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/raid1/www/Hosts/bankrupt/TCR_Public/971202.MBX T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, December 2, 1997, Vol. 1, No. 70 Headlines COBRA INDUSTRIES: Objection to Joint Plan of Liquidation CRAIG CONSUMER: Court Oks Rejection of Employment Contracts ELI WITT: Modification to First Amended Plan FARM FRESH: Richfood Holdings Signs Purchase Agreement FLORIDA SUNSHINE: Requests Time to Assume or Reject Leases GUY F. ATKINSON: Agreement with Morrison Knudsen PARTY WORLD: Hearing on Debtors' Rejection of 7 Leases PAYLESS CASHWAYS: Motions to Reject Leases PAYLESS CASHWAYS: Seeks Time to Assume or Reject Leases PAYLESS CASHWAYS: Stipulation Concerning Voting Claims RDM SPORTS: Committee Objects to Sale of Certain Assets STREAMLOGIC: Court Authorizes Employment of Auctioneer STREAMLOGIC: Monthly Operating Report - October 1997 US ONE: Seeks Approval to Assume and Assign Lease VITALE ENTERPRISES: Seeks Special Corporate Counsel WESTERN PACIFIC: Committee Seeks Sale of MAX stock WESTERN PACIFIC: Frontier and Wexford Object to DIP Meetings, Conferences and Seminars --------- COBRA INDUSTRIES: Objection to Joint Plan of Liquidation -------------------------------------------------------- Peter Liegl and Forest River, Inc. objected to the confirmation of the joint plan of liquidation of Cobra Industries, Inc., proposed by the Official Committee of Unsecured Creditors and Congress Financial Corporation. In 1995, the debtor and Mr. Liegl entered into an asset purchase agreement. The court approved the sale, and Mr. Liegl paid the debtor in excess of $7.9 million for the assets. As further consideration for the agreement, Liegl committed to $225,000 to the debtor if the debtor was successful in confirming a plan of reorganization. Among the assets were ten parcels of real property in Elkhart County, Indiana. In 1996, Liegl transferred his interest in the property to Forest. Subsequent to the sale, the Elkhart County, Indiana Treasurer asserted a claim of over $1.3 million. The Elkhart County Indiana Treasurer (Elkhart) contended $760,579.41 was secured by a first priority lien on the property. (Property taxes due on the property). The debtor did not give Elkhart notice of the Liegl Agreement or the Order. Elkhart's secured claims attached to the proceeds of the sale ahead of Congress Financial Corporation and BNY Financial Corporation. After closing the Agreement, Liegl attempted to sell one of the parcels for $274,000, but could not because of the lien. Liegl filed an adversary proceeding against Elkhart and the debtor, which cost him about $50,000, and ended in a settlement. Liegl and Forest now object to the plan proposed by the Committee and Congress, as it inappropriately provides for the Liegl Plan Contribution of $225,000. Liegl requests that the Court decline to confirm the plan, or in the alternative, to reduce the Liegl Plan Contribution by $83,550.73, the total sum of Liegl's damages. CRAIG CONSUMER: Court Oks Rejection of Employment Contracts ----------------------------------------------------------- The Court has entered an order on November 18, 1997 authorizing the debtor's rejection of employment agreements with Richard I. Berger and Bonnie Metz. Any claims arising as a result of or in connection with the rejection of these contracts are deemed to have arisen immediately before the Petition Date and shall be allowed or disallowed pursuant to 11 U.S.C section 502. ELI WITT: Modification to First Amended Plan --------------------------------------------- The Eli Witt Company filed a modification to its first amended plan of reorganization. The modification provides: Articles 3.4, 4.5, 4.6, 4.7, and 6.10 of the plan have been deleted in their entirety. The substituted provisions provide that Class 4 secured tax claims shall be satisfied by payment in cash, on the Distribution date, and that Class 4 is unimpaired. Class 5, the secured claims of Philip Morris Capital, are impaired, and Class 6, the secured claims of Culbro Corporation are impaired. Both Class 5 and Class 6 claims are dependent on the sale of the Ocala Facility. In the event that the debtor does not sell the Ocala Facility prior to January 31, 1998, the debtor will abandon the property and the holders of secured claims will be entitled to enforce their rights with respect to the property. FARM FRESH: Richfood Holdings Signs Purchase Agreement ------------------------------------------------------ Richfood Holdings, Inc., a wholesale food distributor in the Mid-Atlantic region, and Farm Fresh, Inc., a privately held supermarket chain based in Norfolk, Virginia, announced that they have signed a definitive purchase agreement in connection with Richfood's previously announced plan to acquire substantially all of the assets of Farm Fresh. The transaction is expected to be effected through a prepackaged voluntary reorganization of Farm Fresh under Chapter 11 of the U.S. Bankruptcy Code or other consensual proceeding. Completion of the transaction is subject to approval of the reorganization plan by the Bankruptcy Court and the holders of Farm Fresh's senior notes as well as required regulatory approvals and other customary closing conditions. Farm Fresh confirmed that the holders of a majority of the outstanding principal amount of its senior notes have indicated that they support and intend to vote in favor of the transaction. Richfood and Farm Fresh confirmed that they expect the transaction to close in early 1998. In the planned transaction, a newly formed subsidiary of Richfood will purchase substantially all of the assets and assume certain liabilities, including all trade liabilities, of Farm Fresh. Under the terms of the purchase agreement, Richfood will not assume Farm Fresh's senior notes or other indebtedness for money borrowed, or its lease obligations for previously closed stores or four currently-operated stores that will be closed in connection with the proposed sale. The anticipated purchase price is expected to consist of approximately $220 million cash, plus the value of certain assumed capital leases, plus 1.5 million warrants for the purchase of shares of Richfood common stock at an exercise price of $25 per share with a term of five years following issuance. The exact amount of the cash purchase price will vary depending on changes in Farm Fresh's working capital and the capital lease obligations assumed by Richfood. Upon completion of the acquisition, Farm Fresh will operate as a separate, wholly owned subsidiary of Richfood. FLORIDA SUNSHINE: Requests Time to Assume or Reject Leases ---------------------------------------------------------- Florida Sunshine Rehab Limited Partnership seeks an additional thirty days to assume or reject three unexpired real property leases. The debtor seeks the additional time because the debtor is discussing and planning a reorganization for the continuing operation of the debtor's business. In addition, the debtor is negotiating the sale of one of the properties, and the debtor had only requested a seven day extension originally, because the debtor did not know some of the pertinent facts regarding these properties. GUY F. ATKINSON: Agreement With Morrison Knudsen ------------------------------------------------ In Boise, Idaho on December 1, 1997, Guy F. Atkinson Company of California and Morrison Knudsen Corporation announced that they have entered into a non- solicitation and expense-reimbursement agreement relating to negotiations between Atkinson and MK for a possible transaction between the two companies. The agreement is subject to court approval. If completed, such transaction could result in a plan of reorganization for Atkinson. Neither company will provide further comment regarding the transaction. PARTY WORLD: Hearing on Debtors' Rejection of 7 Leases ------------------------------------------------------ The Court has entered an order approving an ex parte application for an order shortening the time on the debtors' motion to reject seven nonresidential real property leases. The date of the hearing has been set for November 25, 1997. The leases are located in Richmond, California, San Carlos, California, Millbrae, California, Santa Clara, California, Lakewood, California, West Covina, California, and Oxnard, California. PAYLESS CASHWAYS: Motions to Reject Leases ------------------------------------------ Payless Cashways, Inc. filed motions to reject two unexpired leases of nonresidential property; one, covering property in Kansas City Missouri (the Two Pershing Square office lease) and the other, a lease covering property in Coppell, Dallas County, Texas (the Coppell Warehouse lease). The debtor complains that both leases are burdensome to the debtor and it is in the best interests of the estate that the leases should be rejected. The debtor requests that the Two Pershing Square lease be rejected effective December 31, 1997 and the debtor requests that the Coppell Warehouse lease is rejected effective January 1, 1998. PAYLESS CASHWAYS: Seeks Time to Reject and Assume Leases -------------------------------------------------------- Payless Cashways, Inc., seeks an extension of time to reject its unexpired lease of nonresidential real property located in Hanover, Massachusetts. The debtor owns the building situated on the property leased under a Ground Lease and formerly operated one of its stores at this location. The store was closed in 1997, however, the debtor recently reached an agreement to sell the building and formal rejection of the Ground Lease may not be necessary. The debtor obtained the approval of the Ground Lessor to assign the lease to a designated sublessee and to release the debtor from the ground lease. The debtor expects the necessary documents and transactions will be completed and closed by December 31, 1997. The debtor seeks an extension through December 31, 1997. The debtor is seeking until January 5, 1988 to assume the leases in Las Vegas, Nevada and in Collierville, Tennessee. The debtor has negotiated rent adjustments with the agents for each of the property owners, and the parties expect to complete the documents by January 5, 1998, at which time the debtor expects to assume the leases. PAYLESS CASHWAYS: Stipulation Concerning Voting Claims ------------------------------------------------------ On November 14, 1997, Judge Arthur B. Federman entered a Stipulation agreed to by BTM Leasing & Financing, Inc. (Lenders), BTM Leasing and Financing Inc.(the "Certificate Holders"), Wilmington Trust Company(the "Certificate Trustee") BA Leasing & Capital Corporation, as Agent, all hereinafter called The Synthetic Lease Bank Group, and the debtor, Payless Cashways, Inc. Pursuant to the debtor's first amended plan of reorganization, the Synthetic Lease Bank Group's claims were classified as Class 2C and Class 3A. Pursuant to an Agreement reached in principle between the debtor and the Synthetic Lease Bank Group, the group was to have an allowed Class 2C claim in an aggregate amount of $16 million and an allowed Class 3A claim in an aggregate amount of approximately $16 million (to be determined after deducting from the total claim of approximately $38.2 million the proceeds or value to be ascribed to certain collateral that has been or is to be sold.) In order to ensure that the Synthetic Lease Bank Group did not vote duplicative claims to accept or reject the debtor's plan and to conform the claim amounts for voting purposes, the parties agreed that all members of the Synthetic Lease Bank Group, except the Fuji Bank Ltd. and FBTC Leasing Corp. would vote to accept the plan as holders of the claims in Class 2C and Class 3A in the amounts set forth in the Stipulation, provided that the plan provides for the treatment of such claims in accordance with the Agreement of the parties. RDM SPORTS: Committee Objects to Sale of Certain Assets ------------------------------------------------------- The Official Committee of Unsecured Creditors filed an objection to the debtors' motion to enter into and consummate a sale of certain assets of Diversified Product Corporation to WCB Alabama, Inc. Included with the motion of the debtors is a certain Exclusive Option to Purchase assigned by Assignment of Exclusive Option to Purchase from W.C. Bradley Co. to WCB Alabama, Inc. ("Char-Broil"). The Committee has certain objections to the Option Agreement which it has communicated to Char-Broil. The Committee and Char-Broil have agreed on certain modifications to the Option Agreement that will satisfy the Committee's objections. The Committee therefore requests that the Court reserve the Committee's right to renew objections to the Option Agreement should the Option Agreement not reflect the modifications agreed upon by the Committee and Char-Broil. STREAMLOGIC: Court Authorizes Employment of Auctioneer ------------------------------------------------------ Judge Dennis Montali signed an order authorizing the debtor to employ Stephen R. Brown of Business Brokers Group, Ltd, Inc. as an auctioneer. The debtor is authorized to sell property of the estate that the debtor has determined is not required for the continued operation of its business, subject to the liens or other interests of creditors or third properties. The sale will take place by public auction on an expedited basis as set forth in the application. STREAM LOGIC: Monthly Operating Report - October 1997 ---------------------------------------------------- Stream Logic Corporation filed a summary of its financial status for the month ended October 31, 1997. Total Assets at the end of the current month are listed at $8,502,707, and total liabilities are listed at $29,312,987, with total equity (deficit) totaling $20,810,280. Total receipts for the current month are shown as $1,705,288 compared to $723,000 in the previous month. US ONE: Seeks Approval to Assign Lease --------------------------------------- US One Communications Corp. and its two subsidiaries have determined that they no longer need all of the leased premises at One Lincoln Centere, 550 LBJ Freeway, Dallas Texas, and as of February 28, 1998 they will not need any of the space. The debtors seek to assign the lease to INVESCO Realty Advisors, Inc., and the sale of certain personal property therein to INVESCO, for the sum of $406,000. The debtors state that an assumption and assignment is preferable to the alternative of rejecting the lease, which would create a sizable prepetition claim for termination damages. INVESCO has agreed to cure the current default of the debtors of $38,000, and INVESCO will Pay a brokerage commission to Jackson & Cooksey in an amount equal to two percent of the gross consideration of the lease at $21.55 per square foot. VITALE ENTERPRISES: Seeks Special Corporate Counsel --------------------------------------------------- Vitale Enterprises, Inc., et al., applied to the court to retain nunc pro tunc the law firm of Alampi, Arturi & D'Argenio as special corporate counsel to the debtors. The fixed hourly rates for legal services range from $250 for Mssrs. Arturi and Alampi's services to $75 per hour for a paralegal. The firm has reuqested a retainer in the amount of $25,000. WESTERN PACIFIC: Committee Seeks Sale of MAX stock -------------------------------------------------- The Official Committee of Unsecured Creditors of Western Pacific Airlines, Inc. requested that the court enter an order compelling the debtor to sell the debtor's 57 percent stock interest in Mountain Air Express, or, in the alternative, to authorize the Committee to sell the stock. On October 30, 1997 the debtor entered into a letter agreement to sell the stock to Excalibur Aviation, Inc. for $1.5 million. The Committee has learned that other investors are extremely interested in purchasing the MAX shares. Sky Team Airlines may be willing to pay up to $2 million. To date, the debtor has not filed a motion seeking to sell the shares of stock, and the Committee feels that it should be granted the authority to sell those shares on behalf of the estate. WESTERN PACIFIC: Frontier and Wexford Object to DIP --------------------------------------------------- Wexford Management LLC filed an objection to the debtor's motion for an order authorizing the debtor to obtain post- petition financing. Wexford states that it is a party in interest in this case, since Wexford, together with its partner Frontier Airlines is pursuing its own offer of DIP financing. Wexford objects to the $30 million in DIP financing from Smith Management Company since Wexford believes that the DIP financing proposed by Smith is not the best financing available. Wexford complains that the Poison Pill features of the Smith Plan will effectively chill the development of any competing plans of reorganization. As a result, the Smith plan amounts to a sub rosa plan, which effectively deprives creditors of the protections afforded by the plan confirmation process. Frontier Airlines Inc. also filed an objection to the DIP financing proposed by Smith Management Company. Frontier Airlines states that it is a party in interest because Frontier has a claim against the debtor for amounts due from certain ticketing and baggage services between Frontier and the debtor. Frontier complains that the proposed termination fee of $1 million and 10 percent of each class of equity of the reorganized debtor, if approved, will preclude any other financing arrangement. The termination fee and the provisions of the financing that give Smith Management control over the debtor's plan of reorganization will lock out all other financing and will give control of this case to Smith Management. Frontier also states that the proposed financing is an improper sub rosa or de facto plan of reorganization. Frontier claims that the proposed financing is less favorable than that package offered by Wexford Management LLC. Meetings, Conferences and Seminars ---------------------------------- December 3, 1997 AMERICAN BANRKUPTCY BOARD OF CERTIFICATION Examination Las Costas Resort & Spa, Carlsbad, California Contact: 1-703-739-0800 December 3-4, 1997 STRATEGIC RESEARCH INSTITUTE 4th Annual Conference on Distressed Debt Crowne Plaza Hotel, New York, New York Contact 1-800-599-4950 December 4-6, 1997 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference La Costa Resort & Spa, Carlsbad, California Contact 1-703-739-1060 December 5-6, 1997 STETSON UNIVERSITY COLLEGE OF LAW 22nd Annual Bankruptcy Seminar DoubleTree Surfside Resort Hotel, Clearwater Beach, Florida Contact 1-813-562-7830 DECEMBER 10-11, 1997 INSTITUTE FOR INVESTMENT RESEARCH Investment Opportunities in Workouts & Turnarounds Downtown Conference Center, New York, New York Contact 1-212-661-3500 December 11-13, 1997 AMERICAN LAW INSTITUTE--AMERICAN BAR ASSOCIATION 9th Annual Advanced Court of Study, The Emerged and Emerging New Uniform Commercial Code Sheraton New York Hotel, New York, New York Contact 1-800-CLE-NEWS, ext. 1630 December 15-16, 1997 PRACTISING LAW INSTITUTE Basics of Bankruptcy and Reorganization PLI Conference Center, New York, New York Contact 1-800-260-4PLI or http://www.pli.edu January 29-February 1, 1998 COMMERCIAL LAW LEAGUE OF AMERICA 37th Southern District Annual Meeting Plaza San Antonio, San Antonio, Texas Contact 1-972-285-0391 February 5-7, 1998 AMERICAN BANKRUPTCY INSTITUTE Rocky Mountain Bankruptcy Conference Westin Tabor Center, Denver, Colorado Contact: 1-703-739-0800 February 22-25, 1998 NORTON INSTITUTES ON BANKRUPTCY LAW 12th Annual Norton Bankruptcy Litigation Institute I Olympia Park Hotel, Park City, Utah Contact 1-770-535-7722 March 19-20, 1998 TURNAROUND MANAGEMENT ASSOCIATION Spring Leadership Meeting Hotel del Coronado, San Diego, California Contact 1-312-857-7734 March 20, 1998 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Battleground West Century Plaza Hotel, Los Angeles, California Contact: 1-703-739-0800 March 26-29, 1998 NORTON INSTITUTES ON BANKRUPTCY LAW 10th Annual Norton Bankruptcy Litigation Institute II Flamingo Hilton, Las Vegas, Nevada Contact 1-770-535-7722 April 30-May 3, 1998 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting Grand Hyatt, Washington, D.C. Contact: 1-703-739-0800 May 22-25, 1998 COMMERICAL LAW LEAGUE OF AMERICA 50th New England District Annual Meeting Ocean Edge Resort & Golf Club, Cape Cod, Massachusetts Contact 1-617-720-1355 June 8-9, 1998 TURNAROUND MANAGEMENT ASSOCIATION Advanced Education Workshop & Legislative Conference Radisson Plaza, Charlotte, North Carolina Contact 1-312-857-7734 June 11-14, 1998 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort, Traverse City, Michigan Contact: 1-703-739-0800 July 2-5, 1998 NORTON INSTITUTES ON BANKRUPTCY LAW Western Mountains Bankruptcy Law Institute Jackson Lake Lodge, Jackson Hole, Wyoming Contact 1-770-535-7722 July 16-19, 1998 AMERICAN BANKRUPTCY INSTITUTE Northeast Bankruptcy Conference Sea Crest Resort, Falmouth, Massachusetts Contact: 1-703-739-0800 August 6-9-1998 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop Daufuskie Island Club & Resort, Hilton Head, South Carolina Contact: 1-703-739-0800 September 9-13, 1998 NATIONAL ASSOCIATION OF BANKRUPTCY TRUSTEES Annual Convention Sheraton El Conquistador, Tuscon, Arizona Contact: 1-803-252-5646 September 17-20, 1998 AMERICAN BANKRUPTCY INSTITUTE Southwest Bankruptcy Conference The Inn at Loretta, Santa Fe, New Mexico Contact: 1-703-739-0800 October 16-20, 1998 TURNAROUND MANAGEMENT ASSOCIATION 1998 Annual Conference The Westin Hotel, Chicago, Illinois Contact 1-312-857-7734 December 3-5, 1998 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Westin La Paloma, Tucson, Arizona Contact: 1-703-739-0800 The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ------------- Bond pricing, appearing each Friday, is supplied by DLS Capital Partners, Dallas, Texas. S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington DC. Debra Brennan and Rebecca A. Porter, Editors. Copyright 1997. All rights reserved. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re- mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof is $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *