UNITED STATES
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
NOVEMBER 8, 1999
------------------------------------------------
Date of Report (Date of earliest event reported)
PLANET HOLLYWOOD INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 00028230 59-3283783
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(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification Number)
8669 COMMODITY CIRCLE
ORLANDO, FLORIDA 32819
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(Address of principal executive office, including zip code)
(407) 363-7827
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On October 12, 1999, Planet Hollywood International, Inc. (the
"Company") and twenty- five of its operating subsidiaries filed voluntary
petitions commencing cases under Chapter 11 of the United States Bankruptcy Code
with the United States Bankruptcy Court for the District of Delaware. The cases
are being jointly administered under the case name IN RE: PLANET HOLLYWOOD
INTERNATIONAL, INC., et. al., Case No. 99-3612 (JJF). The Company and its
subsidiaries continue to operate their businesses as debtors-in-possession in
such cases. The Honorable Joseph J. Farnan, Jr., United States District Judge,
will preside over the cases.
On November 8, 1999, the Company filed a Joint Plan of Reorganization
(the "Plan of Reorganization"), a proposed Disclosure Statement (the "Proposed
Disclosure Statement") and certain other related documents with the Bankruptcy
Court. The Plan of Reorganization is attached as Exhibit 99.1 hereto and is
incorporated herein by reference. The Proposed Disclosure Statement is attached
as Exhibit 99.2 hereto and is incorporated herein by reference. The Plan of
Reorganization and the Proposed Disclosure Statement are subject to further
revision and amendment. THE PROPOSED DISCLOSURE STATEMENT HAS NOT BEEN APPROVED
BY THE BANKRUPTCY COURT FOR USE IN THE SOLICITATION OF ACCEPTANCE OF THE PLAN OF
REORGANIZATION PURSUANT TO SECTION 1125(B) OF THE BANKRUPTCY CODE. ACCORDINGLY,
THE FILING AND DISSEMINATION OF THE PROPOSED DISCLOSURE STATEMENT WITH THE
BANKRUPTCY COURT AND AS AN EXHIBIT TO THIS FORM 8-K IS NOT INTENDED, NOR SHOULD
IT BE CONSTRUED, AS SUCH A SOLICITATION, NOR SHOULD THE INFORMATION CONTAINED
THEREIN BE RELIED UPON FOR ANY PURPOSE PRIOR TO A DETERMINATION BY THE
BANKRUPTCY COURT THAT THE PROPOSED DISCLOSURE STATEMENT CONTAINS ADEQUATE
INFORMATION.
The projected financial information included in the Proposed Disclosure
Statement as well as certain statements made in the Plan of Reorganization and
the Proposed Disclosure Statement, including statements that are not a statement
of historical fact, may constitute "forward-looking" statements as defined in
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Such statements include, without limitation, statements regarding
future liquidity, cash needs and alternatives to address capital needs, and are
indicated by words or phrases such as "anticipate," "estimate," "plans,"
"projects," "continuing," "ongoing," "expects," "management believes," "the
Company believes," "the Company intends," "we believe," "we intend," and similar
words or phrases.
Important factors that could cause actual results to differ materially
from the Company's expectations include those risk factors set forth in the
Proposed Disclosure Statement as well as, without limitation, Bankruptcy Court
approval of the Proposed Disclosure Statement and any other needed approvals and
confirmation and consummation of the Plan of Reorganization, the ability of the
Company to consummate asset dispositions and/or to obtain financing as necessary
in order to emerge from bankruptcy and the terms and conditions of any such
dispositions and financing, and the possible need for additional
debtor-in-possession financing if the Company's emergence from bankruptcy is
delayed, many of which are beyond the control of the Company. Further
information regarding these and other factors that might cause future results to
differ
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from those projected in the forward-looking statements is also described from
time to time in the Company's reports filed with the Securities and Exchange
Commission.
ITEM 7. EXHIBITS.
99.1 Joint Plan of Reorganization dated November 8, 1999
99.2 Proposed Disclosure Statement dated November 8, 1999
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.
Date: November 12, 1999 PLANET HOLLYWOOD
INTERNATIONAL, INC.
/s/ SCOTT E. JOHNSON
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Name: Scott E. Johnson
Title: Senior Vice President,
General Counsel and Secretary
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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99.1 Joint Plan of Reorganization dated November 8, 1999
99.2 Proposed Disclosure Statement dated November 8, 1999
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE: )
) CHAPTER 11
PLANET HOLLYWOOD )
INTERNATIONAL, INC., ET AL. ) CASE NO. 99-3612(JJF)
) (JOINTLY ADMINISTERED)
DEBTORS. )
DEBTORS' JOINT PLAN OF REORGANIZATION
Dated: November 8, 1999
Planet Hollywood International, Inc., Cool Planet, Inc., Cool Planet
II, Inc., Planet Hollywood (Aspen), Inc., Planet Hollywood (Atlantic City),
Inc., Planet Hollywood (Chicago), Inc., Planet Hollywood (Honolulu), Inc.,
Planet Hollywood (LP), Inc., Planet Hollywood (New York City), Inc., Planet
Hollywood (New York), Ltd., Planet Hollywood (Orlando), Inc., Planet Hollywood
(Phoenix), Inc., Planet Hollywood (Region I), Inc., Planet Hollywood (Region
II), Inc., Planet Hollywood (Region III), Inc., Planet Hollywood (Region IV),
Inc., Planet Hollywood (Region V), Inc., Planet Hollywood (Region VI), Inc.,
Planet Hollywood (Region VII), Inc., Planet Hollywood (Texas), Ltd., Planet
Hollywood (Warehouse), Inc., Sound Republic, Inc., Sound Republic 1, Inc., All
Star Cafe International, Inc., All Star Cafe (New York), Inc., and EBCO
Management, Inc., Debtors and Debtors-in-Possession (collectively, the
"Debtors") in the above-captioned Chapter 11 cases, propose the following Joint
Plan of Reorganization (the "Plan") pursuant to Section 1121(a) of Title 11 of
the United States Code, as amended.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I.........................................................................................................1
DEFINITIONS AND RULES OF CONSTRUCTION.............................................................................1
ARTICLE II.......................................................................................................13
CLASSIFICATION OF CLAIMS AND INTERESTS...........................................................................13
2.1 Pre-PetitionClaims and Equity Interests Classified....................................................13
2.2 Administrative Claimsand Priority Tax Claims..........................................................13
2.3 Claims Against andInterests in the Debtors............................................................14
ARTICLE III......................................................................................................15
IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS................................................15
3.1 Impaired Classes of Claimsand Interests...............................................................15
3.2 Unimpaired Classesof Claims and Interests.............................................................15
3.3 Impairment Controversies..............................................................................15
ARTICLE IV.......................................................................................................15
TREATMENT OF ADMINISTRATIVE AND PRIORITY TAX CLAIMS..............................................................15
4.1 Fees of Professionals and Claims for Substantial Contribution.........................................15
4.2 Ordinary Course Liabilities...........................................................................15
4.3 Administrative Reclamation Claims.....................................................................16
4.4 Priority Tax Claims...................................................................................16
ARTICLE V........................................................................................................16
TREATMENT OF CLAIMS AND INTERESTS................................................................................16
5.1 CLASS 1. Priority Claims.............................................................................16
5.2 CLASS 2. The SunTrust Claims.........................................................................16
5.3 CLASS 3. Miscellaneous Secured Claims................................................................17
5.4 CLASS 4. Convenience Claims..........................................................................17
5.5 CLASS 5. Old Senior Subordinated Notes Claims........................................................17
5.6 CLASS 6. General UnsecuredClaims.....................................................................17
5.7 CLASS 7. Landlord Settlement Agreement Claims........................................................18
5.8 CLASS 8. Old Common Stock............................................................................18
5.9 CLASS 9. Claims for Issuance of Old Common Stock.....................................................18
5.10 CLASS 10. IntercompanyClaims.........................................................................18
5.11 CLASS 11. Intercompany Interests.....................................................................18
5.12 Post-Petition Interest................................................................................18
5.13 Allocation Between Principal and Accrued Interest.....................................................18
ARTICLE VI.......................................................................................................19
MEANS FOR EXECUTION OF THE PLAN..................................................................................19
6.1 Implementation of Plan................................................................................19
6.2 General Corporate Matters.............................................................................19
6.2.1 Cancellation of Old Securities, Instruments and Agreements Relating to Impaired Claims and
Interests....................................................................................19
6.2.2 Effectiveness of Securities, Instruments and Agreements......................................19
6.2.3 Corporate Action.............................................................................19
6.2.4 Management and Board of Directors............................................................20
6.2.5 New Stock Options............................................................................20
6.2.6 Substantive Consolidation....................................................................21
6.2.7 Extinguishment of Guarantee..................................................................21
6.2.8 Continued Corporate Existence and Vesting of Assets in Reorganized PHI and the Other
Reorganized Debtors..........................................................................21
6.3 Distribution..........................................................................................22
6.3.1 Generally....................................................................................22
6.3.2 Distributions to the Holder of SunTrust Claims...............................................22
6.3.3 Distributions to Holders of Old Senior Subordinated Notes Claims.............................22
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6.3.4 Distributions to Holders of Other Claims and Interests.......................................22
6.3.5 Compensation for Services Related to Distribution............................................22
6.3.6 Delivery of Distributions and Undeliverable or Unclaimed Distributions.......................23
6.3.7 Distribution Record Date.....................................................................24
6.3.8 Means of Cash Payments.......................................................................24
6.3.9 Fractional Plan Securities...................................................................24
6.3.10 Surrender of Canceled Instruments or Securities..............................................25
6.3.11 Setoff.......................................................................................26
6.4 Indenture Trustee Charging Liens......................................................................26
6.5 Retiree Benefits......................................................................................26
6.6 Exemptions from Securities Laws and Registration Rights...............................................27
ARTICLE VII......................................................................................................27
ACCEPTANCE OR REJECTION OF THE PLAN..............................................................................27
7.1 Classes Entitled to Vote..............................................................................27
7.2 Class Acceptance Requirement..........................................................................27
7.3 Confirmation Notwithstanding Rejection of Plan by an Impaired Class...................................28
ARTICLE VIII.....................................................................................................28
PROCEDURE FOR RESOLVING DISPUTED CLAIMS..........................................................................28
8.1 Unimpaired Claims Generally...........................................................................28
8.1.1 Debtor Actions; Reservation of Rights........................................................28
8.1.2 Creditor Actions.............................................................................28
8.2 Rejection Claims......................................................................................29
8.3 Disputed Claims.......................................................................................29
8.4 Authority to Oppose Claims............................................................................29
8.5 Treatment of Disputed Claims and Disputed Interests...................................................29
ARTICLE IX.......................................................................................................29
EXECUTORY CONTRACTS..............................................................................................29
9.1 General Treatment.....................................................................................29
9.2 Bar to Rejection Damages..............................................................................30
9.3 Cure of Defaults for Executory Contracts and Unexpired Leases.........................................30
ARTICLE X........................................................................................................30
CONDITIONS TO CONFIRMATION AND THE OCCURRENCE OF THE EFFECTIVE DATE..............................................30
10.1 Conditions to Confirmation............................................................................30
10.2 Conditions to the Occurrence of the Effective Date....................................................31
ARTICLE XI.......................................................................................................31
EFFECTS OF CONFIRMATION AND EFFECTIVENESS OF PLAN................................................................31
11.1 Discharge of Claims...................................................................................31
11.2 Discharge of Debtors..................................................................................32
11.3 Survival of Indemnification Claims and Obligations....................................................32
11.4 Termination of Claims of Contractual Subordination Against Holders of Old Senior Subordinated
Notes Claims..........................................................................................32
ARTICLE XII......................................................................................................33
RELEASES AND INJUNCTIONS.........................................................................................33
12.1 Releases..............................................................................................33
12.2 No Liability forSolicitation or Participation.........................................................34
12.3 Limitation of Liability...............................................................................34
12.4 General Injunction....................................................................................34
12.5 Section 346 Injunction................................................................................34
ARTICLE XIII.....................................................................................................35
RETENTION OF JURISDICTION........................................................................................35
13.1 Scope of Jurisdiction.................................................................................35
13.2 Failure of the Bankruptcy Court to Exercise Jurisdiction..............................................36
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ARTICLE XIV......................................................................................................36
MISCELLANEOUS PROVISIONS.........................................................................................36
14.1 Compliance With Tax Requirements......................................................................36
14.2 Discharge of Old Indenture Trustee....................................................................36
14.3 Post-Effective Date Fees and Expenses of Professionals................................................36
14.4 Vesting of Property of the Debtors....................................................................37
14.5 Causes of Action......................................................................................37
14.6 Assumption of Liabilities.............................................................................37
14.7 Other Documents and Actions...........................................................................37
14.8 Section 1146 Exemption................................................................................37
14.9 Binding Effect........................................................................................38
14.10 Governing Law.........................................................................................38
14.11 Filing of Additional Documents........................................................................38
14.12 Dissolution of Creditors' Committee...................................................................38
14.13 Amendments and Modifications..........................................................................39
14.14 Revocation............................................................................................39
14.15 Severability..........................................................................................39
14.16 Notices...............................................................................................39
14.17 De Minimis Distributions..............................................................................40
14.18 Plan and Plan Documents Control.......................................................................40
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EXHIBITS
1 Form of Amended and Restated PHI Certificate of Incorporation
2 Form of Amended and Restated PHI By-Laws
3 Form of New Senior Secured Notes Indenture
4 Form of New Senior Secured Notes Security and Pledge Agreement
5 Form of New Working Capital Facility
6 Form of Working Capital Facility Security and Pledge Agreement
7 Form of New Secured PIK Notes Indenture
8 Form of New Secured PIK Notes Security and Pledge Agreement
9 Intercreditor and Collateral Agency Agreement
10 Form of New Warrant Agreement
11 Form of New Warrants
12 Form of Registration Rights Agreement
ANNEXES
A Summary of Terms of New Senior Secured Notes
B Summary of Terms of New Secured PIK Notes
C Summary of Terms of New Warrants
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ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
The following terms used in the Plan shall, unless the context
otherwise clearly requires, have the meanings specified below, and such meanings
shall be equally applicable to both the singular and plural forms of such terms.
1.1 "ADMINISTRATIVE CLAIM" means a Claim or expense allowed under
Section 503(b) of the Bankruptcy Code that is entitled to priority under Section
507(a)(1) of the Bankruptcy Code, including, without limitation, amounts
required to be paid in connection with any assumption of executory contracts and
unexpired leases, Administrative Reclamation Claims and all Post-Petition Trade
Claims.
1.2 "ADMINISTRATIVE RECLAMATION CLAIM" means that portion of a
reclamation Claim entitled to Administrative Claim status pursuant to an order
of the Bankruptcy Court entered under 11 U.S.C. ss.546(c).
1.3 "ALLOWED" means with respect to any Claim or Interest, a Claim or
Interest as to which (i) no objection to the allowance thereof, or motion to
estimate for purposes of allowance, shall have been Filed on or before any
applicable period of limitation that may be fixed by the Bankruptcy Code, the
Bankruptcy Rules and/or the Bankruptcy Court, or (ii) as to which any objection,
or motion to estimate for purposes of allowance shall have been so Filed, to the
extent allowed by a Final Order.
1.4 "ALLOWED CLAIM" means a Claim, or a portion thereof, including any
guarantee by any Debtor of such debt, if any, (i) that is deemed Allowed under
the Plan, (ii) that has been scheduled by a Debtor other than as contingent,
disputed or unliquidated, (iii) proof of which has been timely filed with the
Bankruptcy Court and as to which the period of time in which to file objections
as fixed by the Bankruptcy Code, the Bankruptcy Rules, the Plan or an order of
the Bankruptcy Court, has expired with no such objection having been filed, or
(iv) that has been Allowed by a Final Order of the Bankruptcy Court.
1.5 "ALLOWED INTEREST" means an Interest (i) that is deemed Allowed
under the Plan, (ii) that has been scheduled by a Debtor, (iii) proof of which
has been timely filed with the Bankruptcy Court and as to which the period of
time in which to file objections as fixed by the Bankruptcy Code, the Bankruptcy
Rules, the Plan or an order of the Bankruptcy Court, has expired with no such
objection having been filed, or (iv) that has been Allowed by a Final Order of
the Bankruptcy Court.
1.6 "AMENDED PHI ARTICLES" means the amended and restated certificate
of incorporation of Reorganized PHI that shall become effective on the Effective
Date, substantially in the form Filed as EXHIBIT 1 to this Plan at or prior to
the Confirmation Hearing.
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1.7 "AMENDED PHI BY-LAWS" means the fourth amended and restated by-laws
of Reorganized PHI that shall become effective on the Effective Date,
substantially in the form Filed as EXHIBIT 2 to this Plan at or prior to the
Confirmation Hearing.
1.8 "AVOIDANCE ACTION" means an action pursuant to Sections 544, 545,
547, 548, 549, 550 or 553 of the Bankruptcy Code brought by the Debtors or their
assigns, if any.
1.9 "BANKRUPTCY CODE" means Title 11 of the United States Code, as
now in effect and as hereafter amended.
1.10 "BANKRUPTCY COURT" means the United States Bankruptcy Court for
the District of Delaware, or any other court of competent jurisdiction
exercising jurisdiction over the Chapter 11 Cases, including the United States
District Court for the District of Delaware.
1.11 "BANKRUPTCY RULES" means the Federal Rules of Bankruptcy
Procedure, as amended and promulgated under Section 2075, Title 28, United
States Code.
1.12 "BAR DATE" means the date established by the Bankruptcy Court as
the Bar Date pursuant to the Bar Date Order.
1.13 "BAR DATE ORDER" means the Order (1) Establishing Procedures and
Deadlines for Filing Proofs of Claims and (2) Approving Form and Manner of
Notice, signed by the Bankruptcy Court on or after the Petition Date, as amended
or supplemented from time to time.
1.14 "BUSINESS DAY" means any day except a Saturday, Sunday, or any
other day on which commercial banks are authorized by law to close in the State
of New York.
1.15 "CASH" means cash or cash equivalents.
1.16 "CASH COLLATERAL ORDER" means one or more Order(s) authorizing use
of cash collateral as defined in Section 363(a) of the Bankruptcy Code of
SunTrust and Pro Player, Inc. entered by the Bankruptcy Court on or after the
Petition Date.
1.17 "CELEBRITIES" means actors or actresses in motion picture or
television programs and sports figures who, in the opinion of management of the
Reorganized Debtors, have achieved celebrity status and whose affiliation with
the Debtors or the Reorganized Debtors is beneficial to the Debtors' or the
Reorganized Debtors' business.
1.18 "CELEBRITY OPTIONS" means options to purchase Class A common stock
issued to Celebrities prior to the Petition Date.
1.19 "CHAPTER 11" means Chapter 11 of the Bankruptcy Code.
1.20 "CHAPTER 11 CASES" means the cases under Chapter 11 with respect
to the Debtors, pending in the District of Delaware and administered as IN RE
PLANET HOLLYWOOD INTERNATIONAL, INC., ET AL., Chapter 11 Case Nos. 99-3612 (JJF)
through 99-3637 (JJF).
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1.21 "CHAPTER 11 SCHEDULES" means the Schedules of Assets and
Liabilities and the Statements of Financial Affairs Filed by the Debtors with
the Bankruptcy Court, in the form Filed or as thereafter amended, modified or
supplemented in accordance with the Bankruptcy Code, the Bankruptcy Rules, and
the Bankruptcy Court's local bankruptcy rules.
1.22 "CLAIM" means (i) any right to payment from any Debtor arising
before the Confirmation Date, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured or (ii) any right to an
equitable remedy against any Debtor arising before the Confirmation Date for
breach of performance if such breach gives rise to a right of payment from such
Debtor, whether or not such right to an equitable remedy is reduced to judgment,
fixed, contingent, matured, unmatured, disputed, undisputed, secured or
unsecured, and shall include any guarantee by any Debtor of such right, if any.
1.23 "CLASS" means a class of Claims or Interests as defined in
Article II of the Plan.
1.24 "CLASS 6 ADJUSTMENT AMOUNT" means the face amount of New Secured
PIK Notes which, together with all other consideration provided for in Section
5.6 of the Plan, is necessary to ensure the recovery by Holders of Allowed Class
6 Claims of an aggregate value as a percentage of their Allowed Claims equal to
the aggregate value of the consideration to be received by Holders of Allowed
Class 5 Claims as a result of their receipt of the Supplemental Class 5
Distribution and all other consideration provided to them in Section 5.5 of the
Plan.
1.25 "COLLATERAL AGENT" means the entity designated to serve as
collateral agent under the Intercreditor and Collateral Agency Agreement with
respect to the Working Capital Facility, the New Senior Secured Notes Indenture
and the New Secured PIK Notes Indenture.
1.26 "CONFIRMATION" means the entry of the Confirmation Order by the
Bankruptcy Court pursuant to Section 1129 of the Bankruptcy Code.
1.27 "CONFIRMATION DATE" means the date on which the Confirmation
Order is entered in the Chapter 11 Cases by the Bankruptcy Court.
1.28 "CONFIRMATION HEARING" means the hearing or hearings pursuant to
which the Bankruptcy Court enters the Confirmation Order.
1.29 "CONFIRMATION ORDER" means an order of the Bankruptcy Court
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code.
1.30 "CONSOLIDATED CLAIM" means any Claim of any Consolidated Debtor
against any other Consolidated Debtor.
1.31 "CONSOLIDATED DEBTORS" means PHI and all Filed Subsidiaries.
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1.32 "CONSOLIDATED ESTATES" means the substantively consolidated
estates of PHI and all Filed Subsidiaries.
1.33 "CONVENIENCE CLAIM" means Unsecured Claims in Allowed amounts not
to exceed $2,000, or that are voluntarily reduced to $2,000.
1.34 "CREDITOR" means any entity that is the holder of any Claim
against the Debtors that arose on or before the Petition Date or any Claim
against the Debtors' Estates of a kind specified in Sections 502(g), 502(h), or
502(i) of the Bankruptcy Code.
1.35 "CREDITORS' COMMITTEE" means the official committee of unsecured
creditors appointed in the Chapter 11 Cases by the United States Trustee
pursuant to Section 1102 of the Bankruptcy Code, as reconstituted by the
addition or removal of members from time to time.
1.36 "DEBTOR" or "DEBTORS" means PHI or any other Filed Subsidiary,
individually or collectively, as the context may require.
1.37 "DISCLOSURE STATEMENT" means the Joint Disclosure Statement dated
November 8, 1999, that was Filed by the Debtors in connection with the Plan, as
further amended, modified, restated, or supplemented from time to time.
1.38 "DISPUTED CLAIM" means any Claim, to the extent it has not since
become an Allowed Claim, including those (i) listed on the Chapter 11 Schedules
as unliquidated, disputed or contingent, or (ii) as to which the Debtors or any
other party in interest has interposed a timely objection or request for
estimation in accordance with the Bankruptcy Code and the Bankruptcy Rules,
which objection or request for estimation has not been withdrawn or determined
by a Final Order.
1.39 "DISPUTED INTEREST" means an Interest in the Debtors to the extent
it has not become an Allowed Interest including those (i) listed on the Chapter
11 Schedules as contingent, unliquidated or disputed, or (ii) as to which the
Debtors or any other party in interest has interposed a timely objection in
accordance with the Bankruptcy Code and the Bankruptcy Rules, which objection
has not been withdrawn or determined by a Final Order.
1.40 "DISTRIBUTION RECORD DATE" means the date specified in the
Confirmation Order as the Distribution Record Date with respect to each Class,
or, if no such date is specified, the fifth Business Day prior to the Effective
Date.
1.41 "DOMESTIC SUBSIDIARY" means any entity incorporated or formed
under the laws of the United States of America or any state, province or
territory thereof, that is wholly-owned or otherwise controlled by PHI or by PHI
and/or one or more of its subsidiaries.
1.42 "EFFECTIVE DATE" means a Business Day selected by the Debtors that
is the later of (i) a day that is not less than ten (10) nor more than thirty
(30) days after the Confirmation Date, and (ii) the first Business Day on which
all conditions to the occurrence of the Effective Date
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have been satisfied or duly waived, or such other date as agreed to by the
Debtors and the Creditors' Committee.
1.43 "ENCUMBRANCE" means any Lien, imperfection of title, option, or
restriction of any kind affecting any property of any Debtor.
1.44 "ENTITY" means a person, a corporation, a partnership, an
association, a joint stock company, a joint venture, a limited liability
company, an estate, a trust, an unincorporated organization, a government or any
subdivision thereof or any other entity.
1.45 "ESTATES" means the estates of the Debtors created under Section
541 of the Bankruptcy Code upon the commencement of the Chapter 11 Cases.
1.46 "FILE," "FILED" or "FILING" means file, filed or filing with the
Bankruptcy Court in the Chapter 11 Cases or any other Court with jurisdiction
over the cases of the Debtors or a Filed Foreign Subsidiary.
1.47 "FILED FOREIGN SUBSIDIARY" means a Foreign Subsidiary that has
filed an insolvency proceeding under the laws of its jurisdiction of
incorporation or formation.
1.48 "FILED SUBSIDIARIES" means all subsidiaries of PHI and/or one or
more of its subsidiaries that Files a Chapter 11 petition in the Bankruptcy
Court.
1.49 "FINAL ORDER" means an order of the Bankruptcy Court or any other
court of competent jurisdiction (i) which is not subject to a stay of
effectiveness; (ii) as to which the time to appeal, petition for certiorari or
move for reargument or rehearing has expired and as to which no timely appeal,
petition for certiorari or other proceedings for reargument or rehearing shall
then be pending; or (iii) if a timely appeal, writ of certiorari, reargument or
rehearing thereof has been sought, which shall have been affirmed by the highest
court to which such order was appealed, or certiorari shall have been denied or
reargument or rehearing shall have been denied or resulted in no modification of
such order, and the time to take any further appeal, petition for certiorari, or
move for modification of such order, or move for reargument or rehearing shall
have expired; PROVIDED, HOWEVER, that the possibility that a motion under Rule
59 or Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule
under the Bankruptcy Rules or other rules governing procedure in cases before
the Bankruptcy Court may be Filed with respect to such order shall not cause
such order not to be a Final Order.
1.50 "FOREIGN SUBSIDIARY" means any entity incorporated or formed under
the laws of a country other than the United States of America which is
wholly-owned or otherwise controlled by PHI or by PHI and/or one or more of its
subsidiaries.
1.51 "FRANCHISE AGREEMENTS" means agreements between PHI and various
third parties for the license and use of PLANET HOLLYWOOD or OFFICIAL ALL STAR
CAFE trademarks, tradenames and related intellectual property.
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1.52 "GENERAL UNSECURED CLAIM" means any claim (including any Trade
Claim, Rejection Claim or Litigation Claim) that is not a Consolidated Claim,
Old Senior Subordinated Notes Claim, Intercompany Claim, Administrative Claim,
Priority Claim, SunTrust Claim, Miscellaneous Secured Claim, Indenture Trustee
Claim or a Landlord Settlement Agreement Claim.
1.53 "HOLDER" means an Entity which is the owner, legal and/or
beneficial, of a Claim against or Interest in one or more Debtor, as the case
may be.
1.54 "IMPAIRED CLAIM" means a Claim identified in Section 3.1 of the
Plan as impaired under the Plan.
1.55 "INDENTURE TRUSTEE CHARGING LIEN" means any Lien or other priority
in payment available to the Old Indenture Trustee pursuant to the Old Indenture
for payment of any fees, costs or disbursements incurred by such Old Indenture
Trustee, to the extent not otherwise paid under the Plan.
1.56 "INDENTURE TRUSTEE CLAIM" means a contractual Claim held by the
Old Indenture Trustee for compensation, reimbursement of costs or disbursements
(including without limitation the costs and expenses of its attorneys,
accountants and financial advisors), or indemnity arising from the Old Indenture
regardless of whether such fees and expenses are incurred prior or subsequent to
the Petition Date.
1.57 "INTERCOMPANY CLAIM" means any Claim against any of the Debtors
held by any Subsidiary or Foreign Subsidiary other than any of the Consolidated
Debtors, that continues to operate its business subsequent to the Effective
Date.
1.58 "INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT" means the
agreement governing the respective rights in property of the Debtors securing
parties to the Working Capital Facility, the New Senior Secured Notes Indenture,
and the New Secured PIK Notes Indenture substantially in the form Filed as
Exhibit "9" to the Plan at or prior to the Confirmation Hearing.
1.59 "INTEREST" means an equity security in PHI within the meaning of
Section 101(16) of the Bankruptcy Code.
1.60 "JOINT VENTURES" means strategic venture agreements PHI and one or
more of its Subsidiaries has executed with third parties.
1.61 "LANDLORD SETTLEMENT AGREEMENT" means an agreement between PHI or
any of its Filed Subsidiaries and a landlord regarding the restructuring,
termination or sale of a Debtor's leasehold rights and obligations, which
requires approval or ratification of such agreement by the Bankruptcy Court.
1.62 "LEASEHOLD GUARANTEES" means a guaranty by PHI of any lease
between PHI or any of its Subsidiaries or Joint Ventures as lessee and any
lessor.
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1.63 "LIEN" means any conveyance in trust, assignment or pledge of,
mortgage or lien on, security interest in, or charge or encumbrance of any kind
against, any property of any Debtor.
1.64 "LITIGATION CLAIM" means a claim arising from a pre-Petition Date
dispute between PHI or a Filed Subsidiary and any third party which was not
settled, liquidated or resolved as of the Petition Date.
1.65 "MISCELLANEOUS SECURED CLAIM" means any Allowed Claim that is a
Secured Claim other than the SunTrust Claim.
1.66 "NEW CLASS A COMMON STOCK" means the approximately 3.0 million
shares of authorized common stock of Reorganized PHI, par value $.01 per share,
to be issued under the Plan.
1.67 "NEW CLASS B COMMON STOCK" means the 7.0 million shares of
authorized common stock of Reorganized PHI, par value $.01 per share, to be
issued to the New Money Investors under the Plan.
1.68 "NEW COMMON STOCK" means, collectively, the New Class A Common
Stock, the New Class B Common Stock, and any other common stock of Reorganized
PHI authorized to be issued pursuant to the Plan.
1.69 "NEW INDENTURE TRUSTEE" shall be as designated at the Confirmation
Hearing and have the meaning set forth in the Confirmation Order.
1.70 "NEW MONEY INVESTORS" means certain entities that have agreed to
acquire 7.0 million shares of New Class B Common Stock for $30 million ($4.2857
per share).
1.71 "NEW OPTIONS" means 1.0 million options each for the purchase
of one share of New Class A Common Stock.
1.72 "NEW SECURED PIK NOTES" means the Secured PIK Notes to be issued
by Reorganized PHI pursuant to the Plan under the New Secured PIK Notes
Indenture and guaranteed by all operating Subsidiaries. The principal economic
terms of the New Secured PIK Notes are set forth on ANNEX B hereto.
1.73 "NEW SECURED PIK NOTES INDENTURE" means the Indenture between
Reorganized PHI, as issuer, and the New Secured PIK Notes Indenture Trustee, as
trustee, which indenture relates to the New Secured PIK Notes, substantially in
the form to be Filed as EXHIBIT 7 to the Plan at or prior to the Confirmation
Hearing.
1.74 "NEW SECURED PIK NOTES INDENTURE TRUSTEE" shall be as designated
at the Confirmation Hearing and have the meaning set forth in the Confirmation
Order.
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1.75 "NEW SECURED PIK NOTES SECURITY AND PLEDGE AGREEMENT" means the
Security and Pledge Agreement pursuant to which certain collateral is pledged to
secure Reorganized PHI's obligations under the New Secured PIK Notes,
substantially in the form to be Filed as EXHIBIT 8 to the Plan at or prior to
the Confirmation Hearing.
1.76 "NEW SENIOR SECURED NOTES" means the senior secured notes to be
issued by Reorganized PHI pursuant to the Plan under the New Senior Secured
Notes Indenture. The principal economic terms of the New Senior Secured Notes
are set forth on ANNEX A hereto.
1.77 "NEW SENIOR SECURED NOTES INDENTURE" means the Indenture between
Reorganized PHI, as issuer, and the New Senior Secured Notes Indenture Trustee,
as trustee, which indenture relates to the New Senior Secured Notes,
substantially in the form to be Filed as EXHIBIT 3 to the Plan at or prior to
the Confirmation Hearing.
1.78 "NEW SENIOR SECURED NOTES INDENTURE TRUSTEE" shall be as
designated at the Confirmation Hearing and have the meaning set forth in the
Confirmation Order.
1.79 "NEW SENIOR SECURED NOTES SECURITY AND PLEDGE AGREEMENT" means the
Security and Pledge Agreement pursuant to which certain collateral is pledged to
secure Reorganized PHI's obligations under the New Senior Secured Notes,
substantially in the form Filed as EXHIBIT 4 to the Plan at or prior to the
Confirmation Hearing.
1.80 "NEW STOCK OPTION PLAN" means a stock option plan to be
implemented by Reorganized PHI providing for the issuance to management and
Celebrities of options to purchase up to 1.0 million shares of New Class A
Common Stock on a fully diluted basis.
1.81 "NEW WARRANT AGENT" shall be as designated at the Confirmation
Hearing and shall have the meaning set forth in the Confirmation Order.
1.82 "NEW WARRANT AGREEMENT" means the Warrant Agreement between
Reorganized PHI, as issuer, and the New Warrant Agent, as agent, which agreement
relates to the New Warrants, substantially in the form to be Filed as EXHIBIT 10
to the Plan at or prior to the Confirmation Hearing. The terms of the New
Warrants are set forth in the Summary of New Warrants attached hereto as ANNEX
C.
1.83 "NEW WARRANTS" means the freely transferable warrants issued
pursuant to the New Warrant Agreement evidencing the right to purchase up to
200,000 shares of New Class A Common Stock, which shall expire three (3) years
from the Effective Date, and which shall have an exercise price of $65.50 per
share, substantially in the form to be Filed as EXHIBIT 11 to the Plan at or
prior to the Confirmation Hearing.
1.84 "OLD CELEBRITY OPTIONS" means any outstanding options for the
purchase of Class A Old Common Stock issued to Celebrities prior to the Petition
Date.
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1.85 "OLD COMMON STOCK" means, collectively, the Class A and Class B
common shares, par value $.01 per share, of PHI, issued and outstanding, or held
in treasury, immediately prior to the Effective Date.
1.86 "OLD EMPLOYEE OPTIONS" means any outstanding options for the
purchase of Class A Old Common Stock, issued to officers, employees and
independent contractors prior to the Petition Date.
1.87 "OLD INDENTURE" means the Old Senior Subordinated Notes Indenture.
1.88 "OLD INDENTURE TRUSTEE" means United States Trust Company of New
York, or its successor, as trustee under the Old Senior Subordinated Notes
Indenture.
1.89 "OLD SECURITY" or "OLD SECURITIES" means the Old Senior
Subordinated Notes, the Old Common Stock, the Old Warrants, the Old Celebrity
Options and the Old Employee Options, individually or collectively, as the
context may require.
1.90 "OLD SENIOR SUBORDINATED NOTES" means the 12% Senior Subordinated
Notes due 2005, issued by PHI pursuant to the Old Senior Subordinated Notes
Indenture.
1.91 "OLD SENIOR SUBORDINATED NOTES CLAIM" means any Claim of a Holder
of Old Senior Subordinated Notes which, for purposes of the Plan, shall be
deemed to be an amount equal to the sum of (i) the outstanding principal amount,
as of the Petition Date, of Old Senior Subordinated Notes held by such Holder,
and (ii) an amount equal to 100% of the accrued and unpaid interest at the rate
of 12% per annum plus interest on defaulted interest at the rate of 13% per
annum and other amounts that specifically arise under the Old Senior
Subordinated Notes Indenture, exclusive of amounts covered by the Indenture
Trustee Claim, and the Old Senior Subordinated Notes Indenture through but not
including the Petition Date.
1.92 "OLD SENIOR SUBORDINATED NOTES INDENTURE" means the Indenture
between PHI, as issuer, and the Old Senior Subordinated Notes Indenture Trustee,
as trustee, dated as of March 25, 1998, as amended, which Indenture relates to
the Old Senior Subordinated Notes.
1.93 "OLD TRANSFER AGENT" means as registrar and transfer agent with
respect to the Old Common Stock.
1.94 "OLD WARRANTS" means any warrants outstanding as of the Petition
Date to purchase shares of Old Common Stock.
1.95 "ORDINARY COURSE PROFESSIONALS ORDER" means the Order Authorizing
Debtors to Employ and Compensate Professionals for Specific Services Rendered in
the Ordinary Course of Business, which was signed by the Bankruptcy Court on
October 13, 1999, as amended from time to time.
1.96 "PETITION DATE" means October 12, 1999, the date on which the
Debtors filed their voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code.
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1.97 "PHI" means Planet Hollywood International, Inc., a Delaware
corporation.
1.98 "PLAN" means this Joint Plan of Reorganization proposed by the
Debtors, as it may hereafter be amended or modified from time to time.
1.99 "PLAN DOCUMENTS" means those documents identified in Exhibits 1
through 12 which will be Filed at or prior to the Confirmation Hearing.
1.100 "PLAN SECURITIES" means the New Common Stock issuable pursuant to
the Plan, the New Senior Secured Notes, the New Secured PIK Notes, the New
Warrants and the shares of New Class A Common Stock issuable upon exercise of
the New Warrants, the New Options and the shares of New Class A Common Stock
issuable upon exercise of the New Options.
1.101 "POST-PETITION TRADE CLAIM" means an expense or obligation
incurred by any of the Debtors arising from or with respect to the sale and
delivery of goods or the rendition of services (except for fees and
disbursements of Professionals) to any of the Debtors after the Petition Date.
1.102 "PRIORITY CLAIM" means any Allowed Claim, to the extent entitled
to priority under Section 507 (a) of the Bankruptcy Code, other than an
Administrative Claim or a Priority Tax Claim, against any Debtor.
1.103 "PRIORITY TAX CLAIM" means the tax Claims of governmental units
to the extent such Claims are entitled to priority under Section 507(a)(8) of
the Bankruptcy Code.
1.104 "PROFESSIONAL" means (i) any professional retained in the Chapter
11 Cases pursuant to an order of the Bankruptcy Court in accordance with
Sections 327 or 1103 of the Bankruptcy Code (other than the Ordinary Course
Professionals Order), (ii) any attorney or accountant seeking compensation or
reimbursement of expenses pursuant to Section 503(b) of the Bankruptcy Code,
(iii) any Entity whose fees and expenses are subject to approval by the
Bankruptcy Court as reasonable pursuant to Section 1129(a)(4) of the Bankruptcy
Code, and (iv) any attorney, accountant or financial advisor for the Old
Indenture Trustee.
1.105 "PRO RATA" means, with respect to any amount of consideration to
be distributed to a Creditor holding an Allowed Claim or Holder of an Allowed
Interest of a particular Class on a particular date, a proportionate share, so
that the ratio of the consideration distributed on account of an Allowed Claim
or Allowed Interest in a Class to the amount of such Allowed Claim or Allowed
Interest is the same as the ratio of the aggregate amount of the consideration
distributed on account of all Allowed Claims or Allowed Interests in such Class
to the aggregate amount of all Allowed Claims or Allowed Interests in such
Class.
1.106 "REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth
in Section 6.6(b) of this Plan.
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1.107 "REJECTION CLAIM" means the Claim, if any, of parties other than
any of the Debtors to executory contracts or unexpired leases with any of the
Debtors which are rejected or deemed rejected pursuant to a Final Order.
1.108 "RELEASES" shall have the meaning set forth in Section 12.1 of
this Plan.
1.109 "REORGANIZED PHI" means PHI from and after the Effective Date.
1.110 "REORGANIZED DEBTORS" means any or all of the Debtors from and
after the Effective Date.
1.111 "SECURED CLAIM" means any Claim which is wholly or partially
secured by a valid Lien, which has been properly perfected as required by
applicable law on property of the Debtors to the extent of the value of the
interest of the Holder of such Claim in such property of the Debtors, or that is
subject to set-off under Section 553 of the Bankruptcy Code as determined by the
Bankruptcy Court pursuant to Section 506(a) of the Bankruptcy Code.
1.112 "SHELF REGISTRATION STATEMENT" shall have the meaning set forth
in Section 6.6(b) of this Plan.
1.113 "SUBSIDIARIES" means the Domestic Subsidiaries and the Foreign
Subsidiaries, collectively.
1.114 "SUNTRUST" means SunTrust Bank, Central Florida, National
Association.
1.115 "SUNTRUST AGREEMENTS" means, collectively, (i) the Amended and
Restated Revolving Credit Agreement dated March 25, 1998, as amended, which was
executed by SunTrust, individually and as Administrative Agent and Agent, and
PHI, including the Synthetic Lease, Interest Rate Swap and Letter of Credit
agreements executed in connection therewith (respectively, the "Revolving Credit
Agreement," the "Synthetic Lease," the "Interest Rate Swap" and the "Letter of
Credit Facility"); (ii) the Security Agreement dated March 25, 1998, as amended,
which was executed by SunTrust as Agent, PHI and Planet Hollywood (Region IV),
Inc.; and (iii) the Guaranty Agreement dated March 25, 1998 as subsequently
ratified, which was executed by PHI and its material subsidiaries.
1.116 "SUNTRUST CLAIM" means the outstanding balance due on the Letter
of Credit Facility of the Sun Trust Agreements (in the amount of approximately
$2.5 million as of the Petition Date).
1.117 "SUPPLEMENTAL CLASS 5 DISTRIBUTION" shall have the meaning set
forth in Section 5.5 of the Plan.
1.118 "TRADE CLAIM" means any unsecured Claim arising from or with
respect to (i) the sale and delivery of goods, or the rendition of services, to
the Debtors prior to the Petition Date; and (ii) all other obligations incurred
in the ordinary course, conduct and operation of the Debtors' businesses prior
to the Petition Date.
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1.119 "TREASURY RATE" means the "underpayment rate" (as defined in
Section 6612(a)(2) of the Internal Revenue Code of 1986, as amended) on the
Business Day immediately preceding the Confirmation Date which rate is the rate
of interest charged by the Internal Revenue Service on delinquent federal income
taxes.
1.120 "UNCONSOLIDATED AFFILIATES" means affiliated companies which are
not majority owned by PHI or its Subsidiaries, consisting of PH Asia, ECE, and
Planet Hollywood Hospitality, Inc.
1.121 "UNIMPAIRED CLAIM" means a Claim in a Class identified in
Section 3.2 of the Plan as unimpaired thereunder.
1.122 "UNOFFICIAL NOTEHOLDERS' COMMITTEE" means the committee of
holders of Old Senior Subordinated Notes formed prior to the Petition Date,
representing holders of in excess of $160 million principal amount of the Old
Senior Subordinated Notes.
1.123 "UNOFFICIAL NOTEHOLDERS' COMMITTEE SUBSTANTIAL CONTRIBUTION
CLAIM" means the Claim, if any, of the Unofficial Noteholders' Committee for
reimbursement of the reasonable unpaid post-Petition Date fees and expenses of
its legal and financial advisors, which amount PHI has agreed to pay pursuant to
the Plan.
1.124 "WORKING CAPITAL FACILITY" means a post-Effective Date working
capital facility in an amount not to exceed $15 million substantially in the
form Filed as Exhibit "5" to the Plan at or prior to the Confirmation Hearing.
1.125 "WORKING CAPITAL FACILITY SECURITY AND PLEDGE AGREEMENT" means
the Security and Pledge Agreement pursuant to which certain collateral may be
pledged to secure Reorganized PHI's obligations under the Working Capital
Facility, substantially in the form Filed as EXHIBIT 6 to the Plan at or prior
to the Confirmation Hearing.
1.126 "WORKING CAPITAL LENDER" means the provider(s) of the Working
Capital Facility.
RULES OF CONSTRUCTION
1.127 INTERPRETATION AND RULES OF CONSTRUCTION . Unless otherwise
specified, all section, article, schedule, annex and exhibit references in the
Plan are to the respective section in, article of, annex to or schedule or
exhibit to, the Plan, as the same may be amended, waived, or modified from time
to time in accordance with the provisions hereof. The rules of construction
contained in Section 102 of the Bankruptcy Code shall apply to the construction
of the Plan (excluding the Plan Documents, unless made applicable thereto
pursuant to an express provision thereof).
1.128 OTHER TERMS. The words "herein" "hereof," "hereto," "hereunder,"
and others of similar import refer to the Plan as a whole and not to any
particular section, subsection, or clause
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contained in the Plan. Each capitalized term used herein that is not defined
herein shall have the meaning ascribed to that term, if any, in the Bankruptcy
Code or the Bankruptcy Rules.
1.129 HEADINGS. Headings are used in the Plan for convenience of
reference only and shall not constitute a part of the Plan for any other
purpose. Headings shall not limit or otherwise affect the provisions of the
Plan.
1.130 INCORPORATION OF EXHIBITS. All exhibits referred to in this Plan
are deemed incorporated into, and made a part of this Plan, whether Filed
contemporaneously herewith or hereafter.
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
2.1 PRE-PETITION CLAIMS AND EQUITY INTERESTS CLASSIFIED. All Claims and
all Interests are classified as set forth in Section 2.3 hereof. A Claim or
Interest is classified in a particular Class only to the extent that the Claim
or Interest qualifies within the description of that Class, and is classified in
another Class or Classes to the extent that any remainder of the Claim or
Interest qualifies within the description of such other Class or Classes. A
Claim or Interest is classified in a particular Class only to the extent that
the Claim or Interest is an Allowed Claim or Allowed Interest in that Class and
has not been paid, released or otherwise satisfied before the Effective Date. A
Claim or Interest which is not an Allowed Claim or Allowed Interest is not in
any Class and, notwithstanding anything to the contrary contained in the Plan,
no distribution shall be made on account of any Claim or Interest which is not
an Allowed Claim or Allowed Interest. Holders of Claims or Interests shall be
entitled to vote in, and receive distributions from, a particular Class only to
the extent the Allowed Claim or Allowed Interest is within such Class.
2.2 ADMINISTRATIVE CLAIMS AND PRIORITY TAX CLAIMS. As provided in
Section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority
Tax Claims against the Debtors shall not be classified for purposes of voting on
or receiving distributions under the Plan. All such Claims shall be treated
separately as unclassified Claims on the terms set forth in Article IV of the
Plan.
2.3 CLAIMS AGAINST AND INTERESTS IN THE DEBTORS. All Claims against,
and Interests in, any of the Debtors are classified as follows:
(a) CLASS 1 CLAIMS Class 1 consists of all Priority Claims.
(b) CLASS 2 CLAIMS Class 2 consists of the SunTrust Claims.
(c) CLASS 3 CLAIMS Class 3 consists of all Miscellaneous
Secured Claims.
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(d) CLASS 4 CLAIMS Class 4 consists of all Convenience
Claims.
(e) CLASS 5 CLAIMS Class 5 consists of all Old Senior
Subordinated Notes Claims.
(f) CLASS 6 CLAIMS Class 6 consists of all General
Unsecured Claims.
(g) CLASS 7 CLAIMS Class 7 consists of Claims arising from
Landlord Settlement Agreements.
(h) CLASS 8 INTERESTS Class 8 consists of all Interests of
Holders of Old Common Stock.
(i) CLASS 9 CLAIMS FOR ISSUANCE OF OLD COMMON STOCK
Class 9 consists of all Old Warrants,
Old Celebrity Options and Old Employee
Options and all other options or rights
to acquire Old Common Stock, including,
without limitation, all Claims arising
out of the rejection of Old Warrants,
Old Celebrity Options and Old Employee
Options and other options to acquire
Old Common Stock, to the extent they
constitute executory contracts, and
any Claim that has the same priority
as the Old Common Stock pursuant to
Section 510(b) of the Bankruptcy Code.
(j) CLASS 10 CLAIMS Class 10 consists of all Intercompany
Claims.
(k) CLASS 11 INTERESTS Class 11 consists of all Interests of
PHI and any Filed Subsidiary in any
other Filed Subsidiary.
ARTICLE III
IDENTIFICATION OF IMPAIRED CLASSES
OF CLAIMS AND EQUITY INTERESTS
3.1 IMPAIRED CLASSES OF CLAIMS AND INTERESTS. Class 5 Claims, Class 6
Claims, Class 8 Interests and Class 9 Claims are impaired under the Plan.
3.2 UNIMPAIRED CLASSES OF CLAIMS AND INTERESTS. Class 1 Claims, Class 2
Claims, Class 3 Claims, Class 4 Claims, Class 7 Claims and Class 10 Claims are
not impaired under the Plan. Class 11 Interests are not impaired.
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3.3 IMPAIRMENT CONTROVERSIES. If a controversy arises as to whether any
Claims or Interests, or any Class of Claims or Class of Interests, is impaired
under the Plan, the Bankruptcy Court shall, after notice and a hearing, resolve
such controversy.
ARTICLE IV
TREATMENT OF ADMINISTRATIVE AND PRIORITY TAX CLAIMS
4.1 FEES OF PROFESSIONALS AND CLAIMS FOR SUBSTANTIAL CONTRIBUTION. All
Professionals retained by any Debtor and any other Entities (other than any
Professionals retained by the Old Indenture Trustee, which Professionals shall
be paid in accordance with Section 6.4 of the Plan) requesting compensation or
reimbursement of expenses pursuant to Sections 327, 328, 330, 331, or 503(b) of
the Bankruptcy Code for services rendered before the Confirmation Date
(including, without limitation, any compensation requested by any Professional
or any other Entity for making a substantial contribution in the Chapter 11
Cases shall File and serve on Reorganized PHI, the Creditors' Committee and the
United States Trustee an application for final allowance of compensation and
reimbursement of expenses no later than thirty (30) days after the Effective
Date. Objections to applications of Professionals for compensation or
reimbursement of expenses must be Filed and served on Reorganized PHI, the
United States Trustee, the Creditors' Committee and the Professionals to whose
application the objections are addressed, no later than fifteen (15) days after
service of the related application. Reorganized PHI shall pay the amounts
Allowed by Final Order of the Bankruptcy Court within ten (10) days after the
date of such Order.
4.2 ORDINARY COURSE LIABILITIES. Holders of Administrative Claims based
on liabilities incurred in the ordinary course of the Debtors' business shall
not be required to File any request for payment of such Claims. Such
Administrative Claims shall be assumed and paid by Reorganized PHI pursuant to
the terms and conditions of the particular transactions giving rise to such
Administrative Claims without any further action by the Holders of such Claims
or the need for Bankruptcy Court approval.
4.3 ADMINISTRATIVE RECLAMATION CLAIMS. Holders of Allowed
Administrative Reclamation Claims shall be paid in full in Cash on the Effective
Dates or such other date as shall be approved by an order of the Bankruptcy
Court.
4.4 PRIORITY TAX CLAIMS. Unless otherwise agreed between the Holder of
a Priority Tax Claim and any Debtor or Reorganized PHI, in accordance with
Section 1129(a)(9)(C) of the Bankruptcy Code, each Holder of an Allowed Priority
Tax Claim shall receive, at such Debtor's or Reorganized PHI's option, as the
case may be, either (i) Cash, in the full amount of such Allowed Priority Tax
Claim on the Effective Date or (ii) deferred payments of Cash in the full amount
of such Allowed Priority Tax Claim, payable in equal annual principal
installments beginning the first anniversary of the Effective Date and ending on
the earlier of the sixth anniversary of the Effective Date or the sixth
anniversary of the date of the assessment of such Claim, together with interest
(payable quarterly in arrears) on the unpaid balance of such Allowed Priority
Tax Claim at an annual rate equal to the Treasury Rate or such other rate as
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may be set by the Bankruptcy Court at the Confirmation Hearing. The amount of
any Allowed Priority Tax Claim for which the time for filing a return, if
required, under applicable law or under any authorized extension thereof, has
not expired on or prior to the Effective Date, and the rights of the Holder of
such Claim, if any, to payment in respect thereof shall (i) be determined in the
manner in which the amount of such Claim and the rights of the Holder of such
Claim would have been resolved or adjudicated if the Chapter 11 Cases had not
been commenced, PROVIDED, HOWEVER, that the Debtors reserve the right to seek a
determination by the Bankruptcy Court of the validity, amount and priority of
any Priority Tax Claim under 11 U.S.C. ss.505, (ii) survive the Effective Date
and consummation of the Plan as if the Chapter 11 Cases had not been commenced,
and (iii) not be discharged pursuant to Section 1141 of the Bankruptcy Code.
ARTICLE V
TREATMENT OF CLAIMS AND INTERESTS
5.1 CLASS 1. PRIORITY CLAIMS. Class 1 Claims are unimpaired. At
Reorganized PHI's option, each Holder of an Allowed Priority Claim shall be
entitled to receive, in full satisfaction of such Claim, the Allowed amount of
such Claim in full in Cash on the later of (i) the Effective Date, (ii) the date
that such Claim becomes an Allowed Priority Claim and (iii) the date that such
Claim would be paid in accordance with any terms and conditions of any
agreements or understandings relating thereto between any Debtor and the Holder
of such Claim.
5.2 CLASS 2. THE SUNTRUST CLAIMS. Allowed Class 2 Claims are
unimpaired. On the Effective Date, each Holder of an Allowed Class 2 Claim shall
receive in full satisfaction of its Allowed Class 2 Claim in Cash, the
outstanding unpaid amount due, if any, under the SunTrust Agreements plus
accrued and unpaid interest, if any, at the non-default contractual rate set
forth in the SunTrust Agreements through the Effective Date, plus Allowed fees,
costs and expenses, if any.
5.3 CLASS 3. MISCELLANEOUS SECURED CLAIMS. Claims 3 Claims are
unimpaired. At Reorganized PHI's option, on the Effective Date each Holder of an
Allowed Miscellaneous Secured Claim shall either be treated in accordance with
Section 1124(2) of the Bankruptcy Code, or in accordance with the terms of any
agreements between the Secured Creditor and any Debtor, as approved by the
Bankruptcy Court.
5.4 CLASS 4. CONVENIENCE CLAIMS. Class 4 Claims are unimpaired. On the
Effective Date, each Holder of an Allowed Claim that is $2,000 or less or
reduced to $2,000 or less shall receive a Cash payment equal to the lesser of
$2,000 or the Allowed amount of the Claim.
5.5 CLASS 5. OLD SENIOR SUBORDINATED NOTES CLAIMS. Class 5 Claims are
impaired. On the Effective Date, each Holder of a Class 5 Claim as of the
Distribution Record Date shall have an Allowed Claim equal to the face amount of
its Old Senior Subordinated Notes plus unpaid accrued interest and interest on
defaulted payments of interest at the default rate provided in the Old Senior
Subordinated Notes Indenture and related documents through the
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Petition Date, and shall receive on the Effective Date, in full satisfaction of
its Allowed Class 5 Claim, its Pro Rata share of $47.5 million in Cash, $60
million principal amount of New Secured PIK Notes, and 2.65 million shares of
New Class A Common Stock. In the event PHI is unable to complete an agreement
with a third-party lender to purchase the New Senior Secured Notes prior to the
Confirmation Date, PHI may, with the written consent of Holders of at least $167
million in principal amount of Old Senior Subordinated Notes, in lieu of the
payment of up to $25 million in Cash, deliver to the Holders of Class 5 Claims
up to $25 million of New Senior Secured Notes having the principal economic
terms set forth in ANNEX A hereto, plus a fee totaling $625,000 Cash and 350,000
shares of New Class A Common Stock. The principal economic terms of the New
Secured PIK Notes are set forth on ANNEX B hereto. In the event that the amount
of any New Class A Common Stock paid to a third-party lender as partial
consideration for the puchase of the New Senior Secured Notes is less than
350,000 shares of New Class A Common Stock, then the Holders of Class 5 Claims
shall receive, on the Effective Date, their Pro Rata share of that undistributed
New Class A Common Stock up to a total of 350,000 shares (the "Supplemental
Class 5 Distribution"), and the amount of New Secured PIK Notes distributed to
Class 5 shall be reduced by their Class 6 Adjustment Amount.
5.6 CLASS 6. GENERAL UNSECURED CLAIMS.
Each Holder of an Allowed Class 6 Claim will receive in full
satisfaction of its Allowed Claim, Cash and New Secured PIK Notes having an
aggregate value as a percentage of its Allowed Claim equal to the aggregate
value of the consideration to be received by each Holder of an Allowed Class 5
Claim as a percentage of its Allowed Claim. The Cash component of the
distribution to Class 6 shall be the same percentage of a Class 6 Holder's
Allowed Claim as the Cash component of the distribution to Class 5 is as a
percentage of the Allowed Claims of Holders in Class 5, counting a distribution
of New Senior Secured Notes to Class 5, if any, as a Cash payment. For the
purpose of calculating the Class 6 distribution, New Secured PIK Notes and New
Senior Secured Notes, if any, distributed to Class 5, shall be valued at their
face amounts and New Class A Common Stock shall be valued at $4.2857 per share.
In the event Class 5 receives the Supplemental Class 5 Distribution, then the
Holders of Class 6 Claims shall receive, on the Effective Date, their Pro Rata
share of the Class 6 Adjustment Amount determined as provided in this Section
5.6.
5.7 CLASS 7. LANDLORD SETTLEMENT AGREEMENT CLAIMS. Class 7 Claims are
unimpaired. Holders of Claims arising under Landlord Settlement Agreements,
whether executed prior to or subsequent to the Petition Date, shall receive the
treatment provided in the Landlord Settlement Agreement, whether payment of
Cash, performance by a Debtor, surrender of leasehold or other property rights,
or as otherwise required, in the manner and at the time provided in a Landlord
Settlement Agreement. All such Claims for payment, performance or otherwise
shall be deemed Allowed unless a Final Order of the Bankruptcy Court is entered
prior to the Effective Date disallowing, disapproving or unwinding a Landlord
Settlement Agreement.
5.8 CLASS 8. OLD COMMON STOCK. Class 8 Interests are impaired.
(a) If both Class 5 and Class 6 accept the Plan, each Holder
of an Allowed Class 8 Interest as of the Distribution Record Date shall receive
on the Effective Date, in full
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satisfaction of its Allowed Interest, its Pro Rata share of New Warrants,
PROVIDED, HOWEVER, that Holders of less than 5,450 shares of Old Common Stock
will receive no distribution.
(b) If either Class 5 or Class 6 rejects the Plan, Holders of
Class 8 Interests shall not receive or retain any property on account of their
Class 8 Interests, and no New Warrants shall be issued.
5.9 CLASS 9. CLAIMS FOR ISSUANCE OF OLD COMMON STOCK. Class 9 Claims
are impaired. The Holders of Class 9 Claims shall not receive or retain any
property under the Plan. All Old Employee Options and all other options or
rights to acquire the Old Common Stock shall be canceled, annulled and
extinguished on the Effective Date.
5.10 CLASS 10. INTERCOMPANY CLAIMS. Class 10 Claims are unimpaired.
Except as provided in Section 6.1.5 hereof, at Reorganized PHI's option, each
Holder of an Allowed Class 10 Claim shall be treated in accordance with Section
1124(2) of the Bankruptcy Code.
5.11 CLASS 11. INTERCOMPANY INTERESTS. Class 11 Interests are
unimpaired. Holders of Class 11 Interests shall be treated in accordance with
Section 1124(2) of the Bankruptcy Code.
5.12 POST-PETITION INTEREST. To the extent required by a Final Order of
the Bankruptcy Court or applicable law, the aggregate distribution paid to
Holders of Allowed Claims deemed to be unimpaired under the Plan shall include
interest accrued thereon from the Petition Date through the Effective Date at
the lower of (i) the Treasury Rate; (ii) the rate earned on the Debtors' cash
investments; or (iii) the rate determined by the Bankruptcy Court.
5.13 ALLOCATION BETWEEN PRINCIPAL AND ACCRUED INTEREST. The aggregate
consideration paid to Holders in respect of their Allowed Claims shall be
treated under this Plan as allocated first to the principal amount of such
Allowed Claim to the extent thereof and, thereafter, to the interest, if any,
accrued thereon through the Effective Date.
ARTICLE VI
MEANS FOR EXECUTION OF THE PLAN
6.1 IMPLEMENTATION OF PLAN.. On the Effective Date, PHI shall (i)
receive $30 million in cash from the New Money Investors, the purchase price for
7.0 million shares of New Class B Common Stock; (ii) issue up to $25 million
face amount of the New Senior Secured Notes to one or more third-party lenders
or to the Holders of Class 5 Claims, and (iii) obtain such other financing on
terms reasonably acceptable to the Debtors and the Creditors' Committee as
necessary to effectuate the Plan, including, on or after the Effective Date, the
proceeds from the Working Capital Facility to the extent necessary to fund the
Debtors' obligations under this Plan and to operate the Reorganized Debtors. PHI
shall issue the New Senior Secured Notes, the New Secured PIK Notes, the New
Warrants, New Options and New Common Stock, and shall deliver cash to the
entities entitled to receive distributions under this Plan.
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6.2 GENERAL CORPORATE MATTERS. Reorganized PHI and the other
Reorganized Debtors shall take such action as is necessary under the laws of the
State of Delaware, federal law and other applicable law to implement the terms
and provisions of the Plan.
6.2.1 CANCELLATION OF OLD SECURITIES, INSTRUMENTS AND AGREEMENTS
RELATING TO IMPAIRED CLAIMS AND INTERESTS. On the Effective Date, except as
otherwise provided in the Plan, all securities, instruments and agreements
governing any Claims and Interests impaired hereby shall be deemed canceled and
terminated, and the obligations of the Debtors relating to, arising under, in
respect of or in connection with such securities, instruments and agreements
shall be discharged; PROVIDED, HOWEVER, that except as otherwise provided
herein, notes, securities and other evidences of Claims and Interests shall,
effective upon the Effective Date, represent the right to participate, to the
extent such Claims and Interests are Allowed, in the distributions contemplated
by the Plan.
6.2.2 EFFECTIVENESS OF SECURITIES, INSTRUMENTS AND AGREEMENTS. On the
Effective Date, all securities, instruments and agreements entered into or
issued pursuant to the Plan, including, without limitation, the Plan Documents
and any security, instruments or agreements entered into in connection with any
of the foregoing, shall become effective and binding in accordance with their
respective terms and conditions upon the parties thereto and shall be deemed to
become effective simultaneously.
6.2.3 CORPORATE ACTION. As of the Effective Date, Reorganized PHI shall
be deemed to have adopted the Amended PHI Articles and the Amended PHI By-Laws
which shall thereupon become effective. Reorganized PHI shall file the Amended
PHI Articles which shall, among other things, contain appropriate provisions
consistent with the Plan and other Plan Documents (i) governing the
authorization of the New Common Stock, (ii) prohibiting the issuance of
nonvoting equity securities as required by Section 1123(a)(6) of the Bankruptcy
Code, and (iii) implementing such other matters as Reorganized PHI believes are
necessary and appropriate to effectuate the terms and conditions of the Plan,
including, without limitation, provisions implementing the Board member election
rights of the Holders of New Class A Common Stock and New Class B Common Stock.
Except as otherwise specifically provided in the Plan, the adoption of the
Amended PHI Articles and the Amended PHI By-Laws, the selection of directors and
officers of Reorganized PHI, the distribution of Cash, the issuance and
distribution of the New Senior Secured Notes, the New Secured PIK Notes, the New
Common Stock, the New Warrants, and the New Stock Options, and the adoption,
execution and delivery of all contracts, instruments, indentures, modifications
and other agreements related to any of the foregoing, and other matters provided
for under the Plan involving corporate action to be taken by or required of
Reorganized PHI shall be deemed to have occurred and be effective on the
Effective Date as provided herein, and shall be authorized and approved in all
respects without any requirements of further action by stockholders, officers or
directors of Reorganized PHI. To the extent required by law, the Board of
Directors of Reorganized PHI shall take such action as may be necessary from
time to time to approve the issuance of the Plan Securities and such other
action, if any, as may be required to meet the requirements of the Plan, the
Plan Securities or the Plan Documents.
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6.2.4 MANAGEMENT AND BOARD OF DIRECTORS. On the Effective Date, the
Board of Directors of Reorganized PHI shall consist of five (5) members
appointed by the New Money Investors (the "Class B Directors") and two (2)
members appointed by the Creditors' Committee (the "Class A Directors"). After
the Effective Date, Holders of New Class B Common Stock shall have the right to
elect the five Class B Directors, and the Holders of New Class A Common Stock
shall have the right to elect the two Class A Directors until repayment in full
of the New Secured PIK Notes, at which time the number of Class A Directors
shall be reduced to one, and thereafter the Class A Director shall be elected by
the Holders of New Class A Common Stock in accordance with the terms of the
Amended PHI Articles and the Amended PHI By-Laws. Robert Earl shall be the Chief
Executive Officer of PHI on and after the Effective Date. Selection of a Chief
Financial Officer and a Chief Operating Officer for PHI prior to or as of the
Effective Date shall be subject to the consent, not to be unreasonably withheld,
of the Creditors' Committee, and after the Effective Date shall be subject to
the super-majority approval of at least six (6) members of Reorganized PHI's
Board of Directors. Officers and directors for all of the Reorganized Debtors
other than PHI shall be designated by the Board of Directors of Reorganized PHI.
Except as otherwise provided herein or in any Plan Document, the members of the
existing Board of Directors of PHI shall have no continuing obligations to any
of the Debtors or Reorganized PHI on and after the Effective Date. At such time
as there shall be no issued and outstanding shares of Class B Common Stock, all
members of the Board of Directors of Reorganized PHI shall be elected by the
holders of Class A Common Stock.
6.2.5 NEW STOCK OPTIONS. On the Effective Date, PHI shall implement the
New Stock Option Plan for the benefit of Post-Effective Date management and
Celebrities who continue to sponsor PHI. The Stock Options issued under the New
Stock Option Plan shall have a five year term, and shall be set at an exercise
price equal to the fair market value of the New Class A Common Stock on the date
of grant.
6.2.6 SUBSTANTIVE CONSOLIDATION. The Plan contemplates the substantive
consolidation of the Chapter 11 Cases of the Debtors into a single Case solely
for purposes of confirmation, consummation and implementation of the Plan.
Pursuant to the Confirmation Order, on the Confirmation Date: (i) all assets,
and all proceeds thereof, and all liabilities of the Consolidated Debtors will
be merged or treated as though they were merged with and into the assets and
liabilities of Reorganized PHI; (ii) all Consolidated Claims and Claims among
the Consolidated Debtors will receive no distribution under the Plan; (iii) any
obligation of any Consolidated Debtor, and all guarantees thereof executed by
one or more of the Consolidated Debtors, and any Claims filed or to be filed in
connection with any such obligation and guarantee will be deemed one Claim
against Reorganized PHI; (iv) each and every Claim filed in the individual
Chapter 11 Case of any of the Consolidated Debtors will be deemed filed against
Reorganized PHI; and (v) for purposes of determining the availability of the
right of set-off under Section 553 of the Bankruptcy Code, the Consolidated
Debtors shall be treated for purposes of the Plan as one entity so that, subject
to the other provisions of Section 553 of the Bankruptcy Code, debts due to any
of the Consolidated Debtors may be setoff against the debts of any of the
Consolidated Debtors.
6.2.7 EXTINGUISHMENT OF GUARANTEE. Except as otherwise provided in the
Plan or in any Plan Documents, or in executory contracts or leases assumed by
the Debtors, on the Effective
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Date, all Claims based upon guarantees of collection, payment or performance
made by any of the Debtors as to the obligations of each other, including,
without limitation, the Leasehold Guarantees, shall be discharged, released and
of no further force and effect.
6.2.8 CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN
REORGANIZED PHI AND THE OTHER REORGANIZED DEBTORS. PHI shall continue to exist
on and after the Effective Date as Reorganized PHI, a duly organized Delaware
corporation, with all the rights and powers of a corporation under applicable
law and without prejudice to any right to alter or terminate such existence
(whether by merger or otherwise) under Delaware law, subject to the terms and
provisions of this Plan and the Confirmation Order. The other Reorganized
Debtors shall continue to exist on and after the Effective Date as duly
organized entities within the state of their incorporation or organization,
unless otherwise determined by PHI or Reorganized PHI. Except as otherwise
provided in the Plan, on or after the Effective Date, all property of the
Consolidated Estates, and any property and assets acquired by the Debtor or the
Reorganized Debtors under any provisions of the Plan, shall vest in the
Reorganized Debtors, free and clear of any and all Claims, Liens, charges and
other Encumbrances. On and after the Effective Date, the Reorganized Debtors may
operate their businesses and may use, acquire and dispose of property or assets
and compromise or settle any Claims against them without supervision or approval
by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or
Bankruptcy Rules, other than those restrictions expressly imposed by the Plan or
the Confirmation Order. Without limiting the foregoing, the Reorganized Debtors
may pay the charges that they incur on or after the Effective Date for
Professional fees, disbursements, expenses or related support services without
application to the Bankruptcy Court, except as otherwise provided in Section
14.3 of the Plan.
6.3 DISTRIBUTION.
6.3.1 GENERALLY. Except as otherwise provided in the Plan, any
distribution required by the Plan to be made on the Effective Date in respect of
a Claim or Interest that is Allowed as of the Effective Date will be deemed made
on the Effective Date if made on the Effective Date or as promptly thereafter as
practicable, but in any event no later than the later to occur of: (i) 45 days
after the Effective Date or (ii) the date on which such Claim or Interest
becomes Allowed and any other conditions to distribution with respect to such
Claim or Interest shall have been satisfied.
6.3.2 DISTRIBUTIONS TO THE HOLDER OF SUNTRUST CLAIMS. Any cash payment
required to be made on the Sun Trust Claims shall be delivered by PHI to Sun
Trust on the Effective Date conditioned on the delivery by Sun Trust of executed
releases of Liens, guarantees and cash collateral including any necessary
mortgage satisfactions, UCC Terminations Statements or other documents
reasonably requested by PHI.
6.3.3 DISTRIBUTIONS TO HOLDERS OF OLD SENIOR SUBORDINATED NOTES CLAIMS.
All distributions provided for in the Plan on account of Old Senior Subordinated
Notes Claims will be made to the Old Indenture Trustee for further distribution
to individual Holders of Old Senior Subordinated Notes Claims. Any such
distribution made by the Old Indenture Trustee will be made pursuant to the Old
Senior Subordinated Notes Indenture. Notwithstanding any provision
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in the Plan to the contrary, the Old Senior Subordinated Notes Indenture will
continue in effect to the extent necessary to allow the Old Indenture Trustee to
receive and make distributions pursuant to the Plan on account of Old Senior
Subordinated Notes Claims. Any actions taken by the Old Indenture Trustee on or
after the Effective Date that are not for this purpose will be null and void as
against the Debtors and Reorganized PHI, and Reorganized PHI will have no
obligations to the Old Indenture Trustee for any fees, costs or expenses
incurred in connection with any such actions.
6.3.4 DISTRIBUTIONS TO HOLDERS OF OTHER CLAIMS AND INTERESTS.
Reorganized PHI will make all distributions required under the Plan, except for
distributions made by the Old Indenture Trustee. Reorganized PHI may employ or
contract with other Entities including but not limited to the Old Stock Transfer
Agent to assist it in making the distributions required by the Plan.
6.3.5 COMPENSATION FOR SERVICES RELATED TO DISTRIBUTION. In
consideration for providing services related to distributions pursuant to the
Plan, the Old Indenture Trustee and any other Entity employed by Reorganized
PHI, as the case may be, will receive from Reorganized PHI without further
Bankruptcy Court approval, reasonable compensation for such services and
reimbursement of reasonable out-of-pocket expenses incurred in connection with
such services. These payments will be made on terms agreed to with Reorganized
PHI and will not be deducted from distributions to be made pursuant to the Plan
to Holders of Allowed Claims and Allowed Interests.
6.3.6 DELIVERY OF DISTRIBUTIONS AND UNDELIVERABLE OR UNCLAIMED
DISTRIBUTIONS.
(a) Distributions to Holders of Allowed Claims and Holders of
Allowed Interests will be made as follows: (a) with respect to Old Senior
Subordinated Notes Claims by the Old Indenture Trustee, in accordance with the
applicable Old Senior Subordinated Notes Indenture, (b) with respect to all
other Allowed Claims, by Reorganized PHI (i) at the addresses set forth on the
respective proofs of Claim Filed by Holders of such Claims; (ii) at the
addresses set forth in any written notices of address change delivered to
Reorganized PHI after the Bar Date; (iii) at the addresses reflected in the
applicable Debtor's records if no proof of Claim has been Filed and Reorganized
PHI has not received a written notice of a change of address, and (c) with
respect to Allowed Class 8 Interests by Reorganized PHI at the addresses for
record holders supplied by the Old Stock Transfer Agent or by PHI as of the
Distribution Record Date.
(b) If any distribution to a Holder of a Class 5 Claim is
returned to the Old Indenture Trustee as undeliverable (an "Undeliverable Class
5 Distribution"), no further distributions will be made to that Holder until the
Old Indenture Trustee is notified in writing of such Holder's then current
address. If a Holder of Old Senior Subordinated Notes is not entitled to a
distribution under the Old Senior Subordinated Notes Indenture, the Plan, or any
order of the Bankruptcy Court, such distribution shall be treated as an
Undeliverable Class 5 Distribution. Any such Undeliverable Class 5 Distributions
will be held by the Old Indenture Trustee until they become deliverable, or one
year from the Effective Date, whichever is earlier. After one year from the
Effective Date, the Old Indenture Trustee may redistribute the Undeliverable
Class 5 Distributions to other claimants receiving Class 5 distributions, on a
pro rata basis. Any such
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distribution shall not alter the calculation of the aggregate value
distributable to Class 5 for purposes of calculating the distribution to Class
6. If the Undeliverable Class 5 Distributions are so small as to make it unduly
burdensome to distribute them to other claimants, the Old Indenture Trustee will
return the Undeliverable Class 5 Distributions to Reorganized PHI.
(c) If any distribution to any other Holders of Allowed Claims
or Allowed Interests is returned as undeliverable, no further distributions will
be made to such Holders until Reorganized PHI or its distribution agents are
notified in writing of such Holder's then current address.
(d) Undeliverable Cash (including dividends or other
distributions on account of undeliverable New Common Stock) will be held in
segregated bank accounts in the name of Reorganized PHI for the benefit of the
potential claimants of such funds. Undeliverable Cash will be invested by
Reorganized PHI in a manner consistent with Reorganized PHI's investment and
deposit guidelines. Subject to paragraph 6.3.6(b) above, undeliverable Plan
Securities will be held by Reorganized PHI for the benefit of the potential
claimants of such securities. Any Holder of an Allowed Claim or an Allowed
Interest that does not assert a claim pursuant to the Plan for an undeliverable
distribution to be made by Reorganized PHI or the Old Indenture Trustee, as the
case may be, within one year after the Effective Date will have its claim for
such undeliverable distribution discharged and will be forever barred from
asserting any such claim against the Debtors, Reorganized PHI, the other
Reorganized Debtors or their respective property. In such case, subject to
paragraph 6.3.6(b) above, (i) any Cash held for distribution on account of such
claims for undeliverable distributions (including Cash interest, maturities,
dividends and other distributions on undelivered Plan Securities, as the case
may be) shall be property of Reorganized PHI, free of any restrictions thereon
(except as otherwise provided in any Plan Document); (ii) any New Secured PIK
Notes held for distribution on account of such claims for distribution shall be
canceled and of no further force or effect; and (iii) any New Common Stock held
for distribution on account of such claims for distribution shall either be
canceled or held as treasury shares as Reorganized PHI may determine is
appropriate.
(e) Pending the distribution of the New Common Stock,
Reorganized PHI will cause all of the New Common Stock held by it for
distribution under the Plan to be: (i) represented in person or by proxy at each
meeting of the stockholders of Reorganized PHI; and (ii) voted proportionately
with the votes cast with respect to New Class A Common Stock, by the other
holders of New Class A Common Stock taken as a whole, and with respect to New
Class B Common Stock, by the other holders of New Class B Common Stock taken as
a whole.
6.3.7 DISTRIBUTION RECORD DATE.
As of the close of business on the Distribution Record Date,
the respective transfer registers for the Old Securities (as applicable) will be
closed, and Reorganized PHI, the Old Indenture Trustee, the Old Stock Transfer
Agent and their respective agents will have no obligation to recognize the
transfer of any Old Securities occurring after the close of business on the
Distribution Record Date and will be entitled for all purposes herein to
recognize and deal only with those Holders of record as of the close of business
on the Distribution Record Date.
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6.3.8 MEANS OF CASH PAYMENTS. Except as otherwise specified herein,
Cash payments made pursuant to the Plan will be in U.S. dollars by checks drawn
on a domestic bank selected by Reorganized PHI, or by wire transfer from a
domestic bank, at the option of Reorganized PHI.
6.3.9 FRACTIONAL PLAN SECURITIES.
(a) Notwithstanding any other provisions of the Plan,
principal amounts of the New Secured PIK Notes or the New Senior Secured Notes
will be issued only in denominations of $1,000 and integral multiples thereof.
When any distribution on account of an Allowed Claim would otherwise result in
the issuance of New Secured PIK Notes or the New Senior Secured Notes with an
aggregate principal amount that is not an integral multiple of $1,000, the
actual distribution of such notes will be rounded to the next higher or lower
integral multiple of $1,000, as follows: (a) aggregate principal amounts that
exceed an integral multiple of $1,000 by $500 or more will be rounded to the
next higher integral multiple of $1,000 and (b) aggregate principal amounts that
exceed an integral multiple of $1,000 by less than $500 will be rounded to the
next lower integral multiple of $1,000. If, as a result of such rounding, the
sum of such principal amounts differs from the aggregate principal amount of
such New Secured PIK Notes or the New Senior Secured Notes specified to be
distributed pursuant to the Plan, as applicable, the aggregate principal amount
of the New Secured PIK Notes or the New Senior Secured Notes so specified to be
distributed pursuant to the Plan will be adjusted upward or downward to provide
for the distribution of the applicable New Secured PIK Notes or the New Senior
Secured Notes in an aggregate principal amount equal to such sum. No
consideration will be provided in lieu of principal amounts that are rounded
down.
(b) Notwithstanding any other provision of the Plan, only
whole numbers of shares of New Common Stock, and whole numbers of New Warrants
and New Options will be issued. When any distribution on account of an Allowed
Claim or an Allowed Interest would otherwise result in the issuance of a number
of shares of New Common Stock or a number of New Warrants or New Options that is
not a whole number, the actual distribution of shares of such stock, warrants or
options will be rounded to the next higher or lower whole number as follows: (i)
fractions equal to or greater than 2 will be rounded to the next higher whole
number and (ii) fractions less than 2 will be rounded to the next lower number.
The total number of shares of New Common Stock, New Warrants or New Options
specified to be distributed to a Class of Claims or Interests will be adjusted
as necessary to account for the rounding provided for herein. If, as a result of
such rounding, the amount of shares of New Common Stock or the amount of New
Warrants to be distributed to a particular Class differs from the aggregate
number of shares of New Common Stock, New Warrants or New Options specified to
be distributed pursuant to the Plan to that Class, the aggregate number of
shares of New Common Stock or the amount of New Warrants or New Options
specified with respect to such Class will be adjusted upward or downward to
provide for the appropriate distribution of New Common Stock, New Warrants or
New Options, as the case may be. No consideration will be provided in lieu of
fractional shares, warrants or options that are rounded down. In addition,
notwithstanding the foregoing, no de minimis distribution shall be made as
provided in Section 14.17 of this Plan.
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6.3.10 SURRENDER OF CANCELED INSTRUMENTS OR SECURITIES.
(a) As a condition precedent to receiving any distribution
pursuant to the Plan on account of an Allowed Claim or an Allowed Interest
evidenced by the notes, instruments, securities or other documentation canceled
pursuant to the Plan, the Holder of such Claim or Interest must tender the
applicable notes, instruments, securities or other documentation evidencing such
Claim or Interest to Reorganized PHI or its designated agent, or the Old
Indenture Trustee, as applicable. Any Cash or Plan Securities to be distributed
pursuant to the Plan on account of any such Claim or Interest will, pending such
surrender, be treated as an undeliverable distribution pursuant to Section 6.3.6
hereof.
(b) Except as provided in Section 6.3.10(c) hereof, each
Holder of an Allowed Claim or an Allowed Interest will tender its Old Security
to Reorganized PHI or its designated agent or the Old Indenture Trustee, as
applicable, together with a letter of transmittal to be provided to such Holder
by Reorganized PHI or its designated agent, or the Old Indenture Trustee as
promptly as practicable following the Effective Date. The letter of transmittal
will include, among other provisions, customary provisions with respect to the
authority of the Holder of the applicable Old Security to act and the
authenticity of any signatures required thereon. All surrendered Old Securities
will be marked as canceled by Reorganized PHI or its designated agent, or the
Old Indenture Trustee, as applicable, and delivered to Reorganized PHI.
(c) In addition to any requirements under the applicable Old
Indenture, any Holder of a Claim or Interest evidenced by an Old Security that
has been lost, stolen, mutilated or destroyed will, in lieu of surrendering such
Old Security, deliver to Reorganized PHI or its designated agent or the Old
Indenture Trustee, as applicable: (i) evidence satisfactory to such Entity of
such loss, theft, mutilation or destruction and (ii) such security or indemnity
as may be required by such Entity to hold such Entity harmless from any damages,
liabilities or costs incurred in treating such individual as a Holder of an Old
Security. Upon compliance with this Section 6.3.10(c) by a Holder of a Claim or
an Interest evidenced by an Old Security, such Holder will, for all purposes
under the Plan, be deemed to have surrendered an Old Security.
(d) Any Holder of an Old Security that fails to surrender or
be deemed to have surrendered such Old Security within one year after the
Effective Date will have its claim for a distribution pursuant to the Plan on
account of such Old Security discharged and will be forever barred from
asserting any such claim against the Debtors, Reorganized PHI, the other
Reorganized Debtors or their respective property.
6.3.11 SETOFF. Reorganized PHI may, but shall not be required to, set
off against any Allowed Claim and the distributions to be made pursuant to the
Plan on account of such Claim, claims of any nature that the Debtors or
Reorganized PHI may have against the Holder of such Allowed Claim; PROVIDED,
HOWEVER, that neither the failure to effect such a setoff nor the allowance of
any Claim against the Debtors or Reorganized PHI shall constitute a waiver or
release by the Debtors or Reorganized PHI of any claim that the Debtors or
Reorganized PHI may possess against such Holder.
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6.4 INDENTURE TRUSTEE CHARGING LIENS. In full satisfaction of
Allowed Claims secured by Indenture Trustee Charging Liens, the Old Indenture
Trustee will receive from Reorganized PHI Cash equal to the amount of such
Claims, and any Indenture Trustee Charging Liens will be released. Distributions
received by Holders of Allowed Claims pursuant to the Plan will not be reduced
on account of payment of Allowed Claims secured by Indenture Trustee Charging
Liens. Notwithstanding any other provisions of the Plan, upon: (a) submission of
appropriate documentation to Reorganized PHI regarding fees and expenses
incurred by the Old Indenture Trustee in connection with the Chapter 11 Cases
through the Effective Date that are secured by an Old Indenture Trustee Charging
Lien and (b) the failure of Reorganized PHI to object on the grounds of
reasonableness, as determined under the terms of the applicable Old Senior
Subordinated Notes Indenture, to the payment of such fees and expenses within 20
Business days after receipt of such documentation, the Old Indenture Trustee
will be deemed to hold an Allowed Claim for such fees and expenses, which
Reorganized PHI will pay in Cash within 30 Business Days after the receipt of
the documentation regarding the fees and expenses of such Old Indenture Trustee,
without further Bankruptcy Court approval.
6.5 RETIREE BENEFITS. On and after the Effective Date, to the
extent required by Section 1129(a)(13) of the Bankruptcy Code, Reorganized PHI
shall continue to pay all retiree benefits (if any), as the term "retiree
benefits" is defined in Section 1114(a) of the Bankruptcy Code, maintained or
established by the Debtors prior to the Confirmation Date.
6.6 EXEMPTIONS FROM SECURITIES LAWS AND REGISTRATION RIGHTS.
(a) The Confirmation Order shall provide that the offer
and sale of the Plan Securities are exempt from registration pursuant to Section
1145(a) of the Bankruptcy Code and that the Plan Securities may be resold by the
holders thereof without restriction, except to the extent that any such holder
is deemed to be an "underwriter," as defined in Section 1145(b)(1) of the
Bankruptcy Code with respect to the Plan Securities.
(b) Reorganized PHI, the New Money Investors and certain
other holders of Plan Securities, if any, who may be deemed to be "underwriters"
as defined in Section 1145(b)(1) of the Bankruptcy Code with respect to the Plan
Securities shall enter into a Registration Rights Agreement, substantially in
the form filed as Exhibit "12" to this Plan at or prior to the Confirmation
Hearing. The Registration Rights Agreement requires Reorganized PHI to use its
reasonable best efforts to file within 45 days after the Effective Date, or such
longer time as may be required to prepare the necessary financial statements, at
its expense, a "shelf" registration statement (the "Shelf Registration
Statement"), and to have the Shelf Registration Statement declared effective as
soon as practicable after such filing and to keep the Shelf Registration
Statement continuously effective until the second anniversary date of the
effective date thereof. No securities other than the New Common Stock, the New
Secured PIK Notes and the New Warrants, in each instance held by the New Money
Investors or an Entity deemed to be an "underwriter" under Section 1145(b)(1) of
the Bankruptcy Code, shall be included in the Shelf Registration Statement.
Reorganized PHI shall also, if necessary, supplement or make amendments to the
Shelf Registration Statement to the extent necessary to keep the Shelf
Registration Statement effective as aforesaid.
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ARTICLE VII
ACCEPTANCE OR REJECTION OF THE PLAN
7.1 CLASSES ENTITLED TO VOTE. Only Holders of an Allowed
Claim in Class 5 or Class 6 under the Plan shall be entitled to vote separately
to accept or reject the Plan. Each Holder of a Claim or Interest in a Class of
Claims or Interests which is unimpaired under the Plan, including Class 1, Class
2, Class 3, Class 4, Class 7, Class 10 and Class 11 shall be presumed to have
accepted the Plan pursuant to Section 1126(f) of the Bankruptcy Code. Classes 8
and 9 shall be presumed to have rejected the Plan pursuant to Section 1126(g) of
the Bankruptcy Code.
7.2 CLASS ACCEPTANCE REQUIREMENT. An impaired Class of Claims
shall have accepted the Plan if (i) the Holders (other than any Holder
designated under Section 1126(e) of the Bankruptcy Code) of at least two-thirds
in dollar amount of the Allowed Claims actually voting in such Class have voted
to accept the Plan and (ii) the Holders (other than any Holder designated under
Section 1126(e) of the Bankruptcy Code) of more than one-half in number of the
Allowed Claims actually voting in such Class have voted to accept the Plan.
7.3 CONFIRMATION NOTWITHSTANDING REJECTION OF PLAN BY AN IMPAIRED
CLASS. If any impaired Class or Classes of Claims or Interests shall not accept
the Plan, the Debtors request that the Bankruptcy Court confirm the Plan in
accordance with Section 1129(b) of the Bankruptcy Code. In addition, the Debtors
reserve the right to modify the Plan pursuant to the provisions of Section 14.13
of the Plan to provide treatment sufficient to assure that the Plan does not
discriminate unfairly, and is fair and equitable, with respect to the Class or
Classes not accepting the Plan and, in particular, the treatment necessary to
meet the minimum requirements of Sections 1129(a) and (b) of the Bankruptcy Code
with respect to the rejecting Classes and any other Classes affected by such
modifications; PROVIDED, HOWEVER, that the Debtors shall not modify the Plan to
(i) reduce the distributions to be made to any of Classes 1, 2, 3, 4, 5, 6, 7,
10 or 11; or (ii) increase the distributions to be made to any Class, without
first having obtained the consent of the Creditors' Committee.
ARTICLE VIII
PROCEDURE FOR RESOLVING DISPUTED CLAIMS
8.1 UNIMPAIRED CLAIMS GENERALLY. The amount of any Allowed
Unimpaired Claim including the rights, if any, of the Holder of any such Claim
that has properly Filed a proof of Claim on or prior to the Bar Date, or any
other date determined by the Bankruptcy Court with respect to such Claim, to
payment in respect thereof shall (a) be determined, (i) in the event that no
objection to, or request for estimation with respect to, such Claim is Filed in
accordance with Section 8.3 hereof, by any court of competent jurisdiction other
than the Bankruptcy Court in the manner in which the amount of such Claim and
the rights of the Holder of such Claim would have been resolved and adjudicated
if these Chapter 11 Cases had not been commenced or (ii) in the event that an
objection to, or request for estimation with respect to, such Claim is Filed in
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accordance with Section 8.3 hereof, by the Bankruptcy Court, (b) except as
otherwise provided in Section 8.1(a)(ii) hereof, survive the Effective Date and
consummation of the Plan as if the Chapter 11 Cases had not been commenced, and
(c) not be discharged pursuant to Section 1141 of the Bankruptcy Code. In order
to carry out the foregoing provisions of the Plan, the Debtors, Reorganized PHI
and the Holders of Unimpaired Claims that have properly Filed a proof of Claim
on or prior to the Bar Date, shall have, among other rights and obligations, the
following rights and obligations:
8.1.1 DEBTOR ACTIONS; RESERVATION OF RIGHTS. Except to the extent
that an objection to, or a request for estimation with respect to an Unimpaired
Claim has been filed in accordance with Section 8.3 hereof, the Holder of such
Claim shall be entitled, after the Effective Date, to commence any action or
proceeding against Reorganized PHI, or to continue any action or proceeding
against any of the Debtors, to determine the amount of its Claim in any court of
competent jurisdiction.
8.1.2 CREDITOR ACTIONS. The Debtors or Reorganized PHI, as the case
may be, may at any time before or after the Confirmation Date and before or
after the Effective Date, dispute, defend against or otherwise oppose, in
accordance with bankruptcy or nonbankruptcy law, any such Unimpaired Claim
(other than any such Claim to the extent allowed by Final Order of the
Bankruptcy Court or the Confirmation Order) without taking any formal action
either in or out of court (except as otherwise required by bankruptcy or
nonbankruptcy law). Reorganized PHI shall retain, in addition to all claims,
rights and causes of action retained by Reorganized PHI pursuant to Section 14.5
of the Plan, all defenses, at law or in equity, to any and all Unimpaired Claims
(other than any such Claim to the extent allowed by Final Order of the
Bankruptcy Court or the Confirmation Order).
8.2 REJECTION CLAIMS. Any Rejection Claim not barred pursuant to
the provisions of Section 9.2 of the Plan shall be an Allowed Claim in the
amount set forth in the Filed proof of Claim evidencing such Claim unless an
objection is Filed to such Claim not later than sixty (60) days after the
Effective Date or such later time ordered by the Bankruptcy Court without need
for notice and hearing. Upon the Filing of any such objection, the amount of the
Allowed Rejection Claim, if any, shall be determined by the Bankruptcy Court
unless it shall have sooner become an Allowed Claim.
8.3 DISPUTED CLAIMS. The amount of any Claim which is a Disputed
Claim and the rights of the Holder of such Claim, if any, to payment in respect
thereof shall be determined by the Bankruptcy Court, unless it shall have sooner
become an Allowed Claim. Unless otherwise ordered by the Bankruptcy Court, all
objections to Claims (other than as provided in Section 4.1 hereof) and
Interests shall be Filed and served upon the Holder of such Claim or Interest no
later than sixty (60) days after the Effective Date; PROVIDED, HOWEVER, that,
unless otherwise ordered by the Bankruptcy Court, any of the Debtors, or
Reorganized PHI shall be entitled to File an objection to any Claim Filed after
the Bar Date, including, without limitation, any Claim Filed by a governmental
unit pursuant to Section 502(b)(9) of the Bankruptcy Code, on or prior to the
later of (i) sixty (60) days after the Effective Date and (ii) sixty (60) days
after the service of such Claim on any of the Debtors or Reorganized PHI.
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8.4 AUTHORITY TO OPPOSE CLAIMS. On and after the Effective Date,
except as the Bankruptcy Court may otherwise order, Reorganized PHI shall have
the exclusive right to make, prosecute and settle any objections to Claims or
Interests.
8.5 TREATMENT OF DISPUTED CLAIMS AND DISPUTED INTERESTS.
Notwithstanding any other provisions of the Plan, no payments or distributions
shall be made on account of a Disputed Claim until such Claim or Interest
becomes an Allowed Claim or an Allowed Interest, as the case may be.
ARTICLE IX
EXECUTORY CONTRACTS
9.1 GENERAL TREATMENT. If the Effective Date occurs, all executory
contracts and unexpired leases of the Debtors designated for assumption under
the Plan, or at or prior to the Confirmation Hearing, shall be assumed by
Reorganized PHI or the applicable other Reorganized Debtor as of the
Confirmation Date. All other executory contracts or unexpired leases shall be
deemed rejected as of the Confirmation Date.
9.2 BAR TO REJECTION DAMAGES. If the rejection of an executory
contract or unexpired lease by the Debtors results in damages to the other party
or parties to such contract or lease, a Claim for such damages, if not
previously evidenced by a Filed proof of Claim or barred by a Final Order, shall
be forever barred and shall not be enforceable against the Debtors, Reorganized
PHI, the other Reorganized Debtors or their properties or agents, successors, or
assigns, unless a proof of Claim relating thereto is Filed with the Bankruptcy
Court within thirty (30) days after the later of (i) the entry of a Final Order
authorizing such rejection and (ii) the Effective Date, or within such shorter
period as may be ordered by the Bankruptcy Court.
9.3 CURE OF DEFAULTS FOR EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
Each executory contract and unexpired lease to be assumed pursuant to the Plan
shall be reinstated and rendered unimpaired in accordance with Sections 1124(2)
and 365(b)(1) of the Bankruptcy Code, or in accordance with the applicable
Landlord Settlement Agreement or any other agreement that is approved by the
Bankruptcy Court. In connection therewith, the Debtors shall cure or provide
adequate assurance that they will cure any monetary default (other than of the
kind specified in Section 365(b)(2) of the Bankruptcy Code), by payment of the
default amount in Cash on the Effective Date (or on such other terms as the
parties to such executory contract or unexpired lease may otherwise agree),
compensate, or provide adequate assurance that the Debtors will promptly
compensate parties other than the Debtors to such contract or lease for any
actual pecuniary loss to such parties resulting from such default, and provide
adequate assurance of future performance under such contract or lease. In the
event of a dispute regarding: (i) the amount of any cure payments, (ii) the
ability of Reorganized PHI, the other Reorganized Debtors or any of their
assignees to provide "adequate assurance of future performance" (within the
meaning of Section 365 of the Bankruptcy Code) under the contract or lease to be
assumed, or (iii) any other matter pertaining to assumption, the cure payments
or performance required by
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Section 365(b)(1) of the Bankruptcy Code shall be made following the entry of a
Final Order resolving the dispute and approving the assumption.
ARTICLE X
CONDITIONS TO CONFIRMATION AND THE
OCCURRENCE OF THE EFFECTIVE DATE
10.1 CONDITIONS TO CONFIRMATION. Confirmation of this Plan is
conditioned upon the occurrence of the following, or waiver of the following,
conditions jointly by the Debtors and the Creditors' Committee:
(a) PHI shall have Filed with the Bankruptcy Court a
fully-executed agreement with the New Money Investors for the acquisition of New
Class B Common Stock on terms consistent with this Plan;
(b) PHI shall have Filed with the Bankruptcy Court a
fully-executed agreement for the acquisition by (one or more third parties) of
the New Senior Secured Notes for up to $25 million on terms consistent with this
Plan or evidence of other financing as necessary to implement the Plan on terms
acceptable to the Debtors and the Creditors= Committee, or shall have obtained
the necessary consents to issue the New Senior Secured Notes to the Holders of
Class 5 Claims;
(c) The Plan shall have been accepted by not less than
two-thirds in amount and a majority in number of the holders of the Claims in
Class 5 (Old Senior Subordinated Notes) entitled to vote and that do vote on the
Plan;
(d) A Confirmation Order in form and substance acceptable
to the Debtors and the Creditors' Committee shall have been Filed with and
signed by the Bankruptcy Court; and
(e) No material alterations to the Plan as Filed shall be
required by the Bankruptcy Court, unless consented to by the Debtors.
10.2 CONDITIONS TO THE OCCURRENCE OF THE EFFECTIVE DATE. This Plan
shall not be consummated and the Effective Date shall not occur unless and until
each of the following conditions have been satisfied or, if waivable, waived
jointly by the Debtors and the Creditors' Committee:
(a) All fees payable pursuant to Section 1930 of Title 28
of the United States Code, as determined by the Bankruptcy Court at the
Confirmation Hearing, shall have been paid;
(b) The provisions of the Plan and all exhibits thereto
shall be reasonably satisfactory to the Debtors and the Creditors' Committee;
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(c) The Confirmation Order shall have become a Final
Order; and
(d) All actions and documents necessary to implement the
provisions of this Plan shall have been effected, executed or duly provided for
in a manner reasonably satisfactory to the Debtors and the Creditors' Committee.
ARTICLE XI
EFFECTS OF CONFIRMATION AND EFFECTIVENESS OF PLAN
11.1 DISCHARGE OF CLAIMS. Except as otherwise provided herein or in
the Confirmation Order, on the Effective Date: (i) the rights afforded in the
Plan and the payments and distributions to be made hereunder shall discharge all
existing debts and Claims of any kind, nature, or description whatsoever against
the Debtors, any of their assets or properties or any property dealt with under
the Plan to the extent permitted by Section 1141 of the Bankruptcy Code; (ii)
all existing Claims against the Debtors shall be and shall be deemed to be
discharged; (iii) all obligations of the Debtors, directly or as guarantors,
under the SunTrust Agreements and the Old Senior Subordinated Notes Indenture,
shall be deemed released, discharged and satisfied; and (iv) all Holders of
Claims and Interests shall be precluded from asserting against the Debtors, any
of their assets or properties, or any property dealt with under the Plan, any
other or further Claim based upon any act or omission, transaction, or other
activity of any kind or nature that occurred prior to the Confirmation Date,
whether or not such Holder Filed a proof of Claim.
11.2 DISCHARGE OF DEBTORS. Except as otherwise provided herein, any
consideration distributed to Creditors under the Plan shall be in exchange for
and in complete satisfaction, discharge, and release of all Claims of any nature
whatsoever against the Debtors or any of their assets or properties; and, except
as otherwise provided herein, upon the Effective Date, the Debtors shall be
deemed discharged and released to the extent permitted by Section 1141 of the
Bankruptcy Code from any and all Claims, including but not limited to demands
and liabilities that arose before the Confirmation Date, and all debts of the
kinds specified in Sections 502(g), 502(h) or 502(i) of the Bankruptcy Code,
whether or not (i) a proof of Claim based upon such debt is Filed or deemed
Filed under Section 501 of the Bankruptcy Code; or (ii) the Holder of a Claim
based upon such debt has accepted the Plan. Except as provided herein and
therein, the Confirmation Order shall be a judicial determination of discharge
of all liabilities of the Debtors. As provided in Section 524 of the Bankruptcy
Code, such discharge shall void any judgment against the Debtors at any time
obtained to the extent it relates to a Claim discharged, and operates as an
injunction against the commencement or continued prosecution of any action
against the Debtors, Reorganized PHI, the other Reorganized Debtors, or any of
their respective properties, to the extent it relates to a Claim discharged.
11.3 SURVIVAL OF INDEMNIFICATION CLAIMS AND OBLIGATIONS.
Notwithstanding any other provision of this Plan, all obligations of the Debtors
or any Foreign Subsidiary or Domestic Subsidiary to indemnify or hold harmless
current or former officers or directors of any of the Debtors, or the Old
Indenture Trustee, and all Claims of such officers, directors or the Old
Indenture Trustee, under the by-laws of such Debtor, the Old Senior Subordinated
Notes
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Indenture or other applicable law, corporate documents or agreements shall
expressly survive Confirmation of the Plan and be binding on and enforceable
against Reorganized PHI irrespective of whether indemnification is owed in
connection with an event occurring before, on or after the Petition Date.
11.4 TERMINATION OF CLAIMS OF CONTRACTUAL SUBORDINATION AGAINST
HOLDERS OF OLD SENIOR SUBORDINATED NOTES CLAIMS. Provided that (i) the
Bankruptcy Court shall have entered the Confirmation Order and (ii) the
Effective Date shall have occurred, all rights, actions or causes of action
between or among Holders of "senior indebtedness" (as defined in the Old Senior
Subordinated Notes Indenture) and Holders of Old Senior Subordinated Notes
Claims based upon any claimed right to contractual subordination shall be
satisfied, terminated, void and of no further force or effect as of the
Effective Date so that, notwithstanding any such rights, actions or causes of
action, each Holder of Old Senior Subordinated Notes Claims shall have the
rights and benefits of the distributions provided in this Plan.
ARTICLE XII
RELEASES AND INJUNCTIONS
12.1 RELEASES. On the Effective Date, Reorganized PHI and the other
Reorganized Debtors shall be deemed to release unconditionally, and hereby are
deemed to release unconditionally on such date (i) each present or former
officer, director, shareholder, employee, consultant, attorney, accountant and
other representatives of the Debtors, the Domestic Subsidiaries and the Foreign
Subsidiaries, PROVIDED, HOWEVER, that in no event shall the Reorganized Debtors
be deemed to have released any Releasee that asserts a Disputed Claim against
the Debtors or the Reorganized Debtors from any claim, counter claim, defense or
offset that may be asserted in connection with such claim; (ii) the Creditors'
Committee and, solely in their capacity as members or representatives of the
Creditors' Committee each consultant, attorney, accountant or other
representative or member (and each of such member's respective officers,
directors, shareholders, employees, consultants, attorneys, accountants and
other representatives) of the Creditors' Committee, and (iii) the Holders of Old
Senior Subordinated Notes Claims that are or were at any time members of the
Unofficial Noteholders' Committee and, solely in their capacity as
representatives of such Holders, each of such Holder's respective officers,
directors, shareholders, employees, consultants, attorneys, accountants and
other representatives as well as attorneys and financial advisors to the
Unofficial Noteholders' Committee, and their officers, directors, shareholders
and employees (the Entities specified in clauses (i), (ii) and (iii) are
referred to collectively as the "Releasees"), from any and all claims,
obligations, suits, judgments, damages, rights, causes of action and liabilities
whatsoever, whether known or unknown, foreseen or unforeseen, existing or
hereafter arising, in law, equity or otherwise, based in whole or in part upon
any act or omission, transaction, event or other occurrence taking place on or
prior to the Effective Date in any way relating to the Chapter 11 Cases or the
Plan, except that no Releasees shall be released from acts or omissions which
are the result of gross negligence or willful misconduct.
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On the Effective Date, each Holder of a Claim shall be deemed
to have released unconditionally, and hereby is deemed to release
unconditionally on such date, the Releasees, from any and all rights, claims,
causes of action, obligations, suits, judgments, damages and liabilities
whatsoever which any such Holder may be entitled to assert, whether known or
unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity
or otherwise, based in whole or in part upon any act or omission, transaction,
event or other occurrence taking place on or before the Effective Date in any
way relating to Reorganized PHI, the other Reorganized Debtors, the Chapter 11
Cases or the Plan, except that no Releasees shall be released from acts or
omissions which are the result of gross negligence or willful misconduct.
If and to the extent that the Bankruptcy Court concludes that
the Plan cannot be confirmed with any portion of the foregoing releases, then
the Debtors reserve the right to amend the Plan so as to give effect as much as
possible to the foregoing releases, or to delete them.
12.2 NO LIABILITY FOR SOLICITATION OR PARTICIPATION. As specified
in Section 1125(e) of the Bankruptcy Code, Entities that solicit acceptances or
rejections of the Plan and/or that participate in the offer, issuance, sale or
purchase of securities offered or sold under the Plan, in good faith and in
compliance with the applicable provisions of the Bankruptcy Code, are not
liable, on account of such solicitation or participation, for violation of any
applicable law, rule or regulation governing the solicitation of acceptances or
rejections of the Plan or the offer, issuance, sale or purchase of securities in
connection therewith.
12.3 LIMITATION OF LIABILITY. Neither the Debtors, Reorganized PHI,
the other Reorganized Debtors, nor any of their respective employees, officers,
directors, agents, or representatives, nor any Professionals employed by any of
them, nor the Creditors' Committee or any of its members, agents,
representatives, or professional advisors, shall have or incur any liability to
any Entity for any act taken or omission made in good faith in connection with
or related to formulating, implementing, confirming or consummating the Plan, or
any contract, instrument, release, or other agreement or document created in
connection with the Plan.
12.4 GENERAL INJUNCTION. Except as provided herein or in the
Confirmation Order, from and after the Effective Date, all Entities who received
or are Holders of Plan Securities and all Holders of Claims against the Estates
are permanently restrained and enjoined after the Confirmation Date (i) from
commencing, continuing, or taking any act, to enforce against any of the Debtors
or any Foreign Subsidiary or Domestic Subsidiary or any officer, director or
employee of any of the Debtors any right, claim or cause of action arising under
or related to any Old Security or any claim from enforcing, attaching,
collecting or recovering by any manner or means, any judgment, award, decree or
order against any Debtor or any Foreign Subsidiary or Domestic Subsidiary or any
right, claim or cause of action arising under or related to any Old Security or
any claim, (ii) from creating, perfecting or enforcing any encumbrance of any
kind against any Debtor or any Foreign Subsidiary or Domestic Subsidiary or any
right, claim or cause of action arising under or related to any Old Security or
any claim, (iii) from asserting any setoff, right of subrogation,
indemnification, contribution or recoupment of any kind against any obligation
due any Debtor or any Foreign Subsidiary or Domestic Subsidiary, or any right,
claim or cause of action arising under or related to any Old Security or any
claim, and (iv) from performing any act, in any manner, in any place whatsoever,
that does not conform to or comply
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with the provisions of the Plan and orders of the Bankruptcy Court; PROVIDED,
HOWEVER, that each Holder of a Claim may, to the extent permitted by and in
accordance with the provisions of the Plan, commence or continue any action or
proceeding to determine the amount of its Claim in the Bankruptcy Court or any
other court of competent jurisdiction, and all Holders of Claims shall be
entitled to enforce their rights under the Plan and the Plan Documents.
12.5 SECTION 346 INJUNCTION. In accordance with Section 346 of the
Bankruptcy Code, for purposes of any state or local law imposing a tax, income
will not be realized by the Estates, the Debtors or Reorganized PHI by reason of
the forgiveness or discharge of indebtedness resulting from the Chapter 11
Cases. As a result each state or local taxing authority is permanently enjoined
and restrained, after the Confirmation Date, from commencing, continuing or
taking any act to impose, collect or recover in any manner any tax against any
Debtor, Reorganized PHI or the other Reorganized Debtor, arising by reason of
the forgiveness or discharge of indebtedness of any such Entity under the Plan.
ARTICLE XIII
RETENTION OF JURISDICTION
13.1 SCOPE OF JURISDICTION. Pursuant to Sections 1334 and 157 of
Title 28 of the United States Code, notwithstanding occurrence of the Effective
Date or substantial consummation of the Plan, the Bankruptcy Court shall retain
and have jurisdiction from and after the Confirmation Date of all matters
arising in, arising under, and related to the Chapter 11 Cases and the Plan
pursuant to, and for the purposes of, Sections 105(a) and 1142 of the Bankruptcy
Code and for, among other things, the following purposes:
13.1.1 To hear and determine any and all adversary
proceedings, applications or contested matters pending on the Effective Date or
brought after the Effective Date including, but not limited to, Avoidance
Actions, if any;
13.1.2 To hear and determine any and all applications for
substantial contribution and for compensation and reimbursement of expenses
Filed in accordance with the Plan;
13.1.3 To hear and determine Rejection Claims, disputes
arising from the assumption and assignment of executory contracts and unexpired
leases, and Disputed Claims which are Impaired Claims or which are held by
Holders of Unimpaired Claims;
13.1.4 To hear and determine, pursuant to the provisions of
Section 505 of the Bankruptcy Code, all issues related to the liability of a
Debtor for any tax incurred prior to the Effective Date;
13.1.5 To enforce the provisions of the Plan and to
determine any and all disputes under the Plan;
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13.1.6 To enter and implement such orders as may be
appropriate in the event Confirmation is for any reason stayed, reversed,
revoked, modified or vacated;
13.1.7 To modify any provision of the Plan to the extent
permitted by the Bankruptcy Code and to correct any defect, cure any omission or
reconcile any inconsistency in the Plan or the Confirmation Order as may be
necessary to carry out the purposes and intent of the Plan;
13.1.8 To enter such orders as may be necessary or
appropriate in furtherance of consummation and implementation of the Plan;
13.1.9 To determine the allowance of Claims and Interests as
provided in the Plan; and
13.1.10 To enter an order closing the Chapter 11 Cases.
13.2 FAILURE OF THE BANKRUPTCY COURT TO EXERCISE JURISDICTION. If
the Bankruptcy Court abstains from exercising, or declines to exercise,
jurisdiction or is otherwise without jurisdiction over any matter arising in,
arising under, or related to the Chapter 11 Cases, this Article XIII shall have
no effect upon and shall not control, prohibit, or limit the exercise of
jurisdiction by any other court having jurisdiction with respect to such matter.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 COMPLIANCE WITH TAX REQUIREMENTS. In connection with the Plan,
the Debtors, Reorganized PHI, the other Reorganized Debtor, the Collateral
Agent, and the Old Indenture Trustee shall comply with all applicable
withholding and reporting requirements imposed by federal, state, local and
foreign taxing authorities, and all distributions hereunder shall be subject to
such withholding and reporting requirements. Creditors may be required to
provide certain tax information as a condition to receipt of distributions
pursuant to the Plan. Notwithstanding any other provision of the Plan, each
Entity receiving a distribution pursuant to the Plan will have sole and
exclusive responsibility for the satisfaction and payment of any tax obligations
imposed by any governmental unit, including income, withholding and other tax
obligations, on account of such distribution.
14.2 DISCHARGE OF OLD INDENTURE TRUSTEE. Subsequent to the
performance of the Old Indenture Trustee, or its agents, of their duties and
obligations under the provisions of the Plan and the Confirmation Order, if any,
and under the terms of the Old Senior Subordinated Notes Indenture, such Old
Indenture Trustee and its agents shall be relieved, discharged and released from
all obligations, claims, rights, demands and causes of action associated with or
arising from such Old Senior Subordinated Notes Indenture. The Confirmation
Order shall enjoin from and after the Effective Date the prosecution, whether
directly, derivatively or otherwise, of any
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claim, debt, right, cause of action or liability released or to be released
pursuant to this Section 14.2.
14.3 POST-EFFECTIVE DATE FEES AND EXPENSES OF PROFESSIONALS.
Reorganized PHI shall, in the ordinary course of business and without the
necessity for any approval by the Bankruptcy Court (except as may be required by
Section 1129(a)(4) of the Bankruptcy Code), pay the reasonable fees and
reasonable expenses of the Professionals related to implementation and
consummation of the Plan that are incurred after the Effective Date; PROVIDED,
HOWEVER, that no such fees and expenses shall be paid except upon receipt by
Reorganized PHI of a detailed written invoice from the Professional seeking
compensation and expense reimbursement and PROVIDED, FURTHER, HOWEVER, that
Reorganized PHI may, within ten (10) business days after receipt of an invoice
for fees and expenses, object to some or all of any such invoice, and if the
dispute cannot be resolved with the Professional seeking compensation, then
either party may request that the Bankruptcy Court determine the reasonableness
of such fees and expenses.
14.4 VESTING OF PROPERTY OF THE DEBTORS. Except as otherwise
provided in the Plan (including any Plan Document) or any other indentures,
instruments or agreements to be executed and delivered pursuant to the Plan or
the Confirmation Order, upon the Effective Date, all property of the
Consolidated Estates, wherever situated, shall vest in Reorganized PHI or the
other Reorganized Debtors, as applicable, and shall be retained by Reorganized
PHI or the other Reorganized Debtors, as applicable, or distributed to Creditors
or Interest Holders as provided in the Plan. On the Effective Date, all property
of the Consolidated Estates, whether retained by Reorganized PHI or the other
Reorganized Debtors, as applicable, or distributed to Creditors or Interest
Holders, shall be free and clear of all Claims, Liens, Encumbrances and
Interests, except the Claims, Liens, Encumbrances and Interests of Creditors and
Holders of Interests expressly provided for in the Plan (including in any Plan
Document).
14.5 CAUSES OF ACTION. Except as otherwise provided in the Plan, or
in any contract, instrument, release, or other agreement entered into in
connection with the Plan, in accordance with Section 1123(b) of the Bankruptcy
Code, Reorganized PHI shall retain and may enforce any claims, rights and causes
of action that any of the Consolidated Debtors or the Consolidated Estates may
hold against any entity including, without limitation, any Avoidance Actions or
any claims, rights or causes of action arising under any similar provisions of
state law, or any other statute or legal theory. Reorganized PHI or any
successor may pursue those rights of action, as appropriate, in accordance with
what is in the best interests of Reorganized PHI or any successor holding such
rights of action.
14.6 ASSUMPTION OF LIABILITIES. The liability for and obligation to
make the distributions required under the Plan shall be assumed by Reorganized
PHI, which shall have the liability for, and obligation to make, all
distributions of Cash, Plan Securities or other instruments to be issued by the
Debtors or Reorganized PHI.
14.7 OTHER DOCUMENTS AND ACTIONS. Without a further order of the
Bankruptcy Court, the Debtors and Reorganized PHI may execute such documents and
take such other action as is necessary to effectuate the transactions provided
for in the Plan. Each of the President, any Vice President, the Chief Financial
Officer, the Secretary, the Treasurer or other duly authorized
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representative of each of the Debtors and of Reorganized PHI, is authorized to
execute, deliver, file, or record such contracts, instruments, releases,
indentures and other agreements or documents and take such actions as may be
necessary or appropriate to effectuate and further evidence the terms and
conditions of the Plan and any notes or securities issued pursuant to the Plan.
14.8 SECTION 1146 EXEMPTION. Pursuant to Section 1146(c) of the
Bankruptcy Code, (i) the issuance, transfer or exchange of any security under
the Plan or the making or delivery of any instrument of transfer pursuant to, in
implementation of, or as contemplated by the Plan, including any merger
agreements or agreements of consolidation, deeds, bills of sale or assignments
executed in connection with any of the transactions contemplated under the Plan
or the revesting, transfer or sale of any real or personal property of the
Debtors pursuant to, in implementation of, or as contemplated by the Plan, (ii)
the making, delivery, creation, assignment, amendment or recording of any note
or other obligation for the payment of money or any mortgage, deed of trust or
other security interest under, in furtherance of, or in connection with the
Plan, the issuance, renewal, modification or securing of indebtedness by such
means, and (iii) the making, delivery or recording of any deed or other
instrument of transfer under, in furtherance of, or in connection with, the
Plan, including, without limitation, the Confirmation Order, shall not be
subject to any document recording tax, stamp tax, conveyance fee or other
similar tax, mortgage tax, real estate transfer tax, mortgage recording tax or
other similar tax or governmental assessment. Consistent with the foregoing,
each recorder of deeds or similar official for any county, city or governmental
unit in which any instrument hereunder is to be recorded shall, pursuant to the
Confirmation Order, be ordered and directed to accept such instrument, without
requiring the payment of any documentary stamp tax, deed stamps, stamp tax,
transfer tax, intangible tax or similar tax.
14.9 BINDING EFFECT.
(a) From and after the Confirmation Date, the Plan shall
be binding upon and inure to the benefit of the Reorganized Debtors, Holders of
Claims, Holders of Interests, and their respective successors and assigns.
(b) If the Plan is not confirmed, the Plan shall be
deemed null and void and notwithstanding anything herein or in the Disclosure
Statement to the contrary nothing contained herein or in the Disclosure
Statement shall be deemed (i) to constitute a waiver or release of any Claims by
the Debtors or any other Entity, (ii) to prejudice in any manner the rights of
the Debtors or any other Entity, (iii) to constitute any admission by any of the
Debtors, or any other Entity, or (iv) to constitute any admission or concession
regarding any Claim or Interest.
14.10 GOVERNING LAW. Unless an applicable rule of law or
procedure is supplied by federal law (including the Bankruptcy Code and the
Bankruptcy Rules) or the Delaware Corporation Law, the internal laws of the
State of Delaware (without reference to conflict of laws principles) shall
govern the construction and implementation of the Plan and any agreements,
documents, and instruments executed in connection with the Plan or the Chapter
11 Cases, except as may otherwise be provided in such agreements, documents, and
instruments.
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14.11 FILING OF ADDITIONAL DOCUMENTS. On or before the conclusion of
the Confirmation Hearing, the Debtors shall File such agreements and other
documents as may be necessary or appropriate to effectuate and further evidence
the terms and conditions of the Plan.
14.12 DISSOLUTION OF CREDITORS' COMMITTEE. On the Effective Date,
the Creditors' Committee shall dissolve and the members of the Creditors'
Committee shall be released and discharged from all further rights and duties
arising from or related to the Chapter 11 Cases. The Professionals retained by
the Creditors' Committee and the members thereof shall not be entitled to
compensation or reimbursement of expenses for any services rendered after the
Effective Date, except as specifically provided in the Plan, and for services
rendered and expenses incurred in connection with any applications for allowance
of compensation and reimbursement of expenses pending on the Effective Date or
Filed after the Effective Date pursuant to the Plan.
14.13 AMENDMENTS AND MODIFICATIONS.
(a) The Debtors may, with the consent of the Creditors'
Committee and in accordance with Section 1127(a) of the Bankruptcy Code and
Bankruptcy Rule 3019, after hearing on notice to such Entities as are entitled
to such notice pursuant to Bankruptcy Rule 3019, amend or modify the Plan prior
to the entry of the Confirmation Order. No amendment or modification of Section
12.1 of the Plan shall require any resolicitation of acceptances.
(b) After the entry of the Confirmation Order, PHI may,
with the consent of the Creditors' Committee and in accordance with Section
1127(b) of the Bankruptcy Code, amend or modify this Plan, or remedy any defect
or omission or reconcile any inconsistency in the Plan in such manner as may be
necessary to carry out the purpose and intent of the Plan, and after the
Effective Date the parties to any Plan Document may amend or modify any such
Plan Document pursuant to the terms thereof without notice to any Entity not
entitled to receive notice under such Plan Document and without an order from
the Bankruptcy Court.
14.14 REVOCATION. The Debtors reserve the right to revoke and
withdraw the Plan prior to Confirmation. If the Debtors revoke or withdraw the
Plan pursuant to this Section 14.14, then the Plan shall be deemed null and void
and, in such event, the provisions of Section 14.9(b) shall apply.
14.15 SEVERABILITY. Should any provision in the Plan be determined
to be unenforceable, with the consent of the Debtors or Reorganized PHI, as
applicable, such provisions shall be deemed to be severed, and such
determination shall in no way limit or affect the enforceability and operative
effect of any other provisions of the Plan.
14.16 NOTICES. Any pleading, notice or other document required by
the Plan or the Confirmation Order to be served or delivered to the Debtors,
Reorganized PHI or the Creditors' Committee will be sent by overnight delivery
service, courier service or facsimile transmission to:
38
<PAGE>
(a) Planet Hollywood International, Inc.
8669 Commodity Circle
Orlando, FL 32819
Attn: General Counsel
with copies to:
Lewis Kruger
Robin Keller
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
(212) 806-5400 (phone)
(212) 806-6006 (fax)
(COUNSEL TO THE DEBTORS)
b) Myron Trepper
Steven Wilamowsky
Willkie Farr & Gallagher
153 East 53rd Street
New York, NY 10022
(212) 728-8000
(212) 728-8111
(COUNSEL TO THE OFFICIAL UNSECURED CREDITORS' COMMITTEE)
14.17 DE MINIMIS DISTRIBUTIONS. Notwithstanding any provision to the
contrary contained herein, no distribution of less than twenty-five dollars
($25) in Cash or less than 100 shares of New Common Stock or 10 New Warrants or
New Options shall be made to any Holder of an Allowed Claim or an Allowed
Interest. Such undistributed amount will be retained by Reorganized PHI, and in
the case of undistributed New Common Stock, held as treasury shares.
14.18 PLAN AND PLAN DOCUMENTS CONTROL. In the event and to the
extent that any provision of the Disclosure Statement is inconsistent with any
provision of the Plan or any Plan Document, the applicable provision of the Plan
or the applicable Plan Document shall control and take precedence. In the event
and to the extent that any provision of the Plan is inconsistent with any
provision of any Plan Document, the applicable provision of the applicable Plan
Document shall control and take precedence.
39
<PAGE>
Dated: Wilmington, Delaware
November 8, 1999
Respectfully submitted,
PLANET HOLLYWOOD INTERNATIONAL, INC. COOL PLANET, INC.
INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
COOL PLANET II, INC. PLANET HOLLYWOOD (ASPEN), INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (ATLANTIC PLANET HOLLYWOOD (CHICAGO), INC.
CITY), INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (HONOLULU), INC. PLANET HOLLYWOOD (LP), INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
40
<PAGE>
PLANET HOLLYWOOD (NEW YORK CITY), INC. PLANET HOLLYWOOD (NEW YORK) LTD.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (ORLANDO), INC. PLANET HOLLYWOOD (PHOENIX), INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (REGION I), INC. PLANET HOLLYWOOD (REGION II), INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (REGION III), INC. PLANET HOLLYWOOD (REGION IV), INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (REGION V), INC. PLANET HOLLYWOOD (REGION VI), INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
41
<PAGE>
PLANET HOLLYWOOD (REGION VII), INC. PLANET HOLLYWOOD (TEXAS), LTD.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (WAREHOUSE), INC. SOUND REPUBLIC, INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
SOUND REPUBLIC I, INC. ALL STAR CAFE INTERNATIONAL, INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
ALL STAR CAFE (NEW YORK), INC. EBCO MANAGEMENT, INC.
By: ________________________________ By: __________________________________
Name: Name:
Title: Title:
42
<PAGE>
ANNEX A
SUMMARY TERMS OF NEW SENIOR SECURED NOTES
Issuer: Reorganized Planet Hollywood International, Inc. ("PHI")
Guarantors: All Operating Subsidiaries of PHI (together with PHI, the
"Company")
Principal Amount: Up to $25 million
Maturity: Second Anniversary of the Effective Date [subject to the
approval of the Senior Secured Notes purchaser].
Interest: Payable semi-annually in arrears in cash at a rate of 8%
per annum.
Security: The New Senior Secured Notes shall be secured by liens on
substantially all of the Reorganized Company's assets
except that their liens on inventory, receivables,
Memorabilia and other collateral reasonably determined by
PHI to be necessary in accordance with prudent business
practices to secure the Working Capital Facility, shall
be junior to the liens of the Working Capital Facility.
The Company will negotiate in good faith with the
Committee regarding terms for the release by the Working
Capital Facility lender of Memorabilia and other
collateral securing the Working Capital Facility based on
liquidity levels of the Company to be determined,
provided that after giving effect to such releases, the
Company maintains adequate liquidity and working capital.
Covenants: Normal and customary for secured indebtedness of this
nature to be determined to the reasonable satisfaction of
the Creditors' Committee.
Asset Sales: Any net proceeds from the sale of any collateral must be
used to repay the Senior Secured Notes, subject to the
terms of the Working Capital Facility.
Commitment Fee: To Be Determined
Equity: To Be Determined
<PAGE>
ANNEX B
SUMMARY TERMS OF NEW SECURED PIK NOTES
Issuer: Reorganized Planet Hollywood International, Inc. ("PHI")
Guarantors: All Operating Subsidiaries of PHI (together with PHI, the
"Company")
Principal Amount: $65.7 million (estimated)
Maturity: Fifth Anniversary of the Effective Date
Interest: Payable semi-annually in cash, at 10% per annum, or at
the sole election of the issuer, payable in kind in
additional New Secured PIK Notes at 12.75% per annum;
PROVIDED, HOWEVER, that commencing two and one-half years
after the Effective Date, interest on the New Secured PIK
Notes shall be payable only in cash at 10% per annum; AND
FURTHER PROVIDED, HOWEVER, that after one year from the
date of issuance, interest on the New Secured PIK Notes
shall be paid in cash at 10% per annum if the ratio of
the Reorganized Company's consolidated EBITDA to Interest
Expense is greater than 1.75 for the last twelve month
period.
Security: The New Secured PIK Notes shall be secured by liens on
substantially all of the Reorganized Company's assets
junior solely to the New Senior Secured Notes and the
Working Capital Facility.
Optional Redemption: New Secured PIK Notes may be redeemed, in whole or in
part, at any time, at the option of the Issuer, at par
plus accrued and unpaid interest to the date of
redemption.
Mandatory
Redemption: At an annual measuring point to be agreed upon by PHI and
the Creditors' Committee: (a) if the ratio of the
Company's consolidated EBITDA to Interest Expense is
greater than 2.0 for the last twelve month period; and
(b) the sum of the Company's cash plus availability under
its post-Effective Date Working Capital Facility exceeds
$25 million, then 50% of such excess shall be used to
redeem the New Secured PIK Notes.
Covenants: Normal and customary for secured indebtedness of this
nature, to be determined to the reasonable satisfaction
of the Creditors' Committee.
2
<PAGE>
ANNEX C
SUMMARY TERMS OF NEW WARRANTS
Issuer: Reorganized Planet Hollywood International, Inc. ("PHI")
Strike Price: $65.50 per share
Term: Expire three years after the Effective Date
3
<PAGE>
EXHIBIT 1
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF AMENDED AND RESTATED PHI CERTIFICATE OF INCORPORATION
[TO BE INCLUDED]
<PAGE>
EXHIBIT 2
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF AMENDED AND RESTATED PHI BY-LAWS
[TO BE INCLUDED]
<PAGE>
EXHIBIT 3
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF NEW SENIOR SECURED NOTES INDENTURE
[TO BE INCLUDED]
<PAGE>
EXHIBIT 4
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF NEW SENIOR SECURED NOTES SECURITY
AND PLEDGE AGREEMENT
[TO BE INCLUDED]
<PAGE>
EXHIBIT 5
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF NEW WORKING CAPITAL FACILITY
[TO BE INCLUDED]
<PAGE>
EXHIBIT 6
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF WORKING CAPITAL FACILITY SECURITY AND PLEDGE AGREEMENT
[TO BE INCLUDED]
<PAGE>
EXHIBIT 7
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF NEW SECURED PIK NOTES INDENTURE
[TO BE INCLUDED]
<PAGE>
EXHIBIT 8
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF NEW SECURED PIK NOTES SECURITY AND PLEDGE AGREEMENT
[TO BE INCLUDED]
<PAGE>
EXHIBIT 9
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT
[TO BE INCLUDED]
<PAGE>
EXHIBIT 10
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF NEW WARRANT AGREEMENT
[TO BE INCLUDED]
<PAGE>
EXHIBIT 11
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF NEW WARRANTS
[TO BE INCLUDED]
<PAGE>
EXHIBIT 12
TO
JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF REGISTRATION RIGHTS AGREEMENT
[TO BE INCLUDED]
EXHIBIT 99.2
- --------------------------------------------------------------------------------
THIS DISCLOSURE STATEMENT HAS BEEN FILED WITH BUT NOT YET APPROVED BY THE
BANKRUPTCY COURT
- --------------------------------------------------------------------------------
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: ) Chapter 11
) Case No. 99-3612(JJF)
PLANET HOLLYWOOD ) (Jointly Administered)
INTERNATIONAL, INC., ET AL., )
)
DEBTORS. )
)
)
DISCLOSURE STATEMENT PURSUANT TO SECTION 1125
OF THE BANKRUPTCY CODE FOR THE
JOINT PLAN OF REORGANIZATION DATED NOVEMBER 8, 1999
OF PLANET HOLLYWOOD INTERNATIONAL, INC.
AND CERTAIN OF ITS SUBSIDIARIES
Respectfully Submitted,
STROOCK & STROOCK & LAVAN LLP
Lewis Kruger
Robin E. Keller
180 Maiden Lane
New York, New York 10038
(212) 806-5400
YOUNG CONAWAY STARGATT & TAYLOR, LLP
James L. Patton, Jr. (No. 2002)
Pauline K. Morgan (No. 3650)
Rodney Square North, 11th Floor
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6600
ATTORNEYS FOR THE DEBTORS AND
DEBTORS-IN-POSSESSION
DISCLOSURE STATEMENT, DATED NOVEMBER 8, 1999
<PAGE>
SOLICITATION OF VOTES
WITH RESPECT TO THE
JOINT PLAN OF REORGANIZATION OF
PLANET HOLLYWOOD INTERNATIONAL, INC. AND
CERTAIN OF ITS SUBSIDIARIES
THE DEBTORS BELIEVE THAT THE JOINT PLAN OF REORGANIZATION ATTACHED
HERETO AS EXHIBIT "1" IS IN THE BEST INTERESTS OF HOLDERS OF CLAIMS AND
INTERESTS. THE HOLDERS OF CLAIMS IN IMPAIRED CLASSES SOLICITED HEREBY ARE URGED
TO VOTE IN FAVOR OF THE PLAN.
THE HOLDERS OF CLAIMS SOLICITED HEREBY ARE ENCOURAGED TO READ AND
CONSIDER CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT, INCLUDING THE PLAN AND THE
MATTERS DESCRIBED IN THIS DISCLOSURE STATEMENT UNDER "RISK FACTORS," PRIOR TO
VOTING.
VOTING INSTRUCTIONS ARE CONTAINED ON YOUR BALLOT AND ARE SET FORTH IN
SECTION VII.G. OF THIS DISCLOSURE STATEMENT. TO BE COUNTED, YOUR BALLOT MUST BE
DULY COMPLETED, EXECUTED AND ACTUALLY RECEIVED BY THE BALLOT AGENT NO LATER THAN
4:00 P.M., EASTERN TIME, ON ________, 1999 (THE "VOTING DEADLINE").
THE VOTES OF HOLDERS OF OLD COMMON STOCK INTERESTS AND HOLDERS OF
OPTIONS OR RIGHTS TO ACQUIRE OLD COMMON STOCK ARE NOT BEING SOLICITED SINCE THEY
ARE DEEMED TO HAVE REJECTED THE PLAN. ACCORDINGLY THIS DISCLOSURE STATEMENT HAS
NOT BEEN SENT TO THE HOLDERS OF SUCH CLAIMS OR INTERESTS. [AS DESCRIBED HEREIN,
THE DEBTORS HAVE OBTAINED A COURT ORDER PERMITTING THE DEBTORS TO TRANSMIT
INSTEAD TO SUCH HOLDERS A SUMMARY OF THE PRINCIPAL TERMS OF THE PLAN.]
THE CONFIRMATION HEARING HAS BEEN SCHEDULED TO COMMENCE ON __________
AT __ _.M. BEFORE THE HONORABLE JOSEPH J. FARNAN, JR. AT THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF DELAWARE (THE "COURT"), J. CALEB BOGGS
FEDERAL BUILDING, 844 KING STREET, WILMINGTON, DELAWARE 19801. THE CONFIRMATION
HEARING MAY BE ADJOURNED WITHOUT FURTHER NOTICE TO PARTIES-IN-INTEREST EXCEPT
FOR AN ANNOUNCEMENT OF THE ADJOURNED DATE MADE AT THE HEARING.
OBJECTIONS TO CONFIRMATION OF THE PLAN MUST BE IN WRITING, STATE THE
NATURE AND AMOUNT OF CLAIMS OR INTERESTS HELD OR ASSERTED BY THE OBJECTOR
AGAINST THE DEBTORS' ESTATES OR PROPERTY, THE BASIS FOR THE OBJECTION, AND THE
SPECIFIC GROUNDS
2
<PAGE>
THEREFOR, AND MUST BE FILED WITH THE COURT AND SERVED UPON THE DEBTORS, THEIR
COUNSEL, AND COUNSEL FOR THE CREDITORS' COMMITTEE IN THE MANNER SET FORTH IN THE
CONFIRMATION NOTICE SO AS TO BE RECEIVED NO LATER THAN ________ _.M. EASTERN
TIME ON ___________ ___.
NO PERSON IS AUTHORIZED BY THE DEBTORS TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE PLAN OR THE SOLICITATION OF
ACCEPTANCES FOR THE PLAN OTHER THAN AS CONTAINED IN THIS DISCLOSURE STATEMENT
AND THE EXHIBITS ATTACHED HERETO, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DEBTORS.
THE DELIVERY OF THIS DISCLOSURE STATEMENT WILL NOT UNDER ANY CIRCUMSTANCES IMPLY
THAT ALL OF THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
INFORMATION CONTAINED HEREIN REGARDING THE DEBTORS, THEIR BUSINESSES,
ASSETS AND LIABILITIES HAVE BEEN PROVIDED BY THE DEBTORS. WHERE STATED, THE
DEBTORS HAVE RELIED ON INFORMATION PROVIDED BY THEIR ADVISORS.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED HEREIN.
EACH CAPITALIZED TERM USED IN THIS DISCLOSURE STATEMENT AND NOT
OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANING ASCRIBED TO SUCH TERM IN THE
PLAN.
The summaries of the Plan and the related documents contained in this
Disclosure Statement are qualified in their entirety by reference to the Plan
and such documents. If there is any inconsistency between this Disclosure
Statement and the Plan and any operative documents Filed and to be Filed, the
terms of the Plan and the operative documents Filed and to be Filed shall
control. The information contained in this Disclosure Statement is included
herein solely for the purposes of soliciting acceptances of the Plan. If the
Plan is not confirmed, the Plan and this Disclosure Statement shall be deemed
null and void, and notwithstanding anything in the Plan or in this Disclosure
Statement to the contrary, nothing contained in the Plan or in this Disclosure
Statement shall be deemed (a) to constitute a waiver or release of any Claims by
the Debtors or any other Entity, (b) to prejudice in any manner the rights of
the Debtors or any other Entity, (c) to constitute any admission by the Debtors
or any other Entity, or (d) to constitute any admission or concession regarding
any Claim or Interest.
3
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
I. INTRODUCTION.......................................................................1
II. SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN........................2
III. THE COMPANY........................................................................9
A. OVERVIEW OF BUSINESS.........................................................9
B. OPERATIONAL RESTRUCTURING PLAN..............................................11
C. CURRENT DEBT STRUCTURE AND MATERIAL AGREEMENTS..............................12
1. Bank Debt...............................................................12
2. Public Notes............................................................12
3. Major Suppliers and Vendors.............................................13
4. Leases and Contracts (franchises, joint venture, other).................13
5. Stockholder Interests...................................................14
D. Pre-Petition Special Transactions...........................................14
E. Legal Proceedings...........................................................14
IV. AVAILABLE FINANCIAL INFORMATION...................................................16
V. PRE-FILING PLAN DISCUSSIONS AND AGREEMENT WITH INFORMAL
NOTEHOLDERS' COMMITTEE; LANDLORD SETTLEMENTS......................................17
A. Noteholders' Agreement......................................................17
B. Landlord Settlements........................................................17
VI. POST-PETITION OPERATIONS..........................................................18
A. Commencement of the Reorganization Cases and First Day Orders..............18
B. Store Closings.............................................................19
C. Formation of Creditors' Committee..........................................19
D. Foreign Operations and Proceedings.........................................20
E. Asset Transfers............................................................20
F. Emergence Business Plan....................................................20
G. Current and Post-Confirmation Management...................................28
1. Post-Restructuring Executive Officers and Directors.....................28
a. Current Executive Officers and Directors............................29
b. Initial Directors of Reorganized PHI................................29
c. Director Compensation...............................................30
d. Executive Compensation..............................................31
2. Emplt Contracts.........................................................32
VII. CONFIRMATION STANDARDS; LIQUIDATION ANALYSIS AND VOTING
PROCEDURES........................................................................33
A. Brief Explanation of Chapter 11............................................33
B. Acceptance of the Plan.....................................................34
ii
<PAGE>
C. Classification of Claims and Interests.....................................35
D. Optional Plan Provisions/Substantive Consolidation.........................36
E. Confirmation of the Plan...................................................37
F. Liquidation Analysis.......................................................41
G. Voting Procedures..........................................................46
VIII.DESCRIPTION OF THE PLAN...........................................................49
A. Classification and Treatment of Claims and Interests Under the Plan........50
1. Unclassified Claims - Administrative and Priority Tax Claims...........50
2. Classified Claims and Interests........................................51
Class 1. PRIORITY CLAIMS...............................................51
Class 2. THE SUNTRUST CLAIMS..........................................52
Class 3. MISCELLANEOUS SECURED CLAIMS.................................52
Class 4. CONVENIENCE CLAIMS...........................................52
Class 5. OLD SENIOR SUBORDINATED NOTES CLAIMS.........................53
Class 6. GENERAL UNSECURED CLAIMS.....................................53
Class 7. LANDLORD SETTLEMENT AGREEMENT CLAIMS.........................54
Class 8. OLD COMMON STOCK.............................................54
Class 9. CLAIMS FOR ISSUANCE OF OLD COMMON STOCK......................55
Class 10. INTERCOMPANY CLAIMS..........................................55
Class 11. INTERCOMPANY INTERESTS.......................................55
B. Means for Execution of the Plan........................................56
C. Distributions..........................................................60
D. Acceptance or Rejection of the Plan/Confirmation Notwithstanding
Rejection by an Impaired Class ........................................65
E. Procedure for Resolving Disputed Claims................................66
F. Executory Contracts....................................................67
G. Conditions to Confirmation and the Occurrence of the Effective Date....68
H. Effects of Confirmation and Effectiveness of Plan......................69
I. Releases and Injunctions...............................................70
J. Retention Of Jurisdiction..............................................72
K. Miscellaneous Provisions...............................................73
IX. CERTAIN RISK FACTORS..............................................................76
Highly Leveraged Position.......................................................76
Risks Relating to the Exit Facilities...........................................76
Risks Relating to the Projections...............................................77
Competition in the Restaurant Industry..........................................77
Capital Requirements............................................................78
Dividend Restrictions...........................................................78
Certain Risks of Non-Confirmation...............................................78
Noncomparability of Historical Financial Information............................79
Seasonality.....................................................................79
Government Regulations..........................................................80
Lack of Alternatives to Confirmation and Consummation of the Plan...............80
ii
<PAGE>
Securities Law Considerations...................................................81
Market for Plan Securities......................................................82
X. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN...............................83
A. Certain Federal Income Tax Consequences to Holders of Allowed Claims........84
1. Tax Securities..........................................................84
2. Exchange of Old Senior Subordinated Notes for Cash, New Secured PIK
Notes, New Common Stock and Possibly New Senior Secured Notes...........84
3. Exchange of Allowed General Unsecured Claims for Cash and New
Secured PIK Notes.......................................................87
4. Cancellation of Old Common Stock or Exchange of Old Common Stock for
New Warrants............................................................88
5. Distributions in Discharge of Accrued Interest..........................88
6. Original Issue Discount and Premium.....................................89
7. Market Discount.........................................................92
8. Disposition of Plan Securities..........................................92
9. Backup Withholding......................................................94
10. Adjustments.............................................................94
B. Certain Federal Income Tax Consequences to the Debtors......................95
1. Cancellation of Indebtedness............................................95
2. Limitation of Net Operating Loss Carryforwards Following an Ownership
Change..................................................................96
3. Alternative Minimum Tax.................................................98
XI. RECOMMENDATION AND CONCLUSION.....................................................99
</TABLE>
EXHIBITS
1. Joint Plan of Reorganization
2. List of Licensed or Franchised Units
3. List of Locations Closed Since January 1, 1999
4. List of Locations subject to Landlord Settlement Agreements
5. Historical Financial Information
iii
<PAGE>
I. INTRODUCTION
This Disclosure Statement is submitted by Planet Hollywood
International, Inc. ("PHI") (hereafter referred to as "PHI" or the "Company")
and certain subsidiaries of PHI that are debtors in the above-captioned Chapter
11 Cases (the "Filed Subsidiaries" and collectively with PHI, the "Debtors"). A
copy of the Debtors' Joint Plan of Reorganization, together with certain
exhibits and annexes thereto (collectively, the "Plan") is attached hereto as
Exhibit 1. The Debtors, as proponents of the Plan, seek confirmation of the Plan
under chapter 11 ("Chapter 11") of title 11 of the United States Code (the
"Bankruptcy Code") and submit this Disclosure Statement in connection with their
solicitation of votes on the Plan. The exhibits to the Plan will be Filed prior
to the hearing on confirmation of the Plan and are an integral part of the Plan.
The overall purpose of the restructuring embodied in the Plan (the
"Restructuring") is to achieve changes in PHI's capital structure and raise
working capital, which PHI believes will enhance its long-term viability. PHI
believes that the Plan presents the best long-term solution to its present
difficulties by providing liquidity for the turnaround of its operations through
access to new debt and equity financing, and the means to maximize the
recoveries available for creditors.
In the past year, the Debtors have closed, sold or franchised more than
30 domestic and foreign locations, thereby reducing overhead costs and stemming
losses from unprofitable operations. They have exited their SOUND REPUBLIC
concept and are in the process of significantly reducing their OFFICIAL ALL STAR
CAFE operations, in order to focus on their core concept and operations: PLANET
HOLLYWOOD theme venues. The Debtors expect the consummation of the Plan, in
conjunction with the continued implementation of their new business strategy (as
described below under "The Company," the "Operational Restructuring Plan,"
Section III.B.), to result in (i) a reduction of more than $180 million in
principal and accrued interest on their pre-Petition Date debt; and (ii)
adequate cash flow to fund such obligations and the Company's operations.
The Operational Restructuring Plan is the premise for a capital
restructuring that has been agreed to between PHI and Holders of over $200
million of the $250 million principal amount of PHI's 12% Senior Subordinated
Notes due 2005 ("Old Senior Subordinated Notes") and forms the basis for the
Plan.
The Plan of Reorganization contemplates a $30 million infusion of new
equity by a group of investors organized by Robert Earl, PHI's current Chairman
and Chief Executive Officer (the "New Money Investors"), in exchange for
approximately 70% of the equity of Reorganized PHI; a debt facility in the form
of New Senior Secured Notes totaling up to $25 million, secured by substantially
all of the Reorganized Debtors' assets (which is expected to be a temporary
"bridge" facility pending the sale of the 1567 Broadway interests described
below); and up to a $15 million post-Effective Date secured Working Capital
Facility. The New Money Investors will primarily consist of Mr. Earl, or a Trust
created in favor of his family or his children, His Highness Prince Alwaleed Bin
Talal Bin Abdulaziz Al Saud; Mr. Ong Beng Seng; HPL (a Singapore company); and
one or more additional investors.
The Plan provides for the payment of $47.5 million of Cash, the
issuance of $60 million of New Secured PIK Notes and equity totaling
approximately 26.5% of Reorganized PHI to the holders of Old Senior Subordinated
Notes. An alternative distribution, if requested by the Debtors and agreed to in
writing by Holders of at least $167 million principal amount of Old Senior
Subordinated Notes, would substitute up to $25 million of New Senior Secured
Notes and other consideration for a portion of the Cash distribution.
<PAGE>
THE TERMS OF THE PLAN HAVE BEEN AGREED UPON BY THE DEBTORS, AND HOLDERS
OF APPROXIMATELY $200 MILLION OF PHI'S OLD SENIOR SUBORDINATED NOTES
REPRESENTING IN EXCESS OF TWO THIRDS IN DOLLAR AMOUNT OF THE OLD SENIOR
SUBORDINATED NOTES. THE PLAN IS SUPPORTED BY THE OFFICIAL COMMITTEE OF UNSECURED
CREDITORS, COMPOSED OF FOUR REPRESENTATIVES OF THE OLD SENIOR SUBORDINATED NOTES
AND THREE REPRESENTATIVES OF GENERAL UNSECURED CREDITORS.
Other General Unsecured Creditors, which are classified in Class 6
under the Plan, consisting principally of Holders of Trade Claims, Rejection
Claims, Litigation Claims, and non-priority Claims of past and present
employees, and excluding those unsecured Creditors which fall within the limits
of the administrative convenience class established in Class 4 under the Plan,
will receive a combination of Cash and New Secured PIK Notes. The distribution
to Holders of Class 6 Claims will have an aggregate value approximately equal to
that received by Holders of Class 5 Claims, with the Cash portion of the
distribution being the same for each such Class.
Existing common stock interests, and options to acquire such interests
and all other equity securities will be cancelled. If the Plan is accepted by
all impaired creditor classes, Holders of Old Common Stock will receive in the
aggregate 200,000 New Warrants, each for the purchase of one share of New Class
A Common Stock.
In addition, PHI has entered into separate Landlord Settlement
Agreements with approximately twenty-six of the landlords holding interests in
leases relating to Company-owned restaurant and merchandise store locations,
pursuant to which PHI and the applicable landlord have agreed either (i) to
restructure the lease terms under which PHI will continue to conduct its
operations, (ii) to franchise or license the existing restaurant or store to the
landlord or a third party, or (iii) on the amount of the landlord's Rejection
Claim resulting from PHI's cessation of operations and rejection of the lease.
The Plan ratifies the Landlord Settlement Agreements, to the extent not
previously approved by Order of the Bankruptcy Court.
Under the Plan, Reorganized PHI will implement the New Stock Option
Plan for the benefit of Post-Effective Date management and Celebrities who
sponsor PHI post-Effective Date. Under the New Stock Option Plan, Celebrities
and management will receive approximately 1.0 million options, each for the
purchase of one share of New Class A Common Stock.
II. SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS
UNDER THE PLAN
The following is a summary of certain provisions of the Plan describing
the treatment of Claims and Interests. This overview is qualified in its
entirety by reference to the provisions of the Plan itself. If there is an
inconsistency between the Plan and its exhibits and annexes whether Filed or to
be Filed, on the one hand, and this Disclosure Statement, on the other hand, the
terms of the Plan and the exhibits and annexes thereto shall control. For a more
extensive discussion of the Plan and the terms of securities to be received by
Creditors, see the discussion under the caption "Description of the Plan" in
Section VIII of this Disclosure Statement. The Plan contemplates the substantive
consolidation of the Debtors for purposes of the Plan only. Following the
Effective Date, all Filed Subsidiaries with ongoing operations shall retain
their corporate identity as it existed prior to the Petition Date.
2
<PAGE>
Pursuant to the Plan, Holders of Claims and Interests will receive, in
full satisfaction of such Claims and Interests, the consideration set forth
below.
CLAIMS AND INTERESTS: TREATMENT:
--------------------- ----------
UNCLASSIFIED CLAIMS:
- --------------------
ADMINISTRATIVE CLAIMS Holders of Administrative Claims
- --------------------- incurred in the ordinary course of
business shall be assumed and paid by
the Reorganized Debtors, as applicable,
pursuant to the terms and conditions of
the transaction giving rise to the
Claim.
Holders of Administrative Reclamation
Claims shall be paid in full in Cash
their Allowed Administrative Reclamation
Claim on the Effective Date. The
Administrative Reclamation Claims are
estimated to be approximately $600,000.
Administrative cure costs with respect
to executory contracts and leases are
estimated to be approximately $1.45
million.
Administrative Claims by Professionals
for fees and expenses or by any other
Entity for substantial contribution that
are authorized to be paid by Court Order
shall be paid in Cash in the amounts
Allowed by Final Order of the Bankruptcy
Court within ten (10) days after the
date of such Order. Professional Claims
are estimated to be approximately $3.4
million.
PRIORITY TAX CLAIMS Allowed Priority Tax Claims shall
- ------------------- receive at the applicable Debtor's or
Reorganized PHI's option, (i) payment in
full in Cash on the Effective Date, or
(ii) deferred payments of Cash in the
full amount of the Allowed Claim payable
in equal annual principal installments
beginning on the first anniversary of
the Effective Date and ending on the
earlier of the sixth anniversary of the
Effective Date or the sixth anniversary
of the date of assessment of such Claim,
together with interest (payable
quarterly in arrears) on the unpaid
balance of
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<PAGE>
such Allowed Claim at the Treasury Rate
or such other rate as may be set by the
Bankruptcy Court at the Confirmation
Hearing. Priority Tax Claims are
estimated to be approximately $500,000.
CLASSIFIED CLAIMS AND INTERESTS
- -------------------------------
CLASS 1: PRIORITY CLAIMS: Allowed Each Holder of an Allowed Priority Claim
Claims entitled to priority under will receive the Allowed amount of such
the Bankruptcy Code, other than an Claim in Cash on the later of (i) the
Administrative Claim, or a Priority Effective Date, (ii) the date such Claim
Tax Claim. The estimated amount of becomes an Allowed Claim and (iii) the
Priority Claims is $0. date for payment provided by any
CLASS 1 IS UNIMPAIRED. agreements or understandings between the
parties.
CLASS 2: SUNTRUST CLAIMS: Each Holder of Allowed SunTrust Claims
Commitments under the SunTrust will receive in Cash all amounts due, if
Agreements in the aggregate amount any, under the SunTrust Agreements plus
of $2.5 million. accrued, unpaid interest thereon at the
CLASS 2 IS UNIMPAIRED. non-default contractual rate set forth
in the SunTrust Agreements through the
Effective Date, plus Allowed fees, costs
and expenses. On or prior to the
Effective Date, the Letter of Credit
Facility will be terminated.
CLASS 3: MISCELLANEOUS SECURED Each Holder of an Allowed Miscellaneous
CLAIMS: Allowed Claims that are Secured Claim will at the applicable
Secured Claims. The estimated Debtor's option, either be treated in
amount of these Claims is accordance with Section 1124(2) of the
approximately $2.0 million and they Bankruptcy Code,(1) or in accordance
consist primarily of security with the terms of any agreements between
interests and liens of merchandise the Secured Creditor and the Debtors as
vendors. approved by the Bankruptcy Court.
CLASS 3 IS UNIMPAIRED.
CLASS 4: CONVENIENCE CLAIMS: Each Holder of an Allowed Convenience
(1) Section 1124(2) of the Bankruptcy Code provides that a cliam is unimpaired
if the plan:
(A) cures any such default that occured before or after the commencement of
the case under this title, other than a default of a kind specified in
section 365(b)(2) of this title;
(B) reinstates the maturity of such claim or interest as such maturity
existed before such default;
(C) compensates the holder of such claim or interest for any damages
incurred as a result of any reasonable reliance by such holder on such
contractual provision or such applicable law; and
(D) does not otherwise alter the legal, equitable, or contractual rights to
which such claim or interest entitles the holder of such claim or interest.
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<PAGE>
Convenience Claims consist of Claim will receive Cash on the Effective
Allowed Unsecured Claims of $2,000 Date equal to the lesser of $2,000 or
or less, or that are reduced to the Allowed amount of the Claim.
$2,000 or less. There are estimated
to be approximately 1,900 Holders
of Claims that are or will be
reduced to $2,000 or less. The
payment to Class 4 is expected to
total approximately $1.5 million.
CLASS 4 IS UNIMPAIRED.
CLASS 5: OLD SENIOR SUBORDINATED On the Effective Date, each Holder
NOTES CLAIMS: Claims under the Old of an Old Senior Subordinated Notes
Senior Subordinated Notes ($250 Claim shall have an Allowed Claim
million aggregate principal amount equal to the face amount of its Old
plus unpaid accrued interest and Senior Subordinated Notes plus
interest on defaulted payments of accrued interest through the
interest at the default rate Petition Date, and shall receive on
provided in the applicable the Effective Date, in full
documents of approximately $32 satisfaction of its Allowed Class 5
million, calculated through October Claim, its Pro Rata share of (i)
11, 1999). The distribution to $47.5 million in Cash, (ii) $60
Class 5 is estimated to be million of New Secured PIK Notes,
approximately 40% of the Old Senior and (iii) 2.65 million shares of
Subordinated Notes Claims. SEE New Class A Common Stock. PHI may,
Section VII.F. "Hypothetical with the written consent of Holders
Liquidation Analysis; Estimated of at least $167 million in
Recovery For Unsecured Claims Under principal amount of Old Senior
the Plan." Subordinated Notes, in lieu of the
CLASS 5 IS IMPAIRED. payment of up to $25 million in
Cash, deliver to the Holders of
Class 5 Claims up to $25 million of
New Senior Secured Notes plus a fee
totaling $625,000 Cash and 350,000
shares of New Class A Common Stock
(the "Class 5 Alternative
Distribution"). In the event that
the amount of any New Class A
Common Stock paid to a third-party
lender as partial consideration for
the purchase of the New Senior
Secured Notes is less than 350,000
shares of New Class A Common Stock,
then the Holders of Class 5 Claims
shall receive, on the Effective
Date, their Pro Rata share of that
undistributed New Class A Common
Stock up to a total of 350,000
shares (the "Supplemental Class 5
Distribution"), and the amount of
New Secured PIK Notes distributed
to Class 5 shall be reduced by the
Class 6 Adjustment Amount.
CLASS 6: GENERAL UNSECURED CLAIMS: Each Holder of an Allowed Class 6 Claim
Allowed General Unsecured Claims will receive, in full satisfaction of
including, without limitation, its Allowed Claim, Cash and New Secured
Trade Claims, Rejection Claims, PIK Notes having an aggregate value as a
5
<PAGE>
Litigation Claims, and non-priority percentage of its Allowed Claim equal to
Claims of present and former the aggregate value of the consideration
employees of the Debtors. Claims in to be received by each Holder of an
this Class aggregate approximately Allowed Class 5 Claim as a percentage of
$22.5 million as of the Petition its Allowed Claim. The Cash component of
Date. The distribution to Class 6 the distribution to Class 6 shall be the
is estimated to be approximately same percentage of a Class 6 Holder's
40% of the Allowed Claim of each Allowed Claim as the Cash component of
Holder of a General Unsecured the distribution to Class 5 is as a
Claim. SEE Section VII.F. percentage of the Allowed Claims of
"Hypothetical Liquidation Analysis; Holders in Class 5, counting a
Estimated Recovery For Unsecured distribution of New Senior Secured Notes
Claims Under the Plan." to Class 5 as a Cash payment. Based on
CLASS 6 IS IMPAIRED. the projected level of Class 6 Claims,
the Debtors will distribute
approximately $3.8 million in Cash and
$5.7 million of New Secured PIK Notes to
Class 6 Holders. In the event Class 5
receives the Supplemental Class 5
Distribution, then the Holders of Class
6 Claims shall receive, on the Effective
Date, their Pro Rata share of the Class
6 Adjustment Amount determined as
provided in Section 5.6 of the Plan.
CLASS 7: LANDLORD SETTLEMENT Each Holder of an Allowed Class 7 Claim
AGREEMENT CLAIMS: Allowed Claims will receive the Cash payment, Debtor
arising out of pre- and performance or other treatment provided
post-petition date and by its applicable Landlord Settlement
post-petition settlement agreements Agreement.
between any of the Debtors and
landlords. The Post-Petition Date
Cash payment is approximately
$896,000.
CLASS 7 IS UNIMPAIRED.
CLASS 8: OLD COMMON STOCK: Shares If Classes 5 and 6 accept the Plan, each
of Class A and Class B Common Holder of an Allowed Class 8 Interest
Stock, par value $.01 per share, of will receive its Pro Rata share of New
PHI (the "Old Common Stock") (an Warrants, provided that not less than
aggregate of 109,089,940 shares ten (10) New Warrants will be
issued and outstanding). distributed to any Holder. Thus, Holders
CLASS 8 IS IMPAIRED of less than 5,450 shares of Old Common
Stock will receive no consideration. If
Classes 5 or 6 reject the Plan, all
Class 8 Interests will be cancelled as
of the Effective Date, and no New
Warrants will be issued.
CLASS 9: CLAIMS FOR ISSUANCE Holders of Class 9 Interests or rights
OF OLD COMMON STOCK: Old Warrants, shall receive no consideration or
Old Celebrity Options, Old Employee property under the Plan, and their
Options and Interests and rights will be
6
<PAGE>
all other options or rights, if any, cancelled as of the Effective Date.
granted by PHI for the purchase of
Old Common Stock.
CLASS 9 IS IMPAIRED.
CLASS 10: INTERCOMPANY CLAIMS: Each Holder of an Intercompany Claim
Claims of non-Debtor Subsidiaries shall be treated in accordance with
of PHI against any of the Debtors. Section 1124(2) of the Bankruptcy Code.
CLASS 10 IS UNIMPAIRED.
CLASS 11: INTERCOMPANY INTERESTS: Holders of Interests in Class 11 will
Stock ownership Interests of PHI and retain such rights to which their
any Filed Subsidiary in any other Interests entitle them, in accordance
Subsidiary or Unconsolidated Affiliate with Section 1124(2) of the Bankruptcy
that is not a File Subsidiary. Code.
CLASS 11 IS UNIMPAIRED.
SUMMARY TERMS OF NEW SENIOR SECURED NOTES
Issuer: Reorganized Planet Hollywood International, Inc.
("PHI")
Guarantors: All Operating Subsidiaries of PHI (together with PHI,
the "Company")
Principal Amount: Up to $25 million
Maturity: Second Anniversary of the Effective Date [subject to
the approval of the Senior Secured Notes purchaser]
Interest: Payable semi-annually in arrears in cash at a rate of
8% per annum
Security: The New Senior Secured Notes shall be secured by first
liens on substantially all of the Reorganized Company's
assets, except that their liens on certain collateral
including inventory, receivables, Memorabilia and other
collateral reasonably determined by PHI to be necessary
in accordance with prudent business practices to secure
the Working Capital Facility, shall be junior to the
liens of the Working Capital Facility. The Company will
negotiate in good faith with the Committee regarding
terms for the release by the Working Capital Facility
lender of Memorabilia and other collateral securing the
Working Capital Facility based on liquidity levels of
the Company to be determined, provided that after
giving effect to such releases, the Company maintains
adequate liquidity and working capital.
Asset Sales: Any net proceeds from the sale of any collateral must
be used to repay the New Senior Secured Notes, subject
to the terms of the Working Capital Facility.
Covenants: Normal and customary for secured indebtedness of this
nature, to be determined to the reasonable satisfaction
of the Creditors' Committee.
7
<PAGE>
Commitment Fee: To Be Determined
Equity: To Be Determined
SUMMARY TERMS OF NEW SECURED PIK NOTES
Issuer: Reorganized Planet Hollywood International, Inc.
("PHI")
Guarantors: All Operating Subsidiaries of PHI (together with PHI,
the "Company")
Principal Amount: $65.7 million (estimated)
Maturity: Fifth Anniversary of the Effective Date
Interest: Payable semi-annually in cash, at 10% per annum, or at
the sole election of the issuer, payable in kind in
additional New Secured PIK Notes at 12.75% per annum;
PROVIDED, HOWEVER, that commencing two and one-half
years after the Effective Date, interest on the New
Secured PIK Notes shall be payable only in cash at 10%
per annum; AND FURTHER PROVIDED, HOWEVER, that after
one year from the date of issuance, interest on the New
Secured PIK Notes shall be paid in cash at 10% per
annum if the ratio of the Reorganized Company's
consolidated EBITDA to Interest Expense is greater than
1.75 for the last twelve month period.
Security: The New Secured PIK Notes shall be secured by liens on
substantially all of the Reorganized Company's assets
junior solely to the New Senior Secured Notes and the
Working Capital Facility.
Optional
Redemption: New Secured PIK Notes may be redeemed, in whole or in
part, at any time, at the option of the Issuer, at par
plus accrued and unpaid interest to the date of
redemption.
Mandatory
Redemption: At an annual measuring point to be agreed upon by PHI
and the Creditors' Committee: (a) if the ratio of the
Company's consolidated EBITDA to Interest Expense is
greater than 2.0 for the last twelve month period; and
(b) the sum of the Company's cash plus availability
under its post-Effective Date Working Capital Facility
exceeds $25 million, then 50% of such excess shall be
used to redeem the New Secured PIK Notes.
Covenants: Normal and customary for secured indebtedness of this
nature, to be determined to the reasonable satisfaction
of the Creditors' Committee.
SUMMARY TERMS OF NEW WARRANTS
Issuer: Reorganized Planet Hollywood International, Inc.
("PHI")
8
<PAGE>
Strike Price: $65.50 per share
Term: Expire three years after the Effective Date
III. THE COMPANY
A. OVERVIEW OF BUSINESS
PHI is a creator and world-wide developer of consumer brands that
transcend international barriers and capitalize on the universal appeal of
movies, sports and other entertainment-based themes. Since PHI commenced
operations in October, 1991, the PLANET HOLLYWOOD name and distinctive logo
design have become among the most widely-recognized trademarks in the world. To
date, the Company has promoted its brands primarily through the operation of
theme restaurants, most notably PLANET HOLLYWOOD and the OFFICIAL ALL STAR CAFE,
that provide a unique dining and entertainment experience, and through their
integrated retail stores, which offer a broad selection of merchandise
displaying the Company's logos.
Historically, an important part of the Company's strategy has been to
promote its brands through the active involvement of Celebrities and Celebrity
stockholders. Certain Celebrities have granted the Company the right to use
their name, approved likeness, approved biography and selected career
memorabilia ("Memorabilia") in connection with the promotion, advertising and
operation of the Company's units. The restaurant experience offers popular
cuisine, attentive service and an atmosphere of excitement created by combining
unique layouts and decor with custom-designed videos, audio soundtracks,
prominently displayed Celebrity memorabilia, and merchandise.
The Company has entered into various license and franchise agreements,
permitting the domestic or overseas operation of restaurant and/or merchandise
locations, and the use of the Company's brands and trademarks in specified
markets. Some franchisees have the exclusive right to open units in specified
countries. In return for the license or franchise, the Company generally
receives an initial non-refundable fee and continuing royalties based on a
percentage of the total revenues of the units. A list of current licensed or
franchised units is annexed hereto as Exhibit 2.
The Company has also entered into several strategic ventures in movie
theaters, lodging, and consumer products (the "Joint Ventures"), including
PLANET MOVIES by AMC, a joint venture with AMC Entertainment, Inc. to develop,
own and operate a multi-screen, movie theater megaplex in Columbus, Ohio; the
PLANET HOLLYWOOD HOTEL, a joint venture to construct and own a hotel in New York
City's Times Square; the development of additional COOL PLANET ice cream and
dessert venues; and the recently disposed of SOUND REPUBLIC concept, a
live-music based theme.
As of the end of 1998, PHI, through its various operating Subsidiaries,
together with its franchisees and licensees, operated 95 units, including 14
retail units only, located in 31 countries around the world, of which 60 were
Company owned. All Company-owned units were located on leased sites, with
long-term lease arrangements, substantially all of which were guaranteed by PHI.
Approximately 72% of PHI's revenues at the end of 1998 were derived from
domestic operations, approximately 24% from European operations, and
approximately 4% from operations in other areas, including Canada.
9
<PAGE>
In 1998 and continuing in 1999, PHI and its Subsidiaries (collectively,
the "PHI Group") experienced declines in revenues at their restaurants, and
decreases in promotional and specialty retail sales. As compared with the
twenty-six week period ended June 27, 1998, total revenues for the PHI Group for
the twenty-six week period ended June 27, 1999 decreased approximately $49.9
million or 25%, while total operating costs, including costs of sales and
related general and administrative expenses, decreased approximately $1.7
million or 1%. During the twenty-six week period ended June 27, 1999, the PHI
Group incurred a loss from operations of approximately $44.9 million as compared
with income of approximately $5.9 million for the 1998 fiscal year. For the
twenty-six week period ended June 27, 1999, the operations of the PHI Group
consumed approximately $27.7 million in cash. This compares with the twenty-six
week period ended June 28, 1998, during which the PHI Group consumed
approximately $20.9 million in cash.
As of December 1998, PHI Group employed approximately 8,250 people. In
fiscal 1998, the Company had revenues of approximately $387 million, down from
revenues of approximately $447 million for fiscal 1997. The PHI Group
experienced a loss on operations in 1998 of approximately $243 million,
including $139 million of recorded charges relating to the impairment of long
lived assets, restructuring, severance, and accelerated compensation costs.
These losses and charges were primarily due to:
o declines in same unit revenues;
o overall disappointing operating results;
o expenses due to the development of the SOUND REPUBLIC concept; and
o losses from major spin-off projects such as the OFFICIAL ALL STAR
CAFE and COOL PLANET locations.
PHI attributes the decrease in revenues primarily to a decline in
customer traffic resulting from increased competition in the theme dining
industry and tourism in several major markets. There has likewise been a decline
of significant promotional and specialty retail sales. The restaurant and retail
merchandising industry has been and continues to be affected by (a) intense
competition; (b) changes in consumer tastes; (c) international, national,
regional and local economic conditions; and (d) patterns in tourist travel,
among other factors.
As reported in PHI's 1998 10K, the PHI Group re-evaluated its long-term
growth strategy in 1998 and approved plans to refocus its business around its
core PLANET HOLLYWOOD operations. It also determined to reduce operating costs,
and to significantly downsize its corporate organization. Towards this end,
prior to the commencement of these Chapter 11 Cases, PHI began to take a series
of consumer-oriented initiatives aimed at rebuilding consumer excitement about
its PLANET HOLLYWOOD restaurants and branded merchandise. Prior to the Petition
Date, PHI introduced a new menu in all locations, began to refurbish the
appearance of its restaurants and launched a new seasonal line of merchandise.
Further, in the fourth quarter of 1998, PHI identified 93 employment positions
which would be eliminated. Sixty of these positions were eliminated in fiscal
1998, and the balance were eliminated in the first quarter of 1999. Certain
historical financial information concerning the Debtors is annexed to this
Disclosure Statement as Exhibit "5".
B. OPERATIONAL RESTRUCTURING PLAN
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<PAGE>
In order to address its operating losses and restore profitability, the
Company developed an operational restructuring program, portions of which it
began implementing in the beginning of 1999, which forms the economic basis for
the Plan. The key elements of that restructuring program are:
o Sell or otherwise dispose of the SOUND REPUBLIC locations and
joint venture, franchise, sell or otherwise dispose of several of
the OFFICIAL ALL STAR CAFE locations and the COOL PLANET Irvine
location;
o Identify franchise and license opportunities for selected
international Company-owned PLANET HOLLYWOOD locations;
o Raise capital through the sale of assets and location of third
party investment;
o Reduce overhead and losses through strategic store closings
domestically and overseas;
o Refocus on core PLANET HOLLYWOOD operations by introducing a new
menu, updating the look and appearance of the restaurants,
launching a new merchandise strategy aimed at providing more
fashion-oriented merchandise, and initiating new marketing and
public relations strategies aimed at delivering a fresh, exciting
and consistent message to consumers.
PHI has developed a business plan which assumes a return to
approximately 1998 levels of per store revenues at its remaining core operating
units by 2004. SEE Projected Financial Information in Section VI. F. of this
Disclosure Statement. As a result of the recapitalization under the Plan and the
proceeds of excess asset sales including the sale of the 1567 Broadway interests
described below, PHI projects having ample liquidity post-bankruptcy to fund
capital improvements, marketing and advertising needs, in addition to the debt
service requirements under the Plan. License, franchise and royalty revenues
will supplement store revenues. Proceeds from the sale of excess merchandise and
Memorabilia, though not projected in the business plan, may augment revenues as
well.
Potential areas for expansion include additional PLANET MOVIES
ventures, hotel and casino licensing, expansion of the COOL PLANET concept, new
franchise opportunities, and e-commerce development concepts. Announcement of a
successful emergence from Chapter 11, combined with ongoing and new Celebrity
support and merchandise design innovations are expected to receive media
attention and re-invigorate interest and excitement about PLANET HOLLYWOOD
entertainment and dining.
C. CURRENT DEBT STRUCTURE AND MATERIAL AGREEMENTS
1. BANK DEBT. In March 1998, concurrently with the Notes offering
described below, PHI replaced its existing $155 million multi-currency,
long-term credit facility with a consortium of financial institutions, with a
$65 million multi-currency revolving credit facility and a $35 million
LIBOR-based leveraged lease facility. Interest rates were variable, with either
prime or LIBOR indexes. SunTrust Bank, Central Florida, N.A. was the agent and
lead lender for this facility (the "SunTrust Facility"). In December, 1998, PHI
amended the existing SunTrust Facility which amendment terminated the revolving
credit portion of the Facility, retaining the leveraged lease facility (the
"Synthetic Lease") and up to $2 million coverage under an interest rate swap
arrangement, which provided hedging against interest rate movements under the
Synthetic
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<PAGE>
Lease. The Facility also provided for a fully cash-collateralized Letter of
Credit facility of up to $10 million. The SunTrust Facility matured on June 30,
1999. Principal payments were required under the Synthetic Lease in the amounts
of $10 million by December 8, 1998, $12.5 million by March 31, 1999, and the
balance by June 30, 1999. PHI was also required to commence marketing its
headquarters property in Orlando, Florida, and the New York movie themed hotel
property underlying the Synthetic Lease, and to use the proceeds to reduce
principal on the SunTrust Facility.
All outstanding indebtedness under the SunTrust Facility was
paid in full prior to the Petition Date, with the exception of an outstanding
balance under the Letter of Credit Facility pursuant to which two letters of
credit totaling in the aggregate $2.5 million remain outstanding, fully secured
by cash collateral accounts.
The obligations of PHI under the SunTrust Facility were
guaranteed by each of its material Subsidiaries, and secured by a mortgage on
the Company's Orlando, Florida headquarters property and other assets.
2. PUBLIC NOTES. In March 1998, PHI issued $250 million face amount of
12% Senior Subordinated Notes due in 2005. The Notes were issued pursuant to an
Indenture with United States Trust Company of New York as Indenture Trustee.
Interest on the Notes was payable semi-annually in arrears on April 1 and
October 1 of each year, commencing October, 1998. The documents governing the
Notes contain certain covenants which, among other things, restrict the issuance
of additional debt and preferred stock, payment of dividends, and the sale of
assets.
3. MAJOR SUPPLIERS AND VENDORS. The Company has a contract with
ProPlayer, Inc. and Salem Sportswear, Inc. for the provision of soft-line goods
(T-shirts, fleecewear and other non-leather merchandise) which is secured by a
purchase money security interest in such goods held for delivery or delivered to
the Company for sale. As of the Petition Date, ProPlayer was owed approximately
$950,000 for goods delivered to various Company locations, and held merchandise
worth approximately $1.2 million in its own warehouse pending the placement of
orders.
Alliant Food Services distributes food supplies to all
Company-owned store locations in the U.S., pursuant to a contract through the
end of 1999. As of the Petition Date, Alliant was owed approximately $2.0
million, and has asserted a reclamation Claim of approximately $450,000. Other
significant vendor agreements include exclusive supplier arrangements with
PepsiCo for non-alcoholic beverages supplied to most Company locations, and
which provide for promotional fees paid by Pepsi through rebates against
purchases. In addition, there are Company-wide agreements for cleaning services
and supplies.
4. LEASES AND CONTRACTS (FRANCHISES, JOINT VENTURE, OTHER). PHI through
its Domestic and Foreign Subsidiaries, is party to long term, non-cancelable
operating and capital leases primarily for its unit sites. Leases are generally
established using a base rental amount and/or the payment of a percentage of
sales. Certain leases provide for fixed and/or variable escalating lease
payments over the terms of the lease. PHI has guaranteed substantially all
leases of its Subsidiaries. Leased units contain furniture, fixtures and
equipment, leasehold improvements, and Memorabilia which are Company-owned,
leased or on loan from third parties. Since January, 1999 approximately 30
leased sites have been closed, franchised, licensed or sold, or become subject
to termination agreements. Approximately 25 locations are expected to continue,
and approximately
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five continue to be evaluated. There are two significant joint ventures in which
the Company has acquired either real property interests or development rights,
which are held in part through non-Debtor subsidiaries.
PLANET MOVIES
The first such venture is the PLANET MOVIES arrangement with AMC
for the development of a Columbus, Ohio theater, restaurant and retail complex.
Through its wholly-owned, non-Debtor subsidiary Planet Hollywood Theaters, Inc.,
PHI has formed a 50-50 joint venture with AMC Entertainment, Inc., one of the
nation's leading motion picture exhibitors, to develop, own and operate a
multi-screen, movie theater megaplex under the brand name PLANET MOVIES BY AMC.
The Columbus, Ohio megaplex opened in the summer of 1999, and includes PLANET
HOLLYWOOD and ALL STAR CAFE restaurants. PHI has guaranteed the joint venture
obligations of its Subsidiary.
1567 BROADWAY
The second major ongoing venture consists of PHI's 20% equity
interest, through its wholly-owned, non-Debtor subsidiary Planet Hospitality
Holdings, Inc., in a venture with several prominent real estate developers to
construct and own a 50-story hotel at the intersection of Broadway and 47th
Street in New York City's Times Square redevelopment area. In addition, PHI owns
a fee interest in a retail condominium consisting of the lower four floors of
the hotel building, which was pledged to Atlantic Financial on behalf of
SunTrust under the Synthetic Lease portion of the SunTrust Facility. The
obligation underlying the Synthetic Lease has been fully repaid, and the Debtors
are in the process of reconveying record title from Atlantic Financial. The 20%
equity interest and the Debtor's fee interest in the Times Square hotel property
are collectively referred to herein as "1567 Broadway."
PHI is presently in negotiations to sell its retail condominium
interests in 1567 Broadway to Intell 1567 Broadway, an entity formed by one of
PHI's joint venture partners, for approximately $30.0 million. PHI believes the
remainder of its 1567 Broadway interests can be sold for in excess of $15.0
million.
5. STOCKHOLDER INTERESTS. Stockholder interests arise from a 1996
public offering of PHI's Class A Old Common Stock, the sale of Class A stock to
an investor in 1997, and the issuance of PHI's restricted, non-voting, Class B
Old Common Stock to certain Celebrities. As of the Petition Date, a majority of
the outstanding shares of Old Common Stock was held by officers or directors,
franchisees and joint venture partners of PHI and the balance was held by the
public. The Company has issued Old Warrants in connection with private placement
debt offerings, and issued Stock Options to management, employees and
Celebrities.
D. PRE-PETITION DATE SPECIAL TRANSACTIONS
Prior to the Petition Date, PHI completed several asset dispositions
certain of the proceeds of which were used to satisfy the SunTrust debt as it
matured. The excess was held for working capital needs. In May of 1999, PHI
completed the sale of property including a building under construction located
on Boylston Street in Boston, Massachusetts, to a subsidiary of Atlantic
Financial, for approximately $7.0 million. In July of 1999, PHI completed the
sale/leaseback of its headquarters building in Orlando, Florida to a subsidiary
of RREEF Funds. The property was sold for approximately $16.6 million, and
leased back at an annual rental of approximately $2.7 million per year for
fifteen years. In August 1999, PHI completed the sale of its 20% interest in the
Pennsylvania Hotel in New York City and a related license agreement, to Vornado
Realty Trust
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for approximately $18 million. In July of 1999, PHI completed a sale of its
leasehold interest in 1501 Broadway, Inc. to Parkview Restaurant Group and
effectuated a discharge of its long-term lease for that property. The
improvements were sold for approximately $7.5 million including an approximate
$1.0 million equity stake in the purchaser.
The proceeds of the foregoing sales satisfied substantially all
obligations owed under the SunTrust Agreements, including the obligation
underlying the Synthetic Lease for the 1567 Broadway property.
E. LEGAL PROCEEDINGS
The Company and the Filed Subsidiaries are potential or named defendants in
several lawsuits and claims arising in the ordinary course of business. While
the outcome of such claims, lawsuits or other proceedings against the Company
cannot be predicted with certainty, management expects that such liability, to
the extent not provided for through insurance or otherwise, will not have a
material adverse effect on the financial statements of the Company.
In addition, there are several litigations which have been commenced by
or against PHI or various affiliates which are unusual in nature. While PHI does
not anticipate substantial liability against it as a result of any likely
outcome of such actions, the nature of the claims asserted are as follows:
a. BONNIE FALKENBERG, ET AL. VS. PHI AND ITS BOARD MEMBERS. This action
was commenced in the Delaware Chancery Court in August, 1999 immediately
following PHI's announcement of its settlement agreement with the Holders of its
Old Senior Subordinated Notes, and the potential elimination of Old Common Stock
interests. It purports to be a class action on behalf of shareholders (no class
has been certified, however) which seeks injunctive relief blocking the proposed
restructuring. The complaint was neither served nor prosecuted prior to the
Petition Date. The Debtors have filed a Motion to dismiss for lack of subject
matter and personal jurisdiction, insufficiency of process and failure to state
a claim.
b. EDG VS. PHI, ET AL. This action was commenced in New York State
Supreme Court in September, 1999. During the summer of 1999, PHI executed a
letter of intent with EDG regarding the potential sale of several of the ALL
STAR CAFE locations and entities. EDG failed to execute definitive agreements by
the deadline required in the letter of intent, and the agreement expired by its
own terms. Notwithstanding that expiration, caused solely by its own delay and
indecision, EDG obtained a temporary restraining order against PHI in connection
with the New York action to enjoin any other disposition of the ALL STAR CAFE
assets. PHI believes the temporary restraining order has expired without
extension, and that all claims of EDG to any interest in the ALL STAR CAFE
assets are entirely specious. EDG has asserted its belief that the temporary
restraining order is still in effect and that PHI cannot sell the assets to any
third party. PHI has removed this action to the Bankruptcy Court and opposes
EDG's position that it may not freely dispose of its ALL STAR CAFE interests.
c. PLANET HOLLYWOOD (REGION IV), INC., PLANET HOLLYWOOD, INTERNATIONAL
INC. V. HOLLYWOOD CASINO CORPORATION, HOLLYWOOD CASINO AURORA INC., EDWARD T.
PRATT, III, HOLLYWOOD CASINO TUNICA, INC. AND GREATE BAY CASINO CORP. This
action is currently pending in the United States District Court for the Northern
District of Illinois. Planet Hollywood initially filed a complaint against the
defendants alleging causes of action under the Lanham Act for false designation
of origin, trademark and trade dress infringement, dilution as well as related
state law claims, based on the fact that defendants recently developed marks and
trade dress infringe upon and dilute the
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<PAGE>
value of Planet Hollywood marks and trade dress. Planet Hollywood also seeks a
declaration from the Court that it be allowed to register and use its marks and
trade dress for casino services, and that its use of the descriptive term
"Hollywood" does not infringe upon any of defendant's rights. Defendants filed
counterclaims against Planet Hollywood for trademark infringement, false
designation of origin, unfair competition, trade dress infringement, trademark
dilution and unjust enrichment. Defendants also seek a declaratory judgment that
would enjoin Planet Hollywood from expanding into casino services under a mark
or trade name which includes the term "Hollywood". The trial on liability has
been completed and is awaiting the Judge's ruling. PHI and the defendants have
stipulated to lift the automatic stay solely to permit the Judge's ruling on
liability to be entered, and appeals, if any to be brought.
d. ALL STAR CAFE (NEW YORK), INC. V. RICHTER & RATNER CONTRACTING CORP.
All Star Cafe commenced an action against Richter & Ratner Contracting Corp., in
the Supreme Court of New York County seeking damages in excess of $2.5 million
arising out of a breach of contract in the construction of the All Star Cafe in
New York City. In response, Richter & Ratner asserted counterclaims seeking an
alleged contract balance and damages in excess of $4.0 million.
e. PHI V. AMERICA EUROPE ASIA INTERNATIONAL TRADE AND MANAGEMENT
CONSULTANTS, LTD. ("AEA"). This action is pending in the Circuit Court of the
Ninth Judicial Circuit in and for Orange County, Florida. PHI filed a Complaint
against the Defendant seeking recovery of damages related to an Asset Purchase
Agreement ("APA") between the parties whereby PHI, INTER ALIA, repurchased
franchise rights previously sold to AEA. The Company sustained damage as a
result of Defendant's failure to indemnify the Company for expenses associated
with third party litigation as required by the APA, as well as the damage to the
Company's name and reputation therefrom, and damage to the value of the
Company's rights to develop franchises in certain territories. PHI's
out-of-pocket expenses associated with this litigation exceeded $400,000. The
Defendant originally counterclaimed against the Company for a variety of
matters, including common law fraud, misrepresentation, "deceit", constructive
fraud, violations of certain securities law and breach of contract. The
Defendant's counterclaim sought damages in excess of $11 million. In October
1999, the court granted PHI's motion to strike and dismiss a variety of the
Defendant's claims, including the claims based on fraud, securities law
violations, "deceit" and other matters. In general, the surviving portion of
Defendant's counterclaim relates to PHI's alleged breach of contract under the
terms of the APA. The Defendant claims that PHI should pay Defendant certain
amounts based upon the profitability of certain of the restaurant locations
previously owned by the Defendant. The APA requires any such payments to be made
by delivery of shares of PHI's common stock. PHI has not filed an answer to the
remaining portion of Defendant's counterclaim, and the Defendant has been given
the opportunity to file an amended counterclaim.
f. BRIAN WOODS V. PHII. This action is currently pending in the Circuit
Court of the Ninth Circuit in and for Orange County, Florida. Brian Woods, the
former President of Planet Hollywood Entertainment filed a complaint against
PHII alleging breach of contract and seeking damages in excess of $2.0 million.
PHII denies the extent of Mr. Woods' claims, particularly the amount of alleged
compensation sought, and has filed offsetting counterclaims.
g. PLANET HOLLYWOOD (REGION I), INC. (MIAMI) V. NORTHPORT MARKETPLACE,
LTD., CITY NATIONAL BANK CORPORATION AND NOMURA ASSET CAPITAL CORPORATION.
Planet Hollywood (Miami) commenced an action against its Landlord, Northport
Marketplace, on or about October 6, 1999, in the Circuit Court of the Seventh
Judicial District, Broward County, Florida, seeking rescission for breach of
contract. Specifically, Planet Hollywood asserts Defendant Northport Marketplace
breached its contractual obligations in failing to complete construction of the
unit
15
<PAGE>
premises, provide a grand opening event, provide parking for Planet Hollywood
employees and guests and otherwise interfered with Planet Hollywood's possession
and quiet use and enjoyment of the unit premises. As of October 29, 1999,
Defendant Northport Marketplace has not filed its Answer to Planet Hollywood's
Motion for Declaratory and Ancillary Relief.
IV. AVAILABLE FINANCIAL INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, which
include its form 10-K for fiscal year 1998, Form 10-Q's for the first three
quarters of 1999, 8-K's filed in the first three quarters of 1999, proxy
statements and other information filed by the Company or by third parties with
respect to the Debtors are incorporated herein by reference, and can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Regional Offices of the Commission at 7 World Trade Center, Room 1300, New
York, New York 10048. Copies of such material can also be obtained by mail from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates, and are available on the Internet at
www.sec.com.
V. PRE-FILING PLAN DISCUSSIONS AND AGREEMENT WITH
INFORMAL NOTEHOLDERS' COMMITTEE; LANDLORD
SETTLEMENTS
A. NOTEHOLDERS' AGREEMENT
As a result of weaker than anticipated results, the Company did not
have sufficient cash available to make the $15.0 million scheduled interest
payments due April 1, 1999 and October 1, 1999 on the Old Senior Subordinated
Notes.
By letter agreement dated April 14, 1999 the Company retained
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") to provide financial
advice about various restructuring alternatives for the Company, and on April 8,
1999 retained Stroock & Stroock & Lavan LLP to provide legal restructuring
advice. At approximately the same time, holders of in excess of $200 million of
the Company's Old Senior Subordinated Notes formed an informal committee (the
"Unofficial Noteholders' Committee"), and retained Houlihan, Lokey, Howard &
Zukin ("Houlihan") as their financial advisor, and Willkie Farr & Gallagher
("Willkie") as legal counsel. The Company entered into fee and expense
agreements with Houlihan and Willkie dated as of April 23, 1999 and May 4, 1999,
respectively. After their retention, the financial and legal advisors to the
Unofficial Noteholders' Committee conducted business and legal due diligence,
including discussions with the Company's management concerning the business and
operations of the Company and its financial condition and prospects.
After months of discussions and negotiations with the Unofficial
Noteholders' Committee and its advisors, the parties reached an agreement in
principle providing for a proposed restructuring (the "Proposed Restructuring")
(embodied in a term sheet dated August 9, 1999), which set forth the key terms
for this reorganization, including the designation of classes under the Plan of
Reorganization and the treatment of those classes, and called for the ultimate
filing of the Chapter 11 Cases to implement such restructuring.
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<PAGE>
The parties agreed that on the Effective Date, Reorganized PHI's board
shall consist of seven members, five of whom shall be appointed by the New Money
Investors and two by the Creditors' Committee. A super-majority equal to the
greater of six members and 75% of the Board will be required for the approval of
any insider transactions and/or major transactions.
The parties further agreed that Robert Earl, the co-founder of the
PLANET HOLLYWOOD concept, shall remain as Chief Executive Officer. Selection of
a Chief Financial Operator/Chief Operating Officer prior to the Effective Date
of the Plan, is to be subject to the consent of the Unofficial Noteholders'
Committee (now the Creditors' Committee), not to be unreasonably withheld, and
thereafter to the super-majority approval of at least six members of the
Company's Board.
On August 17, 1999, PHI issued a press release announcing the agreement
in principle with the Noteholders, and the Company's intention to file for
Chapter 11 before the end of the year. On August 23, 1999 an 8-K was filed
further describing the terms of the agreement.
B. LANDLORD SETTLEMENTS
In order to address another significant area of perceived potential
exposure, the Company undertook an effort to approach landlords for facilities
with leases that the Company needed to terminate or restructure in order to
continue to operate profitably, to try to reach agreement on restructuring of
the lease and other debt terms, or for the transfer to third parties or release
of the property back to the landlord.
Immediately prior to the Petition Date, the Company entered into
agreements with certain of its landlords and other third parties regarding the
disposition of various unprofitable leasehold obligations through a pre-petition
termination agreement, franchise or license agreement or assignment. Generally,
all such leases were at or above market for their locations.
Twelve locations were disposed of through termination agreements
whereby the landlords agreed to a termination of the lease, and, if applicable,
the obligations of PHI as guarantor in exchange for a pre-petition cash payment
and, in most cases, forfeiture of the tenant's rights to certain on-site
furniture, fixtures and equipment. In all instances the cash payments made to
the landlords were significantly less than the Company's calculation of the cost
of payment of such landlord's Rejection Claim.
Five locations were disposed of by way of pre-petition franchise or
license agreements with an accompanying assignment of the lease to third parties
or a franchise or license agreement directly with the landlord. Generally, these
agreements provide for a limited license of the PLANET HOLLYWOOD or OFFICIAL ALL
STAR CAFE trademark in order to operate for a period ranging from a few weeks to
several years. In most instances, no fee or payments were due from the Company
and, in connection with the longer-termed franchises and licenses, a continuing
royalty will be payable in connection with such locations' operations. In all
instances, any payments made to the landlords were substantially less than the
Company's calculation of the cost of payment of such landlord's Rejection Claim.
A list of the locations subject to Landlord Settlement Agreements is annexed
hereto as Exhibit 4.
In addition, the Company executed a number of lease amendments that
enabled the Company to continue operations at the locations on more viable
economic terms. Those agreements required the Debtors to assume the leases
immediately or shortly after the Chapter 11 filings.
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VI. POST-PETITION OPERATIONS
A. COMMENCEMENT OF THE REORGANIZATION CASES AND FIRST DAY ORDERS
On October 12, 1999, PHI and twenty-five of its Domestic Subsidiaries
filed petitions for reorganization under Chapter 11 of the Bankruptcy Code in
the United States Bankruptcy Court for the District of Delaware. The petitions
were filed for various entities authorized to be Debtors under U.S. bankruptcy
laws, that were operating entities or held assets requiring protection from
creditors. No petitions were filed for inactive subsidiaries, or for U.S. or
foreign subsidiaries with assets located exclusively overseas, or for the
entities participating in the PLANET MOVIES and 1567 Broadway joint ventures.
With respect to the status of foreign operations, see Section VI.D. For the
status of the PLANET MOVIES and 1567 Broadway ventures, see Section III.C.4.
Since the Petition Date, the Debtors have continued in possession of
their properties as debtors-in-possession, and are authorized to operate and
manage their businesses and to enter into all transactions that they could have
entered into in the ordinary course of their businesses had there been no
Chapter 11 filings. Pursuant to various provisions of the Bankruptcy Code, the
Debtors have sought and obtained numerous orders from the Bankruptcy Court
intended to facilitate the operations of the Company. Those orders authorized
the Debtors to, among other things: (i) use cash collateral subject to Liens;
(ii) continue their cash management programs, bank accounts, and investment
practices; and (iii) pay certain prepetition Claims, including Claims of
employees for wages, salaries and employee benefits, sales and use taxes, and
special customer-related Claims in order to permit the Debtors to conduct their
ongoing business substantially as they did prior to the Petition Date.
In addition the Debtors have obtained authorization to assume their
Pre-Petition Date liability insurance contracts with Zurich Insurance, and have
been authorized to reject five leases of real property, for the following
locations: Planet Hollywood (Coconut Grove, Florida), Planet Hollywood (Ft.
Lauderdale, Florida), Planet Hollywood (Houston, Texas), All Star Cafe (Atlanta,
Georgia) and Cool Planet (Irvine, California).
The Debtors have obtained approval of the retentions of various
professionals, namely Stroock & Stroock & Lavan LLP as lead bankruptcy counsel,
Young Conaway Stargatt & Taylor LLP as local Delaware counsel, Gray Harris &
Robinson as special Florida counsel, PriceWaterhouseCoopers as independent
accountants, tax advisors, bankruptcy and reorganization consultants, and expect
shortly to retain DLJ as its financial advisors and investment bankers.
The Debtors have obtained a commitment letter, subject to definitive
documentation and Bankruptcy Court approval, from the CIT Group/Business Credit,
Inc. ("CIT") for debtor-in-possession financing. When the applicable credit
agreement and CIT's due diligence are finalized, the Debtors intend to seek
court approval of this financing. Due to its strong cash position, the obtaining
of DIP financing is not immediately urgent for the Company's survival, however,
the Debtors believe the facility will (i) result in greater supplier/vendor
comfort and credit support, (ii) free up excess cash currently collateralizing
certain Letters of Credit, (iii) be available as a backstop against unforeseen
liquidity drains or unanticipated delays in the restructuring process, and (iv)
potentially result in the availability of exit financing from CIT.
B. STORE CLOSINGS
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Immediately prior to the Petition Date, the Debtors closed 17
restaurant locations, and removed and warehoused inventory and Memorabilia
pending their utilization elsewhere in the business, return to owners, or other
disposition. The closing of restaurant locations is a significant component of
the Debtors' operational restructuring plan, since the reduction of costs and
losses related to those operations is necessary to return the Debtors'
operations to stability and profitability. A list of the locations closed from
and after January 1, 1999 is attached hereto as Exhibit 3.
C. FORMATION OF THE CREDITORS' COMMITTEE
On October 22, 1999, the United States Trustee appointed an Official
Committee of Unsecured Creditors, consisting of (i) Alliant Foodservices, Inc.;
(ii) America Europe Asia International Trade and Management Consultants, Ltd.;
(iii) Bay Harbour Management, L.C.; (iv) Rockwell Architecture, Planning and
Design, P.C.; (v) SF Investments; (vi) United States Trust Company of New York;
and (vii) Varde Partners, Inc. The Creditors' Committee has retained Willkie
Farr & Gallagher as its legal counsel and Houlihan Lokey Howard & Zukin as its
financial advisors.
D. FOREIGN OPERATIONS AND PROCEEDINGS
As of the Petition Date, the Company operated 10 Company-owned
restaurant/store units, located in London and Gatwick, England (2), Dublin,
Ireland (1), Amsterdam, Holland (1), Germany (3), and France (3). The French and
ongoing U.K. operations are owned by non-Debtor, U.S. subsidiaries, namely
Planet Hollywood Paris, Inc./ Planet Hollywood France, L.C. and Planet Hollywood
London, Inc./ Planet Hollywood Trocadero, L.C. The other European operations are
owned by companies formed under the laws of the respective countries where
operations are conducted. The Company has determined to shut down, franchise or
sell unprofitable locations. The Company expects to continue to operate two
PLANET HOLLYWOOD locations in the U.K., and has sold its interests in the London
SOUND REPUBLIC location. The Company will retain and operate all units in
France. The Company has already closed or franchised all locations in Canada,
and liquidation proceedings have been commenced in Amsterdam for the entity
operated there. The Company is currently evaluating its operations in Germany
and Ireland.
E. ASSET TRANSFERS
The Debtors intend that on or before the last day of their current
taxable year (i.e., December 26, 1999), PHI will transfer certain of its assets,
including items of Memorabilia and certain stock and partnership investments, to
one or more newly-formed, wholly-owned subsidiaries of PHI. The transfer is
expected to simplify and produce significant cost savings in the Debtors'
compliance with state tax administrative and reporting requirements. These
transfers will not adversely affect the rights of current Creditors, nor will
they impede the effectuation of the Plan, as such assets will be available to be
pledged as collateral for financing and debt securities issued before, on or
after the Effective Date.
F. EMERGENCE BUSINESS PLAN
As a condition to confirmation of a plan of reorganization, Section
1129 of the Bankruptcy Code requires, among other things, that the Bankruptcy
Court determine that confirmation is not likely to be followed by liquidation or
the need for further financial reorganization of the debtor. In connection with
the development
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of the Plan and for the purposes of determining whether the Plan satisfies this
feasibility standard, the Company has analyzed the ability of the Reorganized
Debtors to meet their future obligations under the Plan and to have sufficient
liquidity and capital resources to conduct its business.
In this regard the Company has prepared projections of the Reorganized
Debtors' operations, for a five year period commencing January 1, 2000. The
projections assume an Effective Date for the Plan of December 31, 1999. If the
actual Effective Date is different from the December 31, 1999 assumed date, the
projected results depicted may be materially different.
The following projections were not prepared with a view toward
compliance with published guidelines of the Securities Exchange Commission or
the American Institute of Certified Public Accountants regarding projections or
generally accepted accounting principles. The projections necessarily rely on
numerous assumptions, all of which were made by the Company, with respect to
industry performance, general business and economic conditions, taxes and other
matters, many of which are beyond the Company's control. Such projections and
assumptions are not necessarily indicative of current values or future
performance, which may be significantly less favorable or more favorable than as
set forth below. Although the projections represent the best estimates of the
Company, for which the Company believes it has a reasonable basis as of the date
hereof, of the results of operations and financial position of the Company
giving effect to the Restructuring, they are only estimates, and actual results
may vary considerably from projections. Consequently, the inclusion of the
projected information herein should not be regarded as a representation by the
Company, the Company's advisors or any other person that the projected results
will be achieved. The projections have not been audited, reviewed or compiled by
an independent public accountant and accordingly, no opinion, or any other form
of assurance, has been expressed with respect to the financial information
presented herein.. The projections were prepared by the Company and have not
been independently verified or audited by any other party. The Company cannot
and does not make any representation or warranty with respect to the adequacy or
accuracy of the assumptions or the projections.
The Company does not generally publish its business plans and
strategies or make external projections of its anticipated financial positions
or results of operations. Accordingly, the Company does not intend to update or
otherwise revise the financial projections to reflect circumstances existing
after the date hereof or to reflect the occurrence of unanticipated events, even
in the event that the assumptions underlying the projections are shown to be in
error, except as required by applicable law, after the hearing on the
confirmation of the Plan even if the projections become false or misleading by
reason of subsequent events. The projections should not be relied on for any
purpose following the Confirmation Date. The projections should be read together
with the available financial information described in Section IV, including the
Consolidated Financial Statements of the Company and the related notes thereto
set forth in the Company's public filings.
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<TABLE>
<CAPTION>
1. PROJECTED CONSOLIDATED STATEMENT OF OPERATIONS
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
PROJECTED CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL YEARS ENDING DECEMBER 31, 2000 THROUGH 2004
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
---------------
PROJECTED PLAN
EMERGENCE
DATE ---------------------------------------------------------
ADJUSTMENTS PROJECTED FISCAL YEARS ENDING DECEMBER 31,
----------------- ---------------- ----------------------
JAN 1, 2000 2000 2001 2002 2003 2004
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $ -- $ 193,898 $ 201,541 $ 218,400 $ 237,718 $ 258,879
Cost and Expenses
Cost of Sales 52,869 54,618 59,158 64,393 70,097
Operating Expenses -- 118,100 122,177 127,071 132,881 138,297
General and Administrative -- 19,000 19,950 20,948 21,995 23,095
Depreciation and Amortization -- 10,785 11,585 12,385 13,185 13,985
--------- --------- --------- --------- --------- ---------
Income (Loss) from Operations -- (6,855) (6,789) (1,161) 5,264 13,406
--------- --------- --------- --------- --------- ---------
Other (Income)/Expenses
(Gain)/Loss on Continuing -- 23 -- -- -- --
Operations of All Star Units
(Gain)/Loss on Sale and 17,643 106 -- -- -- --
Write-off of Assets
(Gain)/Loss on Extinguishment (181,609) -- -- -- -- --
of Debt/Claims
Interest Expense -- 10,985 11,240 11,024 10,400 10,396
Interest (Income) -- (714) (306) (336) (393) (438)
--------- --------- --------- --------- --------- ---------
Pre-tax Income 163,966 (17,255) (17,723) (11,850) (4,743) 3,448
--------- --------- --------- --------- --------- ---------
Income Taxes -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
NET INCOME/(LOSS) $ 163,966 $ (17,255) $ (17,723) $ (11,850) $ (4,743) $ 3,448
========= ========= ========= ========= ========= =========
EBITDA $ -- $ 3,930 $ 4,796 $ 11,223 $ 18,449 $ 27,391
========= ========= ========= ========= ========= =========
</TABLE>
* Projected fiscal year ending December 31, 2000 excludes the projected plan
emergence date adjustments.
** The accompanying footnotes and assumptions
are an integral part of these financial projections.
*** Slight rounding may have occurred in calculations.
<PAGE>
2. PROJECTED CONSOLIDATED BALANCE SHEETS
A copy of the Debtors' projected consolidated balance sheets as of December 31,
1999 through December 31, 2004, is set-forth on the next page of this Disclosure
Statement.
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<TABLE>
<CAPTION>
3. PROJECTED CONSOLIDATED STATEMENT OF CASH FLOW
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
PROJECTED CONSOLIDATED STATEMENTS OF CASH FLOW
FISCAL YEARS ENDING DECEMBER 31, 2000 THROUGH 2004
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
----------------
PROJECTED PLAN
EMERGENCE
PROJECT PLAN
EMERGENCE
DATE PROJECTED FISCAL YEARS ENDING DECEMBER 31
ADJUSTMENTS ------------------------------------------------------
JANUARY 1, 2000 2000 2001 2002 2003 2004
--------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING $ 950 $ 7,898 $ 9,025 $ 11,688 $ 10,496 $ 18,398
ACTIVITIES
Cash Flow From Investing Activities:
Additions to Property and Equipment -- (5,000) (6,000) (6,000) (6,000) (6,000)
Proceeds from Assets Sales -- 43,000 -- -- -- --
Investment in Affiliates -- -- -- -- -- --
Other -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET CASH (USED IN) PROVIDED BY -- 38,000 (6,000) (6,000) (6,000) (6,000)
-------- -------- -------- -------- -------- --------
INVESTING ACTIVITIES
Cash Flow From Financing Activities:
Decrease/(Increase) in Restricted Cash -- -- -- -- -- --
Proceeds from Refinance Notes Payable -- -- -- -- -- 37,202
Proceeds from Senior Secured Note 22,000 -- -- -- -- --
Proceeds from New Equity 30,000 -- -- -- -- --
Payment of Administrative/Priority (5,950) -- -- -- -- --
Claims
Payment of Class 1 through 6 Claims (54,783) -- -- -- -- --
Repayment of Senior Secured Note -- (22,000) -- -- -- --
Repayment of New Secured PIK Notes
-- -- -- -- -- (88,369)
-------- -------- -------- -------- -------- --------
NET CASH (USED IN) PROVIDED BY
FINANCING
ACTIVITIES (8,733) (22,000) -- -- -- (51,167)
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Cash (7,783) 23,898 3,025 5,688 4,496 (38,769)
-------- -------- -------- -------- -------- --------
BEGINNING CASH BALANCE 14,444 6,661 30,560 33,585 39,272 43,769
-------- -------- -------- -------- -------- --------
ENDING CASH BALANCE $ 6,661 $ 30,560 $ 33,585 $ 39,272 $ 43,769 $ 5,000
======== ======== ======== ======== ======== ========
</TABLE>
* Projected fiscal year ending December 31, 2000 excludes the projected plan
emergence date adjustments.
** The accompanying footnotes and assumptions are an integral part of these
financial projections.
*** Slight rounding may have occurred in calculations.
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4. NOTES AND ASSUMPTIONS
The projected financial information reflects management's judgment as of
November 8, 1999, the Plan and Disclosure Statement filing date, and should be
read in conjunction with the assumptions, qualifications and explanations set
forth herein.
The "Debtor Entities" referred to herein, are the units that are included in the
bankruptcy and are assumed to continue operating after the Effective Date.
However, the Company is continuing to evaluate all currently operating
locations, and may be required to adjust these assumptions. These PLANET
HOLLYWOOD ("PH"), OFFICIAL ALL STAR CAFE ("OASC"), and COOL PLANET ("CP")
entities include the following operations:
PH Atlanta PH Myrtle Beach PH Seattle
PH Atlantic City PH Nashville PH St. Louis
PH Baltimore PH New York(2) PH Washington DC
PH Dallas PH Orlando PH South Beach (2)
PH Honolulu PH Reno CP Anaheim
PH Lake Tahoe PH San Antonio CP Santa Monica
PH Las Vegas PH San Diego OASC Disney (1)
PH Mall of America PH San Francisco OASC Myrtle Beach (1)
- -------------------
(1) It is anticipated that OASC Disney and Myrtle Beach will be sold or
otherwise disposed of in Fiscal Year 2000.
(2) It is anticipated that OASC units will be converted to PH units in the
first quarter of Fiscal Year 2000.
The "Non-Debtor Entities," referred to herein, are units not included in the
bankruptcy and are assumed to continue operating after the Effective Date. These
entities include the following operating units:
PH Cannes PH Gatwick PH Paris
PH EuroDisney PH London Planet Movies
For presentation purposes, the projected operating results of the Debtor
Entities and those of the Non-Debtor Entities are shown on a consolidated basis.
Additional information concerning the assumptions underlying the projections is
as follows:
NOTE 1 - PLAN TERMS AND CONSUMMATION
The projections assume an Effective Date as of December 31, 1999 with Allowed
Claims and equity Interests treated in accordance with the treatment provided in
the Plan.
NOTE 2 - ECONOMIC CONDITIONS
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The projections were prepared assuming that economic conditions in the markets
served by the Company do not differ markedly over the next five years from
current economic conditions. Inflation in revenues and costs are assumed to
remain at current levels.
NOTE 3 - REVENUES
Revenues reflect the assumed effect of closing under-performing stores,
implementing a new menu, and launching a new public relations and advertising
campaign which includes the introduction of new Celebrity talent. Comparable
store sales for food, beverage and bar are projected to be approximately (6.8%)
and 3.0% during Fiscal Year 2000 and Fiscal Year 2001, respectively and to
increase to approximately 8.0% in subsequent years. Comparable store sales for
merchandise are projected to be approximately (9.1%), 3.0%, and 8.0% for Fiscal
Year 2000, Fiscal Year 2001 and Fiscal Year 2002, respectively. Increase in
comparable store sales for merchandise is assumed to be approximately 10% in the
following years. The plan assumes no new Company-owned store openings during the
projection period. It is projected that Planet Movies' EBITDA will be
approximately $1.1 million in Fiscal Year 2000 and will increase by
approximately 5% in Fiscal Year 2001 and 10% each subsequent year.
Franchisee fees constitute amounts owed by franchisees for buying the franchise
and for royalties based on gross revenues from food, beverage and merchandise.
The royalties typically range from 3% to 10% for food and beverage sales and
from 5% to 15% for merchandise sales. The Company also receives royalties for
licensing its brand and trademarks to its joint ventures and other parties.
During the projection period, the Company projects to sell three site franchises
in Fiscal Year 2000 and four site franchises in each subsequent year. The plan
assumes that royalties will be approximately $5.9 million in Fiscal Year 2000
and will increase through same store sales growth and additional franchises.
NOTE 4 - COST OF SALES - RESTAURANT AND MERCHANDISE
The plan assumes that food, beverage and bar cost of sales is approximately
25.2% throughout the projection period. Merchandise cost of sales is assumed to
be approximately 33.5% for the projection period. The merchandise cost of sales
is based on historical run rates of the go-forward stores. The food, beverage
and bar cost of sales reflects the roll-out of the Company's new menu.
NOTE 5 - OPERATING EXPENSES
Operating expenses includes the following expenses for the stores and Planet
Movies: payroll, occupancy, store level general and administrative expense,
store level public relations and advertising expense and other miscellaneous
operating expenses. These expenses are projected based on historical run rates.
The plan assumes that store level operating expenses will be approximately $105
million in Fiscal Year 2000 and will increase approximately 3.5% each year
during the projected period. The plan assumes that Planet Movies will have
operating expenses of approximately $12.8 million in Fiscal Year 2000 and will
increase approximately 5% in Fiscal Year 2001 and 10% each subsequent year.
NOTE 6 - CORPORATE GENERAL AND ADMINISTRATIVE
It is projected that expenses will be reduced to approximately $19 million in
Fiscal Year 2000 and will increase approximately 5% annually throughout the
projection period. This reflects an
25
<PAGE>
overall reduction of corporate costs due to the store closure program including
a reduction in work force, decreased discretionary spending, reduced use of
outside consultants and other cost containment measures.
NOTE 7 - WORKING CAPITAL
Accounts receivable and inventory are projected on the basis of historic
patterns applied to projected levels of operations. Accounts payable for
foreign, non-Debtor entities is forecast based on the historic pattern of
approximately 30 days outstanding. Domestic accounts payable days outstanding
are projected to be approximately 15 days by the end of Fiscal Year 2000,
approximately 22 days for Fiscal Year 2001 and approximately 30 days in the
following years.
NOTE 8 - CAPITAL EXPENDITURES/ASSET SALES
Capital expenditures in Fiscal Year 2000 - Fiscal Year 2004 reflect investments
in existing stores and corporate. The Company estimates that it will spend
approximately $5 million in Fiscal Year 2000 and $6 million in Fiscal Year 2001
on store renovations, conversions and general corporate matters. In the second
quarter of Fiscal Year 2000, the plan assumes the sale of the 1567 Broadway
interests. It is assumed that this sale will contribute in excess of $43 million
net of commissions.
NOTE 9 - EQUITY INVESTMENT
On the Effective Date, an equity investment of approximately $30 million will be
used to finance the Effective Date payments and going-forward working capital
needs.
NOTE 10 - SENIOR SECURED NOTES
On the Effective Date, the Company will obtain an approximately $22 million
bridge loan facility which will be used to finance the payments on the Effective
Date and for going-forward working capital needs. The 1567 Broadway interests
and other assets will secure the Senior Secured Notes. Interest on the notes is
calculated at a rate of 8% per annum. The Senior Secured Notes are assumed to be
repaid in the second quarter of Fiscal Year 2000 when the 1567 Broadway
interests are sold.
NOTE 11 - REFINANCE NOTE PAYABLE
The Plan assumes the Company will obtain new Notes payable of approximately 37.0
million in Fiscal Year 2004 to repay the Senior Subordinated Secured PIK Notes.
NOTE 12 - ACCOUNTS PAYABLE, TAXES PAYABLE AND ACCRUED LIABILITIES
These balances include liabilities of Non-Debtor Entities and the post-petition
liabilities of Debtor Entities. Accrued liabilities include accrued interest,
rent, payroll and related benefits, insurance, taxes and other miscellaneous
accrued items.
NOTE 13 - ADMINISTRATIVE EXPENSE/PRIORITY CLAIMS
On the Effective Date, this balance includes approximately $3.5 million of
professional fees, approximately $400 thousand of taxes, approximately $600
thousand of reclamation claims and approximately $1.4 million for curing
contracts and leases.
NOTE 14 - CLAIMS CLASSES
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<PAGE>
Treatment of all Classes of Claims, except Classes 5 and 6, is projected in
accordance with Article V of the Plan of Reorganization.
NOTE 15 - CLASS 5 CLAIMS: OLD SENIOR SUBORDINATED NOTES
The New Secured PIK Notes to be provided to the Holders of Class 5 Claims have a
par value of $60.0 million but have been recorded by the Company at their
estimated fair market value as of the Effective Date of approximately $55.0
million, reflecting a 12% - 15% yield on the New Secured PIK Notes.
NOTE 16 - CLASS 6 CLAIMS: GENERAL UNSECURED CLAIMS
The New Secured PIK Notes to be provided to Holders of the Class 6 Claimants
have a par value of $5.7 million but have been recorded by the Company at their
estimated fair market value as of the Effective Date of approximately $5.2
million, reflecting a 12% - 15% yield on the New Secured PIK Notes.
NOTE 17 - OTHER CREDITOR CLASSES AND EQUITY INTERESTS
Treatment of all Classes of Claims, except Classes 5 and 6, is projected in
accordance with Article V of the Plan.
NOTE 18 - FRESH START ACCOUNTING
Fresh start accounting has not been adopted in the financial projections
included herein. The Company is evaluating whether fresh start accounting is
required upon emergence from bankruptcy. The fresh start principals are
contained in the American Institute of Certified Public Accountants Statements
of Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code." If the Company concludes that fresh start accounting is
appropriate, such adoption would not impact the projected cash flow depicted
herein.
G. CURRENT AND POST-CONFIRMATION MANAGEMENT
1. POST-RESTRUCTURING EXECUTIVE OFFICERS AND DIRECTORS
On the Effective Date, the initial board of directors of Reorganized
PHI shall consist of Robert Earl, and four other designees of the New Money
Investors, and two members designated by the Creditors' Committee, to be
announced at or prior to the Confirmation Hearing. Any changes as of the
Effective Date to the executive officers of Reorganized PHI shall be announced
at or prior to the Confirmation Hearing. Subject to any requirement of
Bankruptcy Court approval under Section 1129(a)(5) of the Bankruptcy Code, such
persons designated as directors and officers of Reorganized PHI shall assume
their offices on the Effective Date and shall continue to serve in such capacity
thereafter, pending further action of the board of directors or shareholders of
Reorganized PHI in accordance with the Amended PHI Articles, the Amended PHI
Bylaws and applicable state law.
a CURRENT EXECUTIVE OFFICERS AND DIRECTORS
The current executive officers and directors of the Company and their
ages and positions are listed below:
27
<PAGE>
- ------------------------- ------- ----------------------------------------------
NAME AGE POSITION/PRINCIPAL OCCUPATION
- ------------------------- ------- ----------------------------------------------
Robert Earl 47 Chairman of the Board since November, 1998,
President and ChiefExecutive Officer of PHI.
Michael Tarnopol 62 Director since June 1996
Thomas Avallone 41 Executive Vice President and Chief Financial
Officer; Director since February 1996
Mark McCormack 68 Director since June 1996
Claudio Gonzalez 64 Director since June 1996
Michael Montague 67 Director since May 1998 (recently deceased)
Ong Beng Seng 53 Director since February 1996
CURRENT EXECUTIVE OFFICERS WHO DO NOT SERVE AS DIRECTORS
Scott E. Johnson 43 Executive Vice President, General Counsel and
Secretary
- --------------------------------------------------------------------------------
B. INITIAL DIRECTORS OF REORGANIZED PHI
The following table identifies those persons identified to date that
are expected to serve as members of the initial Board of Directors of
Reorganized PHI on and after the Effective Date, and certain biographical
information relating to each person identified:
- ---------------------------------------------- ---------------------------------
NAME AND PRINCIPAL OCCUPATION
- ---------------------------------------------- ---------------------------------
Robert Earl, Chairman and Chief Mr. Earl has been Chief Executive Officer of
Executive Officer of PHI. the Company since its inception in 1993, and
Chairman of the Board of Directors since
November 1998. Prior to joining the Company,
Mr. Earl was the Chief Executive Officer of
Hard Rock Cafe p.l.c. Mr. Earl was the
founder of Presidents Entertainment in 1977,
a company that developed theme restaurants.
Mr. Earl has over 24 years experience in the
restaurant industry.
- --------------------------------------------------------------------------------
C. DIRECTOR COMPENSATION
Directors who are not compensated as officers of PHI receive $20,000 in
annual fees, with an additional $1,000 payment for each Board of Directors'
meeting attended and a $500
28
<PAGE>
payment for each meeting attended of a special committee (i.e. audit,
compensation and stock option committee) of the Board. The Board of Directors
held monthly meetings through March, 1999 and have generally held weekly
meetings thereafter. Directors who are compensated as PHI employees receive no
additional compensation for service as a director. PHI will also reimburse each
director for out-of-pocket expenses incurred in attending meetings of the Board
of Directors and its committees. All directors, except Mr. Earl, were eligible
to receive stock options.
The following current directors were known by PHI to be beneficial
owners of outstanding shares of PHI's Class A Common Stock or shares underlying
options to acquire such shares as of February 28, 1999.
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<PAGE>
- ------------------------- --------------------- ------------------------
AMOUNT OF BENEFICIAL
OWNERSHIP OF CLASS A
NAME COMMON STOCK PERCENT OF CLASS (%)
- ------------------------- --------------------- ------------------------
Robert Earl 22,876,367 23.5(1)
Michael Tarnopol 22,666(2.) /less than/1
Thomas Avallone 226,232(3.) /less than/1
Mark McCormack 16,666(4.) /less than/1
Claudio Gonzalez 61,111(5.) /less than/1
Michael Montague 26,667(6.) /less than/1
(recently deceased)
Ong Beng Seng 12,050,335(7.) 12.4
- ------------------------- --------------------- ------------------------
1. 100 shares of stock are held individually. The rest of the shares owned by
Mr. Earl are held of record by Ropat Limited Partnership. A related entity
also owns 1,053,793 shares of PHI's non-registered, non-voting Class B
Common Stock, representing approximately 9.0% of such class.
2. 16,666 shares represent shares underlying options to acquire Class A Common
Stock which were exercisable on or before May 31, 1999.
3. 24,221 of the shares listed represent shares underlying options to acquire
Class A Common Stock which were exercisable on or before May 31, 1999.
4. All of these shares represent shares underlying options to acquire Class A
Common Stock which were exercisable on or before May 31, 1999.
5. 33,333 shares represent shares underlying options to acquire Class A Common
Stock which were exercisable on or before May 31, 1999.
6. 16,667 shares represent shares underlying options to acquire Class A Common
Stock which were exercisable on or before May 31,1999.
7. Shares are owned of record by Leisure Ventures Pte. Ltd., formally Planet
Hollywood Holdings Pte., Ltd. Mr. Ong disclaims beneficial ownership of the
shares.
D. EXECUTIVE COMPENSATION
The 1999 Proxy sets forth, as to PHI's Chief Executive Officer and the
other most highly compensated executive officers serving as executive officers
at the end of the 1999 fiscal year, all compensation awarded to, earned by, or
paid to said individuals (the "Named Executive Officers") for all services
rendered in all capacities to PHI and its Subsidiaries for the fiscal years
ended June 1997, 1998 and 1999 except as may otherwise be specifically noted.
30
<PAGE>
2. EMPLOYMENT CONTRACTS
Several current and former Senior Executive Officers have entered into
employment agreements with PHI. Set forth below is a brief description of each
such agreement.
EMPLOYMENT AGREEMENT WITH ROBERT EARL
Mr. Earl and PHI entered into an employment agreement dated as of
August 8, 1995 providing for his employment as Chief Executive Officer of PHI
and its significant subsidiaries and affiliates, including Official All Star
Cafe, through December 31, 2001. The agreement currently provides for a base
salary of $600,000 per year with annual increases of at least 10%, an annual
incentive bonus in the discretion of the Board of Directors of PHI, and
participation in all benefits generally made available to executive officers of
the company. PHI has the right to terminate the agreement without any further
obligation in the event Mr. Earl (i) resigns from the company; (ii) willfully
breaches the agreement; or (iii) is convicted, of or pleads guilty to, a felony
involving moral turpitude or certain crimes involving the company's property.
The agreement provides that Mr. Earl may terminate the agreement in the event he
is not elected or retained in his present positions at PHI or PHI materially
reduces his responsibilities. In the case of such termination, or if the
agreement is terminated by the company without cause or upon Mr. Earl's death or
disability, the agreement provides for him to receive the remainder of his base
salary, all incentive bonuses granted and all options awarded under the stock
incentive plan. The agreement includes a non-competition provision prohibiting
Mr. Earl for a period of two years following the termination of his employment
with PHI in most circumstances from working for any company that operates
restaurants with a movie, sports or action hero theme.
EMPLOYMENT AGREEMENT WITH THOMAS AVALLONE
Mr. Avallone and PHI entered into an employment agreement dated January
1, 1998 providing for his employment as Executive Vice President and Chief
Financial Officer through January 1, 2001, with such term automatically renewing
for additional one-year periods unless either party provides notice to the other
of its unwillingness to renew. The agreement currently provides for a base
salary of $375,000 with additional bonuses and salary increases to be determined
by the Board of Directors. The agreement may be terminated by PHI for cause in
the event (i) Mr. Avallone is convicted of, or pleads guilty to, a crime
involving moral turpitude or certain other crimes involving the company's
property, or (ii) he willfully breaches the agreement. If PHI terminates the
agreement for any reason other than for cause, the agreement provides for Mr.
Avallone to receive his base salary for the following twelve month period and to
become fully vested in all his stock options. Mr. Avallone may terminate the
agreement in the event of a material breach thereof by PHI after giving the
company notice and an opportunity to cure the breach or in the event that Mr.
Avallone no longer reports to Mr. Earl. In the case of any such termination, the
agreement provides for Mr. Avallone to receive his base salary for the following
twelve month period and to become fully vested in all his stock options. The
agreement also contains customary non-disclosure and non-competition provisions.
31
<PAGE>
EMPLOYMENT AGREEMENT WITH IAN HAMILTON
Mr. Hamilton and PHI entered into an employment agreement dated January
7, 1997 providing for his employment as President of PHI's subsidiary, All Star
Cafe, Inc. through February 28, 2000. The agreement provided for a base salary
of $250,000, with a minimum bonus of $50,000 per year, payable in cash or stock
options and such additional bonuses and salary increases as determined by the
Board of Directors. In connection with PHI 's decision to refocus on its Planet
Hollywood brand and joint venture, franchise, sell or otherwise dispose of its
Official All Star Cafe concept, Mr. Hamilton and PHI agreed to the early release
of Mr. Hamilton's employment agreement. Mr. Hamilton left the company in April
1999. Pursuant to the terms of Mr. Hamilton's severance arrangement with PHI,
Mr. Hamilton was to receive his base salary and minimum bonus through February
2000 and became fully vested in certain of his stock options.
EMPLOYMENT AGREEMENT WITH SCOTT JOHNSON
Mr. Johnson and PHI entered into an employment agreement dated May 1,
1996 providing for his employment as Senior Vice President, General Counsel and
Secretary through February 28, 2000, with such term automatically renewing for
additional one-year periods unless either party provides notice to the other of
its unwillingness to renew. The agreement currently provides for a base salary
of $250,000, with additional bonuses and salary increases to be determined by
the President and/or Chief Executive officer, and for Mr. Johnson's
participation in the company employee benefit plans. The agreement may be
terminated by PHI for cause in the event Mr. Johnson (i) is convicted of, or
pleads guilty to, a crime involving moral turpitude or certain other crimes
involving the company's property; (ii) willfully breaches the agreement; or
(iii) has his license to practice law revoked. The agreement provides that Mr.
Johnson may terminate the agreement in the event of a material breach thereof by
PHI after giving the company notice and an opportunity to cure the breach. In
the case of such termination or non-renewal, the agreement provides for him to
receive his base salary and benefits for one year. The agreement also contains
customary non-disclosure and non-competition provisions.
Other employment agreements have been executed with lower level
corporate management employees (and with certain general managers as well).
VII. CONFIRMATION STANDARDS; LIQUIDATION ANALYSIS AND VOTING PROCEDURES
A. BRIEF EXPLANATION OF CHAPTER 11
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under Chapter 11, a debtor is authorized to reorganize its
business for the benefit of itself and its creditors and shareholders.
Consummation of a plan of reorganization is the principal objective in
a Chapter 11 case. In general, a plan of reorganization divides the claims
against and interests in a debtor into separate classes and allocates plan of
reorganization distributions among those classes. If the
32
<PAGE>
legal, equitable and contractual rights of a class are unaffected by the plan of
reorganization, it is considered "unimpaired". Because they are unaffected, all
claimants with claims in unimpaired classes are deemed to have accepted the
plan, and are therefore not entitled to vote on the plan. All classes of claims
or interests that do not receive or retain any property under the plan on
account of such claim or interest are deemed to have rejected the plan of
reorganization under Section 1126(g) of the Bankruptcy Code. All other classes
of claims or interests are considered "impaired", and are entitled to vote on
the plan of reorganization.
Under the Bankruptcy Code, acceptance of the Chapter 11 plan of
reorganization is determined by class, and therefore it is not required that
each holder of an impaired claim or interest vote in favor of a plan of
reorganization in order for the Bankruptcy Court to confirm the plan of
reorganization, so long as the requisite majorities voting in a class accept the
plan. If an impaired class does not vote to accept the plan of reorganization,
the Bankruptcy Court may nonetheless confirm the plan, but only if at least one
impaired class (determined without including the acceptances of insiders) votes
to accept the plan and certain other statutory tests are satisfied. Many of
these tests are designed to protect the interests of creditors and equity
holders who do not vote or who vote against the plan of reorganization but who
will nonetheless be bound by the plan's provisions if confirmed. Under Section
1109(b) of the Bankruptcy Code, all parties in interest, including creditors and
equity security holders of the debtor will have the right to appear and be heard
on any issue in a Chapter 11 case.
B. ACCEPTANCE OF THE PLAN
Except as discussed below, as a condition to a consensual confirmation
process, Section 1129(a) of the Bankruptcy Code requires that (i) each impaired
class of claims or interests that receives or retains property under a plan of
reorganization votes to accept the plan of reorganization and (ii) the plan of
reorganization meets the other requirements of Section 1129(a). An impaired
Class of Claims will be deemed to have accepted the Plan if Holders of at least
two-thirds in dollar amount and a majority in number of the Holders of Claims in
such Class that cast timely Ballots vote to accept the Plan. An impaired Class
of Interests will be deemed to have accepted the Plan if Holders of at least
two-thirds in amount of the Interests in such Class that cast timely Ballots
vote to accept the Plan. Holders of Claims or Interests that fail to vote or
that abstain on the Plan are not counted for purposes of determining either
acceptance or rejection of the Plan by the impaired Class of Claims or Interests
of which they are a member.
If at least one impaired class of claims votes to accept a plan of
reorganization (not counting the votes of insiders), the plan of reorganization
may be confirmed despite rejection by the other impaired classes if the
"cramdown" provisions of Section 1129(b) of the Bankruptcy Code are satisfied.
The "cramdown" provisions of Section 1129(b) essentially provide that a plan of
reorganization may be confirmed over the rejection of an impaired class of
claims or interests if the plan of reorganization "does not discriminate
unfairly" and is "fair and equitable" with respect to such rejecting impaired
class. Further discussion of the provisions of Section 1129(b) is set forth
below.
33
<PAGE>
The Plan has two classes of Claims that are Impaired and are entitled
to vote on the Plan. These are:
- Holders of Claims in Class 5 (Old Senior Subordinated Notes); and
- Holders of Claims in Class 6 (General Unsecured Claims)
Prior to the Petition Date, Holders of in excess of $200 million
principal amount of Old Senior Subordinated Notes agreed to support the Plan,
and the affirmative vote of the requisite majorities in Class 5 is a condition
to confirmation of the Plan.
The rights and interests of Holders in Class 8 (Old Common Stock) and
Class 9 (Claims for Issuance of Old Common Stock) are impaired, and these
Classes are deemed to have rejected the Plan without solicitation of their
votes. Although Holders of Class 8 Old Common Stock Interests are entitled to
receive their PRO RATA share of 200,000 New Warrants under the Plan unless any
voting Class of Creditors rejects the Plan, the value of the New Warrants is
sufficiently minimal as of the Effective Date that the Debtors believe it is
appropriate to deem Class 8 to have rejected the Plan, and thus save the Estates
the burden and expense of soliciting votes. Nonetheless, as of February 28, 1999
over 52% of the outstanding shares of Old Common Stock were held by officers or
directors, franchisees and joint venture partners of PHI who are supportive of
the reorganization and many of whom are participating New Money Investors.
C. CLASSIFICATION OF CLAIMS AND INTERESTS
Section 1123 of the Bankruptcy Code provides that a plan of
reorganization shall designate Classes of a debtor's claims and interests, and
shall specify whether such Classes are not impaired, and the treatment of any
Classes that are impaired, and must provide the same treatment for each Claim or
Interest in a particular Class, unless a holder of such Claim or Interest agrees
to a less favorable treatment. The Plan divides the Claims and Interests into
Classes, designates each Class as Impaired or Unimpaired and sets forth the
treatment offered each Class. Section 101(4) of the Bankruptcy Code defines
"claim" as a right to payment, whether or not such right is "reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured" or a "right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, disputed, undisputed, secured or
unsecured."
Section 1122 of the Bankruptcy Code requires that each class of claims
and interests contain only claims or interests which are substantially similar
to each other. The Debtors believe that they have classified all Claims and
Interests in compliance with the provisions of Sections 1122 and 1123. It is
possible, however, that a Holder of a Claim or Interest may challenge the
Debtors' classification of Claims and Interests and that the Bankruptcy Court
may find that a different classification is required for the Plan to be
confirmed. In such event, it is the present intent of the Debtors, to the extent
permitted by the Bankruptcy Court, to modify the classifications in the Plan as
required by the Bankruptcy Court and to use the acceptances
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<PAGE>
received in the Solicitation for the purpose of obtaining the approval of the
Class or Classes of which the accepting Holder is ultimately deemed to be a
member.
D. OPTIONAL PLAN PROVISIONS/SUBSTANTIVE CONSOLIDATION
Section 1123(b) of the Bankruptcy Code specifies provisions that a plan
may but need not contain, including any appropriate provision not inconsistent
with the applicable provisions of Title 11 of the Bankruptcy Code. The Plan
avails itself of certain such provisions which in the Debtors' view, are in
compliance with applicable standards of law. With respect to all executory
contracts and unexpired leases not previously assumed or rejected and which have
not terminated after the Petition Date by their own terms or by operation of
law, the Plan specifies the proposed treatment to be accorded to those
contracts. In addition, the confirmation, consummation and implementation of the
Plan is premised on the substantive consolidation of the Debtors' Chapter 11
Cases into a single case. Under the doctrine of substantive consolidation,
courts have the power, under certain circumstances, to treat the assets and
liabilities of related separate legal entities, including a parent and one or
more of its subsidiaries, as if the assets were held by, and the liabilities
were incurred by, a single entity. As part of the Confirmation, the Court will
need to find that consolidation, in the manner proposed, is fair to Creditors
and in the best interests of the Debtors' Estates. There are no prescribed
standards for substantive consolidation in the Bankruptcy Code. Instead, courts
have developed several standards in determining whether substantive
consolidation should be granted in any given case.
One such approach has been articulated as a balancing of the equities;
the court determines whether the necessity or benefit of consolidation
counterbalances or outweighs the harm to its objecting creditors if
consolidation is granted. SEE, E.G., EASTGROUP PROPERTIES SOUTHERN MOTEL ASSOC.,
LTD., 935 F.2d 245, 249 (11th Cir. 1991) ("Eastgroup Properties"). In
considering whether consolidation should be granted, some courts have employed
numerous factors in evaluating the propriety of substantive consolidation in the
case before it. SEE, E.G., EASTGROUP PROPERTIES, 935 F.2d 245; IN RE UNITED
STAIRS CORPORATION, 176 B.R. 359, 369 (Bankr. D.N.J. 1995); IN RE VECCO
CONSTRUCTION INDUSTRIES, INC., 4 B.R. 407, 410 (Bankr. E.D.Va. 1980). Courts
which utilize factors in their analysis often use one or more of the following
factors: (i) the presence or absence of consolidated financial statements; (ii)
the unity of interests and ownership between the various corporate entities;
(iii) the existence of parent and inter corporate guaranties on loans; (iv) the
degree of difficulty in segregating and ascertaining individual assets and
liabilities; (v) the existence of transfers of assets without formal observance
of corporate formalities; (vi) the commingling of assets and business functions;
and (vii) whether creditors dealt with the entities as a single economic unit.
In general, courts have not clearly articulated the weight to be accorded to
particular factors and have stated that each analysis is to be done on a case by
case basis.
The Debtors believe that substantive consolidation is necessary and
appropriate in these cases and will be granted by the Court. The substantial
identity of PHI and its Debtor Subsidiaries is evident; all of the Debtors'
operations are similar in nature, operating theme restaurants in which the
Debtors' world recognized brands and Celebrity Memorabilia are prominently
displayed. Many of the trade Creditors are the same for each Debtor entity. PHI,
its Debtor Subsidiaries and other affiliates have consistently filed
consolidated tax returns, and have
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prepared and made public only consolidated financial statements. Further, PHI
has guaranteed substantially all of the leases executed by one or more of the
Debtors. Moreover, as discussed in Section IX, "Certain Risk Factors", a prompt
exit from Chapter 11 is believed essential to preserving the Debtors' customer
base, Celebrity support and consequently, the viability of the Debtors' core
business operations. Consolidation of the Debtors' Chapter 11 Cases for purposes
of the Plan will avoid the significant cost and inevitable delay attendant to
performing a separate valuation of PHI and each of its twenty-five Debtor
Subsidiaries, and the task of attempting to negotiate and prepare separate
Chapter 11 Plans for each Debtor. As a consequence, the absence of consolidation
will not only significantly increase the administrative costs of these Chapter
11 Cases, but may also seriously threaten the Debtors' ability to achieve a
successful reorganization. Confirming the Plan as proposed should preserve value
for the Debtors' Creditors that are Impaired under the Plan.
E. CONFIRMATION OF THE PLAN
CONFIRMATION HEARING
Section 1128 of the Bankruptcy Code requires the Bankruptcy Court,
after notice, to hold a hearing on whether the Plan and its proponents have
fulfilled the confirmation requirements of Section 1129 of the Bankruptcy Code.
A hearing (the "Confirmation Hearing") to consider Confirmation of the Plan has
been scheduled for ____________, ___ at __:__ __ before the Honorable Joseph J.
Farnan, Jr., at the United States District Court for the District of Delaware,
J. Caleb Boggs Federal Building, 844 King Street, Wilmington, Delaware 19801.
The Confirmation Hearing may be adjourned from time to time by the Court without
further notice except for an announcement of the adjourned hearing date made in
open Court. Any objection to Confirmation must be made in writing and must
specify in detail the name and the address of the objector, all grounds for the
objection and the nature and amount of the Claim or Interest held by the
objector. Any such objection must be filed with the Clerk of the United States
Bankruptcy Court for the District of Delaware, Marine Midland Plaza, 824 Market
St., 5th Floor, Wilmington, Delaware 19801, and served upon the parties
designated in the notice of the Confirmation Hearing (the "Confirmation Notice")
so as to be actually received on or before ____________, ___ at 4:00 p.m.
Eastern Time. Unless an objection to Confirmation is timely filed and served it
may not be considered by the Court.
THE PLAN MUST COMPLY WITH THE APPLICABLE PROVISIONS OF THE BANKRUPTCY CODE
In order for the Plan to be confirmed, the Bankruptcy Code requires
that the Bankruptcy Court determine that the Plan complies with certain
requirements set forth in Section 1129(a) of the Bankruptcy Code. Section
1129(a) requires that:
(i) the Plan comply with all applicable provisions of the
Bankruptcy Code, including requirements as to the classification of
Claims and Interests, specification of the treatment of impaired and
unimpaired classes, provision of equal treatment within each class,
provision for adequate means of implementation, inclusion of required
charter provisions and provision for the selection of the officers and
directors;
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(ii) the Debtors comply with all applicable provisions of the
Bankruptcy Code, including requirements for disclosure and solicitation
of acceptances;
(iii)the Plan be proposed in good faith;
(iv) all payments made by the Debtors for services and
expenses in or in connection with the Chapter 11 Cases or in connection
with the Plan and incident to the Chapter 11 Cases be subject to the
approval of the Bankruptcy Court as reasonable;
(v) all necessary information regarding directors, officers
and insiders be disclosed;
(vi) any rate change subject to the jurisdiction of any
governmental regulatory commission be approved or subject to approval
by such commission;
(vii) the Plan satisfies the "Best Interests Test" of Section
1129(a)(7) of the Bankruptcy Code, which requires that with respect to
each Impaired Class, each Holder of a Claim or Interest either (a)
accepts the Plan or (b) receives at least as much pursuant to the Plan
as such Holder would receive in a liquidation of the Debtors under
Chapter 7 of the Bankruptcy Code;
(viii) the Plan be accepted by each Impaired Class and, in any
case, that at least one Impaired Class of Claims accept the Plan
(without considering votes by insiders);
(ix) the Plan provides for payment in full of all Allowed
Administrative and Priority Claims in the manner set forth in the
Bankruptcy Code;
(x) the Plan satisfies the "Feasibility Test" of Section
1129(a)(11) of the Bankruptcy Code, that is, that there is a reasonable
probability that the Debtors will be able to perform their obligations
under the Plan and continue to operate their businesses without
liquidation or further financial reorganization;
(xi) all statutory fees of the United States Trustee under 28
U.S.C.ss. 1930 are to be paid by the Debtors; and
(xii) the Plan provides for continued payment of all retiree
benefits, if any.
The Debtors believe that the Plan will meet all such tests. However, it
is possible that one or more Impaired Classes may reject the Plan. In addition,
Classes 8 and 9 are deemed to have rejected the Plan. Accordingly, the Debtors
may seek confirmation of the Plan under the "cramdown" procedures of Section
1129(b) of the Bankruptcy Code, which permit the confirmation of a plan of
reorganization over the objection of one or more classes if certain additional
tests are met. Although the Debtors believe that the Plan will meet such tests,
there can be no assurance that the Bankruptcy Court will reach the same
conclusion.
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FEASIBILITY TEST. Under the Feasibility Test as set forth in Section
1129(a)(11) of the Bankruptcy Code, in order to confirm the Plan, the Bankruptcy
Court must find that confirmation of the Plan is not likely to be followed by
liquidation or the need for further financial reorganization of the Debtors. For
the Plan to meet the Feasibility Test, the Bankruptcy Court must determine that
the Reorganized Debtors have a reasonable probability ("more likely than not")
of performing their obligations under the Plan, including performing their
obligations under the debt instruments issued under the Plan. For purposes of
determining whether the Plan meets this requirement, the Debtors with their
financial advisors have prepared the Projections, which together with the
material assumptions on which they are based, are set forth in Section VI. F.,
"Emergence Business Plan". Based upon the Projections, the Debtors believe that
the Debtors' reorganization under the Plan will meet the feasibility
requirements of Section 1129(a) of the Bankruptcy Code.
BEST INTERESTS TEST. In order to confirm the Plan if any member of an
Impaired Class votes to reject the Plan, the Bankruptcy Court must independently
determine that the Best Interests Test under Section 1129(a)(7) of the
Bankruptcy Code is satisfied with respect to each member of an Impaired Class.
The Best Interests Test requires that each member of an Impaired Class of Claims
or Interests either (i) accept the Plan or (ii) receive under the Plan property
of a value not less than the value of the distribution that such non-accepting
member would receive if the Debtors were liquidated under Chapter 7 of the
Bankruptcy Code. Management believes that recoveries under the Plan are equal to
or better than those in a liquidation under Chapter 7, and that the Plan
therefore satisfies the Best Interests Test. See Section VII.F. below,
"Liquidation Analysis" for an analysis of projected recoveries to Creditors in a
hypothetical liquidation of the Debtors in a Chapter 7 Case under the Bankruptcy
Code.
CRAMDOWN REQUIREMENTS
The Bankruptcy Code provides for Confirmation of the Plan even if it is
not accepted by all Impaired Classes, as long as at least one Impaired Class of
Claims has accepted it (without counting the acceptances of insiders). These
so-called "cramdown" provisions are set forth in Section 1129(b) of the
Bankruptcy Code. The Plan may be confirmed under the cramdown provisions if, in
addition to satisfying the other requirements of Section 1129 of the Bankruptcy
Code, it (i) is "fair and equitable" and (ii) "does not discriminate unfairly"
with respect to each Class of Claims or Interests that is impaired under, and
has not accepted, such Plan.
THE PLAN MUST BE FAIR AND EQUITABLE. With respect to a dissenting Class
of unsecured creditors, the "fair and equitable" standard requires, among other
things, that the Plan contain one of two elements. It must provide either that
each unsecured Creditor in the Class receives or retains property having a
value, as of the Effective Date, equal to the Allowed amount of its Claim, or
that no Holder of Allowed Claims or Interests in any junior Class may receive or
retain any property on account of such Claims or Interests. The strict
requirement as to the allocation of full value to dissenting Classes before
junior Classes can receive a distribution is known as the "absolute priority
rule."
The Debtors believe that the Plan meets the requirements of the
absolute priority rule. In the event that either Class 5 or Class 6 rejects the
Plan, the Plan provides that the Holders of
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Class 8 Interests will not receive any consideration. As a result, no Classes
junior to Class 5 and Class 6 will receive or retain any property under the Plan
on account of their Claims or Interests if Classes 5 or 6 reject the Plan. The
Plan also meets the absolute priority requirements in respect of Classes 8 and
9, which Interests are deemed to reject the Plan, as no Class junior to such
Classes is receiving or retaining any property on account of its Claim or
Interest under the Plan.
The "fair and equitable" standard has also been interpreted to prohibit
any class senior to a dissenting class from receiving under a plan more than one
hundred percent of its Allowed Claims. The Plan complies with that requirement
with respect to all Holders of Claims and Interests.
THE PLAN MUST NOT DISCRIMINATE UNFAIRLY. As a further condition to
approving a cramdown, the Court must find that the Plan does not "discriminate
unfairly" in its treatment of dissenting Classes. A plan of reorganization does
not "discriminate unfairly" if (a) the plan does not treat any dissenting
impaired class of claims or interests in a manner that is materially less
favorable than the treatment afforded to another class with similar legal claims
against or interests in the debtor and (b) no class receives payments in excess
of that which it is legally entitled to receive for its claims or interests. The
Debtors believe that the Plan does not discriminate unfairly as to any Impaired
Class of Claims or Interests. Under the Plan, Classes 5 and 6 are receiving
comparable treatment: a distribution valued at approximately 40% of the Allowed
amount of each such Claim.
Class 5 Claims are expected to accept the Plan as it embodies the
restructuring agreement negotiated by the Debtors and the Holders of over
two-thirds in amount of those Claims. If Class 6 (General Unsecured Claims)
votes to reject the Plan, the Debtors intend to seek to confirm the Plan
pursuant to the cramdown provisions, and, if the Court were to determine it to
be necessary, modify the Plan in order to comply with such cramdown
requirements.
F. LIQUIDATION ANALYSIS
INTRODUCTION
The hypothetical liquidation scenario set forth in this report is based upon the
orderly Chapter 7 liquidation of the Company, including Debtor and non-Debtor
Subsidiaries. This report projects a low and high recovery range based upon the
estimated December 31, 1999 Balance Sheet and has been prepared on a
consolidated basis.
Nothing contained within this Hypothetical Liquidation Analysis is, or should be
relied upon as, a promise or representation of the future. There are no
representations, warranties or other assurances that any of the projected
results will be realized. Because the projected financial information is based
upon estimates and assumptions about circumstances and events that have not yet
taken place and are subject to variations, actual results will differ and may
significantly vary from projected results which could impact recoveries
materially.
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SIGNIFICANT OVERALL ASSUMPTIONS
All legal entities (including those that did not file Chapter 11 on October 12,
1999) would be liquidated. All the legal entities are assumed to be
substantively consolidated.
No assumptions (recoveries or claims) have been made with respect to contingent
claims (e.g. lawsuits) or unrecorded claims that may ultimately be deemed valid
after all claims are reconciled. In addition, no adjustment in creditor
recoveries has been made for any potential preference, fraudulent conveyance or
other avoidance action that the Company may be capable of asserting.
The liquidation is assumed to be performed over a six to ten month period. Cash
proceeds are assumed to be invested and distributed at a later date.
All units would be closed immediately after the Company's announcement of
liquidation.
All Holders of Allowed General Unsecured Claims are treated pari passu with the
Holders of Old Senior Subordinated Notes Claims.
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PLANET HOLLYWOOD INTERNATIONAL INC.
HYPOTHETICAL LIQUIDATION ANALYSIS
AS OF DECEMBER 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Estimated Net
Book Value as Estimated Recovery % Estimated Recovery $
of 12/31/99 Low High Low High
------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash $ 14,444 100% 100% $ 14,444 $ 14,444
Restricted Cash 6,355 25% 33% 1,600 2,100
Accounts Receivable 12,748 26% 35% 3,377 4,493
Inventory 15,911 25% 40% 3,967 6,368
Prepaid Expenses 8,855 3% 6% 264 528
Property, Plant and Equipment 185,889 19% 23% 35,430 42,835
Goodwill 13,433 0% 0% -- --
Other Assets 15,847 0% 0% -- --
Investment 18,096 58% 79% 10,410 14,265
-------- -------- -------- -------- --------
TOTAL ASSETS $291,577 24% 29% 69,492 85,033
========
Less: Secured Claims 2,000 2,000
Less:
Administrative/Priority Expenses
Wind Down Costs 3,000 1,800
Trustee Fees 2,085 2,551
Severance 1,800 1,200
Professional Fees 4,000 3,500
Reclamation Claims 600 600
Priority Tax 400 400
Post Petition Accounts Payable 3,369 3,369
Post Petition Taxes Payable 2,013 2,013
Post Petition Accrued Liabilities 15,289 $ 15,289
-------- --------
Total Administrative and Priority Expenses 32,556 30,722
Total Proceeds Available to Unsecured Creditors $ 34,936 $ 52,311
======== ========
Unsecured Claims
Senior Subordinated Notes & Accrued Interest $282,000 $282,000
Accounts Payable 11,955 11,955
Other Short Term Debt 5,453 5,453
Lease Rejection Claims 62,000 62,000
-------- --------
Total Unsecured Claims $361,408 $361,408
======== ========
ESTIMATED RECOVERY FOR UNSECURED CLAIMS
ASSUMING A LIQUIDATION 10% 14%
======== ========
RECOVERY %
ESTIMATED RECOVERY FOR UNSECURED CLAIMS UNDER THE PLAN
ESTIMATED
PAR VALUE FMV
-------------- ------------
Class 1 Claims - Priority 100.0% 100.0%
Class 2 Claims - SunTrust 100.0% 100.0%
Class 3 Claims - Miscellaneous Secured 100.0% 100.0%
Class 4 Claims - Convenience 100.0% 100.0%
Class 5 Claims - Senior Subordinated Notes 42.1% 40.4%
Class 6 Claims - General Unsecured 42.1% 40.4%
Class 7 Claims - Landlord Settlement 100.0% 100.0%
Class 8 Claims - Interests of Holders of Old Common Stock 0.0% 0.0%
Class 9 Claims - Issuance of Old Common Stock 0.0% 0.0%
Class 10 Claims - Intercompany 100.0% 100.0%
Class 11 Claims - Intercompany Interest 100.0% 100.0%
</TABLE>
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NOTES - THE FOLLOWING NOTES DESCRIBE THE SIGNIFICANT ASSUMPTIONS THAT ARE
REFLECTED IN THE LIQUIDATION ANALYSIS.
NOTE 1 - CASH: The Company's cash balance represents the estimated cash balance
as of December 31, 1999. It is assumed that the Cash balance, excluding the
restricted Cash, is available for distribution to Creditors.
NOTE 2 - RESTRICTED CASH: The restricted cash balance of approximately $6.4
million is pledged against letters of credit and secures the payroll account.
The Company believes that approximately $700 thousand to $1.2 million could be
recovered from the approximate $5.5 million that has been pledged against the
letters of credit. The approximate $900 thousand of collateral for the payroll
account is assumed to be fully recoverable in a liquidation scenario.
NOTE 3 - ACCOUNTS RECEIVABLE: The outstanding Accounts Receivable balance is
primarily comprised of receivables due from franchisees, credit cards, vouchers
and house accounts.
Franchisee Receivables constitute amounts owed by franchisees for initial
franchise fees and for royalties based on gross revenues from food, beverage,
bar and merchandise. The Company does not believe that it will be able to
recover these receivables in a liquidation scenario.
Historically, the Company collected Credit Card Receivables in 2-7 days and had
negligible chargebacks on these receivables. Management believes that the
Company would recover approximately 90% of the receivables in the low scenario
and approximately 95% in the high scenario.
Voucher Receivables relate to vouchers issued by travel agencies to their
clients, which are subsequently redeemed at the Company's units. Upon receipt,
the Company submits the voucher to the respective travel agent for payment.
Historically, such receivables are paid within 60 to 90 days and have an
uncollectable rate of approximately 10%. Under a liquidation scenario,
management believes that a recovery between 25% and 50% could be achieved with
respect to these receivables.
House Account Receivables primarily relate to corporate functions. Historically,
these receivables have an uncollectable rate of approximately 10% and are
usually collected in 60 to 90 days. Management believes that a recovery rate of
15% to 25% could be achieved, given that a significant portion of these
receivables are foreign.
Other Receivables are composed of a loan to a celebrity, which is collateralized
by real estate and miscellaneous other receivables. The Company estimates that
the recovery on these receivables would be from 25% to 50% of book value in
liquidation.
NOTE 4 - INVENTORY: Inventory is composed of food, beverage, bar and merchandise
inventory. It is assumed that merchandise inventory would be sold to a
liquidator and the recovery would be between approximately 25% and 40% of net
book value. The food, beverage and bar inventory has been ascribed no value upon
liquidation.
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NOTE 5 - PREPAID EXPENSES: Prepaid expenses consist primarily of prepaid rent,
smallwares, and deposits. The recovery rate on prepaid expenses is assumed to
fall between 3% and 6%.
NOTE 6 - PROPERTY, PLANT & EQUIPMENT: Property, plant & equipment (net) are
comprised of leasehold improvements, equipment and fixtures, construction work
in process and Memorabilia.
Leasehold improvements are not separable from their respective leased buildings
and, therefore, are estimated to have no recoverable value upon liquidation.
Planet Hollywood has numerous leases associated with its restaurants, warehouses
and offices. A leasehold interest may have value if the contract rent is lower
than the current market rent. Management does not believe that any of the
Company's leases have a contract rent that is significantly below market.
Recoveries on store-level equipment and fixtures are assumed to be approximately
10%-15% of net book value.
Management estimates the recovery of Memorabilia to be between 60% and 70% of
book value. The Memorabilia cases and installation are believed to have no
recovery in liquidation.
Construction work in process is primarily associated with the 1567 Broadway
project and Planet Movies. The Company believes that the condominium portion of
its 1567 Broadway interests could be sold for approximately $30.0 to $35.0
million. In liquidation, a 30% liquidation discount on these proceeds is assumed
to reflect the estimated effect of liquidating these properties in a relatively
short period of time. Commissions and other costs associated with selling the
asset are assumed to be 7% of proceeds. Potential recoveries on the Planet
Hollywood Hotel and Planet Movies are discussed in Note 9.
NOTE 7 - GOODWILL: Goodwill relates to past acquisitions and has been ascribed
no value in a liquidation.
NOTE 8 - OTHER ASSETS: Other Assets primarily includes trademarks, software
development costs, loan origination costs, merger-related costs and other
non-current assets. The Company believes that there is no value to these assets
in a liquidation.
NOTE 9 - INVESTMENTS: The Company owns a 50% equity interest in Planet Hollywood
Asia, which operates and franchises PLANET HOLLYWOOD units in the Pacific Rim.
Planet Hollywood Asia has been operating at a significant loss and, as a result,
no recovery is estimated in liquidation.
Additionally, the Company owns a 20% equity interest in ECE, a publicly traded
Mexican company, which operates themed restaurants/retail units in Mexico, South
America and the Caribbean. Based upon recent market prices, PHI's interest in
ECE has a value of approximately $6.5 million. Recoveries in liquidation,
however, are estimated at $3.9 million to $4.5 million, due to the impact that
such a large stock sale would have on ECE's share price.
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The Company also owns a 20% equity interest in the Planet Hollywood Hotel
portion of the 1567 Broadway project, a themed hotel under development in New
York City. The Company believes that its portion of the 1567 Broadway project,
would provide between $10.0 million and $15.0 million in proceeds. A 30%
liquidation discount on these proceeds is assumed. Commissions and other costs
associated with selling the asset are assumed to be 7% of proceeds.
The Company is unable to transfer its ownership in Planet Movies. As a result,
no recovery on this investment is assumed in a liquidation scenario.
NOTE 10 - SECURED CLAIMS: Secured Claims relate to approximately $2.0 million
of merchandise inventory received from secured vendors.
NOTE 11 - ADMINISTRATIVE/PRIORITY: It is assumed that administrative and
priority expenses are comprised of wind down costs associated with liquidating
the Company's assets over a six to ten month period, trustee fees, severance,
professional fees, reclamation Claims and post-petition accounts payable and
accrued liabilities. It is assumed that the wind down costs would average
approximately $300 thousand per month for the duration of the wind down. It is
assumed that the cost associated with a trustee overseeing the liquidation would
approximate 3% of receipts.
It is assumed that upon termination, individuals employed for more than one year
will receive two weeks of severance, and individuals employed for less than one
year will receive one week of severance. The Debtors estimate that their weekly
payroll for corporate employees and those employees at units remaining open at
the time of the filing is approximately $900 thousand per week and that total
severance would be approximately $1.2 million to $1.8 million.
Professional fees represent the costs of attorneys, accountants, appraisers and
other professionals from the Petition Date through the liquidation.
Approximately $2.0 million of fees relate to services provided prior to December
31, 1999 and the remainder relates to services to be provided to effectuate the
wind down and maximize recovery.
Reclamation Claims represent claims from vendors of approximately $600 thousand
for inventory that the Company received within the ten day period after the
inventory was received prior to the Petition Date.
Priority Tax Claims are estimated to be approximately $400 thousand as of
December 31, 1999.
Post-petition accounts payable, taxes and accrued liabilities relate to
liabilities incurred by the Debtors and the Company's non-Debtor affiliates
subsequent to the Petition Date.
NOTE 12 - ALLOWED UNSECURED CLAIMS: The Company's estimate of Allowed Unsecured
Claims is $361.4 million and primarily consists of the Old Senior Subordinated
Notes Claims, Trade Claims and Rejection Claims. It is assumed in this
hypothetical liquidation analysis that the Company would reject all store
leases. The impact of any contingent Claims has been excluded from this
analysis.
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NOTE 13 - Estimated recovery to Class 5 Claims and Class 6 Claims under the Plan
assumes a 12-15% yield on the New Secured PIK Notes, and an equity value of
$4.79 per share based on the price per share paid by the New Money Investors.
SUMMARY
In a chapter 7 liquidation scenario, the asset recovery value ranges
from approximately 24% of the net book value of assets in the low scenario to
approximately 29% in the high scenario. These ranges would provide a recovery to
Unsecured Creditors of approximately 10% to 14%, substantially below the
projected recoveries under the Plan.
G. VOTING PROCEDURES
VOTING REQUIREMENTS - GENERALLY
Pursuant to the Bankruptcy Code, only Holders of Claims against or
Interests in the Debtors that are Allowed pursuant to Section 502 of the
Bankruptcy Code and that are impaired under the terms and provisions of the Plan
are entitled to vote to accept or reject the Plan. Pursuant to the Bankruptcy
Code, a class of claims or interests is "impaired" if the legal, equitable, or
contractual rights attaching to the claims or interests of that class are
altered. Each Holder of an Old Senior Subordinated Note Claim in Class 5, and
each Holder of a General Unsecured Claim in Class 6, as of the Voting Record
Date of _____________ established by the Court are entitled to vote to accept or
reject the Plan. The Debtors propose that for voting purposes each Holder of a
Class 5 Claim shall be entitled to vote its Claim in the outstanding principal
amount. General Unsecured Claims entitled to vote may vote in the liquidated,
undisputed amount of such Claims. Claims which are not liquidated in amount or
are objected to prior to the Voting Deadline may not vote, or if they have
voted, such vote will not be counted, unless a voting amount is established by
the Court.
Classes of Claims and Interests that are not impaired are not entitled
to vote on the Plan, are presumed to have accepted the Plan and will not receive
a Ballot. As set forth above, Claims in Classes 1, 2, 3, 4, 7 and 10 and
Interests in Class 11 are not impaired, and such Classes are not entitled to
vote on the Plan and are presumed to have accepted the Plan pursuant to Section
1126(f) of the Bankruptcy Code. Holders of Claims in Class 9 and Holders of
Interests in Class 8 (Old Common Stock), are Impaired under the Plan, and are
deemed to have rejected the Plan and will not receive Ballots for voting. The
classification of Claims and Interests and their designation as Impaired or not
Impaired is summarized above in Sections VII. C. "Classification of Claims and
Interests".
BALLOTING AGENT
Donlin Recano & Company, Inc. will act as Balloting Agent in connection
with the solicitation. All deliveries, correspondence and questions should be
directed to the Balloting Agent at the following address or telephone number (i)
if by mail: Planet Hollywood International, Inc., ET AL., c/o Donlin, Recano &
Company, Inc., P.O. Box 2089, Murray Hill Station, New York, New York
10156-0701; (ii) if by hand: Planet Hollywood International, Inc.,
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ET AL., c/o Donlin, Recano & Company, Inc., 419 Park Avenue South, Suite 1206,
New York, NY 10016; and (iii) if by telephone: (212) 481-1411. The Balloting
Agent will provide Holders of Claims and Interests with information regarding
the solicitation, assist Holders in obtaining copies of this Disclosure
Statement and Ballots, to the extent applicable, and respond to questions with
respect to any of the foregoing.
VOTING PROCEDURES - GENERALLY
Consistent with the provisions of Bankruptcy Rule 3018, the Court has
fixed the close of business on __________ __, _____ as the record date for
determining the Holders of Claims who are entitled to receive a copy of this
Disclosure Statement and to vote to accept or reject the Plan (the "Voting
Record Date"). Entities that acquire Claims after the Voting Record Date will
not be entitled to vote on the Plan.
A Ballot, or in some cases, a Master Ballot, for voting to accept or
reject the Plan is enclosed with each copy of the Disclosure Statement. IF YOU
HAVE A CLAIM OR INTEREST THAT IS IMPAIRED UNDER THE PLAN AND YOU ARE ENTITLED TO
VOTE AND YOU DID NOT RECEIVE A BALLOT, RECEIVED A DAMAGED BALLOT, OR LOST YOUR
BALLOT, PLEASE CONTACT DONLIN RECANO & COMPANY, INC., THE BALLOTING AGENT, AT
(212) 481-1411. IF YOU HOLD CLAIMS IN MORE THAN ONE CLASS, YOU MAY RECEIVE MORE
THAN ONE BALLOT. YOU SHOULD COMPLETE AND SIGN AND RETURN EACH BALLOT YOU
RECEIVE.
Under the Bankruptcy Code, for purposes of determining whether the
requisite acceptances have been received, ONLY THOSE HOLDERS THAT VOTE TO ACCEPT
OR REJECT THE PLAN WILL BE COUNTED. VOTES CANNOT BE TRANSMITTED ORALLY OR BY
FACSIMILE TRANSMISSION. Accordingly it is important that you return your signed
and properly completed Ballot(s) promptly. PLEASE FOLLOW THE INSTRUCTIONS
CONTAINED ON THE BALLOT CAREFULLY. To accept the Plan, the Holder must check the
box entitled "accept the Plan" on the appropriate Ballot. Any Ballot cast that
does not indicate whether the Holder of the Claim is voting to accept or reject
the Plan or indicates that the Holder both accepts and rejects the Plan will NOT
be counted as either an acceptance or rejection of the Plan. Any Ballot that
does not indicate a vote to accept or reject the Plan will not be counted at
all. You must sign your Ballot. Failure by any Holder to send a duly executed
Ballot with an original signature will be deemed an abstention by such holder
with respect to a vote on the Plan and will not be counted as a vote for or
against the Plan. A vote may be disregarded if the Court determines, after
notice and a hearing, that such acceptance or rejection was not solicited or
procured in good faith or in accordance with the provisions of the Bankruptcy
Code or if a Claim was voted in bad faith.
VOTING PROCEDURES - CLASS 5 (OLD SENIOR SUBORDINATED NOTES) CLAIMS
Copies of this Disclosure Statement and appropriate Ballots and Master
Ballots have been sent to all registered Holders of Class 5 Claims as of the
Voting Record Date, including brokerage firms, commercial banks, trust
companies, or other nominees ("Intermediaries"). If such Intermediaries do not
hold for their own account, they must provide copies of this Disclosure
Statement and appropriate Ballots to their customers and to Holders of such
Claims
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who are the beneficial owners of such Claims. ANY BENEFICIAL OWNER WHO DOES NOT
RECEIVE A COPY OF THIS DISCLOSURE STATEMENT AND A BALLOT SHOULD CONTACT ITS
APPROPRIATE INTERMEDIARY OR THE BALLOTING AGENT.
Any beneficial owner holding Old Senior Subordinated Notes in "street
name" can vote only by following these instructions:
a. fill out the appropriate account and other information on the
Ballot;
b. sign the Ballot unless already signed by the Intermediary; and
c. return the completed Ballot to the Intermediary in the
self-addressed, stamped envelope enclosed with the Ballot, in sufficient time to
enable such Intermediary to include your vote on the Master Ballot which itself
must be actually received by the Balloting Agent by the Voting Deadline to be
counted. If no envelope was enclosed, contact the Balloting Agent or your
Intermediary for instructions.
The Intermediary will be responsible for completing a Master Ballot
reflecting its vote and the votes of other beneficial owners for which the
Intermediary acts as nominee, and for delivering the Master Ballot in a timely
manner (i.e. prior to the Voting Deadline) to the Balloting Agent. Any Ballot
submitted to an Intermediary will not be counted unless such Intermediary timely
delivers the Ballot to the Balloting Agent.
Any beneficial owner which is also the record holder of the Old Senior
Subordinated Notes will receive from the Balloting Agent a copy of this
Disclosure Statement and an appropriate Ballot to be properly filled out and
signed. Such beneficial owners should return the completed Ballot directly to
the Balloting Agent prior to the Voting Deadline, in order for such vote to
count.
UNITED STATES TRUST COMPANY OF NEW YORK, THE OLD INDENTURE TRUSTEE FOR
THE OLD SENIOR SUBORDINATED NOTES, WILL NOT VOTE ON BEHALF OF THE HOLDERS OF OLD
SENIOR SUBORDINATED NOTES CLAIMS. ACCORDINGLY, EACH HOLDER OF OLD SENIOR
SUBORDINATED NOTES CLAIMS MUST SUBMIT ITS OWN BALLOT. DO NOT RETURN THE
CERTIFICATES REPRESENTING YOUR CLAIMS WITH YOUR BALLOTS.
VOTING PROCEDURES - CLASS 6 (GENERAL UNSECURED) CLAIMS
General Unsecured Claims entitled to vote may vote in the liquidated,
undisputed amount of such Claims. Claims which are not liquidated in amount or
are disputed may not vote unless a voting amount is established by the Court.
In most cases, the Ballot enclosed with this Disclosure Statement is
printed with the amount of your Claim for voting purposes. Such amount is based
either on your proof of claim, the Debtors' Schedules of Liabilities or an order
of the Court. If your Claim is or may become a Disputed Claim this amount may
not be the amount ultimately Allowed for purposes of
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distribution in the Class in which your Claim has been classified. All votes to
accept or reject the Plan must be cast by using the Ballot enclosed with this
Disclosure Statement, or by obtaining a duplicate Ballot from the Balloting
Agent.
CONVENIENCE CLASS ELECTION BY GENERAL UNSECURED CREDITORS
Each Holder of a General Unsecured Claim in excess of $2,000 may elect,
in writing, at the appropriate place on the Ballot, to voluntarily reduce its
Claim to $2,000. All Holders of Class 6 Claims that make such election on a
validly executed and timely delivered Ballot will receive the treatment accorded
to the Holders of Convenience Claims (Class 4) under the Plan (payment in Cash,
in full of the lesser of the Allowed Claim amount or $2,000).
VOTING DEADLINE
IN ORDER TO BE COUNTED, BALLOTS AND MASTER BALLOTS MUST BE SIGNED AND
RETURNED SO THAT THEY ARE RECEIVED BY THE BALLOTING AGENT NO LATER THAN 4:00
P.M. EASTERN TIME ON __________ __, ____ (THE "VOTING DEADLINE"). ANY BALLOT OR
MASTER BALLOT RECEIVED AFTER THE VOTING DEADLINE WILL NOT BE COUNTED. IT IS OF
THE UTMOST IMPORTANCE TO THE DEBTORS THAT YOU VOTE PROMPTLY TO ACCEPT THE PLAN.
VIII. DESCRIPTION OF THE PLAN
THE FOLLOWING IS A SUMMARY OF CERTAIN SIGNIFICANT PROVISIONS OF THE
PLAN. THIS SUMMARY IS FOR DESCRIPTIVE PURPOSES ONLY, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION SET FORTH IN THE PLAN,
WHICH IS ATTACHED TO THIS DISCLOSURE STATEMENT AS EXHIBIT 1. TO THE EXTENT THAT
THE TERMS OF THIS DISCLOSURE STATEMENT VARY FROM THE TERMS OF THE PLAN, THE
TERMS OF THE PLAN SHALL BE CONTROLLING.
A. CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN
Set forth below is the classification of Claims and Interest and the
treatment of such Claims and Interests under the Plan. The Plan contains 11
Classes of Claims and Equity Interests. In accordance with the Bankruptcy Code,
Administrative and Priority Tax Claims are not classified for purposes of voting
on or receiving distributions under the Plan, but must be paid in full or as
otherwise agreed by the parties. A Claim or Interest is part of a particular
Class only to the extent that such Claim or Interest qualifies within the
description of that Class, and such Claim or Interest shall be part of a
different Class to the extent that any remainder of the Claim or Interest
qualifies within the description of such other Class or Classes. The Debtors
believe they have classified the Claims and Interests in the Plan in accordance
with Section 1123(a)(1) of the Bankruptcy Code.
1. UNCLASSIFIED CLAIMS - ADMINISTRATIVE AND PRIORITY TAX CLAIMS
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ADMINISTRATIVE CLAIMS. Administrative Claims are those Claims entitled
to priority in payment pursuant to Sections 503, 507(a)(1) or 507(b) of the
Bankruptcy Code and include all amounts required to be paid in connection with
reclamation claims and the assumption of executory contracts and unexpired
leases. Priority Tax Claims are those tax Claims of governmental units entitled
to priority under Section 507(a)(8) of the Bankruptcy Code. Holders of Priority
Tax Claims shall not be required to file Proofs of Claim.
ORDINARY COURSE LIABILITIES. Holders of Administrative Claims based on
liabilities incurred in the ordinary course of the Debtors' business shall not
be required to File any request for payment of such Claims. Such Administrative
Claims shall be assumed and paid by Reorganized PHI pursuant to the terms and
conditions of the particular transactions giving rise to such Administrative
Claims without any further action by the Holders of such Claims or the need for
Bankruptcy Court approval.
ADMINISTRATIVE RECLAMATION CLAIMS. Holders of Allowed Administrative
Reclamation Claims shall be paid in full, in Cash, on the Effective Date or such
other date as shall be approved by an order of the Bankruptcy Court.
Administrative Reclamation Claims are those reclamation Claims that are entitled
to Administrative Expense status pursuant to an order of the Bankruptcy Court
entered under 11 U.S.C. ss. 546(c).
FEES OF PROFESSIONALS AND CLAIMS FOR SUBSTANTIAL CONTRIBUTION. All
Professionals retained by any Debtor and any other Entities (other than any
Professionals retained by the Old Indenture Trustee, which Professionals shall
be paid in accordance with Section 6.4 of the Plan) requesting compensation or
reimbursement of expenses pursuant to Sections 327, 328, 330, 331, or 503(b) of
the Bankruptcy Code for services rendered before the Confirmation Date
(including, without limitation, any compensation requested by any Professional
or any other Entity for making a substantial contribution in the Chapter 11
Cases), shall File and serve on Reorganized PHI, the Creditors' Committee and
the United States Trustee an application for final allowance of compensation and
reimbursement of expenses no later than thirty (30) days after the Effective
Date. Objections to applications of Professionals for compensation or
reimbursement of expenses must be Filed and served on Reorganized PHI, the
United States Trustee, the Creditors' Committee and the Professionals to whose
application the objections are addressed, no later than fifteen (15) days after
service of the related application. Reorganized PHI shall pay the amounts
Allowed by Final Order of the Bankruptcy Court within ten (10) days after the
date of such Order.
PRIORITY TAX CLAIMS. Unless otherwise agreed between the Holder of a
Priority Tax Claim and any Debtor or Reorganized PHI, in accordance with Section
1129(a)(9)(C) of the Bankruptcy Code, each Holder of an Allowed Priority Tax
Claim shall receive, at such Debtor's or Reorganized PHI's option, as the case
may be, either (i) Cash, in the full amount of such Allowed Priority Tax Claim
on the Effective Date or (ii) deferred payments of Cash in the full amount of
such Allowed Priority Tax Claim, payable in equal annual principal installments
beginning the first anniversary of the Effective Date and ending on the earlier
of the sixth anniversary of the Effective Date or the sixth anniversary of the
date of the assessment of such Claim, together with interest (payable quarterly
in arrears) on the unpaid balance of such Allowed Priority Tax Claim at an
annual rate equal to the Treasury Rate or such other rate as
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may be set by the Bankruptcy Court at the Confirmation Hearing. The amount of
any Allowed Priority Tax Claim for which the time for filing a return, if
required, under applicable law or under any authorized extension thereof, has
not expired on or prior to the Effective Date, and the rights of the Holder of
such Claim, if any, to payment in respect thereof shall (i) be determined in the
manner in which the amount of such Claim and the rights of the Holder of such
Claim would have been resolved or adjudicated if the Chapter 11 Cases had not
been commenced, PROVIDED, HOWEVER, that the Debtors reserve the right to seek a
determination of the amount of or liability for any Priority Tax Claim under 11
U.S.C. ss. 505; (ii) survive the Effective Date and consummation of the Plan as
if the Chapter 11 Cases had not been commenced, and (iii) not be discharged
pursuant to Section 1141 of the Bankruptcy Code.
2. CLASSIFIED CLAIMS AND INTERESTS
CLASS 1. PRIORITY CLAIMS.
Class 1 consists of all Priority Claims, which are defined in the Plan
as any Allowed Claim, to the extent entitled to priority under Section 507 (a)
of the Bankruptcy Code, other than an Administrative Claim or a Priority Tax
Claim, against any Debtor. The Debtors do not believe that there are any unpaid
Holders of Allowed Priority Claims, due to the entry of First-Day Orders
authorizing payment of Priority Claims.
To the extent that there are any Holders of an Allowed Priority Claim,
each Holder of an Allowed Priority Claim shall be entitled to receive, in full
satisfaction of such Claim, the Allowed amount of such Claim in full in Cash on
the later of (i) the Effective Date; (ii) the date that such Claim becomes an
Allowed Priority Claim; and (iii) the date that such Claim would be paid in
accordance with any terms and conditions of any agreements or understandings
relating thereto between any Debtor and the Holder of such Claim.
CLASS 1 CLAIMS ARE UNIMPAIRED. Holders of Priority Claims are presumed
to have accepted the Plan and solicitation of votes from Holders of Class 1
Claims is not required under the Bankruptcy Code.
CLASS 2. THE SUNTRUST CLAIMS
Class 2 consists of the SunTrust Claims, which are defined in the Plan
as the outstanding commitments under the SunTrust Agreements and any other
amounts due thereunder. As of the Petition Date, the outstanding balance owed to
Sun Trust was approximately $2.5 million.
On the Effective Date, the Holder of the Allowed Class 2 Claim shall
receive in full satisfaction thereof, the outstanding unpaid amount due, if any,
under the Sun Trust Agreements, plus accrued and unpaid interest, if any, at the
non-default contractual rate set forth in the SunTrust Agreements through the
Effective Date, plus Allowed fees, costs and expenses, all payable in Cash.
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CLASS 2 CLAIMS ARE UNIMPAIRED. Holders of the SunTrust Claims are
presumed to have accepted the Plan and solicitation of votes from holders of
Class 2 Claims is not required under the Bankruptcy Code.
CLASS 3. MISCELLANEOUS SECURED CLAIMS.
Class 3 consists of all Miscellaneous Secured Claims, which are defined
in the Plan as any Allowed Claim that is a Secured Claim other than the SunTrust
Claim. These Claims generally include the Claims of equipment lessors and
merchandise suppliers.
Each Holder of an Allowed Miscellaneous Secured Claim shall be treated
in accordance with Section 1124(2) of the Bankruptcy Code, or in accordance with
the terms of any agreements between the Secured Creditor and the Debtors as
approved by the Bankruptcy Court.
CLAIMS 3 CLAIMS ARE UNIMPAIRED. Holders of Miscellaneous Secured Claims
are presumed to have accepted the Plan and solicitation of votes from Holders
thereof is not required under the Bankruptcy Code.
CLASS 4. CONVENIENCE CLAIMS.
Class 4 consists of all Convenience Claims, which are defined in the
Plan as Unsecured Claims in Allowed Amounts not to exceed $2,000, or that are
voluntarily reduced to $2,000 by written election of the holders of such Claims
on validly executed and timely delivered ballots. The Debtors project that
approximately 1,900 Claims will fall within or opt into this category, resulting
in a total payment obligation of approximately $1.5 million.
On the Effective Date, each Holder of an Allowed Claim that is $2,000
or less or reduced to $2,000 or less shall receive a Cash payment equal to the
lesser of the Allowed amount of the Claim or $2,000.
CLASS 4 CLAIMS ARE UNIMPAIRED. Holders of Convenience Claims are
presumed to have accepted the Plan and solicitation of votes from Holders of
Class 4 Claims is not required under the Bankruptcy Code.
CLASS 5 OLD SENIOR SUBORDINATED NOTES CLAIMS
Class 5 consists of all Old Senior Subordinated Notes Claims held by
the Holders of the 12% Senior Subordinated Notes due 2005, issued by PHI
pursuant to the Old Senior Subordinated Notes Indenture.
On the Effective Date, each Holder of an Allowed Class 5 Claim as of
the Distribution Record Date, shall have an Allowed Claim equal to the face
amount of its Old Senior Subordinated Notes plus unpaid accrued interest and
interest on defaulted payments of interest at the default rate provided in the
Old Senior Subordinated Notes Indenture and related documents through the
Petition Date. Under the Plan, the holder of an Allowed Class 5 Claim shall
receive, in full satisfaction of its Allowed Class 5 Claim, its Pro Rata share
of: (i) $47.5 million in Cash,
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(ii) $60 million of New Secured PIK Notes; and (iii) 2.65 million shares of New
Class A Common Stock. In the event PHI is unable to complete an agreement with a
third-party lender to purchase the New Senior Secured Notes prior to the
Confirmation Date, PHI may, with the written consent of Holders of at least $167
million in principal amount of Old Senior Subordinated Notes, in lieu of the
payment of up to $25 million in Cash, deliver to the Holders of Class 5 Claims
up to $25 million of New Senior Secured Notes (payable on the same terms and
conditions as are set forth in Section II hereof and on ANNEX A to the Plan),
plus a fee totaling $625,000 and 350,000 additional shares of New Class A Common
Stock (the "Class 5 Alternative Distribution"). In the event that the amount of
any New Class A Common Stock paid to a third-party lender as partial
consideration for the purchase of the New Senior Secured Notes is less than
350,000 shares of New Class A Common Stock, then the Holders of Class 5 Claims
shall receive, on the Effective Date, their Pro Rata share of that undistributed
New Class A Common Stock up to a total of 350,000 shares (the "Supplemental
Class 5 Distribution"), and the amount of New Secured PIK Notes distributed to
Class 5 shall be reduced by the Class 6 Adjustment Amount. The principal
economic terms of the New Secured PIK Notes are set forth in Section II of this
Disclosure Statement, and on ANNEX B to the Plan.
CLASS 5 CLAIMS ARE IMPAIRED. The beneficial Holders of the Old Senior
Subordinated Notes are entitled to vote to accept or reject the Plan.
CLASS 6. GENERAL UNSECURED CLAIMS
Class 6 consists of all General Unsecured Claims, which are defined as
any Claim (including any Trade Claim, Rejection Claim, and Litigation Claim)
that is not a Consolidated Claim, Old Senior Subordinated Notes Claim,
Intercompany Claim, Administrative Claim, Priority Claim, SunTrust Claim, a
Miscellaneous Secured Claim, Landlord Settlement Agreement Claim or Old
Indenture Trustee Claim. Each Holder of an Allowed Class 6 Claim shall receive,
in full satisfaction of its Allowed Claim, Cash and New Secured PIK Notes having
an aggregate value as a percentage of its Allowed Claim, equal to the aggregate
value of the consideration to be received by each Holder of an Allowed Class 5
Claim as a percentage of its Allowed Claim. The Cash component of the
distribution to Class 6 shall be the same percentage of a Class 6 Holder's
Allowed Claim as the Cash component of the distribution to Class 5 is as a
percentage of the Allowed Claims of Holders in Class 5, counting a distribution
of New Senior Secured Notes to Class 5, if any, as a Cash payment. For purposes
of calculating the Class 6 distribution, the New Secured PIK Notes shall be
valued at their face amount, and New Class A Common Stock shall be valued at
$4.2857 per share. In the event Class 5 receives the Supplemental Class 5
Distribution, then the Holders of Class 6 Claims shall receive, on the Effective
Date, their Pro Rata share of the Class 6 Adjustment Amount determined as
provided in Section 5.6 of the Plan.
CLASS 6 CLAIMS ARE IMPAIRED. Holders of General Unsecured Claims are
entitled to vote to accept or reject the Plan.
CLASS 7. LANDLORD SETTLEMENT AGREEMENT CLAIMS.
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Class 7 consists of Landlord Settlement Agreement Claims which are
defined in the Plan as pre Petition Date or post Petition Date agreements
between PHI or any of its Filed Subsidiaries and a landlord regarding the
restructuring, termination or sale of a Debtor's leasehold rights and
obligations which requires approval or ratification thereof by the Bankruptcy
Court, and which give rise to Claims for the payment of Cash, performance by a
Debtor under a lease, a Debtor's surrender of leasehold or other property
rights, or as otherwise provided under the applicable Landlord Settlement
Agreement. All such Claims shall be Allowed unless the Court enters a Final
Order disallowing, disapproving or unwinding a Landlord Settlement Agreement.
CLASS 7 CLAIMS ARE UNIMPAIRED. Holders of Landlord Settlement Agreement
Claims are presumed to have accepted the Plan and solicitation of votes from
Holders of Class 7 Claims is not required under the Bankruptcy Code.
CLASS 8 OLD COMMON STOCK.
Class 8 consists of all Interests of Holders of Old Common Stock of PHI
which is defined in the Plan as, collectively, the Class A and Class B common
shares, par value $.01 per share, issued and outstanding, or held in treasury,
immediately prior to the Effective Date.
If both Class 5 and Class 6 accept the Plan, each Holder of an Allowed
Class 8 Interest as of the Distribution Record Date shall receive on the
Effective Date, in full satisfaction of its Allowed Interest, its Pro Rata share
of New Warrants, PROVIDED, HOWEVER, that no distribution will be made to a
Holder of less than 5,450 shares of Old Common Stock. If either Class 5 or Class
6 rejects the Plan, Holders of Class 8 Interests shall not receive or retain any
property on account of their Class 8 Interests and no New Warrants shall be
issued.
CLASS 8 INTERESTS ARE IMPAIRED. Holders of Old Common Stock Interest
are presumed to have rejected the Plan and solicitation of votes from them is
not required under the Bankruptcy Code.
CLASS 9. CLAIMS FOR ISSUANCE OF OLD COMMON STOCK.
Class 9 consists of all Old Warrants, Old Celebrity Options and Old
Employee Options and all other options or rights to acquire Old Common Stock,
including, without limitation, all Claims arising out of the rejection of Old
Warrants, Old Celebrity Options and Old Employee Options and other options to
acquire Old Common Stock, to the extent they constitute executory contracts, and
any Claim that has the same priority as the Old Common Stock pursuant to Section
510(b) of the Bankruptcy Code, including, without limitation, any Claim for the
issuance of Old Common Stock in connection with an acquisition or otherwise.
The Holders of Class 9 Claims shall not receive or retain any property
under the Plan. All options or rights to acquire the Old Common Stock shall be
canceled, annulled and extinguished on the Effective Date.
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CLASS 9 CLAIMS ARE IMPAIRED. Holders of Claims for issuance of Old
Common Stock are presumed to have rejected the Plan and solicitation of votes
from Holders of Class 9 Claims is not required under the Bankruptcy Code.
CLASS 10. INTERCOMPANY CLAIMS.
Class 10 consists of all Intercompany Claims, which are defined under
the Plan as any Claim held by any Domestic Subsidiary or Foreign Subsidiary,
other than any of the Consolidated Debtors, against any of the Debtors.
Each Holder of an Allowed Class 10 Claim shall be treated in accordance
with Section 1124(2) of the Bankruptcy Code.
CLASS 10 CLAIMS ARE UNIMPAIRED. Holders of Intercompany Claims are
presumed to have accepted the Plan and solicitation of votes from Holders of
Class 10 Claims is not required under the Bankruptcy Code.
CLASS 11. INTERCOMPANY INTERESTS.
Class 11 consists of all stock ownership Interests of PHI and any
Subsidiary in any other Subsidiary or Unconsolidated Affiliate.
The Holders of Class 11 Interests shall retain unaltered the legal,
equitable and contractual rights to which their Interests entitle them in
accordance with Section 1124(2) of the Bankruptcy Code.
CLASS 11 INTERESTS ARE UNIMPAIRED. Holders of Intercompany Interests
are presumed to have accepted the Plan and solicitation of votes from Holders of
Class 11 Interests is not required under the Bankruptcy Code.
POST-PETITION INTEREST. To the extent required by the Bankruptcy Court
or applicable law, the aggregate distribution paid to Holders of Allowed Claims
deemed to be unimpaired under the Plan shall include interest accrued thereon
from the Petition Date through the Effective Date at the lower of (i) the
Treasury Rate; (ii) the rate earned on the Debtors' cash investments; or (iii)
the rate determined by the Bankruptcy Court.
ALLOCATION BETWEEN PRINCIPAL AND ACCRUED INTEREST. The aggregate
consideration paid to Holders in respect of their Allowed Claims shall be
treated under this Plan as allocated first to the principal amount of such
Allowed Claim to the extent thereof and, thereafter, to the interest, if any,
accrued thereon through the Effective Date.
B. MEANS FOR EXECUTION OF THE PLAN
FUNDING THE PLAN. On the Effective Date, PHI shall (i) receive $30
million cash from the New Money Investor as the purchase price for 7.0 million
shares of New Class B Common Stock; (ii) issue up to $25 million face amount of
the New Senior Secured Notes to third party lenders or,
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with the consent of the requisite amount of Holders, to the Holders of Class 5
Claims; and (iii) obtain such other financing on terms reasonably acceptable to
the Committee as necessary to fund the Debtors' obligations under the Plan and
to operate the Reorganized Debtors. PHI shall issue the New Senior Secured
Notes, the New Secured PIK Notes, the New Warrants, New Options and New Common
Stock, and shall deliver Cash to the Entities entitled to receive distributions
under the Plan.
CANCELLATION OF OLD SECURITIES, INSTRUMENTS AND AGREEMENTS RELATING TO
IMPAIRED CLAIMS AND INTERESTS. On the Effective Date, except as otherwise
provided in the Plan or by Court order, all securities, instruments and
agreements governing any Claims and Interests Impaired by the Plan shall be
deemed canceled and terminated, and the obligations of the Debtors relating to,
arising under, in respect of or in connection with such securities, instruments
and agreements shall be discharged; PROVIDED, HOWEVER, that notes, securities
and other evidences of Claims and Interests shall, effective upon the Effective
Date, represent the right to participate, to the extent such Claims and
Interests are Allowed, in the distributions contemplated by the Plan.
EFFECTIVENESS OF SECURITIES, INSTRUMENTS AND AGREEMENTS. On the
Effective Date, all securities, instruments and agreements entered into or
issued pursuant to the Plan, including, without limitation, the Plan documents
and any security, instruments or agreements entered into in connection with any
such documents shall become effective and binding in accordance with their
respective terms and conditions upon the parties thereto and shall be deemed to
become effective simultaneously.
CORPORATE GOVERNANCE AND VOTING. On the Effective Date, Reorganized PHI
will be authorized to issue 225 million shares of Common Stock consisting of 100
million shares of New Class A Common Stock, par value $.01 per share, and 25
million shares of New Class B Common Stock, par value $.01 per share and 100
million shares of preferred stock, par value $.01 per share. The New Class A
Common Stock and the New Class B Common Stock are referred to collectively
herein as the "Common Stock." On the Effective Date, approximately 3.0 million
shares of New Class A Common Stock and 7.0 million shares of New Class B Common
Stock are expected to be issued and outstanding.
On the Effective Date, no shares of preferred stock will be issued and
outstanding.
Each share of New Common Stock held of record as of the record date of
any meeting shall entitle the holder thereof to one vote on each matter
submitted to a vote of the stockholders. Except in connection with the election
or removal of Directors or as may otherwise be provided by the Amended PHI
Articles or Delaware law, the New Class A Common Stock and the New Class B
Common Stock shall vote together, as a single class, on all matters.
The Amended PHI Articles provide that all dividends, whether cash,
property or stock, shall be shared ratably among all holders of Common Stock;
provided that all dividends and distributions on the New Class A Common Stock
payable in stock of Reorganized PHI shall be made in shares of New Class A
Common Stock, and all dividends and distributions on the New Class B Common
Stock payable in stock of the Reorganized PHI shall be made in shares of New
Class B Common Stock. Similarly, in the event of the voluntary or involuntary
liquidation, dissolution or winding up of Reorganized PHI, the holders of New
Class A Common Stock and
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New Class B Common Stock shall be entitled to share ratably as a single class in
all of the remaining assets of Reorganized PHI of whatever kind available for
distribution to stockholders.
The Board of Directors of Reorganized PHI shall be comprised of seven
directors, consisting of two Class A Directors and five Class B Directors. The
holders of the New Class A Common Stock, voting separately as a single class,
will elect the Class A Directors by a plurality of votes cast, and the holders
of the New Class B Common Stock, voting separately as a single class, will elect
the Class B Directors by a plurality of votes cast.
On the Effective Date, the Board of Directors of Reorganized PHI shall
consist of five members appointed by the New Money Investors (the "Class B
Directors") and two members appointed by the Creditors' Committee (the "Class A
Directors"). After the Effective Date, Holders of New Class A Common Stock shall
have the right to elect the two Class A Directors until repayment in full of the
New Secured PIK Notes, at which time the number of Class A Directors shall be
reduced to one and the number of Class B Directors shall be increased to six,
and thereafter the Class A Director shall be elected by the holders of New Class
A Common Stock and the Class B Directors shall be elected by the Holders of New
Class B Common Stock, in each case, voting separately as a single class, by a
plurality of the votes cast. Any one or more of the Class A Directors may be
removed with or without cause only by a vote of the holders of a majority of the
outstanding shares of New Class A Common Stock, voting separately as a single
class. Anyone or more of the Class B Directors may be removed with or without
cause only by a vote of the holders of a majority of the outstanding shares of
New Class B Common Stock, voting separately as a single class.
Robert Earl shall be the Chief Executive Officer of PHI as of the
Confirmation Date and on and after the Effective Date. Selection of a Chief
Financial Officer and Chief Operating Officer for Reorganized PHI prior to or as
of the Effective Date shall be subject to the consent, not to be unreasonably
withheld, of the Creditors' Committee, and after the Effective Date shall be
subject to the super-majority approval of at least six (6) members of
Reorganized PHI's Board of Directors. Officers and directors for all of the
Reorganized Debtors other than PHI shall be designated by the Board of Directors
of Reorganized PHI. Except as otherwise provided herein or in any Plan Document,
the members of the existing Board of Directors of PHI shall have no continuing
obligations to any of the Debtors or Reorganized PHI on and after the Effective
Date.
The individuals listed as directors of Reorganized PHI as of the
Confirmation Date shall serve as directors of Reorganized PHI and their
elections to the Board of Directors of Reorganized PHI shall be deemed to have
occurred and be effective on and after the Effective Date without any
requirement of further action by stockholders of PHI or Reorganized PHI. The
Class B Directors will be chosen by the New Money Investors and the Class A
Directors will be chosen by the Creditors' Committee.
The Amended PHI Articles will provide that New Class B Common Stock may
be transferred to any other Person, provided that upon such transfer (other than
a transfer to a New Money Investor or an affiliate of a New Money Investor) such
shares shall be automatically converted into an equal number of shares of New
Class A Common Stock. All shares of New Class B Common Stock shall be
convertible at any time after payment in full of the New Secured
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PIK Notes, at the option of the holders thereof, into New Class A Common Stock;
provided that any such optional conversion must include all then outstanding
shares of New Class B Common Stock. In addition, in the event that the number of
outstanding shares of Class B Common Stock constitutes 10% or less of the
aggregate number of all outstanding shares of Common Stock, all outstanding
shares of New Class B Common Stock shall be automatically converted into New
Class A Common Stock. At such time as there are no shares of New Class B Common
Stock outstanding, the holders of New Class A Common Stock shall elect all
members of the Board of Directors of Reorganized PHI. In addition, the
certificates and articles of incorporation and by-laws of each Subsidiary shall
be amended as required by applicable law to incorporate all other relevant
provisions of the Plan with respect to such certificates, articles and by-laws.
SUBSTANTIVE CONSOLIDATION. The Plan contemplates the substantive
consolidation of the Chapter 11 Cases of the Debtors into a single Case solely
for purposes of confirmation, consummation and implementation of the Plan.
Pursuant to the Confirmation Order, on the Confirmation Date: (i) all assets,
and all proceeds thereof, and all liabilities of the Consolidated Debtors will
be merged or treated as though they were merged with and into the assets and
liabilities of Reorganized PHI; (ii) all Consolidated Claims and Claims among
the Consolidated Debtors will receive no distribution under the Plan; (iii) any
obligation of any Consolidated Debtor, and all guarantees thereof executed by
one or more of the Consolidated Debtors, and any Claims Filed or to be Filed in
connection with any such obligation and guarantee will be deemed one Claim
against Reorganized PHI; (iv) each and every Claim Filed in the individual
Chapter 11 Case of any of the Consolidated Debtors will be deemed Filed against
Reorganized PHI; and (v) for purposes of determining the availability of the
right of set-off under Section 553 of the Bankruptcy Code, the Consolidated
Debtors shall be treated for purposes of the Plan as one entity so that, subject
to the other provisions of Section 553 of the Bankruptcy Code, debts due to any
of the Consolidated Debtors may be setoff against the debts of any of the
Consolidated Debtors.
The Debtors believe substantive consolidation for purposes of
confirmation, consummation and implementation of the Plan is fair, equitable and
in the best interests of Creditors. SEE Section VII. D. for further discussion.
EXTINGUISHMENT OF GUARANTEES. Except as otherwise provided in the Plan
or in any Plan Document, or in executory contracts or leases assumed by the
Debtors, on the Effective Date, all Claims based upon guarantees of collection,
payment or performance made by any of the Debtors as to the obligations of each
other, including, without limitation, the Leasehold Guarantees, shall be
discharged, released and of no further force and effect.
CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN REORGANIZED PHI
AND THE OTHER REORGANIZED DEBTORS. PHI shall continue to exist on and after the
Effective Date as Reorganized PHI, a duly organized Delaware corporation, with
all the rights and powers of a corporation under applicable law and without
prejudice to any right to alter or terminate such existence (whether by merger
or otherwise) under Delaware law, subject to the terms and provisions of the
Plan and the Confirmation Order. Unless otherwise determined by PHI, the other
Reorganized Debtors shall continue to exist on and after the Effective Date as
duly organized entities within the state of their incorporation or organization.
Except as otherwise provided in the Plan, on or
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after the Effective Date, all property of the Consolidated Estates, and any
property and assets acquired by the Debtors or the Reorganized Debtors under any
provisions of the Plan, shall vest in the Reorganized Debtors, free and clear of
any and all Claims, Liens, charges and other Encumbrances. On and after the
Effective Date, the Reorganized Debtors may operate their businesses and may
use, acquire and dispose of property or assets and compromise or settle any
Claims against them without supervision or approval by the Bankruptcy Court and
free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than
those restrictions expressly imposed by the Plan or the Confirmation Order.
Without limiting the foregoing, the Reorganized Debtors may pay the charges that
they incur on or after the Effective Date for Professional fees, disbursements,
expenses or related support services without application to the Bankruptcy
Court, except to the extent otherwise provided in the Plan.
C. DISTRIBUTIONS
GENERALLY. Except as otherwise provided in the Plan, any distribution
required by the Plan to be made on the Effective Date in respect of a Claim or
Interest that is Allowed as of the Effective Date will be deemed made on the
Effective Date if made on the Effective Date or as promptly thereafter as
practicable, but in any event no later than the later to occur of: (i) 45 days
after the Effective Date or (ii) the date on which such Claim or Interest
becomes Allowed and any other conditions to distribution with respect to such
Claim or Interest shall have been satisfied.
DISTRIBUTIONS TO THE HOLDER OF SUNTRUST CLAIMS. Any Cash payment
required to be made on the SunTrust Claims will be delivered by Reorganized PHI
to SunTrust on the Effective Date conditioned on the delivery by SunTrust of
executed releases of Liens, guarantees and cash collateral including any
necessary mortgage satisfactions, UCC Termination Statements or other documents
reasonably requested by PHI.
DISTRIBUTIONS TO HOLDERS OF OLD SENIOR SUBORDINATED NOTES CLAIMS. All
distributions provided for in the Plan on account of Old Senior Subordinated
Notes Claims will be made to the Old Indenture Trustee for further distribution
to individual Holders of Old Senior Subordinated Notes Claims. Any such
distribution made by the Old Indenture Trustee will be made pursuant to the Old
Senior Subordinated Notes Indenture. Notwithstanding any provision in the Plan
to the contrary, the Old Senior Subordinated Notes Indenture will continue in
effect to the extent necessary to allow the Old Indenture Trustee to receive and
make distributions pursuant to the Plan on account of Old Senior Subordinated
Notes Claims. Any actions taken by the Old Indenture Trustee on or after the
Effective Date that are not for this purpose will be null and void as against
the Debtors and Reorganized PHI, and Reorganized PHI will have no obligations to
the Old Indenture Trustee for any fees, costs or expenses incurred in connection
with any such actions.
DISTRIBUTIONS TO HOLDERS OF OTHER CLAIMS AND INTERESTS. Reorganized PHI
will make all distributions required under the Plan, except for distributions
made by the Old Indenture Trustee. Reorganized PHI may employ or contract with
other Entities including but not limited to the Old Stock Transfer Agent to
assist it in making the distributions required by the Plan.
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COMPENSATION FOR SERVICES RELATED TO DISTRIBUTION. In consideration for
providing services related to distributions pursuant to the Plan, the Old
Indenture Trustee and any other Entity employed by Reorganized PHI will receive
from Reorganized PHI without further Bankruptcy Court approval, reasonable
compensation for such services and reimbursement of reasonable out-of-pocket
expenses incurred in connection with such services. These payments will be made
on terms agreed to with Reorganized PHI and will not be deducted from
distributions to be made pursuant to the Plan to Holders of Allowed Claims and
Allowed Interests.
DELIVERY OF DISTRIBUTIONS AND UNDELIVERABLE OR UNCLAIMED DISTRIBUTIONS.
(a) Distributions to Holders of Allowed Claims and Holders of Allowed
Interests will be made as follows: (a) with respect to Old Senior Subordinated
Notes Claims by the Old Indenture Trustee, in accordance with the applicable Old
Senior Subordinated Notes Indenture; (b) with respect to all other Allowed
Claims, by Reorganized PHI (i) at the addresses set forth on the respective
proofs of Claim Filed by Holders of such Claims; (ii) at the addresses set forth
in any written notices of address change delivered to Reorganized PHI after the
Bar Date; (iii) at the addresses reflected in the applicable Debtor's records if
no proof of Claim has been Filed and Reorganized PHI has not received a written
notice of a change of address; and (c) with respect to Allowed Class 8 Interests
by Reorganized PHI at the addresses for record holders supplied by the Old
Transfer Agent or by PHI as of the Distribution Record Date.
(b) If any distribution to a Holder of a Class 5 Claim is returned to
the Old Indenture Trustee as undeliverable (an "Undeliverable Class 5
Distribution"), no further distributions will be made to that Holder until the
Old Indenture Trustee is notified in writing of such Holder's then current
address. If a Holder of Old Senior Subordinated Notes is not entitled to a
distribution under the Old Senior Subordinated Notes Indenture, the Plan, or any
order of the Bankruptcy Court, such distribution shall be treated as an
Undeliverable Class 5 Distribution. Any such Undeliverable Class 5 Distributions
will be held by the Old Indenture Trustee until they become deliverable or one
year from the Effective Date, whichever is earlier. After one year from the
Effective Date, the Old Indenture Trustee may redistribute the Undeliverable
Class 5 Distributions to other claimants receiving Class 5 Distributions, on a
pro rata basis. Any such distribution shall not alter the calculation of the
aggregate value distributable to Class 5 for purposes of calculating the
distribution to Class 6. If the Undeliverable Class 5 Distributions are so small
as to make it unduly burdensome to distribute them to other claimants, the Old
Indenture Trustee will return the Undeliverable Class 5 Distributions to
Reorganized PHI.
(c) If any distribution to any other Holders of Allowed Claims or
Allowed Interests is returned as undeliverable, no further distributions will be
made to such Holders until Reorganized PHI or its distribution agents are
notified in writing of such Holder's then current address.
(d) Undeliverable Cash (including dividends or other distributions on
account of undeliverable New Common Stock) will be held in segregated bank
accounts in the name of Reorganized PHI for the benefit of the potential
claimants of such funds. Undeliverable Cash will be invested by Reorganized PHI
in a manner consistent with Reorganized PHI's investment
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and deposit guidelines. Subject to paragraph 6.3.6(b) above, undeliverable Plan
Securities will be held by Reorganized PHI for the benefit of the potential
claimants of such securities. Any Holder of an Allowed Claim or an Allowed
Interest that does not assert a claim pursuant to the Plan for an undeliverable
distribution to be made by Reorganized PHI or the Old Indenture Trustee, as the
case may be, within one year after the Effective Date will have its claim for
such undeliverable distribution discharged and will be forever barred from
asserting any such claim against the Debtors, Reorganized PHI, the other
Reorganized Debtors or their respective property. In such case, (i) any Cash
held for distribution on account of such claims for undeliverable distributions
(including Cash interest, maturities, dividends and other distributions on
undelivered Plan Securities, as the case may be) shall be property of
Reorganized PHI, free of any restrictions thereon (except as otherwise provided
in any Plan Document); (ii) any New Secured PIK Notes held for distribution on
account of such claims for distribution shall be canceled and of no further
force or effect; and (iii) any New Common Stock held for distribution on account
of such claims for distribution shall either be canceled or held as treasury
shares as Reorganized PHI may determine is appropriate.
(e) Pending the distribution of the New Common Stock, Reorganized PHI
will cause all of the New Common Stock held by it for distribution under the
Plan to be: (i) represented in person or by proxy at each meeting of the
stockholders of Reorganized PHI; and (ii) voted proportionately with the votes
cast with respect to New Class A Common Stock, by the other holders of New Class
A Common Stock taken as a whole, and with respect to New Class B Common Stock by
the other holders of New Class B Common Stock taken as a whole.
DISTRIBUTION RECORD DATE.
As of the close of business on the Distribution Record Date, the
respective transfer registers for the Old Securities (as applicable) will be
closed, and Reorganized PHI, the Old Indenture Trustee, the Old Stock Transfer
Agent and their respective agents will have no obligation to recognize the
transfer of any Old Securities occurring after the close of business on the
Distribution Record Date and will be entitled for all purposes herein to
recognize and deal only with those Holders of record as of the close of business
on the Distribution Record Date.
MEANS OF CASH PAYMENTS. Except as otherwise specified herein, Cash
payments made pursuant to the Plan will be in U.S. dollars by checks drawn on a
domestic bank selected by Reorganized PHI, or by wire transfer from a domestic
bank, at the option of Reorganized PHI.
FRACTIONAL PLAN SECURITIES.
(a) Notwithstanding any other provisions of the Plan, principal amounts
of the New Secured PIK Notes, or the New Senior Secured Notes will be initially
issued only in denominations of $1,000 and integral multiples thereof. When any
distribution on account of an Allowed Claim would otherwise result in the
issuance of New Secured PIK Notes or the New Senior Secured Notes with an
aggregate principal amount that is not an integral multiple of $1,000, the
actual distribution of such notes will be rounded to the next higher or lower
integral multiple of $1,000, as follows: (a) aggregate principal amounts that
exceed an integral multiple of $1,000 by $500 or more will be rounded to the
next higher integral multiple of $1,000 and (b)
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aggregate principal amounts that exceed an integral multiple of $1,000 by less
than $500 will be rounded to the next lower integral multiple of $1,000. If, as
a result of such rounding, the sum of such principal amounts differs from the
aggregate principal amount of such New Secured PIK Notes or the New Senior
Secured Notes specified to be distributed pursuant to the Plan, as applicable,
the aggregate principal amount of the New Secured PIK Notes or the New Senior
Secured Notes specified will be adjusted upward or downward to provide for the
distribution of the applicable New Secured PIK Notes or the New Senior Secured
Notes specified in an aggregate principal amount equal to such sum. No
consideration will be provided in lieu of principal amounts that are rounded
down.
(b) Notwithstanding any other provision of the Plan, only whole numbers
of shares of New Common Stock, and whole numbers of New Warrants will be issued.
When any distribution on account of an Allowed Claim or an Allowed Interest
would otherwise result in the issuance of a number of shares of New Common Stock
or a number of New Warrants that is not a whole number, the actual distribution
of shares of such stock or warrants will be rounded to the next higher or lower
whole number as follows: (i) fractions equal to or greater than 1/2 will be
rounded to the next higher whole number and (ii) fractions less than 1/2 will be
rounded to the next lower number. The total number of shares of New Common Stock
or New Warrants specified to be distributed to a Class of Claims or Interests
will be adjusted as necessary to account for the rounding provided for herein.
If, as a result of such rounding, the amount of shares of New Common Stock or
the amount of New Warrants to be distributed to a particular Class differs from
the aggregate number of shares of New Common Stock or New Warrants specified to
be distributed pursuant to the Plan to that Class, the aggregate number of
shares of New Common Stock or the amount of New Warrants specified with respect
to such Class will be adjusted upward or downward to provide for the appropriate
distribution of New Common Stock or New Warrants, as the case may be. No
consideration will be provided in lieu of fractional shares or warrants that are
rounded down. In addition, notwithstanding the foregoing, no de minimis
distributions shall be made as provided in Section 14.17 of the Plan.
SURRENDER OF CANCELED INSTRUMENTS OR SECURITIES.
(a) As a condition precedent to receiving any distribution pursuant to
the Plan on account of an Allowed Claim or an Allowed Interest evidenced by the
notes, instruments, securities or other documentation canceled pursuant to the
Plan, the Holder of such Claim or Interest will tender the applicable notes,
instruments, securities or other documentation evidencing such Claim or Interest
to Reorganized PHI or its designated agent, or the Old Indenture Trustee, as
applicable. Any Cash or Plan Securities to be distributed pursuant to the Plan
on account of any such Claim or Interest will, pending such surrender, be
treated as an undeliverable distribution pursuant to Section 6.3.6 of the Plan.
(b) Except as provided in Section 6.3.10(c) of the Plan, each Holder of
an Allowed Claim or an Allowed Interest will tender its Old Security to
Reorganized PHI or its designated agent or the Old Indenture Trustee, as
applicable, together with a letter of transmittal to be provided to such Holder
by Reorganized PHI or its designated agent, or the Old Indenture Trustee as
promptly as practicable following the Effective Date. The letter of transmittal
will include, among other provisions, customary provisions with respect to the
authority of the
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Holder of the applicable Old Security to act and the authenticity of any
signatures required thereon. All surrendered Old Securities will be marked as
canceled by Reorganized PHI or its designated agent, or the Old Indenture
Trustee, as applicable, and delivered to Reorganized PHI.
(c) In addition to any requirements under the applicable Old Senior
Subordinated Notes Indenture, any Holder of a Claim or Interest evidenced by an
Old Security that has been lost, stolen, mutilated or destroyed will, in lieu of
surrendering such Old Security, deliver to Reorganized PHI or its designated
agent, or the Old Indenture Trustee, as applicable: (i) evidence satisfactory to
such Entity of such loss, theft, mutilation or destruction and (ii) such
security or indemnity as may be required by such Entity to hold such Entity
harmless from any damages, liabilities or costs incurred in treating such
individual as a Holder of an Old Security. Upon compliance with Section
6.3.10(c) of the Plan by a Holder of a Claim or an Interest evidenced by an Old
Security, such Holder will, for all purposes under the Plan, be deemed to have
surrendered an Old Security.
(d) Any Holder of an Old Security that fails to surrender or be deemed
to have surrendered such Old Security within one year after the Effective Date
will have its claim for a distribution pursuant to the Plan on account of such
Old Security discharged and will be forever barred from asserting any such claim
against the Debtors, Reorganized PHI, the other Reorganized Debtors or their
respective property.
SETOFF. Reorganized PHI may, but shall not be required to, set off
against any Allowed Claim and the distributions to be made pursuant to the Plan
on account of such Claim, claims of any nature that the Debtors or Reorganized
PHI may have against the Holder of such Allowed Claim; PROVIDED, HOWEVER, that
neither the failure to effect such a setoff nor the allowance of any Claim
against the Debtors or Reorganized PHI shall constitute a waiver or release by
the Debtors or Reorganized PHI of any claim that the Debtors or Reorganized PHI
may possess against such Holder.
INDENTURE TRUSTEE CHARGING LIENS. In full satisfaction of Allowed
Claims secured by Indenture Trustee Charging Liens, the Old Indenture Trustee
will receive from Reorganized PHI Cash equal to the amount of such Claims, and
any Indenture Trustee Charging Liens will be released. Distributions received by
Holders of Allowed Claims pursuant to the Plan will not be reduced on account of
payment of Allowed Claims secured by Indenture Trustee Charging Liens.
Notwithstanding any other provisions of the Plan, upon: (a) submission of
appropriate documentation to Reorganized PHI regarding fees and expenses
incurred by the Old Indenture Trustee in connection with the Chapter 11 Cases
through the Effective Date that are secured by an Old Indenture Trustee Charging
Lien and (b) the failure of Reorganized PHI to object on the grounds of
reasonableness, as determined under the terms of the applicable Old Senior
Subordinated Notes Indenture, to the payment of such fees and expenses within 20
Business Days after receipt of such documentation, the Old Indenture Trustee
will be deemed to hold an Allowed Claim for such fees and expenses, which
Reorganized PHI will pay in Cash within 30 Business Days after the receipt of
the documentation regarding the fees and expenses of such Old Indenture Trustee,
without further Bankruptcy Court approval.
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RETIREE BENEFITS. On and after the Effective Date, to the extent
required by Section 1129(a)(13) of the Bankruptcy Code, Reorganized PHI shall
continue to pay all retiree benefits (if any), as the term "retiree benefits" is
defined in Section 1114(a) of the Bankruptcy Code, maintained or established by
the Debtors prior to the Confirmation Date.
EXEMPTIONS FROM SECURITIES LAWS AND SHELF REGISTRATION.
(a) The Confirmation Order will provide that the offer and sale of the
Plan Securities are exempt from registration pursuant to Section 1145(a) of the
Bankruptcy Code and that the Plan Securities may be resold by the holders
thereof without restriction, except to the extent that any such holder is deemed
to be an "underwriter," as defined in Section 1145(b)(1) of the Bankruptcy Code
with respect to the Plan Securities.
(b) Reorganized PHI, the New Money Investors and certain other Holders
of Plan Securities, if any, who may be deemed to be "underwriters" as defined in
Section 1145(b)(1) of the Bankruptcy Code with respect to the Plan Securities,
shall enter into a Registration Rights Agreement, substantially in the form to
be Filed as EXHIBIT "12" to the Plan at or prior to the Confirmation Hearing.
The Registration Rights Agreement requires Reorganized PHI to use its reasonable
best efforts to file within 90 days after the Effective Date, or such longer
time as may be required to prepare the necessary financial statements, at its
expense, a "shelf" registration statement (the "Shelf Registration Statement"),
and to have the Shelf Registration Statement declared effective as soon as
practicable after such filing and to keep the Shelf Registration Statement
continuously effective until the second anniversary of the effective date
thereof. No securities other than the New Common Stock, the New Secured PIK
Notes and the New Warrants, in each instance held by the New Money Investors or
an Entity deemed to be an "underwriter" under Section 1145(b)(1) of the
Bankruptcy Code, shall be included in the Shelf Registration Statement.
Reorganized PHI shall also, if necessary, supplement or make amendments to the
Shelf Registration Statement to the extent necessary to keep the Shelf
Registration Statement effective as aforesaid.
D. ACCEPTANCE OR REJECTION OF THE PLAN/CONFIRMATION NOTWITHSTANDING REJECTION BY
AN IMPAIRED CLASS.
Only Holders of Allowed Claims in Class 5 (Old Senior Subordinated
Notes Claims) and Class 6 (General Unsecured Claims) are Impaired Classes
entitled to vote on the Plan. Holders of Claims or Interests in Classes 1, 2, 3,
4, 7, 10 and 11 are presumed to have accepted the Plan since they are
Unimpaired. Holders of Claims or Interests in Classes 8 and 9 are deemed to have
rejected the Plan.
An Impaired Class of Claims shall have accepted the Plan if two-thirds
in amount and a majority in number of Claims that are actually voted accept
their treatment under the Plan.
If any Impaired Class (other than Class 5) does not accept the Plan,
the Debtors may request confirmation of the Plan under the "cramdown"
provisions, and reserve the right to seek to modify the Plan as necessary to
ensure satisfaction of the confirmation requirements, PROVIDED, HOWEVER, that
the Debtors shall not reduce the distributions to Classes 1, 2, 3, 4, 5, 6,
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7, 10 or 11, nor increase the distributions to any Class without the consent of
the Creditors' Committee. SEE ALSO Sections VII. B. and E. of this Disclosure
Statement.
E. PROCEDURE FOR RESOLVING DISPUTED CLAIMS
CLAIMS GENERALLY. The amount of any Allowed Unimpaired Claim including
the rights, if any, of the Holder of any such Claim that has properly Filed a
proof of Claim on or prior to the Bar Date, or any other date determined by the
Bankruptcy Court with respect to such Claim, to payment thereof shall (a) be
determined, (i) in the event no objection to, or request for estimation with
respect to, such Claim is Filed in accordance with Section 8.3 of the Plan, by
any court of competent jurisdiction other than the Bankruptcy Court in the
manner in which the amount of such Claim and the rights of the Holder of such
Claim would have been resolved and adjudicated if the Chapter 11 Cases had not
been commenced or (ii) in the event that an objection to, or request for
estimation with respect to, such Claim is Filed in accordance with Section 8.3
of the Plan, by the Bankruptcy Court, (b) except as otherwise provided in
Section 8.1(a)(ii) of the Plan, survive the Effective Date and consummation of
the Plan as if the Chapter 11 Cases had not been commenced, and (c) not be
discharged pursuant to Section 1141 of the Bankruptcy Code. In order to carry
out the foregoing provisions of the Plan, the Debtors, Reorganized PHI and the
Holders of Unimpaired Claims that have properly Filed a proof of Claim on or
before the Bar Date, shall have, among other rights and obligations, the
following rights and obligations:
a. Except to the extent that an objection to, or a request for
estimation with respect to an Unimpaired Claim has been Filed in accordance with
Section 8.3 of the Plan, the Holder of such Claim shall be entitled, after the
Effective Date, to commence any action or proceeding against Reorganized PHI, or
to continue any action or proceeding against any of the Debtors, to determine
the amount of its Claim in any court of competent jurisdiction.
b. The Debtors or Reorganized PHI, as the case may be, may at any time
before or after the Confirmation Date and before or after the Effective Date,
dispute, defend against or otherwise oppose, in accordance with bankruptcy
and/or nonbankruptcy law, any such Unimpaired Claim (other than any such Claim
to the extent allowed by Final Order of the Bankruptcy Court or the Confirmation
Order) without taking any formal action either in or out of court (except as
otherwise required by bankruptcy or nonbankruptcy law). Reorganized PHI shall
retain, in addition to all claims, rights, and causes of action retained by
Reorganized PHI pursuant to Section 14.5 of the Plan, all defenses, at law or in
equity, to any and all such Unimpaired Claims (other than any such Claim to the
extent allowed by Final Order of the Bankruptcy Court or the Confirmation
Order).
REJECTION CLAIMS. Any Rejection Claim not barred pursuant to the
provisions of Section 9.2 of the Plan will be an Allowed Claim in the amount set
forth in the Filed proof of Claim evidencing such Claim unless an objection is
Filed to such Claim not later than sixty (60) days after the Effective Date or
such later time ordered by the Bankruptcy Court without need for notice and
hearing. Upon the Filing of any such objection, the amount of the Allowed
Rejection Claim, if any, will be determined by the Bankruptcy Court unless it
will have sooner become an Allowed Claim.
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DISPUTED CLAIMS. The amount of any Claim which is a Disputed Claim and
the rights of the Holder of such Claim, if any, to payment in respect thereof
will be determined by the Bankruptcy Court, unless it will have sooner become an
Allowed Claim. Unless otherwise ordered by the Bankruptcy Court, all objections
to Claims (other than as provided in Section 4.1 of the Plan) and Interests will
be Filed and served upon the Holder of such Claim or Interest no later than
sixty (60) days after the Effective Date; PROVIDED, HOWEVER, that, unless
otherwise ordered by the Bankruptcy Court, any of the Debtors, or Reorganized
PHI will be entitled to File an objection to any Claim Filed after the Bar Date,
including, without limitation, any Claim Filed by a governmental unit pursuant
to Section 502(b)(9) of the Bankruptcy Code, on or prior to the later of (i)
sixty (60) days after the Effective Date and (ii) sixty (60) days after the
service of such Claim on any of the Debtors or Reorganized PHI.
AUTHORITY TO OPPOSE CLAIMS. On and after the Effective Date, except as
the Bankruptcy Court may otherwise order, Reorganized PHI will have the
exclusive right to make, prosecute and settle any objections to Claims or
Interests.
TREATMENT OF DISPUTED CLAIMS AND DISPUTED INTERESTS. Notwithstanding
any other provisions of the Plan, no payments or distributions will be made on
account of a Disputed Claim or Interest until such Claim or Interest becomes an
Allowed Claim or an Allowed Interest, as the case may be.
F. EXECUTORY CONTRACTS
GENERAL TREATMENT. If the Effective Date occurs, all executory
contracts and unexpired leases of the Debtors, designated by the Debtors for
assumption at or prior to the Confirmation Date will be assumed by Reorganized
PHI or the applicable other Reorganized Debtor as of the Confirmation Date. All
other executory contracts and unexpired leases will be deemed rejected as of the
Confirmation Date.
BAR TO REJECTION DAMAGES. If the rejection of an executory contract or
unexpired lease by the Debtors results in damages to the other party or parties
to such contract or lease, a Claim for such damages, if not previously evidenced
by a Filed proof of Claim or barred by a Final Order, will be forever barred and
will not be enforceable against the Debtors, Reorganized PHI, the other
Reorganized Debtors or their properties or agents, successors, or assigns,
unless a proof of Claim relating thereto is filed with the Bankruptcy Court
within thirty (30) days after the later of (i) the entry of a Final Order
authorizing such rejection and (ii) the Effective Date, or within such shorter
period as may be ordered by the Bankruptcy Court.
CURE OF DEFAULTS FOR EXECUTORY CONTRACTS AND UNEXPIRED LEASES. Each
executory contract and unexpired lease to be assumed pursuant to the Plan will
be reinstated and rendered unimpaired in accordance with Sections 1124(2) and
365(b)(1) of the Bankruptcy Code, or in accordance with the applicable Landlord
Settlement Agreement or any other agreement that is approved by the Bankruptcy
Court. In connection therewith, the Debtors will cure or provide adequate
assurance that they will cure any monetary default (other than of the kind
specified in Section 365(b)(2) of the Bankruptcy Code), by payment of the
default amount in Cash on the Effective Date (or on such other terms as the
parties to such executory contract or unexpired
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lease may otherwise agree), compensate, or provide adequate assurance that the
Debtors will promptly compensate parties other than the Debtors to such contract
or lease for any actual pecuniary loss to such parties resulting from such
default, and provide adequate assurance of future performance under such
contract or lease. In the event of a dispute regarding: (i) the amount of any
cure payments; (ii) the ability of Reorganized PHI, the other Reorganized
Debtors or any of their assignees to provide "adequate assurance of future
performance" (within the meaning of Section 365 of the Bankruptcy Code) under
the contract or lease to be assumed; or (iii) any other matter pertaining to
assumption, the cure payments or performance required by Section 365(b)(1) of
the Bankruptcy Code will be made following the entry of a Final Order resolving
the dispute and approving the assumption.
G. CONDITIONS TO CONFIRMATION AND THE OCCURRENCE OF THE EFFECTIVE DATE
CONDITIONS TO CONFIRMATION. Confirmation of the Plan is conditioned
upon the occurrence of the following, or waiver of the following, conditions
jointly by the Debtors and the Creditors' Committee:
(a) PHI shall have Filed with the Bankruptcy Court a fully-executed
agreement with the New Money Investor for the acquisition of New Class B Common
Stock on terms consistent with the Plan;
(b) PHI shall have Filed with the Bankruptcy Court a fully-executed
agreement for the acquisition by one or more third parties of the New Senior
Secured Notes for up to $25 million on terms consistent with the Plan, or
evidence of other financing as necessary to implement the Plan on terms
acceptable to the Debtors and the Creditors Committee, or shall have obtained
the necessary consents to issue the New Senior Secured Notes to the Holders of
Class 5 Claims, as provided in the Plan;
(c) The Plan shall have been accepted by not less than two-thirds in
amount and a majority in number of the holders of the Claims in Class 5 (Old
Senior Subordinated Notes) entitled to vote and that do vote on the Plan;
(d) A Confirmation Order in form and substance acceptable to the
Debtors and the Creditors' Committee shall have been Filed with and signed by
the Bankruptcy Court; and
(e) No material alterations to the Plan as Filed shall be required by
the Bankruptcy Court unless consented to by the Debtors.
CONDITIONS TO THE OCCURRENCE OF THE EFFECTIVE DATE. The Plan shall not
be consummated and the Effective Date shall not occur unless and until each of
the following conditions have been satisfied or, if waivable, waived jointly by
the Debtors and the Creditors' Committee:
(a) All fees payable pursuant to Section 1930 of Title 28 of the United
States Code, as determined by the Bankruptcy Court at the Confirmation Hearing,
shall have been paid;
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(b) The provisions of the Plan and all exhibits thereto shall be
reasonably satisfactory to the Debtors and the Creditors' Committee;
(c) The Confirmation Order shall have become a Final Order; and
(d) All actions and documents necessary to implement the provisions of
the Plan shall have been effected, executed or duly provided for in a manner
reasonably satisfactory to the Debtors and the Creditors' Committee.
H. EFFECTS OF CONFIRMATION AND EFFECTIVENESS OF PLAN
DISCHARGE OF CLAIMS. Except as otherwise provided in the Plan or in the
Confirmation Order, on the Effective Date: (i) the rights afforded in the Plan
and the payments and distributions to be made will discharge all existing debts
and Claims of any kind, nature, or description whatsoever against the Debtors,
any of their assets or properties or any property dealt with under the Plan to
the extent permitted by Section 1141 of the Bankruptcy Code; (ii) all existing
Claims against the Debtors will be and will be deemed to be discharged; (iii)
all obligations of the Debtors, directly or as guarantors, under the SunTrust
Agreements and the Old Senior Subordinated Notes Indenture, will be deemed
released, discharged and satisfied; and (iv) all Holders of Claims and Interests
will be precluded from asserting against the Debtors, any of their assets or
properties, or any property dealt with under the Plan, any other or further
Claim based upon any act or omission, transaction, or other activity of any kind
or nature that occurred prior to the Confirmation Date, whether or not such
Holder Filed a proof of Claim.
DISCHARGE OF DEBTORS. Except as otherwise provided in the Plan, any
consideration distributed to Creditors under the Plan will be in exchange for
and in complete satisfaction, discharge, and release of all Claims of any nature
whatsoever against the Debtors or any of their assets or properties; and, except
as otherwise provided herein, upon the Effective Date, the Debtors will be
deemed discharged and released to the extent permitted by Section 1141 of the
Bankruptcy Code from any and all Claims, including but not limited to demands
and liabilities that arose before the Confirmation Date, and all debts of the
kinds specified in Sections 502(g), 502(h) or 502(i) of the Bankruptcy Code,
whether or not (i) a proof of Claim based upon such debt is Filed or deemed
Filed under Section 501 of the Bankruptcy Code; or (ii) the Holder of a Claim
based upon such debt has accepted the Plan. Except as provided in the Plan or
Confirmation Order, the Confirmation Order will be a judicial determination of
discharge of all liabilities of the Debtors. As provided in Section 524 of the
Bankruptcy Code, such discharge will void any judgment against the Debtors at
any time obtained to the extent it relates to a discharged Claim, and operates
as an injunction against the commencement or continued prosecution of any action
against the Debtors, Reorganized PHI, the other Reorganized Debtors, or any of
their respective properties, to the extent it relates to a discharged Claim.
SURVIVAL OF INDEMNIFICATION CLAIMS AND OBLIGATIONS. Notwithstanding any
other provision of the Plan, all obligations of the Debtors or any Foreign
Subsidiary or Domestic Subsidiary to indemnify or hold harmless current or
former officers or directors of any of the Debtors, or the Old Indenture
Trustee, and all Claims of such officers, directors or the Old Indenture
Trustee, under the bylaws of such Debtor, the Old Senior Subordinated Notes
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Indenture or other applicable law, corporate documents or agreements will
expressly survive Confirmation of the Plan and be binding on and enforceable
against Reorganized PHI irrespective of whether indemnification is owed in
connection with an event occurring before, on or after the Petition Date.
TERMINATION OF CLAIMS OF CONTRACTUAL SUBORDINATION AGAINST HOLDERS OF
OLD SENIOR SUBORDINATED NOTES CLAIMS. Provided that (i) the Bankruptcy Court
shall have entered the Confirmation Order and (ii) the Effective Date shall have
occurred, all rights, actions or causes of action between or among Holders of
"senior indebtedness" (as defined in the Old Senior Subordinated Notes
Indenture) and Holders of Old Senior Subordinated Notes Claims based upon any
claimed right to contractual subordination shall be satisfied, terminated, void
and of no further force or effect as of the Effective Date so that,
notwithstanding any such rights, actions or causes of action, each Holder of Old
Senior Subordinated Notes Claims shall have the rights and benefits of the
distributions provided in the Plan.
I. RELEASES AND INJUNCTIONS
EXTENT OF RELEASE. Except as set forth in Article XII of the Plan,
nothing contained in the Plan will affect any right of any Entity to assert or
pursue any claim or cause of action against any entity other than the Debtors.
RELEASES. On the Effective Date, Reorganized PHI and the other
Reorganized Debtors are deemed to release unconditionally (i) each present or
former officer, director, shareholder, employee, consultant, attorney,
accountant and other representatives of the Debtors, the Domestic Subsidiaries
and the Foreign Subsidiaries; provided, however, that in no event shall the
Reorganized Debtors be deemed to have released any Releasee that asserts a
Disputed Claim against the Debtors or the Reorganized Debtors or the Reorganized
Debtors from any claim, counterclaim, defense or offset that may be asserted in
connection with such claim; (ii) the Creditors' Committee and, solely in their
capacity as members or representatives of the Creditors' Committee each
consultant, attorney, accountant or other representative or member (and each of
such member's respective officers, directors, shareholders, employees,
consultants, attorneys, accountants and other representatives) of the Creditors'
Committee, and (iii) the Holders of Old Senior Subordinated Notes Claims that
are or were at any time members of the Unofficial Noteholders' Committee and,
solely in their capacity as representatives of such Holders, each of such
Holder's respective officers, directors, shareholders, employees, consultants,
attorneys, accountants and other representatives as well as attorneys and
financial advisors to the Unofficial Noteholders' Committee and their officers,
directors, shareholders and employees (the Entities specified in clauses (i),
(ii) and (iii) are referred to collectively as the "Releasees"), from any and
all claims, obligations, suits, judgments, damages, rights, causes of action and
liabilities whatsoever, whether known or unknown, foreseen or unforeseen,
existing or hereafter arising, in law, equity or otherwise, based in whole or in
part upon any act or omission, transaction, event or other occurrence taking
place on or prior to the Effective Date in any way relating to the Chapter 11
Cases or the Plan, except that no Releasees shall be released from acts or
omissions which are the result of gross negligence or willful misconduct.
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On the Effective Date, each Holder of a Claim is deemed to have
released unconditionally, the Releasees, from any and all rights, claims, causes
of action, obligations, suits, judgments, damages and liabilities whatsoever
which any such Holder may be entitled to assert, whether known or unknown,
foreseen or unforeseen, existing or hereafter arising, in law, equity or
otherwise, based in whole or in part upon any act or omission, transaction,
event or other occurrence taking place on or before the Effective Date in any
way relating to Reorganized PHI, the other Reorganized Debtors, the Chapter 11
Cases or the Plan, except that no Releasees shall be released from acts or
omissions which are the result of gross negligence or willful misconduct.
If and to the extent that the Bankruptcy Court concludes that the Plan
cannot be confirmed with any portion of the foregoing releases, then the Debtors
reserve the right to amend the Plan so as to give effect as much as possible to
the foregoing releases, or to delete them.
NO LIABILITY FOR SOLICITATION OR PARTICIPATION. As specified in Section
1125(e) of the Bankruptcy Code, Entities that solicit acceptances or rejections
of the Plan and/or that participate in the offer, issuance, sale or purchase of
securities offered or sold under the Plan, in good faith and in compliance with
the applicable provisions of the Bankruptcy Code, are not liable, on account of
such solicitation or participation, for violation of any applicable law, rule or
regulation governing the solicitation of acceptances or rejections of the Plan
or the offer, issuance, sale or purchase of securities in connection therewith.
LIMITATION OF LIABILITY. Neither the Debtors, Reorganized PHI, the
other Reorganized Debtors, nor any of their respective employees, officers,
directors, agents, or representatives, nor any Professionals employed by any of
them, nor the Creditors' Committee or any of its members, agents,
representatives, or professional advisors, will have or incur any liability to
any Entity for any act taken or omission made in good faith in connection with
or related to formulating, implementing, confirming or consummating the Plan, or
any contract, instrument, release, or other agreement or document created in
connection with the Plan.
GENERAL INJUNCTION. Except as provided in the Plan or in the
Confirmation Order, from and after the Effective Date, all Entities who received
or are Holders of Plan Securities and all Holders of Claims against the Estates
will be permanently restrained and enjoined after the Confirmation Date (i) from
commencing, continuing, or taking any act, to enforce against any of the Debtors
or any Subsidiary or any officer, director or employee of any of the Debtors any
right, claim or cause of action arising under or related to any Old Security or
any claim (ii) from creating, perfecting or enforcing any encumbrance of any
kind against any Debtor or any Subsidiary or any right, claim or cause of action
arising under or related to any Old Security or any claim, (iii) from asserting
any setoff, right of subrogation, indemnification, contribution or recoupment of
any kind against any obligation due any Debtor or any Subsidiary, or any right,
claim or cause of action arising under or related to any Old Security or any
claim, and (iv) from performing any act, in any manner, in any place whatsoever,
that does not conform to or comply with the provisions of the Plan and orders of
the Bankruptcy Court; PROVIDED, HOWEVER, that each Holder of a Claim may, to the
extent permitted by and in accordance with the provisions of the Plan, commence
or continue any action or proceeding to determine the amount of its Claim in
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the Bankruptcy Court or any other court of competent jurisdiction, and all
Holders of Claims will be entitled to enforce their rights under the Plan and
the Plan Documents.
SECTION 346 INJUNCTION. In accordance with Section 346 of the
Bankruptcy Code, for purposes of any state or local law imposing a tax, income
will not be realized by the Estates, the Debtors or Reorganized PHI by reason of
the forgiveness or discharge of indebtedness resulting from the Chapter 11
Cases. As a result each state or local taxing authority is permanently enjoined
and restrained, after the Confirmation Date, from commencing, continuing or
taking any act to impose, collect or recover in any manner any tax against any
Debtor, Reorganized PHI or the other Reorganized Debtor, arising by reason of
the forgiveness or discharge of indebtedness of any such Entity under the Plan.
J. RETENTION OF JURISDICTION
SCOPE OF JURISDICTION. Pursuant to Sections 1334 and 157 of Title 28 of
the United States Code, notwithstanding occurrence of the Effective Date or
substantial consummation of the Plan, the Bankruptcy Court will retain and have
jurisdiction from and after the Confirmation Date of all matters arising in,
arising under, and related to the Chapter 11 Cases and the Plan pursuant to, and
for the purposes of, Sections 105(a) and 1142 of the Bankruptcy Code and for,
among other things, the following purposes:
(a) To hear and determine any and all adversary proceedings,
applications or contested matters pending on the Effective Date or brought after
the Effective Date including, but not limited to, Avoidance Actions, if any;
(b) To hear and determine any and all applications for substantial
contribution and for compensation and reimbursement of expenses Filed in
accordance with the Plan;
(c) To hear and determine Rejection Claims, disputes arising from the
assumption and assignment of executory contracts and unexpired leases, and
Disputed Claims which are Impaired Claims or which are held by Holders of
Unimpaired Claims;
(d) To hear and determine, pursuant to the provisions of Section 505 of
the Bankruptcy Code, all issues related to the liability of a Debtor for any tax
incurred prior to the Effective Date;
(e) To enforce the provisions of the Plan and to determine any and all
disputes under the Plan;
(f) To enter and implement such orders as may be appropriate in the
event Confirmation is for any reason stayed, reversed, revoked, modified or
vacated;
(g) To modify any provision of the Plan to the extent permitted by the
Bankruptcy Code and to correct any defect, cure any omission or reconcile any
inconsistency in the Plan or the Confirmation Order as may be necessary to carry
out the purposes and intent of the Plan;
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(h) To enter such orders as may be necessary or appropriate in
furtherance of consummation and implementation of the Plan;
(i) To determine the allowance of Claims and Interests as provided in
the Plan; and
(j) To enter an order closing the Chapter 11 Cases.
FAILURE OF THE BANKRUPTCY COURT TO EXERCISE JURISDICTION. If the
Bankruptcy Court abstains from exercising, or declines to exercise, jurisdiction
or is otherwise without jurisdiction over any matter arising in, arising under,
or related to the Chapter 11 Cases, Article XIII of the Plan will have no effect
upon and shall not control, prohibit, or limit the exercise of jurisdiction by
any other court having jurisdiction with respect to such matter.
K. MISCELLANEOUS PROVISIONS
COMPLIANCE WITH TAX REQUIREMENTS. In connection with the Plan, the
Debtors, Reorganized PHI, the other Reorganized Debtors, the Collateral Agent,
and the Old Indenture Trustee will comply with all applicable withholding and
reporting requirements imposed by federal, state, local and foreign taxing
authorities, and all distributions made under the Plan will be subject to such
withholding and reporting requirements. Creditors may be required to provide
certain tax information as a condition to receipt of distributions pursuant to
the Plan. Notwithstanding any other provision of the Plan, each Entity receiving
a distribution pursuant to the Plan will have sole and exclusive responsibility
for the satisfaction and payment of any tax obligations imposed by any
governmental unit, including income, withholding and other tax obligations, on
account of such distribution.
DISCHARGE OF OLD INDENTURE TRUSTEE. Subsequent to the performance of
the Old Indenture Trustee, or its agents, of their duties and obligations under
the provisions of the Plan and the Confirmation Order, if any, and under the
terms of the Old Senior Subordinated Notes Indenture, such Old Indenture Trustee
and its agents will be relieved, discharged and released from all obligations,
claims, rights, demands and causes of action associated with or arising from
such Old Senior Subordinated Notes Indenture. The Confirmation Order will enjoin
from and after the Effective Date the prosecution, whether directly,
derivatively or otherwise, of any claim, debt, right, cause of action or
liability against the Old Indenture Trustee and its agents released or to be
released pursuant to the Plan.
POST-EFFECTIVE DATE FEES AND EXPENSES OF PROFESSIONALS. Reorganized PHI
will, in the ordinary course of business and without the necessity for any
approval by the Bankruptcy Court (except as may be required by Section
1129(a)(4) of the Bankruptcy Code), pay the reasonable fees and reasonable
expenses of the Professionals related to implementation and consummation of the
Plan that are incurred after the Effective Date; PROVIDED, HOWEVER, that no such
fees and expenses will be paid except upon receipt by Reorganized PHI of a
detailed written invoice from the Professional seeking compensation and expense
reimbursement and PROVIDED, FURTHER, HOWEVER, that Reorganized PHI may, within
ten (10) Business Days after receipt of an invoice for fees and expenses, object
to some or all of any such invoice, and if the dispute cannot be
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resolved with the Professional seeking compensation, then either party may
request that the Bankruptcy Court determine the reasonableness of such fees and
expenses.
VESTING OF PROPERTY OF THE DEBTORS. Except as otherwise provided in the
Plan (including any Plan Document) or any other indentures, instruments or
agreements to be executed and delivered pursuant to the Plan or the Confirmation
Order, upon the Effective Date, all property of the Consolidated Estates,
wherever situated, will vest in Reorganized PHI or the other Reorganized
Debtors, as applicable, and will be retained by Reorganized PHI or the other
Reorganized Debtors, as applicable, or distributed to Creditors or Interest
Holders as provided in the Plan. On the Effective Date, all property of the
Consolidated Estates, whether retained by Reorganized PHI or the other
Reorganized Debtors, as applicable, or distributed to Creditors or Interest
Holders, will be free and clear of all Claims, Liens, Encumbrances and
Interests, except the Claims, Liens, Encumbrances and Interests of Creditors and
Holders of Interests expressly provided for in the Plan (including in any Plan
Document).
CAUSES OF ACTION. Except as otherwise provided in the Plan, or in any
contract, instrument, release, or other agreement entered into in connection
with the Plan, in accordance with Section 1123(b) of the Bankruptcy Code,
Reorganized PHI will retain and may enforce any Avoidance Actions or any claims,
rights and causes of action that any of the Consolidated Debtors or the
Consolidated Estates may hold against any entity. Reorganized PHI or any
successor may pursue those rights of action, as appropriate, in accordance with
what is in the best interests of Reorganized PHI or any successor holding such
rights of action.
OTHER DOCUMENTS AND ACTIONS. Without a further order of the Bankruptcy
Court, the Debtors and Reorganized PHI may execute such documents and take such
other action as is necessary to effectuate the transactions provided for in the
Plan.
BINDING EFFECT From and after the Confirmation Date, the Plan will be
binding upon and inure to the benefit of the Reorganized Debtors, Holders of
Claims, Holders of Interests, and their respective successors and assigns.
DISSOLUTION OF CREDITORS' COMMITTEE. On the Effective Date, the
Creditors' Committee shall dissolve and the members of the Creditors' Committee
will be released and discharged from all further rights and duties arising from
or related to the Chapter 11 Cases and the Professionals retained by the
Creditors' Committee and the members thereof shall not be entitled to
compensation or reimbursement of expenses for any services rendered after the
Effective Date.
AMENDMENTS AND MODIFICATIONS.
(a) The Debtors may, with the consent of the Creditors' Committee and
in accordance with Section 1127(a) of the Bankruptcy Code amend or modify the
Plan prior to the entry of the Confirmation Order. Prior notice of such action
will be served in accordance with the Bankruptcy Rules.
(b) After the entry of the Confirmation Order, PHI may, with the
consent of the Creditors' Committee and in accordance with Section 1127(b) of
the Bankruptcy Code,
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amend or modify this Plan, or remedy any defect or omission or reconcile any
inconsistency in the Plan in such manner as may be necessary to carry out the
purpose and intent of the Plan, and after the Effective Date the parties to any
Plan Document may amend or modify any such Plan Document pursuant to the terms
thereof without notice to any Entity not entitled to receive notice under such
Plan Document and without an order from the Bankruptcy Court.
REVOCATION. The Debtors reserve the right to revoke and withdraw the
Plan prior to Confirmation. If the Debtors revoke or withdraw the Plan in
accordance with Section 14.14 of the Plan then the Plan shall be deemed null and
void. In that event, nothing contained in the Plan or herein shall be deemed (i)
to constitute a waiver or release of any Claims by the Debtors or any other
Entity, (ii) to prejudice in any manner the rights of the Debtors or any other
Entity, (iii) to constitute any admission by any of the Debtors, or any other
Entity, or (iv) to constitute any admission or concession regarding any Claim or
Interest.
SEVERABILITY. Should any provision in the Plan be determined to be
unenforceable, with the consent of the Debtors or Reorganized PHI, as
applicable, such provisions shall be deemed to be severed, and such
determination will in no way limit or affect the enforceability and operative
effect of any other provisions of the Plan.
DE MINIMIS DISTRIBUTIONS. Notwithstanding any provision to the contrary
in the Plan, no distribution of less than twenty-five dollars ($25) in Cash or
less than 100 shares of New Common Stock or 10 New Warrants or New Options shall
be made to any Holder of an Allowed Claim or an Allowed Interest. Such
undistributed amount will be retained by Reorganized PHI, and in the case of
undistributed New Common Stock, held as treasury shares.
IX. CERTAIN RISK FACTORS
In considering whether or not to accept the Plan, Holders of Claims and
Interests should carefully consider the following factors, together with all of
the other information contained in this Disclosure Statement.
THE NEW SENIOR SECURED NOTES, THE NEW SECURED PIK NOTES, THE NEW COMMON
STOCK AND THE NEW WARRANTS TO BE ISSUED PURSUANT TO THE PLAN ARE SUBJECT TO A
NUMBER OF MATERIAL RISKS, INCLUDING THOSE ENUMERATED BELOW. THE RISK FACTORS
ENUMERATED BELOW GENERALLY ASSUME THE CONFIRMATION AND CONSUMMATION OF THE PLAN
AND ALL TRANSACTIONS CONTEMPLATED THEREBY, AND, EXCEPT AS INDICATED, DO NOT
GENERALLY INCLUDE MATTERS THAT COULD PREVENT OR DELAY CONFIRMATION. PRIOR TO
DECIDING WHETHER AND HOW TO VOTE ON THE PLAN, EACH HOLDER OF A CLAIM OR INTEREST
IN AN IMPAIRED VOTING CLASS SHOULD CAREFULLY CONSIDER ALL OF THE INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT, ESPECIALLY THE FACTORS MENTIONED IN THE
FOLLOWING PARAGRAPHS.
HIGHLY LEVERAGED POSITION
The Company is now highly leveraged and although the reorganization
will significantly reduce the Company's debt obligations, the Company will still
have substantial indebtedness and debt service requirements, both in absolute
terms and in relation to shareholders' equity.
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The Company's management believes that, based on its forecasts, the
Company will have sufficient operating cash flow from operations (together with
funds available under a working capital and letter of credit bank facility) to
pay interest and scheduled amortization on all of its outstanding indebtedness
and to fund anticipated capital expenditures through 2004, after giving effect
to the reorganization. However, even if the reorganization is completed, the
Company's ability to meet its debt service obligations will depend on a number
of factors, including management's ability to maintain operating cash flow, and
there can be no assurance that targeted levels of operating cash flow will
actually be achieved. The Company's ability to maintain or increase operating
cash flow will depend upon consumer tastes, the success of marketing initiatives
and other efforts by the Company to increase customer traffic in its
restaurants, prevailing economic conditions and other factors, many of which are
beyond the control of the Company.
The Company's highly leveraged position may limit its ability to obtain
additional financing in the future on terms and subject to conditions deemed
acceptable by Company management. Even after the reorganization, a substantial
portion of its cash flow from operations must be dedicated to the payment of
interest and principal on outstanding debt. The agreements governing that debt
will impose significant operating and financial restrictions on the Company.
Based on the Projections, the Company will be required to re-finance
approximately $37 million of the New Secured PIK Notes in 2004. Its highly
leveraged position may limit its ability to do so on acceptable terms.
RISKS RELATING TO THE EXIT FACILITIES
Pending the sale of its 1567 Broadway property interests, the Company
will require the proceeds from the New Senior Secured Notes to fund its
obligations under the Plan (the "Exit Financing"). Consummation of Exit
Financing is regarded as critical to the successful emergence of the Debtors
from the Chapter 11 Cases and to their operations thereafter. The closing of
such facility, however, is subject, among other conditions, to the negotiation
of definitive agreements with one or more third-party lenders on terms
acceptable to the lender(s), the Debtors and the Creditors' Committee, or
alternatively acceptance of the New Senior Secured Notes by Holders of at least
$167 million principal amount of Old Senior Subordinated Notes. In addition, the
Debtors may require up to a $15 million Working Capital Facility upon emergence.
The closing of such facility is subject to the negotiation of definitive
agreements with one or more third-party lenders on terms acceptable to the
lender(s), the Debtors and the Creditors' Committee.
RISKS RELATING TO THE PROJECTIONS
The management of PHI has prepared the projected financial information
contained in this Disclosure Statement relating to the Reorganized Debtors (the
"Projections") in connection with the development of the Plan and in order to
present the anticipated effects of the Plan and the transactions contemplated
thereby. The Projections assume the Plan and the transactions contemplated
thereby will be implemented in accordance with their terms and represent
management's best estimate of the results of the Reorganized Debtors' operations
following the Effective Date. The assumptions and estimates underlying such
Projections are inherently
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uncertain and, although considered reasonable by management as of the date
hereof, are subject to significant business, economic and competitive risks and
uncertainties that could cause actual results to differ materially from those
projected, including, among others, (1) the uncertain ability of the Reorganized
Debtors to generate sufficient funds or to gain access to additional capital, if
needed, to meet their capital expenditure and refinancing needs; (2)
seasonality; (3) the possible effects that commencement of the Reorganization
Cases, even in connection with the Plan, may have on the Company's relationships
with its customers, suppliers, employees and franchisees. Accordingly, the
Projections are not necessarily indicative of the future financial condition or
results of operations of the Reorganized Debtors. Consequently, the projected
financial information contained herein should not be regarded as a
representation by the Company, the Company's advisors or any other person that
the Projections can or will be achieved.
COMPETITION IN THE RESTAURANT INDUSTRY
The restaurant and retail merchandising industries are affected by
changes in consumer tastes and by international, national, regional and local
economic conditions and demographic trends. Discretionary spending priorities,
traffic patterns, tourist travel, weather conditions, employee availability and
the type, number and location of competing restaurants, among other factors,
also directly affect the performance of the Company's units. Changes in any of
these factors in the markets where the Company currently operates units could
adversely affect the Company's results of operations. Moreover, the theme
restaurant industry is relatively young, is particularly dependent on tourism
and has seen the entrance of a number of new competitors.
The restaurant and retail merchandising industries are highly
competitive based on the type, quality and selection of the food or merchandise
offered, price, service, location and other factors. Many well-established
companies with greater financial, marketing and other resources and longer
operating histories than the Company compete with the Company in many markets.
In addition, some competitors have design and operating concepts similar to
those of the Company. There can be no assurance that the Company will be able to
respond to various competitive factors affecting the restaurant and retail
industries.
The motion picture exhibition industry is affected by a number of
factors, including the availability of desirable motion pictures and their
performance in the exhibitors' markets. Poor performance of, or disruption in
the production of or access to, motion pictures, whether produced by the major
studios or independent producers, could adversely affect the performance of the
PLANET MOVIES BY AMC joint venture. In addition, were the joint venture to
experience poor relationships with one or more major motion picture
distributors, its business could be adversely affected. The joint venture will
be subject to varying degrees of competition with respect to licensing films,
attracting patrons, obtaining new theater sites and acquiring theater circuits.
In addition, the joint venture's theaters face competition from a number of
motion picture exhibition delivery systems, such as pay television, pay-per-view
and home video systems, and from other forms of entertainment that compete for
the public's leisure time and disposable income.
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CAPITAL REQUIREMENTS
The Reorganized Debtors' businesses are expected to have substantial
capital expenditure needs. While the Projections assume that the Reorganized
Debtors will generate sufficient funds to meet their capital expenditure needs
for the foreseeable future, the ability of the Reorganized Debtors to gain
access to additional capital, if needed, cannot be assured, particularly in view
of competitive factors and industry conditions.
DIVIDEND RESTRICTIONS
PHI has never paid dividends on its Common Stock and does not intend to
do so in the foreseeable future. In addition, instruments governing indebtedness
of the Reorganized Debtors following consummation of the Plan will restrict the
ability of the Reorganized Debtors to pay dividends. Accordingly, it is not
anticipated that any cash dividends will be paid on the New Common Stock in the
foreseeable future.
CERTAIN RISKS OF NON-CONFIRMATION
Even if the requisite acceptances are received, there can be no
assurance that the Bankruptcy Court will confirm the Plan. A non-accepting
Creditor or a stockholder might challenge the adequacy of the disclosure or the
balloting procedures and results as not being in compliance with the Bankruptcy
Code. Even if the Bankruptcy Court were to determine that the disclosure and the
balloting procedures and results were appropriate, the Bankruptcy Court could
still decline to confirm the Plan if it were to find that any statutory
conditions to confirmation had not been met. In this regard, there is a risk
that if the Bankruptcy Court were to determine that certain third party release
provisions of the Plan contravene applicable provisions of the Bankruptcy Code,
the Bankruptcy Court could determine not to confirm the Plan. Section 1129 of
the Bankruptcy Code sets forth the requirements for confirmation and requires,
among other things, a finding by the Bankruptcy Court that the confirmation of
the Plan is not likely to be followed by a liquidation or a need for further
financial reorganization and that the value of distributions to non-accepting
Creditors and Interest Holders will not be less than the value of distributions
such Creditors and Interest Holders would receive if the Debtors were liquidated
under Chapter 7 of the Bankruptcy Code. While there can be no assurance that the
Bankruptcy Court will conclude that these requirements have been met, the
Debtors believe that the Plan will not be followed by a need for further
financial reorganization and that non-accepting Creditors and Interest Holders
will receive greater distributions than they would receive following a
liquidation pursuant to Chapter 7 of the Bankruptcy Code.
The confirmation and consummation of the Plan are also subject to
certain other conditions. See "The Plan of Reorganization-Conditions Precedent
to Confirmation and Consummation of the Plan."
If the Plan, or a plan determined not to require resolicitation of any
Classes by the Bankruptcy Court, were not to be confirmed, it is unclear whether
a reorganization could be implemented and what holders of Claims and Interests
would ultimately receive with respect to their Claims and Interests. If an
alternative reorganization could not be agreed to, it is possible
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that the Debtors would have to liquidate their assets, in which case it is
likely that Holders of Claims and Interests would receive less than they would
have received pursuant to the Plan. Alternatively, there could be significant
delays in the development of an alternative plan, which could materially
adversely impact the recoveries for Creditors due to potential continuing
declines in revenues caused, in part, by the continuation of these bankruptcy
proceedings and delays in the infusion of new working capital.
NONCOMPARABILITY OF HISTORICAL FINANCIAL INFORMATION
As a result of the consummation of the Plan and the transactions
contemplated thereby, the financial condition and results of operations of the
Reorganized Debtors from and after the Effective Date may not be comparable to
the financial condition or results of operations reflected in the historical
financial statements of the Debtors.
SEASONALITY
The Company's business is moderately seasonal Restaurant sales are
generally greater in the second and third calendar quarters (April through
September) than in the first and fourth calendar quarters (October through
March). Occupancy and other operating costs, which remain relatively constant,
have a disproportionately negative effect on operating results during quarters
with lower restaurant sales. The Company's working capital requirements also
fluctuate seasonally, with its greatest needs occurring during its first and
fourth quarters.
GOVERNMENT REGULATIONS
The Company and its franchisees are subject to federal, state and local
laws and regulations governing health, sanitation, environmental matters,
safety, the sale of alcoholic beverages and hiring and employment practices.
Restaurant operations are also subject to federal and state laws that prohibit
discrimination and laws regulating the design and operation of facilities, such
as the Americans With Disabilities Act of 1990. The operation of the Company's
franchisee system is also subject to the regulations enacted by the governments
of numerous foreign countries. The Company cannot predict the effect on its
operations, particularly on its relationship with franchisees, caused by the
future enactment of additional legislation regulating the franchise
relationship.
LACK OF ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN
If the Plan is not confirmed, and if the Debtors' exclusive period to
File a plan is terminated or expires, the Debtors or any other party in interest
could attempt to formulate and propose a different plan. Such plan might involve
either a reorganization and continuation of the Debtors' business or an orderly
liquidation. The Debtors have explored various alternatives to the Plan prior to
and in connection with their extensive negotiations with the Unofficial
Noteholders' Committee. The Debtors have concluded that confirmation and
consummation of the Plan is the best alternative and will enable the Holders of
Claims and Interests to obtain the maximum value possible.
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It is unclear whether any alternative plan of reorganization could be
implemented and what amounts, if any, Holders of Claims and Interests would
ultimately recover under an alternative plan. It is clear to the Debtors,
however, that any successful restructuring of their business must be premised
upon the continued operation of the Debtors' core PLANET HOLLYWOOD restaurant
and retail merchandise locations with the continued involvement of Mr. Robert
Earl as the Reorganized Debtors' Chief Executive Officer.
The failure of Mr. Earl to remain as the Company's Chief Executive
Officer constitutes a material breach under the terms and conditions of the
Debtors' contracts with certain of its key landlords, which would cause such
agreements to be terminated. Further, the Debtors believe that the significant
amount of good will associated with the PLANET HOLLYWOOD name and intellectual
property and the theme ambience of the Company's units would be substantially
adversely impacted if Mr. Earl no longer served in his top executive capacity.
Historically, an important component of the Company's marketing and
consumer awareness strategy has been to promote its operating units and branded
apparel through the active participation of Celebrities and Celebrity
stockholders. While certain Celebrities have granted the Company the right to
use their name, approved likeness and Memorabilia in connection with promoting
the Company's units, it is the Debtors' belief that without Robert Earl's
involvement the Celebrity support which has been so critical for the Company
will evaporate.
An alternative plan or plans of reorganization which does not have the
support of Robert Earl and maintain his key role in the Company's operations is
likely to result in the Debtors having to liquidate their assets under chapter 7
of the Bankruptcy Code, in which case it is likely that Holders of Claims and
Interests would receive less than they will receive pursuant to the Plan.
SECURITIES LAW CONSIDERATIONS
The Company has not filed a registration statement under the Securities
Act or any other federal or state securities laws with respect to any of the
Plan Securities that they may be deemed to be offering by virtue of the
Company's solicitation of acceptances of the Plan pursuant to this Disclosure
Statement. The Company is relying on Section 1145(a) of the Bankruptcy Code
("Section 1145(a)") to exempt from registration under the Securities Act and any
applicable state securities laws the offer of any Plan Securities that may be
deemed to be made pursuant to the Plan. Generally, Section 1145(a)(1) exempts
the offer and sale of securities pursuant to a plan of reorganization from such
registration requirements if the following conditions are satisfied: (i) the
securities are issued by a debtor (or its affiliate or successor) under a plan
of reorganization; (ii) the recipients of the securities hold a claim against,
an interest in, or a claim for an administrative expense against, the debtor;
and (iii) the securities are issued entirely in exchange for the recipient's
claim against or interest in the debtor, or are issued "principally" in such
exchange and "partly for cash or property." The Company believes that the Plan
Securities issued pursuant to the Plan will satisfy the requirements of Section
1145(a)(1).
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The Plan Securities may be resold by the holders thereof without
restriction, except for any such holder that is deemed to be an "underwriter"
with respect to the Plan Securities as defined in Section 1145(b)(1) of the
Bankruptcy Code. Generally, Section 1145(b)(1) defines an "underwriter" as any
person who (i) purchases a claim against, or an interest in, a debtor with a
view towards distribution of any security to be received in exchange for such
claim or interest, (ii) offers to sell securities issued pursuant to a
bankruptcy plan for the holders of such securities, (iii) offers to buy
securities issued pursuant to a bankruptcy plan from persons receiving such
securities, if the offer to buy is made with a view towards distribution of such
securities, or (iv) is an issuer within the meaning of Section 2(11) of the
Securities Act. Section 2(11) of the Securities Act provides that the term
"issuer" includes all persons who, directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with, an
issuer of securities. Under Rule 405 of Regulation C under the Securities Act,
the term "control" means the possession, direct or indirect, of the power to
direct or cause the direction of the policies of a person, whether through the
ownership of voting securities, by contract or otherwise. Accordingly, an
officer or director of a reorganized debtor (or its affiliate or successor)
under a plan of reorganization may be deemed to "control" such debtor (and
therefore be an underwriter for purposes of Section 1145), particularly if such
management position is coupled with the ownership of a significant percentage of
a debtor's (or its affiliate's or successor's) voting securities. Any entity
that is an "underwriter" but not an "issuer" with respect to an issue of
securities is, however, entitled to engage in exempt "ordinary trading
transactions" within the meaning of Section 1145(b).
Holders of such securities who are deemed to be "underwriters" within
the meaning of Section 1145(b)(1) of the Bankruptcy Code or who may otherwise be
deemed to be "underwriters" of, or to exercise "control" over, the Company
within the meaning of Rule 405 of Regulation C under the Securities Act should,
assuming all other conditions of Rule 144A are met, be entitled to avail
themselves of the safe harbor resale provisions thereof. Rule 144A, promulgated
under the Securities Act, provides a non-exclusive safe harbor exemption from
the registration requirements of the Securities Act for resales to certain
"qualified institutional buyers" of securities which are "restricted securities"
within the meaning of the Securities Act, irrespective of whether the seller of
such securities purchased its securities with a view towards reselling such
securities under the provisions of Rule 144A. Under Rule 144A, a "qualified
institutional buyer" is defined to include, among other Entities (E.G.,
"dealers" registered as such pursuant to Section 15 of the Exchange Act and
"banks" as defined in Section 3(a)(2) of the Securities Act), any entity which
purchases securities for its own account or for the account of another qualified
institutional buyer and which (in the aggregate) owns and invests on a
discretionary basis at least $100 million in the securities of unaffiliated
issuers. Subject to certain qualifications, Rule 144A does not exempt the offer
or sale of securities which, at the time of their issuance, were securities of
the same class of securities then listed on a national securities exchange
(registered as such under Section 6 of the Exchange Act) or quoted in a U.S.
automated interdealer quotation system (E.G., NASDAQ).
To the extent that Rule 144A is unavailable, holders may, under certain
circumstances, be able to sell their securities pursuant to the more limited
safe harbor resale provisions of Rule 144 under the Securities Act. Generally,
Rule 144 provides that if certain conditions are met (E.G., one-year holding
period with respect to "restricted securities," volume limitations, manner of
sale, availability of current information about the issuer, etc.), (a) any
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person who resells "restricted securities" and (b) any "affiliate" of the issuer
of the securities sought to be resold will not be deemed to be an "underwriter"
as defined in Section 2(11) of the Securities Act. Under paragraph (k) of Rule
144, the aforementioned conditions to resale will no longer apply to restricted
securities sold for the account of a holder who is not an affiliate of the
Company at the time of such resale and who has not been such during the
three-month period next preceding such resale, so long as a period of at least
two years has elapsed since the later of (i) the Effective Date and (ii) the
date on which such holder acquired his or its securities from an affiliate of
the Company.
MARKET FOR PLAN SECURITIES
There is no existing market for the Plan Securities and there can be no
assurance that an active trading market for the Plan Securities will develop.
The Debtors have agreed to use their best efforts to list the New Common Stock
on a nationally recognized exchange. However, no assurance can be given that a
Holder of Plan Securities will be able to sell such Plan Securities in the
future or as to the price at which such Plan Securities might trade. The
liquidity of the market for such Plan Securities and the prices at which such
Plan Securities trade will depend upon the number of Holders thereof, the
interest of securities dealers in maintaining a market in such Plan Securities
and other factors beyond the Company's control.
X. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following is a summary of certain federal income tax consequences
of the Plan to the Debtors, and to the Holders of the Old Senior Subordinated
Notes, General Unsecured Claims and the Old Common Stock. This summary is based
on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations thereunder, and administrative and judicial interpretations and
practice, all as in effect on the date hereof and all of which are subject to
change, with possible retroactive effect. Due to the lack of definitive judicial
or administrative authority in a number of areas, substantial uncertainty may
exist with respect to some of the tax consequences described below. No opinion
of counsel has been obtained, and the Debtors do not intend to seek a ruling
from the Internal Revenue Service (the "Service") as to any of such tax
consequences. There can be no assurance that the Service will not challenge one
or more of the tax consequences of the Plan described below.
The following discussion is limited to Holders that hold Old Senior
Subordinated Notes, General Unsecured Claims, Old Common Stock and Plan
Securities (collectively, "Securities") as capital assets and does not address
all matters that may be relevant to particular classes of Holders that are
subject to special rules under the Code, including, without limitation,
financial institutions, securities dealers, broker-dealers, tax-exempt entities,
insurance companies, foreign persons, Holders that hold their Securities as part
of a "straddle" or a "conversion transaction" (as defined in the Code) and
Holders who acquired their stock through the exercise of an employee stock
option or otherwise acquired their stock or employee stock options as
compensation. Consequently, such Holders may be subject to special rules not
discussed below. In addition, the tax treatment of employees of the Company who
receive as compensation New Common Stock or options to acquire New Common Stock
in connection with the Plan, any
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restructuring of the Debtors or post-restructuring operations of the Debtors or
of any amounts paid by the Debtors with respect to the Unofficial Noteholders'
Committee Substantial Contribution Claim, is not described below.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ARE COMPLEX. ALL
HOLDERS OF ALLOWED CLAIMS AND PLAN SECURITIES SHOULD CONSULT WITH THEIR TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE PLAN AND THE
OWNERSHIP AND DISPOSITION OF PLAN SECURITIES, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGE IN APPLICABLE
TAX LAWS.
A. CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF ALLOWED CLAIMS
1. TAX SECURITIES
The federal income tax consequences of the Plan may vary depending
upon, among other things, whether a Holder's Claim being exchanged and each of
the Plan Securities being received constitute a "security" of PHI for federal
income tax purposes (a "tax security"). Whether a debt instrument constitutes a
tax security within the meaning of federal income tax law is relevant to
determining whether and the extent to which a Holder of such a debt instrument
will recognize gain or loss in a reorganization. There is no definition of a tax
security in the Code or Treasury regulations for this purpose. Whether a debt
instrument is classified as a tax security depends on an overall evaluation of
the nature of the debt instrument at the time it is issued (or subsequently
amended), with the term of the debt instrument usually regarded as the most
important factor. Under current law, debt instruments with a five-year term or
less generally have not qualified as tax securities, whereas debt instruments
with a ten-year term or more generally have qualified as tax securities.
Further, under Treasury regulations, warrants to purchase stock of a party to a
reorganization, such as the Old Warrants and the New Warrants, are tax
securities.
The Debtors believe that it is likely, although not free from doubt,
that the Old Senior Subordinated Notes will qualify as tax securities, and this
discussion assumes they will be so treated. The New Secured PIK Notes will have
a term of five years, subject to the possibility of early redemption. The New
Senior Secured Notes will have a term of two years. The Debtors believe that the
New Secured PIK Notes may not and that the New Senior Secured Notes will not
qualify as tax securities. This discussion assumes that the New Senior Secured
Notes will not qualify as tax securities. Holders are urged to consult their tax
advisors regarding the classification of the debt instruments involved in the
Plan as tax securities and the resulting tax consequences if the Old Senior
Subordinated Notes are not treated as debt securities.
2. EXCHANGE OF OLD SENIOR SUBORDINATED NOTES FOR CASH, NEW SECURED PIK NOTES,
NEW COMMON STOCK AND POSSIBLY NEW SENIOR SECURED NOTES
Holders of Old Senior Subordinated Notes will receive its Pro Rata
share of $47.5 million Cash, $60 million principal amount of the New Secured PIK
Notes and 2.65 million shares of New Class A Common Stock under the Plan. If,
however, PHI is unable to complete
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an agreement in a timely manner and on reasonable terms acceptable to it with a
third-party lender to purchase the New Senior Secured Notes, PHI may with the
written consent of Holders of at least $167 million in principal amount of the
Old Senior Subordinated Notes, deliver the New Senior Secured Notes to the
Holders of the Senior Subordinated Note Claims, in lieu of the payment of up to
$25 million in Cash. In addition, the amount of Cash and New Class A Common
Stock received by the Holders will be increased by a fee of $625,000 and 350,000
shares, respectively, to reflect a fee that otherwise would have been payable to
a third-party lender (the principal amount of New Secured PIK Notes given as
consideration remains unchanged at $60 million). In addition, in the event a
third-party lender purchases the New Senior Secured Notes without taking some or
all of the New Class A Common Stock allocable to such lender, then the Holders
of Old Senior Subordinated Notes Claims shall receive, Pro Rata, the
undistributed New Class A Common Stock up to a total of 350,000 shares and the
amount of New Secured PIK Notes distributed shall be reduced. If the Holders of
Old Senior Subordinated Notes receive New Senior Secured Notes, the tax
consequences to them may vary depending on whether the consideration received in
such circumstances is all treated as given in exchange for the Old Senior
Subordinated Notes Claims, or the Holders are instead treated as having
received, in exchange for their Old Senior Subordinated Notes Claims, the
consideration to which they otherwise would have been entitled had there been a
third-party lender and then purchased the New Senior Secured Notes and received,
as additional consideration or as a fee in connection therewith, the additional
Cash and the additional shares of New Class A Common Stock. Except as
specifically provided below, this discussion assumes that if the Holders of Old
Senior Subordinated Notes receive New Senior Secured Notes, all the
consideration received by such Holders in such circumstances will be treated as
received in exchange for their Old Senior Subordinated Note Claims (although the
more likely treatment may be that described in the last paragraph of this
Section X.A.2).
A Holder of Old Senior Subordinated Notes that receives Cash, New
Secured PIK Notes, New Common Stock and New Senior Secured Notes, if any, will
recognize ordinary interest income to the extent that any portion of the Cash,
New Secured PIK Notes, New Common Stock or New Senior Secured Notes received is
allocable to accrued but untaxed interest. See "Distributions in Discharge of
Accrued Interest," below. The following discussion addresses only that portion
of the consideration received by a Holder of Old Senior Subordinated Notes which
is not allocable to accrued but untaxed interest.
A Holder of Old Senior Subordinated Notes will recognize gain (but not
loss) equal to the lesser of (i) the sum of the Cash, the fair market value of
the New Common Stock, and the issue prices of the New Secured PIK Notes and any
New Senior Secured Notes received in exchange for such Holder's Old Senior
Subordinated Notes, less the Holder's tax basis in the Old Senior Subordinated
Notes, and (ii) the sum of the Cash, the fair market value of any New Senior
Secured Notes, and, in the event the New Secured PIK Notes are not tax
securities, the fair market value of the New Secured PIK Notes received in
exchange for such Holder's Old Senior Subordinated Notes. Such gain will be
capital gain and will be long-term capital gain if the holding period with
respect to the Old Senior Subordinated Notes exceeds one year, except to the
extent of any accrued (but not recognized) market discount, which will be
treated as ordinary income, as described below under the heading, "Market
Discount." It is expected that the Old Senior Subordinated Notes will be treated
as publicly traded in an established securities market
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and that installment reporting will not be available with respect to the
exchange. See "Original Issue Discount and Premium."
Assuming the New Secured PIK Notes and New Senior Secured Notes are not
tax securities, a Holder's initial tax basis in the New Common Stock received
generally will equal the Holder's adjusted tax basis in the Old Senior
Subordinated Notes surrendered, reduced by the amount of Cash and the fair
market value of the New Secured PIK Notes and any New Senior Secured Notes
received in the exchange, and increased by any capital gain recognized by the
Holder on the exchange. In such case, the Holder's initial tax basis in the New
Secured PIK Notes and any New Senior Secured Notes received will be equal to
their respective fair market values.
If the New Secured PIK Notes are treated as tax securities, a Holder's
aggregate initial tax basis in the New Common Stock and the New Secured PIK
Notes generally will equal the Holder's adjusted tax basis in the Old Senior
Subordinated Notes surrendered, reduced by the amount of Cash and the fair
market value of any New Senior Secured Notes received in the exchange, and
increased by any capital gain recognized by the Holder on the exchange. Such
aggregate initial tax basis will be allocated between the New Secured PIK Notes
and New Common Stock in accordance with their relative fair market values. The
Holder's initial tax basis in any New Senior Secured Notes received will be
equal to their fair market value.
The Holder's holding period in the New Common Stock and, if the New
Secured PIK Notes are tax securities, the New Secured PIK Notes received will
include such Holder's holding period for the Old Senior Subordinated Notes
surrendered. The Holder's holding period in any New Senior Secured Notes and, if
the New Secured PIK Notes are not tax securities, the New Secured PIK Notes
received will begin on the day following the Effective Date. The holding period
of any additional New Secured PIK Notes which are issued in lieu of paying Cash
interest on a New Secured PIK Note will include such Holder's holding period for
the New Secured PIK Notes received in exchange for its Old Senior Subordinated
Notes.
The Company intends to treat the New Secured PIK Notes received in the
exchange as issued with original issue discount. Accordingly, each Holder
thereof will include such original issue discount in income on a constant-yield
basis over the entire term of such Notes, regardless of the timing of Cash
payments. Depending on their issue price, the New Senior Secured Notes may be
issued with original issue discount. See "Original Issue Discount and Premium,"
below.
As indicated earlier, it is possible that the Holders of Old Senior
Subordinated Notes will be treated as having received, in exchange for their Old
Senior Subordinated Notes Claims, the consideration to which they otherwise
would have been entitled had there been a third-party lender and then purchased
the New Senior Secured Notes and received, as additional consideration or as a
fee in connection therewith, the additional Cash and the additional shares of
New Class A Common Stock. In such case, the Holders may be treated as having
purchased an investment unit comprised of the New Senior Secured Notes and the
additional shares of New Class A Common Stock they receive over the amount they
would have otherwise received had there been a third-party lender. The amount
paid for the investment unit would have to be allocated between the New Senior
Secured Notes and such additional shares of New Class A
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Common Stock based on their relative fair market values. The portion of the
purchase price allocated to the New Senior Secured Notes would constitute their
issue price and their initial tax basis. To the extent such allocable portion is
less than the face amount of the New Senior Secured Notes, the New Senior
Secured Notes may be treated as issued with original issue discount, which as
described under "Original Issue Discount and Premium" below, is includible in
income on a constant-yield basis over the entire term of such Notes, regardless
of the timing of Cash payments. Further, if the price paid for the investment
unit is considered reduced by the amount of the additional Cash the Holders
receive that would otherwise have been paid as a fee to the third-party lender,
the purchase price allocable to the New Senior Secured Notes will be less and
the New Senior Secured Notes will have a larger amount of original issue
discount. On the other hand, if the purchase price is not reduced by the
additional Cash, it is possible that such additional Cash may be viewed as a fee
to the Holders of the Old Senior Subordinated Notes, which fee would be
includible in income to such Holders upon its receipt. Further, it is possible
that the additional shares of New Class A Common Stock also may be viewed as a
fee to the Holders of the Old Senior Subordinated Notes, and not as
consideration for their Old Senior Subordinated Notes Claim or as part of a
purchased investment unit. In such case, the Holders would have to include the
value of the additional shares of New Class A Common Stock in income upon its
receipt as well.
3. EXCHANGE OF ALLOWED GENERAL UNSECURED CLAIMS FOR CASH AND NEW SECURED PIK
NOTES
In general, gain or loss will be recognized by a Holder of an Allowed
General Unsecured Claim in an amount equal to the difference between (i) the
"amount realized" by the Holder in respect of its claim (other than any claim
for accrued but unpaid interest) and (ii) the Holder's adjusted tax basis in its
General Unsecured Claim (other than any claim for accrued but unpaid interest).
See "Distributions in Discharge of Accrued Interest," below. The amount realized
by a Holder will equal the amount of Cash and the issue price of the New Secured
PIK Notes received in respect of its claim (other than any claim for accrued but
unpaid interest). For this purpose, the issue price, as described below under
"Original Issue Discount and Premium," should equal the fair market value of the
New Secured PIK Notes.
Where gain or loss is recognized by a Holder of a General Unsecured
Claim, the character of such gain or loss as long-term or short-term capital
gain or loss, or as ordinary income or loss will be determined by a number of
factors, including the tax status of the Holder, whether the obligation from
which a Claim arose constitutes a capital asset in the hands of the Holder and
how long it has been held, and whether and to what extent the Holder has
previously claimed a bad debt deduction. A Holder which purchased its Claim from
a prior holder at a market discount may be subject to the market discount rules
of the Code which could characterize a portion of the gain recognized as
ordinary income. In addition, Section 582(c) of the Code provides that the sale
or exchange of a bond, debenture, note, or certificate or other evidence of
indebtedness by certain financial institutions shall be considered the sale or
exchange of a non-capital asset. Accordingly, any gain or loss recognized by
such financial institutions as a result of the implementation of the Plan will
be ordinary gain or loss, regardless of the nature of their Claims. Since it is
expected that the New Secured PIK Notes will be treated as traded in an
established securities market, installment reporting will not be available
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with respect to the receipt of the New Secured PIK Notes. See "Original Issue
Discount and Premium."
A General Unsecured Creditor's initial tax basis in the New Secured PIK
Notes received will be equal to their fair market value. A General Unsecured
Creditor's holding period in the New Secured PIK Notes received, including any
additional New Secured PIK Notes issued in lieu of paying Cash interest on a New
Secured PIK Note, will begin on the day following the Effective Date.
The Company intends to treat the New Secured PIK Notes received in the
exchange as issued with original issue discount. Accordingly, each Holder
thereof will include such original issue discount in income on a constant-yield
basis over the entire term of such Notes, regardless of the timing of Cash
payments. See "Original Issue Discount and Premium," below.
4. CANCELLATION OF OLD COMMON STOCK OR EXCHANGE OF OLD COMMON STOCK FOR NEW
WARRANTS
If a Holder of the Old Common Stock receives no consideration in
exchange for its Old Common Stock and such Old Common Stock is cancelled, such
Holder of Old Common Stock will generally recognize a loss equal to the Holder's
tax basis in its Old Common Stock. Any such loss will generally be a capital
loss and will be a long-term capital loss if the Old Common Stock was held for
more than one year.
If a Holder of the Old Common Stock receives New Warrants in exchange
for its Old Common Stock, the exchange will be treated as an exchange of stock
for tax securities pursuant to a reorganization under Section 368(a)(1)(E) of
the Code. Accordingly, a Holder of Old Common Stock should not recognize gain or
loss upon such exchange. In general, a Holder's tax basis in the New Warrants
received will equal the Holder's adjusted tax basis in the Old Common Stock
surrendered, and a Holder's holding period in the New Warrants will include its
holding period for the Old Common Stock surrendered.
5. DISTRIBUTIONS IN DISCHARGE OF ACCRUED INTEREST
To the extent the amount received by a Holder is received in discharge
of interest accrued on its Claim during its holding period, such amount will be
taxable to the Holder as interest income (if, under the Holder's applicable
accounting method, such interest was not previously included in the Holder's
gross income). Conversely, a Holder will recognize a deductible loss (or,
possibly, a write-off against a reserve for bad debts) to the extent any accrued
interest claimed was previously included in its gross income and is not paid in
full.
Pursuant to the Plan, any distributions received by a Holder in respect
of an Allowed Claim shall be allocated first to the principal portion of the
Claim to the extent thereof and thereafter to any Claim representing accrued
interest through the Effective Date. There is no assurance, however, that such
allocation will be respected for federal income tax purposes. Accordingly, all
Holders are advised to consult their own tax advisors to determine the amount of
consideration received under the Plan that may be allocable to accrued interest.
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6. ORIGINAL ISSUE DISCOUNT AND PREMIUM
GENERAL RULES
In general, a debt instrument is considered for federal income tax
purposes to be issued with original issue discount ("OID") if the "stated
redemption price at maturity" of the instrument exceeds the instrument's "issue
price" by more than a prescribed de minimis amount.
The issue price of a debt instrument will depend upon whether or not
the debt instrument is treated as "publicly traded" for purposes of the OID
rules. If the debt instrument is publicly traded (whether or not the property
for which it is exchanged is publicly traded), its issue price will be its fair
market value on the issue date. On the other hand, if the debt instrument is not
publicly traded, but the property for which it is exchanged is publicly traded,
the issue price of the debt instrument will be the fair market value of the
property on the issue date of the debt instrument. The issue date is generally
the date on which a substantial amount of the debt instrument is issued.
Property is considered "publicly traded" under Treasury regulations, if, in
general, at any time during the 60 day period ending 30 days after the issue
date, it is traded on a recognized securities exchange, or is listed on a
quotation medium that is a system of general circulation providing a reasonable
basis to determine fair market value by disseminating either recent price
quotations of one or more identified brokers, dealers or traders, or actual
prices of recent sales transactions.
It is expected that the Old Senior Subordinated Notes and the New
Secured PIK Notes will, and that the New Senior Secured Notes may, be treated as
publicly traded for purposes of the OID rules. Accordingly, the issue price of
the New Secured PIK Notes will equal their fair market value (i.e., their
trading price on the date of issuance) and the issue price of the New Senior
Secured Notes will equal their fair market value (if they are publicly traded)
or the fair market value of the Old Senior Subordinated Notes for which they are
exchanged (if the New Senior Secured Notes are not publicly traded).
Accordingly, it is possible that the issue prices of the New Senior Secured
Notes and the New Secured PIK Notes could be significantly less than their
respective principal amounts. Thus, the New Senior Secured Notes may be issued
with OID and the New Secured PIK Notes could have OID in addition to that
resulting from the inclusion of all interest payments in their stated redemption
price at maturity, as described immediately below.
The stated redemption price at maturity of a debt instrument is the
aggregate of all payments due to the Holder under such debt instrument at or
before its maturity date, other than interest that is actually and
unconditionally payable in Cash or property (other than debt instruments of the
issuer) at fixed intervals of one year or less during the entire term of the
instrument at certain specified rates ("qualified stated interest"). Under this
definition, no interest payable with respect to the New Secured PIK Notes will
be treated as qualified stated interest (since the Debtor may issued additional
New Secured PIK Notes ("Additional Notes") in lieu of paying Cash interest on a
New Secured PIK Note under certain circumstances) and all such interest will be
included in the stated redemption price at maturity of the New Secured PIK
Notes. Further, since interest on the New Senior Secured Notes will be paid
currently in Cash,
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all such interest will be treated as qualified stated interest and will not be
included in their stated redemption price at maturity. As a result, the stated
redemption price of the New Secured PIK Notes will exceed their issue price by
more than the de minimis amount and the New Secured PIK Notes will be issued
with OID. Further, unless the issue price of the New Senior Secured Notes is
less than their principal amount, the New Senior Secured Notes should not be
treated as issued with OID.
Even if the New Senior Secured Notes were not treated as issued with
OID under the rules described above, they may have OID if they are treated as
part of a purchased investment unit and not as consideration for the Old Senior
Subordinated Notes Claims. In such case, their issue price will equal the
portion of the investment unit purchase price which is properly allocable to the
New Senior Secured Notes, which issue price may be significantly less than the
stated redemption price at maturity of such Notes. As a result, if the New
Senior Secured Notes are properly viewed as part of an investment unit, they may
be issued with OID.
In general, OID with respect to a debt instrument is includible in
income on a constant-yield method, based on the original yield to maturity of
the debt instrument calculated by reference to its issue price, regardless of
the taxpayer's method of accounting and regardless of when interest on the debt
instrument is actually paid in Cash. Accordingly, the holder of a debt
instrument issued with OID may be required to take OID into income prior to the
receipt of Cash payments with respect to that instrument.
For purposes of the OID rules, any Additional Notes issued in lieu of
paying Cash interest on a New Secured PIK Note will be aggregated with the New
Secured PIK Note such that the issuance of an Additional Note will not be
treated as a payment with respect to the New Secured PIK Notes and payments with
respect to the Additional Notes will be treated as made with respect to the
original New Secured PIK Notes.
BOND PREMIUM
If a holder's tax basis with respect to a debt instrument upon its
acquisition exceeds its issue price, the debt instrument will be treated as
having been acquired with "acquisition premium" and the holder may reduce its
OID accruals with respect to such debt instrument by the proportion of the
aggregate amount of OID remaining to be accrued that is represented by the
amount of such excess.
If a holder's tax basis with respect to a debt instrument upon its
acquisition exceeds the stated redemption price at maturity of such debt
instrument, then the holder will not be required to accrue OID with respect of
such debt instrument and such excess may be deductible by the holder as
"amortizable bond premium" under Section 171 of the Code on a constant-yield
basis over the term of the debt instrument, subject to certain limitations. Such
deductions are available only if the holder makes (or has made) a timely
election under Section 171 of the Code. Any such election to amortize bond
premium would apply to all debt instruments held or subsequently acquired by the
electing holder and cannot be revoked without permission from the Service.
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CONTINGENT PAYMENT DEBT INSTRUMENTS
Special rules apply to debt instruments treated as "contingent payment
debt instruments" under applicable Treasury regulations. The New Secured PIK
Notes are subject to mandatory redemption if certain tests relating to the
Debtors' consolidated EDITDA, interest expense and working capital are
satisfied. Accordingly, if the issue price of the New Secured PIK Notes (i.e.,
their fair market value on the date of issuance) does not equal their principal
amount, the Debtors intend to treat the New Secured PIK Notes as contingent
payment debt instruments (under Treasury regulations Section 1.1275-4) issued
with OID since it is not possible to predict if and when the mandatory
redemption will occur.
Under the contingent payment debt rules, OID with respect to the New
Secured PIK Notes will be calculated based on a projected payment schedule and
assuming the same yield for the New Secured PIK Notes as the yield which would
result for comparable fixed rate debt instruments issued by the Debtors as of
the issue date of the New Secured PIK Notes. The amount of accrued OID is
adjusted to reflect differences in actual and projected payments with respect to
the New Secured PIK Notes. The excess of an actual contingent payment over a
projected payment is a "positive adjustment" and the excess of a projected
payment over an actual contingent payment is a "negative adjustment." Where the
positive adjustments for a taxable year exceed the negative adjustments for a
taxable year, the difference (the "net positive adjustment") is treated as
additional interest for the taxable year. Where the negative adjustments for a
taxable year exceed the positive adjustments for the taxable year, the
difference (the "net negative adjustment") is first, applied as a reduction of
OID that would otherwise be accrued on the bond for the taxable year; second,
treated as an ordinary loss to the extent the holder's total interest inclusions
on the bond exceed the total amount of the holder's net negative adjustments
treated as ordinary losses on the bond in prior taxable years; and third,
carried forward and treated as a negative adjustment occurring on the first day
of the next taxable year. Any net negative adjustment carryforward for the
taxable year in which the bond is sold, exchanged or retired is treated as a
reduction in the holder's amount realized upon such sale, exchange or
retirement. The projected payment schedule used by the Debtors to calculate OID
with respect to the New Secured PIK Notes will be made available to all holders
of New Secured PIK Notes by submission of a written request to the Debtors. All
holders of Old Senior Subordinated Notes and General Unsecured Claims should
consult their tax advisors concerning the applicability and effect of the
Treasury regulations relating to contingent payment debt instruments.
Under the Treasury regulations relating to contingent payment debt
instrument, if a Holder's tax basis in the New Secured PIK Notes exceeds their
issue price (adjusted for any accrued OID, any noncontingent payments and the
projected amount of any contingent payments), any difference is allocated in a
reasonable manner to daily portions of interest or projected payments over the
term of the New Secured PIK Notes and, on the date a daily portion accrues or
the payment is made, the amount allocated to such daily portion or payment is
treated as a negative adjustment, which is treated as described above. The
election under Section 171 of the Code relating to bonds acquired at a premium
is not applicable with respect to contingent payment debt instruments.
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7. MARKET DISCOUNT
In general, a debt instrument issued with OID is considered to have
been acquired with "market discount" if its holder's adjusted tax basis is less
than its adjusted issue price by more than a prescribed de minimis amount.
A holder that acquires a debt instrument with market discount will be
required to include accrued and unrecognized market discount in income as
ordinary income to the extent partial principal payments are made on the debt
instrument or gain is realized by the holder on the sale, exchange, redemption
or other taxable disposition of the debt (unless the holder of the debt
instrument elects to include market discount in income as it accrues). In
addition, the holder could be required to defer the deduction of a portion of
the interest paid on any indebtedness incurred or continued to purchase or carry
a debt instrument acquired with market discount.
The market discount rules of section 1276 do not apply to contingent
payment debt instruments. Accordingly, if the New Secured PIK Notes are treated
as contingent payment debt instruments under the applicable Treasury
regulations, if a holder's basis in a New Secured PIK Note is less than the
issue price of the New Secured PIK Note (adjusted for any accrued OID, any
noncontingent payments and the projected amount of any contingent payments), any
difference is allocated in a reasonable manner to daily portions of interest or
projected payments over the term of the New Secured PIK Note, and, on the date a
daily portion accrues or the payment is made, the amount allocated to such daily
portion or payment is treated as a positive adjustment. See "Original Issue
Discount and Premium" above for the treatment of positive adjustments. Holders
of New Secured PIK Notes should consult their tax advisors regarding the
applicability of interest deductions with respect to debt incurred to purchase
or carry New Secured PIK Notes that have market discount.
8. DISPOSITION OF PLAN SECURITIES
Generally, any sale, exchange or redemption of a New Secured PIK Note
or a New Senior Secured Note will result in gain or loss equal to the difference
between the amount realized on the sale, exchange or redemption and a Holder's
adjusted tax basis in such Notes. If the New Secured PIK Notes are treated as
contingent payment debt instruments, as described in "Original Issue Discount
and Premium" above, the amount realized for purposes of calculating gain or loss
from a disposition will be reduced by any negative adjustment carryforwards for
the taxable year of such disposition.
The calculation of the adjusted tax basis of the New Secured PIK Notes
will depend on whether or not such Notes are treated as contingent payment debt
instruments. See "Original Issue Discount and Premium" above. If the New Secured
PIK Notes are not contingent payment debt instruments, a Holder's adjusted tax
basis in the New Secured PIK Notes (and, in all cases, a Holder's adjusted tax
basis in the New Senior Secured Notes, if any) is generally the initial tax
basis in such Notes on the Effective Date (as described above under "Exchange of
Old Senior Subordinated Notes for Cash, New Secured PIK Notes, New Common Stock
and Possibly New Senior Secured Notes" and under "Exchange of Allowed General
Unsecured Claims for Cash and New Secured PIK Notes"), increased by any OID or
market discount included in income
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with respect to such Notes and decreased by any payments received on the Notes
and any amortized premium.
If the New Secured PIK Notes are contingent payment debt instruments, a
Holder's adjusted tax basis in the New Secured PIK Notes is generally the
initial tax basis in such Notes on the Effective Date (as described above under
"Exchange of Old Senior Subordinated Notes for Cash, New Secured PIK Notes, New
Common Stock and Possibly New Senior Secured Notes" and under "Exchange of
Allowed General Unsecured Claims for Cash and New Secured PIK Notes"), increased
by any OID previously accrued on the New Secured PIK Notes (determined before
accounting for positive and negative adjustments), and decreased by the amount
of any noncontingent payment and the projected amount of any contingent payment
previously made on the bond to the holder. The basis of a contingent New Secured
PIK Note is further increased (decreased) by a positive (negative) adjustment
that results from a difference in a Holder's basis in and the adjusted issue
price of a New Secured PIK Note on the date of such adjustment, as described in
"Market Discount" and "Original Issue Discount and Premium" above.
If a Holder has received additional New Secured PIK Notes in lieu of
Cash payments of interest on the New Secured PIK Notes and separately disposes
of the original New Secured PIK Notes or the additional notes, the adjusted tax
basis generally will be allocated among the original New Secured PIK Notes and
such additional notes in proportion to their respective principal amounts.
Except to the extent treated as ordinary income or loss under the
contingent payment debt rules, gain or loss on the disposition of a New Secured
PIK Note or a New Senior Secured Note generally will be capital gain or loss if
the New Secured PIK Note was held as a capital asset. Capital losses generally
may be used only to offset capital gains. The Treasury regulations relating to
contingent payment debt instruments provide that gain upon the disposition of a
contingent payment debt instrument will be ordinary income if the contingencies
relating to payments on the debt instrument are unresolved as of the time of the
disposition, and some or all of any loss upon the disposition of the contingent
payment debt instrument may be ordinary. All holders of New Secured PIK Notes
should consult their tax advisors concerning the applicability and effect of the
Treasury regulations relating to contingent payment debt instruments.
In general, any gain or loss recognized on a subsequent sale or
exchange of the New Common Stock received under the Plan will be capital gain or
loss. However, if the Old Senior Subordinated Notes are treated as tax
securities with respect to which the Holder accrued but had not recognized
market discount, a portion of the gain on the disposition of the New Common
Stock received in exchange therefor may be treated as ordinary income, as
described above under "Market Discount."
In general, any gain or loss recognized on a subsequent sale or
exchange of the New Warrants received under the Plan will be capital gain or
loss and such gain or loss will be long-term capital gain or loss if the New
Warrants were held for more than one year. If the New Warrants are not exercised
and lapse, a Holder generally will recognize a capital loss equal to the
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Holder's tax basis in the New Warrants, and such loss will be a long-term
capital loss if the New Warrants were held for more than one year.
The exercise of the New Warrants will not be a taxable event to the
Holder thereof. The Holder's tax basis in the New Common Stock received upon
such exercise will be equal to the Holder's tax basis in the New Warrants plus
the amount paid by the Holder to exercise the New Warrant.
9. BACKUP WITHHOLDING
A noncorporate Holder of Old Securities or Plan Securities may be
subject to backup withholding at the rate of 31 percent with respect to
"reportable payments," which include payments in respect of dividends, interest
or accrued OID, and the proceeds of a sale, exchange or redemption of Old
Securities or Plan Securities. Generally, a payor will be required to deduct and
withhold the prescribed amounts if (a) the payee fails to furnish a taxpayer
identification number ("TIN") to the payor in the manner required, (b) the
Service notifies the payor that the TIN furnished by the payee is incorrect, (c)
there has been a failure of the payee to certify under penalty of perjury that
the payee is not subject to withholding under Section 3406(a)(1)(C) of the Code,
or (d) the payee is notified by the Service that he or she failed to report
properly payments of interest and dividends and the Service has notified the
Debtors that he or she is subject to backup withholding.
Amounts paid as backup withholding do not constitute an additional tax
and will be credited against the Holder's federal income tax liabilities, so
long as the required information is provided to the Service. The Debtors will
report to the Holders of Old Securities and Plan Securities and to the Service
the amount of any "reportable payments" for each calendar year and the amount of
tax withheld, if any, with respect to payments on such securities to any
noncorporate Holder other than an "exempt recipient" (which if necessary
provides adequate proof of its exempt status).
10. ADJUSTMENTS
The conversion ratio and exercise price of the New Warrants are subject
to adjustments under certain circumstances. If such adjustments to the
conversion ratio and/or exercise price of the New Warrants are made, Holders of
the New Warrants could be treated as having received a constructive distribution
under Section 301 and Section 305(c) of the Code that may be treated as a
dividend distributed by the Debtor and taxable as ordinary income (regardless of
whether the Holder ever exercises the New Warrant). In general, a Holder's basis
in a New Warrant will include the amount of any such deemed taxable dividend.
B. CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS
1. CANCELLATION OF INDEBTEDNESS
In connection with the Plan, the amount of the Debtors' aggregate
outstanding indebtedness will be substantially reduced. A taxpayer generally
realizes cancellation of debt
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("COD") income for federal income tax purposes equal to the amount of any
indebtedness that is discharged or canceled during the taxable year. In the case
of an exchange such as that contemplated by the Plan, where outstanding
indebtedness is canceled in exchange for newly issued indebtedness (such as the
New Secured PIK Notes and possibly the New Senior Secured Notes) and other
property (such as the Cash and New Common Stock), the amount of such COD income
is, in general, equal to the excess of the adjusted issue price (including
accrued but unpaid interest) of the indebtedness satisfied over the sum of the
issue prices of the new debt instruments and the fair market value of the other
property issued therefor. If the discharge is granted by a court in a Chapter 11
proceeding or is pursuant to a plan approved by such court, however, such income
is excluded from the taxpayer's taxable income under Code Section 108(a).
Consequently, any COD income attributable to the Plan will be excluded from the
Debtors' taxable income.
However, Code Section 108(b) provides, in general, that certain tax
attributes of a debtor, including any net operating loss carryforwards ("NOLs")
and a portion of certain tax credits, must be reduced by the amount of the
debtor's COD income that is excluded under Code Section 108(a). To the extent
that the amount excluded exceeds these tax attributes, the debtor's tax basis in
its property is reduced by the amount of such excluded COD income, except that
such reduction is limited to the excess of the aggregate tax basis of the
property held by the debtor over the aggregate liabilities of the debtor
immediately after the transaction. Although not entirely clear, the Debtors
believe and intend to take the position that any attribute reduction under Code
Section 108(b) is to be applied on a separate company basis (i.e., COD income of
a debtor company can be applied only against attributes of that company), even
though a debtor may be part of an affiliated group that files a consolidated
income tax return.
As a result of the Plan, and assuming an aggregate issue price for each
of the debt instruments issued in the Plan equal to its aggregate principal
amount, the Debtors estimate that they will realize approximately $175 million
of COD income in connection with the Plan. The amount of COD income will be
greater if and to the extent the issue price of the New Secured PIK Notes or any
New Senior Secured Notes issued to Holders is less than their principal amount.
In either event, this COD income will completely eliminate the NOLs of PHI and
could substantially eliminate the NOLs of PHI's subsidiaries if attribute
reduction were applied on a consolidated group basis. However, assuming separate
company attribute reduction, the Debtors expect that the subsidiaries of PHI
will continue to have significant NOLs following implementation of the Plan.
2. LIMITATION OF NET OPERATING LOSS CARRYFORWARDS FOLLOWING AN OWNERSHIP CHANGE
The Debtors estimate that as of the end of their 1999 Fiscal Year, they
will report NOL carryforwards of approximately $150 million (and tax credits of
approximately $9 million), although there can be no assurance that the Service
will concur in the reporting positions on which the Debtors' calculations are
based. These NOLs are expected to be reduced to approximately $75 million (and
the tax credits to approximately $4.5 million) as a result of the COD income
described above (and assuming separate company attribute reduction).
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Section 382 of the Code generally limits a corporation's use of its
NOLs (and may limit a corporation's use of certain built-in losses recognized
within a five-year period) if the corporation undergoes an "ownership change."
Section 383 of the Code applies similar limitations to capital loss
carryforwards and tax credits. In general, an ownership change occurs when the
percentage of the corporation's stock owned by certain "5 percent shareholders"
increases by more than 50 percentage points over the lowest percentage owned at
any time during the applicable "testing period" (generally the shorter of (i)
the three-year period preceding the testing date or (ii) the period of time
since the most recent ownership change of the corporation). A 5 percent
shareholder for these purposes includes, very generally, an individual or entity
that directly or indirectly (and taking into account certain attribution rules)
owns 5 percent or more of the value of the corporation's stock during the
relevant period, and may include one or more groups of shareholders that in the
aggregate own less than 5 percent of the value of the corporation's stock.
As a result of the Plan, it is anticipated that the Debtors will
undergo an "ownership change" within the meaning of Code Section 382.
Consequently, the ability of the Debtors to use their NOLs, as well as any
losses arising in the taxable period ending on the Effective Date of the Plan,
will become subject to the provisions of Code Section 382.
If an ownership change occurs pursuant to the consummation of a
bankruptcy debt restructuring and Section 382(l)(5) (as described below) does
not apply, the NOLs available each year to offset income of the loss
corporation's group is limited (to the extent not previously limited) to the
product of (a) the aggregate fair market value (after taking into account any
increase in value as a result of such bankruptcy restructuring) of the
outstanding stock of the common parent of the group, and (b) the federal
long-term tax-exempt interest rate in effect on the date of the ownership
change, plus the portion of any such limitation amount not utilized in prior
years (the "Section 382 limitation"). (If the ownership change does not occur as
a result of a bankruptcy debt restructuring, the aggregate fair market value of
the common stock referred to in clause (a) of the preceding sentence is the
stock's value before the ownership change, whether or not the ownership change
occurs while the loss corporation is under the jurisdiction of the bankruptcy
court). If the group ceases the conduct of its historic business within the
two-year period following the date of the ownership change, the ability of the
group to utilize NOLs under the foregoing formula restriction is eliminated
entirely.
In addition, NOL carryovers may be used without restriction during a
five-year period (the "recognition period"), beginning with the date of an
ownership change, to offset "built-in gains" (generally the excess of the fair
market value of the assets of the corporation over their adjusted tax basis - in
the case of an affiliated consolidated group, built-in gains or losses are
computed on a group basis taking into account each member's assets but
disregarding stock owned by a member in any other member corporation) existing
at the time of the ownership change and recognized during the recognition
period, up to the amount of the net built-in gain on the date of the ownership
change, provided that on the date of the ownership change the amount of net
built-in gain with respect to the assets of the corporation (excluding Cash,
Cash equivalents and certain other assets) exceeds the lesser of $10,000,000 or
15% of the fair market value of such assets. (Conversely, if a corporation has a
net unrealized built-in loss exceeding
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the threshold amount, any portion of such net unrealized built-in loss
recognized during the recognition period is subject to the Section 382
limitation).
Unless a debtor elects for it not to apply, Section 382(l)(5) of the
Code provides that in the case of a debtor under the jurisdiction of a
bankruptcy court in a Title 11 case, assuming no prior ownership change, the
annual formula limitations imposed by Section 382 of the Code (as discussed
above) will not apply to any ownership change resulting from such a proceeding
if qualifying creditors and shareholders (determined immediately before such
ownership change) own, after such ownership change as a result of being
shareholders or creditors immediately before such change, 50% or more of the
stock of the loss corporation.
A cost of applying Section 382(l)(5) of the Code is that NOL carryovers
must be reduced by any deduction of interest claimed by the loss corporation,
with respect to any indebtedness converted into stock, for any taxable year
ending during the three-year period preceding the taxable year of the ownership
change and the portion of the year of the ownership change prior to the date of
the ownership change. Any NOL reduction arising from the application of Section
382(l)(5) will not again be taken into account in computing the amount of COD
income realized by the Debtors.
In addition, if Section 382(l)(5) is applicable and is applied, a
second ownership change within two years will result in Section 382(l)(5) being
inapplicable retroactively, and the Debtors' Section 382 limitation for the
second ownership change will be zero.
The Debtors do not currently believe that the requirements for applying
Section 382(l)(5) will be satisfied in connection with the anticipated ownership
change resulting from the consummation of the Plan. Prior to the time prescribed
for electing not to apply Section 382(l)(5), the Debtors will determine whether
they satisfy such requirement and, if so, whether it will be preferable to
choose to apply the approach incorporated in Section 382(l)(5).
3. ALTERNATIVE MINIMUM TAX
In general, an "alternative minimum tax" ("AMT") is imposed on a
corporation's "alternative minimum taxable income" at a rate of 20% to the
extent such tax exceeds the corporation's regular federal income tax. In
computing taxable income for AMT purposes, certain tax deductions and other
beneficial allowances are modified or eliminated. In particular, even though a
corporation might be able to offset all of its taxable income for regular
federal income tax purposes by available NOL carryovers, only 90% of a
corporation's taxable income for AMT purposes may be offset by available NOL
carryovers (as recomputed for AMT purposes), resulting in an effective AMT of
2%.
Any AMT that a corporation pays generally will be allowed as a
nonrefundable credit against its regular federal income tax liability in future
taxable years when the corporation is no longer subject to the AMT.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE RESTRUCTURING ARE COMPLEX.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL
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ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER
IN LIGHT OF SUCH HOLDER'S PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. ALL
HOLDERS OF THE OLD SECURITIES SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE TRANSACTIONS CONTEMPLATED BY THE
RESTRUCTURING AND THE OWNERSHIP AND DISPOSITION OF THE PLAN SECURITIES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF ANY CHANGE IN APPLICABLE TAX LAWS.
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XI. RECOMMENDATION AND CONCLUSION
For all of the reasons set forth in this Disclosure Statement, the
Debtors believe that the Confirmation and consummation of the Plan is preferable
to all other alternatives. Consequently, the Debtors urge all Holders of Claims
solicited hereby to vote to ACCEPT the Plan, and to duly complete their Ballots
and/or Master Ballots such that they will be ACTUALLY RECEIVED by the Balloting
Agent on or before 4:00 p.m., Eastern Time, on January __, 2000.
Dated: November 8, 1999
Orlando, Florida
Respectfully submitted,
PLANET HOLLYWOOD INTERNATIONAL, COOL PLANET, INC.
INC.
By:___________________________ By:___________________________
Name: Name:
Title: Title:
COOL PLANET II, INC. PLANET HOLLYWOOD (ASPEN), INC.
By:____________________________ By:___________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (ATLANTIC PLANET HOLLYWOOD (CHICAGO), INC.
CITY), INC.
By:____________________________ By:___________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (HONOLULU), PLANET HOLLYWOOD (LP), INC.
INC.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
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PLANET HOLLYWOOD (NEW YORK PLANET HOLLYWOOD (NEW YORK),
CITY), INC. LTD.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (ORLANDO), INC. PLANET HOLLYWOOD (PHOENIX), INC.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (REGION I), INC. PLANET HOLLYWOOD (REGION II),
INC.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (REGION III), INC. PLANET HOLLYWOOD (REGION IV),
INC.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (REGION V), INC. PLANET HOLLYWOOD (REGION VI),
INC.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
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PLANET HOLLYWOOD (REGION VII), PLANET HOLLYWOOD (TEXAS), LTD.
INC.
By:_____________________________ By:____________________________
Name: Name:
Title: Title:
PLANET HOLLYWOOD (WAREHOUSE), SOUND REPUBLIC, INC.
INC.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
SOUND REPUBLIC I, INC. ALL STAR CAFE INTERNATIONAL,
INC.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
ALL STAR CAFE (NEW YORK), INC. EBCO MANAGEMENT, INC.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
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EXHIBIT 1
TO
DISCLOSURE STATEMENT FOR THE
JOINT REORGANIZATION PLAN OF
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
JOINT PLAN OF REORGANIZATION
<PAGE>
EXHIBIT 2
TO
DISCLOSURE STATEMENT FOR THE
JOINT REORGANIZATION PLAN OF
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
LIST OF LICENSED OR FRANCHISED UNITS
<PAGE>
EXHIBIT 3
TO
DISCLOSURE STATEMENT FOR THE
JOINT REORGANIZATION PLAN OF
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
LIST OF LOCATIONS CLOSED SINCE JANUARY 1, 1999
<PAGE>
EXHIBIT 4
TO
DISCLOSURE STATEMENT FOR THE
JOINT REORGANIZATION PLAN OF
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
LIST OF LOCATIONS SUBJECT TO LANDLORD SETTLEMENT AGREEMENTS
<PAGE>
EXHIBIT 5
TO
DISCLOSURE STATEMENT FOR THE
JOINT REORGANIZATION PLAN OF
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
HISTORICAL FINANCIAL INFORMATION
