You are on page 1of 27

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: PERKINS & MARIE CALLENDER’S INC.,1 et al., Debtors.

        Chapter 11 Case No. 11-11795 (KG) Jointly Administered

Ref. Docket Nos. 922 and 935

DECLARATION OF JOSEPH F. TRUNGALE IN SUPPORT OF CONFIRMATION OF DEBTORS’ SECOND AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE I, JOSEPH F. TRUNGALE, do hereby declare, under penalty of perjury, that: 1. I have held the positions of President and Chief Executive Officer of Perkins &

Marie Callender’s Inc. (f/k/a The Restaurant Company) (“PMCI”) and various of the other debtors (collectively, with PMCI, the “Debtors”), since March of 2004. In my capacity as such, I have detailed knowledge of, and experience with, the business and financial affairs of the Debtors. Additionally, I have spent my entire professional career (approximately forty-five (45) years) in various management and senior executive positions within the restaurant management industry in which the Debtors operate. 2. I submit this declaration (the “Declaration”) in support of confirmation of the

“Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code”, dated September 9, 2011[Docket No. 922] (including all exhibits thereto and as may be

1

The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are: Perkins & Marie Callender’s Inc. (4388); Perkins & Marie Callender’s Holding Inc. (3999); Perkins & Marie Callender’s Realty LLC (N/A); Perkins Finance Corp. (0081); Wilshire Restaurant Group LLC (0938); PMCI Promotions LLC (7308); Marie Callender Pie Shops, Inc. (7414); Marie Callender Wholesalers, Inc. (1978); MACAL Investors, Inc. (4225); MCID, Inc. (2015); Wilshire Beverage, Inc. (5887); and FIV Corp. (3448). The mailing address for the Debtors is 6075 Poplar Avenue, Suite 800, Memphis, TN 38119.

01: 11551443.1

070242.1001

amended, modified, or supplemented from time to time (the “Plan”).2 Except as otherwise indicated herein, all facts set forth herein are based upon my information and belief, and upon my review of the Debtors’ books and records, including the Plan and the documents related thereto, and other relevant information, including discussions with the Debtors’ personnel and outside advisors, as well as my experience and knowledge of the Debtors’ business operations. Based on the foregoing, if I were called upon to testify regarding the facts set forth herein, I could and would testify competently with respect thereto. I am authorized to execute this Declaration on behalf of the Debtors. 3. I have supervised the chapter 11 cases for all of the Debtors (collectively, the

“Chapter 11 Cases”), and I have participated in the Debtors’ strategic planning as it pertains to the Chapter 11 Cases filed in the United States Bankruptcy Court for the District of Delaware (the “Court”). As a result of my first-hand experience, and through my review of the Debtors’ books and records and other information, including discussions with outside advisors, I have formed the following opinions as to the necessity of confirmation of the Plan. FACTUAL BACKGROUND I. The Chapter 11 Cases 4. On June 13, 2011 (the “Petition Date”), each of the Debtors filed a voluntary

petition for relief under chapter 11 of the Bankruptcy Code, thereby commencing the Chapter 11 Cases in this Court. No request has been made for the appointment of a trustee or examiner, and the Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On June 24, 2011, the Office of the United States Trustee appointed the Creditors’ Committee.
2

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Plan. Any summary herein of the terms and conditions of the Plan and any related documents is qualified in its entirety by the actual terms and conditions thereof.

01: 11551443.1

2 070242.1001

II.

Overview of the Debtors’ Businesses and History 5. The Debtors are one of the leading operators of family-dining and casual-dining

restaurants, under their two (2) highly-recognized brands: (i) their full-service family dining restaurants located primarily in the Midwest, Florida and Pennsylvania under the name “Perkins Restaurant and Bakery” (“Perkins”), and (ii) their mid-priced, full-service casual-dining restaurants, specializing in the sale of pies and other bakery items, located primarily in the western United States under the name “Marie Callender’s Restaurant and Bakery” (“Marie Callender’s”). 6. Through the Debtors’ Foxtail Foods bakery goods manufacturing operations

(“Foxtail”), the Debtors offer pies, muffin batters, cookie doughs, pancake mixes, and other food products for sale to both company-owned and franchised Perkins and Marie Callender’s restaurants, and to unaffiliated customers, such as food service distributors and supermarkets, as well as on-line to the public. 7. $507 million. III. Corporate Structure and Pre-Petition Capitalization 8. Perkins & Marie Callender’s Holding Inc. (f/k/a The Restaurant Holding The Debtors’ revenues for the year ended December 26, 2010 were approximately

Corporation) is a holding company that wholly owns PMCI. PMCI is the Debtors’ principal operating entity and the primary obligor on the Debtors’ pre-Petition Date senior secured working capital facility and their secured and unsecured bond debt. PMCI directly or indirectly owns and operates the Debtors’ restaurant operations, oversees the Debtors’ franchised restaurant operations, and owns and operates its Foxtail business.

01: 11551443.1

3 070242.1001

9.

On September 24, 2008, PMCI issued $132 million in aggregate principal amount

of 14% Senior Secured Notes, with a maturity date of May 31, 2013 and interest payable semiannually on May 31 and November 30 of each year. Prior thereto, on September 21, 2005, PMCI issued $190 million of 10% Senior Notes, with a maturity date of October 1, 2013 and interest payable semi-annually on April 1 and October 1 of each year. Concurrently with the issuance of the Senior Secured Notes, PMCI and PMC Holding entered into a Credit Agreement dated as of September 24, 2008 (as amended, the “Credit Agreement”) with Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC) as the lender and administrative agent, consisting of a revolving credit facility in favor of PMCI, as borrower, of up to $26,000,000, with a sub-limit of $15,000,000 for the issuance of letters of credit. As of the Petition Date, approximately $103,000,000 in aggregate principal amount of the Senior Secured Notes were outstanding, $190,000,000 in aggregate principal amount of the Senior Notes were outstanding, and approximately $10,060,000 in principal amount was outstanding under the Pre-Petition Secured Credit Facility (comprised solely of outstanding letters of credit). IV. Events Leading to the Debtors’ Chapter 11 Cases 10. Prior to the commencement of these Chapter 11 Cases, the Debtors’ operations

and financial performance were severely and adversely affected due to excessive leverage and poor sales results. The poor economic climate has been a primary factor in the decline in restaurant sales, particularly in Florida and California where there are large concentrations of Perkins and Marie Callender’s restaurants, and where high foreclosure rates and depressed economies have prevailed. With overall unemployment rates at record high levels, discretionary income for many historically-loyal customers and other consumers has been severely constrained, directly correlating to depressed restaurant sales and reduced or eliminated customer

01: 11551443.1

4 070242.1001

traffic. Restaurant sales were also negatively impacted by a lack of restaurant remodeling expenditures due to the Debtors’ internal constraints on deploying cash for capital expenditures. As better resourced competitors continued to build new locations and upgrade their existing facilities (and in some cases, through the vehicle of their own chapter 11 proceedings, restructured their financial affairs), many of the Debtors’ restaurants became facially dated and stale, which also negatively impacted the ability of the Debtors to maintain customer traffic at the levels prevailing prior to the economic downturn. 11. On April 1, 2011, the Debtors obligated thereunder were unable and failed to

make a scheduled interest payment of $9,500,000 on the Senior Notes. After the passage of thirty (30) days from April 1, without payment of such interest, such default became an Event of Default under the Senior Notes Indenture governing the Senior Notes, permitting potential acceleration of the Senior Notes by the holders of at least twenty-five percent (25%) in aggregate principal amount of the Senior Notes. The occurrence of the interest default and subsequent Event of Default (as defined in the Senior Notes Indenture) resulting therefrom also gave rise to various potential collection and enforcement remedies available to the indenture trustee for, and the holders of, the Senior Notes and to the Pre-Petition Administrative Agent under the PrePetition Secured Credit Facility. Certain technical defaults also existed under the Pre-Petition Credit Agreement as to which the Pre-Petition Secured Credit Facility Agent had similar potential rights and remedies. Effective April 30, 2011, PMCI and various of the other Debtors entered into two (2) forbearance agreements (collectively, the “Forbearance Agreements”). On or about May 4, 2011, PMCI, those certain guarantor Subsidiary Debtors and the holders of in excess of eighty percent (80%) in aggregate principal amount of the Senior Notes entered into a forbearance agreement, pursuant to which said holders agreed to forbear from exercising any and

01: 11551443.1

5 070242.1001

all of their rights and remedies with respect to the aforesaid payment default and other existing and anticipated defaults and Events of Default through and including June 30, 2011 (the “Senior Note Forbearance Agreement”). Additionally, on or about May 9, 2011, the Debtors (other than Promotions) entered into a forbearance agreement with the lender and the Pre-Petition Administrative Agent under the Pre-Petition Secured Credit Facility (triggered by certain technical defaults thereunder including the nonpayment of the semi-annual interest payment on the Senior Notes) pursuant to which the lender and Pre-Petition Administrative Agent agreed to forbear from exercising any and all of their rights and remedies to and until June 30, 2011. 12. During the window of opportunity created by the execution and delivery of the

Forbearance Agreements, the Debtors entered into negotiations with the Restructuring Support Parties which negotiations were designed to restructure and recapitalize the Debtors’ businesses and balance sheet. To that end, in the weeks preceding the Petition Date, the Debtors and the Restructuring Support Parties entered into a “Restructuring Support Agreement” dated as of June 6, 2011,3 designed to mutually and consensually develop and agree upon the parameters of a reorganization program for the Debtors that will, among other things, delever the Debtors’ capital structure, and thereby establish a pre-filing blueprint for an efficient and effective chapter 11 reorganization process. 13. In consultation with their professionals and certain of their constituencies, the

Debtors diligently evaluated a number of options to address their current financial and capital issues. These efforts have included sharing information with and engaging in discussions with a variety of the Debtors’ stakeholders with the goal of restructuring the Debtors’ balance sheet to

In order to accommodate ongoing discussions and negotiations, the Debtors and Restructuring Support Parties entered into a certain Amendment No. 1 to the Restructuring Support Agreement, dated as of August 22, 2011 (“RSA Amendment No. 1”). In conjunction with RSA Amendment No. 1, the Debtors entered into a corresponding amendment to the DIP Credit Agreement.

3

01: 11551443.1

6 070242.1001

bring it into line with the Debtors’ current debt servicing capabilities. Based on the Debtors’ evaluation of their options for addressing their current financial and capital issues and discussion with their stakeholders, the Debtors concluded that proceeding with a restructuring on the terms set forth in the Restructuring Support Agreement provided the best available means of achieving their goals. V. Filing of the Plan and the Disclosure Statement 14. In accordance with the Restructuring Support Agreement, after months of

working closely with the Restructuring Support Parties and certain key creditor constituencies in the Chapter 11 Cases, including the Creditors’ Committee, on September 9, 2011, the Debtors filed the “Second Amended Disclosure Statement for Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code”, dated September 9, 2011 [Docket No. 923] (including all exhibits thereto and as may be amended, modified or supplemented from time to time, the “Disclosure Statement”) . 15. On September 9, 2011, the Court entered an order [Docket No. 935] (the

“Disclosure Statement Order”) approving the Disclosure Statement pursuant to section 1125 of the Bankruptcy Code. Pursuant to the Disclosure Statement Order, the Court (i) established certain procedures for the solicitation and tabulation of votes to accept or reject the Plan, (ii) established October 14, 2011 at 4:00 p.m. (prevailing Eastern Time) as the deadline for submitting Ballots or Master Ballots accepting or rejecting the Plan (the “Voting Deadline”) and for filing objections to confirmation of the Plan (the “Objection Deadline”), and (iii) scheduled a hearing (the “Confirmation Hearing”) commencing on October 31, 2011 at 10:00 a.m. (prevailing Eastern Time) to consider confirmation of the Plan.

01: 11551443.1

7 070242.1001

VI.

Solicitation of the Plan 16. To obtain the requisite acceptance of the Plan, on or about September 14, 2011, as

required by the Disclosure Statement Order, the Debtors completed solicitation of acceptances and rejections of the Plan by distributing the Disclosure Statement and related materials to the holders of Claims, as of the Record Date, in the classes of Claims that, under the Plan, are entitled to vote to accept or reject the Plan. As required by the Disclosure Statement Order, and as evidenced by the Affidavits of Service filed with the Court on September 27, 2011 [Docket Nos. 1043 and 1045] (the “Solicitation Package Affidavits of Service”), the Debtors, through their noticing and voting agent in these Chapter 11 Cases, Omni Management Group, LLC (“Omni”), timely mailed to all holders of Claims entitled to vote on the Plan a solicitation package (each, a “Solicitation Package”) containing copies of (a) the Confirmation Hearing Notice (as defined in the Disclosure Statement Order), which provided written notice of (i) the Court’s approval of the Disclosure Statement, (ii) the Voting Deadline, (iii) the Objection Deadline; and (iv) the date of the Confirmation Hearing; (b) a copy of the Disclosure Statement, including the Plan; (c) a copy of the Disclosure Statement Order; (d) a Ballot or Master Ballot (with instructions); and (e) a return envelope (postage prepaid) for mailing the Ballot or Master Ballot. 17. As further required by the Disclosure Statement Order, the Debtors, through

Omni, timely transmitted the Notice of Non-Voting Status (as defined in the Disclosure Statement Order) to the Non-Voting Parties (as defined in the Disclosure Statement Order) and the Confirmation Hearing Notice to the known counterparties to executory contracts and unexpired leases. Affidavits of Service evidencing such actual notice were filed with the Court on September 27, 2011 [Docket Nos. 1044 and 1046].

01: 11551443.1

8 070242.1001

VII.

Plan Supplement 18. On October 21, 2011, the Debtors filed the “Plan Supplement for Debtors’ Second

Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code” [Docket No. 1204] (the “Plan Supplement”), which included the following: (i) the First Lien Exit Facility Credit Agreement in its then-most current form; (ii) the form of New Secured Term Loan Agreement in its then-most current form; (iii) reference to the fact that the New Intercreditor Agreement will be filed in advance of the Confirmation Hearing; (iv) the New Certificate of Formation; (v) the PMC Holding LLC Agreement; (vi) the form of Subsidiary LLC Agreements; (vii) a list of the initial post-Effective Date managers and officers of the Reorganized Debtors; (viii) a list of the Litigation Rights retained by the Reorganized Debtors; (ix) the Schedule of Rejected Contracts and Leases; (x) the schedule of Assigned Avoidance Actions; and (xi) the schedule of Specified General Unsecured Claims. VIII. Ballot Tabulation 19. As described more fully in the “Declaration of Paul Deutch Regarding Analysis of

Ballots for Accepting or Rejecting Second Amended Joint Plan of Reorganization of Perkins & Marie Callender’s, Inc., et al., Pursuant to Chapter 11 of the Bankruptcy Code” (the “Voting Declaration”), Class 3 Senior Secured Notes Claims, Class 4 Senior Notes Claims, and Class 5 General Unsecured Claims voted to accept the Plan. Pursuant to sections 1126 and 1129(a)(8) of the Bankruptcy Code, Class 1 Other Priority Claims, Class 2 Other Secured Claims, Class 6 Convenience Claims, Class 7 Intercompany Claims and 9B Equity Interests in Other Subsidiary Debtors are Unimpaired under the Plan and are deemed to have accepted the Plan. Because the Plan provides that holders of Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI will not receive or retain any property on account of such Interests, such

01: 11551443.1

9 070242.1001

Classes are deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code. 20. On October 3, 2011, the Debtors’ filed their Objection to Certain Claims Solely

for Purposes of Voting to Accept or Reject the Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1071] (the “Debtors’ Determination Objection”) seeking an order of the Court temporarily allowing the Modified Voting Claims (as defined in the Debtors’ Determination Objection) identified on the exhibits attached thereto, solely for purposes of voting to accept or reject the Plan, in the amounts and classifications provided for on the exhibits, as opposed to the amounts and classifications asserted in the Modified Voting Claims. Subsequent to the filing of the Debtors’ Determination Objection, the Debtors received responses from certain creditors identified on the exhibits to the Debtors’ Determination Objection and the Debtors thereafter withdrew certain of their objections and resolved all of the other responses received. On October 25, 2011, the Court entered an order [Docket No. 1218] with respect to the Debtors’ Determination Motion. 21. On October 3, 2011, the Creditors’ Committee filed its Motion of the Official

Committee of Unsecured Creditors to Disallow Certain Proofs of Claim Solely for Purposes of Voting on the Debtors’ Second Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1067] (the “Creditors’ Committee’s Determination Motion”) to disallow, solely for purposes of voting to accept or reject the Plan, claims asserted against the Debtors pursuant to: (i) proofs of claim nos. 1485, 1487, 1489, 1493 filed by Castle Harlan, Inc. (“Castle Harlan”); (ii) proof of claim no. 1495 filed by P&MC's Holding LLC (“Castle Harlan Holding”); and (iii) proof of claim no. 1754 filed by Omega Trust (collectively, (i), (ii), and (iii) are the “Disputed Claims”). Omega Trust filed an objection to the Creditors’ Committee’s

01: 11551443.1

10 070242.1001

Determination Motion on October 18, 2011 [Docket No. 1167]. Solely for purposes of voting to accept or reject the Plan, the Creditors’ Committee resolved the Creditors’ Committee’s Determination Motion as it pertained to the Disputed Claims as follows: (i) on October 17, 2011, the Court entered an Order [Docket No. 1145] approving the stipulation between the Creditors’ Committee, Castle Harlan, and Castle Harlan Holding whereby Castle Harlan and Castle Harlan Holding agreed to forego voting on the Plan and the Creditors’ Committee agreed to withdraw the Creditors’ Committee’s Determination Motion as it pertained to Castle Harlan and Castle Harlan Holding; and (ii) on or about October 25, 2011, the Creditors’ Committee, the Restructuring Support Parties, the Debtors, and Omega Trust entered into a preliminary settlement agreement resolving, among other things, the Creditors’ Committee’s Determination Motion as it pertained to Omega Trust (the “Omega Settlement”). The final terms of the Omega Settlement will be embodied in the Confirmation Order. 22. As of the filing of this Declaration, the Debtors received the following objections

to confirmation of the Plan: (i) Objection of City of Waco and Waco Independent School District to Confirmation of Debtors’ Joint Plan of Reorganization [Docket No. 652]; (ii) Travis County’s Objection to Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1082]; (iii) Objection of Tri-State House of Pancakes, Inc. to Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1131] (the “Tri-State Objection”); (iv) Objection by the Internal Revenue Service to the Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1132]; (v) Limited Objection of the Macerich Company and Watt Management Company to the (I) Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code; and (II) Proposed Cure Amounts [Docket No. 1133]; (vi)

01: 11551443.1

11 070242.1001

Objection of Inland Pacific Property Services LLC to the Debtors’ Second Amended Joint Plan or Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1134]; (vii) Objection of Missouri Department of Revenue to Confirmation of Debtors’ Second Amended Joint Plan of Reorganization [Docket No. 1136]; (viii) Objection of Omega Trust to Confirmation of the Debtors’ Second Amended Joint Plan of Reorganization [Docket No. 1140]; and (ix) Local Texas Tax Authorities’ Objection to Confirmation of Debtors’ Second Amended Joint Plan of Reorganization [Docket No. 1141] (collectively, the “Plan Objections”). 23. I have been advised by counsel, and therefore believe, that each of the Plan

Objections, with the exception of the Tri-State Objection, have been resolved, or are anticipated to be resolved, by the Debtors agreeing to insert certain agreed-upon language in the proposed Confirmation Order. I believe the only remaining objection to the Plan will be the Tri-State Objection. IX. Highlights of the Plan 24. The Plan, which is the product of extensive negotiations among the Debtors and

certain of their major creditors constituencies, including, without limitation, the Creditors’ Committee and the Restructuring Support Parties, constitutes a plan of reorganization under chapter 11 of the Bankruptcy Code for the Debtors, under which their Estates will be limitedly consolidated for purposes of the Plan, confirmation thereof, and Distributions to be made thereunder. The Plan provides for full payment of Allowed Administrative Claims, Professional Fee Claims, Priority Tax Claims and DIP Financing Claims, and renders Unimpaired Class 1 Other Priority Claims, Class 2 Other Secured Claims, Class 6 Convenience Claims, Class 7 Intercompany Claims and Class 9B Equity Interests in the Other Subsidiary Debtors.

01: 11551443.1

12 070242.1001

25.

Meanwhile, the Senior Secured Notes Claims shall be Allowed and deemed to be

Allowed in the amount of (i) $103,063,000 on account of the aggregate outstanding principal amount of the Senior Secured Notes plus (ii) accrued and unpaid interest thereon at the applicable contract rate, if any, as of the Effective Date. On or as soon as reasonably practicable after the Effective Date, the Senior Secured Notes shall be cancelled and, in full and final satisfaction of and in exchange for all Allowed Senior Secured Notes Claims, each holder of Senior Secured Notes shall receive (a) rights and obligations in respect of the New Secured Term Loans in a principal amount equal to the principal amount of such holder’s Senior Secured Notes Claim and (b) Cash equal to the amount of any accrued and unpaid interest owed on account of its Senior Secured Notes Claim, if any, due as of the Effective Date. The vote by the holders of the Senior Secured Notes to accept the Plan shall constitute such holders’ consent to the Prepayment Premium Waiver; provided, however, that the Prepayment Premium Waiver shall be deemed null and void if the Effective Date of the Plan does not occur. 26. The Senior Notes Claims shall be Allowed and deemed to be Allowed in the

amount of (i) $190,000,000 on account of the aggregate outstanding principal amount of the Senior Notes plus (ii) accrued and unpaid interest thereon at the applicable contract rate from October 1, 2010 to the Petition Date. On or as soon as reasonably practicable after the Effective Date, the Senior Notes shall be cancelled, and, in full and final satisfaction of and in exchange for all Allowed Senior Notes Claims, each holder of an Allowed Senior Notes Claim shall receive its Pro Rata percentage of the Reorganized PMC Holding Membership Interests (subject to dilution on account of Reorganized PMC Holding Membership Interests or other similar Interests, if any, that may be issued from time to time pursuant to the Management Incentive Plan), with such Pro Rata percentage determined by dividing the Allowed amount of such

01: 11551443.1

13 070242.1001

holder’s Senior Notes Claim by the total aggregate amount of all Allowed Senior Notes Claims and Allowed General Unsecured Claims that receive Reorganized PMC Holding Membership Interests under the Plan; provided, however, that any Cash Eligible Claimant holding an Allowed Senior Notes Claims may, in lieu of such Pro Rata percentage of Reorganized PMC Holding Membership Interests, make the Cash Election and receive Cash in an amount equal to (a) the lesser of (i) 14% of such holder’s Allowed Senior Notes Claim or (ii) such holder’s Pro Rata share of the Cash Cap Amount; plus (b) such holder’s Pro Rata share of the Avoidance Action Recovery Pool. 27. With respect to the holders of Allowed General Unsecured Claims, on or as soon

as reasonably practicable after the Effective Date, in full and final satisfaction of and in exchange for all Allowed General Unsecured Claims: (A) each holder of an Allowed General Unsecured Claim that is a Cash Eligible Claimant shall receive Cash in an amount equal to (a) the lesser of (i) 14% of the holder’s Allowed General Unsecured Claim or (ii) such holder’s Pro Rata share of the Cash Cap Amount; plus (b) such holder’s Pro Rata share of the Avoidance Action Recovery Pool; provided, however, that such Cash Eligible Claimant may, in lieu of receiving Cash, make the Class 5 Equity Election and receive its Pro Rata share of Reorganized PMC Holding Membership Interests (subject to dilution on account of Reorganized PMC Holding Membership Interests or other similar Interests, if any, that may be issued from time to time pursuant to the Management Incentive Plan), with such Pro Rata percentage determined by dividing the Allowed amount of such holder’s General Unsecured Claim by the total aggregate amount of all Allowed Senior Notes Claims and Allowed General Unsecured Claims that receive Reorganized PMC Holding Membership Interests under the Plan; and (B) each holder of an Allowed General Unsecured Claim that is not a Cash Eligible Claimant shall receive its Pro Rata percentage of the

01: 11551443.1

14 070242.1001

Reorganized PMC Holding Membership Interests (subject to dilution on account of Reorganized PMC Holding Membership Interests or other similar Interests, if any, that may be issued from time to time pursuant to the Management Incentive Plan), with such Pro Rata percentage determined by dividing the Allowed amount of such holder’s General Unsecured Claim by the total aggregate amount of all Allowed Senior Notes Claims and Allowed General Unsecured Claims that receive Reorganized PMC Holding Membership Interests under the Plan. 28. Finally, Class 8 Subordinated Claims and Class 9A Equity Interests in PMC

Holding and PMCI shall be discharged, cancelled, released, and extinguished as of the Effective Date and holders of Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI shall neither receive any Distributions nor retain any property under the Plan for or on account of such Claims and Equity Interests. COMPLIANCE WITH SECTION 1129 OF THE BANKRUPTCY CODE 29. I have been advised and believe that the Plan complies with all of the

requirements of subsection 1129(a) of the Bankruptcy Code and is therefore confirmable. 30. I have been further advised and believe that the Plan complies with the applicable

provisions of the Bankruptcy Code, as required by section 1129(a)(1) thereof. 31. I have been further advised and believe that the Debtors, as the proponents of the

Plan, have complied with the applicable provisions of the Bankruptcy Code, as required by section 1129(a)(2) thereof. 32. I believe that the Debtors have proposed the Plan in good faith and not by any

means forbidden by law. The Plan provides for the reorganization of the Debtors’ businesses and for distributions to holders of Allowed Claims in accordance with the terms and conditions of the Plan and the applicable priorities of the Bankruptcy Code, and permits creditors to realize

01: 11551443.1

15 070242.1001

the highest recoveries possible in chapter 11, in a timely and efficient manner. The Plan and the related transactions embodied therein are the result of extensive arms’ length and good faith negotiations among various parties in interest in these cases, including the Creditors’ Committee and the Restructuring Support Parties, and their respective counsel and advisors. I believe the Debtors’ good faith is further evidenced by, among other things, the overwhelming approval of the Plan by the Voting Parties. Therefore, I have been advised and further believe that the Plan complies with section 1129(a)(3) of the Bankruptcy Code. 33. Except as otherwise provided in the Plan or certain prior orders of this Court, any

payments made, or to be made, for services or for costs and expenses incurred in connection with these Chapter 11 Cases are subject to this Court’s approval, and I have been advised and believe that the Plan therefore complies with section 1129(a)(4) of the Bankruptcy Code. 34. The Plan provides that Reorganized PMC Holding shall be a manager-managed

limited liability company. The initial board of managers of Reorganized PMC Holding shall be a seven-member board made up of seven (7) managers designated by the Restructuring Support Parties, one of whom shall be the Chief Executive Officer of Reorganized PMC Holding and one of whom shall be selected by the Restructuring Support Parties and acceptable to the Creditors’ Committee in the exercise of its reasonable discretion. The initial officers of Reorganized PMC Holding shall be designated by the Restructuring Support Parties. The Plan provides that

Reorganized PMCI and each other Reorganized Subsidiary Debtor that is a limited liability company shall be a manager-managed limited liability company. The initial boards of managers or directors, as applicable, of each of the Reorganized Subsidiary Debtors shall have the same membership and composition as the board of managers for Reorganized PMC Holding (or such other membership or composition as determined by the board of managers of Reorganized PMC

01: 11551443.1

16 070242.1001

Holding), provided that the board of managers or directors, as applicable, of any material Reorganized Subsidiary Debtor shall have the same membership and composition as the board of managers of Reorganized PMC Holding. The initial officers of each of the Reorganized

Subsidiary Debtors shall be determined in accordance with the Plan. 35. In accordance with section 1129(a)(5) of the Bankruptcy Code, in the Plan

Supplement, the Debtors provided notice that, as of the filing of the Plan Supplement, six (6) of the seven (7) managers of the initial board of managers of Reorganized PMC Holding had been selected and identified therein those six (6) managers. The Debtors further indicated in the Plan Supplement that the members of the initial board of managers (or equivalent governing bodies) for the other Reorganized Debtors shall have the same membership and composition as the board of managers for Reorganized PMC Holdings or such other membership or composition as determined by the board of managers for Reorganized PMC Holding, provided, that the board of managers or directors of any material Reorganized Subsidiary Debtors shall have the same membership and composition as the board of managers of Reorganized PMC Holding. The Plan Supplement also indicated that, as of the filing of the Plan Supplement, the Debtors anticipated that, subject to Articles V.C and V.E of the Plan, the initial officers of the Reorganized Debtors will be substantially the same as the officers of the Debtors on the Effective Date. In the Plan Supplement, the Debtors included the identities of the officers of the Reorganized Debtors after the Effective Date, together with their applicable employment titles and their annual salaries for employment. I believe that the compensation of the anticipated officers is substantially similar to compensation received by Persons serving in similar roles in comparable companies. In light of the foregoing, I believe that the appointment of the managers and officers is consistent with the best interests of the holders of Claims and Interests and with public policy. Accordingly, I

01: 11551443.1

17 070242.1001

have been advised and believe that the Plan complies with section 1129(a)(5) of the Bankruptcy Code. 36. The Debtors’ businesses are not subject to rate regulation; therefore, I have been

advised and believe that section 1129(a)(6) of the Bankruptcy Code is inapplicable to the Confirmation of the Plan. 37. With respect to each Impaired Class of Claims or Interests, the Voting

Declaration and the Debtors’ liquidation analysis attached as Exhibit D to the Disclosure Statement (the “Liquidation Analysis”) indicates that each holder of a Claim or Interest in an Impaired Class has voted to accept the Plan or will receive or retain under the Plan on account of such Claim or Interest property of a value, as of the Effective Date, that is not less than the amount that such holder would so receive or retain if the Debtors’ businesses were liquidated under chapter 7 of the Bankruptcy Code on such date. Based the Voting Declaration and the Liquidation Analysis, which is discussed in greater detail in the Disclosure Statement and the Declaration of Joseph H. Santarlasci, Jr. in Support of Confirmation of Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the “Santarlasci Declaration”), I believe that each Class of Claims and Interests will receive under the Plan at least as much as that Class would receive in a hypothetical Chapter 7 liquidation. I am informed by counsel that, as a result, the Plan satisfies section 1129(a)(7) of the Bankruptcy Code. 38. I have been advised and believe that: (i) Class 1 Other Priority Claims and Class

2 Other Secured Claims are Unimpaired under the Plan and are deemed to have accepted the Plan; (ii) Class 3 Senior Secured Notes Claims, Class 4 Senior Notes Claims, and Class 5 General Unsecured Claims voted to accept the Plan, as evidenced by the Voting Declaration; and

01: 11551443.1

18 070242.1001

(iii) because the Plan provides that Holders of both Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI will not receive or retain any property under the Plan on account of such Interests, such Classes are deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code, thereby resulting in section 1129(a)(8) of the Bankruptcy Code having not been satisfied. However, I have been further advised and believe that the Plan may be confirmed under the “cram down” provisions of section 1129(b) of the Bankruptcy Code, as it does not “discriminate unfairly” and is “fair and equitable” with respect to the Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI. 39. I have been advised and believe that the Plan’s treatment of allowed

Administrative Claims, Professional Fee Claims, Priority Tax Claims, DIP Financing Claims, Class 1 Other Priority Claims, and Class 2 Other Secured Claims satisfies section 1129(a)(9) of the Bankruptcy Code. 40. I have been advised and believe Class 3 Senior Secured Notes Claims, Class 4

Senior Notes Claims, and Class 5 General Unsecured Claims voted to accept the Plan, as evidenced by the Voting Declaration, without the need to include any acceptance of any insider. I have been advised and believe, therefore, that the Plan complies with section 1129(a)(10) of the Bankruptcy Code. 41. I have been advised and believe that the Plan is feasible and complies with section As discussed in greater detail in the Santarlasci

1129(a)(11) of the Bankruptcy Code.

Declaration, the Debtors have taken a number of steps in connection with these Chapter 11 Cases to improve their financial position and business operations, and the financial projections attached as Exhibit C to the Disclosure Statement (the “Financial Projections”) demonstrate the Debtors’ ability to satisfy their Plan obligations and to continue to operate viably after the Effective Date.

01: 11551443.1

19 070242.1001

Therefore, I have been informed and believe that section 1129(a)(11) of the Bankruptcy Code is satisfied. 42. In accordance with section 1129(a)(12) of the Bankruptcy Code, Article XII.A of

the Plan provides that all fees payable on or before the Effective Date pursuant to 28 U.S.C. § 1930 will be paid by the Debtors on or before the Effective Date. I have been advised and therefore believe that the Plan complies with section 1129(a)(12) of the Bankruptcy Code. 43. Article VIII.E of the Plan provides that as of and subject to the Effective Date, all

employment and severance agreements and policies, and all employee compensation and benefit plans, policies, and programs of the Debtors applicable generally to their employees, including agreements and programs subject to section 1114 of the Bankruptcy Code, as in effect on the Effective Date, including all savings plans; retirement plans; health care plans; disability plans; severance benefit plans; incentive plans; life, accidental death, and dismemberment insurance plans; nonqualified deferred compensation plans; and senior executive retirement plans shall be deemed to be, and shall be treated as though they are, executory contracts that are assumed under the Plan, and the Debtors’ obligations under all such agreements and programs shall survive the Effective Date of the Plan, without prejudice to the Reorganized Debtors’ rights under applicable nonbankruptcy law to modify, amend, or terminate the foregoing arrangements in accordance with the terms and provisions thereof, except for (i) such executory contracts or plans specifically rejected pursuant to the Plan (to the extent such rejection does not violate section 1114 of the Bankruptcy Code), and (ii) such executory contracts or plans as have previously been terminated, or rejected, pursuant to a Final Order, or specifically waived by the beneficiaries of such plans, benefits, contracts, or programs. Thus, I have been advised and believe that the Plan satisfies the requirements of section 1129(a)(13) of the Bankruptcy Code.

01: 11551443.1

20 070242.1001

44.

The principal purpose of the Plan is not the avoidance of taxes or avoidance of the

requirements of Section 5 of the Securities Act of 1933, and I am unaware of any filing by any governmental entity asserting such avoidance. Thus, I am advised and believe that the

requirements of section 1129(d) of the Bankruptcy Code have been met. MEANS FOR IMPLEMENTATION 45. I have been advised and believe that the Plan provides “adequate means” for its

implementation. In compliance with section 1123(a)(5) of the Bankruptcy Code, Article VII of the Plan sets forth the means for implementation of the Plan, which means are adequate and proper. The Debtors or Reorganized Debtors, through the Disbursing Agent or such other entity, will be able to make all of the Distributions under, and comply with all other provisions of, the Plan, as the Debtors estimate that they will have sufficient Cash to ensure that the holders of Allowed Administrative Claims, Professional Fee Claims, Priority Tax Claims and DIP Financing Claims and Allowed Claims in Classes 1 and 2 are satisfied in full, and holders of Allowed Claims in Classes 3, 4, 5 and 6 will receive the Distributions required under the Plan. 46. I have been advised and believe that Article VII and various other

provisions of the Plan provide adequate and proper means for the Plan’s implementation, including, without limitation: (i) the execution, delivery and implementation of the Exit

Financing, consisting of the First Lien Exit Facility and the New Secured Term Loans; (ii) the issuance of Reorganized PMC Holding Membership Interests; (iii) the adoption, execution, delivery and implementation of the New Intercreditor Agreement; (iv) the appointment of the Claims Administrator; (v) the authorization that, on and after the Effective Date, the Reorganized Debtors and the officers and members of the boards of managers or the board of directors thereof, are authorized to and may issue, execute, deliver, file or record such contracts, securities,

01: 11551443.1

21 070242.1001

instruments, releases, and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of the Plan and the securities issued pursuant to the Plan in the name of and on behalf of the Reorganized Debtors, without need for any approvals, authorization, or consents except for those expressly required pursuant to the Plan and applicable non-bankruptcy law; (vi) the authorization that upon the Effective Date, all corporate actions contemplated by the Plan shall be deemed authorized and approved in all respects; (vii) the cancellation, on the Effective Date, of, among other obligations of the Debtors, the obligations of the Debtors under the Pre-Petition Secured Credit Facility, the Senior Secured Notes Indenture, the Senior Notes Indenture and any other certificate, share, note, bond, indenture, purchase right, option, warrant, or other instrument or document directly or indirectly evidencing or creating any indebtedness or obligation of or ownership interest in the Debtors giving rise to any Claim or Equity Interest (except such certificates, notes, or other instruments or documents evidencing indebtedness or obligations of the Debtors that are specifically reinstated pursuant to the Plan); and (viii) provisions governing Distributions on account of Allowed Claims and the resolution of Disputed Claims. Additionally, Article IX of the Plan provides adequate and proper means for (a) the continued corporate existence of each of the Debtors as Reorganized Debtors and (b) the vesting of assets in each respective Reorganized Debtor, free and clear of Liens, Claims, charges or other encumbrances (except for Liens, if any, granted to secure the First Lien Exit Facility, the New Secured Term Loans and any liens applicable to any capitalized leases existing on the Effective Date. Accordingly, I believe the Plan satisfies the requirements of section 1123(a)(5) of the Bankruptcy Code.

01: 11551443.1

22 070242.1001

PLAN RELEASES I. Releases by the Debtors of Certain Parties 47. Article IX.E of the Plan provides that:

Pursuant to section 1123(b)(3) of the Bankruptcy Code, effective as of the Effective Date, each Debtor, in its individual capacity and as a debtor in possession for and on behalf of its Estate, shall release and discharge and be deemed to have conclusively, absolutely, unconditionally, irrevocably, and forever released and discharged all Released Parties for and from any and all claims or Causes of Action existing as of the Effective Date in any manner arising from, based on, or relating to, any Claim or Interest that is treated in the Plan, the business or contractual arrangements between any Debtor and any Released Party, the restructuring of Claims and Interests prior to or in the Chapter 11 Cases, or any act, omission, occurrence, or event in any manner related to any such Claims, Interests, corporate or debt restructuring, or the Chapter 11 Cases, including any claim relating to or arising out of the Chapter 11 Cases, the negotiation and filing of the Plan, the filing of the Chapter 11 Cases, the formulation, preparation, negotiation, dissemination, filing, implementation, administration, confirmation, or consummation of the Plan, the Disclosure Statement, any document filed by the Debtors in respect of the Plan, the Plan Supplement, any employee benefit plan, instrument, release, or other agreement or document created, modified amended or entered into in connection with the Plan. The Reorganized Debtors and any newly-formed entities that will be continuing the Reorganized Debtors’ businesses after the Effective Date shall be bound, to the same extent that the Debtors are bound, by the releases and discharges set forth above; provided, however, that the Debtors shall not release any claims or Causes of Action if any, against the Debtors’ directors as of the Petition Date (other than any director who continued to serve as an officer and a director subsequent to the Petition Date) or any holders of Interests in the Debtors as of the Petition Date in any way relating to (i) the CHI Management Agreements and (ii) any claims of CHI or any other Person or entity arising under or from the rejection of the CHI Management Agreements (collectively, the “Debtor Releases”). 48. The Debtor Releases are the product of extensive arms’ length and good faith

negotiations among various parties in interest in the Chapter 11 Cases, including the Released Parties, and their respective counsel and professional advisors, if any, and have been critical to obtaining the support of the non-Debtor Released Parties for the Plan. I believe that the Debtor Releases are integral and vital to the compromises contained in the Plan and provide consideration for a consensual chapter 11 plan that is significantly beneficial to the Debtors’ other creditor constituencies. The Debtors have been advised by the non-Debtor Released 01: 11551443.1 23 070242.1001

Parties that unless the Debtor Releases are included in the Plan, the Plan will not have the support of such parties. Furthermore, the non-Debtor Released Parties have advised the Debtors that without the Debtor Releases they will not agree to the terms of the Plan and the treatment of Claims and Interests thereunder, including, without limitation, the Senior Secured Notes Claims and the Senior Notes Claims (collectively, the “Non-Debtor Released Party Claims”). 49. I also believe that the contributions of the Non-Debtor Released Parties have

benefitted the Debtors’ Estates and Creditors, because absent the treatment provided for the NonDebtor Released Party Claims under the Plan, there is a significant possibility that the holders of Allowed Claims would receive substantially less recovery in the Chapter 11 Cases than is currently provided for, and anticipated under, the Plan. Accordingly, the Debtor Releases are an integral element of the Plan, which is a global agreement among various parties in the Chapter 11 Cases and premised on all of its mutually-interdependent elements. Such releases will allow the Reorganized Debtors to proceed without the threat of litigation and allow all interested parties to put these Chapter 11 Cases behind them and move forward to focus on strengthening the Debtors’ businesses for the benefit of the Debtors’ new shareholders. Moreover, virtually all of the Released Parties played integral and instrumental parts in formulating and implementing the Debtors’ restructuring, as they shared the common goal of the Debtors’ prompt and successful emergence from chapter 11 and worked hard to achieve it. 50. I further believe that by providing the Debtor Releases, the Debtors, their Estates

and creditors and the non-Debtor Released Parties will avoid the burdens and uncertainties necessarily attendant to litigation and the Debtors’ continued existence in chapter 11. Finally, I believe that the contributions of the Debtor’s officers, directors, and professional advisors have benefitted the Debtors’ Estates and creditors through, among other things, the negotiation of a

01: 11551443.1

24 070242.1001

consensual chapter 11 plan which, under the facts and circumstances of the Chapter 11 Cases, I believe is in the best interests of the Debtors’ Estates and creditors. II. Releases by Non-Debtors 51. Article IX.F of the Plan provides that:

On the Effective Date, each Persons who (a) directly or indirectly, has held, holds, or may hold any Claim, (b) votes to accept the Plan in its capacity as a holder of any Claim or Interest, and (c) does not mark their Ballot to indicate their refusal to grant the releases provided in [Article IX.F of the Plan], in consideration for the obligations of the Debtors and the Reorganized Debtors under the Plan including the New Secured Term Loans and the Cash, Reorganized PMC Holding Membership Interests, and other contracts, instruments, releases, agreements, or documents to be delivered in connection with the Plan (each, a “Release Obligor”), shall have conclusively, absolutely, unconditionally, irrevocably, and forever released and discharged the Debtors, the Reorganized Debtors, and all Released Parties for and from any Claim or Cause of Action existing as of the Effective Date in any manner arising from, based on, or relating to, in whole or in part, any or all of the Debtors, the subject matter of, or the transaction or event giving rise to, the Claim of such Release Obligor prior to or in connection with the Chapter 11 Cases, the business or contractual arrangements between or among any Debtors and Release Obligor or any Released Party, the restructuring of the claim of such Release Obligor prior to or in connection with the Chapter 11 Cases, or any act, omission, occurrence, or event in any manner related to such subject matter, transaction, obligation, restructuring or the Chapter 11 Cases, including any Claim relating to, or arising out of the Chapter 11 Cases, the filing of the Chapter 11 Cases, the formulation, preparation, negotiation, dissemination, filing, implementation, administration, confirmation, or consummation of the Plan, the Disclosure Statement, any document filed by the Debtors in respect of the Plan, the Plan Supplement, any employee benefit plan, instrument, release, or other agreement or document, created, modified, amended or entered into in connection with the Plan; provided, however, that nothing in this Article IX.F shall release (i) any obligations of the Debtors or the Reorganized Debtors arising under the Plan, (ii) any of the Released Parties from any claim based on any act or omission that constitutes gross negligence or willful misconduct as determined by Final Order or (iii) any Claims or Causes of Action against the Debtors’ directors as of the Petition Date (other than any director who continued to serve as an officer and a director subsequent to the Petition Date) or any holders of Interests in the Debtors as of the Petition Date in any way relating to (x) the CHI Management Agreements and (y) any claims of CHI or any other Person or entity arising under or from the rejection of the CHI Management Agreements (collectively, the “Third Party Release”). 52. Under the Plan, the Third Party Release is only given by each Persons who (a)

directly or indirectly, has held, holds, or may hold any Claim, (b) votes to accept the Plan in its

01: 11551443.1

25 070242.1001

capacity as a holder of any Claim or Interest, and (c) does not mark their Ballot to indicate their refusal to grant the releases provided in Article IX.F of the Plan, and therefore is a “consensual third party release.” Because the Third Party Release is consensual, I am advised and believe that it is therefore appropriate under applicable law and fair and reasonable to all parties in interest. LIMITED CONSOLIDATION 53. As set forth more fully therein, the Plan provides that solely for purposes of

voting on, confirmation of, and Distributions to be to holders of Allowed Claims under the Plan, the Plan is predicated upon, and it is a condition precedent to confirmation of the Plan, that the Court provide in the Confirmation Order for the limited consolidation of the Estates of the Debtors into a single Estate for purposes of the Plan, the confirmation thereof and Distributions thereunder. 54. The Plan further provides that such limited consolidation shall not affect (a) the

legal and corporate structure of the Reorganized Debtors, (b) any obligations under any contracts or leases that were entered into during the Chapter 11 Cases or executory contracts or unexpired leases that have been or will be assumed pursuant to the Plan, (c) distributions from any insurance policies or proceeds of such policies, (d) the revesting of assets in the separate Reorganized Debtors pursuant to Article IX.B of the Plan, or (e) guarantees that are required to be maintained post-Effective Date (i) in connection with executory contracts or unexpired leases that were entered into during the Chapter 11 Cases or that have been, or will under the Plan be, assumed, (ii) pursuant to the express terms of the Plan, (iii) in connection with the First Lien Exit Facility, or (iv) in connection with the New Secured Term Loans. Further, the limited

consolidation proposed in the Plan and provided for in the Confirmation Order will not affect

01: 11551443.1

26 070242.1001

each Debtor’s obligation to file the necessary operating reports and pay any required fees pursuant to 28 U.S.C. § 1930(a)(6), as such obligations shall continue until a Final Order is entered closing, dismissing, or converting each Debtor’s Chapter 11 Case. 55. In light of the foregoing, I have been advised and believe that the limited

substantive consolidation of the Debtors’ Estates proposed in the Plan and provided for in the Confirmation Order is warranted under the facts and circumstances of these Chapter 11 Cases and will not adversely impact the treatment of any holders of Allowed Claims. CONCLUSION 56. I believe that the Plan will enable the holders of Allowed Claims to realize the

highest possible recoveries under the circumstances of these Chapter 11 Cases. I therefore conclude that the Plan is in the best interests of the Debtors, their Estates and creditors and other interested parties, and respectfully request that this Court enter an order confirming the Plan. 57. I declare under penalty of perjury under the laws of the United States of America

that the foregoing is true and correct to the best of my knowledge, information and belief. Executed on this 27th day of October, 2011.

/s/ Joseph F. Trungale Joseph F. Trungale President and Chief Executive Officer of Perkins & Marie Callender’s Inc. et al.

01: 11551443.1

27 070242.1001