NOGI, APPLETON, WEINBERGER & WREN, P.C.
MYLES R. WRENI ESQUIRE
415 WYOMING AVENUE
SCRANTON, PA 18503
(717) 963-8880
(717) 963-9372 (Facsimile)
HOEGEN & MARSH
PETER J. HOEGEN, JR., ESQUIRE
25 N. RIVEIZ STREET
WILKES-BARRE, PA 18701
(717) 826-1810
(717) 824-8431 (Facsimile)
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
IN RE: :
:
C.B.G. LIMITED, : CASE NO: 5-92-00525
TRACHELE, INC., : CASE NO: 5-92-00615
EAGLE ROCK SRI AREA, : CASE NO: 5-92-00616
VALLEY UTILITIES COMPANY, INC., : CASE NO: 5-92-00617
RAVENS RUN EQUESTRIAN CENTER, : CASE NO: 5-92-00618
ONEIDA WATER COMPANY, : CASE NO: 5-92-00619
CHEZ-RAEL, INC., : CASE NO: 5-92-00620
:
Debtors : CHAPTER 11
:
FIRST EASTERN BANK, N.A. :
:
: (Consolidated Cases)
:
Movant :
:
VS. :
:
C.B.G. LIMITED, :
TRACHELE, INC., :
EAGLE ROCK SKI AREA. :
VALLEY UTILITIES COMPANY, INC., :
RAVENS RUN EQUESTRIAN CENTER, :
ONEIDA WATER COMPAYY, :
CHEZ-RAEL, INC., and :
the U.S. TRUSTEE AS HIS :
INTEREST MAY APPEAR, :
:
Respondents :
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
STIPULATION FOR CONSENT ORDER FOR RELIEF
FROM STAY, ADEOUATE PROTECTION, LEASE
REJECTION AND CASH COLLATERAL
TO THE HONORABLE JOHN J. THOMAS
UNITED STATES BANKRUPTCY JUDGE
C.B.G. Limited, and its affiliates, above captioned
(hereinafter sometimes collectively called the "Debtor") First
Eastern Bank, N.A., ("the Bank"), and First Eastern Equipment
Leasing ("FEEL"), by and through their counsel respectfully
represent as follows:
I.
STATEMENT OF FACTS GIVING
RISE TO THIS AGREEMENT
The debtor owns five (5) classes of property, to wit:
1. Fully developed commercial properties which are run and
operated by Debtor, to produce a continual income stream at a
profit.
2. Fully developed real properties, intended for sale by
Debtor to others as a profit.
3. Partially developed commercial properties, intended to
be run and operated by Debtor to produce a continual income
stream at a profit.
4. Partially developed real properties, intended for sale
by Debtor to others at a profit.
5. Undeveloped real and commercial properties planned for
development. by Debtor.
The property is subject to a first mortgage to an individual
and subordinate mortgages to the Bank and there are lease
agreements with FEEL affecting some of the personal property. It
is the Bank's and FEEL's interests that are to be protected by
this agreed order, and the parties intend that this Agreement
2
shall also assist Debtor to maximize Debtor's effort and
opportunity to achieve a successful Reorganization, thereby
enhancing the potential recovery by other creditors, both secured
and unsecured.
WHEREAS; Subordinate to the Bank's interests is a suggested,
but unrealized equity cushion. It was against this equity
cushion that the Debtor heretofore sought to "borrow" $600,000 by
the request to grant a super priority lien in that amount and
subordinating the existing mortgages.
As a result of the hearing thereon, this court found on July
7, 1992 that:
The existing equity cushion was $4,604,216 or 16% of the
total value of the property;
The subordination would reduce the equity cushion to 14%
of the total value;
Uniformly, an equity cushion of 20% is always adequate and
an equity cushion of 11% is not; the courts are divided on
cushions between those percentages;
Arrears in interest and taxes exist post-petition and
continue to grow with the Debtor having no ability to pay the
same.
Based upon these findings, this Court denied the super pri-
ority loan and grant of prime lien.
The Bank has advanced its claim for relief from the
Automatic Stay, the only issue remaining is whether Debtor can
"Adequately Protect" the Bank (11 USC Section 361). The Debtor
3
represents it cannot absent this agreement, and the assistance of
Bank, continue its day to day operations, while seeking to
formulate a plan of reorganization which can be approved by this
court.
WHEREAS; Debtor believes that it can obtain new financing
and/or equity capital contribution within a limited period.
WHEREAS; prior matters came to be heard on the Motions (the
"Motion") of the Bank, by its attorneys, for the entry of an
Order authorizing the Debtor to use certain "Cash Collateral" (as
defined in Section 363 (a) of the Bankruptcy Code) and Relief
from the Automatic Stay (11 USC 362), the Cash collateral of
which is presently subject to security interests and rights of
set-off in favor of the Bank which secures the prepetition
liabilities direct and contingent indebtedness of C.B.G. LIMITED
(the "Pre-Dip") to the Lender on their Lending as follows:
(See Addendum (4a))
These are secured by, among other instruments, i) Loan
Agreements, Mortgages, and Security Agreements, Security
Agreements - Personal Property, Financing Statements, including
Pennsylvania, and local filings, the Guarantees of Frank V.
Cedrone and (ii) consists of the funds on deposit or to be
deposited in depository accounts maintained at various other
banks (the "Other Bank Accounts") and in connection with such
authorization, granting certain substitute and additional liens
and other relief for the benefit of the Bank.
4
Debtor's Counsel and Lender's Counsel appearing do hereby
consent for use of certain Cash Collateral up to the amount
stated in the Exhibits attached, provided such use is conditioned
upon the entry of this order in this present form imposing
certain conditions and granting certain relief for the benefit
of Debtor and the Bank as hereinafter set forth. Notice of this
Proposed Order will be given to the Debtor and to the Debtors
twenty (20) largest unsecured creditors and the U.S. Trustee and
its unsecured creditors, and such notice being adequate under the
circumstances and in light of the nature of the Motion and the
notice procedures for further objection to this Order, as set
forth below:
THE COURT HAS BEEN ADVISED, AND
C.B.G. LIMITED AS PRE-DIP
AND DEBTOR AND THE BANK HEREBY
STATE ADDITIONAL SUPPORT OF THIS
AGREED ORDER THAT:
WHEREAS; on March 30, 1992, the Debtor filed its Petition
for Relief (the "Petition") under and pursuant to Chapter 11 of
Title 11 of the United States Code (the "BarAkruptcy Code"). It
continues to operate its business and manage its properties as a
Debtor-in-Possession under §§ 1107(a) and 1108 of the Bankruptcy
Code. No trustee or examiner has been appointed in this case.
5
WHEREAS; the Debtor's business consists of real property and
related resort type facilities owned by the Debtor.
WHEREAS; the Debtor executed various agreements, evidenced
by various Notes and Security Interests as better shown by the
Bank's Motions.
WHEREAS; as of March 30, 1992, the Debtor was indebted to
the Bank on these various transactions, in amounts previously
identified herein. The above amount excludes costs and
attorney's fees.
WHEREAS; as security for repayment, the Debtor and the Bank
entered into various Notes, Loan Agreements, Mortgages and
Security Agreements (the "Security Agreements") granting to the
Bank a security interest in collateral which is essentially of
all Debtors' Assets (the "Collateral").
WHEREAS; the Bank duly filed and perfected its security
interest in the Collateral.
WHEREAS; Frank M. Cedrone is a principal who has
guaranteed some of the lending.
WHEREAS; the Debtor has defaulted under the provisions
of the Notes.
6
WHEREAS; the Bank has further asserted its entitlement to
adequate protection of its claimed security interests in the
Collateral pursuant to Sections 361, 362 and 363 of the
Bankruptcy Code. To avoid complex, protracted and costly
litigation and the attendant delay and uncertainty related
thereto, the Debtor and Bank have agreed to the terms hereinafter
set forth.
WHEREAS; this court has jurisdiction over the parties to
this Stipulation and all of the property of this estate and
jurisdiction over the subject matter of this Stipulation pursuant
to Sections 157 and 1334 of Title 28 of United States Code.
Venue of the Stipulation is proper in this district pursuant to
Section 140 of Title 28 of United States Code.
WHEREAS; FEEL and the Debtor had entered into a Master
Equipment Lease on August 22, 1988, with FEEL as a Lessor and the
Debtor as a Lessee;
WHEREAS; as part of the lease financing transaction, the
Debtor executed eleven (11) Acceptance Supplements which describe
the specific items of property to be leased to the Debtor by FEEL
(hereinafter the "Master Equipment Lease" and "Acceptance
Supplements" shall be collectively referred to as the "Lease").
7
WHEREAS; the Debtor has defaulted under the terms of the
Lease and is indebted to FEEL for arrearages in the following
amounts:
Acceptance Months Amount Late Charges
Supplement No. Delincruent Delincruent
6708 15 $ 60,705.75 $26,535.02
6734 9 $169,497.18 $32,868.95
6847 14 $ 12,996.20 $ 6,086.69
6911 16 $34,055.68 $12,068.80
6962 14 $29,790.60 $10,940.45
6977 14 $9,649.92 $ 3,186.07
7039 23 $28,951.25 $ 6,650.38
7521 21 $34,398.84 $ 8,654.11
7551 9 $95,361.84 $18,492.60
7897 23 $53,469.71 $13,378.48
7971 7 $47,774.44 $ 7,404.39
WHEREAS; the Debtor has possession of the leased property;
WHEREAS; FEEL filed a Motion to Compel Adoption or
Rejection of Lease on May 29, 1992, and an Answer was filed by
the Debtor on June 16, 1992;
WHEREAS; a hearing was held on June 29, 1992 in the United
States Bankruptcy Court in Wilkes-Barre, Pennsylvania.
8
WHEREAS; the above factual statements are accepted as
correct and acknowledged.
ORDER
IT IS HEREBY ADJUDGED, ORDERED, AND DECREED this /22nd/ day
of /October/, 1992, that:
It appearing some of the Pre-Petition Collateral will be
converted to cash and used by the Debtor pursuant to this order
during the period contemplated by this order, it is the intent
and purpose of this Order, inter alia, to grant to the Bank a
security interest in all assets now owned or hereafter acquired
or generated by the Debtor, whether through the use of Cash
Collateral or otherwise (the "DIP Assets") in which such security
interests are granted may, in time, be converted to cash which
also will be used by the Debtor-in-Possession pursuant to this
Order and replaced in whole or in part by additional DIP Assets;
for purposes of this Order the term "Cash Collateral" shall mean
and include all "Cash Collateral" as defined by Section 363 of
the Code, together with cash arising from the collection or other
conversion to cash of assets of the Pre-DIP or the Debtor-in-
Possession in which the Lender has security interests, whether
security interests existed as of the commencement of these
proceedings or arises thereafter pursuant to this Order, and
whether such assets converted to cash existed as of the
9
commencement of these proceedings or arose or were generated
thereafter.
The Debtor-in-Possession shall operate and use Cash
Collateral only (i) for the purposes described in its Business
Plan and Budget, Pro Forma - Cash Collections And Cash Use" and
further as allowed by the Bank, pursuant to this order and (ii)
to the extent the Debtor's Statements of the "Current Asset Base"
shall be maintained and not diminished, or as (iii) the Bank
consents in writing after entry of this Order, to the use of Cash
Collateral in larger amounts prior to the Debtor's use of such
larger amounts if not then, Debtor's use of such larger amount
must cease.
The Debtor shall retain "MLA" to assist and aid the Debtor
with Management Assistance, the "Management Assistant". The
function of MLA shall be to review and verify previously approved
budget line item expenses, verify work performed and generally
monitor for Debtor's compliance with this Order, and to file
reports concerning the same with Bank.
10
On appropriate notice to Debtor, MLA shall at all times have
complete and free access to areas of Debtors' property and
operations as well as all books, records, plans, drawings, maps,
approvals, etc. of Debtors, the same of which are secured
property of the Bank. MLA shall be provided with suitable
facilities to perform the functions described.
The Debtor shall cause to be delivered to the Bank the
following Reports every Tuesday before 3 P.M.
a) Weekly - Cash Receipts and Disbursements
b) Weekly - Cash on hand
c) Bi-Weekly - Accounts Receivables
d) Bi-Weekly - Accounts Payable
e) Bi-Weekly - Summary and Variance of Business Plan and
Budget
f) Bi-Weekly - Summary and Variance of Assets
The Bank may fund operational shortfalls in a purely
discretionary manner and is granted a perfected security interest
in Debtors' assets for this post-petition lending, the same of
which is approved and the Debtor from excess cash flow may repay.
Reports shall be made and records kept on each of the Debtors
separately, and shortfalls and available cash collateral shall be
determined separately for each Debtor.
11
In addition to the other terms and conditions contained in
this order, the Debtor may use the Bank's Collateral after the
period commencing on the date of this order but ending at 12:00
p.m. on the 22nd day of May, 1993, unless extended by mutual
agreement or other order of court.
In addition to its existing rights and interests in the Cash
Collateral authorized by this order for limited use by the
Debtor-in-Possession, as protection for the interests of the Bank
(which is not necessarily adequate protection as such terms is
defined in Section 361 of the Code), the Bank is hereby granted a
valid, perfected and enforceable security interest equivalent to
a lien granted under Section 364 (c) (2) of the Code in and upon
all of the assets owned by the Pre-DIP and the Debtor-in-
Possession, including without limitation, their accounts,
contract rights, inventory, equipment, fixtures, documents (as
said terms are defined in the Uniform Commercial Code), motor
vehicles and equipment and real property and interests in real
property, whether owned or existing on the date of commencement
of the present proceedings or thereafter acquired or arising
(subject in priority only to valid and duly perfected security
interests and liens, including mortgages and deeds of trust,
existing at the time of commencement of the present proceedings),
and all improvement, additions, and accessions thereto, all
replacements thereof, all books and records with respect thereto
12
and all products and proceeds of the foregoing.
The security interests and liens herein granted; (i) are and
shall be in addition to all security interests, liens and rights
set-off existing in favor of the Bank on the Petition date and
(ii) are and shall be valid, perfected, enforceable and effective
as of the date of commencement of the present proceedings without
any further action by the Debtor-in-Possession or the Bank and
without the execution, filing, or recordation of any financing
statements, security agreements, vehicle lien applications,
mortgages or other documents; and (iii) shall secure the payment
of an amount equal to (a) the aggregate Cash Collateral used or
consumed by the Debtor-in-Possession.
To execute and deliver to the Bank financing statements,
mortgages or other instruments or documents considered by the
Lender to be necessary or desirable to further evidence the
perfection of the liens and security interests herein granted,
the Debtor-in-Possession is hereby authorized and directed to
execute and deliver such financing statements, instruments and
documents. Nothing in this order shall in any way restrict the
scope of the Lender's pre-petition liens, security interests or
claims with respect to the Pre-Petition indebtedness, which shall
extend to the maximum extent provided in li U.S.C. Section 552
and shall not be subject to restriction under Section 552 by
13
Motion or Objection of any party.
Upon approval of this Stipulation and Entry of Order, the
Debtor shall use the cash Collateral (i) only in the amounts and
for the purposes for which it was requested, which amounts and
purposes shall be set forth in Debtors' Business Plan and Budget
(unless the Bank shall consent otherwise) and (ii) subject in all
respects to the limitations set forth in this Order. In
particular, the obligations to generate income in the amounts as
shown and maintaining the current assets as described. In
accepting the Budget, and by taking any other actions pursuant to
this Order, the Bank shall not have any liability to any third
party and shall not be deemed to be in control of the operations
of the Debtor-in-Possession or to acting as a "responsible
person" or "owner or operator" with respect to the operation or
management of the Debtor-in-Possession inclusive of the actions
of the Management Assistant.
The Debtor has agreed to share all reports and information
it has or collects with the Bank.
Debtor and Guarantor are allowed and shall give to the Bank
a "General Release".
14
Notwithstanding anything to the contrary in this Order, the
Debtor-in-Possession's authority to use Cash Collateral pursuant
to this Order shall terminate on 5 days written "FAX" notice to
Debtor with copy to Debtor's Attorney, of any Default under terms
of this Order, unless the Court, after expedited hearing, rules
that the Debtor may continue to use cash collateral, or, unless
the Court, after expedited hearing, rules that the period should
be shortened. Either Debtor's counsel or Bank's counsel may move
for an expedited hearing for continued, or termination of, cash
collateral use.
Upon final approval of this Order, Immediate Relief from the
Automatic Stay (11 USC Section 362) is granted to the Bank to
sell, foreclose, or otherwise enforce its rights in the
collateral. This relief shall not be enforced immediately but
shall be subject to the Debtors operational development plan. At
the end of the time period provided, on a default which would
jeopardize the Bank's collateral the Debtor must assist and
cooperate in the actions undertaken by the Bank to enforce its
rights as a secured lender and the hired Management Assistant may
then be retained by the Bank.
The Debtor acknowledges it does not have the available funds
to make administrative payments for its continued post-petition
use of the leased property.
15
As a result of the unavailability of funds to cure its
payment default under the Lease as described in the
aforementioned recitals, or to provide adequate assurance of
future performance under the Lease. Its Leases with FEEL are
deemed rejected.
As a result of its rejection of Lease, the Debtor will
immediately make available, the leased property, to FEEL.
The Debtor has consented to relief from the Automatic Stay
for FEEL and, as such, FEEL is allowed and authorized to take
whatever steps it deems appropriate for the liquidation or
disposal of the leased property pursuant to its right as a Lessor
under applicable state law. Notwithstanding the relief from the
Automatic Stay granted hereby, FEEL shall leave Debtor in
possession of the leased property during the term of this
agreement.
Judgment is entered against the Debtor for its post-petition
months of use of the leased property as a result of the Debtor's
failure to pay its administrative payments to FEEL for the
reasonable value use of the leased property in the amount of the
post-petition lease payment amounts.
16
The Bank and Debtor have agreed that Debtor shall be
permitted to seek equity investors, or purchasers for the entire
property of Debtor during the next seven (7) months following the
date of this order. During that time, the Debtor must sell the
property, if offered, for the price determined by this Court to
be the Fair Market Value in its prior order and the Bank shall
accept this price. Following this time, the Bank may foreclose.
/s/
UNITED STATES BANKRUPTCY JUDGE
17
Consented to:
/s/
Pre-DIP and Debtor-in-Possession
BY: /s/
One of Its Attorneys
/s/
GUARANTORS
FIRST EASTERN BANK, N.A. and FIRST EASTERN
EQUIPMENT LEASING COMPANY
BY: /s/
ONE OF ITS ATTORNEYS
18
LOAN HISTORY AND PRESENRBALANCE
(Secured By Mortgages on Real Property of Debtor)
August 21, 1989 I * $11,500,000.00 Loan Revolver - increase in $8,500,000 revolver
loan
Principal $11,500,000.00
Interest (08/31/92) 1,349,012.99
Late fee, costs and
Attorneys fees - to be computed
II * $10,000,000.00 Receivable Line - increase in $5,000,000 line
Principal $5,070,275.84
Interest (08/31/92) (1,684.63)
Late fee, costs and
Attorneys fees - to be computed
March 2, 1989 I $ 1,500,000.00 Issued Letter of Credit
to Italian Bank
Principal $25,378.19
Interest (08/31/92) 3,038.14
Late fee, costs and
Attorneys fees - to be computed
December 13,1989 I $ 1,500,000.00 2nd Revolver Loan - expired 3/13/90
February 26, 1990 I Mortgage re letter of credit $ 500,000.00
$ 500,000.00 Collateral Position
June 13, 1990 I $ 3,000,000.00 3rd Revolver - August 31, 1990 maturity -- takes
out 2nd revolver -- New documents for this note
Principal $2,997,422.47
Interest (08/31/92) 351,697.57
Late fee, costs and
Attorneys fees - to be computed
October 31, 1990 I $ 600,000.00 Line of Credit - Valley Utilities Company
Principal $583,367.27
Interest (08/31/92) 17,484.80
Late fee , costs and
Attorneys fees - to be computed
ADDENDUM 4 (a)
December 31, 1990 I $ 550,000.00 Loan for working capital
Principal $549,979.50
Interest (08/31/92) 77,115.56
Late fee, costs and
Attorneys fees - to be computed
Note: Certain Additional Small Lendings Exist
* Amended Existing Documents
TOTAL SECURED DEBT $23,023,087.70
_______________
|
|