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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report December 4, 1998
Pay 'N Pak Stores, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Washington
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(State or Other Jurisdiction of Incorporation)
1-8476 91-0729852
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(Commission File Number) (IRS Employer Identification No.)
10944 N.E. 8th St., Bellevue, WA 98004
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(Address of Principal Executive Offices) (Zip Code)
(760) 770-3700
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(Registrant's Telephone Number, Including Area Code)
1209 S. Central Ave., Kent, WA 98064
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
On September 21, 1991, the Registrant filed a petition for
reorganization under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Western District of Washington at
Seattle, Case No. 91-06976 (Jointly Administered). The Registrant, together
with its ultimate parent, PNP Holdings Corporation (collectively, the
"Debtors"), is currently a debtor-in-possession in a proceeding consolidated
for administrative purposes under Chapter 11 of Title 11 of the United States
Bankruptcy Code. The Chapter 11 filing of the Debtors was reported on a
Current Report on Form 8-K in October of 1991.
On June 16, 1992, the Debtors filed a motion seeking the Bankruptcy
Court's authority to commence a managed liquidation in the Chapter 11
proceedings of all of their assets, using cash collateral of Registrant's
major secured lenders (the "Bank Group") to pay the expenses of the
liquidation pursuant to a budget approved by the Bankruptcy Court. Registrant
also sought to place all net proceeds of the liquidation into an escrow
account pending a determination of the Bank Group's right to those proceeds,
and to clarify the rights and priority of the Bank Group to preference
recoveries by the Debtors. In response to this motion, the Official Committee
of Unsecured Creditors ("Committee") moved to convert the case to a Chapter 7
proceeding and to appoint a trustee.
The filing of the motion was necessitated by the Registrant's inability
to continue its operations in the ordinary course. It had suffered continued
losses in its operations, was not able to get sufficient trade credit from
its vendors, was thus not able to pay its vendors according to their normal
contract terms, expected to be in default under its credit line with the Bank
Group, and determined that no reorganization options were realistic. Prior to
taking this course, Registrant made unsuccessful attempts to find alternative
financing, find buyers for all or part of the business, and to reach an
agreement with its Bank Group on a downsizing of its operations.
An emergency hearing on the Debtors' motion was held on June 25, 1992.
By the time of the hearing, the Debtors, the Bank Group and the Creditors'
Committee reached a tentative settlement agreement, which is described in
more detail below, pursuant to which they agreed that a managed liquidation
of the Debtors' assets should be commenced. The Bankruptcy Court entered an
agreed order approved by the parties, which approved a Sixth Amendment to
Registrant's Credit Agreement with the Bank Group (the "Sixth Amendment").
Pursuant to the Sixth Amendment, the Bank Group agreed that Registrant's
management could commence a managed liquidation of all of the Debtors' assets
and use the Bank Group's cash collateral consisting of the proceeds from the
liquidation to pay all of the expenses of the liquidation pursuant to a plan
and budget approved by the Bankruptcy Court (the "Plan"). The Plan permits
Registrant to pay all of its ongoing expenses related to the liquidation,
including without limitation, all payroll and benefits to Registrant's
employees, all rent and other occupancy costs to landlords, all utilities,
etc. No payments to vendors were authorized except those necessary to
complete special order merchandize orders and certain advertising expenses.
On June 25, 1992, the Bankruptcy Court approved the Plan and the Sixth
Amendment on an interim basis pending a final hearing. On July 30, 1992, the
Plan and the Sixth Amendment were finally approved.
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On July 30, 1992, the Bankruptcy Court approved a settlement among the
Debtors, the Committee and the Bank Group (binding on the estate and
creditors) under which the Bank Group released some of its collateral in
exchange for a release by the Debtors and their estates of certain claims
against the Bank Group.
ITEM 5. OTHER EVENTS.
In response to an interpretative request made in May 1992, the
Registrant received confirmation in January 1993 from the staff of the
Securities and Exchange Commission that it would not recommend enforcement
action if the Registrant did not file Form 10-Q quarterly reports and Form
10-K annual reports that would be due under Sections 13 or 15(d) of the
Securities Exchange Act of 1934 and did not produce audited financial
statements for the fiscal year ended February 29, 1992, and thereafter.
The Registrant filed Form 8-K's dated as follows which included monthly
reports filed by it with the United States Bankruptcy Court for the following
months:
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DATE OF FORM 8-K MONTHLY REPORTS
<S> <C>
May 21, 1992 Months ended December 21, 1991, January 25, 1992,
February 29, 1992, March 28, 1992 and April 25, 1992
June 30, 1992 May 30, 1992
July 30, 1992 June 27, 1992
August 21, 1992 July 25, 1992
September 25, 1992 August 29, 1992
November 3, 1992 September 26, 1992
November 25, 1992 October 24, 1992
February 16, 1993 November 28, 1992 and December 26, 1992
</TABLE>
In the Form 8-K dated February 16, 1993, the Registrant stated that it
did not anticipate filing any further monthly reports or other Current
Reports on Form 8-K except (a) to disclose any material events relating to
the liquidation and dissolution of PNP Holdings Corporation and Registrant,
and (b) to disclose the amounts of any liquidation payments, as well as
expenses, and the final liquidation of the Registrant and PNP Prime
Corporation.
The liquidation of the assets of Registrant occurred as provided in the
Plan described in Item 3. Net liquidation proceeds of approximately
$76,000,000 were paid over to the Bank Group in partial satisfaction of the
Bank Group's secured claims. As part of the settlement between the Debtors,
the Bank Group and the Committee, the Bank Group released any claims that it
had to the proceeds of the collection of avoidance liability of various
parties to Pay 'N Pak Stores, Inc.
The Committee was charged with the prosecution of various claims against
parties
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involved in the leveraged buy-out of PNP Prime Corporation ("Prime"), the
Registrant's parent. Certain of the parties settled claims for $5,750,000
that were brought against them for which they were responsible for payment.
The remaining claims were brought to trial on March 18, 1996. The jury
returned a verdict in favor of the remaining defendants. The verdict was
appealed, and the Ninth Circuit Court of Appeals, which upheld the verdict in
1997. Additional claims were brought against other parties resulting in
recoveries of $820,000.
Finally, the Committee and the Debtors resolved or prosecuted avoidance
claims against various parties resulting in cash recoveries of approximately
$11,000,000, and the reduction of claims of $5,271,000.
The Debtors and the Committee were also charged with resolving the
administrative claims that had arisen during the pendency of the bankruptcy.
Claims for non-professional administrative expenses totaled approximately
$46.5 million, of which $12,726,000 were allowed by orders of the bankruptcy
court. In addition, the bankruptcy court allowed professional administrative
claims of $6,860,000. Pursuant to various orders of the bankruptcy court,
$16,130,235 has been paid or will shortly be paid to administrative claimants.
On December 4, 1998, the bankruptcy court entered an order providing for
final payment of the administrative claims. The administrative claimants did
not receive full payment on their claims. The order also permitted the
destruction of the records of the Registrant. As a consequence of these
orders, all of the assets of the Debtors have been administered and there are
no assets to satisfy unsecured credits or shareholders of the Registrant.
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 hereunto duly authorized.
PAY 'N PAK STORES, INC.
Date: February 8, 1999 By /s/ John H. Markley
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John H. Markley
Its President
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