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Robert D. Albergotti TBN 00969800 Ian T. Peck TBN 24013306 John Middleton TBN 24053742 Jarom J. Yates TBN 24071134 HAYNES AND BOONE, LLP 2323 Victory Avenue, Suite 700 Dallas, Texas 75219 (t) 214.651.5000; (f) 214.651.5940 robert.albergotti@haynesboone.com ian.peck@haynesboone.com john.middleton@haynesboone.com jarom.yates@haynesboone.com PROPOSED ATTORNEYS FOR THE DEBTOR-IN-POSSESSION

IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION IN RE: CENTENNIAL BEVERAGE GROUP, LLC Debtor. Chapter 11 Case No. 12-37901-bjh-11

DECLARATION OF GREGORY L. WONSMOS IN SUPPORT OF DEBTORS CHAPTER 11 PETITION AND FIRST-DAY MOTIONS I, Gregory L. Wonsmos, pursuant to 28 U.S.C. 1746, hereby declare that the following is true to the best of my knowledge, information, and belief: 1. I am the President and Chief Executive Officer of Centennial Beverage Group,

LLC (Centennial or the Debtor) and I am familiar with the day-to-day operations, business, and financial affairs of the Debtor. 2. I submit this declaration (the Declaration) to assist the Court and parties-in-

interest in understanding the circumstances that compelled the commencement of this chapter 11 case and in support of (i) the Debtors voluntary petition for relief under chapter 11 of the Bankruptcy Code filed on the date hereof (the Petition Date) and (ii) the relief, in the form of motions, that the Debtor has requested of the Court (the First-Day Motions). Any capitalized

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term not defined herein shall have the meaning assigned to that term in the relevant First-Day Motion. 3. Except as otherwise indicated, all facts set forth in this Declaration are based upon

my personal knowledge, my discussions with other members of the Debtors senior management and other of the Debtors advisors, my review of relevant documents, or my opinion based upon my experience and knowledge of the Debtors operations and financial condition. If I were called to testify, I would testify competently to the facts set forth in this Declaration. I am authorized to submit this Declaration on behalf of the Debtor. 4. This Declaration is intended to provide a summary overview of the Debtor and

this chapter 11 case. Sections I through IV of the Declaration provide a description of the Debtors business, organizational structure, significant debt, and the circumstances giving rise to the commencement of this chapter 11 case. Section V summarizes the First-Day Motions and the relief they seek, which the Debtor believes is crucial to its successful chapter 11 case. I. Debtors Business 5. Centennial was founded in 1936 and has long been Dallas-Fort Worths leading

retailer of spirits, wine, and beer. During its 75 year history, Centennial steadily grew to serve the needs of its customers, through the acquisition of various retail outlets from competitors and the opening of its own new stores. In May of 2000, Centennial acquired the operations of the Big Daddy chain of stores, including two retail locations in Tarrant County and a wholesale division. In early 2011, Centennial purchased Majestic Liquors, adding 32 stores and two warehouse locations to the Centennial family. operated over 70 stores throughout Texas. 6. As of the Petition Date, as a result of the downsizing effort described below, At the height of its expansion, Centennial

Centennial operates 23 Centennial, Majestic, and Big Daddys stores. Centennial currently
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maintains 247 employees, including full-time, part-time, and contract employees.

As of

November 30, 2012, Centennials unaudited financial statements reflected approximately $158 million of revenue for the prior 12-month period. Centennial currently holds approximately $8.4 million in inventory, including beer, wine, and spirits. 7. I am Centennials President and Chief Executive Officer. I joined Centennial in

1977 as Controller, and became Senior Vice-President and Chief Financial Officer in 1983. I began my current role as President and CEO in 1996. Centennials Vice-President is Dave Cooper. Dave re-joined Centennial in 1996, and has held his current position since 2010. II. Organizational Structure 8. Centennial is a Texas limited liability company. Centennials sole member is VEI

Miller Acquisition II, LLC. All corporate, general, and administrative contracts are held by Centennial, and all employees are employed directly by Centennial. 9. Centennial is the limited partner of JWV Associates, Ltd. (JWV Associates),

holding a 99% interest in JWV Associates. JWV Associates owns the real estate for nine of Centennials locations, which it leases to Centennial. The other Centennial stores are leased directly by Centennial from unrelated third parties. Centennial is also the sole member of VEI SPE LLC (VEI SPE). VEI SPE owns the real estate for Centennials corporate headquarters. A chart of Centennials organizational structure is attached as Exhibit A. III. Revolver, Term, and Other Significant Debt 10. Inventory Revolver. Centennial is party to the Amended and Restated Revolving

Loan Agreement dated as of April 17, 2009 (as amended, restated, or otherwise modified, the Revolving Loan Agreement) with Compass Bank (Compass). The Revolving Loan

Agreement is allegedly secured by all of Centennials assets and by the real estate owned by

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JWV Associates, Ltd.

As of the Petition Date, Compass asserts that Centennial owes

approximately $5.7 million under the Revolving Loan Agreement (the Revolver Debt). 11. Real Estate Term Loan. Centennial is also party to the Amended and Restated

Term Loan Agreement dated as of March 11, 2010 (as amended, restated, or otherwise modified, the Term Loan Agreement) with Compass. The Term Loan Agreement is allegedly secured by the real estate owned by JWV Associates and cross-collateralized with Centennials assets that secure the repayment of the Revolving Loan Agreement indebtedness. As of the Petition Date, Compass asserts that Centennial owes in excess of $11.7 million under the Term Loan Agreement (the Term Debt). 12. Wholesaler Obligations. In addition to the secured debt discussed above,

Centennial also owes a total amount in excess of $5 million to Glazers Wholesale and Republic National Distributing Company, from whom Centennial purchases the vast majority of its distilled spirits and wine inventory. As a result of delinquencies in payments of amounts owed to these wholesalers, Centennial has been placed on the Delinquent List maintained by the Texas Alcoholic Beverage Commission pursuant to Texas Alcoholic Beverage Code 102.32. Until the debts to these wholesalers are satisfied and Centennial is removed from the Delinquent List, no wholesaler can sell distilled spirits or wine to Centennial, and Centennial cannot buy distilled spirits or wine from any wholesaler. Tex. Alco. Bev. Code 102.32(d). As further described below, Centennial believes that it will be permitted to make purchases from the wholesalers during its chapter 11 case notwithstanding remaining on the Delinquent List, pursuant to a requested critical vendor program.

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13.

Other Significant Unsecured Debt. Several other parties have issued unsecured

debt to Centennial pursuant to subordinated loan agreements. As of the Petition Date, this debt is alleged in total to be in excess of $15.5 million. This debt is subordinated to the Revolver Debt and Term Debt held by Compass, but is pari passu with other unsecured claims against the Debtor. IV. Events Leading to this Chapter 11 Case 14. Increased competition on a number of fronts has resulted in serious difficulties in

Centennials recent sales amounts. Big-box retailers have posed a serious challenge in both pricing and selection, and changes in local alcohol laws have increased competition by expanding the ability of grocery stores and other retailers to sell beer and wine. As a result of this pressure, sales have declined (and are currently down approximately 50% year over year). At the same time, rent and other occupancy expenses have become a much larger percentage of operating expenses, partially as a result of Centennials recent expansion efforts. 15. In order to address these difficulties and to attempt to avoid bankruptcy,

Centennial began closing a number of its underperforming and unprofitable locations, and sold its East Texas and West Texas operational divisions in the summer of 2012. Centennial used the proceeds from these sales to become current on its tax obligations and to pay down a significant portion of its secured debt. Centennial also significantly reduced staff in order to lower

expenses, scaling back from approximately 650 employees to its current total of 247. These efforts resulted in a reduction of Centennials secured debt obligations by approximately $35 million from January 1, 2012 to the Petition Date. 16. While successful in reducing a material portion of Centennials obligations, these

actions were not sufficient to cure the companys liquidity problems. These ultimately caused Centennial to fall behind on its payments to the wholesalers, as described above. After being
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placed on the Delinquent List, Centennial was unable to restock its supply of distilled spirits and wine, which further diminished Centennials sales and liquidity. 17. Prior to commencing this case, Centennial explored several alternatives to

bankruptcy, including potential sales of substantially all of its non-real property assets to certain competitors, the sale and leaseback of several of its stores, and various refinancing opportunities. Unfortunately, these efforts were ultimately unsuccessful and a bankruptcy filing became necessary. V. Summary of First-Day Motions 18. Concurrently with the filing of its chapter 11 petition, the Debtor has filed a

number of First-Day Motions, which the Debtor believes are necessary to enable it to operate in chapter 11 with minimum disruption and loss of productivity. A description of the relief

requested and the facts supporting each of the First-Day Motions is set forth below. Cash Collateral Motion 19. The Emergency Motion for and Order Approving Interim and Final Use of Cash

Collateral and Granting Adequate Protection (the Cash Collateral Motion) filed by the Debtor seeks the entry of an interim order, substantially in the form attached to the Cash Collateral Motion (the Interim Proposed Order) authorizing the Debtor to use cash collateral through January 6, 2013. The Debtors cash collateral budget for the 13 weeks ending on March 17, 2013 (the Interim Budget) is attached the Cash Collateral Motion and is incorporated by reference herein. The Debtor requests authority to use cash collateral in the amounts set forth on the Interim Budget through January 6, 2013. 20. The Interim Budget incorporates the Debtors proposed sell through of

approximately 50% of existing inventory, with inventory to be replenished following the Interim Budget period (and subject to a potential critical vendor program to be addressed by separate

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motion). This will be accomplished through company-wide promotional pricing during the initial week of this chapter 11 case, leading into the traditional high-sales holiday period. The Interim Budget forecasts total sales of approximately $13.9 million during the 13 weeks ending on March 17, 2013, total receipts of approximately $21 million, operating cash flow of approximately $7.4 million, and net cash flow of approximately $5.1 million. 21. In order to preserve the Debtors ongoing viability as a going-concern entity, and

to avoid immediate and irreparable harm, the Debtor requests interim and final permission for the post-petition use of cash collateral. This relief is necessary for the Debtor to maintain business relationships and confidence with vendors, suppliers, and customers, to satisfy other working capital and operational needs, to meet accrued and ongoing obligations to employees, and to maintain employee morale. 22. Compass contends that all of the Debtors assets, including its cash, all of which

is in accounts at Compass Bank, are its collateral. Absent immediate access to the requested relief, the Debtor would be forced to cease operations immediately, which would cause significant harm to creditors, employees, and other parties-in-interest. Such a sudden shut down would destroy the ability of the Debtor to conduct a going concern sale of its assets or to develop a standalone plan for payment of creditors. 23. As adequate protection for the interests of Compass in the cash collateral, the

Interim Proposed Order provides replacement liens (the Adequate Protection Liens) upon all categories and property of the Debtor, now existing and hereafter acquired, upon which Compass held prepetition security interests or liens and all proceeds, rents, or other income thereof (collectively, the Adequate Protection Collateral), effective upon the Petition Date and without the necessity of the execution or filing by the Debtor or Compass of mortgages, security

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agreements, pledge agreements, financing statements, or otherwise. The Adequate Protection Liens shall not prime, however, any pre-existing liens with priority over Compass prepetition liens such as the liens of ad valorem taxing authorities. The Adequate Protection Liens will secure any diminution in value of Compass collateral, whether by use, sale, lease, depreciation, depletion, disposition, or otherwise (a Diminution in Value). 24. As set forth in the Interim Budget, the Debtor proposes that substantial amounts

of the proceeds of the sale of the Compass inventory collateral be paid to Compass on the Revolver Debt during the Interim Budget period, such that by January 6, 2013, the Revolver Debt will be substantially reduced. The remainder of the Revolver Debt and the Term Debt will remain secured by the Debtors inventory projected at that time to be valued at Debtors cost in excess of $4.7 million. Repayment will be further secured by the remainder of the Debtors assets as well as by the JWV Associates real estate, which alone has a value substantially in excess of the Term Loan. 25. Compass interests are further protected by the Debtors operation and

maintenance of its collateral, including the replenishment of the Debtors inventory made possible by the proposed use of cash collateral in the Interim Proposed Order and the Interim Budget. The Debtor forecasts that its operations in January 2013 will result in positive cash, including cash flow sufficient for it to make a timely payment on 2012 ad valorem taxes on the JWV Associates real estate, avoiding the creation of tax liens senior to Compass claim. Additionally, Compass will retain any previously existing liens on the real property assets held by JWV Associates, which real property has a value in excess of Compass claims against Centennial. Pursuant to appraisals in 2012, the real property collateral has a going concern appraisal value of $16 million. The Term Loan indebtedness is approximately $11 million.

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26.

The Debtor submits that the above treatment provides adequate protection to

Compass for the Debtors use of cash collateral, and that the Court should therefore grant the relief requested. 27. The Debtor brings the Cash Collateral Motion on an emergency basis given the

immediate and irreparable harm that it will potentially suffer if it is denied the relief requested. This relief is necessary for the Debtor to sustain its ongoing business operations and to achieve its future business objectives. Use of cash collateral and the approval of vendor financing will permit the Debtor to, among other things, preserve the value of its bankruptcy estate, continue operations and/or liquidation of its business in an orderly fashion, maintain business relationships with vendors, suppliers, and customers, meet ongoing obligations to employees, maintain employee morale, and satisfy other working capital and operational needs. 28. Absent immediate relief, the Debtor would likely have to cease business

operations to the material detriment of creditors, employees, and other parties-in-interest. The Debtor needs to ensure the availability of such working capital now. The Debtor anticipates using cash collateral to fund its day-to-day operations, including (upon approval of requested critical vendor relief) through the purchase of distilled spirits and other inventory, and to preserve value for its bankruptcy estate. The Debtor will also use cash collateral to satisfy approximately $510,000 in payroll obligations coming due during the Interim Budget period, without which it would face a sharp decline in employee morale and retention. The use of cash collateral is necessary to demonstrate to the Debtors customers, suppliers, vendors, and employees that Centennial has sufficient capital to ensure ongoing operations.

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Cash Management Motion 29. The Emergency Motion for Order (i) Authorizing Continued Use of Existing

Business Forms and Records; (ii) Authorizing Maintenance of Existing Corporate Bank Accounts and Cash Management System; and (iii) Waiving (If Necessary) the Requirements of 11 U.S.C. 345(b) (the Cash Management Motion) filed by the Debtor seeks the entry of an order (i) authorizing the Debtor to continue using its existing business forms and records; (ii) authorizing the Debtor to maintain its Bank Accounts and Cash Management System; and (iii) waiving the requirements of 345(b). 30. Prior to commencing this case, and in the ordinary course of its business, the

Debtor used a cash management system (the Cash Management System) to efficiently collect, transfer, and disburse funds generated by its business operations. The Cash Management System consists of the following accounts maintained at Compass Bank (Compass). a. Centennial Grp-Master, Number XXXXXX-5836 (the Master Account) is the master account through which Centennial funds all the withdrawals or payments for the Payroll, Accounts Payable, EFT, and Beer Accounts. The Master Account is also used to transmit wires to external vendors, such as the wholesalers from whom Centennial has purchased distilled spirits and wine. Money is swept from the Concentration Account to the Master Account daily, maintaining a zero balance account in the Concentration Account. Centennial Liquor-Beer Account, Number XXXXXX-3684 (the Beer Account) is funded by the Master Account and is used for beer purchases. Invoices from vendors and distributors are submitted to Financial Information Technologies, Inc. (FinTech), and FinTech automatically drafts payment of the invoices from the Beer Account. Centennial Liquor-CDA, Number XXXXXX-4450 (the CDA Account) is the controlled disbursements / account payable account. The CDA Account is funded by the Master Account, and is used to pay written checks.

b.

c.

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d.

Centennial Liquor-EFT Account, Number XXXXXX-3676 (the EFT Account) is the electronic funds transfer / Automated Clearing House (ACH) account. The EFT Account is funded by the Master Account, and is used for electronic funds transfers or ACH payments. Centennial Liquor-Payroll Account, Number XXXXXX-3641 (the Payroll Account) is the account used to make payroll transfers. The Payroll Account is funded by the Master Account. Centennial Liquor-Concentration Account, Number XXXXXX-3668 (the Concentration Account) receives funds from the receiving depository accounts the Office, Stores, and Credit Card Accounts. The Concentration Account funds the Master Account daily by zero balance account transfers from the various depository accounts. Centennial Liquor-Office Dep. Account, Number XXXXXX-3692 (the Office Account) is the depository account into which are placed miscellaneous office deposits and accounts receivable for wholesale operations. The Office Account is swept daily into the Concentration Account. Centennial Liquor-Store Dep. Account, Number XXXXXX-3706 (the Store Account) is the depository account into which are placed (by armored car delivery to Compass Bank) the Debtors stores daily cash receipts for sales. The Store Account is swept daily into the Concentration Account. Centennial Liquor-Credit Card Account, Number XXXXXX-3714 (the Credit Card Account) is the depository account into which are placed the Debtors stores credit card sales deposits from the various credit card merchants used by the Debtor. The Credit Card Account is swept daily into the Concentration account.

e.

f.

g.

h.

i.

31.

The accounts listed above are collectively referred to herein as the Accounts or

the Bank Accounts. A graphical summary of the Cash Management System (including the prepetition daily sweep of the accounts by Compass) is attached as an exhibit to the Cash Collateral Motion and is incorporated by reference herein. 32. The Cash Management System is similar to those commonly employed by

business enterprises of size and complexity comparable to the Debtor.

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33.

I have been advised that the Office of the United States Trustee for the Northern

District of Texas (the U.S. Trustee) has established its Guidelines for Chapter 11 Debtors-inPossession (the Guidelines) in order to supervise the administration of chapter 11 cases. I understand that the Guidelines require chapter 11 debtors-in-possession to, among other things, close all existing bank accounts and open new debtor-in-possession (DIP) bank accounts, establish one DIP account for all estate monies required for the payment of taxes (including payroll taxes), maintain a separate DIP account for cash collateral, and obtain checks for all DIP accounts that bear the designation, debtor-in-possession, the bankruptcy case number, and the type of account. I further understand that the Guidelines also require debtors to close their books and records as of the petition date and to open new books and records. 34. As set forth in the Cash Management Motion, the Debtor seeks a waiver of certain

of these requirements of the Guidelines. The Debtors operations would be harmed by the disruption, confusion, delay, and cost that would most certainly result from rigid compliance with the Guidelines. 35. Although the Debtor believes its Bank Accounts satisfy 345(b), out of an

abundance of caution, the Debtor also requests a waiver, to the extent necessary, of the requirements of 345(b). 36. The Debtor further seeks a waiver of the Guidelines requirement that it open a

new set of books and records as of the Petition Date. Opening a new set of books and records would create unnecessary administrative burdens and hardship and would cause unnecessary expense, utilization of resources, and delay. The Debtor, in the ordinary course of its business, uses many invoices, stationery, and other business forms. By virtue of the nature and scope of the business in which the Debtor is engaged and the numerous other parties with whom it deals,

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the Debtor needs to use its existing business forms without alteration or change. Printing new business forms would take an undue amount of time and expense. Fulfillment of the requirement would likely delay the payment of postpetition claims and negatively affect operations and the value of the Debtors estate. Accordingly, the Debtor respectfully requests that it be authorized to continue to use its existing business forms and to maintain its existing business records. 37. The Debtor further requests authority to maintain the Bank Accounts and the Cash

Management System in accordance with its usual and customary practices to ensure a smooth transition into chapter 11 with minimal disruption to operations. The Debtor also requests authority to close any of the Bank Accounts if, in the exercise of its business judgment, the Debtor determines that such action is in the best interest of its estate. 38. In order to conduct its postpetition business, the Debtor needs to be able to issue

checks to vendors, service providers, employees, and others. To open new accounts and obtain checks for those accounts will cause delay and disruption to the Debtors business and a delay in receipt of funds needed for the Debtors operations. The Debtor will add the designation Debtor in Possession or DIP to any checks in its possession and instruct Compass to add the designation to current and any future Accounts. 39. The Debtors Cash Management System constitutes an ordinary course, essential

business practice providing significant benefits to the Debtor including, among other things, the ability to (i) control funds, (ii) ensure the availability of funds when necessary, and (iii) reduce costs and administrative expenses by facilitating the movement of funds and the development of more timely and accurate account balance information. Any disruption of the Cash Management System could have a severe and adverse impact upon the Debtors reorganization efforts.

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40.

The relief requested in the Cash Management Motion is vital to ensuring the

Debtors seamless transition into bankruptcy. Authorizing the Debtor to maintain its Cash Management System, as modified, will avoid many of the possible disruptions and distractions that could divert the Debtors attention from more pressing matters during the initial days of this chapter 11 case. 41. No checks issued prior to the Petition Date will be honored, except as otherwise

provided by separate order of this Court. The Debtor reserves its rights pursuant to 549 of the Bankruptcy Code with respect to any check issued prepetition that is inadvertently honored postpetition. The Debtor will continue to maintain records respecting all transfers between and among the Bank Accounts so that all transactions can be ascertained after they have occurred. 42. Additionally, Compass charges monthly fees to the Debtor for maintaining the

Bank Accounts, which may vary monthly based on actual usage.1 The Debtor was current on payment of these monthly fees as of the Petition Date. The Debtor requests authority to continue paying the monthly fees in the ordinary course of business, including any portion of the fee attributable to prepetition services. 43. The Debtor further seeks a waiver of the requirements of 345(b) of the

Bankruptcy Code. As discussed above, the Bank Accounts are maintained with a financial institution that is financially stable. The Debtor believes that Compass is an authorized

depository in this and other jurisdictions. Out of an abundance of caution, however, the Debtor requests a waiver of the requirement to comply with 345(b)s investment guidelines, if necessary, as the deposit of funds with Compass should pose no substantial risk to the Debtors estate or creditors.

The Debtors average monthly banking fees during 2012 were approximately $10,000.00.

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44.

Due to the significant amounts of money that may be in the Bank Accounts from

time to time, it would take a large amount of time for the Debtor to locate and determine, where necessary, appropriate alternative accounts that satisfy 345(b). Requiring the Debtor to change its deposits and other procedures could result in harm to the Debtor, its estate, and creditors because such change would disrupt the Cash Management System. Conversely, the Debtors estates and creditors will not be harmed by the Debtors maintenance of the status quo because of the relatively safe and prudent practices already utilized by the Debtor. 45. For each of the foregoing reasons, a waiver of the requirement to comply with the

investment guidelines set forth in 345(b) should not pose any risk to the Debtors estate. 46. For the reasons stated previously, the Debtor submits that the relief requested in

the Cash Management Motion is necessary to prevent immediate and irreparable harm to its estate. The exigent nature of the relief sought justifies immediate relief, which is necessary for the Debtor to be able to continue to operate its business and preserve value in its estate. Wages Motion 47. The Emergency Motion for an Order Authorizing the Debtor to Pay Prepetition

Wages, Compensation, and Employee Benefits (the Wages Motion) filed by the Debtor seeks the authority, but not the direction, to pay prepetition wages, compensation, and employee benefits (the Prepetition Employee Obligations) in the ordinary course of business, on an unaccelerated basis, as such payments become due and payable and to the extent adequate funds are available to make such payments. The requested relief shall be without prejudice to the Debtors right to contest the amounts of any Prepetition Employee Obligation on any grounds. 48. It is axiomatic that continued loyalty of a debtors employees is a necessary

component to any successful reorganization. The filing of a chapter 11 petition is a stressful and uncertain time for a debtors employees, most of whom are not familiar with the nuances of
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bankruptcy that many practitioners often take for granted. Such stress and uncertainty often cause poor employee morale just at that critical time when a debtor needs its employees to be most loyal. Low morale may be further compounded if certain employees perceive themselves to have received less favorable treatment than others. Moreover, some employees live paycheck to paycheck and would suffer severe adverse consequences if they failed to receive their full compensation. Additionally, the overwhelming majority of such claims would be entitled to priority treatment under 11 U.S.C. 507. 49. Honoring the Debtors Prepetition Employee Obligations will minimize the

hardship that employees will certainly endure if payroll is interrupted and will prevent the wholesale loss of employees that would ensue if the employees lost the reasonable expectation that they will be paid for their work. As such, the Debtor seeks to continue to compensate employees and provide benefits in the ordinary course regardless of when the applicable wages were earned or benefits were accrued. 50. As of the Petition Date, the Debtors workforce consists of 247 employees

(collectively, the Employees). 65 employees work full time on a salaried basis. 52 employees work part time on an hourly basis, and 130 employees work full time on an hourly basis. In addition, due to the extraordinary demands placed on the Debtors employees during the inventory liquidation sales undertaken by the Debtor during the 2012 holiday season, the Debtors are paying certain of the salaried employees on an hourly basis for work beyond their standard work schedule at the rate of $10.75 per hour. 51. The Debtor currently pays its store level employees (the Store Level

Employees) and its employees at its corporate offices (the Corporate Employees) on separate schedules.

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52.

The next date on which the Debtor will pay Store Level Employees is December

22, 2012. The December 22, 2012 payment is for the pay period ending December 15, 2012. The amount due to be paid to the Store Level Employees on December 21, 2012, will be approximately $250,000.2 The entire sum of $250,000 for the December 22, 2012 payment is for prepetition work. The Debtors subsequent payment to Store Level Employees will be due January 5, 2013, for the pay period beginning December 16, 2012, and ending December 29, 2012. Therefore, a portion of the January 5, 2013 payment will be for work performed prepetition. The Debtor estimates that the January 5, 2013 payment to Store Level Employees will be approximately $185,000. 53. The next date on which the Debtor will pay its Corporate Employees is on or

about December 29, 2012. The December 29, 2012 payment is for the pay period beginning December 15, 2012 and ending December 29, 2012. The amount due to be paid to the Corporate Employees on December 29, 2012, will be approximately $85,000. Approximately half of the December 29, 2012 payment will be for pre-petition work. 54. Beginning in January 2013, the Debtor intends to adjust its payroll schedule such

that all Store Level and Corporate Employees will be paid on the same schedule. The first such combined payroll will occur on January 20, 2013. To facilitate combining the payroll, on or about January 5, 2013, the Corporate Employees will receive their salary earned from December 31, 2012 through January 5, 2013. Thereafter, they will be paid every two weeks commencing January 20, 2013. 55. Payroll is paid through a third-party payroll administrator, ADP (ADP), which

charges the Debtor approximately $10,000 per month for payroll services. On each payment

Amounts listed are gross amounts, not net amounts to the Employees.

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date, the Debtor deposits the gross payroll (including, but not limited to, Employees net pay, federal unemployment and disability taxes, social security and Medicare taxes, federal income tax, the Employees share of health insurance costs, 401k contributions, child support, worker's compensation insurance premiums and all other withheld amounts)3 (Gross Payroll) with ADP. ADP then handles payment to the employees and all other disbursements of the Gross Payroll. 56. As of the Petition Date, the Debtor is current on its payroll obligations and on its

obligations to ADP. Although the Debtor at this time does not request authority to assume the contract with ADP, the Debtor requests authority to continue using ADP as its payroll administrator under the terms and conditions contained in their prepetition contract. 57. The Debtor customarily reimburses the Employees for a variety of business

expenses incurred in the ordinary course of their employment (Reimbursement Obligations). These Reimbursement Obligations include, among other things, business-related travel and business-related expenses. The Debtor typically reimburses Employees for business expenses on an as-needed basis via check. The Debtor cannot determine the precise amount of

Reimbursement Obligations at any given time, as Employees may always have reimbursable expenses that have not been submitted. 58. In the ordinary course of its business, the Debtor provides each of its Employees

with certain benefits, including medical, dental, and life insurance. Under the Debtors medical benefits with Cigna, the employee has the option to choose among four different programs (i.e. Cigna Value, Cigna Select, Cigna DPPO, and Cigna DHMO). Depending upon which of the four different options the employee elects, the Debtor covers between 0% to 81% of the cost of
3

In the ordinary course of processing payroll checks for the Employees, the Debtor may also, from time to time, be required to withhold certain amounts for various garnishments.

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the medical and dental insurance for the Employee and/or the Employees spouse and/or dependents. The Debtor also pays tuition benefits on a case by case, pre-approved basis.

Additionally, the Debtor provides life insurance for the Employees in the amount of $10,000. 59. The Debtor offers a 401(k) retirement saving plan to all Employees after 6 months

of employment with up to a 100% percent match of up to the first 4% percent of the Employees earnings contributed to the plan. The following providers and third-party administrators manage the various Employee benefit plans described herein: Type Medical / Health Insurance Provider/ Administrator Cigna Health and Life Insurance Co. Estimated Payment Description /month $33,000 Administration fees for selffunded plan (e.g., rental of network, customer service, processing of claims) and stop loss insurance coverage Claims

Medical Self Funding Dental Insurance Vision Insurance Life / LTD Insurance 401(k) COBRA Identity Theft

Cigna Cigna Lincoln Financial Group ADP Conexis Life Lock

$40,000 100% Employee paid $2,500 $10,000-$15,000 $150 /month $200

Policy premium 401(k) Matching Plan Administration Total cost is $9.00 per participating Employee (Employee portion is $4.00 and Debtor pays $5.00)

60.

The Debtor provides car allowances to certain employees totaling approximately

$3,700 per month.

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61.

The Debtor has provided certain of the Employees with cellular telephones for

company-related use. AT&T is the service provider for the cellular telephones, and the Debtor supplies an unlimited data and voice plan for the Employees. approximately $2,450 per month for the cell phone service. 62. The Debtor must continue its relationship with the Employees after the Petition The Debtor expends

Date. The institutional knowledge and experience held by the Employees will be vital for maintaining the value of the Debtors estate during this bankruptcy case, and replacing the Employees would deal an economic blow from which the estate may not recover. Similarly, the expense of obtaining new administrators of the Prepetition Employee Obligations would be a waste of the Debtors assets. 63. Failure to pay the Prepetition Employee Obligations would risk harm far in excess

of any harm resulting from their payment. Any delay or failure to pay Prepetition Employee Obligations would irreparably impair the Employees morale, dedication, confidence, and cooperation, and would adversely affect the Debtors relationship with the Employees at a time when the Employees support is critical to the Debtors chapter 11 case. The Debtor cannot risk the substantial damage to the business posed by a rapid decline of the Employees morale. If these benefit programs are not continued, the Employees will suffer undue hardship and, in many instances, serious financial difficulties, as the Employees need the amounts in question to meet their own personal financial obligations. Additionally, the Employees will likely seek other employment alternatives should the Prepetition Employee Obligations not be paid. 64. Similarly, it is necessary to continue payment of administrative fees to the

administrators of the Prepetition Employee Obligations. Without the continued services of these administrators, including, but not limited to, ADP Cigna, Lincoln Financial, Conexis, and Life

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Lock, the Debtor will be unable to continue to honor its employee obligations in an efficient and cost effective manner. 65. The Debtor further submits that there is no practical or legal alternative to the

relief sought. The harm to the Employees can be avoided only if the Prepetition Employee Obligations are paid in the ordinary course of business, thus allowing the Employees to meet their personal financial obligations. 66. The Debtors failure to pay the Prepetition Employee Obligations could have a

material adverse impact on its ability to operate in the ordinary course, as the Employees could prevent or delay the Debtors operations by seeking other employment if the Prepetition Employee Obligations are not paid. 67. For the reasons stated previously, the Debtor submits that the relief requested is

absolutely necessary to prevent immediate and irreparable harm to the estate. The exigent nature of the relief sought justifies immediate relief, which is necessary for the Debtor to be able to continue to operate its business and preserve value in the estate. Credit and Gift Card Motion 68. The Emergency Motion for an Order Granting Authority to Debtor to Continue

Certain Customer Programs and Practices and to Pay Certain Fees Associated with Credit Card Transactions and Gift Card Programs (the Credit and Gift Card Motion) seeks authority to (i) honor and redeem prepetition gift cards after the Petition Date, and (ii) pay certain fees associated with credit card transactions and gift card programs. 69. Another important component of the Debtors customer programs is its sale of gift

cards (Gift Cards). Gift Cards allow a customer to pay in advance, as a deposit, for the right to buy merchandise from store inventory in the future for a pre-determined amount. The Debtors Gift Card program is currently self-administered. In its ordinary course of business, the Debtor
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issued Gift Cards prior to the Petition Date. As of the Petition Date, approximately $3,200 in Gift Cards remained outstanding. 70. Further, as is common in the retail industry, a significant portion of the Debtors

sales are paid through credit and debit cards. The Debtor is party to certain agreements with credit card companies and processors (the Service Providers) which permit Centennial to accept credit and debit card purchases in its stores. The Service Providers are American Express, Vantiv, and Dollars on the Net. Pursuant to the terms of these agreements, the Debtor is required to pay fees to the credit card companies and processors for their respective services. 71. It is essential that the Debtor maintain the ability to accept and process credit and

debit card transactions because many of its customers regularly make purchases via these types of transactions. If the Debtor lost its ability to accept credit and debit cards, it would be at an incredible competitive disadvantage, and its ability to conduct sales transactions in the ordinary course of its operations would suffer tremendously. 72. As a result, the Debtor requests authority to pay, and continue paying, outstanding

fees to the credit card companies and processors for their respective services in the ordinary course of its business to continue providing vital credit and debit card processing services. Generally, the Service Providers fees are based upon a percentage of sales (approximately 1.2%), and the Service Providers deduct their fees from gross credit and debit card sales before the net sales proceeds are remitted to the Debtor. In addition, there is a monthly fee assessed against the Debtor, totaling approximately $60,000 across the three Service Providers. 73. In addition, the Debtor requests that any Service Provider who accepts payment

pursuant to the Motion be obligated to continue providing services to the Debtor postpetition

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according to the existing agreements and the ordinary and customary course of dealing between the parties. 74. If a Service Provider accepts payment pursuant to the Motion and thereafter does

not continue providing services pursuant to the existing agreements and the parties ordinary and customary course of dealing, then the Debtor requests that any payment on a prepetition claim received by such Service Provider be deemed an unauthorized postpetition transfer and recoverable by the Debtor in cash upon written request. 75. The Debtor also requests that all banks and/or financial institutions be authorized

and directed to receive, process, and pay all checks drawn on the Debtors accounts with respect to the Service Providers, regardless of whether the checks were presented prior to or after the Petition Date. 76. Among Centennials most valuable assets are its customers and their goodwill.

The Debtors industry is competitive, and if customers perceive that the Debtor is not timely honoring its obligations to customers under the various programs, these customers will choose to purchase product elsewhere. Any delay in honoring these customer obligations would also harm the Debtors reputation, thereby making it more difficult for the Debtor to attract new customers. Such a situation would severely hinder the Debtors ability to effectively and expeditiously reorganize. Further, if the Debtor was forced to change Service Providers it would incur

significant postpetition expense and risk losing credit card servicing during its busiest month of the year. Accordingly, in the Debtors business judgment, it is essential for it to be allowed to continue to (i) honor the prepetition Gift Cards and (ii) pay amounts due to Service Providers when necessary and consistent with ordinary business practice.

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Insurance Motion 77. The Emergency Motion for an Order (i) Authorizing the Debtor to (a) Continue

its Liability, Property, and Other Insurance Programs, (b) Pay All Obligations in Respect Thereof, and (c) Enter Into Premium Financing Agreements in the Ordinary Course of Business; and (ii) Authorizing Financial Institutions to Honor and Process Checks and Transfers Related to Such Obligations (the Insurance Motion) filed by the Debtor seeks (i) an order authorizing the Debtor to (a) continue its workers compensation program and insurance programs (b) pay all obligations in respect thereof, and (c) enter into premium financing agreements, and (ii) an order authorizing financial institutions to honor and process checks and transfers related to such relief. 78. The Debtor has insurance policies which provide general liability and property

insurance coverage to the Debtor for claims relating to, among other things, workers compensation, automobile losses and liability, flood, directors and officers liability, and general liability (the Insurance Programs). The policies are provided through seven (7) different insurance carriers: Allied Insurance Co., Depositors Insurance Co., Executive Risk, Zurich Insurance Co., Travelers Insurance Co., Standard Fire Insurance Co., and Guard Insurance Group (each an Insurer and together the Insurance Carriers). The following is a summary of the Insurance Programs: Commercial Package Insurance Policy number: ACPBPRC722430829 Insurer: Allied Insurance Co. Coverage period: 4-01-12 to 4-01-13 Business Automobile Policies Policy number: ACPBAPC7224308929 Insurer: Allied Insurance Co. Coverage period: 4-01-12 to 4-01-13

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Inland Marine Policy number: ACPCIMP7224308929 Insurer: Allied Insurance Co. Coverage period: 4-01-12 to 4-01-13

Primary Umbrella Policy number: ACPCAD7224308929 Insurer: Allied Insurance Co. Coverage period: 4-01-12 to 4-01-13

Crime Policy Policy number: 82212887 Insurer: Executive Risk Coverage period: 10-17-12 to 10-17-13

Excess Liability/Umbrella Policy number: SHX00024216376 Insurer: Depositors Insurance Co. Coverage period: 4-01-12 to 04-01-13

Underground Storage Tank Insurer: Zurich Ins. Co. Policy number: USC917986402 Coverage period: 10-15-12 to 10-16-15 Policy number: USC917986403 Coverage period: 10-16-12 to 10-16-13 Flood Insurance Insurer: Standard Fire Insurance Co. Policy No: 6010019352 Coverage period: 5-24-12 to 5-24-13 Policy No: 6010249193 Coverage period: 9-25-12 to 9-25-13 Policy No: 6500979791 Coverage period: 10-18-12 to 10-18-13 Policy No: 6010314773 Coverage period: 1-11-12 to 1-11-13 Policy No: 6005291551 Coverage period: 3-17-12 to 3-17-13

D&O Liability/ Employment Practices Liability/Fiduciary Liability Policy number: 105717538 Insurer: Travelers Ins. Co. Coverage period: 12-08-12 to 12-08-13

Worker's Compensation Insurer: Guard Insurance Group Policy number: CEWC352264 Coverage Period: 3/28/12 to 3/28/13

Policy No: 6005291544 Coverage period: 3-17-12 to 3-17-13

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Policy No: 6010166463 Coverage period: 3-17-12 to 3-17-13

79.

The Debtor pays premiums to the Insurance Carriers for coverage under the

Insurance Programs (collectively, the Insurance Premiums). The Insurance Premiums are based upon a fixed rate established and billed by each Insurance Carrier. The premiums for most of the Insurance Programs are determined annually and are paid at the inception of each policy. The Debtor has various deductible and co-insurance obligations (the Deductible Obligations) that are paid based on the amount of claims made against the Insurance Programs, and that are calculated in accordance with the applicable Insurance Program. 80. Because it is not always economically advantageous for the Debtor to pay the

Insurance Premiums on all of the Insurance Policies on a lump-sum basis, in the ordinary course of the Debtors business, certain of the premium payments under the Insurance Policies are either paid on a monthly basis to the Insurer or have been financed pursuant to premium financing agreements with third-party lenders (Premium Financing Obligations). The Debtor entered into a premium financing arrangement in connection with its directors and officers liability insurance for which its monthly Premium Financing Obligations will be approximately $5,280.86. In addition, the Debtor pays monthly Insurance Premiums under the workers

compensation insurance program of approximately $9,000 per month (these amounts are funded and paid through the Debtors third party payroll processor, ADP, in conjunction with payroll). The Debtor also pays monthly Insurance Premiums of approximately $32,650.65 on four of its liability policies with Allied Insurance Company. 81. The Debtor (i) seeks authorization to satisfy the Insurance Obligations as they

become due and (ii) requests that the Court authorize the Bank to receive, honor, process, and

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pay any and all checks drawn, or electronic fund transfers requested or to be requested, on the disbursement accounts to the extent that such checks or electronic fund transfers relate to any Insurance Obligations. 82. In addition, out of an abundance of caution, the Debtor seeks authorization to

renew the Insurance Programs in the ordinary course of business. In connection therewith, the Debtor also seeks authorization pursuant to section 363(c) of the Bankruptcy Code to finance the premiums due under those Insurance Policies in the ordinary course of the Debtors business. 83. To the extent that the automatic stay would affect the rights of any of the Debtors

employees to proceed with a valid workers compensation claims (Workers Compensation Claims) and any relevant workers compensation policies (the Workers Compensation Programs), the Debtor seeks authorization to modify the automatic stay imposed by section 362 of the Bankruptcy Code (the Automatic Stay) to permit these workers to proceed with their claims under the Workers Compensation Programs. Any claims relating to any of the other Insurance Programs relating to coverage of the Debtor or the Debtors property shall remain subject to the Automatic Stay. 84. The Debtor believes that most of its obligations under the Insurance Programs

will constitute postpetition obligations of the Debtors estate. With respect to those Insurance Obligations that are prepetition claims, however, payment of such obligations is necessary and appropriate. 85. The Debtor is a retail business and its stores host hundreds of customers each day.

Sound business practices include maintaining insurance coverage incident to the operations of the Debtors business. In this Case, the Debtor sells alcoholic beverages to retail customers and it is prudent that the Debtor maintain insurance attendant to the risks of retail alcoholic beverage

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sales. The nature of the Debtors business and the extent of its operations make it essential for the Debtor to maintain its Insurance Programs on an ongoing and uninterrupted basis. The nonpayment of any premiums, deductibles, or related fees under any of the Insurance Programs could result in one or more of the Insurance Carriers terminating their existing policies, declining to renew their insurance policies or refusing to enter into new insurance agreements with the Debtor in the future. Such action could expose the Debtor and its estate to risks for which there is no insurance coverage. 86. I have been advised that the U.S. Trustee has established Guidelines in order to

supervise the administration of chapter 11 cases. I understand that the Guidelines require chapter 11 debtors-in-possession to, among other things, remain current with respect to certain of their primary Insurance Programs. I understand that should any insurance policy lapse during the pendency of the Debtors chapter 11 case, the U.S. Trustee Guidelines mandate that the Debtor forward proof of renewal of that policy to the U.S. Trustee. Therefore, the continuation and renewal of the Insurance Programs, on an uninterrupted basis, and the payment of all prepetition and postpetition Insurance Obligations arising under the Insurance Programs, is not only essential to preserve the Debtors business and the value of the Debtors estate for all creditors, but also compulsory pursuant to the U.S. Trustee Guidelines. 87. If the Debtor is unable to enter into arrangements to pay the premiums under the

renewed Insurance Policies, the Debtor would be required to pay lump-sum premiums for the insurance policies in advance, thus negatively affecting the Debtors cash flow in the infancy of this Chapter 11 case. In view of the importance of maintaining insurance coverage with respect to its business activities and the preservation of the Debtors estate by financing the insurance premiums, the Debtor believes it is in the best interests of its estate to authorize the Debtor to

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enter into new insurance premium financing arrangements in the ordinary course of business. Any other alternative would likely require considerable additional cash expenditures and would be detrimental to the Debtors reorganization efforts. 88. To the extent the Debtors employees hold valid Workers Compensation Claims,

the Debtor seeks authorization, under 362(d) of the Bankruptcy Code, to permit these workers to proceed with their claims in the appropriate judicial or administrative forum. The Debtor believes cause exists to modify the automatic stay because prohibiting the Debtors employees from proceeding with their claims could have a detrimental effect on the financial well-being and morale of such workers and lead to their departure. As discussed above, such departures could severely disrupt the Debtors business to the detriment of all parties-in-interest. 89. To this end, and solely with respect to Workers Compensation Claims covered

under the Workers Compensation Programs, the Debtor seeks to modify the automatic stay as it relates to the Workers Compensation Claims provided that such claims are pursued in accordance with the Workers Compensation Programs and recoveries, if any, are limited to the proceeds from the applicable Workers Compensation Program. All other claims, including any relating to matters covered by other Insurance Programs, will remain subject to the automatic stay. 90. Pursuant to this Motion, the Debtor does not seek a waiver, termination, or

modification of the automatic stay with respect to any other claims or matters. 91. The Debtor further requests that the Court authorize and direct the Bank to

receive, process, honor and pay any and all checks drawn or electronic funds transferred to pay the Insurance Obligations, whether such checks were presented prior to or after the Petition Date;

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EXHIBIT A

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