<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED October 31, 1997
----------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
----------
---------------
Commission file number 0-1946
------
DART GROUP CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 53-0242973
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3300 75th Avenue, Landover, Maryland, 20785
---------------------------------------------
(Address of principal executive offices)
(Zip Code)
(301) 226-1200
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
----- -----
At December 15, 1997, the registrant had 1,695,977 shares outstanding of Class
A Common Stock, $1.00 par value per share, and 327,270 shares outstanding of
Class B Common Stock, $1.00 par value per share. The Class B Stock is the only
voting stock and is not publicly traded.
1
<PAGE> 2
PART I
Item 1. Financial Statements
Certain consolidated financial statements included herein have been prepared by
Dart Group Corporation ("Dart"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although Dart believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in Dart's annual report on Form 10-K for the fiscal year ended January
31, 1997.
2
<PAGE> 3
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended October 31, Ended October 31,
-------------------- --------------------
1997 1996 1997 1996
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Sales $373,086 $157,945 $1,111,807 $478,271
Other interest and other income 5,542 918 8,458 3,659
-------- -------- ---------- --------
378,628 158,863 1,120,265 481,930
-------- -------- ---------- --------
Expenses:
Cost of sales, store occupancy
and warehousing 296,823 125,345 871,870 375,956
Selling and administrative 85,734 36,494 235,308 105,802
Provision for loss on sale of
Trak Auto California operations 10,493 - 10,493 -
Depreciation and amortization 5,974 3,386 19,602 10,316
Interest 8,100 1,257 20,937 5,593
Closed store reserve - (1,052) (1,500) (1,052)
Restructuring reversal - (3,865) - (3,865)
-------- -------- ---------- --------
407,124 161,565 1,156,710 492,750
-------- -------- ---------- --------
Loss before income taxes, equity
in affiliate, minority interests,
extraordinary item and cumulative
effect of accounting change (28,496) (2,702) (36,445) (10,820)
Income taxes (benefit) (19,805) 252 (24,860) (965)
Valuation allowance for deferred
tax assets 28,881 - 31,183 -
-------- -------- ---------- --------
Loss before equity in affiliate,
minority interests,
extraordinary item and cumulative
effect of accounting change (37,572) (2,954) (42,768) (9,855)
Equity in affiliate - 1,894 - 7,018
Minority interests in (income)
loss of consolidated
subsidiaries 14,351 (104) 18,152 908
-------- -------- ---------- --------
Loss before
extraordinary item and cumulative
effect of accounting change (23,221) (1,164) (24,616) (1,929)
Extraordinary item:
Loss on early extinguishment
of debt, net of income taxes
of $2,150 - - (3,126) -
Cumulative effect of Shoppers
Food accounting change, net
of income taxes of $1,344 - 1,729 -
-------- -------- ---------- --------
Net loss $(23,221) $ (1,164) $(26,013) $ (1,929)
======== ======== ========== ========
</TABLE>
(continued on next page)
3
<PAGE> 4
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended October 31, Ended October 31,
--------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loss per share:
Loss before extraordinary item $ (11.47) $ (.66) $ (11.91) $ (1.33)
Extraordinary item:
Loss on early extinguishment
of debt, net - - (1.51) -
Cumulative effect of Shoppers
Food accounting change, net - - .84
-------- -------- -------- --------
Net loss per share $ (11.47) $ (.66) $ (12.58) $ (1.33)
======== ======== ======== ========
Weighted average shares
outstanding 2,024 2,086 2,067 2,075
======== ======== ======== ========
Dividends per share of Class
A Common Stock $ .033 $ .033 $ .099 $ .099
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
October 31, January 31,
ASSETS 1997 1997
---------- ----------
<S> <C> <C>
Current Assets:
Cash $ 16,134 $ 12,382
Short-term instruments 31,656 27,276
Marketable debt securities 32,163 5,714
Accounts receivable 18,752 14,699
Income taxes refundable - 3,802
Merchandise inventories 264,132 218,619
Deferred income tax benefit 11,560 7,324
Other current assets 9,315 6,445
-------- --------
Total Current Assets 383,712 296,261
-------- --------
Property and Equipment, at cost:
Furniture, fixtures and equipment 177,507 104,541
Leasehold improvements 34,077 29,873
Land and buildings 5,434 1,034
Property under capital leases 31,859 24,472
-------- --------
248,877 159,920
Accumulated depreciation and amortization 125,952 80,849
-------- --------
122,925 79,071
-------- --------
Share of equity in Shoppers Food
Warehouse Corp. - 52,802
-------- --------
Goodwill, net of accumulated amortization
of $3,343 and $382 147,769 1,890
-------- --------
Deferred income tax benefit 9,443 14,375
-------- --------
Other assets 22,982 5,773
-------- --------
Total Assets $686,831 $450,172
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
5
<PAGE> 6
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
October 31, January 31,
LIABILITIES 1997 1997
------------ -----------
<S> <C> <C>
Current Liabilities:
Current portion of mortgages payable $ 99 $ 1,106
Accounts payable, trade 149,716 102,942
Income taxes payable 2,150 3,322
Accrued interest 6,933 -
Accrued salaries and employee benefits 27,370 18,766
Accrued taxes other than income taxes 14,472 9,738
Current portion of reserve for closed
facilities and restructuring 6,101 5,701
Other accrued liabilities 62,999 64,215
Current portion of obligations under capital leases 209 209
-------- --------
Total Current Liabilities 270,049 205,999
-------- --------
Mortgages payable 280 353
-------- --------
Crown Books' credit facility 17,167 -
-------- --------
Obligations under capital leases 42,181 30,373
-------- --------
Reserve for closed facilities and restructuring 23,645 27,341
-------- --------
Deferred income taxes 9,337 -
-------- --------
Shoppers Food Senior Notes due 2004 200,000 -
-------- --------
Other Liabilities 2,681 -
-------- --------
Commitments and Contingencies
Minority interests 49,604 67,750
-------- --------
Stockholders' Equity
Class A common stock, non-voting, par value $1.00
per share; 3,000,000 shares authorized; 1,975,255
and 1,962,403 shares issued, respectively 1,975 1,962
Class B common stock, voting par value $1.00 per
share; 500,000 shares authorized and issued 500 500
Paid-in capital 79,887 78,841
Notes receivable-shareholder (65,130) (65,130)
Unrealized gains (losses) on short-term investments 95 (22)
Retained earnings 78,053 104,242
Treasury Stock, 279,584 shares of Class
A common stock, at cost (8,508) (1,749)
Treasury Stock, 277,706 shares of Class
B common stock, at cost (14,985) (288)
-------- --------
Total Stockholders' Equity 71,887 118,356
-------- --------
Total Liabilities and Stockholders' Equity $686,831 $450,172
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
6
<PAGE> 7
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended October 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (26,013) $ (1,929)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 19,602 10,316
Loss on early extinguishment of debt 5,276 -
Amortization of deferred financing costs 1,201 -
Valuation allowance for deferred tax assets 16,997 -
Provision for loss on sale of Trak Auto
California operations 10,493 -
Cumulative effect accounting change (1,729) -
Reverse litigation reserve (7,000) -
Provision (reversal) for closed facilities
and restructuring (589) (3,946)
Loss on disposal of fixed assets 935 -
Interest in excess of capital lease payment 570 -
Equity in affiliate - (7,018)
Changes in assets and liabilities net of effects of
consolidation of Shoppers Food Warehouse Corp.:
Accounts receivable 5,191 (3,510)
Income taxes refundable or prepaid 5,858 (8,250)
Merchandise inventories (15,330) (43,642)
Other current assets (2,870) (4,480)
Deferred income tax benefits (10,915) 4,614
Other assets 793 (958)
Accounts payable, trade 4,944 36,803
Income taxes payable (3,351) 2,041
Accrued salaries and employee benefits 3,718 2,612
Accrued taxes other than income taxes 1,831 668
Accrued interest 6,606 -
Other current liabilities (15,498) (1,689)
Payment to Robert M. Haft - (35,726)
Other liabilities 233 -
Reserve for closed facilities (2,192) (5,356)
Minority interests (18,152) (2,865)
--------- ---------
Net cash used for operating activities $ (19,391) $ (62,315)
--------- ---------
Cash Flows from Securities and Capital
Investment Activities:
Capital expenditures $ (20,223) $ (12,710)
Acquisition of partnership interest in real
estate (4,400) -
Proceeds from sale of Cabot-Morgan Real Estate
joint venture - 2,000
Distribution from Shoppers Food Warehouse - 5,000
Cash and cash equivalents of Shoppers Food
Warehouse Corp. at February 1, 1997 13,739 -
</TABLE>
(Continued on next Page)
7
<PAGE> 8
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended October 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash Flows from Securities and Capital Investments
Activities (Continued):
Acquisition of 50% equity in Shoppers Food
Warehouse Corp. $(210,000) $ -
Purchases of United States Treasury Bills (5,960) (40,152)
Disposition of United States Treasury Bills 987 16,734
Maturities of United States Treasury Bills 973 27,098
Purchases of marketable debt securities (33,871) -
Disposition of marketable debt securities 90,558 3,612
Maturities of marketable debt securities 16,425 6,494
--------- ---------
Net cash provided by(used for) securities
and capital investment activities $(151,772) $ 8,076
--------- ---------
Cash Flows from Financing Activities:
Cash dividends $ (176) $ (175)
Proceeds from Note Receivable - Ronald S. Haft - 11,621
Net borrowing under Crown Books' credit facility 17,167 9,368
Payments for deferred financing and
acquisition costs (16,643) -
Proceeds from Increasing Rate Notes Due 2000 140,000 -
Redemption of Increasing Rate Notes Due 2000 (140,000) -
Proceeds from issuance of Senior
Notes dues 2004 200,000 -
Funds restricted for settlements (50,218) -
Release of Restricted Proceeds 50,000 -
Purchase of treasury stock (21,456) -
Proceeds from stock options exercised 1,059 956
Principal payments under mortgage
obligations (281) (225)
Principal payments under capital
lease obligations (157) (75)
--------- ---------
Net cash provided by financing activities $ 179,295 $ 21,470
--------- ---------
Net increase (decrease) in Cash and Equivalents $ 8,132 $ (32,769)
Cash and Equivalents at Beginning of Period 39,658 64,784
--------- ---------
Cash and Equivalents at End of Period $ 47,790 $ 32,015
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid (refunded)during the three months for:
Interest $ 8,649 $ 3,282
Income taxes (309) 673
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE> 9
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997 and 1996
(Unaudited)
NOTE 1 - GENERAL
The accompanying consolidated financial statements reflect the accounts of Dart
Group Corporation ("Dart") and its direct and indirect wholly-owned and
majority-owned subsidiaries including Trak Auto Corporation ("Trak Auto"),
Crown Books Corporation ("Crown Books"), Total Beverage Corporation ("Total
Beverage") and Shoppers Food Warehouse Corp. ("Shoppers Food"). The accounts
of Shoppers Food are consolidated with Dart's financial statements as of
February 6, 1997, as a result of Dart's acquisition of the 50% equity interest
that it did not previously own. Dart, Trak Auto, Crown Books, Total Beverage
and Shoppers Food and Dart's other direct and indirect wholly-owned and
majority-owned subsidiaries are referred to collectively as the "Company". All
significant intercompany accounts and transactions have been eliminated. The
unaudited statements as of October 31, 1997 and 1996 reflect, in the opinion of
management, all adjustments (normal and recurring in nature) necessary to
present fairly the consolidated financial position as of October 31, 1997 and
1996 and the results of operations and cash flows for the periods indicated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Accordingly, actual results could differ from
those estimates.
The results of operations for the three months ended October 31, 1997 are not
necessarily indicative of the results to be achieved for the full fiscal year.
NOTE 2 - EARNINGS PER SHARE
Earnings per share is based on the weighted average number of Dart's Class A
and Class B common stock, $1.00 par value per share. Common stock equivalents
are antidilutive in all periods presented. In reporting earnings per share,
Dart's interest in the earnings of its majority-owned subsidiaries is adjusted
for the dilutive effect, if any, of these subsidiaries' outstanding stock
options. The difference between primary earnings per share and fully diluted
earnings per share is not significant for either period.
NOTE 3 - SHORT-TERM INSTRUMENTS AND MARKETABLE DEBT SECURITIES
At October 31, 1997, the Company's short-term instruments include United States
Treasury Bills, with a maturity of three months or less, and money market
funds. Marketable debt securities include United States Treasury Bills, with a
maturity greater than three months, United States Treasury Notes, corporate
notes and United States Agency Securities Acceptances.
Management determines the appropriate classification of its investments in debt
securities at the time of purchase and reevaluates such determination at each
9
<PAGE> 10
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1997 and 1996
(Unaudited)
balance sheet date. Debt securities for which the Company does not have the
intent or ability to hold to maturity are classified as available-for-sale.
Securities available-for-sale are carried at fair value, with the unrealized
gains and losses, net of tax, reported as a separate component of stockholders'
equity. At October 31, 1997, the market value of short-term instruments and
marketable debt securities was $95,000 greater than cost (adjusted for income
taxes).
The amortized cost of debt securities classified as available-for-sale is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization and interest are included in interest income. Realized gains
and losses are included in other income or expense. The cost of securities
sold is based on the specific identification method.
Included in short-term instruments and marketable debt securities were
$42,298,000 and $21,094,000 held by majority-owned and wholly-owned
subsidiaries at October 31, 1997 and January 31, 1997, respectively. Shoppers
Food short- term instruments and marketable debt securities are included for
October 31, 1997 but not January 31, 1997.
NOTE 4 - INTERIM INVENTORY ESTIMATES
Trak Auto and Shoppers Food inventories are priced at the lower of last-in,
first-out ("LIFO") cost or market. At October 31, 1997, Trak Auto and Shoppers
Food inventories determined on a lower of first-in, first-out ("FIFO") cost or
market basis would have been greater by $12,048,000 and at January 31, 1997,
Trak Auto inventory on a FIFO basis would have been greater by $6,733,000.
Crown Books' and Total Beverage's inventories are priced at the lower of FIFO
cost or market.
Trak Auto, Shoppers Food and Total Beverage take a physical count of their
store and warehouse inventories semi-annually. Crown Books takes a physical
count of its inventories annually. Shoppers Food takes physical inventories of
its perishable departments monthly at every store. The Company uses a gross
profit method combined with available perpetual inventory information to
determine Trak Auto's, Crown Books', and Total Beverage's inventories for
quarters when complete physical counts are not taken. There were no physical
inventories taken by Trak Auto, Crown Books and Total Beverage for the quarter
ended October 31, 1997 however, Shoppers Food took physical inventories at 12
stores during the quarter ended October 31, 1997.
NOTE 5 - INCOME TAXES
During the three months ended October 31, 1997, Crown Books concluded that it
was more likely than not that it would not realize deferred income tax benefits
of approximately $17.0 million as a result of ongoing net operating losses.
Accordingly, Crown Books increased its valuation allowance for deferred tax
assets from $2.5 million to $19.5 million. Crown Books will continue to evaluate
the need for the valuation allowance for deferred tax assets.
10
<PAGE> 11
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1997 and 1996
(Unaudited)
Dart continues to maintain a full valuation allowance of approximately $47.7
million at October 31, 1997. Dart's deferred tax assets primarily relate to
cumulative net operating losses. Dart will continue to evaluate the need for
the valuation allowance.
NOTE 6 - CREDIT AGREEMENTS
Trak Auto
In December 1996, Trak Auto entered into a revolving credit facility (the
"Facility") with a finance company to borrow up to $25.0 million. Trak Auto
intends to use proceeds from drawdowns under the Facility for working capital
and other corporate purposes. The Facility has an original term of three
years. Borrowings under the Facility bear interest at rates ranging from prime
rate minus 0.50% to prime rate plus 0.25%, for prime rate loans, and LIBOR plus
1.5% to LIBOR plus 2.25%, for LIBOR loans. Interest rates are based upon Trak
Auto's ratio of debt to tangible net worth. Borrowings are limited to eligible
inventory levels, as defined, and are secured by Trak Auto's inventory,
accounts receivable, and proceeds from the sale of such assets. The Facility
contains certain restrictive covenants including limitations on additional
indebtedness, advances to affiliates and payments (limited to $25.0 million) or
guarantees (limited to $20.0 million of the $25.0 million) to settle disputes
with Haft family members and a maximum leverage ratio covenant.
Interest on prime rate loans is payable monthly. Interest and principal on
LIBOR loans is payable between one and six months from the borrowing date.
LIBOR loans are subject to a prepayment penalty and may be continued for a
subsequent one to six month period. LIBOR loans may be converted to prime rate
loans and visa versa. The Facility includes a facility fee of .25% per annum
on the unused principal balance, as defined. No single advance may be
outstanding for more than 36 months. Trak Auto may terminate the Facility upon
60-days prior written notice to the lender and the lender may terminate it as
of December 18, 1999 or on any anniversary date thereafter upon 60-days prior
written notice to Trak Auto.
In addition, Trak Auto has a $750,000 commercial letter of credit facility for
use in importing merchandise.
As of November 1, 1997, there had been no borrowings under these credit
agreements.
Crown Books
On September 12, 1996, Crown Books entered into a revolving credit facility
with a finance company to borrow up to $50 million. While Crown Books'
tangible net worth is less than $70.0 million, Crown Books is limited to
borrowing a maximum of $25.0 million under the current terms of the revolving
credit facility. As of November 1, 1997, Crown Books' tangible net worth was
less than $52.0 million. As of November 2, 1996, outstanding borrowings were
approximately $9.4
11
<PAGE> 12
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1997 and 1996
(Unaudited)
million, which were paid-off as of January 1, 1997. The outstanding balance as
of November 1, 1997 was $17.2 million and the maximum borrowings outstanding at
any one time during the 39 weeks ended November 1, 1997 were $22.1 million. The
average borrowings and weighted average interest rate for the 39 weeks ended
November 1, 1997 were $10.8 million and 8.5%.
Crown Books intends to use proceeds from draw-downs under the credit facility
for working capital and other corporate purposes. The credit facility has an
original term of three years. Borrowings under the credit facility include
revolving loans and letters of credit which bear interest at a rate equal to
the prime rate (as defined in the credit agreement) and LIBOR loans which bear
interest at LIBOR plus 2.25%. Interest on prime rate borrowings is payable
monthly. Interest and principal on LIBOR loans is payable between one and six
months from the borrowing date. LIBOR loans are subject to a prepayment
penalty and may be continued for subsequent one to six month periods. LIBOR
loans may be converted to prime rate loans and vice versa. The agreement
includes a facility fee of .25% per annum on the unused principal balance, as
defined. No single advance may be outstanding for more than 36 months.
Borrowings under the credit facility are secured by Crown Books' inventory,
accounts receivable and proceeds from the sale of such assets of Crown Books.
The credit facility also contains certain restrictive covenants, including a
limitation on the incurrence of additional indebtedness and places a $13.1
million limitation on payments to settle disputes with Haft family members.
There are additional covenants related to tangible net worth. Loans under the
credit facility are subject to limitations based upon eligible inventory
levels, as defined in the agreement. Crown Books may terminate the credit
facility upon 60-days prior written notice to the lender and the lender may
terminate it as of September 12, 1999 or on any anniversary date thereafter
upon 60-days prior written notice to Crown Books. Crown Books had $7.8 million
available for borrowing at November 1, 1997.
Crown Books may need to increase its borrowing under its revolving credit
facility, though its ability to do so is subject to conditions contained
in the loan agreement that Crown Books does not meet. To increase the limit
from $25.0 million to $35.0 million, Crown Books is required to maintain a
minimum tangible net worth of $73.0 million as of the fiscal year end preceding
the election and for each fiscal year end thereafter, and to maintain a minimum
tangible net worth of $70.0 million as of the election date and thereafter, in
addition to other covenants. To increase the limit from $35.0 million to $50.0
million, Crown Books is required to maintain a minimum tangible net worth of
$75.0 million as of the fiscal year end preceding the election and for each
fiscal year end thereafter, in addition to other covenants. Crown Books does
not anticipate that its tangible net worth will increase to the extent
necessary to permit Crown Books to borrow more than $25 million under the
credit facility. Crown Books has initiated preliminary discussions with its
credit facility lender to request an increase in the credit limit to $50.0
million without the tangible net worth requirement. However, there can be no
assurance that such an agreement will occur.
12
<PAGE> 13
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1997 and 1996
(Unaudited)
NOTE 7 - SHOPPERS FOOD WAREHOUSE CORP.
Acquisition
On February 6, 1997, Dart acquired the 50% equity interest in Shoppers Food
that it did not already own for $210.0 million (the "Acquisition"). Dart
financed the Acquisition through the application of $137.2 million in net
proceeds from the offering of $140.0 million Increasing Rate Senior Notes due
2000 (the "Increasing Rate Notes") of SFW Acquisition Corp., a newly created
wholly-owned subsidiary of Dart and $72.8 million of bridge financing.
Immediately after the Acquisition, SFW Acquisition Corp. merged into Shoppers
Food (with Shoppers Food becoming obligor on the Increasing Rate Notes),
Shoppers Food repaid the bridge financing and paid the deferred acquisition
costs and deferred financing costs of approximately $7.2 million from its
existing cash and short-term investments.
The operating results of Shoppers Food from February 1, 1997 to February 6,
1997 were not material. The unaudited pro forma information, for Dart
consolidated, presented below reflects the Acquisition as if it had occurred on
February 1, 1996. The pro forma results reflect amortization of intangibles and
deferred financing costs, interest on the acquisition related debt as well as
depreciation adjustments for Shoppers Food new basis of assets as of the
Acquisition. These results are not necessarily indicative of future operating
results or of what would have occurred had the acquisition been consummated at
that time.
<TABLE>
<CAPTION>
Pro Forma
(in thousands, except per share data)
Twelve Months Ended Nine Months Ended
January 31, 1997 October 31, 1996
------------------ ------------------
<S> <C> <C>
Revenue $1,526,377 $1,111,170
Net income (loss) (9,233) 3,457
Net income (loss) per share (4.45) 1.67
</TABLE>
The Acquisition was recorded using the purchase method of accounting. The
purchase price has been allocated to the assets and liabilities of Shoppers
Food and the remaining excess purchase price over the net assets acquired of
$148,858 million represents goodwill which will be amortized over 40 years. In
connection with the Acquisition, Shoppers Food adopted Dart's method of
depreciating property and equipment on a straight-line basis. Prior to the
Acquisition, Shoppers Food used accelerated depreciation methods. The related
cumulative effect of the accounting change has been reflected in the
accompanying Consolidated Statements of Operations. If the change were applied
retroactively it would not be material to any periods presented.
Refinancing
In June 1997, Shoppers Food refinanced the Increasing Rate Notes with $200.0
million aggregate principal amount 9 3/4% Senior Notes due June 15, 2004 (the
"Senior Notes"). The net proceeds from the Senior Notes was $193.5 million
13
<PAGE> 14
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1997 and 1996
(Unaudited)
(after fees and expenses of approximately $6.5 million) of which $143.3 million
was used to repay the Increasing Rate Notes (including interest) and $50.0
million (the "Restricted Proceeds") was paid to Dart in the form of a $40.0
million dividend and a $10.0 million loan for a Haft family settlement (see
Note 8 for a discussion of the RGL Settlement). Interest on the Senior Notes
accrued from the date of issuance and is payable semi-annually in arrears on
each June 15 and December 15, commencing December 15, 1997. The Senior Notes
have certain covenants including limitations on additional indebtedness,
additional dividends and are guaranteed by the capital stock of Shoppers Food.
Shoppers Food is currently in compliance with all covenants.
NOTE 8 - SETTLEMENT OF LITIGATION
Settlement with Robert, Gloria and Linda Haft
On September 26, 1997, Dart closed the transactions contemplated in an
agreement, dated August 16, 1997, to settle certain litigation and enter into
other related transactions (the "RGL Settlement") with Robert M. Haft, Gloria
G. Haft, Linda G. Haft and certain related parties (collectively, "RGL").
Under the RGL Settlement, Dart purchased from RGL 104,976 shares of Dart Class
B Common Stock for $14.7 million and 77,244 shares of Dart Class A Common Stock
for $6.8 million. In addition, Dart paid to RGL $9.3 million to terminate all
options for shares of Dart Class A Common Stock that they hold or claim and
Dart paid to Robert M. Haft, Linda G. Haft and certain related parties $9.7
million to terminate putative options to purchase shares of Dart/SFW Corp.
Pursuant to the RGL Settlement, the Company dismissed all claims it had against
each of RGL, in addition the Company paid $250,000 to RGL to terminate any and
all rights to purchase shares of the capital stock of Trak Auto and Crown
Books.
In addition, Dart acquired all of Robert M. Haft and Linda G. Haft's interest
in partnerships owning Dart's headquarters building in Landover, Maryland and a
distribution center leased by Trak Auto in Bridgeview, Illinois for $4.4
million. Subsequent to October 31, 1997, Trak Auto funded $1.3 million towards
the Bridgeview portion of the payment. It is contemplated that the $1.3
million will ultimately become an equity contribution by Trak Auto in the
distribution center.
The closing of RGL Settlement, resulted in the termination of the pending claim
by RGL to control of Dart and the settlement of all litigation between them and
Dart and its subsidiaries.
Settlement with Herbert Haft and Ronald S. Haft
On October 16, 1997, Dart announced settlements (the "Settlements") with
Herbert H. Haft and Ronald S. Haft pursuant to a settlement agreement with
Herbert H. Haft (the "HHH Settlement Agreement"), a First Supplemental
Settlement Agreement with Ronald S. Haft (the "First Supplemental Agreement")
and a Second Supplemental Settlement Agreement with Ronald S. Haft (the "Second
Supplemental
14
<PAGE> 15
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1997 and 1996
(Unaudited)
Agreement"). The Settlements were subsequently approved by the Delaware Court
of Chancery on November 24, 1997.
The transactions contemplated in the HHH Settlement Agreement include: the
purchase by Dart from Herbert H. Haft of all his shares of, and options to
purchase, Dart Class A Common Stock; that Herbert H. Haft will resign from all
of his positions with Dart and its subsidiary corporations; that Herbert H.
Haft will relinquish his claim to voting control of Dart and that Herbert H.
Haft will terminate his employment contract with Dart. In addition, all
outstanding litigation and disputes between Dart and Herbert H. Haft will be
resolved. As consideration for the Settlements, Dart will pay Herbert H. Haft
approximately $28 million upon closing, including $9.25 million which may be
deferred until June 1, 1998 if the closing occurs before then. Dart will also
make a $10 million loan to a partnership owned by Herbert H. Haft and Ronald S.
Haft, which loan will be personally guaranteed by Ronald S. Haft and will be
secured by the partnership's interest in three shopping centers located in
suburban Washington, D.C. and by a one-half indirect interest in Shoppers
Food's headquarters in Lanham, Maryland. Shoppers Food will loan Dart an
additional $25 million for the Settlements as permitted by the covenants under
the Senior Notes.
The transactions contemplated in the First Supplemental Agreement
include: completion of bankruptcy plans of reorganization for partnerships
owning Dart's headquarters in Landover, Maryland and the distribution center
leased to Trak Auto in Bridgeview, Illinois; payment by Dart of $7 million to
reduce outstanding mortgage loans on these properties, which will thereafter be
wholly-owned by Dart and/or its affiliates and Ronald S. Haft will pay $2.2
million to Dart from escrowed funds previously earmarked for Ronald S. Haft.
On November 19, 1997, the transactions contemplated in the First Supplemental
Agreement were closed. Trak Auto advanced to a wholly-owned subsidiary of Dart
$2.0 million towards the Bridgeview, Illinois portion of the $7.0 million
mortgage payments. The $2.0 million together with the $1.3 million (discussed
above) may ultimately become an equity interest in that subsidiary.
The closing of the settlement transactions with Herbert H. Haft are expected to
occur in early 1998. There can be no assurance that the closing will occur.
Under the Second Supplemental Agreement, after the closing of the transactions
contemplated in the HHH Settlement Agreement, Dart will be entitled to require
that the shares now held in a Voting Trust for the benefit of Ronald S. Haft to
be transferred to Dart.
15
<PAGE> 16
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1997 and 1996
(Unaudited)
The pro forma Consolidated Balance Sheet presented below reflects the
Settlements and related plans of reorganization as if they had occurred on
October 31, 1997 (in thousands).
<TABLE>
<CAPTION>
Unaudited
----------------------------------------
Historical Pro Forma
October 31, Pro Forma October 31,
1997 Adjustments 1997
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and short-term
instruments $ 47,790 $ (44,080) (a) $ 3,710
Marketable debt securities 32,163 32,163
Accounts receivable 18,752 18,752
Merchandise inventories 264,132 264,132
Deferred income tax benefit 11,560 11,560
Other current assets 9,315 9,315
--------- --------- ---------
Total Current Assets 383,712 (44,080) 339,632
--------- --------- ---------
Property and Equipment, at cost:
Furniture, fixtures and
equipment 177,507 177,507
Leasehold improvements 34,077 34,077
Land and buildings 5,434 12,156 (b) 17,590
Property under capital
leases 31,859 (12,995) (c) 18,864
--------- --------- ---------
248,877 (839) 248,038
Accumulated depreciation
and amortization 125,952 (5,366) (c) 120,586
--------- --------- ---------
122,925 4,527 127,452
--------- --------- ---------
Goodwill 147,769 147,769
--------- ---------
Note receivable-Haft - 7,800 (d) 7,800
Deferred income tax benefit 9,443 9,443
--------- ---------
Other assets 22,982 - 22,982
--------- --------- ---------
Total Assets $ 686,831 $ (31,753) $ 655,078
========= ========= =========
</TABLE>
16
<PAGE> 17
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Unaudited
---------------------------------------
Historical Pro Forma
October 31, Pro Forma October 31,
1997 Adjustments 1997
------------ ----------- -----------
<S> <C> <C> <C>
LIABILITIES
Current Liabilities:
Current portion of
mortgages payable $ 99 $ 1,040 (e)$ 1,139
Note payable - Haft - 9,250 (e) 9,250
Accounts payable, trade 149,716 149,716
Income taxes payable 2,150 2,150
Accrued salaries and
employee benefits 27,370 (3,600) (f) 23,770
Accrued taxes other than
income taxes 14,472 14,472
Current portion of reserve
for closed facilities
and restructuring 6,101 6,101
Other accrued liabilities 69,932 (4,750) (g) 65,182
Current portion of obligations
under capital leases 209 (209) (c) -
--------- --------- ---------
Total Current Liabilities 270,049 1,731 271,780
--------- --------- ---------
Mortgages payable 280 14,678 (h) 14,958
--------- ---------
Crown Books' credit facility 17,167 17,167
--------- ---------
Obligations under capital
leases 42,181 (18,138) (c) 24,043
--------- ---------
Reserve for closed facilities
and restructuring 23,645 (8,970) (k) 14,675
--------- ---------
Deferred income taxes 9,337 9,337
--------- ---------
Shoppers Food Senior Notes 200,000 200,000
--------- ---------
Other Liabilities 2,681 2,681
--------- ---------
Commitments and Contingencies
Minority interests 49,604 - 49,604
--------- --------- ---------
Stockholders' Equity
Class A common stock 1,975 1,975
Class B common stock 500 500
Paid-in capital 79,887 79,887
Notes receivable-shareholder (65,130) (65,130)
Unrealized losses on
short-term investments 95 95
Retained earnings 78,053 (8,154) (i) 69,899
Treasury Stock, Class A
common stock (8,508) (12,900) (j) (21,408)
Treasury Stock, Class B
common (14,985) - (14,985)
--------- --------- ---------
Total Stockholders' Equity 71,887 (21,054) 50,833
--------- --------- ---------
Total Liabilities and
Stockholders' Equity $ 686,831 $ (31,753) $ 655,078
========= ========= =========
</TABLE>
17
<PAGE> 18
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1997 and 1996
(Unaudited)
Notes to the Pro Forma Balance Sheet (in thousands)
<TABLE>
<S> <C>
(a) Reduction in cash as follows:
Purchase of Dart Class A Shares and Trak
Auto and Crown Books Shares $12,900
Purchase of Dart Class A options and
Trak Auto and Crown Books options 3,912
Loan to partnership owned by Ronald S.
Haft and Herbert H. Haft 10,000
Payment to terminate Herbert H. Haft
employment contract 7,690
Cash received from Ronald S. Haft (2,200)
Payments for derivative lawsuits 3,500
Payments to real estate mortgage
holders 7,000
Fees related to transaction 1,278
-------
Total $44,080
=======
(b) Record purchase of real estate contemplated in October 1995 settlement
with Ronald S. Haft and completed with RGL Settlement and the
Settlements.
(c) Reverse capital lease assets and lease obligations for purchased real
estate.
(d) Record discounted note receivable
(e) Record short-term payables:
Current portion mortgage payable $ 8,040
Payments to mortgagee (7,000)
Deferred payment to Herbert H. Haft 9,250
-------
$10,290
=======
(f) Reverse accrued salary and benefits - Herbert H. Haft.
(g) Record payment of litigation costs.
(h) Record mortgage obligations for purchased real estate.
(i) Net effect to the Statement of Operations.
(j) Record purchase of Class A Shares.
(k) Record reversal of closed facility reserve attributable to purchased real
estate.
</TABLE>
9 - MINORITY INTEREST
The $49,604,000 of minority interests reflected in the Consolidated Balance
Sheet as of October 31, 1997 represents the minority portion of Trak Auto and
Crown Books equity owned by the public shareholders of Trak Auto and Crown
Books. Income (loss) attributed to the minority shareholders of Trak Auto was
$(2,669,000) and $658,000 for the nine months ended October 31, 1997 and 1996,
respectively, and $(2,128,000) and $51,000 for the three months ended October
31, 1997 and 1996, respectively. Income (loss) attributed to the minority
shareholders of Crown Books was $(15,483,000) and $(1,566,000) for the nine
months ended October 31, 1997 and 1996, respectively, and $(12,223,000) and
$53,000 for the three months ended October 31, 1997 and 1996, respectively.
18
<PAGE> 19
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1997 and 1996
(Unaudited)
NOTE 10 - PROPERTY, EQUIPMENT AND DEPRECIATION
Effective February 1, 1997, the Company changed its accounting policy from
expensing purchased computer software costs in the year of acquisition to
capitalizing and depreciating these costs over the estimated useful life not to
exceed five years. Management has determined that these costs benefit future
periods.
During the nine months ended October 31, 1997, the Company recorded
amortization of purchased computer software costs of approximately $450,000.
The effect of capitalizing purchased computer software was to decrease the
Company's loss by approximately $1.3 million ($.63 per share)net of income tax
benefits.
NOTE 11 - SUBSEQUENT EVENT
On October 6, 1997, Trak Auto entered into a purchase agreement (the "Purchase
Agreement") with CSK Auto, Inc. ("CSK") pursuant to which Trak Auto has agreed
to sell to CSK its interest in its California operations (including inventory,
store fixtures and the assignment of store leases). Trak Auto and CSK closed
the transaction on December 8, 1997 for an aggregate purchase price of
approximately $33.6 million. Ninety percent (90%) of the aggregate purchase
price, or $30.2 million, was paid to Trak Auto in cash at the closing. The
remaining ten percent (10%) will be paid pending finalization of any purchase
price adjustments.
Trak Auto expects to realize a pre-tax loss estimated to be $10.5 million on
the sale to cover losses associated with the sale of assets and exposure under
the remaining lease obligations. Trak Auto has recorded this estimated loss in
the accompanying Consolidated Statements of Operations, which is subject to the
final purchase price adjustment.
19
<PAGE> 20
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Outlook
Except for historical information, statements in this Management's Discussion
and Analysis of Financial Condition and Results of Operations are forward-
looking. Actual results may differ materially due to a variety of factors,
including the results of ongoing litigation (or settlement litigation), the
Company's ability to effectively compete in the highly competitive retail book
store, automotive aftermarket and grocery businesses, the effect of national
and regional economic conditions, and the availability of capital to fund
operations. The Company undertakes no obligation and does not intend to
update, revise or otherwise publicly release the result of any revisions to
these forward-looking statements that may be made to reflect future events or
circumstances.
The litigation and any settlement of litigation involving the Haft family
members could pose a threat to Dart's liquidity. See "Funding of Possible
Settlements" below.
During the last three years Crown Books' business strategy has been to pursue
growth opportunities by opening new Super Crown Books stores. Realizing these
opportunities is dependent upon the successful performance of the superstores
and adequate liquidity. Adequate liquidity is dependent upon successfully
improving store performance, improving inventory turnover and reducing
expenses. In prior years, Super Crown Books stores have generated higher sales
at converted locations as well as higher gross margins as a result of a
favorable change in product mix. During the last four fiscal quarters, the new
prototype superstores have performed below Crown Books' expectations. Crown
Books is considering certain revisions to the new superstore prototype that may
enhance its performance. After considering the actual results achieved by the
superstores, together with liquidity constraints, Crown Books has significantly
reduced its expansion plans. Without a significant improvement in the
performance of all superstores, Crown Books would not expect operating
expenses, as a percentage of sales, to decrease as the new stores mature.
The retail book market is highly competitive. The two largest book chains
continue to open additional new stores each year in Crown Books' markets,
thereby continuing to increase the overall level of competition. Management
believes that the markets in which it operates will remain highly competitive
in the foreseeable future and, as a result, Crown Books will be significantly
challenged to improve operating results.
Trak Auto believes that its superstore concept represents the strongest segment
of its business and anticipates that all of its new stores will be opened
within this concept as Super Trak and Super Trak Warehouse stores in existing
and possibly new markets. In the past, these superstores have generated higher
sales at locations converted from Classic Trak stores as well as higher gross
margins as a result of a change in product mix (increased hard parts). Trak
Auto believes that as superstores mature, operating expenses as a percentage of
sales will decrease.
The automotive aftermarket is a highly competitive market place. As a result,
the industry is consolidating with independent operators and small chains
either
20
<PAGE> 21
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
going out of business or being acquired by larger competitors. Additionally, the
do-it-yourself customer base is shrinking due to the increased complexity of
automobiles, increased incidences of leasing, and the availability of well-
maintained leased vehicles entering the used car market. Trak Auto's management
believes that the markets in which it operates will remain highly competitive in
the foreseeable future and, as a result, that Trak Auto will be challenged to
improve operating results in fiscal 1998.
Shoppers Food is the third leading supermarket operator in the greater
Washington, D.C. metropolitan area. Shoppers Food operates in a highly
competitive marketplace and its ability to remain competitive depends in part
on its ability to open new stores and remodel and update existing stores which
will require the continued availability of capital resources.
Trak Auto, Crown Books and Total Beverage intend to continue their practice of
reviewing the profitability trends and prospects of existing stores. These
companies may from time to time close, relocate or sell stores (or groups of
stores) that are not satisfying certain performance objectives. Crown Books
currently anticipates closing approximately six Classic Crown Books store
during the remainder of fiscal 1998.
As a result of this ongoing review, on October 6, 1997, Trak Auto entered into
an agreement to sell its California operations. While the California
operations represented approximately thirty percent (30%) of annual revenues
the operating results have historically been weak and declining because of the
highly competitive Los Angeles market. Trak Auto sold all inventory, store
fixtures and assigned store leases, but has retained the obligation on the
distribution center in Ontario, California. The transaction closed on December
8, 1997. Trak Auto recorded an estimated loss related to this transaction $10.5
million, which is subject to final purchase price adjustments.
Liquidity and Capital Resources
Cash, short-term instruments and U.S. government and other marketable debt
securities, are the Company's primary source of liquidity. Cash, including
short-term instruments and U.S. government and other marketable debt securities
increased by $34.6 million to $80.0 million at October 31, 1997 from $45.4
million at January 31, 1997. This increase was due to the consolidation of
Shoppers Food cash and marketable debt securities.
For the quarter ended October 31, 1997, the Company realized a pre-tax yield of
approximately 5.3% on United States Treasury Bills and approximately 5.9% on
the other marketable debt securities.
Operating activities used $19,391,000 of the Company's funds for the nine
months ended October 31, 1997 compared to $62,315,000 during the same period
one year ago. The decrease in the use of funds was primarily due to payment to
Robert M. Haft last year. The primarily use of funds during the nine months
ended October 31, 1997 was payments for merchandise inventory and the RGL
Settlement, partially offset by funds provided by Shoppers Food and Trak Auto
operations.
Investing activities used $151,772,000 of the Company's funds for the nine
months ended October 31, 1997, compared to providing $8,076,000 during the same
period last year. The primary use of funds was for the Acquisition of the 50%
21
<PAGE> 22
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
equity interest in Shoppers Food (see Note 7 to the Consolidated Financial
Statements). Capital expenditures were $20,223,000 (including Shoppers Food)
during the nine months ended October 31, 1997 compared to $12,710,000 (excluding
Shoppers Food) during the nine months ended October 31, 1996.
Financing activities provided $179,295,000 to the Company during the nine
months ended October 31, 1997 due to the proceeds from the Senior Notes at
Shoppers Food and the draws against the revolving line of credit at Crown Books
and was partially offset by payments for deferred financing and acquisition
costs at Shoppers Food and funds used for the RGL Settlement.
Historically, Dart and each of its subsidiaries generally funded their
respective requirements for working capital and capital expenditures with net
cash generated from operations and existing cash resources. However, the
Company's cash, including marketable debt securities, decreased by
approximately $74.2 million during the nine months ended October 31, 1997,
$42.0 million in fiscal 1997 and $104.4 million in fiscal 1996. In fiscal
1997, Crown Books and Trak Auto entered into revolving credit facilities and
Shoppers Food is negotiating a revolving credit facility.
Dart's working capital needs primarily consist of funding any operating losses
of Total Beverage, payroll and legal fees. Dart expects to meet its working
capital needs in fiscal 1998 from existing cash, short-term investments and
possible dividends from Shoppers Food as permitted by covenants of the Senior
Notes.
The primary capital requirements of Crown Books relate to new store openings
and investments in management information systems. Crown Books believes that
the net cash expenditures incurred in opening a new store generally approximate
$800,000, including inventory purchases, net of accounts payable, and the costs
of store fixtures and leasehold improvements, net of landlord contributions. As
of December 15, 1997, Crown Books has opened 26 stores and relocated one
prototype store in fiscal 1998 requiring cash expenditures of approximately
$20.8 million. As of December 15, 1997, Crown Books has entered into lease
agreements to open four new Super Crown Books stores in fiscal 1999. Crown
Books expects to have cash expenditures of approximately $1.2 million related
to stores that have been closed or will be closed, in fiscal 1998.
Crown Books anticipates funding its working capital and capital expenditures
over the next 12 months with cash generated from significantly improving its
inventory turnover, inventory returns from stores being closed, income tax
refunds and borrowing under its revolving credit agreement. Crown Books had
$7.8 million available for borrowing under its revolving credit facility at
November 1, 1997. As of November 1, 1997, Crown Books' tangible net worth was
less than $52 million. While Crown Books' tangible net worth is less than
$70.0 million, Crown Books is limited to borrowing a maximum of $25.0 million
under the current terms of the revolving credit facility. Crown Books does not
anticipate that its tangible net worth will meet the requirements to increase
its borrowings under the credit facility above the current $25.0 million limit.
Crown Books has initiated discussions with its credit facility lender to
request an increase in its credit limit to $50.0 million without the tangible
net worth requirement. However, there can be no assurance that such an
agreement will occur.
As part of its effort to improve its inventory turns and improve liquidity,
22
<PAGE> 23
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Crown Books is undertaking an inventory returns initiative among other steps.
Under the inventory returns initiative, Crown Books anticipates returning
approximately $25.0 million in inventory after December 1997, in addition to its
normal seasonal returns. Crown Books expects to substantially maintain its
title selection throughout the process. If Crown Books does not successfully
complete the inventory returns initiative described above, and continue to
manage its inventory turnover at this higher rate, Crown Books may not have
adequate liquidity for working capital and capital expenditures, including new
stores.
Trak Auto funds its requirements for working capital and capital expenditures
with net cash generated from operations, existing cash resources and, if
necessary, borrowings under its credit facility. Trak Auto will also have
funds available from the sale of its California operations. Trak Auto's
primary capital requirements relate to remodelings and new store openings
(including inventory purchases and the costs of store fixtures and leasehold
improvements). As of November 1, 1997, Trak Auto had entered into lease
agreements to open eight new Super Trak or Super Trak Warehouse stores.
In December 1996, Trak Auto entered into a revolving credit facility with a
finance company to borrow up to $25.0 million. The credit facility has an
original term of three years. Borrowings are limited to eligible inventory
levels and are secured by Trak Auto's inventory, accounts receivable and
proceeds from the sale of those assets. The credit facility contains certain
restrictive covenants and a maximum leverage ratio covenant. The covenants
include a limitation of $25.0 million on amounts paid (including a $20.0
million limitation on amounts guaranteed) to settle disputes with Haft family
members. As of November 1, 1997 Trak Auto had not borrowed under the credit
facility.
Shoppers Food estimates that it will make capital expenditures of approximately
$10.9 million in the 52 weeks ended January 31, 1998. Such expenditures relate
to three new store openings as well as routine expenditures for equipment and
maintenance. Management expects that these capital expenditures will be
financed primarily through cash flow from operations and a new revolving credit
facility. Capital expenditures related to two stores scheduled to open in the
next two fiscal years are estimated to be approximately $7.0 million.
In February 1997, $137.2 million of the net proceeds from the sale of the
Increasing Rate Notes and $72.8 million of Shoppers Food cash, cash equivalents
and short-term investments were used to fund the Acquisition. In addition,
Shoppers Food paid approximately $6.9 million in fees and expenses incurred by
Dart in connection with the Acquisition.
In June 1997, Shoppers Food refinanced the Increasing Rate Notes with $200.0
million aggregate principal amount of its Senior Notes due 2004 (the "Senior
Notes"). The net proceeds of the offering were approximately $193.5 million.
Shoppers Food used approximately $143.5 million of the net proceeds to repay
its Increasing Rate Notes due 2000 (including accrued and unpaid interest
through the estimated date of redemption). The remaining net proceeds were
paid to Dart for a settlement with Robert M., Gloria G. and Linda G. Haft on
September 26, 1997 in the form of a $40.0 million dividend and a $10 million
loan.
Shoppers Food's interest expense consists primarily of interest on the Senior
Notes and capital lease obligations. Interest expense increased $14.5 million
from $1.4 million during the 39 weeks ended November 1, 1996 to $15.9 million
23
<PAGE> 24
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
during the 39 weeks ended November 1, 1997 due to the interest paid on the
Increasing Rate Notes, which were issued on February 6, 1997 and redeemed on
June 25, 1997 and interest accrued on the Senior Notes.
Shoppers Food believes that cash flows from its operations and borrowings under
a new revolving credit facility that it is seeking will be adequate to meet its
anticipated requirements for working capital, debt service, capital expenditures
over the next few years, and a loan of $25 million to Dart for the Haft
Settlements. However, there can be no assurances that Shoppers Food will
generate sufficient cash flow from operations or that it will be able to borrow
under a new revolving credit facility.
Funding of Possible Settlements
Dart and its principal subsidiaries have entered into an agreement to settle
certain litigation and enter other related transactions with Herbert H. Haft
and Ronald S. Haft. As consideration for the Settlements, Dart will pay
Herbert H. Haft approximately $28 million upon closing, including $9.25 million
which may be deferred until June 1, 1998 if the closing occurs before then.
Dart will also make a $10 million loan to a partnership owned by Herbert H.
Haft and Ronald S. Haft, which loan will be personally guaranteed by Ronald S.
Haft and will be secured by the partnership's interest in three shopping
centers located in suburban Washington, D.C. and by a one-half indirect
interest in Shoppers Food's headquarters in Lanham, Maryland. It is
anticipated that Dart would pay substantially all of this amount, though a
portion (yet to be determined) could be allocated to Trak Auto and Crown Books.
Allocation of any actual settlement obligations among the companies would be in
proportion to reflect relative benefits each company receives, as determined by
their boards of directors after consultation with outside advisors.
Dart presently has not determined a final financing plan for the settlement
with Herbert H. Haft, which possible settlement would involve total payments of
approximately $40 million (including a loan of $10 million). Trak Auto and
Crown Books anticipate that they would pay their portion of the settlement
obligations from borrowings under their respective credit facilities and
Shoppers Food will loan Dart up to $25 million for the settlement.
It has been suggested that Dart sell one or all of its subsidiaries and
possibly liquidate. Dart has no plans to liquidate and, although Dart has
considered selling all or part of its equity interest in Shoppers Food, Dart
presently has no intention of doing so. However, Dart may be open to the
possibility of one or more strategic transactions. Dart and Crown have had
preliminary discussions with certain third parties concerning the possible sale
of Dart's interest in Crown Books or the sale of all of Crown Books and the
possible sale of Total Beverage. There can be no assurance that any such
discussions will occur or continue in the future or will result in any
agreement for any such sale or as to the terms or timing of any such sale, if
one occurs.
24
<PAGE> 25
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Results of Operations
Trak Auto
During the 39 weeks ended November 1, 1997, Trak Auto opened seven new Super
Trak and two new Super Trak Warehouse stores and closed or converted 16 classic
Trak stores, closed one Super Trak store and converted one Super Trak Warehouse
to a Super Trak. At November 1, 1997, Trak Auto had 277 stores, including 128
Super Trak stores and 45 Super Trak Warehouse stores.
Sales of $257,800,000 during the 39 weeks ended November 1, 1997 decreased by
$7,597,000 or 2.9% compared to sales for the 39 weeks ended November 2, 1996
while sales of $85,672,000 during the 13 weeks ended November 1, 1997 decreased
$2,281,000 or 2.6% compared to sales for the same period one year ago. The
sales decrease during the 39 weeks ended November 1, 1997 was primarily due to
the mild winter conditions in the Midwest and East coast markets during the
first quarter as well as the weak performance of the stores in the highly
competitive Los Angeles market. Comparable sales (stores open more than one
year) decreased 8.0% and 7.5% for the 39 and 13 weeks ended November 1, 1997.
Sales for comparable Super Trak and Super Trak Warehouse stores decreased 8.0%
and 7.6% for the 39 and 13 weeks ended November 1, 1997, respectively. Sales
for comparable classic Trak stores decreased 7.8% and 7.1% for the 39 and 13
weeks ended November 1, 1997, respectively. Sales for Super Trak and Super
Trak Warehouse stores represented 69.3% and 70.5% of total sales during the 39
and 13 weeks ended November 1, 1997 compared to 58.3% and 60.0% for the 39 and
13 weeks ended November 2, 1996, respectively.
Interest and other income decreased by $586,000 and $208,000 for the 39 and 13
weeks ended November 1, 1997, respectively, when compared to the prior year,
largely due to reduced income from subleased store locations and reduced
recoveries from audits of prior years vendor allowances.
Cost of sales, store occupancy and warehousing expenses as a percentage of
sales were 76.8% and 77.0% for the 39 and 13 weeks ended November 1, 1997
compared to 75.7% and 76.5% for the same periods in the prior year. The
increases were primarily due to increased occupancy and distribution costs.
Selling and administrative expenses were 20.7% and 18.4% as a percentage of
sales for the 39 and 13 weeks ended November 1, 1997 compared to 20.7% and
21.0% for the 39 and 13 weeks ended November 2, 1996. The decrease for the 13
week period was primarily due to increased advertising credits that offset the
advertising expenses incurred during the first half of the fiscal year. Trak
Auto has reduced payroll costs, however for the 39 week period payroll costs,
as a percentage of sales remains higher than last year due to the sales
decrease during the first quarter of this year.
The provision for loss on sale of California operations of $10,493,000 is an
estimate of the loss associated with the sale of Trak Auto's California assets
and exposure under remaining lease obligations (see Note 11 to the Consolidated
Financial Statements).
Depreciation and amortization expenses increased $229,000 for the 39 weeks ended
November 1, 1997 compared to the same period one year ago. The increase was due
to increased fixed assets for new stores, particularly in the Milwaukee market.
25
<PAGE> 26
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Interest expense of approximately $2,791,000 during the 39 weeks ended November
1, 1997 was for interest under capital lease obligations.
Trak Auto recorded an income tax benefit of $3,824,000 during the 39 weeks
ended November 1, 1997. The tax benefit is the result of Trak Auto's
$11,925,000 net operating loss.
Crown Books
During the 39 weeks ended November 1, 1997, Crown Books opened 18 Super Crown
Books stores, relocated one prototype Super Crown Books store and closed seven
Classic Crown Books stores and four Super Crown Books stores. At November 1,
1997, Crown Books had 174 stores, including 123 Super Crown Books stores.
Sales of $199,237,000 for the 39 weeks ended November 1, 1997 increased by
$6,931,000 or 3.6% compared to the 39 weeks ended November 2, 1996 while sales
of $65,676,000 for the 13 weeks ended November 1, 1997 increased by $2,395,000
or 3.8% compared to the 13 weeks ended November 2, 1996. Comparable sales
(sales for stores open for 13 months) decreased 5.7% and 6.1% during the 39 and
13 weeks, respectively. Sales for Super Crown Books stores of $165,247,000 and
$55,250,000 for the 39 and 13 weeks ended November 1, 1997 increased 13.1% and
11.6%, respectively, over the prior year and sales for comparable Super Crown
Books stores decreased 6.3% and 6.6%, respectively. Comparable sales for the
new superstore prototype decreased 6.3% and 7.3% for the 39 and 13 weeks ended
November 1, 1997. Crown Books' superstores consist of the original superstores
of 6,000 to 10,000 square feet and the new superstore prototype targeted to
occupy 15,000 square feet.
Interest and other income decreased by $690,000 and $29,000 during the 39 and
13 weeks ended November 1, 1997 when compared to the same periods one year ago.
The decreases were primarily due to reduced interest income as a result of the
decrease in funds available for short-term investments.
Cost of sales, store occupancy and warehousing as a percentage of sales were
85.6% and 89.9% for the 39 and 13 weeks ended November 1, 1997 compared to
82.3% and 83.1% for the same periods one year ago. The increases were
primarily due to decreased store margins as a result of increased promotional
discounts, obsolete inventory reserves and increased shrink reserves. The
increases were also due to increased store occupancy costs in new stores and
the effect of the decline in comparable sales on occupancy costs in existing
stores.
Selling and administrative expenses as a percentage of sales were 23.7% and
28.1% for the 39 and 13 weeks ended November 1, 1997 compared to 20.6% and
21.5% for the same periods one year ago. The increases were due primarily to
increased payroll and advertising costs and the ongoing cost of implementing
new management information systems and other consulting fees.
Depreciation and amortization expense increased $629,000 for the 39 weeks ended
November 1, 1997 compared to the same period one year ago primarily due to the
increase in fixed assets for new superstores and to the amortization of
computer software.
Interest expense was $1,150,000 during the 39 weeks ended November 1, 1997
compared to $892,000 during the 39 weeks ended November 2, 1996. Interest
26
<PAGE> 27
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
expense during the 39 weeks ended November 1, 1997 was primarily due to
interest on borrowings under the credit facility while interest during the 39
weeks ended November 2, 1996 was primarily due to interest on the Robert M.
Haft judgement which was paid in August 1996.
During the 39 weeks ended November 1, 1997, Crown Books increased its valuation
allowance for deferred income tax assets by $17.0 million (see Note 5 to the
Consolidated Financial Statements).
Shoppers Food
Shoppers Food opened three new stores since July 1997 for a store count of 37
at November 1, 1997.
Sales increased by $8.5 million, from $625.1 million during the 39 weeks ended
November 2, 1996 to $633.6 million during the 39 weeks ended November 1, 1997.
Sales increased by $8.6 million, from $205.5 million during the 13 weeks ended
November 2, 1996 to $214.1 million during the 13 weeks ended November 1, 1997.
The sales increases was due to the three new stores opened since July 1997.
Comparable store sales decreased 1.7% and 4.0% during the 39 weeks and 13 weeks
ended November 1, 1997, respectively. The decreases in comparable store sales
were primarily due to the new stores drawing customers from existing stores and
competitive market conditions.
Gross profit increased by $6.4 million (4.5%), from $141.1 million during the
39 weeks ended November 2, 1996 to $147.5 million during the 39 weeks ended
November 1, 1997 and increased by $3.4 million (7.6%), from $45.0 million
during the 13 weeks ended November 2, 1996 to $48.4 million during the 13 weeks
ended November 1, 1997. Gross profit, as a percentage of sales, increased to
23.3% and 22.6% during the 39 weeks and 13 weeks ended November 1, 1997,
respectively from 22.6% and 21.9% during the 39 weeks and 13 weeks ended
November 2, 1996. The increases were primarily due to a more proactive pricing
strategy on selected items, to a reduction in the number of items which are
offered at special discounts on a weekly basis in stores, and to a higher
allowance income achieved through increased vendor participation.
Selling and administrative expenses increased by $4.7 million (4.1%), from
$113.6 million during the 39 weeks ended November 2, 1996 to $118.3 million
during the 39 weeks ended November 1, 1997 and increased by $2.4 million
(6.1%), from $39.2 million during the 13 weeks ended November 2, 1996 to $41.6
million during the 13 weeks ended November 1, 1997. Selling and administrative
expenses, as a percentage of sales, increased from 18.2% and 19.1% during the
39 weeks and 13 weeks ended November 2, 1996 to 18.7% and 19.4% during the 39
weeks and 13 weeks ended November 1, 1997. The increases were primarily
attributable to increased payroll costs associated with negotiated union rates
and store remodeling and to expenses associated with the new stores opened
since July 1997.
Depreciation and amortization increased $1.3 million from $6.9 million during
the 39 weeks ended November 2, 1996 to $8.2 million during the 39 weeks ended
November 1, 1997 and increased $1.1 million from $2.1 million during the 13
weeks ended November 2, 1996 to $3.2 million during the 13 weeks ended November
1, 1997. The increases were primarily due to additional depreciation and
amortization associated with goodwill and lease rights, as well as with fixed
27
<PAGE> 28
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
assets purchased for the new stores opened since July 1997 offset by a reduction
of assets becoming fully depreciated in 1997 and 1996. In connection with the
Acquisition, Shoppers Food commenced using Dart's method of depreciating
property and equipment on a straight-line basis. Prior to the Acquisition,
Shoppers Food used accelerated methods. The cumulative effect of this change in
accounting principle has been recorded in the interim financial statements for
the nine months ended November 1, 1997. Depreciation expense for the 39 weeks
ended November 2, 1996 would have been $0.2 million more using the straight-line
basis.
Operating income was $21.0 million and $3.6 million for the 39 weeks and 13
weeks ended November 1, 1997 compared to $20.6 million and $3.6 million during
the same periods in the prior year. The increases were primarily as a result
of higher gross profit, partially offset by selling and administrative expenses
and increased depreciation and amortization.
Interest income decreased $2.0 million and $0.7 million during the 39 weeks and
13 weeks ended November 1, 1997 compared to the 39 weeks and 13 weeks ended
November 2, 1996 due to a reduction of funds available for short-term investing
as a result of the repayment of the bridge financing associated with
Acquisition.
Interest expense increased $14.5 million from $1.4 million during the 39 weeks
ended November 2, 1996 to $15.9 million during the 39 weeks ended November 1,
1997 as a result of interest paid on the Increasing Rate Notes, interest
accrued on the Senior Notes and the amortization of financing costs.
The effective income tax rate for the 39 weeks ended November 1, 1997 was
47.6% compared to 34.4% for the 39 weeks ended November 2, 1996. The increase
was primarily attributable to nondeductible amortization of acquisition related
goodwill.
On June 26, 1997 Shoppers Food sold $200 million aggregate principal amount of
its 9.75% senior notes due 2004. Net proceeds were used on July 25, 1997 to
repay $143.3 million (including approximately $3.3 million of accrued and
unpaid interest) of the existing Increasing Rate Notes and to pay $50.0 million
into an escrow account to be used by Dart if and when it consummates a
settlement with certain of its shareholders. As a result of this transaction,
$5.3 million, representing an unamortized portion of the financing costs
incurred to secure initial senior indebtedness, were expensed as an
extraordinary item, net of taxes of approximately $1.9 million.
Net income decreased by $13.0 million, from $15.7 million during the 39 weeks
ended November 2, 1996 to $2.7 million during the 39 weeks ended November 1,
1997 and by $4.1 million, from $3.3 million during the 13 weeks ended November
2, 1996 to a net loss of $0.8 million during the 13 weeks ended November 1,
1997. These decreases were primarily attributable to increased interest
expense associated with Shoppers Food's indebtedness and the extraordinary item
discussed above offset by the cumulative effect of the change in accounting
principle.
Total Beverage
Sales increased $602,000 from $20,568,000 during the 39 weeks ended November 2,
28
<PAGE> 29
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
1996 to $21,170,000 during the 39 weeks ended November 1, 1997 and increased
$951,000 from $6,711,000 during the 13 weeks ended November 2, 1996 to
$7,662,000 during the 13 weeks ended November 1, 1997 primarily due to two new
stores opened since July 1997. Comparable store sales increased 2.9% and 14.1%
during the 39 and 13 weeks ended November 1, 1997, respectively.
Cost of sales and store occupancy as a percentage of sales were 81.9% and 82.6%
during the 39 and 13 weeks ended November 1, 1997 compared to 81.6% for both
the 39 and the 13 week ended November 2, 1996.
Selling and administrative expenses as a percentage of sales were 21.2% and
21.9% during the 39 and 13 weeks ended November 1, 1997 (excluding a reversal
of closed store reserve) compared to 23.0% and 21.8% for the 39 and 13 weeks
ended November 2, 1996.
Total Beverage recorded net income of $493,000 during the 39 weeks ended
November 1, 1997 and a net operating loss of $425,000 during the 13 weeks ended
November 1, 1997 compared to net operating losses of $1,154,000 and $283,000
during the 39 and 13 weeks ended November 2, 1996. The net income for the 39
weeks ended November 1, 1997 included the reversal of a closed store expense of
$1.5 million recorded in fiscal 1996 as a result of a lease termination
agreement with the landlord. The net operating loss for the 39 weeks and 13
weeks ended November 2, 1996 included approximately $632,000 and $20,000 paid
to outside consultants who had been retained to assist in the development and
implementation of a strategic business plan.
Dart Group and Other Corporate
Interest and other income decreased $0.6 million during the nine months ended
October 31, 1997 when compared to the same period in the prior year. The
decrease was primarily due to reduced funds available for short-term
investments.
Administrative expenses increased $1.1 million during the nine months ended
October 31, 1997 primarily due to expenses associated with a settlement of
litigation and related transactions with Robert, Gloria and Linda Haft and was
partially offset by lower legal expenses as a result of recording a legal
accrual during the last quarter of fiscal 1997 and current year legal billings
charged to that accrual.
Interest expense decreased by $0.8 million during the nine months ended October
31, 1997 when compared to the same period in the prior year. The decrease was
primarily due to interest accrued for the Robert M. Haft judgement last year.
Trak Auto and Crown Books file separate income tax returns. Total Beverage and
Shoppers Food are included in Dart's income tax returns.
Dart's cumulative total net tax operating loss carryforward is $86.4 million.
All net operating loss carryforwards will expire by fiscal 2012. In addition,
Dart has an Alternative Minimum Tax credit carryforward of approximately $1.0
million. Dart has a deferred tax valuation allowance of $47.7 million as of
October 31, 1997. Management will continue to evaluate the need for a
valuation allowance on a periodic basis.
29
<PAGE> 30
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Effect of New Financial Accounting Standard
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128
Earnings Per Share. SFAS No. 128 replaces the presentation of primary earnings
per share, previously presented by Shoppers Food, with basic earnings per share
and requires a reconciliation of the numerator and denominator of basic
earnings per share to fully diluted earnings per share. Fully diluted earnings
per share is computed similarly to the previous requirements. Shoppers Food
will be required to adopt SFAS No. 128 in the fourth quarter of fiscal 1998 and
to restate all previously presented earnings per share data. The presentation
of Shoppers Food's basic earnings per share under SFAS No. 128 is not
materially different than the amounts presented herein as primary earnings per
share.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130
Reporting Comprehensive Income. SFAS No. 130 requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. The Company will adopt SFAS No.
130 in the first quarter of fiscal 1999 and will provide the necessary
disclosures.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
Disclosure about Segments of an Enterprise and Related Information which
requires the Company to report financial and descriptive information about its
reportable operating segments. The Company will adopt SFAS No. 131 at its
fiscal year-end January 31, 1999 and will provide the necessary disclosure.
30
<PAGE> 31
PART II
Item 1. Legal Proceedings
Material legal proceedings pending against Dart or its subsidiaries are
described in Dart's Annual Report on Form 10-K for the year ended January 31,
1997 and, with respect to material developments in such earlier reported legal
proceedings, see below
Consummation of Settlement with Robert, Gloria and Linda Haft
On September 26, 1997 Dart closed the transactions contemplated in the
Settlement Agreement dated August 16, 1997 (the "RGL Settlement Agreement")
with Robert, Gloria and Linda Haft. Although the closing of the transactions
contemplated in the Settlement Agreement was conditioned in part upon the
completion of bankruptcy plans of reorganization for the partnerships owning
the Company's headquarters building in Landover, MD (75th Avenue Associates
Limited Partnership) and a warehouse leased by the Company's subsidiary, Trak
Auto Corporation (Trak Chicago Limited Partnership), those bankruptcy plans had
not closed as of September 26, 1997. Instead, the Company acquired all of
Robert Haft's and Linda Haft's respective interests in such partnerships for a
purchase price of $4,400,000. As contemplated in the RGL Settlement
Agreement, Robert Gloria and Linda Haft have terminated their pending claims to
control Dart and all litigation between them and Dart and its subsidiaries has
been settled and dismissed.
Settlements with Herbert H. Haft and Ronald S. Haft.
Dart has entered into settlements with Herbert H. Haft and Ronald S.
Haft pursuant to a settlement agreement with Herbert H. Haft (the "HHH
Settlement Agreement"), a First Supplemental Settlement Agreement with Ronald
S. Haft (the "First Supplemental Agreement") and a Second Supplemental
Settlement Agreement with Ronald S. Haft (the "Second Supplemental Agreement").
The Boards of Directors of Dart, Crown Books and Trak Auto have approved the
settlements.
The transactions contemplated in the First Supplemental Agreement were
closed on or about November 20, 1997. In connection with that closing, Dart
received $2,200,000 from Ronald S. Haft, which payment was made in connection
with Dart's acquisition of Robert and Linda Haft's respective interests in Trak
Chicago Limited Partnership and 75th Avenue Associates Limited Partnership, as
originally contemplated in the RGL Settlement Agreement.
The closing of the transactions contemplated in the HHH Settlement
Agreement and the Second Supplemental Agreement were conditioned upon a
determination by the Delaware Court of Chancery that all of the terms of those
settlements were fair and reasonable to Dart and its subsidiaries. After
notice was provided to shareholders of Dart, Crown Books and Trak Auto, and a
fairness hearing was held, the Delaware Chancery Court approved the settlements
as fair and reasonable and authorized the dismissal of derivative litigation in
which Herbert H. Haft, Ronald S. Haft and certain Dart directors were
defendants. Dart expects to close the transactions contemplated in the HHH
Settlement Agreement and the Second Supplemental Settlement Agreement in
January 1998, although no assurances can be made that the closing will not be
delayed beyond January, 1998. Upon the closing of those settlements, Herbert H.
Haft will (a) sell to Dart all of his shares of Dart Class A Common Stock, and
shares of and options to purchase stock of Trak Auto and Crown Books, (b) retire
from all of
31
<PAGE> 32
Item 1. Legal Proceedings (continued)
his positions with Dart and its subsidiary corporations, (c) relinquish his
claim to voting control of Dart, (d) terminate his employment agreement with
Dart, and (e) sell to Dart various real estate interests. In addition, all
outstanding litigation and disputes between Dart and Herbert H. Haft will be
dismissed. As consideration for the settlements, Dart will pay Herbert H. Haft
approximately $28 million upon closing, of which amount $9.25 million may be
deferred until June 1, 1998 if the closing occurs before then. Dart also will
make a secured $10 million loan to a partnership owned by Herbert H. Haft and
Ronald S. Haft and Dart and Herbert H. Haft will exchange mutual general
releases.
Warehouse Plans of Reorganization.
Prior to November 19, 1997, Dart was the primary lessee or co-lessee
of certain warehouses owned by Seventy-Fifth Avenue Associates Limited
Partnership ("Seventy-Fifth") and Trak Chicago Limited Partnership I ("Trak
Chicago"; and together with Seventy-Fifth, the "Warehouse Debtors"). On May
25, 1995, each of the Warehouse Debtors filed for chapter 11 relief in the
United States Bankruptcy Court for the District of Maryland. On October 31,
1997, orders were entered in each of the Warehouse Debtors' chapter 11 cases
confirming their Fourth Revised Plans of Reorganization (the "Plans"). The
Plans became effective on November 19, 1997. Through the Plans, Dart acquired,
indirectly through wholly-owned limited liability companies, ownership of the
warehouses and assumed certain obligations related to the warehouses' mortgage
debt. Pursuant to the Plans, Dart's lease of the warehouse previously owned by
Seventy-Fifth was modified prospectively to reduce rent to an amount equal to
debt service on the mortgage loan, and Dart's and Trak Auto's lease of the
warehouse previously owned by Trak Chicago was modified prospectively to
eliminate Dart as a co-lessee, and to reduce rent payable by Trak Auto to an
amount equal to the debt service on the mortgage loan. The foregoing summaries
of the Plans are limited, and further reference is made to Plans themselves and
the orders confirming the Plans, copies of which are attached hereto and
incorporated herein as Exhibits 99.1 and 99.2.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
99.1 Debtor's Fourth Revised Plan of
Reorganization and Order Confirming Debtor's
Fourth Revised Plan of Reorganization for
Seventy-Fifty Avenue Associates Limited
Partnership.
99.2 Debtor's Fourth Revised Plan of
Reorganization and Order Confirming Debtor's
Fourth Revised Plan of Reorganization for
Trak Chicago Limited Partnership I.
(b) Reports on Form 8-K
During the quarter ended October 31, 1997, Dart filed
four Current Reports on Form 8-K.
1. Dart filed a Current Report on Form 8-K on
August 19, 1997
32
<PAGE> 33
Item 6. Exhibits and Reports on Form 8-K (continued)
reporting under Item 5 (Other Events) and
Item 7 (Financial Statements and Exhibits) a
settlement agreement with Robert, Gloria and
Linda Haft.
2. Dart filed a Current Report on Form 8-K on
October 9, 1997 reporting under Item 5 (Other
Events) and Item 7 (Financial Statements and
Exhibits) that Dart Group closed the
settlement with Robert, Gloria and Linda
Haft, that Richard B. Stone replaced Larry G.
Schafran as a director and that the
composition of Dart Group's Board of
Directors had changed.
3. Dart filed a Current Report on Form 8-K on
October 24, 1997 reporting under Item 5
(Other Events) that Trak Auto had reached an
agreement to sell the assets of its Los
Angeles, California stores.
4. Dart filed a Current Report on Form 8-K
October 31, 1997 reporting under Item 5
(Other Events) that Dart had reached
settlement agreements with each of Herbert H.
Haft and Ronald S. Haft and in addition
reported a change in the composition of
Dart's Board of Directors.
33
<PAGE> 34
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DART GROUP CORPORATION
Date: September 15, 1997 By: Richard B. Stone
------------------ ------------------------------
RICHARD B. STONE
Acting Chief Executive Officer
Date: September 15, 1997 Mark A. Flint
------------------ ------------------------------
MARK A. FLINT
Senior Vice President and
Chief Financial Officer
34
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<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 47,790
<SECURITIES> 32,163
<RECEIVABLES> 18,752
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0
0
<COMMON> 2,475
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<SALES> 1,111,807
<TOTAL-REVENUES> 1,120,265
<CGS> 871,870
<TOTAL-COSTS> 871,870
<OTHER-EXPENSES> 263,903
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<INTEREST-EXPENSE> 20,937
<INCOME-PRETAX> (36,445)
<INCOME-TAX> 6,323
<INCOME-CONTINUING> (42,768)
<DISCONTINUED> 0
<EXTRAORDINARY> (3,126)
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<PAGE> 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
SOUTHERN DIVISION
In re: *
SEVENTY-FIFTH AVENUE * Case No. 95-1-3103-DK
ASSOCIATES LIMITED (Chapter 11)
PARTNERSHIP, *
Debtor. *
* * * * * * * * * * *
DEBTOR'S FOURTH REVISED
PLAN OF REORGANIZATION
Seventy-Fifth Avenue Associates Limited Partnership, by Ronald S. Haft
individually and as a general partner thereof, hereby proposes this Debtor's
Fourth Revised Plan of Reorganization, pursuant to Chapter 11, Title 11 of the
United States Code.
INTRODUCTION
This Fourth Revised Plan of Reorganization sets forth the treatment of
Claims and interests in the case of Seventy-Fifth Avenue Associates Limited
Partnership.
ARTICLE I
DEFINITIONS
The terms set forth below in this Article I shall be used in this
Fourth Revised Plan of Reorganization and, when so used, unless the context
requires otherwise, shall have the meanings set forth below. A term used in
the Fourth Revised Plan that is not defined shall have the meaning ascribed to
that term, if any, by the Bankruptcy Code.
Administrative Expense(s): means those expenses and costs allowed
pursuant to section 503(b) of the Bankruptcy Code, including court costs and
professional fees incurred by the Debtor-in-Possession subsequent to the filing
of this Reorganization Case.
Allowed Claim(s): means any right to payment as defined in section
101(5) of the Bankruptcy Code: (a) in respect of which a proof of Claim has
been filed with the Bankruptcy Court
<PAGE> 2
on or before the Bar Date; or (b) which is listed in the Schedules and
Statements of Liabilities of Debtor filed by the Debtor-in-Possession with the
Bankruptcy Court, including any amendments thereto, and is not listed as
disputed, contingent or unliquidated as to amount, and which has not otherwise
been paid during the course of this bankruptcy case from any source; and, as to
any Claim, either no objection to the allowance thereof has been filed or, if
any objection has been filed, such objection has been denied by a Final Order
or the Claim fixed as to amount by a Final Order.
Bank: means The Bank of New York.
Bank Security Interest: means the liens and Security Interest of the
Bank pursuant to all of the Bank's Loan Documents, including but not limited to
a deed of trust and deed of trust note in the original amount of
$16,000,000.00, dated December 19, 1986.
Bankruptcy Code: means the United States Bankruptcy Code, 11 U.S.C.
Section 101 et seq. as in effect from time to time.
Bankruptcy Court or Court: means the United States Bankruptcy Court
for the District of Maryland, or any court or tribunal subsequently constituted
to adjudicate matters arising under the Bankruptcy Code or any successor
bankruptcy laws promulgated by the Congress of the United States and which
assumes jurisdiction over this Reorganization Case.
Bar Date: means the date established by the Bankruptcy Court for
filing proofs of Claim in this Reorganization Case; provided, however, that if
the Bankruptcy Court has ordered an extension of the time by which a particular
Creditor may file a proof of Claim, the date set with respect to such Creditor
shall be the Bar Date with respect to such Creditor, but only as to such
Creditor.
Chapter 11: means Chapter 11 of the Bankruptcy Code.
Claim: has that meaning ascribed to it by section 101(5) of the
Bankruptcy Code.
Class: means a Claim or interest, or a group of Claims or interests,
consisting of those Claims or interests which are substantially similar to each
other, as classified under the Plan, or a
2
<PAGE> 3
Claim or interest or a group of Claims or interests classified by amount as may
be reasonable and necessary as administrative convenience Claims, or a group of
Claims or interests which are otherwise required to be separately classified.
Confirmation of the Plan: means the signing by the Court of an order
confirming the Plan in accordance with the provisions of Chapter 11 of the
Bankruptcy Code.
Confirmation Date: means the date of the signing by the Court of the
order of Confirmation of the Plan.
Combined Entities: means any entity through which RSH or HHH or both
now own or any time in the past have owned, operate or operated, manage or
managed, their private interests in various shopping centers, office buildings,
warehouses and other assets, including the entities set forth in Exhibit 1.1.17
attached to the Settlement Agreement.
CPI: means Combined Properties Incorporated.
CPI Management Agreement: means the Amended and Restated Exclusive
Leasing and Management Agreement by and between CPI and Seventy-Fifth Avenue
dated May 12, 1993, as amended from time to time.
Creditor: has that meaning ascribed to it in section 101(10) of the
Bankruptcy Code.
Dart: means Dart Group Corporation.
Dart Claims: means all causes of action, Claims and demands of any
nature whatsoever of Dart and its affiliates and subsidiaries including, inter
alia, Claims for the reformation of its leases with the Debtor and a refund of
rents paid.
Dart/RSH Settlement Agreement: means that agreement by and among
Ronald S. Haft and Dart among others, dated as of October 6, 1995.
Debtor or Debtor-in-Possession: means Seventy-Fifth Avenue Associates
Limited Partnership.
3
<PAGE> 4
Disallowed Claim(s): means any Claim (or Claims) which has been
disallowed pursuant to a Final Order.
Disputed Claim(s): means a Claim (or Claims) against the Debtor and
Debtor-in-Possession, either scheduled or to the extent that a proof of Claim
has been filed or is deemed to have been filed, as to which an objection has
been timely filed and which objection, if timely filed, has not been withdrawn
on or before any date fixed for filing such objections by order of the
Bankruptcy Court and has not been denied by a Final Order. To the extent an
objection relates to the allowance of only a part of a Claim, such Claim shall
be a Disputed Claim only to the extent of the objection.
Effective Date: means that date after the Confirmation of the Plan
when all of the terms and conditions of Article XIII of the Plan have fully
complied with.
Encroached Portion: means that portion of the real property owned
by the Debtor that is currently subject to encroachments by improvements owned
by Pennsy Drive Warehouses, L.L.C.
Equity Security: means the interest of a limited partner in the
Debtor.
Executory Contract: means any unexpired lease or contract to which
the Debtor and Debtor-in-Possession is a party and which is executory within
the meaning of section 365 of the Bankruptcy Code.
Final Order: means an order of the Court or of any court of competent
jurisdiction which has been entered and which has become final by expiration of
the time for an appeal therefrom or, if an appeal(s) is taken, by resolution of
such appeal(s) in favor of one of the parties thereto and the expiration of the
time for further appeal(s) therefrom.
Headquarters Newco: means 75th Avenue Headquarters, L.L.C., a limited
liability company to be formed pursuant to the laws of the State of Delaware
whose sole members are in Dart's discretion Trak Auto, Crown Books Corporation
or Dart and/or other entities wholly owned by Trak Auto, Crown Books
Corporation and/or Dart. .
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Herbert Haft Assertions: means those causes of action, choses in
action, Claims, interests and demands of any nature whatsoever, known or
unknown, which have been or could be asserted by Herbert H. Haft against the
Debtor, including but not limited to all of those causes of action which have
been or could have been brought in the Superior Court Litigation.
Indemnification Claims: means the indemnification and/or guaranty
Claims, if any, of Gloria G. Haft, Robert M. Haft, Linda G. Haft and their
family trusts against the Debtor, which Claims, if any, arise out of, inter
alia, the Indemnification Agreement of July 31, 1994 and the Heads of Agreement
of May 17, 1994.
Insider: has the meaning ascribed to that term by section 101(31) of
the Bankruptcy Code.
Loan Documents: means any notes, deeds of trust, mortgages, pledges,
assignment of rents or other similar documents memorializing an extension of
credit or financing to the Debtor.
Notice and a Hearing: has the meaning ascribed to that term by
section 102(1) of the Bankruptcy Code.
Other Family Members: means Robert M. Haft, Linda G. Haft and
Gloria G. Haft and their respective family trusts.
Partnership Agreement: means the Limited Partnership Agreement of the
Debtor as amended from time to time.
Petition Date: means May 25, 1995.
Plan: means this Fourth Revised Plan of Reorganization.
Priority Claims: means all Claims as defined in sections 507(a)(3),
(a)(4) and (a)(6) of the Bankruptcy Code only [excluding claims as defined in
sections 507(a)(1), (a)(2), (a)(5), (a)(7) and (a)(8)of the Bankruptcy Code].
Proponent(s): means Seventy-Fifth Avenue Associates Limited
Partnership, by Ronald S. Haft individually and as a general partner thereof.
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Pro Rata: means the proportion that the dollar amount of an Allowed
Claim in a particular Class or Classes bears to the aggregate dollar amount of
all Allowed Claims in such particular Class or Classes.
Rejection Claim: means any Claim arising under section 502(g) of the
Bankruptcy Code and any Claim of a holder of an Executory Contract which
pursuant to prior Order of Court is allowed as a Claim under section 502(g)of
the Bankruptcy Code.
Remaining Cash Collateral: means the cash collateral of the Debtor
remaining as of the Effective Date, after the deduction therefrom of the
amounts needed to satisfy the claims for legal fees and costs of the Class One
Creditor.
Reorganization Case: means the case of the reorganization of
Seventy-Fifth Avenue commenced by the filing of a Voluntary Petition for Relief
pursuant to Chapter 11 on or about May 25, 1995, being jointly administered and
now pending in this Court under the designation In re: Haft Equities-Bladen
Limited Partnership, et. al., Case Nos. 95-1-3093-DK through 95-1-3104-DK.
Restructured Loan: means an amended and restated deed of trust note
in the principal amount of $16,000,000.00, as well as amended and restated Loan
Documents to be executed and delivered by Headquarters Newco to the Bank
pursuant to the Plan.
Schedules: means the schedules of assets and liabilities filed by the
Debtor-in-Possession with the Bankruptcy Court.
Secured Claim: means any Allowed Claim secured by a Security
Interest.
Secured Creditor: means the holder of a Security Interest which was
properly perfected as required by law or order of this Court with respect to
property in which the Debtor-in-Possession has an interest, to the extent of
the value of the interest of the holder of such Claim in the
Debtor-in-Possession's interest in such property.
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Security Interest: means mortgage, deed of trust, chattel mortgage,
pledge, assignment of rent, pledge, unavoidable judgment lien of record, tax
lien of record, or consensual lien recorded in the appropriate jurisdiction or
otherwise duly perfected, giving the holder thereof a validly perfected
non-preferential lien on the real or personal property of the Debtor except as
otherwise defined in the Plan.
Settlement Agreement: means the Settlement Agreement dated as of
August 14, 1996 by and between Herbert H. Haft and Ronald S. Haft, including
all Exhibits attached thereto, as well as any amendments thereto.
Seventy-Fifth Avenue: means Seventy-Fifth Avenue Associates Limited
Partnership.
Special Prepayment(s): means the payments in the aggregate amount of
$5,000,000.00 to be made by Dart to the Bank pursuant to the terms of the Plan.
75th Avenue Headquarters: means the office and warehouse located at
3300 75th Avenue, Landover, Maryland and all land, structures and improvements
with respect thereto.
75th Avenue Property: means all of Seventy-Fifth Avenue's right,
title and interest in the 75th Avenue Headquarters, as well as all rights of
Seventy-Fifth Avenue under any leases, security deposits, contract rights,
licenses, permits, certificates and all other intangible rights owned by
Seventy-Fifth Avenue and which are appurtenant to the 75th Avenue Headquarters.
Superior Court Litigation: means the consolidated law suits in the
Superior Court of the District of Columbia, Civil Division and designated:
Herbert H. Haft v Ronald S. Haft et. al., Civil Action Nos. 94-CA9883 and
95-CA12666.
Tax Claim: means all Claims of governmental units pursuant to section
507(a)(8)of the Bankruptcy Code.
Tier II Partnership: means Seventy Fifth Avenue Tier II Limited
Partnership, holder of a sixty-six and two-thirds percent (66 2/3%) limited
partnership interest in Seventy-Fifth Avenue.
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Unsecured Creditor(s): means any entity having a pre-Petition Date
non-priority Claim for which the entity did not have a Security Interest
securing that Claim.
Warehouse Lease: means the lease agreement dated December 26, 1984,
as amended by that certain Amendment to Lease Agreement also dated December 26,
1984, by and between Seventy-Fifth Avenue and Dart Group Corporation.
Wooded Lot: means the 2.66 acres of vacant land near the 75th Avenue
Headquarters.
Wooded Lot Lease: means the lease agreement dated November 22, 1988
by and between Seventy-Fifth Avenue and Dart Group Corporation pertaining to
the Wooded Lot.
ARTICLE II
PROVISION FOR ADMINISTRATIVE CLAIMS
2.01. The holder of an Administrative Expense Claim awarded by a
Final Order of the Court will receive cash equal to the unpaid portion of such
Allowed Administrative Expense Claim on the later of (a) the Effective Date and
(b) the date on which said entity becomes a holder of such Allowed
Administrative Expense Claim pursuant to a Final Order; provided, however,
those Claims that represent liabilities incurred by the Debtor-in-Possession in
the ordinary course of its business, during the pendency of this Reorganization
Case, shall be assumed by the Debtor and paid in the ordinary course of
business in accordance with the terms and conditions of any agreement relating
thereto, or as otherwise agreed.
2.02. Upon the disposition of any property (including real or
personal property, partnership interests, or partnership property) of the
Debtor-in-Possession, the Court, upon application of the Debtor-in-Possession
or any party in interest, may determine the amount of any Tax Claim accruing as
a result of the disposition of said property pursuant to section
503(b)(1)(B)(i) of the Bankruptcy Code.
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ARTICLE III
PROVISION FOR PRIORITY CLAIMS
3.01. All entities having Allowed Priority Claims shall be paid in
cash, in full, on the Effective Date by the Debtor.
ARTICLE IV
PROVISION FOR TAX CLAIMS
4.01. The balance of Allowed Tax Claims, if any, owing on the
Effective Date shall be paid at the sole discretion of the Debtor, by either
(i) equal annual cash payments on each anniversary of the Effective Date, with
interest, pursuant to 11 U.S.C. Section 507(a)(8), until the last anniversary
of the Effective Date that precedes the sixth (6th) anniversary of the date of
the assessment of such Allowed Claim, or (ii) an immediate cash payment to the
extent of cash on hand as of the Effective Date or from contributions from
Ronald S. Haft, or (iii) such other treatment as may be agreed upon by the
Debtor-in-Possession and the holder of such Allowed Tax Claim.
ARTICLE V
CLASSIFICATION OF CLAIMS AND INTERESTS OF SEVENTY-FIFTH AVENUE
5.01. Class One: Shall consist of the Allowed Secured Claim of The
Bank of New York in the real property and related assets of Seventy-Fifth
Avenue, as more particularly described in the Loan Documents related thereto.
5.02. Class Two: Shall consist of the Allowed Claims of Unsecured
Creditors against Seventy-Fifth Avenue, excluding the Dart Claims and excluding
the Indemnification Claims.
5.03. Class Three: Shall consist of the Allowed Dart Claims.
5.04. Class Four: Shall consist of the Allowed interests of the
Equity Security holders of Seventy-Fifth Avenue.
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5.05. Class Five: Shall consist of the Allowed interests of the
general partner of Seventy-Fifth Avenue.
5.06. Class Six: Shall consist of the Herbert Haft Assertions.
5.07. Class Seven: Shall consist of the Allowed Indemnification
Claims.
ARTICLE VI
TREATMENT OF CLASSES OF CLAIMS OR
INTERESTS UNDER THE SEVENTY-FIFTH AVENUE PLAN
A. THE CREDITORS AND INTERESTS OF SEVENTY-FIFTH AVENUE SHALL BE
TREATED AS FOLLOWS:
6.01. The Class One Creditor shall be paid in full and final
satisfaction, discharge and release of its Claim as follows:
(a) The Class One Creditor's Claim shall be Allowed as of
the Effective Date in the amount equal to the sum of:
(i) the principal balance of the deed of trust note
in the original and outstanding principal amount of $16,000,000.000
dated December 19, 1986, (ii) accrued and unpaid interest, if any, at
the non-default contract rate provided in the existing Loan Documents
of the Class One Creditor, (iii) all reasonable fees and expenses
provided for in the existing Loan Documents of the Class One Creditor,
including attorneys' and other professional fees, incurred by the
Class One Creditor in connection with this Reorganization Case, less
(iv) any post-petition adequate protection payments, that are in
excess of post-petition interest payments at the non-default contract
rate.
(b) In consideration for the treatment provided in this
Plan, the Class One Creditor shall waive any Claims it may assert for (x)
interest at the default rate, (y) unpaid late fees, if any, and (z) prepayment
charges permitted under its existing Loan Documents. On the Effective Date,
the Class One Creditor shall receive a payment in cash from the Debtor in an
amount equal to (i) accrued and unpaid interest, if any, at the non-default
contract rate provided in the existing Loan Documents of the Class One Creditor
and (ii) all accrued and unpaid reasonable fees and expenses provided for in
the existing Loan Documents of the Class One Creditor, including attorneys' and
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other professional fees, incurred by the Class One Creditor in connection with
this Reorganization Case
(c) On the Effective Date, fee simple title to all of the
Debtor's real property, improvements, fixtures, including all property subject
to the Warehouse Lease and the Wooded Lot Lease, and all of the Debtor's rights
under any leases, security deposits, contract rights, licenses, permits,
certificates and any intangible rights owned by the Debtor which are
appurtenant to such real property, shall be conveyed (the "Conveyance") to
Headquarters Newco. The Conveyance, and all property transferred pursuant
thereto, shall be subject to the Bank's Security Interest, as amended, and the
Warehouse Lease, as amended, pursuant to the terms of sections 6.01 and 6.03(a)
of the Plan, but not the Wooded Lot Lease. The Bank's Security Interest, as
amended, and all obligations thereunder, shall be assumed by Headquarters
Newco, and shall only be recourse to Headquarters Newco to the extent of the
assets of Headquarters Newco subject to the Security Interest of the Class One
Creditor, and shall not be recourse, directly or indirectly, as to the members
of Headquarters Newco or Ronald S. Haft, and shall be guaranteed by Dart, Trak
Auto Corporation and Crown Books Corporation pursuant to the terms of section
6.01(e)(v) of the Plan.
(d) As soon as practical on or after the Effective Date,
the real property of the Debtor shall be replatted, and fee simple title to the
Encroached Portion shall be conveyed by Headquarters Newco by quitclaim deed to
Pennsy Drive Warehouses, L.L.C., free and clear of the lien of the Deed of
Trust Loan and free and clear of any other liens or encumbrances; provided
however, that the Class One Creditor shall thereupon release the Encroached
Portion from its Security Interest, subject to (i) its review and approval
(which approval shall not be unreasonably withheld) of the subdivision plat and
legal description for both the Encroached Portion and the property remaining
subject to its Security Interest, (ii) its confirmation that the Encroached
Portion will be separately assessed for real estate tax purposes, (iii) its
confirmation that the property
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remaining subject to its Security Interest, after the release of the Encroached
Portion, complies with all subdivision and zoning laws and regulations and (iv)
its receipt of an endorsement to its title insurance policy confirming that the
title insurance is not affected by the release of the Encroached Portion.
(e) On the Effective Date, Headquarters Newco shall
execute and deliver the Restructured Loan which shall contain the following
terms and conditions:
(i) The Restructured Loan shall be dated as of the
Effective Date and shall have a term of five (5) years, with all
unpaid indebtedness due and payable on the fifth anniversary of the
Effective Date.
(ii) The Restructured Loan shall bear interest at a
fixed (the "Fixed Rate Option") or adjustable rate (the "Adjustable
Rate Option"), at the election of Dart, to be exercised five (5)
business days before the Effective Date.
(iii) The Fixed Rate Option shall be equal to the
sum of (A) 200 basis points in excess of the rate on U.S. treasury
instruments having a maturity date closest to the maturity date of the
Restructured Loan, with such fixed rate to be determined as of the
Confirmation of the Plan, provided the Effective Date occurs within
thirty (30) days thereafter; otherwise to be determined five (5)
business days prior to the Effective Date, plus (B) the Bank's actual
swap spread for loans having maturities equal to that of the
Restructured Loan, not to exceed 50 basis points.
(iv) The Adjustable Rate Option shall be equal to
200 basis points in excess of the one-year LIBOR, with such rate to be
determined as of the Confirmation of the Plan, provided the Effective
Date occurs within thirty (30) days thereafter; otherwise to be
determined five (5) business days prior to the Effective Date.
Thereafter the interest rate on the outstanding balance of the
Restructured Loan shall be reset on each anniversary of the Effective
Date to a rate equal to the one-year LIBOR plus 200 basis points,
LIBOR to be determined as of each such anniversary date.
(v) Payment of the Restructured Loan and performance
of all of Headquarter Newco's obligations under the Restructured Loan
shall be guaranteed by Dart, pursuant to the terms of an unconditional
and irrevocable guarantee to be executed and delivered to the Bank on
the Effective Date. Trak Auto Corporation and Crown Books
Corporation, respectively, shall also execute and deliver guaranties
limited in amount to that percentage of the Restructured Loan equal to
the percentage of floor space of 75th Avenue Headquarters that each
occupies pursuant to its respective sub-lease with Dart, as of the
Effective Date.
(vi) The Restructured Loan shall be secured by
valid, perfected and first priority liens and security interests in
and to the real property, improvements and
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fixtures that are subject to the Warehouse Lease (except for the
Encroached Portion), the Warehouse Lease (as modified pursuant to the
Plan) and all other property, rights and interests of the Debtor,
whether or not subject to the existing Security Interest of the Class
One Creditor. As additional security for the Restructured Loan the
Class One Creditor shall have an assignment of and be entitled to
receive directly form Dart, all amounts payable by Dart to
Headquarters Newco under the Warehouse Lease as amended pursuant to
the terms of the Plan and Headquarters Newco shall irrevocably direct
Dart to remit to the Class One Creditor such portion of the monthly
rental payments due under the Warehouse Lease (as amended pursuant to
the terms of the Plan) as is necessary to pay the monthly debt service
to the Class One Creditor under the Restructured Loan.
(vii) If the Fixed Rate Option has been elected,
debt service shall be constant equal monthly payments of principal and
interest in an amount sufficient to fully amortize the $11,000,000.00
principal balance of the Restructured Loan in ten years after the
Effective Date (after giving effect to the Special Prepayments,
provided for in section 6.01(f) of the Plan as if they were both made
on the Effective Date). If the Adjustable Rate Option has been
elected, debt service shall be monthly payments of interest at the
then applicable rate plus monthly payments of principal in the amount
of $91,666.67 until the Restructured Loan is paid in full. Under
either option elected, the first such debt service payment will be due
on the first day of the month following the month in which the
Effective Date occurs, provided that the first payment shall be
adjusted such that interest is paid in arrears.
(viii) If the Fixed Rate Option has been elected,
Headquarters Newco's right to prepay the Restructured Loan prior to
the stated maturity (except for the Special Prepayments provided for
in section 6.03(f) of the Plan) shall be subject to a yield
maintenance provision contained in the Restructured Loan. If the
Adjustable Rate Option has been elected, then Headquarters Newco may
prepay the Restructured Loan, or any part thereof, without penalty on
any anniversary date of the Effective Date, at the expiration of the
then applicable LIBOR interest contract.
(ix) Such representations, warranties, covenants,
conditions and defaults that are substantially similar in nature and
scope to those in the existing Loan Documents and which are in a form
and substance satisfactory to the Bank, Dart, Headquarters Newco and
the Debtor.
(f) On the Effective Date, Dart shall deposit
$5,000,000.00 with the Class One Creditor for the account of Dart.
$2,500,000.00 will be available to and will, on the Effective Date, fund the
first Special Prepayment (and upon such funding will be considered prepaid rent
by Dart under the Warehouse Lease). The remaining $2,500,000.00 will be
available to and will fund the second Special Prepayment (and upon such funding
will be considered prepaid rent by Dart under the Warehouse Lease). While said
funds are on deposit, they shall be invested for Dart's account,
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as Dart may from time to time direct, in securities issued or backed by the
United States Government. No entity or person other than Dart shall have any
rights in or to said funds while on deposit, provided, however, that the Class
One Creditor shall have its common law right of set off and a Security Interest
in said deposit and the proceeds thereof to secure the second Special
Prepayment which shall be due on August 15, 1997.
(g) On the Effective Date, the Class One Creditor shall
release Robert M. Haft, Linda G. Haft, Ronald S. Haft and Herbert H. Haft,
respectively, as to any Claims arising out of the Class One Creditor's existing
Loan Documents, provided, that concurrently therewith, the Class One Creditor
receives from such person a release of any Claims such person may have against
the Class One Creditor arising out of the Class One Creditor's existing Loan
Documents. The exchange of such mutual releases between the Class One
Creditor and any one or more of such persons shall not be (i) dependent upon
the exchange of mutual releases between the Class One Creditor and any other
person, nor (ii) a precondition to the Confirmation of the Plan.
6.02. The Class Two Creditors shall be paid in full and final
satisfaction, discharge and release of their Claims as follows:
(a) Each holder of an Allowed Class Two Claim, if any, shall
receive from cash on hand as of the Effective Date or, to the extent thereafter
needed, from contributions from Ronald S. Haft cash payments in an amount equal
to one hundred percent (100%) of its Allowed Claim, as follows:
(i) Seventy-Fifth Avenue shall first satisfy all
Allowed Administrative Expense Claims, Priority Claims and Tax Claims;
and
(ii) Thereafter, on a monthly basis following the
Effective Date, the holders of Allowed Class Two Claims, if any, shall
receive Pro Rata cash distributions, from the cash on hand as of the
Effective Date or, to the extent thereafter needed, from contributions
from Ronald S. Haft, until such time as they receive one hundred
percent (100%) of such Allowed Claims.
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6.03. The Class Three Creditor shall be treated in full and final
satisfaction of its Claims as follows:
(a) On the Effective Date, Headquarters Newco and the
Class Three Creditor shall execute an amendment of the existing Warehouse
Lease, which amendment shall provide, inter alia, that the Class Three Creditor
pay monthly, as basic rent, a sum equal to the corresponding regularly
scheduled monthly installment of principal and interest due and payable from
time to time under the Restructured Loan.
(b) The Class Three Creditor's rent obligations shall
include the Special Prepayments which the Class Three Creditor shall be
obligated to make as prepaid rent in compliance with the terms and conditions
of section 6.01(f) of the Plan. The rent under the amended Warehouse Lease
shall automatically readjust to reflect (i) the adjusted monthly debt service
on the remaining outstanding balance of the Restructured Loan after each of the
Special Prepayments is made, including but not limited to the first Special
Prepayment which shall be paid on the Effective date, and (ii) any adjustments
in the interest rate if the Adjustable Rate Option is elected (as set forth in
section 6.01(d) of the Plan). In the event of any other prepayments of
principal allowed under the Restructured Loan documents or consented to by the
Class One Creditor, such prepayments shall also result in corresponding
reductions of the Class Three Creditor's monthly payment of rent obligations
under the amended Warehouse Lease.
(c) The Restructured Loan documents and the amended
Warehouse Lease shall provide that the Restructured Loan cannot be refinanced
or otherwise modified in any way without the prior written consent of the Class
Three Creditor.
(d) The Wooded Lot Lease shall be terminated as of the
Effective Date.
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(e) Apart from the treatment provided in this section 6.03 and
as otherwise provided in the Plan, the Class Three Creditor shall not receive
any distributions or payments in satisfaction of its Claims, and the Dart
Claims shall be deemed discharged upon the Confirmation of the Plan.
6.04. The Class Four Equity Security holders of Seventy-Fifth Avenue
shall be treated as follows:
(a) The holder of any Equity Security of Seventy-Fifth
Avenue shall retain its Equity Security in the reorganized Debtor subject to
the terms and conditions of Article VII of the Plan.
6.05. The Class Five general partnership interests shall be treated
as follows:
(a) The general partner shall retain his general
partnership interest in the reorganized Debtor subject to the terms and
conditions of Article VII of the Plan.
6.06. The Class Six Herbert Haft Assertions shall be treated as
follows:
(a) The Class Six Herbert Haft Assertions shall be
treated as set forth in and subject to the terms and conditions of Article VII
of the Plan.
6.07. The Class Seven Indemnification Claimants shall be treated as
follows:
(a) The Class Seven Indemnification Claimants shall be
treated as set forth in and subject to the terms and conditions of Article VII
of the Plan.
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ARTICLE VII
Capital Restructuring for the Reorganized Debtor
7.01. Herbert H. Haft shall not receive any distributions from the
Debtor on account of the Herbert Haft Assertions.
7.02. On the Effective Date or on such other date as may be agreed
upon by and among Robert M. Haft, Linda G. Haft and Dart, Robert M. Haft and
Linda G. Haft shall each receive a cash distribution, pursuant to the terms of
section 8.02.1 of the Plan, in respect of their limited partnership interest in
the Tier II Partnership.
7.03. Except as expressly provided for under the Plan, the Claims
and interests of Ronald S. Haft, Robert M. Haft, Herbert H. Haft and Linda G.
Haft shall not receive any payments or other distributions under the Plan.
7.03.1 To the extent of any allowed Indemnification Claims that are
not satisfied from any other source, Ronald S. Haft shall either (i) satisfy
such Claims, or (ii) cause such amounts to be contributed to the Debtor as may
be necessary to satisfy such Claims.
ARTICLE VIII
MEANS FOR EXECUTION OF THE PLAN
8.01. On the Effective Date, fee simple title to all of the Debtor's
real property, improvements, fixtures, including all property subject to the
Warehouse Lease and the Wooded Lot Lease, and all of the Debtor's rights under
any leases, security deposits, contract rights, licenses, permits, certificates
and any intangible rights owned by the Debtor which are appurtenant to such
real property, shall be conveyed to Headquarters Newco, free and clear of all
Claims, rights of possession, liens and encumbrances, except as expressly set
forth in the Plan.
8.01.1 As soon as possible after the Effective Date, the real
property conveyed to Headquarters Newco shall, subject to the terms of Section
6.01(d) of the Plan, be subdivided, so that
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the fee simple title to the Encroached Portion shall be conveyed by quitclaim
deed to Pennsy Drive Warehouses L.L.C., free and clear of the liens of the
Class One Creditor, as well as any other liens and encumbrances.
8.02. On or about the Effective Date, the Debtor-in-Possession
shall, in accordance with the terms and conditions of the Plan, pay, in cash,
to the respective holders of Allowed Administrative Expense Claims and Allowed
Priority Claims an amount equal to that holder's respective Allowed Claim. The
Debtor-in-Possession shall thereafter, in accordance with the terms and
conditions of the Plan, commence distributions to the holders of Allowed Claims
and interests. CPI on behalf of the Debtor-in-Possession shall act as
disbursement agent for the purpose of making those distributions provided under
the Plan.
8.02.1 On the Effective Date or on such other date as may be agreed
upon by and among Robert M. Haft, Linda G. Haft and Dart, the payments to
Robert M. Haft and Linda G. Haft, as described in section 7.02 of the Plan,
shall be made by Dart as part of the consideration paid by Dart for the
conveyance of the Debtor's Property to Headquarters Newco pursuant to the terms
of the Plan. The payments shall be in the amount of $1,562,000.00 to each of
Robert M. Haft and Linda G. Haft.
8.02.2 On the Effective Date, Dart shall deposit $5,000,000.00 with
the Class One Creditor for the account of Dart to be used to fund the Special
Prepayments.
8.02.3 On the Effective Date, the payment to the Class One Creditor
provided in section 6.01 (b) of the Plan and the payment of Allowed
Administrative Expense Claims as provided in section 2.01 of the Plan shall be
made from the cash collateral of the Debtor and the Remaining Cash Collateral,
if any, shall be conveyed to Headquarters Newco. If, however, the cash on hand
of the Debtor, as of the Effective Date, is insufficient to make the payments
to the Class One Creditor as required by section 6.01 (b) of the Plan and all
Allowed Administrative Expense Claims as required
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by section 2.01 of the Plan, Ronald S. Haft shall make a capital contribution
to the Debtor in such amount as is necessary to make such payments.
8.03. Ronald S. Haft, the general partner of the
Debtor-in-Possession, shall serve as the general partner of the Debtor after
the Effective Date.
8.04. The Debtor-in-Possession shall continue to exist after the
Effective Date in accordance with applicable non-bankruptcy law, to the extent
necessary to wind up its affairs.
8.05. The Partnership Agreement of the Debtor-in-Possession shall be
amended as necessary to satisfy the requirements of the Plan, subject to
further amendment as permitted by applicable law and by the partnership
agreement of the Tier II Partnership.
8.05.1 As soon as practical on or after the Effective Date, the
reorganized Debtor shall execute such other and further documents as are
reasonably necessary to carry out the terms and conditions of the Plan.
8.06. All avoidance actions assert able by the Debtor-in-Possession
pursuant to Sections 542 through 553 of the Bankruptcy Code shall be retained
by the Debtor; provided, however, that, any and all Claims that the
Debtor-in-Possession may have against (i) the Bank and Dart and their
respective affiliates, successors and assigns, (ii) any of the Other Family
Members and (iii) Herbert H. Haft, that arose prior to the Effective Date,
including but not limited to all avoidance actions assertable by the
Debtor-in-Possession pursuant to Sections 542 through 553 of the Bankruptcy
Code shall be deemed released as of the Effective Date and further provided
that, subject and pursuant to the terms of the Settlement Agreement, all causes
of action, if any, against Herbert H. Haft are released.
8.07. Except for the transfers and conveyances made pursuant to the
Plan and the Class One Creditor's Security Interest, the Confirmation of the
Plan shall constitute a revesting of title for all purposes of the
Debtor-in-Possession's property in said Debtor, free and clear of all liens and
Claims
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except as set forth in the Plan, no further order of court shall be required
for the Debtor to sell, convey, loan or encumber its property in any manner.
8.08. Except as otherwise expressly provided in the Plan, the
Confirmation of the Plan shall cause on the Effective Date the discharge of the
Debtor, effective immediately, from any Claim and any "debt" (as that term is
defined in section 101 of the Bankruptcy Code) and the Debtor-in-Possession's
liability in respect thereof will be extinguished completely, whether reduced
to judgment or not, liquidated or unliquidated, contingent or fixed, asserted
or unasserted, matured or unmatured, disputed or undisputed, legal or
equitable, known or unknown, that arose from any agreement that the Debtor
entered into or obligations that the Debtor-in-Possession incurred before the
Confirmation of the Plan, including without limitation, liabilities of a kind
specified in sections 502(g), (h) and (i) of the Bankruptcy Code, whether or
not a proof of Claim is filed or deemed filed under section 501 of the
Bankruptcy Code, whether or not such Claim is allowed under section 502 of the
Bankruptcy Code, or whether or not the holder of such Claim has accepted the
Plan.
8.08.1 Except as expressly set forth in the Plan, Security Interests
shall not be released by virtue of the discharge of Claims and debts which
occurs upon Confirmation of the Plan.
8.08.2 Notwithstanding any provisions of the Plan to the contrary,
the Indemnification Claims shall not be discharged. In each and every respect,
all rights of the holders of the Indemnification Claims are fully preserved,
and nothing in the Plan shall in any way affect or impair any right of any
holder of an Indemnification Claim against the Debtor, Ronald S. Haft or any
other person or entity.
8.09. Except as expressly provided in the Plan, the Confirmation of
the Plan will provide that all persons (including but not limited to
individuals, corporations, partnerships, joint ventures, associations, trusts,
estates, unincorporated organizations, and governments) who have held, hold or
may hold Claims are permanently enjoined, on and after the Confirmation of the
Plan, from:
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<PAGE> 21
(a) commencing or continuing in any manner or form the
enforcement, attachment, collection or recovery, by any manner or means, of any
pre-petition Claim, judgment, award, decree or order against the Debtor or its
current or former partners solely by virtue of their status as a partner
(except to the extent such provision against the Debtor's partners alters the
rights of the holder of a Security Interest, in which event this provision
shall not apply); of creating, perfecting or enforcing any encumbrance of any
kind against the Debtor; from exercising any discretionary and/or "call"
provisions of any loan documents allowing the acceleration of Claims; from
asserting any set off, right of subrogation, or recoupment of any kind against
any obligation due from the Debtor or from any act in any manner, in any place
whatsoever, that does not conform to or comply with the provisions of the Plan;
provided, however, that proceedings may be continued only for the purpose of
obtaining a liquidation of any asserted Claims against the Debtor on the
condition that the holder of any such judgment shall be enjoined from executing
against any of the assets of the Debtor-in-Possession, and further provided
that nothing contained herein shall preclude actions commenced in the Court to
seek compliance with or to enforce the terms and conditions of the Plan.
Unless otherwise provided, the injunction provided herein shall remain in full
force and effect until the consummation of the Plan.
(b) The provisions contained in Section 8.09(a) of the
Plan, as well as the treatment of Claims provided in the Plan, shall not be
deemed or construed to preclude (i) actions or enforcement efforts necessitated
from a breach or default under the terms of the Plan or (ii) a Secured Creditor
from enforcing any remedy available to it pursuant to applicable law or its
Loan Documents based upon a post-Confirmation Date default by the Debtor under
the terms of the Secured Creditor's Loan Documents as modified by the terms and
conditions of the Plan, or (iii) any of the Other Family Members from asserting
and pursuing any rights, demands, debts, obligations
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or Claims of any nature whatsoever that they may have against the Debtor,
Ronald S. Haft , Herbert H. Haft or the Combined Entities.
8.10. The Proponents reserve the right, in accordance with the
Bankruptcy Code, to amend or modify the Plan or the treatment of any Claim
prior to the Confirmation of the Plan. After the Confirmation of the Plan, the
Proponents may amend or modify the Plan, or a portion thereof, in accordance
with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission,
or reconcile any inconsistency in the Plan, in such a manner as may be
necessary to carry out the purpose and intent of the Plan; provided, however,
that no amendment, waiver, modification or supplement shall be made to the Plan
without the prior written consent of (i) Dart and the Bank, or their respective
representatives, and (ii) the Other Family Members, provided that such written
consents shall not be unreasonably conditioned, withheld or delayed.
8.11. The obligations of Dart with respect to the Plan shall be
subject to compliance with the Standstill Order, dated December 6, 1995, of the
Court of Chancery of the State of Delaware in and for New Castle County.
8.12. Headquarters Newco shall be formed on or before the Effective
Date. Its sole members, in Dart's discretion shall be Dart, Trak Auto, Crown
Books Corporation and/or subsidiaries wholly-owned by Dart, Trak Auto and/or
Crown Books Corporation The transfer of any membership interest in
Headquarters Newco, without the prior written consent of the Class One
Creditor, shall constitute an event of default under the Class One Creditor's
Loan Documents, as amended pursuant to the terms of the Plan.
8.13. Any deeds, leases, assignments, pledges, deeds of trust,
transfers of security, mortgages, modifications or other documents of
conveyance contemplated by this Plan, including but not limited to the
subdivision and conveyance of the Encroached Portion, whether made before or
after the Confirmation of the Plan, shall be deemed instruments of transfer
under a plan pursuant
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to 11 U.S.C. Section 1146 and, as a result, may not be taxed under any law
imposing a stamp or similar tax.
ARTICLE IX
JURISDICTION OF THE COURT
9.01. Notwithstanding the Confirmation of the Plan, the Court will
retain jurisdiction until consummation of the Plan to ensure that the purposes
and intent of the Plan are carried out. The Court's jurisdiction shall be over
any and all disputes and litigation pending at the time of the Confirmation of
the Plan, any controversies that may arise thereafter, and any controversies
that may affect the Debtor-in-Possession's ability to effectuate the
consummation of the Plan.
9.01.1 By way of illustration of the jurisdiction retained by the
Court, but not by way of limitation of the same, the Court shall retain
jurisdiction in this case, among other things, for the following purposes:
(a) Classification and re-examination of any Claims of
any Creditors and the determinations of any objections which may be filed
thereto, provided, however, that the Debtor-in-Possession's failure to object
to any Claim which has been allowed for the purpose of voting shall not be
deemed a waiver of the Debtor-in-Possession's right to later object thereto;
(b) The correction of any defect or omission in the Plan
and in the Confirmation of the Plan, as may be necessary to effectuate the
consummation of the Plan;
(c) The modification of the Plan after Confirmation;
(d) To determine any and all applications, Claims,
adversary proceedings, or to allow, disallow, estimate, liquidate, or determine
any Claim against the Debtor-in-Possession and to enter or enforce any order
requiring the filing of any such Claim before a particular date;
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<PAGE> 24
(e) To determine any and all pending applications for
rejection or disaffirmance of Executory Contracts or leases and to hear and
determine and, if need be, to liquidate any and all Claims arising therefrom;
(f) To enter such orders as may be necessary to enforce
the injunctions provided in the Plan;
(g) To determine proceedings pursuant to Section 510 of
the Bankruptcy Code to equitably subordinate any Claim or Class of Claims; and
(h) All other matters which the Court must determine
under the Plan.
9.02. Notwithstanding the retention of jurisdiction by the
Bankruptcy Court, (i) the holders of Security Interests may, after the
Effective Date, enforce any post Confirmation Date defaults in any court of
competent jurisdiction, including state or federal courts, as applicable, and
(ii) any of the Other Family Members may enforce any or all of their rights
arising out of the Indemnification Claims in any court of competent
jurisdiction, including, as applicable any state or federal court, and provided
further that jurisdiction over any dispute arising out of or relating to the
Indemnification Claims shall not be retained by the Court.
ARTICLE X
EXECUTORY CONTRACTS
10.01. Subject to the deliveries, conveyances and agreements required
by the Plan, the Debtor-in-Possession reserves the right to apply to the Court
prior to the Confirmation of the Plan to assume or reject any Executory
Contract pursuant to 11 U.S.C. Section 365.
10.02. On the Effective Date, the Debtor shall reject the Wooded Lot
Lease and the Wooded Lot Lease shall be terminated as of the Effective Date.
Except as otherwise set forth in the Plan, the Confirmation of the Plan shall
automatically constitute an assumption and assignment by the Debtor to
Headquarters Newco of all unexpired leases in which the Debtor-in-Possession is
a lessor which
24
<PAGE> 25
are not otherwise provided for in the Plan which (i) have not been rejected
prior to that date, (ii) have not been assumed, in whole or in part, by prior
Order of Court or, (iii) which are not the subject of a pending application
seeking a rejection thereof. The Confirmation of the Plan shall automatically
constitute an assumption and assignment on the Effective Date by the Debtor to
Headquarters Newco of the Warehouse Lease as amended pursuant to section 6.03
of the Plan.
10.02.1 The CPI Management Agreement will terminate on the Effective
Date, without any penalty to any person or entity, including but not limited to
the Debtor or Headquarters Newco. The Debtor shall, as necessary, provide such
notice to CPI as is required to effectuate said termination.
10.03. Pursuant to Bankruptcy Rule 3002 (c)(4), and except as
otherwise ordered by the Court, proofs of Claim for Claims arising from the
rejection of an Executory Contract or unexpired lease shall be filed with the
Court no later than thirty (30) days after the later of the entry of a Final
Order approving such rejection and the Confirmation of the Plan, or such Claim
shall be forever barred.
ARTICLE XI
GENERAL PROVISIONS
11.01. To the extent a Claim is a contingent or Disputed Claim, the
Debtor-in-Possession shall not be required to make the applicable disputed
portion of a payment to a holder of such contingent or Disputed Claim which
would otherwise be payable to said contingent or Disputed Claimant. Until such
time as a contingent or Disputed Claim becomes fixed and absolute, such Claim
shall be treated as a contested Claim for purposes related to estimation,
allocations and distributions under the Plan and Disputed Claims shall not have
the ability to vote.
11.02. Nothing contained in section 11.01 of the Plan shall be
construed to prohibit the holder of a Disputed Claim or contingent Claim from
seeking an order of the Court authorizing the temporary estimation of such
Claim for voting purposes. In the event that said Claim becomes an
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Allowed Claim, then the Debtor-in-Possession shall thereafter cause to be paid
to the holder an amount which would have theretofore been paid to such holder
under the Plan had the Allowed Claim amount of such Claim been fixed and
determined as of the Effective Date in accordance with the terms of the Plan
and in the same manner as any other Creditor of the same Class.
11.03. Whenever any payment to be made under the Plan is due on a day
other than a business day, such payment will instead be made on the next
business day.
11.04 No action taken by any of the Other Family Members in the
Reorganization Case, including without limitation the filing of proofs of
claims, the filing of any pleadings, any statement made in connection with any
hearing, withdrawal of any objections to confirmation, the casting of any
ballot or withdrawal of any ballot cast in connection with the Plan shall in
any way impair or affect any Claims of any of the Other Family Members against
the Debtor, Ronald S. Haft, Herbert H. Haft or the Combined Entities, nor shall
any such action in any way constitute or be deemed to constitute any grounds
for, or give rise to, any defense to, offset of, or reduction in liability of
the Debtor, Ronald S. Haft, Herbert H. Haft, or the Combined Entities to the
Other Family Members.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. The adoption of the amended Partnership Agreement in
accordance with Article VII of the Plan shall be deemed to have occurred and be
effective on the Effective Date, without any further requirement of action by
the Equity Security holders. Effective as of the Effective Date Ronald S.
Haft, the general partner of the Debtor, shall, without the need for any
further order of the Court, have an irrevocable power of attorney to execute
said amendment on behalf of all limited partners of the Debtor and to execute
all documents needed to effectuate the Conveyance to Headquarters Newco
described in section 6.01(c) of the Plan.
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<PAGE> 27
12.02. All applications for payment of Administrative Expense Claims
must be filed within forty-five (45) days of the Effective Date. Any such
Claim that is not filed by that date shall be forever barred and discharged.
12.03. As soon as possible, but in no event more than two (2) months
after the Effective Date, any party in interest may file and prosecute
objections to Claims and equity interests, which objections shall be filed with
the Bankruptcy Court, provided however, the Class One Claim and the Class Three
Claim shall for all purposes be allowed as provided in the Plan.
12.04. In order to confirm the Plan, and to the extent necessary, the
Debtor invokes the entitlement of Section 1129(b) of the Bankruptcy Code, such
that, as long as the Plan does not discriminate unfairly and is fair and
equitable with respect to any Class of Claims or interests that are impaired
under and have not accepted the Plan, the Plan may be confirmed by the Court.
12.05. On or before the tenth (10th) day preceding the commencement
of the hearing on the Confirmation of the Plan, the Debtor and/or any party in
interest shall file with the Court such agreements and other documents as may
be necessary or appropriate to effectuate and further evidence the terms and
conditions of the Plan, including the Class One Creditor's proposed principal
loan documents evidencing the Restructured Loan.
12.06. Should any provision of this Plan be determined to be invalid,
void or unenforceable, such determination shall not in any way limit or affect
the enforceability and operative effect of any or all other provisions of the
Plan and the Court shall, with the consent of the Proponents, the Class One
Creditor, the Class Three Creditor and the Other Family Members, have the power
to alter and interpret such term or provision to make it valid or enforceable
to the maximum extent practicable, consistent with the original purpose of the
term or provision held to be invalid, void or unenforceable, and such term or
provision shall then be applicable as altered or interpreted. Notwithstanding
any such holding, alteration or interpretation, the remainder of the terms and
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provisions of the Plan shall remain in full force and effect and in no way
shall be affected, impaired or invalidated by such holding, alteration or
interpretation. The Confirmation of the Plan shall constitute a judicial
determination and shall provide that each term and provision of the Plan, as it
may have been altered or interpreted in accordance with the foregoing, is valid
and enforceable pursuant to its terms.
12.07. All fees payable pursuant to Chapter 123 of Title 28, United
States Code, as determined by the Bankruptcy Court on the Confirmation Date,
shall be payable on the Effective Date. Any statutory fees accruing after the
Confirmation of the Plan shall constitute Administrative Expenses and be paid
in accordance with Article II of the Plan.
12.08. Until the Effective Date, all creditors and
parties-in-interests' rights to make any motion or seek any other relief
whatsoever including, but not limited to, moving for relief from the automatic
stay, appointment of a trustee or conversion or dismissal of the Debtor's
Chapter 11 case (including, without limitation, on the grounds of any failure
to consummate the Plan or the Plan to become effective) shall not be impaired
or restricted by the terms of the Plan, the Confirmation of the Plan, or by
virtue of having voted for the Plan. Following the Effective Date, the rights
of the parties shall be governed by the Plan and applicable law.
12.09. Provided that it does not delay the implementation of the
Plan, nor diminish the value of the Plan to Dart, Trak Auto or Headquarters
Newco, Dart, Trak Auto and Headquarters Newco agree to use reasonable efforts
to cooperate with the Debtor, without cost to Dart, Trak Auto or Bridgeview
Newco, in the event the Debtor elects to structure the conveyance(s) provided
in Section 6.01 of the Plan in a tax-free manner pursuant to section 1031 of
the Internal Revenue Code.
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ARTICLE XIII
EFFECTIVENESS OF THE PLAN
13.01. As a condition precedent to the effectiveness and the
Effective Date of the Plan, the following events shall have first occurred:
(a) The Confirmation of the Plan has become a Final
Order;
(b) All documents, instruments and agreements, in form
and substance satisfactory to the Proponents, provided for under or necessary
to implement the Plan shall have been executed and delivered by the parties
thereto, unless such execution or delivery shall have been waived by the
parties entitled under such documents, instruments or agreements to waive such
execution or delivery;
(c) Dart and Ronald S. Haft have executed an amendment to
the terms of the Dart/RSH Settlement Agreement, in a form mutually satisfactory
to them;
(d) Dart shall have deposited with the Class One Creditor
$5,000,000.00 for the account of Dart to be used to fund the Special
Prepayments; and
(e) Headquarters Newco shall have delivered to the Bank
(i) a certified copy of Headquarter Newco's Operating Agreement, (ii) a
certified resolution of Headquarter Newco and its corporate members, (iii) an
incumbency certificate for the managing member of Headquarters Newco and (iv)
an opinion of Headquarters Newco's counsel as to the due authorization of
Headquarters Newco's execution of the amended Loan Documents and as to their
validity, binding effect and enforceability, subject to the usual bankruptcy
and insolvency qualifications.
(f) Dart and the Other Family Members have entered into
definitive settlement agreements, by and among them, in a form mutually
acceptable to them, dealing with all matters in dispute between them and have
thereafter entered into a closing thereon.
29
<PAGE> 30
13.02. Any of the conditions precedent to the effectiveness and the
Effective Date of the Plan may be waived by the unanimous consent of the
Proponents, Dart, the Other Family Members and the Class One Creditor.
13.03. In the event that (i) Dart, Trak Auto, Ronald S. Haft and the
Other Family Members have not entered into definitive settlement agreements,
by and among them, by May 20, 1997, and/or (ii) have not effected the closing
of such settlement agreements by August 15, 1997, then in either such event the
Plan shall be deemed null and void and of no further force and effect at the
election of the Class One Creditor, exercised by written notice to the Debtor,
the Court and all parties in interest.
13.04. If Dart has not previously done so, promptly upon the
execution of any definitive settlement agreement among Dart, Trak Auto Robert
M. Haft, Linda G. Haft and Gloria G. Haft dealing with matters in dispute
between them, Dart and Trak Auto agree to give notice to the other parties to
the Standstill Order described in Section 8.11 of the Plan, as to the
Confirmation of the Plan, the pendency of such definitive settlement agreement,
and such other matters, if any, as Dart may in its discretion deem appropriate.
30
<PAGE> 31
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
SOUTHERN DIVISION
In re: *
SEVENTY-FIFTH AVENUE * Case No. 95-1-3103-DK
ASSOCIATES LIMITED (Chapter 11)
PARTNERSHIP, *
Debtor. *
* * * * * * * * * * *
ORDER CONFIRMING DEBTOR'S
FOURTH REVISED PLAN OF REORGANIZATION
A Confirmation hearing having been held on April 4, 1997 to consider
the Debtor's Third Amended Plan of Reorganization, and upon the motion of all
parties-in-interest the Court having granted leave to the Debtor to file
revisions to said plan, and the Debtor having filed the Debtor's Revised Third
Amended Plan of Reorganization on May 2, 1997 and mailed a copy of the Revised
Third Amended Plan to creditors, equity security holders and other
parties-in-interest, and the Court having entered an Order on June 12, 1997
Confirming the Debtor's Revised Third Amended Plan of Reorganization (the
"First Confirmation Order"), and the Debtor thereafter having filed a
Stipulation and Consent Order Providing for Modification of Debtor's Third
Revised Amended Plan of Reorganization and a Fourth Revised Plan of
Reorganization (the "Plan") on October 28, 1997 and, after proper notice, this
Court has determined:
1. The Plan complies with the applicable provisions of Chapter 11
of the Bankruptcy Code;
<PAGE> 32
2. The Debtor has complied with the applicable provisions of
Chapter 11 of the Bankruptcy Code;
3. The Plan has been proposed in good faith and not by any means
forbidden by law;
4. Any payment made or promised by the Debtor for services or for
costs and expenses incurred in connection with the case, or in connection with
the Plan and incident to the case, has been disclosed to the Court and is
reasonable or is subject to the approval of the Court;
5. The Debtor has disclosed the identity and affiliations of each
individual proposed to serve, after confirmation of the Plan, as a director,
officer or voting trustee of the Debtor, or a successor of the Debtor under the
Plan and the continuance of such individuals is consistent with the interests
of creditors, equity security holders and public policy, and the proponents of
the Plan have disclosed the identity of any insider that will be employed or
retained by the reorganized Debtor and the nature of any compensation for such
insider;
6. Each holder of a claim or interest has accepted the Plan, or
will receive or retain under the Plan property of a value, as of the Effective
Date of the Plan, that is not less than such holder would receive or retain if
the Debtor were liquidated under Chapter 7 of the Bankruptcy Code on such date;
7. With respect to each class of claims or interests, such class
has accepted the Plan or is not impaired under the Plan;
8. Except to the extent that the holder of a particular claim has
agreed to a different treatment of such claim, the Plan provides that:
2
<PAGE> 33
(a) On the Effective Date of the Plan, each holder of a
claim of a kind specified in Section 507(a)(1) of the Bankruptcy Code
will receive on account of such claim cash equal to the allowed amount
of the claim; and
(b) On the Effective Date of the Plan, each holder of a
claim of a kind specified in Section 507(a)(8) of the Bankruptcy Code
will receive on account of such claim deferred cash payments, over a
period not exceeding six years after the date of the assessment of the
claim, of a value, as of the Effective Date of the Plan, equal to the
allowed amount of the claim;
9. At least one class of impaired claims has actually accepted
the Plan, determined without including any acceptance of the Plan by any
insider;
10. All fees payable pursuant to Section 1930 have been paid or
shall be paid on the Effective Date of the Plan;
11. Confirmation of the Plan is not likely to be followed by the
liquidation or the need for further reorganization of the Debtor; and
12. It is in the best interests of the estate that the Plan be
confirmed.
This Court, therefore, finds that the Plan complies with the
requirements of 11 U.S.C. Section 1129. Accordingly, it is this 30th day
of October, 1997,
ORDERED that the First Confirmation Order is hereby vacated,
and deemed null and void and of no further force or effect; and it is further
ORDERED that the Debtor's Fourth Revised Plan of
Reorganization be, and is hereby, CONFIRMED; and it is further
ORDERED that this Court shall retain jurisdiction over this
case as set forth in Article IX of the Plan; and it is further
ORDERED any deeds, leases, assignments, pledges, deeds of
trust, transfers of security, mortgages, modifications or other documents of
conveyance contemplated by this Plan,
3
<PAGE> 34
including, but not limited to, the subdivision and conveyance of the Encroached
Portion, as well as the conveyance to Headquarters Newco, whether made before
or after the Confirmation of the Plan, shall be deemed instruments of transfer
under a plan pursuant to 11 U.S.C. Section 1146 and, as a result, may not be
taxed under any law imposing a stamp or similar tax; and it is further
ORDERED that this Order shall be deemed null and void and of
no further force and effect, in the event that the Class One Creditor exercises
the election specified in Section 13.03 of the Plan prior to the Effective
Date; and it is further
ORDERED that the Debtor shall mail a copy of this Order to all
creditors and parties-in-interest and shall thereafter certify such mailing.
Entered: October 31, 1997 /s/ Duncan Keir
------------------------------
DUNCAN W. KEIR
United States Bankruptcy Judge
cc: Joel I. Sher, Esquire
Sandra A. Manocchio, Esquire
Shapiro and Olander
36 South Charles Street, 20th Floor
Baltimore, MD 21201-3147
4
<PAGE> 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
SOUTHERN DIVISION
In re: *
TRAK CHICAGO LIMITED * Case No. 95-1-3099-DK
PARTNERSHIP I, (Chapter 11)
*
Debtor.
* * * * * * * * * *
DEBTOR'S FOURTH REVISED
PLAN OF REORGANIZATION
Trak Chicago Limited Partnership I, by Ronald S. Haft individually and
as a general partner thereof, hereby proposes this Fourth Revised Plan of
Reorganization, pursuant to Chapter 11, Title 11 of the United States Code.
INTRODUCTION
This Fourth Revised Plan of Reorganization sets forth the treatment of
Claims and interests in the case of Trak Chicago Limited Partnership I.
ARTICLE I
DEFINITIONS
The terms set forth below in this Article I shall be used in this
Fourth Revised Plan of Reorganization and, when so used, unless the context
requires otherwise, shall have the meanings set forth below. A term used in
the Fourth Revised Plan that is not defined shall have the meaning ascribed to
that term, if any, by the Bankruptcy Code:
Administrative Expense(s): means those expenses and costs allowed
pursuant to section 503(b) of the Bankruptcy Code, including court costs and
professional fees incurred by the Debtor-in-Possession subsequent to the filing
of this Reorganization Case.
Allowed Claim(s): means any right to payment as defined in section
101(5) of the Bankruptcy Code: (a) in respect of which a proof of Claim has
been filed with the Bankruptcy Court
<PAGE> 2
on or before the Bar Date; or (b) which is listed in the Schedules and
Statements of Liabilities of Debtor filed by the Debtor-in-Possession with the
Bankruptcy Court, including any amendments thereto, and is not listed as
disputed, contingent or unliquidated as to amount, and which has not otherwise
been paid during the course of this bankruptcy case from any source; and as to
any Claim, either no objection to the allowance thereof has been filed, or if
any objection has been filed, such objection has been denied by a Final Order
or the Claim fixed as to amount by a Final Order.
Bankruptcy Code: means the United States Bankruptcy Code, 11 U.S.C.
Section 101 et seq. as in effect from time to time.
Bankruptcy Court or Court: means the United States Bankruptcy Court
for the District of Maryland, or any court or tribunal subsequently constituted
to adjudicate matters arising under the Bankruptcy Code or any successor
bankruptcy laws promulgated by the Congress of the United States and which
assumes jurisdiction over this Reorganization Case.
Bar Date: means the date established by the Bankruptcy Court for
filing proofs of Claim in this Reorganization Case; provided, however, that if
the Bankruptcy Court has ordered an extension of the time by which a particular
Creditor may file a proof of Claim, the date set with respect to such Creditor
shall be the Bar Date with respect to such Creditor, but only as to such
Creditor.
Bridgeview Newco: means Bridgeview Warehouse, L.L.C., a limited
liability company formed pursuant to the laws of the State of Delaware, whose
sole members are in Dart's discretion, Trak Auto or Dart and/or other entities
wholly owned by Trak Auto and/or Dart.
Bridgeview Warehouse: means the warehouse located at 8811 South 77th
Avenue, Bridgeview, Illinois and all land and structures and improvements with
respect thereto.
Chapter 11: means Chapter 11 of the Bankruptcy Code.
Claim(s): has that meaning ascribed to it by Section 101(5) of the
Bankruptcy Code.
2
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Class: means a Claim or interest, or a group of Claims or interests,
consisting of those Claims or interests which are substantially similar to each
other, as classified under the Plan, or a Claim or interest or a group of
Claims or interests classified by amount as may be reasonable and necessary as
administrative convenience Claims, or a group of Claims or interests which are
otherwise required to be separately classified.
CPI: means Combined Properties Incorporated.
CPI Management Agreement: means the Amended and Restated Exclusive
Leasing and Management Agreement by and between CPI and Trak Chicago dated May
12, 1993, as amended from time to time.
Combined Entities: means any entity through which RSH or HHH or both
now own or any time in the past have owned, operate or operated, manage or
managed, their private interests in various shopping centers, office buildings,
warehouses and other assets, including the entities set forth in Exhibit 1.1.17
attached to the Settlement Agreement.
Confirmation Date: means the date of the signing by the Court of the
Order of Confirmation of the Plan.
Confirmation of the Plan: means the signing by this Court of an order
confirming the Plan in accordance with the provisions of Chapter 11 of the
Bankruptcy Code.
Creditor: has that meaning ascribed to it by section 101(10) of the
Bankruptcy Code.
Dart: means Dart Group Corporation.
Dart Claims: means all causes of action, Claims and demands of any
nature whatsoever of Dart and Trak Auto, including, inter alia, Claims for the
reformation of its lease with the Debtor and a refund of rents paid.
Dart/RSH Settlement Agreement: means that agreement by and among
Ronald S. Haft and Dart, among others, dated as of October 6, 1995.
3
<PAGE> 4
Debtor or Debtor-in-Possession: means Trak Chicago Limited
Partnership I.
Disallowed Claim(s): means any Claim (or Claims) which has been
disallowed pursuant to a Final Order.
Disputed Claim(s): means a Claim (or Claims)against the Debtor and
Debtor-in-Possession, either scheduled or to the extent that a proof of Claim
has been filed or is deemed to have been filed, as to which an objection has
been timely filed and which objection, if timely filed, has not been withdrawn
on or before any date fixed for filing such objections by order of the
Bankruptcy Court and has not been denied by a Final Order. To the extent an
objection relates to the allowance of only a part of a Claim, such Claim shall
be a Disputed Claim only to the extent of the objection.
Effective Date: means that date after the Confirmation of the Plan
when all of the terms and conditions of Article XIII of the Plan have been
fully complied with.
Equity Security: means the interest of a limited partner of a Debtor.
Executory Contract: means any unexpired lease or contract to which
the Debtor and Debtor-in-Possession is a party and which is executory within
the meaning of section 365 of the Bankruptcy Code.
Final Order: means an order of the Court or of any court of competent
jurisdiction which has been entered and which has become final by expiration of
the time for an appeal therefrom, or, if an appeal(s) is taken, by resolution
of such appeal(s) in favor of one of the parties thereto and the expiration of
the time for further appeal(s) therefrom.
Herbert Haft Assertions: means those causes of action, choses in
action, Claims, interests and demands of any nature whatsoever, known or
unknown, which have been or could be asserted by Herbert H. Haft against the
Debtor, including, but not limited to, all of those causes of action which have
been or could have been brought in the Superior Court Litigation.
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Indemnification Claims: means the indemnification and/or guaranty
Claims, if any, of Gloria G. Haft, Robert M. Haft, Linda G. Haft and their
family trusts against the Debtor, which Claims, if any, arise out of, inter
alia, the Indemnification Agreement of July 31, 1994 and the Heads of Agreement
of May 17, 1994.
Insider: has the meaning ascribed to that term by section 101(31) of
the Bankruptcy Code.
Loan Documents: means any notes, deeds of trust, mortgages, pledges,
assignment of rents or other similar documents memorializing an extension of
credit or financing to the Debtor.
Notice and a Hearing: has the meaning ascribed to that term by
section 102(1) of the Bankruptcy Code.
Other Family Members: means Robert M. Haft, Linda G. Haft and Gloria
G. Haft and their respective family trusts.
Partnership Agreement: means the Limited Partnership Agreement of the
Debtor as amended from time to time.
Petition Date: means May 25, 1995.
Plan: means this Fourth Revised Plan of Reorganization.
Priority Claims: means all Claims as defined in sections 507(a)(3),
(a)(4) and (a)(6) of the Bankruptcy Code only [excluding claims as defined in
sections 507(a)(1), (a)(2), (a)(5), (a)(7) and (a)(8)of the Bankruptcy Code].
Proponent(s): means Trak Chicago, by Ronald S. Haft individually and
as a general partner thereof.
Pro Rata: means the proportion that the dollar amount of an Allowed
Claim in a particular Class or Classes bears to the aggregate dollar amount of
all Allowed Claims in such Class or Classes.
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Rejection Claim: means any Claim arising under section 502(g) of the
Bankruptcy Code and any Claim of a holder of an Executory Contract which
pursuant to prior Order of Court is allowed as a Claim under section 502(g) of
the Bankruptcy Code.
Remaining Cash Collateral: means the cash collateral of the Debtor
remaining as of the Effective Date, after the deduction therefrom of the
amounts needed to satisfy the Allowed Claims for legal fees and costs of
Travelers.
Reorganization Case: means the case of the reorganization of Trak
Chicago commenced by the filing of a Voluntary Petition for Relief pursuant to
Chapter 11 on or about May 25, 1995, being jointly administered and now pending
in this Court under the designation of In re: Haft Equities-Bladen Limited
Partnership, et. al., Case Nos. 95-1-3093-DK through 95-1-3104-DK.
Restructured Loan: means an amended and restated deed of trust note
in an initial principal amount equal to the outstanding balance as of the
Effective Date of the Travelers note dated August 14, 1987, net of any
interest, costs or other charges as well as amended and restated Loan
Documents to be executed and delivered by Bridgeview Newco to Travelers
pursuant to the Plan, the form and substance of which shall be satisfactory to
Travelers and Bridgeview Newco.
Schedules: means the schedules of assets and liabilities filed by the
Debtor-in-Possession with the Bankruptcy Court.
Secured Claim: means a Claim secured by a Security Interest.
Secured Creditor: means the holder of a Security Interest which was
properly perfected as required by law or order of this Court with respect to
property in which the Debtor-in-Possession has an interest, to the extent of
the value of the interest of the holder of such Claim in the
Debtor-in-Possession's interest in such property.
Security Interest: means mortgage, deed of trust, chattel mortgage,
pledge, assignment of rent, pledge, unavoidable judgment lien of record, tax
lien of record, or consensual lien recorded in
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the appropriate jurisdiction or otherwise duly perfected, giving the holder
thereof a validly perfected non-preferential lien on the real or personal
property of the Debtor except as otherwise defined in the Plan.
Settlement Agreement: means the Settlement Agreement dated as of
August 14, 1996 by and between Herbert H. Haft and Ronald S. Haft, including
all Exhibits attached thereto, as well as any amendments thereto.
Special Prepayment(s): means the payments in the aggregate amount of
$2,000,000.00 to be made by Trak Auto to Travelers on the Effective Date,
pursuant to the terms of the Plan.
Superior Court Litigation: means the consolidated law suits in the
Superior Court of the District of Columbia, Civil Division and designated:
Herbert H. Haft v Ronald S. Haft et. al., Civil Action Nos. 94-CA9883 and
95-CA12666.
Tax Claim: means all Claims of governmental units pursuant to section
507(a)(8)of the Bankruptcy Code.
Tier II Partnership: means Trak Chicago Tier II Limited Partnership,
holder of a sixty-six and two-thirds percent (66 2/3%) limited partnership
interest in Trak Chicago.
Trak Auto: means Trak Auto Corporation.
Trak Chicago: means Trak Chicago Limited Partnership I.
Trak Property: means all of Trak Chicago's ownership interest in and
title to the Bridgeview Warehouse, real or personal property, as well as all
rights of Trak Chicago under any leases, security deposits, contract rights,
licenses, permits, certificates and all other intangible rights owned by Trak
Chicago and which are appurtenant to the Bridgeview Warehouse.
Travelers: means The Travelers Insurance Company
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Travelers Security Interest: means the liens and security interest of
Travelers pursuant to all of Traveler's Loan Documents including but not
limited to a mortgage loan in the original amount of $6,000,000.00, dated
August 14, 1987.
Unsecured Creditor: means any entity having a pre-Petition Date
non-priority Claim for which the entity did not have a Security Interest
securing that Claim.
Warehouse Lease: means the lease agreement dated March 12, 1984 by
and between Trak Chicago, Trak Auto and Dart.
ARTICLE II
PROVISION FOR ADMINISTRATIVE CLAIMS
2.01. The holder of an Administrative Expense Claim awarded by a
Final Order of the Court will receive cash equal to the unpaid portion of such
Allowed Administrative Expense Claim on the later of (a) the Effective Date and
(b) the date on which said entity becomes a holder of such Allowed
Administrative Expense Claim pursuant to a Final Order; provided, however,
those Claims that represent liabilities incurred by the Debtor-in-Possession in
the ordinary course of its business, during the pendency of this Reorganization
Case, shall be assumed by the Debtor and paid in the ordinary course of
business in accordance with the terms and conditions of any agreement relating
thereto, or as otherwise agreed.
2.02. Upon the disposition of any property (including real or
personal property, partnership interests, or partnership property) of the
Debtor-in-Possession, the Court, upon application of the Debtor-in-Possession
or any party in interest, may determine the amount of any Tax Claim accruing as
a result of the disposition of said property pursuant to section
503(b)(1)(B)(i) of the Bankruptcy Code.
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ARTICLE III
PROVISION FOR PRIORITY CLAIMS
3.01. All entities having Allowed Priority Claims shall be paid in
cash, in full, on the Effective Date by the Debtor.
ARTICLE IV
PROVISION FOR TAX CLAIMS
4.01. The balance of Allowed Tax Claims owing on the Effective Date
shall be paid at the sole discretion of the Debtor-in-Possession, by either (i)
equal annual cash payments on each anniversary of the Effective Date with
interest pursuant to 11 U.S.C. Section 507(a)(8), until the last anniversary of
the Effective Date that precedes the sixth (6th) anniversary of the date of the
assessment of such Allowed Claim, or (ii) an immediate cash payment to the
extent of cash on hand as of the Effective Date or from contributions from
Ronald S. Haft, or (iii) such other treatment as may be agreed upon by the
Debtor-in Possession and the holder of such Allowed Tax Claim.
ARTICLE V
CLASSIFICATION OF CLAIMS AND INTERESTS OF TRAK CHICAGO
5.01. Class One: Shall consist of the Allowed Secured Claim of The
Travelers Insurance Company in the real property and related assets of Trak
Chicago, as more particularly described in the Loan Documents related thereto.
5.02. Class Two: Shall consist of the Allowed Claims of unsecured
Creditors against Trak Chicago, excluding the Dart Claims and excluding the
Indemnification Claims.
5.03. Class Three: Shall consist of the Allowed Dart Claims.
5.04. Class Four: Shall consist of the Allowed interests of the
Equity Security holders of Trak Chicago.
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5.05. Class Five: Shall consist of the Allowed interests of the
general partner of Trak Chicago.
5.06. Class Six: Shall consist of the Herbert Haft Assertions.
5.07. Class Seven: Shall consist of the Allowed Indemnification
Claims.
ARTICLE VI
TREATMENT OF CLASSES OF CLAIMS AND
INTERESTS UNDER THE TRAK CHICAGO PLAN
A. THE CREDITORS AND INTERESTS OF TRAK CHICAGO SHALL BE TREATED
AS FOLLOWS:
6.01. The Class One Creditor shall be paid in full and final
satisfaction, discharge and release of its Claim as follows:
(a) The Class One Creditor's Claim shall be Allowed as of
the Effective Date in the amount equal to the sum of:
(i) the outstanding balance of principal and
interest, as of the Effective Date, on the mortgage loan in the
original amount of $6,000,000.00 dated August 14, 1987, including
accrued interest at the non-default contract rate provided in the
existing Loan Documents of the Class One Creditor, plus (ii) all
reasonable fees and expenses of the Class One Creditor, including
attorneys' and other professional fees, incurred by the Class One
Creditor prior to and in connection with this Reorganization Case,
including documenting the Restructured Loan, less (iii) any
post-petition payments (to the extent not applied in respect to the
categories set forth in clauses (i) and (ii) above).
(b) In consideration for the treatment provided in this
Plan the Class One Creditor shall waive any Claims it may assert for (x)
interest at the default rate, (y) unpaid late fees, if any, and (z) prepayment
charges permitted under its existing Loan Documents. On the Effective Date the
Class One Creditor shall receive a payment in cash from the Debtor in an amount
equal to (i) accrued and unpaid interest, if any, at the non-default contract
rate provided in the existing Loan Documents of the Class One Creditor, plus
(ii) $247, 190.20 for all attorneys' fees and expenses in respect of bills
received by Travelers on or before March 13, 1997, plus (iii) the amount of
reasonable fees and
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expenses in respect of bills received by Travelers after March 13, 1997
together with all other reasonable fees and expenses constituting a part of
Travelers' Allowed Claim under Section 6.01(a) of the Plan. Any dispute
concerning the reasonableness of fees and expenses referred to in Section
6.01(b)(iii) of the Plan shall be submitted to the Court for resolution, and
the portion of such fees and expenses so subject to dispute shall not be
payable until the dispute is resolved.
(c) On the Effective Date, (i) the Debtor shall cause the
Illinois land trust trustee to convey to Bridgeview Newco fee simple title to
all of the Debtor's real property, improvements, fixtures, including all
property subject to the Warehouse Lease and (ii) all of the Debtor's or said
trustee's (as the case may be) rights under any leases, security deposits,
contract rights, licenses, permits, certificates and any intangible rights
owned by the Debtor or said trustee which are appurtenant to such real
property, shall be conveyed to Bridgeview Newco (collectively, the
"Conveyance"). The Conveyance, and all property transferred pursuant thereto,
shall be subject to Traveler's Security Interest and the Warehouse Lease as
amended pursuant to the terms of Sections 6.01 and 6.03(a) of the Plan.
Traveler's Security Interest, and all obligations thereunder, shall be assumed
by Bridgeview Newco, without any further obligation of the Debtor and shall be
non-recourse as to the members of Bridgeview Newco, but shall be guaranteed by
Trak Auto pursuant to the terms of section 6.01(d)(iv) of the Plan.
(d) On the Effective Date Bridgeview Newco shall execute
and deliver the Restructured Loan which shall contain the following terms and
conditions:
(i) The Restructured Loan shall be dated as of the
Effective Date and shall have a term of ten (10) years, with all
unpaid indebtedness due and payable on the tenth anniversary of the
Effective Date.
(ii) The Restructured Loan shall bear interest at a
fixed rate equal to 190 basis points in excess of the rate on U.S.
treasury instruments having a maturity date closest to the maturity
date of the Restructured Loan, with such fixed rate to be determined
as of the Effective Date. Interest shall be payable monthly as
provided herein.
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(iii) As a means to effect payment of debt service
(without limiting its obligations with respect thereto), Bridgeview
Newco shall direct Trak Auto to remit directly to Travelers such
portion of the basic monthly rental payments due under the Warehouse
Lease as is necessary to pay the monthly debt service, and Travelers
shall credit such payments to monthly debt service as if paid by
Bridgeview Newco directly. Bridgeview Newco shall make equal monthly
payments of principal and accrued interest in an amount sufficient to
fully amortize the principal balance of the Restructured Loan in
fifteen (15) years from the Effective Date (after giving effect to the
Special Prepayments as they are received by Travelers). The first
such payment shall be due on the first day of the month following the
month in which the Effective Date occurs, provided that the first
payment shall be adjusted such that interest is paid in arrears.
(iv) Payment of the Restructured Loan and
performance of all of Bridgeview Newco's obligations under the
Restructured Loan shall be guaranteed by Trak Auto, pursuant to the
terms of an unconditional and irrevocable guarantee to be executed and
delivered to Travelers on the Effective Date.
(v) the Restructured Loan shall be secured by
valid, perfected and first priority liens and security interests in
and to the Bridgeview Warehouse, the Warehouse Lease (as modified
pursuant to the Plan) and all other property, rights and interests of
Bridgeview Newco, whether or not subject to the existing Security
Interest of the Class One's Creditor. As additional security for the
Restructured Loan the Class One Creditor shall have an assignment of
and be entitled to receive directly from Trak Auto, all amounts, if
any, payable by Trak Auto to Bridgeview Newco under the Warehouse
Lease as amended pursuant to the terms of the Plan and Bridgeview
Newco shall irrevocably direct Trak Auto to remit to the Class One
Creditor such portion of the monthly rental payments due under the
Warehouse Lease (as amended pursuant to the terms of the Plan) as is
necessary to pay the monthly debt service to the Class One Creditor
under the Restructured Loan.
(vi) Bridgeview Newco's right to prepay the
Restructured Loan prior to the stated maturity (except for the Special
Prepayments provided for in section 6.03(e) of the Plan) shall be
subject to a yield maintenance provision substantially in the form of
Exhibit A attached hereto and incorporated by reference herein.
(vii) The loan documents evidencing the Restructured
Loan shall (I) contain representations, warranties, covenants,
conditions and defaults that are substantially similar in nature and
scope to those in the existing Loan Documents and (ii) otherwise be in
a form and substance satisfactory to Travelers, Bridgeview Newco, Trak
Auto and the Debtor (including, without limitation, the delivery of a
title insurance policy in form and substance satisfactory to
Travelers).
(viii) All customary and reasonable costs and
expenses of Travelers incurred in connection with the closing of the
Restructured Loan (other then attorneys' fees which shall be paid in
accordance with Section 6.01 (a) and (b) of the Plan) including,
without limitation, recording fees, escrow charges, and the cost of
obtaining title insurance, shall be paid by Bridgeview Newco on the
Effective Date.
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(e) On the Effective Date Bridgeview Newco shall make a
payment of the Special Prepayments of principal, without penalty or premium, to
Travelers in the aggregate amount of $2,000,000.00, to be funded by Trak Auto
(and which shall be considered additional rent by Trak Auto under the Warehouse
Lease).
(f) On the Effective Date, Travelers shall receive an
estoppel certificate from Trak Auto, in form and substance satisfactory to
Travelers, which, among other things, confirms Trak Auto's obligations under
the Warehouse Lease and acknowledges Travelers' senior rights as holder of the
mortgage.
(g) On the Effective Date, the Class One Creditor shall
release Robert M. Haft, Linda G. Haft, Ronald S. Haft and Herbert H. Haft,
respectively, as to any Claims arising out of the Class One Creditor's existing
Loan Documents, provided, that concurrently therewith, the Class One Creditor
receives from such person a release of any Claims such person may have against
the Class One Creditor arising out of the Class One Creditor's existing Loan
Documents. The exchange of such mutual releases between the Class One Creditor
and any one or more of such persons shall not be (i) dependent upon the
exchange of mutual releases between the Class One Creditor and any other
person, nor (ii) a precondition to the Confirmation of the Plan.
6.02. The Class Two Creditors shall be paid in full and final
satisfaction, discharge and release of their Claims as follows:
(a) Each holder of an Allowed Class Two Claim, if any,
shall receive from cash on hand as of the Effective Date or, to the extent
thereafter needed, contributions from Ronald S. Haft cash payments in an amount
equal to one hundred percent (100%) of its Allowed Claims, as follows:
(i) Trak Chicago shall first satisfy all Allowed
Administrative Expense Claims, Allowed Priority Claims and Allowed Tax
Claims; and
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(ii) Thereafter, on a monthly basis following the
Effective Date, the holders of Allowed Class Two Claims, if any, shall
receive Pro Rata cash distributions, from cash on hand as of the
Effective Date or, to the extent thereafter needed, contributions from
Ronald S. Haft, until such time as they receive one hundred percent
(100%) of such Allowed Claims.
6.03. The Class Three Creditor shall be treated in full and final
satisfaction of their Claims as follows:
(a) On the Effective Date Bridgeview Newco, Dart, Trak
Auto and the Class Three Creditor shall execute an amendment of the existing
Warehouse Lease, which amendment shall provide, inter alia, that Dart shall be
removed as a party thereto and released from all liability thereunder and that
Trak Auto shall pay monthly, as basic rent, a sum equal to the corresponding
regularly scheduled monthly installment of principal and interest due and
payable from time to time under the Restructured Loan. Except as the Class One
Creditor may otherwise agree, upon maturity of the Restructured Loan, by
acceleration or otherwise, the Warehouse Lease, as amended, shall continue at
the monthly rate in effect immediately prior to the date of maturity, exclusive
of any Special Prepayments and the balloon payment due at maturity, until such
time as the Class One Claim is paid in full other than through a foreclosure
sale.
(b) Trak Auto's rent obligations shall include the
Special Prepayments which Trak Auto shall be obligated to make as prepaid rent
in compliance with the terms and conditions of section 6.01(e) of the Plan.
The rent under the amended Warehouse Lease shall automatically readjust to
reflect the adjusted monthly debt service on the remaining outstanding balance
of the Restructured Loan after each of the Special Prepayments is made. If any
other prepayments of principal allowed under the Restructured Loan documents or
consented to by the Class One Creditor are made, such prepayments shall also
result in corresponding reductions of Trak Auto's monthly payments of rent
obligations under the amended Warehouse Lease.
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(c) Apart from the treatment provided in this Section
6.03 and otherwise in the Plan, the Class Three Creditor shall not receive any
distributions or payments in satisfaction of its Claims, and the Dart Claims
shall be deemed discharged upon the Effective Date.
6.04. The Class Four Equity Security holders of Trak Chicago shall
be treated as follows:
(a) The holder of any Equity Security of Trak Chicago
shall retain its Equity Security in the reorganized Debtor subject to the terms
and conditions of Article VII of the Plan.
6.05. The Class Five general partnership interests shall be treated
as follows:
(a) The general partner shall retain his general
partnership interest in the reorganized Debtor subject to the terms and
conditions of Article VII of the Plan.
6.06. The Class Six Herbert Haft Assertions shall be treated as
follows:
(a) The Class Six Herbert Haft Assertions shall be
treated as set forth in and subject to the terms and conditions of Article VII
of the Plan.
6.07. The Class Seven Indemnification Claimants shall be treated as
follows:
(a) The Class Seven Indemnification Claimants shall be
treated as set forth in and subject to the terms and conditions of Article VII
of the Plan.
ARTICLE VII
CAPITAL RESTRUCTURING FOR THE REORGANIZED DEBTOR
7.01. Herbert H. Haft shall not receive any distributions from the
Debtor on account of the Herbert Haft Assertions.
7.02. On the Effective Date or on such other date as may be agreed
upon by and among Robert M. Haft, Linda G. Haft and Dart, Robert M. Haft and
Linda G. Haft shall each receive a cash distribution pursuant to the terms of
section 8.02.1 of the Plan, in respect of their limited partnership interest in
the Tier II Partnership.
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7.03. Except as expressly provided for under the Plan, the Claims
and interests of Ronald S. Haft, Robert M. Haft, Herbert H. Haft and Linda G.
Haft shall not receive any payments or other distributions under the Plan.
7.03.1 To the extent of any allowed Indemnification Claims that are
not satisfied from any other source, Ronald S. Haft shall either (i) satisfy
such Claims, or (ii) cause such amounts to be contributed to the Debtor as may
be necessary to satisfy such Claims.
ARTICLE VIII
MEANS FOR EXECUTION OF THE PLAN
8.01. On the Effective Date, fee simple title to all of the Debtor's
and the land trust's real property (including real property title which is held
by the land trust), improvements, fixtures and all of the Debtor's and the land
trust's rights under any leases, security deposits, contract rights, licenses,
permits, certificates and any intangible rights owned by the Debtor or the of
all Claims, rights of possession, liens and encumbrances, except as expressly
set forth in the Plan.
8.02. On or about the Effective Date, the Debtor-in-Possession shall
in accordance with the terms and conditions of the Plan, pay, in cash, to the
respective holders of Allowed Administrative Expense Claims and Allowed
Priority Claims, an amount equal to that holder's respective Allowed Claim.
The Debtor-in-Possession shall thereafter in accordance with the terms and
conditions of the Plan, commence distributions to the holders of Allowed Claims
and interests. CPI on behalf of the Debtor-in-Possession shall act as
disbursement agent for the purpose of making those distributions provided under
the Plan.
8.02.1 On the Effective Date or on such other date as may be agreed
upon by and among Robert M. Haft, Linda G. Haft and Dart, the payments to
Robert M. Haft and Linda G. Haft, as
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described in section 7.02 of the Plan, shall be made by Trak Auto as part of
the consideration paid by Trak Auto for the conveyance of the Debtor's Property
to Bridgeview Newco pursuant to the terms of the Plan. The payments shall be
in the amount of $638,000.00 to each of Robert M. Haft and Linda G. Haft.
8.02.2 On the Effective Date, the payment to the Class One Creditor
provided in section 6.01 (b) of the Plan and the payment of Allowed
Administrative Expense Claims as provided in section 2.01 of the Plan shall be
made from the cash collateral of the Debtor and the Remaining Cash Collateral,
if any, shall be conveyed to Bridgeview Newco. If however, the cash collateral
of the Debtor, as of the Effective Date, is insufficient to make the payments
to the Class One Creditor as provided in section 6.01 (b) of the Plan and all
Allowed Administrative Expense Claims as required by section 2.01 of the Plan,
Ronald S. Haft shall make a capital contribution to the Debtor in such amount
as is necessary to make such payments.
8.03. Ronald S. Haft, the general partner of the
Debtor-in-Possession, shall serve as the general partner of the Debtor after
the Effective Date.
8.04. Except for the transfers and Conveyance made pursuant to the
Plan, the Confirmation of the Plan shall constitute, as of the Effective Date,
a revesting of title for all purposes of the Debtor-in-Possession's property in
said Debtor-in-Possession, free and clear of all liens and claims and no
further order of court shall be required for such Debtor-in-possession to sell,
convey, loan, or encumber its property in any manner.
8.05. The Debtor-in-Possession shall continue to exist after the
Effective Date in accordance with applicable non-bankruptcy law, to the extent
necessary to wind up its affairs.
8.06. The Partnership Agreement of the Debtor-in-Possession shall be
amended as necessary to satisfy the requirements of the Plan, subject to
further amendment as permitted by applicable law and by the partnership
agreement of the Tier II Partnership.
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8.06.1 As soon as practical on or after the Effective Date, the
reorganized Debtor shall execute such other and further documents as are
reasonably necessary to carry out the terms and conditions of the Plan.
8.07. All avoidance actions assertable by the Debtor-in-Possession,
pursuant to Sections 542 through 553 of the Bankruptcy Code, shall be retained
by the Debtor on behalf of and for the benefit of the Debtor following
Confirmation of the Plan; provided, however, that any and all Claims that the
Debtor may have against (i) Travelers, Trak Auto and Dart and their respective
affiliates, successors and assigns, (ii) any of the Other Family Members and
(iii) Herbert H. Haft, that arose prior to the Effective Date, including but
not limited to all avoidance actions assertable by the Debtor-in-Possession,
pursuant to Sections 542 through 553 of the Bankruptcy Code, shall be deemed
released as of the Effective Date and further provided that subject and
pursuant to the terms of the Settlement Agreement, all causes of action, if
any, against Herbert H. Haft are released.
8.08. Except as otherwise expressly provided in the Plan, the
Confirmation of the Plan shall, cause on the Effective Date, the discharge of
the Debtor, effective immediately, from any Claim and any "debt" (as that term
is defined in section 101 of the Bankruptcy Code) and the Debtor's liability in
respect thereof will be extinguished completely, whether reduced to judgment or
not, liquidated or unliquidated, contingent or fixed, asserted or unasserted,
matured or unmatured, disputed or undisputed, legal or equitable, known or
unknown, that arose from any agreement that the Debtor entered into or
obligations that the Debtor-in-Possession incurred before the Confirmation of
the Plan, including without limitation, liabilities of a kind specified in
sections 502(g), (h) and (i) of the Bankruptcy Code, whether or not a proof of
Claim is filed or deemed filed under section 501 of the Bankruptcy Code,
whether or not such Claim is allowed under section 502 of the Bankruptcy Code,
or whether or not the holder of such Claim has accepted the Plan.
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8.08.1 Except as expressly set forth in the Plan, Security Interests
shall not be released by virtue of the discharge of Claims and debts which
occurs upon the Effective Date.
8.08.2 Notwithstanding any provisions of the Plan to the contrary,
the Indemnification Claims shall not be discharged. In each and every respect,
all rights of the holders of the Indemnification Claims are fully preserved,
and nothing in the Plan shall in any way affect or impair any right of any
holder of an Indemnification Claim against the Debtor, Ronald S. Haft or any
other person or entity.
8.09. Except as expressly provided in the Plan, the Confirmation of
the Plan will provide that all persons (including but not limited to
individuals, corporations, partnerships, joint ventures, associations, trusts,
estates, unincorporated organizations, and governments) who have held, hold or
may hold Claims are permanently enjoined, on and after the Effective Date,
from:
(a) commencing or continuing in any manner or form the
enforcement, attachment, collection or recovery, by any manner or means, of any
pre-petition Claim, judgment, award, decree or order against the Debtor or its
current or former partners solely by virtue of their status as a partner
(except to the extent such provision against the Debtor's partners alters the
rights of the holder of a Security Interest, in which event this provision
shall not apply); of creating, perfecting or enforcing any encumbrance of any
kind against the Debtor; from exercising any discretionary and/or "call"
provisions of any loan documents allowing the acceleration of Claims; from
asserting any set off, right of subrogation, or recoupment of any kind against
any obligation due from the Debtor or from any act in any manner, in any place
whatsoever, that does not conform to or comply with the provisions of the Plan;
provided, however, that proceedings may be continued only for the purpose of
obtaining a liquidation of any asserted Claims against the Debtor on the
condition that the holder of any such judgment shall be enjoined from executing
against any of the assets of the Debtor-in-Possession, and further provided
that nothing contained herein shall preclude
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actions commenced in the Court to seek compliance with or to enforce the terms
and conditions of the Plan. Unless otherwise provided, the injunction provided
herein shall remain in full force and effect until the consummation of the
Plan.
(b) The provisions contained in Section 8.09(a) of the
Plan, as well as the treatment of Claims provided in the Plan, shall not be
deemed or construed to preclude (i) actions or enforcement efforts necessitated
from a breach or default under the terms of the Plan or (ii) a Secured Creditor
from enforcing any remedy available to it pursuant to applicable law or its
Loan Documents based upon a post-Confirmation Date default under the terms of
the Secured Creditor's Loan Documents as modified by the terms and conditions
of the Plan, or (iii) Travelers from exercising any right or remedy under or
from enforcing any obligations in respect of the Restructured Loan, or (iv) any
of the Other Family Members from asserting and pursuing any rights, demands,
debts, obligations or Claims of any nature whatsoever that they may have
against the Debtor, Ronald S. Haft, Herbert H. Haft or the Combined Entities.
8.10. The Proponents reserve the right, in accordance with the
Bankruptcy Code to amend or modify the Plan or the treatment of any Claim prior
to the Confirmation of the Plan. After the Confirmation of the Plan, the
Proponents may amend or modify the Plan, or a portion thereof, in accordance
with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission,
or reconcile any inconsistency in the Plan, in such a manner as may be
necessary to carry out the purpose and intent of the Plan; provided, however,
that no amendment, waiver, modification or supplement shall be made to the Plan
without the prior written consent of (i) Dart, Trak Auto and Travelers, or
their respective representatives, and (ii) the Other Family Members, provided
that such written consents shall not be unreasonably conditioned, withheld or
delayed.
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8.11. The obligations of Dart and Trak Auto with respect to the Plan
shall be subject to compliance with the Standstill Order dated December 6, 1995
of the Court of Chancery of the State of Delaware in and for Newcastle County.
8.12. Bridgeview Newco shall be formed on or before the Effective
Date. Its sole members shall in Dart's discretion be Dart, Trak Auto, and or
subsidiaries or other entities wholly owned by Dart and/or Trak Auto.
8.13. Any deeds, leases, assignments, pledges, deeds of trust,
transfers of security, mortgages, modifications or other documents of
conveyance contemplated by this Plan from the Debtor-in-Possession, including,
but not limited to the transfer of the land trust, whether made before or after
the Confirmation of the Plan, shall be deemed instruments of transfer under a
plan pursuant to 11 U.S.C. Section 1146 and, as a result, may not be taxed
under any law imposing a stamp or similar tax.
ARTICLE IX
JURISDICTION OF THE COURT
9.01. Notwithstanding the Confirmation of the Plan, the Court will
retain jurisdiction until consummation of the Plan to ensure that the purposes
and intent of the Plan are carried out. The Court's jurisdiction shall be over
any and all disputes and litigation pending at the time of the Confirmation of
the Plan, any controversies that may arise thereafter, and any controversies
that may affect the Debtor-in-Possession's ability to effectuate the
consummation of the Plan.
9.01.1 By way of illustration of the jurisdiction retained by the
Court, but not by way of limitation of the same, the Court shall retain
jurisdiction in this case, among other things, for the following purposes:
(a) Classification and re-examination of any Claims of
any Creditors (other than the Class One Claim as Allowed under the Plan), and
the determinations of any objections which may be filed thereto, provided,
however, that the Debtor-in-Possession's failure to object to any
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Claim which has been allowed for the purpose of voting shall not be deemed a
waiver of the Debtor-in-Possession's right to later object thereto;
(b) The correction of any defect or omission in the Plan
and in the Confirmation of the Plan, as may be necessary to effectuate the
consummation of the Plan;
(c) The modification of the Plan after Confirmation;
(d) To determine any and all applications, Claims,
adversary proceedings, or to allow, disallow, estimate, liquidate, or determine
any Claim against the Debtor-in-Possession and to enter or enforce any order
requiring the filing of any such Claim before a particular date;
(e) To determine any and all pending applications for
rejection or disaffirmance of Executory Contracts or leases and to hear and
determine and, if need be, to liquidate any and all Claims arising therefrom;
(f) To enter such orders as may be necessary to enforce
the injunctions provided in the Plan;
(g) To determine proceedings pursuant to Section 510 of
the Bankruptcy Code to equitably subordinate any Claim or Class of Claims; and
(h) All other matters which the Court must determine
under the Plan;
9.02. Notwithstanding the retention of jurisdiction by the
Bankruptcy Court, (i) the holders of Security Interests may, after the
Effective Date, enforce any post Confirmation Date defaults in any court of
competent jurisdiction, including state or federal courts, as applicable, and
(ii) any of the Other Family Members may enforce any or all of their rights
arising out of the Indemnification Claims in any court of competent
jurisdiction, including, as applicable any state or federal court, and provided
further that jurisdiction over any dispute arising out of or relating to the
Indemnification Claims shall not be retained by the Court.
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ARTICLE X
EXECUTORY CONTRACTS
10.01. The Debtor-in-Possession reserves the right to apply to the
Court prior to the Confirmation of the Plan to assume or reject any Executory
Contract pursuant to 11 U.S.C. Section 365.
10.02. Except as otherwise set forth in the Plan, by virtue of the
Confirmation of the Plan, the Effective Date shall automatically constitute an
assumption and assignment by the Debtor to Bridgeview Newco of all unexpired
leases in which the Debtor-in-Possession or the land trust is a lessor which
are not otherwise provided for in the Plan which (i) have not been rejected
prior to that date, (ii) have not been assumed, in whole or in part, by prior
Order of Court or, (iii) which are not the subject of a pending application
seeking a rejection thereof. The Confirmation of the Plan shall automatically
constitute an assumption and assignment on the Effective Date by the Debtor to
Bridgeview Newco of the Warehouse Lease as amended pursuant to Section 6.03 of
the Plan.
10.02.1 The CPI Management Agreement will terminate on the Effective
Date, without any penalty to any person or entity, including but not limited to
the Debtor or Bridgeview Newco. The Debtor shall, as necessary, provide such
notice to CPI as is required to effectuate said termination.
10.03. Pursuant to Bankruptcy Rule 3002 (c)(4), and except as
otherwise ordered by the Court, proofs of Claim for Claims arising from the
rejection of an Executory Contract or unexpired lease shall be filed with the
Court no later than thirty (30) days after the later of the entry of a Final
Order approving such rejection and the Confirmation of the Plan, or such Claim
shall be forever barred.
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ARTICLE XI
GENERAL PROVISIONS
11.01. To the extent a Claim is a contingent or Disputed Claim, the
Debtor-in-Possession shall not be required to make the applicable disputed
portion of a payment to a holder of such contingent or Disputed Claim which
would otherwise be payable to said contingent or Disputed Claimant. Until such
time as a contingent or Disputed Claim becomes fixed and absolute, such Claim
shall be treated as a contested Claim for purposes related to estimation,
allocations and distributions under the Plan and Disputed Claims shall not have
the ability to vote.
11.02. Nothing contained in section 11.01 of the Plan shall be
construed to prohibit the holder of a Disputed Claim or contingent Claim from
seeking an order of the Court authorizing the temporary estimation of such
Claim for voting purposes. In the event that said Claim becomes an Allowed
Claim, then the Debtor-in-Possession shall thereafter cause to be paid to the
holder an amount which would have theretofore been paid to such holder under
the Plan had the Allowed Claim amount of such Claim been fixed and determined
as of the Effective Date in accordance with the terms of the Plan and in the
same manner as any other Creditor of the same Class.
11.03. Whenever any payment to be made under the Plan is due on a day
other than a business day, such payment will instead be made on the next
business day.
11.04. No action taken by any of the Other Family Members in the
Reorganization Case, including without limitation the filing of proofs of
claims, the filing of any pleadings, any statement made in connection with any
hearing, withdrawal of any objections to confirmation, the casting of any
ballot or withdrawal of any ballot cast in connection with the Plan shall in
any way impair or affect any Claims of any of the Other Family Members against
the Debtor, Herbert H. Haft, Ronald S. Haft or the Combined Entities, nor shall
any such action in any way constitute or be deemed to
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constitute any grounds for, or give rise to, any defense to, offset of, or
reduction in liability of the Debtor, Ronald S. Haft, Herbert H. Haft or the
Combined Entities to the Other Family Members.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. The adoption of the amended Partnership Agreement in
accordance with Article VII of the Plan shall be deemed to have occurred and be
effective on the Effective Date, without any further requirement of action by
the Equity Security holders. Effective as of the Effective Date, Ronald S.
Haft, the general partner of the Debtor shall, without the need for any further
order of the Court, have an irrevocable power of attorney to execute said
amendment on behalf of all limited partners of the Debtor and to execute all
documents needed to effectuate the Conveyance to Bridgeview Newco described in
section 6.01(c) of the Plan.
12.02. All applications for payment of Administrative Expense Claims,
must be filed within forty-five (45) days of the Effective Date. Any such
Claim that is not filed by that date shall be forever barred and discharged.
12.03. As soon as possible, but in no event more than two (2) months
after the Effective Date, any party in interest may file and prosecute
objections to Claims and equity interests, which objections shall be filed with
the Bankruptcy Court; provided, however, the Class One Claim and the Class
Three Claim shall for all purposes be allowed as provided in this Plan.
12.04. In order to confirm the Plan, and to the extent necessary, the
Debtor invokes the entitlement of Section 1129(b) of the Bankruptcy Code, such
that, as long as the Plan does not discriminate unfairly, and is fair and
equitable, with respect to any Class of Claims or interests that are impaired
under and have not accepted the Plan, the Plan may be confirmed by the Court.
12.05. On or before the tenth (10th) day preceding the commencement
of the hearing on the Confirmation of the Plan, the Debtor and/or any party in
interest shall file with the Court such
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agreements and other documents as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan, including the Class
One Creditor's drafts of the proposed principal loan documents evidencing the
Restructured Loan.
12.06. Should any provision of this Plan be determined to be invalid,
void or unenforceable, such determination shall not in any way limit or affect
the enforceability and operative effect of any or all other provisions of the
Plan and the Court shall, with the consent of the Proponents, the Class One
Creditor, the Class Three Creditor and the Other Family Members, have the
power to alter and interpret such term or provision to make it valid or
enforceable to the maximum extent practicable, consistent with the original
purpose of the term or provision held to be invalid, void or unenforceable, and
such term or provision shall then be applicable as altered or interpreted.
Notwithstanding any such holding, alteration or interpretation, the remainder
of the terms and provisions of the Plan shall remain in full force and effect
and in no way shall be affected, impaired or invalidated by such holding,
alteration or interpretation. The Confirmation of the Plan shall constitute a
judicial determination and shall provide that each term and provision of the
Plan, as it may have been altered or interpreted in accordance with the
foregoing, is valid and enforceable pursuant to its terms.
12.07. All fees payable pursuant to Chapter 123 of Title 28, United
States Code, as determined by the Bankruptcy Court on the Confirmation Date,
shall be payable on the Effective Date. Any statutory fees accruing after the
Confirmation of the Plan shall constitute Administrative Expenses and be paid
in accordance with Article II of the Plan.
12.08. Until the Effective Date, all creditors and
parties-in-interests' rights to make any motion or seek any other relief
whatsoever including, but not limited to, moving for relief from the automatic
stay, appointment of a trustee or conversion or dismissal of the Debtor's
Chapter 11 case (including, without limitation, on the grounds of any failure
to consummate the Plan or the Plan to
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become effective) shall not be impaired or restricted by the terms of the Plan,
the Confirmation of the Plan, or by virtue of having voted for the Plan.
Following the Effective Date, the rights of the parties shall be governed by
the Plan and applicable law.
12.09. Provided that it does not delay the implementation of the
Plan, nor diminish the value of the Plan to Dart, Trak Auto or Bridgeview
Newco, Dart, Trak Auto and Bridgeview Newco agree to use reasonable efforts to
cooperate with the Debtor, without cost to Dart, Trak Auto or Bridgeview Newco,
in the event the Debtor elects to structure the conveyance(s) provided in
Section 6.01 of the Plan in a tax-free manner pursuant to section 1031 of the
Internal Revenue Code.
ARTICLE XIII
EFFECTIVENESS OF THE PLAN
13.01. As a condition precedent to the effectiveness and the
Effective Date of the Plan the following events shall have first occurred:
(a) The Confirmation of the Plan has become a Final
Order;
(b) All documents, instruments and agreements, in form
and substance satisfactory to the Proponents, provided for under or necessary
to implement the Plan shall have been executed and delivered by the parties
thereto, unless such execution or delivery shall have been waived by the
parties entitled under such documents, instruments or agreements to waive such
execution or delivery; and
(c) Dart and Ronald S. Haft have executed an amendment to
the terms of the Dart/RSH Settlement Agreement in a form mutually acceptable to
them.
(d) Dart, Trak Auto and the Other Family Members have
entered into definitive settlement agreements, by and among them, in a form
mutually acceptable to them, dealing with all matters in dispute between them
and have thereafter entered into a closing thereon.
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13.02. Any of the conditions precedent to the effectiveness and the
Effective Date of the Plan may be waived by the unanimous consent of the
Proponents, Dart, Trak Auto, the Other Family Members and the Class One
Creditor.
13.03. In the event that (i) Dart, Trak Auto, Ronald S. Haft and the
Other Family Members have not entered into definitive settlement agreements,
by and among them, within thirty (30) days after the filing of the Plan, and/or
(ii) have not effected the closing of such settlement agreements by August 15,
1997, then in either such event the Plan shall be deemed null and void and of
no further force and effect at the election of the Class One Creditor,
exercised by written notice to the Debtor, the Court and all parties in
interest.
13.04. If Dart has not previously done so, promptly upon the
execution of any definitive settlement agreement among Dart, Trak Auto Robert
M. Haft, Linda G. Haft and Gloria G. Haft dealing with matters in dispute
between them, Dart and Trak Auto agree to give notice to the other parties to
the Standstill Order described in Section 8.11 of the Plan, as to the
Confirmation of the Plan, the pendency of such definitive settlement agreement,
and such other matters, if any, as Dart may in its discretion deem appropriate.
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
SOUTHERN DIVISION
In re: *
TRAK CHICAGO LIMITED * Case No. 95-1-3099-DK
PARTNERSHIP I, (Chapter 11)
*
Debtor.
* * * * * * * * * *
ORDER CONFIRMING DEBTOR'S
FOURTH REVISED PLAN OF REORGANIZATION
A Confirmation hearing having been held on April 4, 1997 to consider
the Debtor's Third Amended Plan of Reorganization, and upon the motion of all
parties-in-interest the Court having granted leave to the Debtor to file
revisions to said plan, and the Debtor having filed the Debtor's Revised Third
Amended Plan of Reorganization on May 2, 1997 and mailed a copy of the Revised
Third Amended Plan to creditors, equity security holders and other
parties-in-interest, and the Court having entered an Order on June 12, 1997
Confirming the Debtor's Revised Third Amended Plan of Reorganization (the
"First Confirmation Order"), and the Debtor thereafter having filed a
Stipulation and Consent Order Providing for Modification of Debtor's Revised
Third Amended Plan of Reorganization and a Fourth Revised Plan of
Reorganization (the "Plan") on October 28, 1997 and, after proper notice, this
Court has determined:
1. The Plan complies with the applicable provisions of Chapter 11
of the Bankruptcy Code;
2. The Debtor has complied with the applicable provisions of
Chapter 11 of the Bankruptcy Code;
<PAGE> 30
3. The Plan has been proposed in good faith and not by any means
forbidden by law;
4. Any payment made or promised by the Debtor for services or for
costs and expenses incurred in connection with the case, or in connection with
the Plan and incident to the case, has been disclosed to the Court and is
reasonable or is subject to the approval of the Court;
5. The Debtor has disclosed the identity and affiliations of each
individual proposed to serve, after confirmation of the Plan, as a director,
officer or voting trustee of the Debtor, or a successor of the Debtor under the
Plan and the continuance of such individuals, is consistent with the interests
of creditors, equity security holders and public policy, and the proponents of
the Plan have disclosed the identity of any insider that will be employed or
retained by the reorganized Debtor and the nature of any compensation for such
insider;
6. Each holder of a claim or interest has accepted the Plan, or
will receive or retain under the Plan property of a value, as of the Effective
Date of the Plan, that is not less than such holder would receive or retain if
the Debtor were liquidated under Chapter 7 of the Bankruptcy Code on such date;
7. With respect to each class of claims or interests, such class
has accepted the Plan or is not impaired under the Plan;
8. Except to the extent that the holder of a particular claim has
agreed to a different treatment of such claim, the Plan provides that:
(a) On the Effective Date of the Plan, each holder of a
claim of a kind specified in Section 507(a)(1) of the Bankruptcy Code
will receive on account of such claim cash equal to the allowed amount
of the claim; and
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(b) On the Effective Date of the Plan, each holder of a
claim of a kind specified in Section 507(a)(8) of the Bankruptcy Code
will receive on account of such claim deferred cash payments, over a
period not exceeding six years after the date of the assessment of the
claim, of a value, as of the Effective Date of the Plan, equal to the
allowed amount of the claim;
9. At least one class of impaired claims has actually accepted
the Plan, determined without including any acceptance of the Plan by any
insider;
10. All fees payable pursuant to Section 1930 have been paid or
shall be paid on the Effective Date of the Plan;
11. Confirmation of the Plan is not likely to be followed by the
liquidation or the need for further reorganization of the Debtor; and
12. It is in the best interests of the estate that the Plan be
confirmed.
This Court, therefore, finds that the Plan complies with the
requirements of 11 U.S.C. Section 1129. Accordingly, it is this 30th day
of October, 1997,
ORDERED that the First Confirmation Order is hereby vacated,
and deemed null and void and of no further force or effect; and it is further
ORDERED that the Debtor's Fourth Revised Plan of
Reorganization be, and is hereby, CONFIRMED; and it is further
ORDERED that this Court shall retain jurisdiction over this
case as set forth in Article IX of the Plan; and it is further
ORDERED any deeds, leases, assignments, pledges, deeds of
trust, transfers of security, mortgages, modifications or other documents of
conveyance contemplated by the Plan including, but not limited to, the
transfer of the land trust and the conveyance to Bridgeview
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<PAGE> 32
Newco, whether made before or after the Confirmation of the Plan, shall be
deemed instruments of transfer under a plan pursuant to 11 U.S.C. Section 1146
and, as a result, may not be taxed under any law imposing a stamp or similar
tax.; and it is further
ORDERED that this Order shall be deemed null and void and of
no further force and effect, in the event that the Class One Creditor exercises
the election specified in Section 13.03 of the Plan prior to the Effective
Date; and it is further
ORDERED that the Debtor shall mail a copy of this Order to all
creditors and parties-in-interest and shall thereafter certify such mailing.
Entered: October 31, 1997 /s/ Duncan Keir
------------------------------
DUNCAN W. WEIR
United States Bankruptcy Judge
cc: Joel I. Sher, Esquire
Sandra A. Manocchio, Esquire
Shapiro and Olander
36 South Charles Street, 20th Floor
Baltimore, MD 21201-3147
4
