliet, Illinois (Attn: Donald E. Harer and Kenneth W. Nemeth); (b) Strack and Van Til Super Market, Inc., th Street, Highland, Indiana (Attn: Alpesh A. Almin and Phillip Latchford; (c) Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York (Attn.: Ray C. Schrock, P.C., Stephen Karotkin, Esq., and Sunny Singh, Esq.) and Richards, Layton & Finger, P.A., 920 North King Street, Wilmington, Delaware (Attn: Mark D. Collins, Esq. and Paul N. Heath, Esq.); and (d) the Office of the United States Trustee for the District of Delaware, 844 King Street, Suite 2207, Wilmington, Delaware (collectively, the Adequate Assurance Notice Parties ). 4. Any Additional Assurance Request must (a) be made in writing, (b) set forth the location where utility services are provided, (c) include a summary of the Debtors payment history relevant to the affected account(s), including the amounts of any security deposits, and (d) set forth why the Utility Provider believes the proposed Adequate Assurance Deposit is insufficient adequate assurance of future payment. 5. Any Additional Assurance Request must be made and actually received by all the Adequate Assurance Notice Parties no later than twenty (20) days after entry of the Proposed Order, or such greater period as may be agreed to by the Debtors and the relevant Utility Provider. If a Utility Provider fails to file and serve a timely Additional Assurance Request, it shall be: (a) deemed to have received adequate assurance of payment satisfactory to such Utility Provider in compliance 2 If deposit with any Utility Provider exceeds of two weeks worth of the average utility cost, the Debtors reserve their right to demand such excess amounts. 3 If a Utility Provider has more than one account with the Debtors, then, upon termination of an account by the Debtors, only that portion of the Adequate Assurance Deposit attributable to such account will be returned. 2

27 Case BLS Doc 5 Filed 05/04/17 Page 27 of 31 with section 366 of the Bankruptcy Code; and (b) forbidden to discontinue, alter, or refuse service to, or discriminate against, the Debtors on account of any unpaid prepetition charges, or require additional assurance of payment other than the proposed Adequate Assurance. 6. If the Debtors, in their sole discretion, determine that an Adequate Assurance Request or any consensual agreement reached in connection therewith is reasonable, the Debtors, without further order of the Court, may enter into agreements granting additional Adequate Assurance to the Utility Provider serving such Adequate Assurance Request and, in connection with such agreements, provide the Utility Provider with Additional Adequate Assurance, including payments on prepetition amounts owing, cash deposits, prepayments, or other forms of security. 7. If the Debtors, in their sole discretion, determine that an Adequate Assurance Request is unreasonable, then they shall, within thirty (30) days after receipt of such Adequate Assurance Request, or such longer period as may be agreed to between the Debtors and the Utility Provider, file a motion (a Determination Motion ) pursuant to section 366(c)(3) of the Bankruptcy Code seeking a determination from the Court that the proposed Adequate Assurance, plus any additional consideration offered by the Debtors, constitutes adequate assurance of payment. Pending notice and a hearing on the Determination Motion, the Utility Provider that is the subject of the unresolved Adequate Assurance Request may not alter, refuse, or discontinue services to the Debtors; provided, however, that, while such Determination Motion is pending, at any time after twenty (20) days after entry of the Final Order, such Utility Provider may file a motion seeking a determination that the proposed Adequate Assurance does not constitute adequate assurance of payment. 8. Absent compliance with the procedures set forth in the Motion and the Proposed Order, the Debtors Utility Providers are prohibited from altering, refusing, or discontinuing service on account of any unpaid prepetition charges and are deemed to have received adequate assurance of payment in compliance with section 366 of the Bankruptcy Code. C. Subsequent Modifications 9. The terms of the Proposed Order apply to any subsequently identified Utility Provider. For those Utility Providers that are subsequently added to Exhibit B to the Motion (the Utility Service List ), the Debtors will serve a copy of the Order on such subsequently added Utility Provider and deposit two weeks worth of estimated utility costs in the Adequate Assurance Account for the benefit of such Utility Provider (less any amounts on deposit with any such subsequently added Utility Provider that have not been applied to outstanding prepetition amounts). Utility Providers subsequently added to the Utilities Service List will have twenty (20) days from service of the Proposed Order to make an objection thereto. 3