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Full title: Notice of Hearing and Motion for an Order (I) Authorizing Continuation of, and Payment of, Prepetition Obligations Incurred in the Ordinary Course of Business In Connection with Various Insurance Policies, and (II) Authorizing Banks to Honor and Process Checks and Electronic Transfers Requests Related Thereto filed by Tea Olive I, LLC . An affidavit or verification, Memorandum of law, Proposed order. Hearing scheduled 1/13/2021 at 02:00 PM at *TELEPHONIC HEARING* with Judge William J. Fisher (St Paul). (Barbie MNBS) (Entered: 01/11/2021)
Document posted on Jan 10, 2021 in the bankruptcy, 21 pages and 1 tables.
List of Tables
Page 1UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MINNESOTA In re: Case No.: 21-30037 Tea Olive I, LLC d/b/a Stock+Field, Chapter 11 Case Debtor. NOTICE OF HEARING AND MOTION FOR AN ORDER (I) AUTHORIZING CONTINUATION OF, AND PAYMENT OF, PREPETITION OBLIGATIONS INCURRED IN THE ORDINARY COURSE OF BUSINESS IN CONNECTION WITH VARIOUS INSURANCE POLICIES, AND (II) AUTHORIZING BANKS TO HONOR AND PROCESS CHECKS AND ELECTRONIC TRANSFER REQUESTS RELATED THERETO TO: The parties in interest as specified in Local Rule 9013-3(a)(2). 1. The above-captioned debtor and debtor in possession (together, the “Debtor”) hereby move this Court for the relief requested below and give notice of hearing. 2. The Court will hold a hearing on this Motion at 2:00 p.m. (CT) on Wednesday, January 13, 2021, in Courtroom 2B, 232 Warren E. Burger Federal Building and U.S. Courthouse, 316 North Robert Street, St. Paul, MN 55101. The hearing will be held telephonically: a. Dial 1-888-684-8852; b. When prompted, enter ACCESS CODE: 5988550; c. When prompted, enter SECURITY CODE: 0428. 3. Local Rule 9006-1(c) provides deadlines for responses to this Motion. However, given the expedited nature of the relief sought, the Debtor does not object to written responses being served and filed two hours prior to the hearing. UNLESS A RESPONSE OPPOSING
Page 2THE MOTION IS TIMELY FILED, THE COURT MAY GRANT THE MOTION WITHOUT A HEARING. 4. This Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and 1334, Rule 5005 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and Local Rules 1070-1 and 1073-1. This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409. The petition commencing this chapter 11 case was filed on January 10, 2021 (the “Filing Date”). The case is currently pending in this Court. 5. This Motion arises under sections 105(a) and 363(b) of the Bankruptcy Code, and is filed under Local Rules 9013-1, 9013-2 and 9013-3. Expedited relief is requested pursuant to Bankruptcy Rule 9006(c) and Local Rule 9006-1(e). Notice of the hearing on this Motion is provided pursuant to Bankruptcy Rule 2002(a) and Local Rules 9013-3 and 2002-1(b). The Debtor seeks entry of an order (i) granting expedited relief, (ii) authorizing, but not directing, the Debtor to continue and, to the extent necessary, renew prepetition insurance policies in the ordinary course of business and pay prepetition obligations in respect thereof; (iii) authorizing banks and other financial institutions at which the Debtor holds accounts (collectively, the “Banks”) to honor and process check and electronic transfer requests related to the foregoing; and (iv) granting related relief. BACKGROUND 6. On the Filing Date, the Debtor filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The Debtor has continued in possession of its respective assets and the management of its business as a debtor-in-possession pursuant to Section 1107(a) and 1108 of the Bankruptcy Code.
Page 37. Further general background information about the Debtor and this case is set forth in the Declaration of Matthew F. Whebbe in Support of Chapter 11 Petition and Initial Motions. The additional facts relevant to this Motion set forth below are verified by Matthew Whebbe, as evidenced by the attached verification. RELEVANT FACTS AND RELIEF REQUSTED I. THE DEBTOR’S INSURANCE POLICIES. 8. In the ordinary course of its business, the Debtor maintains numerous insurance policies with various insurance providers (collectively, the “Insurers”) that provide coverage for, among other things, general liability, property, automobile, cyber liability, umbrella liability, excess liability, crime, directors and officers liability, fiduciary liability, firearms liability, and workers’ compensation claims (the “Insurance Policies”), as summarized in Exhibit A attached hereto. The Debtor incurs a total of approximately $1,316,352 in the aggregate in annual premiums to cover its Insurance Policies as well as other obligations, including the Broker Fees (as defined below) (collectively, the “Insurance Obligations”). In addition, the Debtor may make retroactive adjustments in the ordinary course of business with respect to one or more of the Insurance Policies, as applicable. A. Third-Party Insurance Policies. 9. The Debtor maintains third-party Insurance Policies through various insurance companies. The Insurance Policies are essential to the ongoing operation of the Debtor’s business. The Debtor incurs approximately $1,316,352 in annual premiums relating to third party Insurance Policies, excluding broker fees and workers’ compensation plan obligations.1 The third-party 1 Under certain Insurance Policies, the Debtor may have the ability to reduce the premiums for such Insurance Policies in connection with the closing of store locations and as such the Debtor’s Insurance Obligations may be reduced during the course of this Chapter 11 case.
Page 4Insurance Policies can be grouped into the following categories: (i) Property Policy. 10. The Debtor maintains an Insurance Policy that covers the Debtor’s owned and leased property (the “Property Policy”) with Affiliated FM. The Property Policy provides coverage through August 17, 2021. The Property Policy covers losses relating to, among other things, loss or damage to property resulting from fire, flood, terrorism, weather damage, boiler and machinery, earthquake, sprinkler leakage, inventory, business interruption, and marine cargo stock throughput liability. The Debtor incurs approximately $300,733 in the aggregate in annual premiums for the Property Policies.2 As of the Filing Date, the Debtor owes approximately $153,363 on account of the current premiums for the Property Policy. The Debtor timely remits payments to cover its Property Policy and as of the Filing Date no premiums on account of the Property Policy are accrued and unpaid. (ii) Casualty Policies. 11. The Debtor maintains Insurance Policies that cover casualty losses (the “Casualty Policies”) with Liberty Insurance Company, Everest National Insurance Company, Federal Insurance Company, Cincinnati Specialty Underwriters Insurance Company, and Beazley Insurance Company. The Casualty Policies with Liberty Insurance Company provide coverage through August 17, 2021, the Casualty Policy with Everest National Insurance Company provides coverage through August 17, 2021, the Casualty Policy with Federal Insurance Company provides coverage through August 17, 2021, the Casualty Policy with Cincinnati Specialty Underwriters 2 Some of the Debtor’s policy premiums are combined with other premiums for policies more further described below. To calculate the amounts set forth in this Motion, the Debtor divided the combined premiums on a pro rata basis.
Page 5Insurance Company provides coverage through August 17, 2021, and the Casualty Policy with Beazley Insurance Company provides coverage through August 17, 2021. 12. The Casualty Policies cover losses relating to, among other things, products liability, general liability, automobile accidents, cyber and privacy liability, travel accident liability, firearms liability, umbrella liability, and excess umbrella coverage. The Debtor is required to maintain certain of the Casualty Policies pursuant to applicable law. The Debtor incurs approximately $612,156 in the aggregate in annual premiums for the Casualty Policies. As of the Filing Date, the Debtor owes approximately $260,125 on account of the current premiums for the Casualty Policies. The Debtor timely remits payments to cover its Casualty Policies and as of the Filing Date no premiums on account of the Casualty Policies are accrued and unpaid. (iii) Management Liability Policy. 13. The Debtor maintains an Insurance Policy that covers management and employee liability (the “Management Liability Policy”) with Federal Insurance Company. The Management Liability Policy provides financial protection for the Debtor and its directors and officers in the event that they suffer a loss as a result of the actions of their employees or are sued in conjunction with the performance of their duties as they relate to the Debtor. 14. The Debtor maintains a policy that covers, among other things, (a) directors’ and officers’ liability; (b) fiduciary liability for wrongful acts committed, attempted or allegedly attempted, or the failure to act, by any person for whose wrongful acts or omissions the Debtor is legally liable; (c) employment-related claims against the Debtor, such as harassment and discrimination; (d) kidnap, ransom and extortion payments related to any associate of the Debtor who is kidnapped, held for ransom, or extorted during the course of employment with Debtor, which includes ransom payments and any other costs associated with extricating such associate;
Page 6and (e) crime and the loss of corporate assets resulting from employee theft and dishonesty, loss of money and securities inside and outside the Debtor’s premises, counterfeit currency, and forgery. 15. The Debtor’s Management Liability Policy provides coverage through August 17, 2021. The Debtor incurs approximately $30,930 in the aggregate in annual premiums to cover the Management Liability Policy and still owes approximately $15,833 on account of the current premiums for the Management Liability Policy. However, the Debtor timely remits payments to cover its Management Liability Policy, and, as of the Filing Date, all of the premiums due and owing for the Management Liability Policy were paid in the ordinary course of business. Accordingly, the Debtor believes there are no outstanding amounts that have accrued prepetition and are unpaid on account of the Management Liability Policy. (iv) The Workers’ Compensation Policy. 16. The Debtor maintains an Insurance Policy that covers workers’ compensation claims (the “Workers’ Compensation Policy”) with Liberty Insurance Company. The Debtor’s policy provides coverage through August 17, 2021. The Debtor incurs approximately $390,069 in annual premiums for the Workers’ Compensation Policy. The Debtor timely remits payments to cover its Workers’ Compensation Policies and, as of the Filing Date, the Debtor has paid approximately $279,610 of the current premiums for the Workers’ Compensation Policy. Accordingly, the Debtor still owes approximately $110,459 on account of the current premiums for the Workers’ Compensation Policies. The Debtor estimates that, as of the Filing Date, no premiums on account of the Workers’ Compensation Policy have accrued and remain unpaid.3 3 The Debtor also pays certain workers’ compensation claims. Authority to pay such claims has been requested in its Motion for Order (I) Granting Expedited Relief; (II) Authorizing Debtor to Pay Prepetition Employee Compensation, Benefits, Workers’ Compensation Obligations, and
Page 7B. The Brokers. 17. The Debtor employs Lockton Companies as its insurance broker (the “Broker”) to assist it with the procurement and negotiation of its Insurance Policies. The Broker provides services to and receives compensation (the “Broker Fees”) from the Debtor pursuant to certain contracts with the Debtor. The Debtor pays an annual fee of approximately $6,750 to the Broker. The remainder of the Broker Fees are built into the various premiums described above. The Debtor believes that no amount has accrued prepetition and remains unpaid on account of the Broker Fees as of the Filing Date. RELIEF REQUESTED 18. The Debtor seeks entry of an order authorizing, but not directing, the Debtor to (i) continue and renew its Insurance Policies, or obtain new insurance policies, as needed as needed in the ordinary course of business, and (ii) honor all of its prepetition and postpetition obligations. 19. The Debtor also seeks entry of an order authorizing its Banks to receive, process, honor, and pay checks or electronic transfers used by the Debtor to pay the foregoing and to rely on the representations of such Debtor as to which checks are issued and authorized to be paid in accordance with this Motion. EXPEDITED RELIEF 20. The Debtor requests expedited relief on this Motion. Previously and concurrently herewith the Debtor has scheduled and served a number of initial motions designed to facilitate an orderly transition to chapter 11. The granting of this Motion on an expedited basis will enable the Debtor to remain current on its Insurance Obligations, alleviate the risk of losing its insurance Other Related Amounts; and (III) Authorizing Payroll Provider and Financial Institutions to Honor and Process Checks and Transfers Related to Such Relief filed concurrently with this and the Debtor’s other initial motions.
Page 8coverage and accruing significant uninsured losses and penalties for failing to maintain required insurance coverage, and protect third parties benefitting from the Debtor’s policies. 21. Pursuant to Local Rule 9013-2, this Motion is verified and is accompanied by a Memorandum of Law, proposed order and proof of service. 22. Pursuant to Local Rule 9013-2, the Debtor gives notice that it may, if necessary, call one or more of the following to testify regarding the facts set forth in this Motion: (a) Matthew Whebbe, the Chief Executive Officer of the Debtor, whose business address is 2600 Eagan Woods Drive, Suite 120, Eagan, MN 55121 and (b) Michael Wesley, a Partner at Clear Thinking Group, the Chief Restructuring Officer and Financial Advisor to the Debtor, whose business address is 401 Towne Centre Drive, Hillsborough, NJ 08844. REQUEST FOR WAIVER OF STAY 23. In addition, by this Motion, the Debtor seeks a waiver of any stay of the effectiveness of the order approving this Motion. Pursuant to Bankruptcy Rule 6004(h), “[a]n order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the court orders otherwise.” As discussed above, the Debtor requires immediate relief to continue ordinary business operations for the benefit of all parties in interest. Accordingly, the Debtor submits that ample cause exists to justify a waiver of the 14-day stay imposed by Bankruptcy Rule 6004(h), to the extent that it applies. NO PREVIOUS REQUEST 24. No previous request for the relief sought herein has been made by the Debtor to this or any other court. WHEREFORE, the Debtor respectfully moves the Court for an order A. Granting expedited relief;
Page 9B. Authorizing the Debtor to pay the Insurance Obligations, whether relating to the period before or after the Filing Date; C. Authorizing the Banks to honor and process related checks and transfers; and D. Granting such other and further relief as the Court may deem just and equitable. Dated: January 11, 2021 /e/ Samuel M. Andre Clinton E. Cutler (#0158094) James C. Brand (#0387362) Steven R. Kinsella (#0392289) Samuel M. Andre (#0399669) FREDRIKSON & BYRON, P.A. 200 South Sixth Street, Suite 4000 Minneapolis, MN 55402-1425 (612) 492-7000 email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org PROPOSED ATTORNEYS FOR THE DEBTOR
Page 10VERIFICATION I, Matthew Whebbe, the Chairman and Chief Executive Officer of Tea Olive I, LLC (the “Debtor”), declare under penalty of perjury that the facts set forth in the preceding motion are true and correct according to the best of my knowledge, information, and belief, including based on information provided to me by other representatives of the Debtor and the Debtor’s professional advisors. Dated: January 10, 2021 Matthew Whebbe
|Policy Type||Effective||Expiration||Issuing Co||Billing Co||Policy #||Premium||SL Tax||SL Fee||Other Taxes
|GL||8/17/2020||8/17/2021||Liberty Insurance Company||Liberty Mutual Insurance||XXXXXX||$ 281,596.00||$ -||$ -||$ -||$ 281,596.00|
|Auto||8/17/2020||8/17/2021||Liberty Insurance Company||Liberty Mutual Insurance||XXXXXX||$ 23,070.00||$ -||$ -||$ -||$ 23,070.00|
|WC||8/17/2020||8/17/2021||Liberty Insurance Company||Liberty Mutual Insurance||XXXXXX||$ 385,596.00||$ 4,993.00||$ 390,589.00|
|Property||8/17/2020||8/17/2021||Affiliated FM||FM Global Group||XXXXXX||$ 294,382.00||$ -||$ -||$ -||$ 294,382.00|
|Umbrella ($10M)||8/17/2020||8/17/2021||Everest National Insurance Company||Everest National Insurance
|XXXXXX||$ 150,000.00||$ -||$ -||$ 150,000.00|
|XS- (10x10)||8/17/2020||8/17/2021||Federal Insurance Company||Chubb||XXXXXX||$ 54,280.00||$ -||$ -||$ -||$ 54,280.00|
|XS - Firearms||10/12/2020||8/17/2021||Cincinnati Specialty Underwriters Insurance
|CSU Producer Resources, Inc.||XXXXXX||$ 77,421.00||$2,710.00||£ 58.00||$ 35.00||$ 80,224.00|
|8/17/2020||8/17/2021||Federal Insurance Company||Chubb||XXXXXX||$ 30,277.00||$ 30,277.00|
|Cyber Liability||8/17/2020||8/17/2021||Beazley Insurance Co.||Beazley||XXXXXX||$ 19,730.00||$ 19,730.00|