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Exhibit 10.1
EXECUTION COPY
RESTRUCTURING AGREEMENT
REGARDING PRE-NEGOTIATED
PLAN OF REORGANIZATION
STUART ENTERTAINMENT, INC.
AND
MEMBERS OF AD HOC COMMITTEE OF HOLDERS OF
$100,000,000 OF 12 1/2% SENIOR SUBORDINATED NOTES DUE 2004
DATED: MAY 21, 0000
XXX XXXX, XXX XXXX
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TABLE OF CONTENTS
Page
Article 1 Definitions............................................................................................ 1
Article 2 General Terms of Restructuring......................................................................... 3
Section 2.1 Treatment of Constituencies........................................................... 3
Section 2.2 Securities Considerations.............................................................
Article 3 Treatment of Notes, Existing Common Stock, the Senior Credit Facility and Trade Claims................. 4
Section 3.1 Exchange of Notes for Common Stock.................................................... 4
Section 3.2 Cancellation of Existing Common Stock................................................. 4
Section 3.3 Senior Credit Facility................................................................ 4
Section 3.4 Forbearance by Noteholders............................................................ 5
Section 3.5 Transfer by Noteholders............................................................... 5
Section 3.6 Trade Claims.......................................................................... 5
Article 4 Existing Stockholder Warrants.......................................................................... 5
Section 4.1 The Warrants.......................................................................... 5
Section 4.2 Purchase Price........................................................................ 5
Section 4.3 Adjustments........................................................................... 5
Section 4.4 Reservation of Shares................................................................. 6
Article 5 Management and Employees............................................................................... 6
Section 5.1 Executive Options..................................................................... 6
Section 5.2 Equity Incentive Options.............................................................. 6
Section 5.3 Transaction Payment................................................................... 7
Section 5.4 Other Employees....................................................................... 7
Section 5.5 Board of Directors.................................................................... 7
Section 5.6 Employment and Severance Agreements................................................... 7
Section 5.7 Management Compensation............................................................... 8
Section 5.8 The Employee Stock Bonus Plan......................................................... 8
Article 6 Gaming Regulation...................................................................................... 8
Section 6.1 Gaming Regulatory Considerations...................................................... 8
Section 6.2 Compliance Person..................................................................... 8
Article 7 Bankruptcy Process..................................................................................... 8
Section 7.1 Bankruptcy Filing..................................................................... 8
Section 7.2 Plan of Reorganization and Related Documents.......................................... 9
Section 7.3 Support of the Plan................................................................... 9
Section 7.4 No Improper Solicitation.............................................................. 9
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Page
Section 7.5 Noteholder Committee.................................................................. 10
Section 7.6 Conduct of Business Pending the Closing Date.......................................... 10
Section 7.7 Public Announcements.................................................................. 10
Article 8 Closing Conditions..................................................................................... 11
Section 8.1 Conditions to Noteholder Obligations.................................................. 11
Section 8.2 Conditions to Stuart Obligations...................................................... 12
Article 9 Other Agreements ...................................................................................... 13
Section 9.1 Election to be a Private Company...................................................... 13
Section 9.2 Alternative Transactions.............................................................. 13
Article 10 Miscellaneous......................................................................................... 13
Section 10.1 Successors and Assigns................................................................ 13
Section 10.2 Settlement............................................................................ 14
Section 10.3 Notices............................................................................... 14
Section 10.4 Amendments............................................................................ 15
Section 10.5 Applicable Law........................................................................ 15
Section 10.6 Headings.............................................................................. 15
Section 10.7 Counterparts.......................................................................... 15
Section 10.8 Entire Agreement...................................................................... 15
Section 10.9 Time Is of the Essence................................................................ 16
Section 10.10 Additional Noteholders................................................................ 16
Section 10.11 Term of Agreement..................................................................... 16
Section 10.12 Professional Fees..................................................................... 16
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This RESTRUCTURING AGREEMENT dated as of May 21, 1999 (this
"Agreement") is by and between STUART ENTERTAINMENT, INC., a Delaware
corporation ("Stuart"), and CONTRARIAN CAPITAL MANAGEMENT, L.L.C. ("Contrarian")
(together with any other holder of Notes that may become a party to the
Agreement pursuant to Section 10.10, the "Noteholders").
RECITALS
WHEREAS, pursuant to that certain Indenture dated as of November 13,
1996 (the "Indenture") by and among Stuart and Marine Midland Bank, a national
banking association (the "Trustee"), as trustee thereunder, Stuart has issued
$100,000,000 principal amount of its 12 1/2% Senior Subordinated Notes due 2004
(the "Notes"); and
WHEREAS, Stuart will not make the May 15, 1999 interest payment due
with respect to the Notes and will, as a result, after the applicable 30-day
cure period, be in default of its obligations with respect to the Notes; and
WHEREAS, the parties have determined that it would be in their mutual
best interests to restructure Stuart's debt and equity securities in the manner
provided below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby covenant and agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Agreement" shall mean this Restructuring Agreement.
"Alternative Transaction" shall have the meaning set forth in Section
9.2.
"Approvals" shall have the meaning set forth in Section 8.1(d).
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 0000, Xxxxx
00, Xxxxxx Xxxxxx Code, as now in effect or hereafter amended, Sections 11
U.S.C. 101 et seq.
"Bankruptcy Court" shall mean the United States Bankruptcy Court for
the District of Delaware.
"Chapter 11 Case" shall have the meaning set forth in Article 2.
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"Closing" shall mean the completion of the transactions to occur on the
Closing, Date as provided herein.
"Closing Date" shall mean the date on which the Closing occurs.
"Confirmation Date" shall mean the date upon which the Bankruptcy Court
enters its order confirming the Plan.
"Conversion Event" shall mean the date upon which the effectiveness of
the Plan occurs, including the conversion of the Notes to New Common Stock of
Stuart.
"EBITDA" shall mean, during each applicable fiscal year, for Stuart and
its subsidiaries, determined in accordance with GAAP consistently applied, the
net income (or loss) for such period, plus, to the extent reflected in the
statement of net income for such period, the sum of (a) the income tax of Stuart
and its subsidiaries, (b) the interest expense of Stuart and its subsidiaries,
(c) depreciation expense of Stuart and its subsidiaries, and (d) amortization of
Stuart and its subsidiaries on a consolidated basis.
"Employee Stock Plan" shall have the meaning set forth in Article 2.
"Equity Incentive Options" shall have the meaning set forth in Section
5.2.
"Executive" shall mean any person who is a member of the Executive
Management Group.
"Executive Management Group" shall consist of Xxxxxx X. Xxxxxxxx (Chief
Executive Officer), Xxxxxxxx X. Xxxxxx, III (Chief Financial Officer), Xxxxx
Xxxxxxxx (Chief Operating Officer), Xxxxx X. Xxxxxx (Senior Vice President -
Strategic Planning and Analysis), and Xxxx Xxxxxxxx (Senior Vice President).
"Executive Options" shall mean the options to be issued to the
Executive Management Group under Section 5.1 hereof on the Closing Date.
"Existing Common Stock" shall mean the common stock, $0.01 par value,
of Stuart issued and outstanding immediately prior to the Closing Date.
"Existing Stockholder Warrants" shall mean the warrants to be issued to
holders of the Existing Common Stock under Article 4 hereof on the Closing Date.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession.
"Indenture" shall have the meaning set forth in the Recitals to this
Agreement.
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"New Common Stock" shall mean the common stock, $0.01 par value per
share, to be authorized under the Company's amended and restated certificate of
incorporation to be filed with the Delaware Secretary of State effective upon
the Closing.
"Noteholders" shall have the meaning set forth in the Preamble to this
Agreement.
"Notes" shall have the meaning set forth in the Recitals to this
Agreement.
"Official Noteholder Committee" shall have the meaning set forth in
Section 7.5.
"Operating Pleading" shall have the meaning set forth in Section 7.1.
"Petition Pleadings" shall have the meaning set forth in Section 7.1
"Plan" shall mean the pre-negotiated plan of reorganization to be
proposed by Stuart consistent with this Agreement.
"Plan Related Documents" shall have the meaning set forth in Section
7.2.
"Restructuring" shall have the meaning set forth in Article 2.
"Retention Bonus" shall mean the approximately $227,500 in bonuses
payable to certain employees on December 31, 1999.
"Senior Credit Facility" shall mean the senior secured working capital
facility in the principal amount of $30,000,000, which indebtedness is senior to
the Notes and secured by essentially all the assets of Stuart and its
subsidiaries.
"Trade Claims" shall mean all claims against Stuart as of the
commencement of its Chapter 11 Case incurred in the purchase, lease or use of
goods and services in the ordinary course of Stuart's business, excluding
therefrom any claim arising out of the rejection of any unexpired lease or
executory contract and any claim arising under or related to the Notes.
"Trustee" shall have the meaning set forth in the Recitals to this
Agreement.
ARTICLE 2
GENERAL TERMS OF RESTRUCTURING
Section 2.1 Treatment of Constituencies. The parties to this Agreement have
agreed in principle to a restructuring of Stuart which shall be implemented by a
Chapter 11 filing by Stuart in the United States Bankruptcy Court for the
District of Delaware, Wilmington, Delaware (the "Restructuring"). Specifically,
Stuart shall file a petition for relief under Chapter 11 of the Bankruptcy Code
(the "Chapter 11 Case") and shall propound a pre-negotiated plan of
reorganization that provides for, among other things: (a) the conversion of the
Notes into shares of New Common Stock and the cancellation of the Notes; (b) the
cancellation of the Existing Common Stock, and any options, warrants or other
rights to acquire any Existing
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Common Stock of Stuart; (c) the granting to holders of Existing Common Stock
warrants to acquire a total of 10% of the New Common Stock on a pro rata basis,
as described in Article 4; (d) the establishment of an Employee Stock Bonus Plan
(the "Employee Stock Plan") as described in Article 5; (e) the payment of the
Retention Bonus to certain employees and the issuance of the Executive Options
and the Equity Incentive Options to the Executive Management Group; and (f) the
restructuring of the Senior Credit Facility. The summary of the Restructuring
set forth in this Article 2 is qualified in its entirety by the other provisions
of this Agreement, which provide a more detailed description of the terms and
conditions of the Restructuring.
Section 2.2 Securities Considerations. Stuart intends to maintain its
status as a registered reporting company under the Securities Exchange Act of
1934 throughout the Chapter 11 Case and, subject to the provisions of Section
9.1 hereof, following the Closing Date. Subject to Section 9.1 hereof, Stuart
also intends to secure a listing for trading of the New Common Stock on a
recognized national securities exchange or automated quotation system either
concurrent with or as soon as practicable after the Closing Date. If Stuart and
the Noteholders elect to maintain Stuart's status as a registered reporting
company under the Securities Exchange Act of 1934 following the Closing Date as
set forth in Section 9.1, the Plan will provide for the issuance of round-lots
of New Common Stock to a sufficient number of Stuart employees pursuant to the
Employee Stock Plan to satisfy the Nasdaq Small Cap Market or Nasdaq National
Market quantitative shareholder requirements.
ARTICLE 3
TREATMENT OF NOTES, EXISTING COMMON STOCK, THE SENIOR CREDIT FACILITY AND TRADE
CLAIMS
Section 3.1 Exchange of Notes for Common Stock. On the Closing Date:
(a) the Notes, including principal, interest, fees and other charges with
respect thereto, shall be cancelled and extinguished and, in exchange therefor,
subject to the provisions of Section 9.1 hereof, Noteholders shall receive their
pro rata share of one hundred percent (100%) of the New Common Stock issued and
outstanding on the Closing Date (excluding shares of New Common Stock reserved
for issuance (i) upon exercise of the Existing Stockholder Warrants, (ii) under
the Employee Stock Plan, and (iii) upon exercise of the Executive Options and
the Equity Incentive Options); and (b) Stuart shall have no further obligations
under or in connection with the Notes of any kind whatsoever.
Section 3.2 Cancellation of Existing Common Stock. On the Closing Date,
the Existing Common Stock shall be canceled and extinguished, and the holders of
the Existing Common Stock shall receive, in exchange therefor, and subject to
the provisions of Section 9.1 hereof, their pro rata share of the Existing
Stockholder Warrants. Other than the Existing Stockholder Warrants, the holders
of the Existing Common Stock shall not receive any equity or other interest in
Stuart (as reorganized) or any other consideration in exchange for cancellation
of the Existing Common Stock.
Section 3.3 Senior Credit Facility. On the Closing Date, the Senior
Credit Facility shall be restructured or satisfied pursuant to a new senior
secured working capital facility obtained by Stuart and its subsidiaries, which
facility may also include a portion of term
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indebtedness. The terms and conditions of such restructured Senior Credit
Facility or new senior working capital facility shall be reasonably acceptable
to the parties hereto.
Section 3.4 Forbearance by Noteholders. The parties acknowledge that
the Company will not make the May 15, 1999 interest payment due under the
Indenture, and that the Company will not make the payment during the 30-day cure
period. During the term of this Agreement, the Noteholders shall (a) refrain
from filing (or causing to be filed) or otherwise taking any action to enforce
the Notes or the obligations of Stuart under the Indenture, or any guarantee
relating thereto, including any requirement that Stuart make the May 15th
interest payment, and (b) instruct the Trustee to refrain from filing or taking
any such action.
Section 3.5 Transfer by Noteholders. Each of the Noteholders agrees
that during the term of this Agreement, it shall not, directly or indirectly,
sell, assign, transfer, hypothecate or otherwise dispose of (a) any Note
beneficially owned by it or as to which it has investment authority or
discretion (including Notes acquired after the date hereof), (b) any "claim" (as
that term is defined in Section 101(5) of the Bankruptcy Code) arising from,
based on or related to the Notes, or (c) any option, interest in, or right to
acquire any Note or claim referred to in clauses (a) and (b) above unless, in
each and every such case, the Noteholder, as transferor, provides a complete
copy of this Agreement to transferee with the initial transaction statement
governing the transfer or sale of the Notes.
Section 3.6 Trade Claims. The Noteholders shall consent and agree to
the payment in full by Stuart of all Trade Claims either pursuant to the terms
and conditions under which such Trade Claim arose or in the ordinary course of
Stuart's business.
ARTICLE 4
EXISTING STOCKHOLDER WARRANTS
Section 4.1 The Warrants. Subject to the provisions of Section 9.1
hereof, each holder of Existing Common Stock shall be granted, on a pro rata
basis, Existing Stockholder Warrants to acquire an aggregate number of shares of
New Common Stock, which will be equivalent to ten percent (10%) of the New
Common Stock issued and outstanding on the Closing Date (on a fully diluted
basis, giving effect to the issuance of the shares (i) upon exercise of the
Existing Stockholder Warrants, (ii) under the Employee Stock Plan, and (iii)
upon exercise of the Executive Options and the Equity Incentive Options).
Section 4.2 Purchase Price. Subject to the provisions of Section 9.1
hereof, each Existing Stockholder Warrant shall initially entitle the holder
thereof to purchase one (1) share of New Common Stock, in accordance with the
terms of the Existing Stockholder Warrant, at a purchase price per share equal
to the per share value of the New Common Stock required to produce an aggregate
equity value to the Noteholders sufficient to satisfy all amounts payable under
the Notes as of the commencement of Stuart's Chapter 11 Case.
Section 4.3 Adjustments. The Existing Stockholder Warrants shall
include customary provisions with respect to the adjustment of the number of
shares subject to such Existing
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Stockholder Warrants in the event of stock splits, stock dividends and mergers
and similar events.
Section 4.4 Reservation of Shares. Subject to the provisions of Section
9.1 hereof, Stuart shall at all times reserve and keep available out of its
authorized New Common Stock, solely for the purpose of issue upon exercise of
Existing Stockholder Warrants, such number of New Common Stock as shall then be
issuable upon the exercise of all Existing Stockholder Warrants.
ARTICLE 5
MANAGEMENT AND EMPLOYEES
Section 5.1 Executive Options. On the occurrence of a Conversion Event,
the Executive Management Group shall be entitled to receive at the Closing
options to acquire an aggregate number of shares of New Common Stock, equivalent
to four percent (4%) of the outstanding New Common Stock on the Closing Date
(the "Executive Options"). When issued, such New Common Stock shall dilute all
shares of New Common Stock issued and outstanding at the time of issuance on a
pro rata basis. The Executive Options shall have a nominal exercise price, and
shall be allocated among the Executive Management Group in a manner and in an
amount as determined by Xx. Xxxxxxxx prior to the occurrence of a Conversion
Event. The number of shares subject to the Executive Options shall be adjusted
in the event of stock splits, stock dividends and mergers and similar events.
Section 5.2 Equity Incentive Options. The Executive Management Group
shall receive performance-based options to acquire an aggregate number of shares
of New Common Stock, which shall be equivalent to six percent (6%) of the
outstanding New Common Stock on the Closing Date (the "Equity Incentive
Options"). When issued, such New Common Stock shall dilute only the shares of
New Common Stock issued under Section 3.1 of this Agreement, on a pro rata
basis. The Equity Incentive Options shall have an exercise price per share equal
to the fair market value per share of New Common Stock as of the Closing Date.
The Equity Incentive Options shall vest and become exercisable if Stuart meets
the following EBITDA targets during the first three (3) full fiscal years of the
Company following the Confirmation Date in accordance with the vesting schedule
established below.
EBITDA
FISCAL YEAR ($ IN MILLIONS) VESTING
----------- --------------- -------
1 $12 1/3
2 $14 1/3
3 $16 1/3
Notwithstanding the foregoing, the EBITDA targets set forth above shall be
cumulative and the Equity Incentive Options may vest earlier than as set forth
in the vesting schedule. For example, if Stuart fails to meet the total EBITDA
for the first two fiscal years, but meets the target in the third fiscal year,
and the aggregate EBITDA for all three fiscal years exceeds $42 million, the
Equity Incentive Options shall vest in full. Further, if Stuart meets the EBITDA
target
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established for any fiscal year during an earlier fiscal year, the Equity
Incentive Options which would have vested based on achieving such EBITDA target
in the later fiscal year shall vest in full. The Equity Incentive Options shall
be allocated among the Executive Management Group in a manner and in an amount
as determined by Xx. Xxxxxxxx prior to the occurrence of a Conversion Event. The
number of shares and exercise price of the Equity Incentive Options shall be
adjusted in the event of stock splits, stock dividends and mergers and similar
events.
Section 5.3 Transaction Payment. If, in connection with any Alternative
Transaction or series or combination of such transactions which occur before
November 17, 1999, including, but not limited to, a tender offer for the Notes
by a third-party, or a merger or sale of the Company, but not including any
series or combination of private sales of Notes among existing Noteholders which
in total relate to less than 100% of the outstanding Notes, the Noteholders
receive at least $30 million in cash, or if a cash distribution of at least $30
million is made under the Plan to the Noteholders, the Executive Management
Group shall receive 10% of all value in excess of $30 million that is received
by the Noteholders. Such amounts shall be allocated among the Executive
Management Group in a manner and in an amount as determined by Xx. Xxxxxxxx. For
purposes of this Section 5.3, the term Note includes any securities of the
Company the Notes are exchanged for or converted into.
Section 5.4 Other Employees. On December 31, 1999, each employee listed
on Schedule 5.4 hereto shall be entitled to receive a Retention Bonus consisting
of cash in an amount equal to ten percent (10%) of his or her annual base salary
in effect on the date of this Agreement, provided that such employee remains an
employee through December 31, 1999.
Section 5.5 Board of Directors. The initial Board of Directors of
Stuart following the Confirmation Date shall be comprised of five (5) directors.
Xx. Xxxxxxxx shall be a director of Stuart and shall be appointed the Chairman
of the Board. Failure to appoint Xx. Xxxxxxxx Chairman of the Board or to elect
him to the Board of Directors shall constitute termination without "Cause" under
his employment agreement. Xx. Xxxxxxxx shall also have the right to appoint one
additional director to the Board during the term of his Employment Agreement.
Xx. Xxxxxxxx shall have the right to recommend nominees to serve as the
remaining three initial directors of Stuart, subject to the approval of the
Noteholders; provided, however, that any member of the Official Noteholder
Committee, or its nominee, may choose to serve instead of any such recommended
nominees.
Section 5.6 Employment and Severance Agreements. Subject to the final
review of the Noteholders, the Noteholders hereby agree to approve and support
approval by the Bankruptcy Court as part of the Chapter 11 Case, the Employment
Agreements and Severance Agreements listed on Schedule 5.6 hereto, as may be
modified or amended to reflect the terms of this Agreement.
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Section 5.7 Management Compensation. The initial Board of Directors
shall, within three (3) months of a Conversion Event, review compensation levels
of the Executive Management Group and shall make adjustments, as appropriate and
in good faith, to fairly compensate the members of the Executive Management
Group at levels competitive with similarly situated companies.
Section 5.8 The Employee Stock Bonus Plan. Subject to the provisions of
Section 9.1 hereof, the Company shall establish the Employee Stock Plan under
which employees who are members of the middle management of Stuart and who are
listed on Schedule 5.4 hereto, and certain other employees to be designated by
executive management at a later date, each shall receive 100 shares of New
Common Stock, or an aggregate amount of New Common Stock which will be
equivalent to one and two tenths percent (1.2%) of the outstanding Common Stock
(on a fully diluted basis, giving effect to the issuance of the shares (i) upon
exercise of the Existing Stockholder Warrants, (ii) under the Employee Stock
Plan, and (iii) upon exercise of the Executive Options and the Equity Incentive
Options).
ARTICLE 6
GAMING REGULATION
Section 6.1 Gaming Regulatory Considerations. The parties will
cooperate to take such further steps as may be available to limit the
application of the gaming regulations to the Noteholders and their principals.
These steps may include the Noteholders' establishing subsidiary entities to
hold the New Common Stock, creating multiple classes of New Common Stock,
obtaining the agreement or acquiescence of regulatory authorities to refrain
from applying or limiting the application of such regulations to the Noteholders
for some period of time, granting by Noteholders of an irrevocable proxy to a
senior decision-maker or group of senior decision-makers within the stockholder
organization, or other measures. In any event, the obligations of each
Noteholder hereunder will be conditioned upon such Noteholder's determination,
in its reasonable discretion, that the application to such Noteholder of the
gaming regulations associated with such Noteholder's ownership of New Common
Stock will not be unduly burdensome or require such Noteholder or its principals
to make disclosure of any information which such Noteholder or principal would
otherwise maintain confidential.
Section 6.2 Compliance Person. Stuart, at its cost, shall provide the
Noteholders with an individual experienced in gaming license matters to assist
them as reasonably necessary with gaming license matters and related reporting
obligations, if any, associated with their ownership of New Common Stock. This
compliance person shall assist the Noteholders with respect to interpreting
regulations, preparing forms and inter-facing with gaming license authorities,
and shall be accessible by telephone or e-mail to the Noteholders during regular
business hours.
ARTICLE 7
BANKRUPTCY PROCESS
Section 7.1 Bankruptcy Filing. Upon execution of this Agreement, Stuart
shall promptly commence preparation of Chapter 11 petitions, statements of
financial affairs, schedules of assets and liabilities, and any and all other
documents necessary to commence the
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Chapter 11 Case (collectively, the "Petition Pleadings"). Stuart shall consult
with the Noteholders in the preparation of the Petition Pleadings. In addition,
upon execution of this Agreement, Stuart shall promptly commence preparation of
all required cash collateral, debtor-in-possession financing and other operating
documents which shall be filed as of the commencement of the Chapter 11 Case
(the "Operating Pleading"). The Operating Pleading shall be in form and
substance reasonably satisfactory to Stuart, the Noteholders, and their
respective counsel and advisors.
Section 7.2 Plan of Reorganization and Related Documents. Promptly
following execution of this Agreement, the parties hereto shall commence
preparation of the Plan, Disclosure Statement, Existing Stockholder Warrants,
the Executive Options, the Equity Incentive Options, the Employee Stock Plan and
other documents reasonably necessary to implement the Plan as contemplated
hereunder (collectively, the "Plan Related Documents"). The Plan Related
Documents shall be in form and substance reasonably satisfactory in all respects
to Stuart and the Noteholders, and their respective counsel and advisors. The
Plan Related Documents shall be filed with the Bankruptcy Court upon
commencement of the Chapter 11 Case.
Section 7.3 Support of the Plan. Stuart and each Noteholder shall use
its reasonable best efforts to obtain confirmation of the Plan in accordance
with the Bankruptcy Code and on terms consistent with this Agreement. Stuart and
each Noteholder shall take all necessary and appropriate actions to achieve
confirmation of the Plan, including recommending to the holders of impaired
claims (including the other holders of the Notes) and interests that the Plan be
confirmed. No Noteholder shall (a) object to the confirmation of the Plan or
otherwise commence any proceeding to oppose or alter the Plan or any other
reorganization documents containing terms and conditions consistent with those
set forth in this Agreement, (b) vote for, consent to, support or participate in
the formulation of any other plan of reorganization or liquidation proposed or
filed or to be proposed or filed in any Bankruptcy proceeding commenced with
respect to Stuart, (c) directly or indirectly seek, solicit, support or
encourage any other plan, proposal or offer of dissolution, winding up,
liquidation, reorganization, merger or restructuring of Stuart that could
reasonably be expected to prevent, delay or impede the successful restructuring
of Stuart as contemplated by this Agreement, or (d) take any other action that
is inconsistent with, or that would delay confirmation of, the Plan; provided,
however, that no Noteholder shall be barred from (e) objecting to compliance
with Section 1126 of the Bankruptcy Code if the Disclosure Statement received by
such Noteholder contains a material misstatement or omission, or (f) taking any
action with respect to any matter which action is not inconsistent with the
terms of this Agreement.
Section 7.4 No Improper Solicitation. Notwithstanding Section 7.3
above, this Agreement and the terms of the Plan Related Documents are the
product of negotiations among Stuart and the Noteholders. This Agreement is not
and shall not be deemed to be a solicitation for consents to the Plan. No
Noteholder's acceptance of the Plan shall be solicited until such party has
received a Disclosure Statement approved by the Bankruptcy Court and otherwise
in compliance with Section 1126 of the Bankruptcy Code.
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Section 7.5 Noteholder Committee. In conjunction with the Chapter 11
Case and pursuant to either Sections 1102(a)(1) or (a)(2) of the Bankruptcy
Code, Stuart shall support the appointment of an official committee comprised of
the Noteholders and such other holders of the Notes as may be appointed by the
Office of United States Trustee (the "Official Noteholder Committee"). The
Official Noteholder Committee shall, subject to compliance with the applicable
provisions of the Bankruptcy Code, be entitled to retain the law firm of
Milbank, Tweed, Xxxxxx & XxXxxx, L.L.P., to assist it in the prosecution of the
Plan and related matters. In the event the appointment of an Official Noteholder
Committee is not approved in the Chapter 11 Case, Stuart shall actively support
the approval, under Section 503(b) of the Bankruptcy Code, of the payment of the
reasonable costs and fees incurred by the professionals retained by the
Noteholders.
Section 7.6 Conduct of Business Pending the Closing Date. Stuart agrees
that, prior to the Closing Date, unless otherwise expressly contemplated or
permitted by this Agreement:
(a) Stuart shall not directly or indirectly, do or permit to occur any
of the following: (1) issue, sell, pledge, dispose of or encumber any additional
shares of, or any options, warrants, conversion privileges or rights of any kind
to acquire any shares of, any of its capital stock; (ii) amend or propose to
amend its articles of incorporation; (iii) split, combine or reclassify any
outstanding shares of its capital stock, or declare, set aside or pay any
dividend or other distribution payable in cash, stock, property or otherwise
with respect to shares of Existing Common Stock; (iv) redeem, purchase or
acquire or offer to acquire any shares of its capital stock; (v) acquire (by
merger, exchange, consolidation, acquisition of stock or assets or otherwise)
any corporation, partnership, joint venture or other business organization or
division or material assets thereof-, (vi) incur any indebtedness for borrowed
money or issue any debt securities, except in connection with any restructuring
or satisfaction of the Senior Credit Facility, including any
debtor-in-possession financing obtained by Stuart and its subsidiaries either as
part of or in connection with the Chapter 11 Case; or (vii) enter into or
propose to enter into, or modify or propose to modify, any agreement,
arrangement or understanding with respect to any of the matters set forth in
this Section 7.6(a); provided, however, that this Section 7.6(a) shall not
prohibit Stuart from entering into any agreement to acquire any other person or
entity (or the assets or operations thereof), whether or not such agreement may
involve the issuance of equity securities of Stuart, if such agreement is
expressly conditioned upon the approval of the Noteholders as a part of and
pursuant to the Plan; and
(b) Stuart shall (i) maintain its good standing under the laws of
Delaware; and (ii) shall notify the Noteholders of any governmental or third
party complaints, investigations or hearings (or communications indicating that
the same may be contemplated).
Section 7.7 Public Announcements. As soon as practicable after the
execution of this Agreement, a press release shall be made announcing the
material terms of the Restructuring as set forth herein, which press release
shall be in form and substance reasonably satisfactory to Stuart and the
Noteholders.
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ARTICLE 8
CLOSING CONDITIONS
Section 8.1 Conditions to Noteholder Obligations. The obligations of
the Noteholders to consummate the Restructuring as described herein shall be
subject to the satisfaction as of the Closing Date, in all material respects, of
each of the following conditions:
(a) Compliance by Stuart. Stuart shall have performed and complied with
all of its material covenants and other material obligations under this
Agreement and the Plan Related Documents. Stuart shall not be in default of its
obligations under this Agreement or the Plan Related Documents.
(b) Proceedings Relating to the Chapter 11 Case. In connection with the
proceedings in the Chapter 11 Case:
(i) The Bankruptcy Court shall have confirmed the Plan and the
Confirmation Order shall be in form and substance reasonably acceptable
to the Noteholders.
(ii) No Trustee (as such term is defined under the Bankruptcy
Code) shall be appointed in the Chapter 11 Case.
(iii) The Chapter 11 Case shall not be converted to a
liquidation case under Chapter 7 of the Bankruptcy Code.
(iv) Stuart shall have sufficient cash on the Closing Date to
make all cash payments required to be made on the Closing Date pursuant
to the Plan.
(v) All claims of creditors, secured or unsecured, and equity
holders shall be treated consistent with the terms of the Plan. In that
regard, Stuart and the Noteholders acknowledge that the Plan may
provide for the distribution of New Common Stock otherwise distributed
to Noteholders under Section 3.1 hereof to the holders of allowed
claims arising out of the rejection of certain unexpired leases or
other executory contracts. In all events, all claims of creditors,
secured or unsecured, shall be the treated in a manner satisfactory to
the Noteholders.
(c) No Prohibition of Transaction. There shall not be in force any
order, decree or ruling by any court or governmental body having jurisdiction,
or any threatened or pending complaint of a governmental body or any person
praying for an order, decree or ruling of a court restraining or enjoining the
consummation of or rendering illegal the transactions contemplated by this
Agreement, and there shall not be in force any such order or decree (including
any injunction or temporary restraining order granted pursuant to a complaint
filed under the federal antitrust laws); provided, however, that nothing in this
Agreement shall require Stuart or any of the Noteholders to seek a stay pending
appeal of any such injunction, decree or order other than a temporary
restraining order.
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(d) Regulatory Approvals. Stuart shall have received all regulatory
approvals, including without limitation all approvals by applicable gaming
authorities, which shall have become final and nonappealable or any period of
objection by regulatory authorities shall have expired, as applicable, and all
other material approvals, permits, authorization, consents, licenses and
agreements from other third parties that are necessary or appropriate to permit
the transactions contemplated hereby and by the Plan and any related agreements
and to permit Stuart to carry on its business after the Closing Date in a manner
consistent in all material respects with the manner in which it was carried on
prior to the Closing Date (collectively, the "Approvals"), which Approvals shall
not contain any condition or restriction that materially impairs Stuart's
ability to carry on its business in a manner consistent in all respects with the
manner as proposed to be carried on by Stuart pursuant to the Plan.
(e) Filings and Service. The Plan Related Documents each shall not have
been modified or withdrawn without the prior consent of the Noteholders.
(f) Material Adverse Change. There shall not have occurred, directly or
indirectly, after the date hereof and before the Closing Date, any material
adverse change in Stuart's condition (financial or otherwise), business, assets,
liabilities or results of operations.
The foregoing conditions contained in this Section 8.1 are intended solely for
the benefit of the Noteholders. The Noteholders shall at all times have the
right to waive any condition. All approvals given by the Noteholders under this
Section shall be in writing. The waiver by the Noteholders of any condition
shall not relieve any other party of any liability or obligation with respect to
any covenant or agreement set forth herein.
Section 8.2 Conditions to Stuart Obligations. The Closing and Stuart's
obligations hereunder shall be subject to the satisfaction as of the Closing
Date of each of the following, conditions:
(a) Compliance by Noteholders. Each of the Noteholders shall have
complied with all of its material covenants and other material obligations under
this Agreement and the Plan Related Documents. None of the Noteholders shall be
in default of its obligations under this Agreement or the Plan Related
Documents.
(b) Proceedings Relating to the Chapter 11 Case. A Confirmation Order
and any other orders by the Bankruptcy Court necessary to confirm the Plan and
approve this Agreement and the Plan Related Documents, any documents related
hereto and the transactions contemplated hereby shall be entered, each of which
order or orders shall be a final order reasonably acceptable in form and
substance to Stuart and its counsel.
(c) No Prohibition of Transaction. There shall not be in force any
order, decree or ruling by any court or governmental body having jurisdiction,
or any threatened or pending complaint of a governmental body or any person
praying for an order, decree or ruling of a court restraining or enjoining the
consummation of or rendering illegal the transactions contemplated by this
Agreement, and there shall not be in force any such order or decree (including
any injunction or temporary restraining order granted pursuant to a complaint
filed
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under the federal antitrust laws); provided, however, that nothing in this
Agreement shall require Stuart or any Noteholder to seek a stay pending appeal
of any such injunction, decree or order other than a temporary restraining
order.
(d) Regulatory Approvals. The Noteholders shall have received all
Approvals, which Approvals shall have become final and nonappealable or any
period of objection by regulatory authorities shall have expired, as applicable.
The foregoing conditions contained in this Section 8.2 are intended solely for
the benefit of Stuart. Stuart shall at all times have the right to waive any
condition. All approvals given by Stuart under this Section shall be in writing.
The waiver by Stuart of any condition shall not relieve any other party of any
liability or obligation with respect to any covenant or agreement set forth
herein.
ARTICLE 9
OTHER AGREEMENTS
Section 9.1 Election to be a Private Company. The parties to this
Agreement are currently examining whether it is more beneficial for Stuart to
operate, immediately following the Closing Date, as a public company, registered
under the Securities Exchange Act of 1934, or as a private company. The parties
agree to continue to investigate the merits of being a public or private company
following the Closing Date in good faith and shall make a final decision
regarding this matter by the earlier of the filing of the Petition Pleadings or
June 10, 1999. Moreover, Stuart shall agree to operate as a private company
immediately following the Closing Date if, as a result of an Alternative
Transaction, the capital structure for Stuart as contemplated in this Agreement
is modified and such modified structure provides economic value and compensation
to the relevant constituents of the Company, including the Executive Management
Group, in a manner and in an amount at least equivalent to that contained in
this Agreement.
Section 9.2 Alternative Transactions. The parties to this Agreement
acknowledge that the Company, with the assistance of its advisors, is in the
process of soliciting third-parties concerning a possible merger, business
combination, sale of assets, sale of equity interests or other securities in the
Company (an "Alternative Transaction"). During the term of this Agreement, the
Company and the Noteholders shall cooperate with each other with respect to the
solicitation or negotiation of any Alternative Transaction. Additionally, if any
such Alternative Transaction is proposed, and the terms thereof are acceptable
to both the Company, including the Executive Management Group, and the
Noteholders, the parties hereto agree to make all necessary amendments to this
Agreement and, if applicable, the Plan Related Documents, and to undertake such
acts that are necessary and appropriate to implement such Alternative
Transaction.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns, including, without
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limitation, any transferee who receive any Notes held by a Noteholder executing
this Agreement; provided, further, that nothing contained in this Section 9.1
shall be deemed to permit sales, assignments or transfers other than in
accordance with the provisions of Section 3.5.
Section 10.2 Settlement. This Agreement and the Plan are part of a
proposed settlement of disputes among the parties hereto. Except as expressly
provided herein, nothing in this Agreement is intended to in any manner waive,
limit, impair or restrict the ability of the Noteholders to protect and preserve
their respective rights, remedies and interests, including without limitation
their respective claims against Stuart and their respective full participation
in the Chapter 11 Case. Nothing in this Agreement shall be deemed an admission
of any sort. Nothing set forth herein effects a modification of any Noteholder's
rights under any document or agreement unless and until the Plan is confirmed
and becomes effective. If the transactions contemplated hereby are not
consummated or if this Agreement is terminated for any reason, the parties
hereto fully reserve any and all of their rights. Pursuant to Federal Rule of
Evidence 408 and any applicable state rules of evidence, this Agreement shall
not be admitted into evidence in any proceeding other than a proceeding to
enforce its terms.
Section 10.3 Notices. Any notice by any party to another party
hereunder shall be deemed sufficiently given if in writing either served by
personal delivery or sent by overnight courier guaranteeing next day delivery or
by telecopy, addressed (until further written notice of change of address), if
to Stuart, to:
STUART ENTERTAINMENT, INC.
0000 Xxxxxxxx Xxxxxx
Xxxxxxx Xxxxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Chairman and
Chief Executive Officer
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
XXXXXX XXXXXXX & XXXXXXX L.L.P.
Two Renaissance Square
00 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
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if to the Noteholders to:
CONTRARIAN CAPITAL MANAGEMENT, L.L.C.
000 Xxxx Xxxxxx Xxx.
Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Managing Partner
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
MILBANK, TWEED, XXXXXX & XXXXXX, LLP
000 X. Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
Notice given by personal delivery shall be effective upon delivery. Notice
transmitted by overnight courier guaranteeing next day delivery shall be
effective on the business day following timely delivery to such courier. Notice
transmitted by telecopy shall be effective when receipt is acknowledged.
Section 10.4 Amendments. This Agreement shall not be modified, amended
or otherwise changed without the written agreement of all of the parties hereto.
Section 10.5 Applicable Law. This Agreement shall be governed by the
laws of the State of New York (without reference to the provisions thereof
relating to conflicts of laws) and applicable federal bankruptcy law and any
questions arising hereunder shall be construed or determined in accordance with
such laws. The parties hereby agree to retain jurisdiction in the Bankruptcy
Court with respect to questions arising under this Agreement.
Section 10.6 Headings. The table of contents and the headings at the
beginning of the articles, sections and subsections of this Agreement are solely
for the convenience of the parties and are not a part of this Agreement.
Section 10.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 10.8 Entire Agreement. This Agreement (including all Exhibits
hereto) contains the entire understanding between the parties relating to its
subject matter and supersedes all prior agreements, understandings,
representations and statements, oral or written.
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Section 10.9 Time Is of the Essence. Time is of the essence under this
Agreement.
Section 10.10 Additional Noteholders. Any additional holder of any
portion of the Notes may become a party to this Agreement by duly executing a
written acknowledgment of such holder's agreement to be bound by the terms and
provisions of this Agreement and to be deemed to be a "Noteholder" for all
purposes hereof, and upon delivery of an executed copy of such acknowledgment to
Stuart and each other Noteholder, such holder shall be thereafter deemed to be a
Noteholder for all purposes hereof.
Section 10.11 Term of Agreement. Unless extended in writing by Stuart
and the Noteholders, this Agreement shall terminate and be of no further force
and effect on the earlier to occur of (i) the Conversion Event, or (ii)
September 30, 1999. If any time during the term hereof, less than 40% of the
face amount of the total outstanding Notes have executed this Agreement, Stuart
shall have the right, at its sole discretion, but without obligation, to
terminate this Agreement, in which case this Agreement shall have no further
force and effect.
Section 10.12 Professional Fees. All reasonable out-of-pocket fees,
costs and expenses (including, without limitation, all legal and professional
fees and costs) incurred by or on behalf of the Noteholders in connection with
the restructuring through the date of the commencement of the Chapter 11 Case,
shall be paid in full by Stuart prior to the commencement thereof.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have caused this Restructuring
Agreement to be executed as of the date first above written.
STUART ENTERTAINMENT, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------------
Its: Chairman of the Board, Chief
Executive Officer and President
----------------------------------
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CONTRARIAN CAPITAL MANAGEMENT, L.L.C.
By: /s/ Xxxxx Xxxxxxx
--------------------------------------------
Its: Managing Director
----------------------------------
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XXXXXXX XXXXX XXXXXX
By: /s/
--------------------------------------------
Its:
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