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
JANUARY 21, 2000
------------------------------------------------
Date of Report (Date of earliest event reported)
PLANET HOLLYWOOD INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 00028230 59-3283783
- ------------------------------- ----------------- ----------------------
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification Number)
8669 COMMODITY CIRCLE
ORLANDO, FLORIDA 32819
-----------------------------------------------------------
(Address of principal executive office, including zip code)
(407) 363-7827
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 1. CHANGE IN CONTROL OF REGISTRANT
In connection with the reorganization of Planet Hollywood International
Inc. (the "Company") described under Item 3 below (the "Reorganization"), the
Company will experience on the Effective Date of the Reorganization a change in
its equity ownership that may constitute a change of control. See Item 3 for a
discussion of the relevant cancellations and issuances of equity interests of
the Company in the Reorganization.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
As previously reported, on October 12, 1999, the Company and
twenty-five of its operating subsidiaries (the "Debtors") 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
have been jointly administered under the case name IN RE: PLANET HOLLYWOOD
INTERNATIONAL, INC., et. al., Case No. 99-3612, with the Honorable Joseph J.
Farnan, Jr., United States District Judge, presiding over the cases. The Debtors
have continued to operate their businesses as debtors-in-possession during such
cases.
Also as previously reported, on November 8, 1999, the Debtors filed a
Joint Plan of Reorganization and a proposed Disclosure Statement with the
Bankruptcy Court which were supported by the Official Committee of Unsecured
Creditors for the Debtors. Such documents were attached as Exhibit 99.1 and
Exhibit 99.2, respectively, to the Company's Current Report on Form 8-K filed on
November 15, 1999. Following a hearing held on December 9, 1999, the Bankruptcy
Court approved the Disclosure Statement as amended and scheduled a hearing on
confirmation of the reorganization plan, as amended, for January 20, 2000.
On December 13, 1999, the Debtors filed their First Amended Joint Plan
of Reorganization (the "Plan") and First Amended Disclosure Statement (the
"Disclosure Statement") with the Bankruptcy Court. A hearing on the confirmation
of the Plan was held on January 20, 2000 and the Plan, as modified by the
Confirmation Order, was confirmed by the Bankruptcy Court pursuant to an Order
entered January 21, 2000 (the "Confirmation Order"). A copy of the Plan is
attached as Exhibit 2.1 hereto and is incorporated herein by reference. A copy
of the Disclosure Statement is attached as Exhibit 99.1 hereto and is
incorporated herein by reference. A copy of the Confirmation Order is attached
as Exhibit 99.2 hereto and is incorporated herein by reference. Capitalized
terms used, but not defined, herein shall have the same meanings as in the Plan.
The Confirmation Order, if not appealed or stayed, is expected to
become a Final Order in late February, 2000. The Effective Date of the Plan will
be the first Business Day after the Confirmation Order becomes a Final Order on
which the Debtors have obtained the necessary financing and all other conditions
to the occurrence of the Effective Date have been satisfied or duly waived, or
such other date as agreed by the Debtors and the Creditors Committee. The
Debtors currently anticipate that the Effective Date will occur on or before
February 29, 2000, although there can be no assurances that the conditions to
the occurrence of the Effective Date will be satisfied or waived, or as to the
timing thereof.
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<PAGE>
Set forth below is a summary of the material terms of the Plan,
together with an indication of what will be the Company's outstanding equity
interests as of the Effective Date and information regarding the assets and
liabilities of the Company as of the latest practicable date. Such summary is
qualified in its entirety by reference to the Plan, the Disclosure Statement and
the Confirmation Order, copies of which are attached hereto as Exhibit 2.1,
Exhibit 99.1 and Exhibit 99.2, respectively.
The Plan provides that the following Claims are "unimpaired" and will
be paid in cash on or after the Effective Date or otherwise satisfied in
accordance with the terms of any agreements with the Debtors:
<TABLE>
<CAPTION>
ESTIMATED AMOUNT ESTIMATED CASH
CLASS OF CLAIM OF CLAIMS PAYMENTS
- -------------- ---------------- ---------------
<S> <C> <C>
Unclassified Claims, including $6.5 million $6.5 million
Administrative Claims and Priority
Tax Claims
Class 1 - Priority Claims $0 $0
Class 2 - SunTrust Claims $2.5 million $2.5 million
Class 3 - Miscellaneous Secured $2.0 million $2.0 million
Claims
Class 4 - Convenience Claims $1.5 million $1.5 million
Class 7 - Landlord Settlement $0.9 million $0.9 million
Agreement Claims
Class 10 - Intercompany Claims n/a n/a
Class 11 - Intercompany Interests n/a n/a
</TABLE>
The Plan provides that the following Claims and Interests are
"impaired" and will be paid partly in cash on or after the Effective Date or
otherwise satisfied or extinguished in accordance with the terms of the Plan or
any agreements with the Debtors:
<TABLE>
<CAPTION>
ESTIMATED AMOUNT
CLASS OF CLAIM OR INTEREST OF CLAIMS ESTIMATED PAYMENTS
- -------------------------- ---------------- ------------------
<S> <C> <C>
Class 5 - Old Senior Subordinated $282 million pro-rata share of (i) $47.5
Notes Claims million cash, (ii) $60
million New Secured PIK
Notes and (iii) 2.65 million
shares of New Class A
Common Stock
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
Class 6 - General Unsecured $22.5 million pro-rata share of (i) $3.8
Claims or such higher million cash and (ii) $5.7
amount as may million of New Secured
be approved by PIK Notes, as adjusted to
the Bankruptcy provide appropriate percentage
Court payment based on final Allowed
Claim amounts
Class 8 - Old Common Stock n/a pro-rata share of New
Warrants; provided that no
distribution will be made
to a Holder of less than
5,450 shares of Old
Common Stock
Class 9 - Claims for Issuance of n/a none
Old Common Stock
</TABLE>
Summaries of the terms of the New Senior Secured Notes, the New Secured
PIK Notes and the New Warrants are set forth as Annexes A, B and C,
respectively, to the Plan. The final terms of such securities will be set forth
in the definitive documentation agreed to by the Debtors, the Lenders and the
Creditors Committee. The New Warrants will provide for the purchase of an
aggregate 200,000 shares of New Class A Common Stock. Each Warrant will be
exercisable for the purchase of one share of New Class A Common Stock at an
exercise price of $65.50 per share and will expire on the third anniversary of
the Effective Date of the Plan.
On the Effective Date, except as otherwise provided in the Plan or by
Bankruptcy 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 thereto shall be
discharged; provided, however, that any such evidences of Claims and Interests
shall, effective upon the Effective Date, represent the right to participate, to
the extent allowed under the Plan, in the distributions contemplated by the
Plan. As a condition precedent to receiving any distribution under the Plan on
account of a Claim or 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 documentation evidencing such Claim or
Interest. Any Holder of an Old Security that fails to surrender or be deemed to
have surrendered such Old Security within one year of 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, the Reorganized Company, the other Reorganized Debtors or
their respective property.
The Plan is conditioned upon and contemplates that, on the Effective
Date, the Company shall (i) receive $30 million cash from the New Money
Investors as the purchase price for approximately seven million shares of New
Class B Common Stock (approximately $4.2857 per share); (ii) issue approximately
$22 million face amount New Senior Secured Notes; and (iii) obtain such other
financing on terms reasonably acceptable to the Creditors Committee as necessary
to fund the Debtors' obligations under the Plan and to operate the Reorganized
Debtors. The Debtors contemplate that the New Senior Secured Notes will be
issued to Bay Harbour Management L.C. and certain other holders of the Old
Senior Subordinated Notes who
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<PAGE>
will receive a fee of $625,000 in cash and 350,000 shares of New Class A Common
Stock. The additional financing referred to in clause (iii) above is expected to
consist of a $15 million Working Capital Facility for which the Debtors have
received a commitment letter from the CIT Group/Business Credit, Inc. and
Rothschild Recovery Fund, L.P. On the Effective Date, the reorganized Company
shall also issue the New Secured PIK Notes, New Warrants, New Options and New
Common Stock, and shall deliver cash to the holders of Claims and Interests
entitled to receive distributions under the Plan. The Company shall adopt on the
Effective Date two stock option plans, one for employees and independent
contractors and one for celebrities. The options to be issued under the plans
will be exercisable for the purchase of up to a total of one million shares of
New Class A Common Stock. The New Money Investors have also agreed to allow the
Company to redirect up to approximately one million of their seven million
shares of New Class B Common Stock to celebrities in exchange for their
involvement with the Company (which stock by its terms will automatically
convert to New Class A Common Stock).
In connection with the Plan, the Company and certain of its
subsidiaries have also entered into a contract for the sale of their interests
in a retail condominium unit at 1567 Broadway, New York, New York. The
Bankruptcy Court approved the sale by order dated January 20, 2000, which order
should become final by the end of February 2000. The sale of the 1567 Broadway
interest is an important component of the Company's restructuring effort. By its
terms, the sale is scheduled to close on or about May 1, 2000. The retail unit
and the sales contract together with certain other equity interests of the
Company in Times Square Partners, LLC ("TSP"), a limited liability company which
owns the balance of the 1567 Broadway property, will be collateral for the
various tranches of exit financing to be obtained on the Effective Date. If the
anticipated sale closes on time, the $22 million face amount New Senior Secured
Notes issed to Bay Harbour Management L.C. will be repaid in full, and the
balance of any proceeds will be applied to pay down drawings, if any, on the
Working Capital Facility and will otherwise be available for general corporate
purposes. If the $22 million face amount New Senior Secured Notes are not repaid
or otherwise refinanced by the projected closing date, there are scheduled
penalty payments to Bay Harbour that come due, ranging from a $500,000 payment
if repayment is delayed a month, to a maximum $5 million payment if repayment is
delayed by nine months or more. The Company's equity interest in TSP is also
expected to generate revenues from (i) the sale or joint venture of the upper
floors of the 1567 Broadway property as a hotel and/or (ii) certain signage
rights for the property. While the hotel development process is underway, there
is no assurance as to when, and at what level, revenues may be generated and
become available for corporate purposes.
On the Effective Date, the Company's certificate of incorporation and
bylaws will be amended and restated. The reorganized Company will be authorized
to issue 225 million shares of Common Stock consisting of 100 million shares of
New Class A Common Stock, 25 million shares of New Class B Common Stock and 100
million shares of preferred 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. No shares of preferred
stock are expected to be issued and outstanding on the Effective Date.
The Board of Directors of the reorganized Company shall initially
consist of the following seven directors on the Effective Date: Robert Earl,
Thomas Avallone, Claudio Gonzalez, Steven Grapstein, Mustafa Al Hejailan, and
two individuals designated by the Creditors' Committee. Thereafter, and until
the Company's New Secured PIK Notes have been paid, the Company's Class B Common
Stock shareholders will be entitled to elect all directors; provided that they
have agreed to vote in favor of two directors nominated by the New Indenture
Trustee of the New Secured PIK Notes. Subsequent to the payment of the New
Secured PIK Notes, the Class A Common Stock shareholders shall be entitled to
elect two directors. 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 Company's Board of Directors. The number of directors shall be
divided into three categories, with staggered three-year terms. Other than the
election of directors, Class A Common Stock shareholders and Class B Common
Stock shareholders shall have the same voting rights and shall vote together as
a single class.
The terms of the New Class B Common Stock provide that (i) upon any
transfer of such stock to Entities other than a New Money Investor or an
affiliate thereof, the shares shall automatically convert into an equal number
of New Class A Common Stock, (ii) once the New Secured PIK Notes have been paid,
the New Money Investors may voluntarily convert all (but not less than all) of
the outstanding New Class B Common Stock shares into an equal number of New
Class A Common Stock, and (iii) in the event that all issued and outstanding
shares of New Class B Common Stock constitute 10% or less of all issued and
outstanding shares of Common Stock, all such issued and outstanding shares of
New Class B Common Stock shall automatically convert into an equal number of New
Class A Common Stock.
5
<PAGE>
As of December 31, 1999, the latest practicable date that such
information is available, and before giving effect to the consummation of the
Plan, the Company projected that it had assets totaling approximately $291.6
million and liabilities totaling approximately $363.6 million. The Company
estimated the liquidation value of its assets, before fees and expenses, as of
that date at between approximately $69.5 million and $85.0 million. The
foregoing financial information was furnished to the Bankruptcy Court and is
included in the Disclosure Statement.
Certain statements made herein and in the Plan and the 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
Disclosure Statement as well as, without limitation: any other required
approvals or confirmations of the Plan; the ability of the Company to consummate
asset dispositions and/or to obtain financing as necessary in order to carry out
the terms of the Plan and the terms and conditions of any such dispositions and
financing; difficulties or delays in the Company's implementation of initiatives
and strategies, including the introduction of a new menu and new merchandising
and marketing strategies; actions taken by competitors, including business
combinations, new product offerings and marketing and promotions successes;
difficulties or delays in realizing improved results from operating
consolidations or the sale of certain facilities or assets held for sale or
franchise; the success of the Company's franchisees and licensees and the manner
in which they promote, operate or develop the Company's brands; the availability
of sufficient capital to service the Company's debt obligations and to finance
the Company's business plans on terms satisfactory to the Company; and the
success of the Company's marketing of certain assets and pursuit of financing
alternatives. The Company assumes no responsibility to update forward-looking
information contained herein or in the Plan or Disclosure Statement. Further
information regarding these and other factors that might cause future results to
differ 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.
2.1 Debtors' First Amended Joint Plan of Reorganization
dated December 13, 1999
99.1 First Amended Disclosure Statement Pursuant to Section
1125 of the Bankruptcy Code For the First Amended Joint
Plan of Reorganization dated December 13, 1999 of Planet
Hollywood International, Inc. and Certain of its
Subsidiaries
6
<PAGE>
99.2 Order confirming the Company's First Amended Joint Plan
of Reorganization dated January 21, 2000
7
<PAGE>
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: February 3, 2000 PLANET HOLLYWOOD
INTERNATIONAL, INC.
/s/ THOMAS AVALLONE
--------------------------------
Name: Thomas Avallone
Title: Executive Vice President and
Chief Financial Officer
8
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' FIRST AMENDED JOINT PLAN OF REORGANIZATION
Dated: December 13, 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.
<PAGE>
TABLE OF CONTENTS
ARTICLE I......................................................................1
DEFINITIONS AND RULES OF CONSTRUCTION..........................................1
ARTICLE II....................................................................14
CLASSIFICATION OF CLAIMS AND INTERESTS........................................14
2.1 Pre-Petition Claims and Equity Interests Classified............14
2.2 Administrative Claims and Priority Tax Claims..................14
2.3 Claims Against and Interests in the Debtors....................14
ARTICLE III...................................................................15
IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS.............15
3.1 Impaired Classes of Claims and Interests.......................15
3.2 Unimpaired Classes of Claims and Interests.....................15
3.3 Impairment Controversies.......................................15
ARTICLE IV....................................................................16
TREATMENT OF ADMINISTRATIVE AND PRIORITY TAX CLAIMS...........................16
4.1 Fees of Professionals and Claims for Substantial Contribution..16
4.2 Ordinary Course Liabilities....................................16
4.3 Administrative Reclamation Claims..............................16
4.4 Cure Cost Claims...............................................16
4.5 Priority Tax Claims............................................16
ARTICLE V.....................................................................17
TREATMENT OF CLAIMS AND INTERESTS.............................................17
5.1 CLASS 1. Priority Claims......................................17
5.2 CLASS 2. The SunTrust Claims..................................17
5.3 CLASS 3. Miscellaneous Secured Claims.........................17
5.4 CLASS 4. Convenience Claims...................................17
5.5 CLASS 5. Old Senior Subordinated Notes Claims.................18
5.6 CLASS 6. General Unsecured Claims.............................18
5.7 CLASS 7. Landlord Settlement Agreement Claim..................18
5.8 CLASS 8. Old Common Stock.....................................19
5.9 CLASS 9. Claims for Issuance of Old Common Stock..............19
5.10 CLASS 10. Intercompany Claims.................................19
5.11 CLASS 11. Intercompany Interests..............................19
5.12 Post-Petition Interest.........................................19
5.13 Allocation Between Principal and Accrued Interest..............19
ARTICLE VI....................................................................20
MEANS FOR EXECUTION OF THE PLAN...............................................20
6.1 Implementation of Plan.........................................20
6.2 General Corporate Matters......................................20
6.2.1 Cancellation of Old Securities, Instruments and
Agreements Relating to Impaired Claims and Interests....20
6.2.2 Effectiveness of Securities, Instruments and Agreements.20
6.2.3 Corporate Action........................................21
6.2.4 Management and Board of Directors.......................21
6.2.5 New Stock Options.......................................22
6.2.6 Substantive Consolidation...............................22
6.2.7 Extinguishment of Guarantee.............................22
6.2.8 Continued Corporate Existence and Vesting of Assets
in Reorganized PHI and the Other Reorganized Debtors....22
6.3 Distribution...................................................23
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<PAGE>
6.3.1 Generally...............................................23
6.3.2 Distributions to the Holder of SunTrust Claims..........23
6.3.3 Distributions to Holders of Old Senior Subordinated
Notes Claims............................................23
6.3.4 Distributions to Holders of Other Claims and Interests..24
6.3.5 Compensation for Services Related to Distribution.......24
6.3.6 Delivery of Distributions and Undeliverable or
Unclaimed Distributions.................................24
6.3.7 Distribution Record Date................................25
6.3.8 Means of Cash Payments..................................25
6.3.9 Fractional Plan Securities..............................26
6.3.10 Surrender of Canceled Instruments or Securities.........26
6.3.11 Setoff..................................................27
6.4 Indenture Trustee Charging Liens...............................27
6.5 Retiree Benefits...............................................28
6.6 Exemptions from Securities Laws and Registration Rights........28
ARTICLE VII...................................................................29
ACCEPTANCE OR REJECTION OF THE PLAN...........................................29
7.1 Classes Entitled to Vote.......................................29
7.2 Class Acceptance Requirement...................................29
7.3 Confirmation Notwithstanding Rejection of Plan by an Impaired
Class..........................................................29
ARTICLE VIII..................................................................30
PROCEDURE FOR RESOLVING DISPUTED CLAIMS.......................................30
8.1 Unimpaired Claims Generally....................................30
8.1.1 Debtor Actions; Reservation of Rights...................30
8.1.2 Creditor Actions........................................30
8.2 Rejection Claims...............................................30
8.3 Disputed Claims................................................31
8.4 Authority to Oppose Claims.....................................31
8.5 Treatment of Disputed Claims and Disputed Interests............31
ARTICLE IX....................................................................31
EXECUTORY CONTRACTS...........................................................31
9.1 General Treatment..............................................31
9.2 Bar to Rejection Damages.......................................31
9.3 Cure of Defaults for Executory Contracts and Unexpired Leases..32
ARTICLE X.....................................................................32
CONDITIONS TO CONFIRMATION AND THE OCCURRENCE OF THE EFFECTIVE DATE...........32
10.1 Conditions to Confirmation.....................................32
10.2 Conditions to the Occurrence of the Effective Date.............33
ARTICLE XI....................................................................33
EFFECTS OF CONFIRMATION AND EFFECTIVENESS OF PLAN.............................33
11.1 Discharge of Claims............................................33
11.2 Discharge of Debtors...........................................34
11.3 Survival of Indemnification Claims and Obligations.............34
11.4 Termination of Claims of Contractual Subordination Against
Holders of Old Senior Subordinated Notes Claims................34
ARTICLE XII...................................................................35
RELEASES AND INJUNCTIONS......................................................35
12.1 Releases.......................................................35
12.2 No Liability for Solicitation or Participation.................36
12.3 Limitation of Liability........................................36
12.4 General Injunction.............................................36
12.5 Section 346 Injunction.........................................37
ARTICLE XIII..................................................................37
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<PAGE>
RETENTION OF JURISDICTION.....................................................37
13.1 Scope of Jurisdiction..........................................37
13.2 Failure of the Bankruptcy Court to Exercise Jurisdiction.......38
ARTICLE XIV...................................................................38
MISCELLANEOUS PROVISIONS......................................................38
14.1 Compliance With Tax Requirements...............................38
14.2 Discharge of Old Indenture Trustee.............................38
14.3 Post-Effective Date Fees and Expenses of Professionals.........39
14.4 Vesting of Property of the Debtors.............................39
14.5 Causes of Action...............................................39
14.5 Assumption of Liabilities......................................39
14.7 Other Documents and Actions....................................40
14.8 Section 1146 Exemption.........................................40
14.9 Binding Effect.................................................40
14.10 Governing Law..................................................40
14.11 Filing of Additional Documents.................................41
14.12 Dissolution of Creditors' Committee............................41
14.13 Amendments and Modifications...................................41
14.14 Revocation.....................................................41
14.15 Severability...................................................41
14.16 Notices........................................................42
14.17 De Minimis Distributions.......................................42
14.18 Plan and Plan Documents Control................................42
- iii -
<PAGE>
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
- iv -
<PAGE>
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.
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
1
<PAGE>
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 "BAY HARBOUR AGREEMENT" means an agreement between PHI and Bay
Harbour Management, L.C. to be executed prior to the Confirmation Date if PHI
determines to accept Bay Harbour's proposed terms whereby Bay Harbour shall
acquire the balance, if any, of the New Senior Secured Notes and a Pro Rata
portion of the Cash and New Class A Common Stock fee related to those Notes that
are not subscribed to by Electing Class 5 Holders. The terms of the New Senior
Secured Notes as currently set forth in Annex A to the Plan may be modified in
the Bay Harbour Agreement, but not in a manner materially adverse to PHI or
other classes of Creditors or Interests under the Plan.
1.14 "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.
1.15 "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.
1.16 "CASH" means cash or cash equivalents.
1.17 "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.
1.18 "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.
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1.19 "CELEBRITY OPTIONS" means options to purchase Class A common stock
issued to Celebrities prior to the Petition Date.
1.20 "CHAPTER 11" means Chapter 11 of the Bankruptcy Code.
1.21 "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).
1.22 "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.
1.23 "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.
1.24 "CLASS" means a class of Claims or Interests as defined in Article
II of the Plan.
1.25 "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.
1.26 "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.
1.27 "CONFIRMATION" means the entry of the Confirmation Order by the
Bankruptcy Court pursuant to Section 1129 of the Bankruptcy Code.
1.28 "CONFIRMATION DATE" means the date on which the Confirmation Order
is entered in the Chapter 11 Cases by the Bankruptcy Court.
1.29 "CONFIRMATION HEARING" means the hearing or hearings pursuant to
which the Bankruptcy Court enters the Confirmation Order.
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1.30 "CONFIRMATION ORDER" means an order of the Bankruptcy Court
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code.
1.31 "CONSOLIDATED CLAIM" means any Claim of any Consolidated Debtor
against any other Consolidated Debtor.
1.32 "CONSOLIDATED DEBTORS" means PHI and all Filed Subsidiaries.
1.33 "CONSOLIDATED ESTATES" means the substantively consolidated
estates of PHI and all Filed Subsidiaries.
1.34 "CONVENIENCE CLAIM" means Unsecured Claims in Allowed amounts not
to exceed $2,000, or that are voluntarily reduced to $2,000.
1.35 "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.
1.36 "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.
1.37 "CURE COST CLAIM" means the amount required to cure pre-petition
defaults on leases or contracts that are assumed by any of the Debtors pursuant
to 11 U.S.C.ss.365.
1.38 "DEBTOR" or "DEBTORS" means PHI or any other Filed Subsidiary,
individually or collectively, as the context may require.
1.39 "DISCLOSURE STATEMENT" means the First Amended Joint Disclosure
Statement dated December 13, 1999, that was Filed by the Debtors in connection
with the Plan, as further amended, modified, restated, or supplemented from time
to time.
1.40 "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.
1.41 "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.
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1.42 "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.
1.43 "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.
1.44 "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 have been satisfied or
duly waived, or such other date as agreed to by the Debtors and the Creditors'
Committee.
1.45 "ELECTING HOLDERS OF CLASS 5 CLAIMS" means those Holders of Class
5 Claims that have elected to receive their Pro Rata share of New Senior Secured
Notes, a fee of $625,000 Cash and New Class A Common Stock, which election shall
be evidenced by checking a box on the Class 5 Ballot sent to Holders of Class 5
Claims providing for an affirmative participation in the New Senior Secured
Notes.
1.46 "ENCUMBRANCE" means any Lien, imperfection of title, option, or
restriction of any kind affecting any property of any Debtor.
1.47 "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.
1.48 "ESTATES" means the estates of the Debtors created under Section
541 of the Bankruptcy Code upon the commencement of the Chapter 11 Cases.
1.49 "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.
1.50 "FILED FOREIGN SUBSIDIARY" means a Foreign Subsidiary that has
filed an insolvency proceeding under the laws of its jurisdiction of
incorporation or formation.
1.51 "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.
1.52 "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
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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.
1.53 "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.
1.54 "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.
1.55 "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.
1.56 "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.
1.57 "IMPAIRED CLAIM" means a Claim identified in Section 3.1 of the
Plan as impaired under the Plan.
1.58 "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.
1.59 "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.
1.60 "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.
1.61 "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
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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.
1.62 "INTEREST" means an equity security in PHI within the meaning of
Section 101(16) of the Bankruptcy Code.
1.63 "JOINT VENTURES" means strategic venture agreements PHI and one or
more of its Subsidiaries has executed with third parties.
1.64 "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.
1.65 "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.
1.66 "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.
1.67 "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.
1.68 "MISCELLANEOUS SECURED CLAIM" means any Allowed Claim that is a
Secured Claim other than the SunTrust Claim.
1.69 "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.
1.70 "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.
1.71 "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.
1.72 "NEW INDENTURE TRUSTEE" shall be as designated at the Confirmation
Hearing and have the meaning set forth in the Confirmation Order.
1.73 "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).
1.74 "NEW OPTIONS" means 1.0 million options each for the purchase of
one share of New
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Class A Common Stock.
1.75 "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.
1.76 "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.
1.77 "NEW SECURED PIK NOTES INDENTURE TRUSTEE" shall be as designated
at the Confirmation Hearing and have the meaning set forth in the Confirmation
Order.
1.78 "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.
1.79 "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.
1.80 "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.
1.81 "NEW SENIOR SECURED NOTES INDENTURE TRUSTEE" shall be as
designated at the Confirmation Hearing and have the meaning set forth in the
Confirmation Order.
1.82 "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.
1.83 "NEW STOCK OPTION PLAN" means one or more stock option plans 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.
1.84 "NEW WARRANT AGENT" shall be as designated at the Confirmation
Hearing and shall have the meaning set forth in the Confirmation Order.
1.85 "NEW WARRANT AGREEMENT" means the Warrant Agreement between
Reorganized PHI,
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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.
1.86 "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.
1.87 "OLD CELEBRITY OPTIONS" means any outstanding options for the
purchase of Class A Old Common Stock issued to Celebrities prior to the Petition
Date.
1.88 "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.
1.89 "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.
1.90 "OLD INDENTURE" means the Old Senior Subordinated Notes Indenture.
1.91 "OLD INDENTURE TRUSTEE" means United States Trust Company of New
York, or its successor, as trustee under the Old Senior Subordinated Notes
Indenture.
1.92 "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.
1.93 "OLD SENIOR SUBORDINATED NOTES" means the 12% Senior Subordinated
Notes due 2005, issued by PHI pursuant to the Old Senior Subordinated Notes
Indenture.
1.94 "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.
1.95 "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,
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1998, as amended, which Indenture relates to the Old Senior Subordinated Notes.
1.96 "OLD TRANSFER AGENT" means as registrar and transfer agent with
respect to the Old Common Stock.
1.97 "OLD WARRANTS" means any warrants outstanding as of the Petition
Date to purchase shares of Old Common Stock.
1.98 "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.
1.99 "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.
1.100 "PHI" means Planet Hollywood International, Inc., a Delaware
corporation.
1.101 "PLAN" means this Joint Plan of Reorganization proposed by the
Debtors, as it may hereafter be amended or modified from time to time.
1.102 "PLAN DOCUMENTS" means those documents identified in Exhibits 1
through 12 which will be Filed at or prior to the Confirmation Hearing.
1.103 "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.
1.104 "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.
1.105 "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.
1.106 "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.
1.107 "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
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reasonable pursuant to Section 1129(a)(4) of the Bankruptcy Code, and (iv) any
attorney, accountant or financial advisor for the Old Indenture Trustee.
1.108 "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.
1.109 "REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth
in Section 6.6(b) of this Plan.
1.110 "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.
1.111 "RELEASES" shall have the meaning set forth in Section 12.1 of
this Plan.
1.112 "REORGANIZED PHI" means PHI from and after the Effective Date.
1.113 "REORGANIZED DEBTORS" means any or all of the Debtors from and
after the Effective Date.
1.114 "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.
1.115 "SECURITIES ACT" means the Securities Act of 1933, as amended.
1.116 "SHELF REGISTRATION STATEMENT" shall have the meaning set forth
in Section 6.6(b) of this Plan.
1.117 "SUBSIDIARIES" means the Domestic Subsidiaries and the Foreign
Subsidiaries, collectively.
1.118 "SUNTRUST" means SunTrust Bank, Central Florida, National
Association.
1.119 "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
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(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.
1.120 "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).
1.121 "SUPPLEMENTAL CLASS 5 DISTRIBUTION" shall have the meaning set
forth in Section 5.5 of the Plan.
1.122 "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.
1.123 "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.
1.124 "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.
1.125 "UNIMPAIRED CLAIM" means a Claim in a Class identified in Section
3.2 of the Plan as unimpaired thereunder.
1.126 "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.
1.127 "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.
1.128 "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.
1.129 "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
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Plan at or prior to the Confirmation Hearing.
1.130 "WORKING CAPITAL LENDER" means the provider(s) of the Working
Capital Facility.
RULES OF CONSTRUCTION
1.131 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).
1.132 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 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.
1.133 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.
1.134 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)
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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.
(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.
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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.
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. Allowed Administrative
Reclamation Claims
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shall be paid in full in Cash on the later of the Effective Date, the date of
allowance of the Reclamation Claim, or such other date as shall be approved by
an order of the Bankruptcy Court.
4.4 CURE COST CLAIMS. Allowed Cure Cost Claims shall be paid in full in
Cash on the later of the Effective Date, the date of allowance of the Cure Cost
Claim, or at such other date as shall be approved by an order of the Bankruptcy
Court.
4.5 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 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.
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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
later of the Effective Date, the date of allowance of its Convenience Claim or
such other date as shall be approved by an order of the Bankruptcy Court, 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 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. If, prior to the Confirmation Date, PHI has entered into the Bay
Harbour Agreement, then PHI shall deliver to Electing Holders of Class 5 Claims
in lieu of payment of up to $25 million Cash and, if applicable, to Bay Harbor
under the Bay Harbor Agreement, their respective Pro Rata shares of (i) up to
$25 million of New Senior Secured Notes having the principal economic terms set
forth in ANNEX A hereto, and (ii) a fee consisting of $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. If 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.
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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 Holders of Class 5 Claims, 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 Holders of Class
5 Claims, 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 CLAIM. 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 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.
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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
and/or to Bay Harbor and the Electing 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. Reorganized 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.
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
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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.
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 a majority of the members (including at least one
Class A Director) 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
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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 Plans for the benefit of Post-Effective Date management and
Celebrities who continue to sponsor PHI. The Stock Options issued under the New
Stock Option Plans shall be exercisable into shares of New Class A Common Stock.
A Committee appointed by PHI's Board of Directors shall determine the exercise
price and exercise term of the Stock Options.
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 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.
Guarantees by the Debtors, any non-Debtor affiliates, officers, directors, other
third parties or their affiliates of leases or contracts that are assumed by the
Debtors on or prior to the Effective Date shall remain in existence and shall
not be discharged or extinguished.
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 corporation duly organized
under the laws of Delaware, 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
entities duly organized under the laws of their respective states of
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
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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; provided, however, that any distributions
of New Senior Secured Notes to Holders of Class 5 Claims shall be made only to
Bay Harbor and the Electing Holders of Class 5 Claims. 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.
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
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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 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
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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.
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
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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.
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
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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.
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.
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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 will provide that the offer and sale of
those Plan Securities that are issued in exchange for a Claim against, an
interest in, or an Administrative Claim against the Debtors, or principally in
such exchange and partly for cash or property, are exempt from registration
pursuant to Section 1145(a) of the Bankruptcy Code and that those 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 those Plan Securities.
(b) Plan Securities issued to the New Money Investors, or to a
purchaser of the New Senior Secured Notes, or to any other Entity that is not
exchanging Claims or Interests for such securities, shall be issued pursuant to
the exemption provided by Section 4(2) of the Securities Act.
(c) 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 or under the Securities Act
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 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 date of the effective date thereof. No securities other than the
New Common Stock, the New Senior Secured Notes, 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", 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.
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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 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
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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.
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
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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 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 Bay Harbour Management, L.C. or
one or more other 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;
(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
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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;
(c) The Confirmation Order shall have become a Final Order;
(d) The Effective Date shall have occurred no later than
February 29, 2000; and
(e) 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
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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 existing provisions of the
By-Laws, the Old Senior Subordinated Notes Indenture or other applicable laws,
corporate documents or agreements of the Debtors or any Foreign Subsidiary or
Domestic Subsidiary providing for the indemnification of 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 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.
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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.
On the Effective Date, each Holder of a Claim or Interest 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
34
<PAGE>
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 or Interests
in 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 with the provisions of the Plan
and orders of the Bankruptcy Court; PROVIDED, HOWEVER, that each Holder of a
Claim or Interest 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 or Interest in the Bankruptcy Court or any
other court of competent jurisdiction, and all Holders of Claims or Interests
shall be entitled to enforce their rights under the Plan and the Plan Documents,
provided further, however, that nothing in the Plan shall restrain and enjoin
all Entities who received or are Holders of Plan Securities and all Holders of
Claims against and Interests in the Estates from taking any action to enforce
liability arising from acts or omissions which are the result of gross
negligence or willful misconduct.
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
35
<PAGE>
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;
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
36
<PAGE>
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 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.
37
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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 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,
38
<PAGE>
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.
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.
39
<PAGE>
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:
(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)
40
<PAGE>
(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.
41
<PAGE>
CONFIRMATION REQUEST
Debtors hereby request Confirmation of the Plan pursuant to Section
1129(a) or, in the event the Plan is not accepted by each of those Classes of
Claims and Interests entitled to vote, Section 1129(b) of the Bankruptcy Code.
Dated: December 13, 1999
Orlando, Florida
Respectfully submitted,
PLANET HOLLYWOOD INTERNATIONAL, INC. COOL PLANET, 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:
42
<PAGE>
PLANET HOLLYWOOD (NEW YORK PLANET HOLLYWOOD (NEW YORK), LTD.
CITY), INC.
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:
43
<PAGE>
PLANET HOLLYWOOD (REGION VII), INC. PLANET HOLLYWOOD (TEXAS), LTD.
By: By:
------------------------------ ---------------------------------
Name: Name:
Title: Title:
PLANET HOLLYWOOD (WAREHOUSE), INC. 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:
44
<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: First or Second Anniversary of the Effective Date [subject
to the approval of the Senior Secured Notes purchaser].
Interest: Payable quarterly or semi-annually in arrears in cash at a
rate of 8% per annum, plus an applicable default interest
rate as may be negotiated.
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
FIRST AMENDED 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
FIRST AMENDED 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
FIRST AMENDED 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
FIRST AMENDED 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
FIRST AMENDED 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
FIRST AMENDED 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
FIRST AMENDED 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
FIRST AMENDED 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
FIRST AMENDED 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
FIRST AMENDED 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
FIRST AMENDED JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF NEW WARRANTS
[TO BE INCLUDED]
<PAGE>
EXHIBIT 12
TO
FIRST AMENDED JOINT PLAN OF REORGANIZATION
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FORM OF REGISTRATION RIGHTS AGREEMENT
[TO BE INCLUDED]
IN THE 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. )
)
)
FIRST AMENDED DISCLOSURE STATEMENT PURSUANT
TO SECTION 1125 OF THE BANKRUPTCY CODE
FOR THE FIRST AMENDED JOINT PLAN
OF REORGANIZATION DATED DECEMBER 13, 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
<PAGE>
FIRST AMENDED DISCLOSURE STATEMENT, DATED DECEMBER 13, 1999
SOLICITATION OF VOTES
WITH RESPECT TO THE FIRST AMENDED
JOINT PLAN OF REORGANIZATION OF
PLANET HOLLYWOOD INTERNATIONAL, INC. AND
CERTAIN OF ITS SUBSIDIARIES
THE DEBTORS BELIEVE THAT THE FIRST AMENDED 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
5:00 P.M., EASTERN TIME, ON JANUARY 14, 2000 (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 JANUARY 20,
2000 AT 2:00 P.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 IN OPEN COURT.
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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 THEREFOR, AND MUST BE FILED WITH THE COURT AND SERVED UPON THE
DEBTORS, THEIR COUNSEL, COUNSEL FOR THE CREDITORS' COMMITTEE AND THE OFFICE OF
THE UNITED STATES TRUSTEE IN THE MANNER SET FORTH IN THE CONFIRMATION NOTICE SO
AS TO BE RECEIVED NO LATER THAN 4:00 P.M. EASTERN TIME ON JANUARY 14, 2000.
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
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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.
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TABLE OF CONTENTS
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I. INTRODUCTION...............................................................................................1
II. SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN
AND SUMMARY OF TERMS OF NEW SENIOR SECURED NOTES, NEW SECURED
PIK NOTES, NEW WARRANTS, AND NEW STOCK OPTION PLANS........................................................3
III. THE COMPANY...............................................................................................15
A. OVERVIEW OF BUSINESS.............................................................................15
B. OPERATIONAL RESTRUCTURING PLAN...................................................................17
C. CURRENT DEBT STRUCTURE AND MATERIAL AGREEMENTS...................................................18
1. Bank Debt...............................................................................18
2. Public Notes............................................................................19
3. Major Suppliers and Vendors.............................................................19
4. Leases and Contracts (franchises, joint venture, other).................................19
5. Stockholder Interests...................................................................21
D. Pre-Petition Date Special Transactions...........................................................22
E. Legal Proceedings................................................................................22
IV. AVAILABLE FINANCIAL INFORMATION...........................................................................25
V. PRE-FILING PLAN DISCUSSIONS AND AGREEMENT WITH INFORMAL
NOTEHOLDERS' COMMITTEE; LANDLORD SETTLEMENTS, INSIDER
TRANSACTIONS UNDER THE PLAN...............................................................................26
A. Noteholders' Agreement...........................................................................26
B. Landlord Settlements.............................................................................27
C. Insider Transactions Under the Plan..............................................................28
1. Alternative Restructuring Efforts Resulting in Current Plan Structure...................28
2. Other Insider Benefits Under the Plan...................................................30
VI. POST-PETITION OPERATIONS..................................................................................32
A. Commencement of the Reorganization Cases and First Day Orders....................................32
B. Store Closings...................................................................................35
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C. Formation of the Creditors' Committee............................................................35
D. Foreign Operations and Proceedings...............................................................36
E. Asset Transfers..................................................................................36
F. Emergence Business Plan..........................................................................36
G. Current and Post-Confirmation Management.........................................................45
1. Information Regarding Executive Officers and Directors..................................45
a. Post-Confirmation Officers and Directors............................................45
b. Current Executive Officers and Directors............................................46
c. Current Director Compensation and Shareholder Interests.............................46
d. Current Executive Compensation......................................................48
2. Employment Contracts....................................................................49
VII. CONFIRMATION STANDARDS; LIQUIDATION ANALYSIS AND VOTING
PROCEDURES................................................................................................51
A. Brief Explanation of Chapter 11..................................................................51
B. Acceptance of the Plan...........................................................................51
C. Classification of Claims and Interests...........................................................53
D. Optional Plan Provisions/Substantive Consolidation...............................................53
E. Confirmation of the Plan.........................................................................54
F. Liquidation Analysis.............................................................................58
G. Voting Procedures................................................................................65
VIII. DESCRIPTION OF THE PLAN...................................................................................68
A. Classification and Treatment of Claims and Interests Under the Plan..............................69
1. Unclassified Claims - Administrative and Priority Tax Claims............................69
2. Classified Claims and Interests.........................................................70
Class 1. Priority Claims............................................................70
Class 2. The SunTrust Claims........................................................71
Class 3. Miscellaneous Secured Claims...............................................71
Class 4. Convenience Claims.........................................................72
Class 5. Old Senior Subordinated Notes Claims.......................................72
Class 6. General Unsecured Claims...................................................73
Class 7. Landlord Settlement Agreement Claims.......................................73
Class 8. Old Common Stock...........................................................74
Class 9. Claims for Issuance of Old Common Stock....................................74
Class 10. Intercompany Claims........................................................74
Class 11. Intercompany Interests.....................................................75
B. Means for Execution of the Plan..................................................................75
C. Distributions....................................................................................79
D. Acceptance or Rejection of the Plan/Confirmation Notwithstanding Rejection by an
Impaired Class...................................................................................85
E. Procedure for Resolving Disputed Claims..........................................................86
F. Executory Contracts..............................................................................87
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G. Conditions to Confirmation and the Occurrence of the Effective Date..............................88
H. Effects of Confirmation and Effectiveness of Plan................................................89
I. Releases and Injunctions.........................................................................90
J. Retention Of Jurisdiction........................................................................92
K. Miscellaneous Provisions.........................................................................93
IX. CERTAIN RISK FACTORS......................................................................................96
Highly Leveraged Position...............................................................................96
Risks Relating to the Exit Facilities...................................................................97
Risks Relating to the Projections.......................................................................97
Competition in the Restaurant Industry..................................................................98
Capital Requirements....................................................................................98
Dividend Restrictions...................................................................................98
Certain Risks of Non-Confirmation.......................................................................99
Noncomparability of Historical Financial Information...................................................100
Seasonality............................................................................................100
Government Regulations.................................................................................100
Lack of Alternatives to Confirmation and Consummation of the Plan......................................100
Securities Law Considerations..........................................................................101
Market for Plan Securities.............................................................................103
X. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN......................................................104
A. Certain Federal Income Tax Consequences to Holders of Allowed Claims............................104
1. Tax Securities.........................................................................105
2. Exchange of Old Senior Subordinated Notes for Cash, New Secured PIK Notes, New Common
Stock and Possibly New Senior Secured Notes............................................105
3. Exchange of Allowed General Unsecured Claims for Cash and New Secured PIK Notes........108
4. Cancellation of Old Common Stock or Exchange of Old Common Stock for New Warrants......109
5. Distributions in Discharge of Accrued Interest.........................................109
6. Original Issue Discount and Premium....................................................109
7. Market Discount........................................................................112
8. Disposition of Plan Securities.........................................................113
9. Backup Withholding.....................................................................115
10. Adjustments............................................................................115
B.. Certain Federal Income Tax Consequences to the Debtors..........................................115
1. Cancellation of Indebtedness...........................................................115
2. Limitation of Net Operating Loss Carryforwards Following an Ownership Change...........116
3. Alternative Minimum Tax................................................................118
XI. RECOMMENDATION AND CONCLUSION............................................................................120
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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
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I. INTRODUCTION
This First Amended 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' First Amended 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 in the form of New Class B
Common Stock; 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
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Trust created in favor of his family or his children; His Royal Highness Prince
Alwaleed Bin Talal Bin Abdulaziz Al Saud; Mr. Ong Beng Seng; HPL (a Singapore
company); and one or more additional investors. The New Money Investors have
made a $5 million cash good faith deposit into escrow, which will be applied
toward their funding obligations if the Effective Date of the Plan occurs no
later than February 29, 2000.
The Plan provides for the payment of $47.5 million of Cash, the
issuance of $60 million of New Secured PIK Notes and equity in the form of New
Class A Common Stock totaling approximately 26.5% of Reorganized PHI to the
Holders of Old Senior Subordinated Notes. If, prior to the Confirmation Date,
PHI has entered into an agreement with Bay Harbour Management, L.C. ("Bay
Harbour"), whereby Bay Harbour agrees to acquire the balance, if any, of New
Senior Secured Notes and the related Cash and New Class A Common Stock fee as
described in Section 5.5 of the Plan, that are not subscribed to by Electing
Holders of Class 5 Claims, then PHI shall deliver to Electing Holders of Class 5
Claims and to Bay Harbour in lieu of payment of up to $25 million Cash, their
respective Pro Rata shares of (a) up to $25 million of New Senior Secured Notes
having the principal economic terms set forth in Annex A to the Plan; and (b) a
fee of $625,000 Cash and 350,000 shares of New Class A Common Stock. The terms
of the New Senior Secured Notes as currently set forth in Annex A may be
modified by Bay Harbour, but not in a manner materially adverse to PHI or other
classes of Creditors or Interests under the Plan.
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 TWO 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
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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 had agreed either (i) to restructure the lease
terms under which PHI was conducting 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.
The Debtors, the Creditors' Committee and other interested parties are
still in the midst of negotiations over the details of the Plan Securities and
other matters which may effect changes to the corporate structure of Reorganized
PHI, but will not materially adversely affect the key economic terms of the Plan
with respect to any Class.
II.SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS
UNDER THE PLAN AND SUMMARY OF TERMS OF
NEW SENIOR SECURED NOTES, NEW SECURED
PIK NOTES, NEW WARRANTS, AND
NEW STOCK OPTION PLANS
The following is a summary of certain provisions of the Plan describing
the treatment of Claims and Interests, and of key elements of the new Plan
Securities to be issued on or after the Effective Date. 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, 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.
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:
- -------------------
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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 later of the Effective Date, the date of
allowance of their Reclamation Claims, or as
otherwise provided by Order of the Court.
The Administrative Reclamation Claims are
estimated to be approximately $600,000.
Holders of Administrative cure cost Claims
with respect to executory contracts and leases,
shall be paid in full in Cash on the later of
(i) the Effective Date, (ii) the date of
allowance of their cure cost Claims, or (iii) as
otherwise provided by Order of the Court.
Administrative cure costs 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
Court within ten (10) days after the date of
such Order. Professional Claims are
estimated to be approximately $3.5 million.
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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
such Allowed Claim at the Treasury Rate or
such other rate as may be set by the 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 the Bankruptcy will receive the Allowed amount of such
Code, other than an Administrative Claim, or a Claim in Cash on the later of (i) the Effective
Priority Tax Claim. The estimated amount of Date, (ii) the date such Claim becomes an
Priority Claims is $0. Allowed Claim and (iii) the date for payment
CLASS 1 IS UNIMPAIRED. provided by any agreements or
understandings between the parties.
CLASS 2: SUNTRUST CLAIMS: Each Holder of Allowed SunTrust Claims
Commitments under the SunTrust Agreements will receive in Cash all amounts due, if any,
in the aggregate amount of $2.5 million. under the SunTrust Agreements plus accrued,
CLASS 2 IS UNIMPAIRED. unpaid interest thereon at the 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.
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CLASS 3: MISCELLANEOUS SECURED Each Holder of an Allowed Miscellaneous
CLAIMS: Allowed Claims that are Secured Secured Claim will at the applicable Debtor's
Claims. The estimated amount of these Claims option, either be treated in accordance with
is approximately $2.0 million and they consist Section 1124(2) of the Bankruptcy Code,(1) or
primarily of security interests and liens of in accordance with the terms of any
merchandise vendors. agreements between the Secured Creditor and
CLASS 3 IS UNIMPAIRED. the Debtors as approved by the Court.
CLASS 4: CONVENIENCE CLAIMS: Each Holder of an Allowed Convenience
Convenience Claims consist of Allowed Claim will receive Cash on the later of (i) the
Unsecured Claims of $2,000 or less, or that are Effective Date, (ii) the date such Claim
reduced to $2,000 or less. There are estimated becomes an Allowed Claim or (iii) as
to be approximately 1,900 Holders of Claims otherwise provided by Order of the Court,
that are or will be reduced to $2,000 or less. equal to the lesser of $2,000 or the Allowed
The payment to Class 4 is expected to total amount of the Claim.
approximately $1.5 million.
CLASS 4 IS UNIMPAIRED.
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CLASS 5: OLD SENIOR SUBORDINATED On the Effective Date, each Holder of an Old
NOTES CLAIMS: Claims under the Old Senior Subordinated Notes Claim shall have an
Senior Subordinated Notes ($250 million Allowed Claim equal to the face amount of its
aggregate principal amount plus unpaid accrued Old Senior Subordinated Notes plus accrued
interest and interest on defaulted payments of interest through the Petition Date, and shall
interest at the default rate provided in the receive on the Effective Date, in full
applicable documents of approximately $32 satisfaction of its Allowed Class 5 Claim, its
million, calculated through October 11, 1999). Pro Rata share of (i) $47.5 million in Cash, (ii)
The distribution to Class 5 is estimated to be $60 million of New Secured PIK Notes, and
approximately 40% of the Old Senior (iii) 2.65 million shares of New Class A
Subordinated Notes Claims. SEE Section VII.F. Common Stock. If, prior to the Confirmation
"Hypothetical Liquidation Analysis; Estimated Date, PHI has entered into the Bay Harbour
Recovery For Unsecured Claims Under the Agreement, then PHI shall deliver to Electing
Plan." Holders of Class 5 Claims in lieu of payment
CLASS 5 IS IMPAIRED. of up to $25 million Cash and, if applicable,
any unsubscribed amount to Bay Harbour under the
Bay Harbour Agreement, their respective Pro Rata
shares of up to $25 million of New Senior Secured
Notes having the principal economic terms set
forth in Annex A to the Plan, or other terms not
materially more adverse to any Class under the
Plan, plus their Pro Rata Share of a fee
consisting of $625,000 Cash and 350,000 shares of
New Class A Common Stock. 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.
Failure of a Class 5 Claim holder to check the
appropriate box on the Ballot will preclude them
from receiving a distribution of New Senior Secured
Notes under the Plan.
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CLASS 6: GENERAL UNSECURED Each Holder of an Allowed Class 6 Claim will
CLAIMS: Allowed General Unsecured Claims receive, in full satisfaction of its Allowed
including, without limitation, Trade Claims, Claim, Cash and New Secured PIK Notes
Rejection Claims, Litigation Claims, and non- having an aggregate value as a percentage of
priority Claims of present and former employees its Allowed Claim equal to the aggregate value
of the Debtors. Claims in this Class aggregate of the consideration to be received by each
approximately $22.5 million as of the Petition Holder of an Allowed Class 5 Claim as a
Date. The distribution to Class 6 is estimated to percentage of its Allowed Claim. The Cash
be approximately 40% of the Allowed Claim of component of the distribution to Class 6 shall
each Holder of a General Unsecured Claim. SEE be the same percentage of a Class 6 Holder's
Section VII.F. "Hypothetical Liquidation Allowed Claim as the Cash component of the
Analysis; Estimated Recovery For Unsecured distribution to Class 5 is as a percentage of the
Claims Under the Plan." Allowed Claims of Holders in Class 5,
CLASS 6 IS IMPAIRED. counting a distribution of New Senior Secured
Notes to Class 5 as a Cash payment. Based on 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 will
AGREEMENT CLAIMS: Allowed Claims receive the Cash payment, Debtor
arising out of pre- and post-petition date performance or other treatment provided by its
settlement agreements between any of the applicable Landlord Settlement Agreement.
Debtors and landlords. The Post-Petition Date
Cash payment is approximately $896,000.
CLASS 7 IS UNIMPAIRED.
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CLASS 8: OLD COMMON STOCK: Shares If Classes 5 and 6 accept the Plan, each Holder
of Class A and Class B Common Stock, par of an Allowed Class 8 Interest will receive its
value $.01 per share, of PHI (the "Old Common Pro Rata share of New Warrants, provided
Stock") (an aggregate of 109,089,940 shares that not less than ten (10) New Warrants will
issued and outstanding). be distributed to any Holder. Thus, Holders of
CLASS 8 IS IMPAIRED. 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 OF Holders of Class 9 Interests or rights shall
OLD COMMON STOCK: Old Warrants, Old receive no consideration or property under the
Celebrity Options, Old Employee Options and Plan, and their Interests and rights will be
all other options or rights, if any, granted by cancelled as of the Effective Date.
PHI for the purchase of Old Common Stock.
CLASS 9 IS IMPAIRED.
CLASS 10: INTERCOMPANY CLAIMS: Each Holder of an Intercompany Claim shall
Claims of non-Debtor Subsidiaries of PHI be treated in accordance with Section 1124(2)
against any of the Debtors. of the Bankruptcy Code.
CLASS 10 IS UNIMPAIRED.
CLASS 11: INTERCOMPANY Holders of Interests in Class 11 will retain
INTERESTS: Stock ownership Interests of such rights to which their Interests entitle
PHI and any Filed Subsidiary in any other them, in accordance with Section 1124(2) of
Subsidiary or Unconsolidated Affiliate that is the Bankruptcy Code.
not a Filed Subsidiary.
CLASS 11 IS UNIMPAIRED.
</TABLE>
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: First or Second Anniversary of the Effective Date [subject
to the approval of the Senior Secured Notes purchaser]
Interest: Payable quarterly or semi-annually in arrears in cash at a
rate of 8% per
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annum, plus an applicable default interest rate as may be
negotiated.
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.
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 PROVIDED, HOWEVER, that after one year from the date of
issuance, interest on the New
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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")
Strike Price: $65.50 per share
Term: Expire three years after the Effective Date
SUMMARY TERMS OF NEW STOCK OPTION PLANS
a. 1999 STOCK AWARD AND INCENTIVE PLAN
Issuer: Reorganized Planet Hollywood International, Inc. ("PHI").
Purposes: The purpose of the Management Plan is to (i) attract and
retain persons eligible to participate in the Management
Plan; (ii) motivate Participants (as defined below), by
means of appropriate incentives, to achieve long-range
goals; (iii) provide incentive compensation opportunities
that PHI
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believes are competitive within the market through
compensation that is based on PHI's common stock; and
thereby promote the long-term financial interests of PHI.
Administration: The Management Plan will be administered by a committee (the
"Committee") appointed by the Board of Directors of PHI. The
Committee will have the authority to administer the
Management Plan and to exercise all the powers and
authorities either specifically granted to it under the
Management Plan or necessary or advisable in the
administration of the Management Plan. The Committee will
consist of two or more persons selected by the Board of
Directors of PHI.
Eligibility: Awards may be granted to (i) officers, directors and other
employees of PHI, (ii) directors who are not employees of
PHI and (iii) persons and service companies providing
services in their capacities as independent contractors for
PHI, in the sole discretion of the Committee.
Stock Subject to
the Management
Plan; Limitation The maximum number of shares of New Class A Common Stock,
par value $.01 per share of PHI (the "Stock") to be reserved
for issuance pursuant to the Management Plan shall be in an
amount to be determined which together with amounts reserved
under the Celebrity Stock Option Plan shall not exceed 1
million shares (subject to customary adjustments in the
event of certain corporate transactions or events).
Stock Options: The Committee will have the authority to grant Non-Qualified
Stock Options (as defined in the Management Plan) to
eligible participants (the "Participants") and Incentive
Stock Options (as defined in the Management Plan) to
eligible grantees (the "Grantees"). Each grant of Options
will be memorialized by an Award Agreement. Each Award
Agreement will set forth the number of Stock Options
granted, whether the Option is a Non- Qualified Option or an
Incentive Stock Option, the exercise price of the Stock
Options and the term and exercisability of the Stock
Options. The exercise price will be paid in full, at the
time of exercise, in cash or in shares of New Class A Common
Stock having a Fair Market Value (as defined in the
Management Plan) equal to such exercise price or in a
combination of cash and New Class A Common Stock or, in the
sole discretion of the Committee, through a cashless
exercise procedure.
Subject to such exceptions as may be determined by the
Committee, if a Participant's or Grantee's employment by, or
relationship with, the
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<PAGE>
Company terminates, Options granted to such Participant or
Grantee prior to such termination shall remain exercisable
following the effective date of such termination in the
manner and to the extent to be provided in the Stock Option
Plan documents.
Options may be subject to other conditions including, but
not limited to, restrictions on transferability of the
shares acquired upon exercise of such Options, as the
Committee may prescribe in its discretion.
Maximum Exercise
Period: The exercise period for any options issued under the
Management Plan shall not exceed ten years.
Incentive Stock
Options: The Committee will have the authority to issue Incentive
Stock Options subject to the following special terms and
conditions (in addition to the general terms governing
Option Awards): (i) the aggregate Fair Market Value (as
defined in the Management Plan) (determined as of the date
the Incentive Stock Option is granted) of the shares of
Stock with respect to which Incentive Stock Options granted
under the Management Plan and all other plans of the Group
(defined as PHI and its subsidiaries) become exercisable for
the first time by each Grantee during any calendar year
shall not exceed $100,000; (ii) in the case of an Incentive
Stock Option granted to a Ten Percent Stockholder (as
defined in the Management Plan), (x) the Option Price shall
not be less than one hundred ten percent (110%) of the Fair
Market Value of the shares of Stock on the date of grant of
such Incentive Stock Option, and (y) the exercise period
shall not exceed five (5) years from the date of grant of
such Incentive Stock Option; (iii) Incentive Stock Options
shall be awarded solely to those eligible persons that are
Grantees under the Management Plan; (iv) Incentive Stock
Options will be granted under the Management Plan only
within the ten (10) year period commencing on the Effective
Date of the Management Plan.
Stock Appreciation
Rights: The Committee is authorized to grant freestanding Stock
Appreciation Rights ("SARs") and SARs granted in tandem with
an Option to Participants. An SAR will confer on the
Participant a right to receive with respect to each share
subject thereto, upon exercise thereof, the excess of (i)
the Fair Market Value (as defined in the Management Plan) of
one share of Common Stock on the date of exercise over (ii)
the grant price of the SAR (which in the case of an SAR
granted in tandem with an Option shall be equal to the
exercise price of the underlying Option, and which in
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<PAGE>
the case of any other SAR shall be such price as the
Committee may determine).
Restricted Stock: The Committee will be authorized to grant restricted Stock
to Participants. Restricted Stock will be subject to
restrictions on transferability and other restrictions, if
any, as the Committee may impose at the date of grant or
thereafter.
Restricted Stock
Units: The Committee will be authorized to grant to Participants
the right to receive Stock or cash at the end of a specified
deferral period, which right may be conditioned on the
satisfaction of criteria determined by the Committee
("Restricted Stock Units").
Dividend
Equivalents: The Committee is authorized to grant rights to receive cash,
Stock, or other property equal in value to dividends paid
with respect to a specified number of shares of Stock
("Dividend Equivalents") to Participants.
Other Stock or
Cash-Based
Awards: The Committee is authorized to grant to Participants other
Stock-based awards or other cash based awards as an element
of or supplement to any other Award under the Celebrity
Plan.
b. 1999 CELEBRITY STOCK AWARD AND INCENTIVE PLAN
Issuer: Reorganized Planet Hollywood International, Inc. ("PHI").
Purposes: The purpose of the Celebrity Plan is to afford an incentive
to selected celebrities and others (including certain
producers, agents and business advisors) in their capacities
as independent contractors of PHI or any of subsidiaries to
(i) acquire a proprietary interest in PHI, (ii) continue as
independent contractors, (iii) increase their efforts on
behalf of PHI and (iv) promote the success of PHI's
business.
Administration: The Celebrity Plan will be administered by a committee (the
"Committee") appointed by the Board of Directors of PHI. The
Committee will have the authority to administer the
Celebrity Plan and to exercise all the powers and
authorities either specifically granted to it under the
Celebrity Plan or necessary or advisable in the
administration of the Celebrity Plan. The Committee will
consist of two or more persons selected by the Board of
Directors of PHI.
14
<PAGE>
Eligibility: Awards may be granted to independent contractors of PHI in
the sole discretion of the Committee.
Stock Subject to
the Celebrity Plan;
Limitation on
Grants: The maximum number of shares of New Class A Common Stock,
value $.01 per share of PHI (the "Stock") to be reserved for
issuance pursuant to the Celebrity Plan shall be in an
amount to be determined which, together with amounts
reserved under the Management Stock Option Plan, shall not
exceed 1 million shares (subject to customary adjustments in
the event of certain corporate transactions or events).
Stock Options: The Committee will have the authority to grant Stock Options
to eligible participants. Only non-qualified stock options
will be granted under the Celebrity Plan. Each grant of
Stock Options will be memorialized by an Award Agreement
which will set forth the number of Stock Options granted,
the exercise price of the Stock Options and the term and
exercisability of the Stock Options. The exercise price will
be paid in full, at the time of exercise, in cash or in
shares of New Class A Common Stock having a Fair Market
Value (as defined in the Celebrity Plan) equal to such
exercise price or in a combination of cash and New Class A
Common Stock or, in the sole discretion of the Committee,
through a cashless exercise procedure.
Subject to such exceptions as may be determined by the
Committee, if a participant's independent contractor
relationship with PHI terminates, Options granted to such
participant prior to such termination shall remain
exercisable following the effective date of such termination
in the manner and to the extent to be provided in the Stock
Option Plan documents.
Options may be subject to other conditions including, but
not limited to, restrictions on transferability of the
shares acquired upon exercise of such Options, as the
Committee may prescribe in its discretion. Options may be
subject to such other conditions including, but not limited
to, restrictions on transferability of the shares acquired
upon exercise of such Options, as the Committee may
prescribe in its discretion.
Stock Appreciation
Rights: The Committee is authorized to grant freestanding Stock
Appreciation Rights ("SARs")and SARs granted in tandem with
a Stock Option to eligible participants. An SAR will confer
on the participant a right to
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<PAGE>
receive with respect to each share subject thereto, upon
exercise thereof, the excess of (i) the Fair Market Value
(as defined in the Celebrity Plan) of one share of Stock on
the date of exercise over (ii) the grant price of the SAR
(which in the case of an SAR granted in tandem with an
Option shall be equal to the exercise price of the
underlying Option, and which in the case of any other SAR
shall be such price as the Committee may determine).
Restricted Stock: The Committee will be authorized to grant restricted Stock
to eligible participants. Restricted Stock will be subject
to restrictions on transfer.
Restricted Stock
Units: The Committee will be authorized to grant to eligible
participants the right to receive Stock or cash at the end
of a specified deferral period, which right may be
conditioned on the satisfaction of criteria determined by
the Committee ("Restricted Stock Units").
Dividend
Equivalents: The Committee is authorized to grant rights to receive cash,
Stock, or other property equal in value to dividends paid
with respect to a specified number of shares of Stock
("Dividend Equivalents") to eligible participants.
Other Stock or
Cash-Based
Awards: The Committee is authorized to grant to participants other
Stock-based awards or other cash based awards as an element
of or supplement to any other Award under the Celebrity
Plan.
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.
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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.
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
17
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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 $475 million for fiscal 1997. The PHI Group
experienced a loss on operations in 1998 of approximately $201 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:
declines in same unit revenues;
overall disappointing operating results;
expenses due to the development of the SOUND REPUBLIC concept; and
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". Exhibit 5 contains condensed consolidated
statements of operations, cash flows and balance sheets.
B. OPERATIONAL RESTRUCTURING PLAN
In order to address its operating losses and restore profitability, the
Company developed
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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:
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;
Identify franchise and license opportunities for selected
international Company-owned PLANET HOLLYWOOD locations;
Raise capital through the sale of assets and location of third
party investment;
Reduce overhead and losses through strategic store closings
domestically and overseas;
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
following the anticipated sale of excess assets 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
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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 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 entered into a Supply
Agreement effective January 1, 1999 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 pursuant to
a Purchase Money Security Agreement dated May 1, 1999. As of the Petition Date,
ProPlayer asserts that it was owed approximately $1.1 million for goods
delivered to various Company locations, and held merchandise worth approximately
$1.2 million in its own warehouse pending the placement of orders. ProPlayer
also asserts that PHI is indebted to it for an unearned advance of approximately
$950,000. PHI is in the process of reviewing these Claims.
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
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<PAGE>
owed approximately $2.0 million, and has asserted a reclamation Claim of
approximately $450,000. The Company is in the process of negotiating a new
long-term Supply Agreement with Alliant. 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 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 is a commercial condominium
project with several prominent real estate developers to construct and own a
50-plus story building, containing a hotel, restaurant, and provisions for
signage on the building's exterior facility, at the intersection of Broadway and
47th Street in New York City's Times Square redevelopment area. The premises are
currently under construction, and consist of a "Hotel Unit," "Retail Unit" and
"Sign Unit." PHI, through its wholly-owned, non-Debtor subsidiary Planet
Hospitality Holdings, Inc. ("Holdings"), owns a 20% membership interest (the
"Membership Interest") in Times Square Partners, LLC ("TSP"), the owner of the
Hotel and Signage units. In addition, Filed Subsidiary Planet Hollywood (Region
III), Inc. ("Region III") owns a fee interest in the Retail Unit, consisting of
portions of the lower four floors of the building, which was pledged to
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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 agreement with TSP contains numerous, significant
restrictions on transfer of the Retail Unit and the Membership Interest. The
Debtors are presently in negotiations to sell the fee interest in the Retail
Unit to Intell 1567 Broadway ("Intell"), an affiliate of the managing member of
TSP, for approximately $30.0 million plus forgiveness of approximately $2.0
million of construction debt. As part of this transaction, TSP will relax the
restrictions on transferability of the Membership Interest, enabling the Debtors
to realize additional value for the Estates through either (i) sale by TSP of
the entire hotel/restaurant/signage project, resulting in a PRO RATA
distribution of net profits to the Debtors on account of the Membership
Interest, or (ii) the amount realized from sale of the Membership Interest,
which sale shall be subject to TSP's right of first refusal on the terms of the
Debtors' contract with the potential buyer. The Debtors believe that the
additional value realized from either of these alternatives would likely equal
or exceed $15 million. The sale of the 1567 Broadway interest is a crucial
component of the restructuring plan. The sale of the Retail Unit is not expected
to close prior to the Effective Date, and thus the New Senior Secured Notes must
be issued as a "bridge" source of funding until the Retail Unit Sale closes.
Realization of the value of the TSP interests is also vital to the Reorganized
Debtors' viability post-Effective Date, and is projected to be received in
fiscal year 2000.
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.
The Company's Common Stock had been traded on the New York Stock
Exchange under the symbol "PHL", was delisted from the Exchange effective August
18, 1999, and has been trading on the over the counter market since. The
Company's Old Senior Subordinated Notes also trade on the over the counter
dealer market.
The following table sets forth, for the calendar periods indicated, the
high and low closing sales prices per share for the Company's Old Common Stock
as reported on the New York Stock Exchange, and for the Company's Old Senior
Subordinated Notes based on information available from Bloomberg. There is no
single established source of information for PHI's bond prices.
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<TABLE>
<CAPTION>
OLD SENIOR
OLD COMMON STOCK SUBORDINATED NOTES
---------------- ------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
1998 $ $ $ $
Quarter ended March 31................. 14 1/8 7
Quarter ended June 30.................. 10 4/7 7 1/8
Quarter ended September 30............. 7 1/4 4 90.60 58.02
Quarter ended December 31.............. 4 3/8 2 1/4 57.70 35.98
1999
Quarter ended March 31................. 4.00 1.00 39.68 18.25
Quarter ended June 30.................. 1.25 0.69 28.05 19.24
Quarter ended September 30............. 0.94 0.14 20.10 19.48
</TABLE>
At the present time, there are (i) approximately 4300 record owners and
19,000 street name Holders of the Company's Old Common Stock and (ii) one record
owner and approximately 500 street name Holders of the Company's Old Senior
Subordinated Notes.
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 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.
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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:
(i) 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.
(ii) 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. As of the Petition Date, PHI believed the temporary restraining order
had expired without extension, and that all claims of EDG to any interest in the
ALL STAR CAFE assets were entirely specious. EDG had asserted its belief that
the temporary restraining order was still in effect and that PHI could not sell
the assets to any third party. PHI has removed the state court action to the
District Court for the Southern District of New York and moved for transfer of
the action to the Bankruptcy Court. As of the Petition Date, PHI sought to
reject a lease in Atlanta where it operated an All Star Cafe restaurant. EDG
filed opposition papers to the rejection asserting that the state court
restraining order prevented the Debtors from rejecting the lease. Following a
hearing on November 2, 1999, the Court issued a Memorandum Decision holding that
there was no evidence of any stay, and permitting the rejection of the Atlanta
Lease. EDG has not sought to appeal the Court's ruling.
(iii) 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 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 was completed prior to the Filing Date. PHI
and the defendants
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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. The District Court
has just issued a 154 page ruling, the synopsis of which is that the Court
dismissed both sides' declatory judgment actions relating to whether Planet
Hollywood's use of its marks for casinos would infringe upon Hollywood Casino's
marks on the grounds that the issue is not ripe because there is no immediate
use in the Casino field. Otherwise, the Court denied both sides' claims with
respect to trademark and trade dress infringement. There was no financial award.
Both sides are to pay their own costs. The parties are reviewing appeal
possibilities.
(iv) 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.
(v) PHI V. AMERICA EUROPE ASIA INTERNATIONAL TRADE AND MANAGEMENT
CONSULTANTS, LTD. ("AEA"). Prior to the Petition Date, PHI filed a Complaint
against the Defendant in the Circuit Court of the Ninth Judicial Circuit in and
for Orange County, Florida, 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 and its Chief Executive
Officer, Robert Earl, for a variety of matters, including common law fraud,
misrepresentation, deceit, constructive fraud, violations of certain securities
laws and breach of contract. The Defendant's counterclaims 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, and dismissed the
claims against Robert Earl for failure to state a cause of action against him
personally. Of the ten counts of the original counterclaim, six counts are still
pending relating, in general, to the Defendant's claim that PHI has breached the
terms of the APA, and leave has been granted to amend the counterclaim. 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
unregistered shares of PHI's Old Common Stock. PHI has not paid the Defendant
any consideration under the APA. The Defendant asserts that PHI's failure to
timely deliver to it the consideration due under the APA gives rise to an
unsecured Claim in these cases. AEA has amended its alleged damage request in
pleadings before the Bankruptcy Court to $25 million.
On November 19, 1999, PHI removed the state court action to the Orlando
Division of the United States District Court for the Middle District of Florida,
and moved for a transfer of that action to the Bankruptcy Court. AEA has filed a
Second Amended counterclaim against Robert Earl, which PHI believes contains the
same defects which caused the prior dismissal of those claims. PHI also filed a
motion with the Bankruptcy Court for an expedited estimation procedure under 11
U.S.C. Section 502(c),
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which would allow an estimation of AEA's Claims for purposes of allowance and
distribution under the Plan, prior to the date set for confirmation of the Plan.
AEA has filed an objection to the request for estimation. PHI asserts that such
estimation is necessary because of the highly inflated nature of AEA's Claims,
which on their face would more than double the cost of payment of General
Unsecured Claims under the Plan. PHI strongly disputes the validity and amount
of the AEA Claims and believes it is in the best interests of these Estates and
their Creditors to have a prompt determination of the allowable amount of the
AEA Claims. A hearing on the Debtors' estimation motion was held on December 3,
1999, and the parties were asked to submit supplemental information to the
Court.
(vi) 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.
(vii) 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 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. Creditors and shareholders may also obtain copies of the Debtors'
public filings by written requests addressed to Stroock & Stroock & Lavan LLP,
180 Maiden Lane, New York, New York 10038, Attn: Rose Serrette.
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V. PRE-FILING PLAN DISCUSSIONS AND AGREEMENT
WITH INFORMAL NOTEHOLDERS' COMMITTEE;
LANDLORD SETTLEMENTS, INSIDER TRANSACTIONS UNDER THE
PLAN
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 the request of the Company, a group of Noteholders organized an
unofficial committee for the purpose of negotiating a possible restructuring
transaction with the Company. The Unofficial Noteholders' Committee, which then
represented in excess of $200 million of the Notes, selected Willkie Farr &
Gallagher ("Willkie") as its counsel and Houlihan Lokey Howard & Zukin
("Houlihan") as its financial advisors. As is customary in similar
circumstances, the Company entered into letter agreements with Houlihan and
Willkie dated as of April 23, 1999 and May 4, 1999, respectively, whereby the
Company agreed to pay the fees and expenses of the Unofficial Noteholders'
Committee's professionals and, as of the Petition Date, had paid approximately
$325,000 (inclusive of a paid retainer, some portion of which is still held on
account) to Willkie and $658,000 (inclusive of any amounts that may be held on
account) to Houlihan. 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.
In June, 1999, after the Company indicated that it had identified
investors willing to make an investment in the Company, a restricted
subcommittee (the "Subcommittee") of the Unofficial Noteholders' Committee was
formed to negotiate with the Company regarding the terms of a restructuring.
Members of the Subcommittee entered into confidentiality agreements with the
Company pursuant to which such members agreed to become restricted from trading
the Company's securities for a limited period of time for the purposes of
negotiating the terms of a restructuring and evaluating financial information
that had not yet been publicly released. The Subcommittee was initially
comprised of: (i) Salomon Smith Barney; (ii) SF Investments, Inc.; and (iii)
Varde Partners, Inc. Later in the process, Bay Harbour Management, L.C., which
had acquired a substantial position in the Old Senior Subordinated Notes, joined
the Subcommittee.
Nearly two months of active negotiations between the Subcommittee and
the Company resulted in an agreed 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. These negotiations involved significant compromises by both
sides. The Term Sheet was ultimately approved by holders of over 2/3 in face
amount of the Notes, who indicated in writing their agreements to support the
Term Sheet,
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including support for a plan incorporating the Term Sheet provisions. No
Noteholder expressly committed to vote its claim in any particular manner in the
Company's prospective chapter 11 case.
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 a
majority of the members of the Board including at least one Class A director
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
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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.
C. INSIDER TRANSACTIONS UNDER THE PLAN
1. ALTERNATIVE RESTRUCTURING EFFORTS RESULTING IN CURRENT PLAN
STRUCTURE
In the fall of 1998, the Company recognized that, based on its recent
historical operating results and significant debt burden, if it were unable to
reverse its poor operating results, it might not be able to meet its debt
obligations as they came due with cash flow from operations. From the end of
1998 into the second quarter of 1999, management explored various financial and
strategic alternatives including selling all or certain assets of the Company,
raising additional capital or restructuring its debt obligations. The Company
hired two international investment banking firms to help evaluate and explore
alternatives. Faced with rapidly declining operating results, increased
competition in the theme restaurant business and an impending liquidity problem
due to the termination of the SunTrust working capital facility, the Company was
unable to effectuate a transaction that would provide it the capital it needed
to turnaround its operations.
Because of the Company's continued deterioration in its operating
results and its inability to find additional capital, the Company decided not to
make its scheduled April 1, 1999 interest payment on the Old Senior Subordinated
Notes. The Company retained DLJ to advise it on a restructuring of its
outstanding debt. DLJ and the Unofficial Noteholders' Committee's financial
advisor, Houlihan, reviewed the Company's business plan and operations and
conducted due diligence on its properties and other assets and liabilities. In
light of the Company's continued operating losses, declining comp store sales,
operating margin erosion and negative EBITDA, each of which was expected to
continue for the foreseeable future due to increased competition in the theme
restaurant business, the Company and Unofficial Noteholders' Committee agreed
that without additional capital, the Company could not continue as a going
concern. In addition, the parties agreed that any restructuring would need to
result in a significant reduction in debt and that the existing common equity
was essentially worthless given the significant liabilities relative to the
liquidation value of the Company.
In the absence of any other apparent source of funding to effectuate a
financial restructuring and operating turnaround, a group of investors (the "New
Money Investors") including Robert Earl, Chairman and CEO of Planet Hollywood
and a holder, directly or indirectly, of approximately 23.5% of PHI's Old Class
A Common Stock, Mr. Ong Beng Seng, a director and holder of approximately 12.4%
of PHI's Old Class A Common Stock, His Royal Highness Prince Alwaleed Bin Talal
Bin Abdulaziz Al Saud, a holder of approximately 16.7% of PHI's Old Class A
Common Stock, and other business and personal colleagues of Mr. Earl agreed to
provide $30 million of capital to the Company. The $30 million of capital, in
conjunction with asset sales, was to be used to reduce the Company's debt and
provide working capital to
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fund operating losses until the restaurant operations could be improved. The
plan was premised on Robert Earl remaining Chairman and CEO given that his
intimate knowledge of the business and his relationships with both the old and
new Celebrities would be vital to any turnaround. Through a series of
negotiations between the New Money Investors and the Unofficial Noteholders'
Committee, it was determined that the New Money Investors would receive
approximately 70% of the new fully diluted equity of the Reorganized Debtors,
representing an equity value of approximately $43 million and enterprise value
of approximately $100 million.
Neither the Company nor the Unofficial Noteholders' Committee obtained
a fairness opinion with respect to the equity purchase price for the New Money
Investors; however, negotiations between the New Money Investors, not all of
whom are presently insiders of the Company, and the holders of the Old Senior
Subordinated Notes were arms length. The Company and its financial advisors
believe the valuation is reasonable based on the Company's going forward
business plan which includes a significant reduction in the number of owned
restaurants, a downsizing of corporate overhead and continued competition in the
theme restaurant business. See, Section VII.F. "Emergence Business Plan."
In evaluating the acceptability of the purchase price to be paid by the
New Money Investors, the Unofficial Noteholders' Committee was guided in large
measure by: (a) the advice of its financial advisor, Houlihan, which conducted
substantial due diligence in connection with the restructuring negotiations and
was provided full access to the Company's books and records and other non-public
information; and (b) its consideration of available alternatives. Given the
Company's financial condition, it appeared that, regardless of how thorough the
Company's marketing efforts had been, no non-insider third party would be found
that would be willing to make a meaningful equity investment in the Company.
Consequently, the alternative to the Plan would have been either a restructuring
of the Company pursuant to which the Noteholders and other creditors would have
received little or no cash, but substantially all of the Company's equity, or a
bankruptcy liquidation of the Company's assets. The former option, a
restructuring of the Company without the New Money Investors, would have placed
the entire risk of the Company's future prospects upon the Company's creditors.
The latter option, the liquidation of the Company's assets, would have, based
upon Houlihan's analysis, likely resulted in a cents on the dollar recovery to
creditors substantially lower than that available under the Plan.
In connection with negotiation of the Term Sheet and the Plan, PHI
representatives consulted with holders of approximately 52% of the outstanding
Old Common Stock of PHI, but did not negotiate or consult with holders or
representatives of non-insider shareholders, nor has management been approached
at any time by any representatives of such holders, despite the widespread
publicity surrounding the announcement of the terms of PHI's restructuring by
the press in early August, 1999 when the agreement with the Unofficial
Noteholders' Committee was first announced, and again in connection with the
commencement of these cases in October, 1999.
2. OTHER INSIDER BENEFITS UNDER THE PLAN
Post-Effective Date, current officers, directors and shareholders,
namely Mr. Earl (or a trust held by his children), Mr. Ong Beng Seng, and His
Royal Highness Prince Alwaleed Bin Talal Bin Abdulaziz Al
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Saud will control a substantial portion of the 70% of the New Common Stock
allocable to the New Money Investors. The effect of ownership of the New Class B
Common Stock is that the New Money Investors will have voting control of the
stock and of the Board of Reorganized PHI, subject, however, to the Board
membership rights of Holders of New Class A Common Stock under the Plan, the
supermajority voting provisions contained in the Amended Articles of
Incorporation and By-Laws of PHI, and other restrictions on transactions
contained in the New Senior Secured Notes Indenture, the New Secured PIK Notes
Indenture, and the Working Capital Facility. The New Money Investors will
receive a substantial portion of the New Warrants to be issued, however, the
"strike price" is such that there is minimal if any further dilutive effect on
the interests of other New Class A Common Stock Holders. It is not anticipated
that the New Money Investors will receive any Stock Options.
Mr. Earl will remain as Chairman and Chief Executive Officer of
Reorganized PHI, and will receive an employment agreement, expected to be
substantially comparable economically to his current agreement. The identity and
compensation arrangements for other directors and senior executive-level
officers are not yet determined, and will be disclosed at or prior to the
Confirmation Hearing; however, executive and director compensation is not
expected to differ materially from the levels currently in place.
Article XII of the Plan provides for present and former officers and
directors to receive unconditional releases from each of the Reorganized Debtors
and each Holder of a Claim or Interest from all claims, obligations, suits,
judgments, damages and liabilities based upon any act or omission, transaction,
event or other occurrence taking place on or before the Effective Date relating
to the Reorganized Debtors, the Chapter 11 Cases or the Plan. The officers and
directors are not entitled to releases from acts or omissions which are the
result of gross negligence or willful misconduct. In addition, existing
guarantees by any of the Debtors' officers or directors or their affiliates of
leases, contracts or other obligations that are assumed under the Plan are not
released, and their enforcement is not enjoined under the Plan.
The Plan provides for the survival of indemnification obligations of
PHI, the other Debtors and any non-Debtor affiliates to current or former
officers or directors of the Debtors and the Old Indenture Trustee, whether such
obligations arose prior or subsequent to the Petition Date. Such indemnification
obligations might be dischargeable if the triggering claims were contingent at
the time of confirmation of the Plan.
Article XII of the Plan also provides a general injunction which
precludes all Holders of Plan Securities and all Holders of Claims or Interests
from taking any act to enforce against any officer or director of any of the
Debtors any right, claim or cause of action arising under or related to any Old
Security or any Claim, except for claims arising from the gross negligence or
willful misconduct of such entities.
The Debtors believe the releases and indemnities proposed to be granted
to the Debtors' officers, directors and shareholders, and the injunctive
provisions of which they are beneficiaries, are entirely appropriate in these
cases, and will further the implementation of the Plan. As described above, the
Plan is premised on an infusion of equity capital by the New Money Investors.
Several of those parties are currently officers, directors or significant
shareholders of PHI. In addition to the need to incentivize those
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entities to participate in the Plan, there are no known or asserted claims
against any officers, directors or shareholders that should preclude the
releases and indemnities provided under the Plan.
Although PHI has not commissioned an independent investigation of
potential claims against officers, directors, shareholders or third parties, its
management has made a careful and thorough search in connection with the
preparation of the Schedules of Liabilities and Statement of Financial Affairs
filed with the Bankruptcy Court, and believes it has disclosed all known and
knowable contingent claims. As more fully described in Section III.E. of this
Disclosure Statement, only the following claims against officers, directors or
shareholders (in their capacity as such) are known to exist:
(a) Bonnie Falkenberg, et. al. vs. PHI and its Board Members. This
action for injunctive relief against the restructuring
contemplated by the Plan names certain officers and directors
of PHI. The action has not been prosecuted or even served on
the defendants, in PHI's view is entirely mooted by these
Chapter 11 proceedings, and neither asserts nor gives rise to
independent claims against the officers or directors of PHI.
(b) PHI vs. AEA. AEA has asserted counterclaims in this proceeding
alleging fraud, securities violations, criminal misconduct and
other such charges against Robert Earl as well as PHI. Most of
AEA's counterclaims against PHI were dismissed by the State
Court prior to the commencement of these Chapter 11 Cases, and
all claims against Mr. Earl were dismissed, but can be and
have been re-asserted by AEA. In PHI's view of the case, AEA's
claims are purely for breach of contract, at best, and are
highly inflated in the amounts sought. PHI does not believe
that Robert Earl has liability individually on these claims.
(c) There may be other Claims that are or could be asserted
against officers or directors as well as the Debtors that have
not been identified, but they are not believed to be material.
The Debtors' existing obligation to indemnify their current and former
officers and directors for liability and expenses arises from their respective
corporate by-laws. As an example, Article X of the existing by-laws of PHI
provides that PHI may indemnify any person who is a party or is threatened to be
made a party to any claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative, including one by or in the right of PHI, by
reason of the fact that he is or was a director, officer, employee or agent of
PHI, or is or was serving at the request of PHI as a director, officer, employee
or agent of another corporation, partnership, joint venture, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
PHI, and with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct unlawful.
PHI has no indemnification obligation in respect of any claim, issue or
matter where such person has been adjudged to be liable for negligence or
misconduct in the performance of his duty to PHI unless the court in which such
action is pending determines that such person is fairly and reasonably entitled
to indemnity for expenses deemed proper by the court. While the aforementioned
proceedings may give rise to Claims for indemnification by officers or directors
of PHI, PHI believes that such Claims were incurred
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by those officers and directors in the fulfillment of their duties to PHI and
are properly indemnifiable. It is not contemplated that PHI will be indemnifying
its officers or directors for any, and certainly not for any willful, violations
of federal securities laws. There are no known indemnity Claims being assumed
under the Plan that arise out of unresolved securities litigation and that would
otherwise be discharged.
The Securities and Exchange Commission ("SEC") has raised questions
with PHI, and in fact does so in connection with most Chapter 11 reorganization
cases with public securities, where there are releases from direct or
third-party claims, as to the propriety of the granting of the releases.
Although PHI hopes to satisfy the SEC as to the propriety of the releases,
indemnities and injunctive relief for officers, directors and insider
shareholders under the facts and circumstances of the Plan, the SEC reserves its
rights to raise objections to those provisions in connection with the
confirmation hearing on the Plan. In addition, one Creditor, AEA, has filed an
objection to the granting of releases as provided in the Plan, which objection
the Debtors intend to oppose. See Section III.E.(v) for further discussion of
AEA's Claims.
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).
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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, as well as
various "ordinary course" professionals, 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.
BAR DATE MOTION/GLOBAL NOTICE
On motion of the Debtors, the Bankruptcy Court entered an order (the
"Bar Date Order") on October 13, 1999 authorizing the Debtors to fix a bar date
for filing proofs of claim against each of the Debtors for Claims that arose
prior to the Petition Date and that did not fall within one of the enumerated
exceptions. These exceptions include: (A) Claims previously filed with the
Bankruptcy Court; (B) Claims listed on the Debtors' Schedules of Liabilities if
(i) the creditor agrees with the classification and amount of its scheduled
Claim and (ii) the Claim is not listed as disputed, contingent or unliquidated;
(C) Claims allowed by order of this Court entered on or before the Bar Date; (D)
administrative expense Claims; (E) Claims of a governmental unit; and (F) Claims
arising solely from (i) outstanding principal or interest due on account of
ownership of the Senior Secured Notes and (ii) the ownership of Common Stock. In
addition, the Court approved the form of the Bar Date Notice and mailing and
publication procedures.
The Bankruptcy Court also authorized the Debtors to employ Donlin,
Recano & Company, Inc. as the official claims agent for the purpose of receipt
and docketing of Claims. The Debtors fixed December 13, 1999 at 4:00 p.m.
(Eastern Time) as the Bar Date, and timely sent Bar Date Notices to those
parties designated to receive same under the Bar Date Order, consisting of: (i)
the Office of the United States Trustee, (ii) all persons or entities filing a
Notice of Appearance herein, (iii) all persons or entities listed on the
Debtors' schedules of liabilities, (iv) all parties or entities known to be
party to an executory contract or unexpired lease of the Debtors, and (v) all
other entities known by the Debtors that hold or assert pre-petition Claims.
In addition, notice of the Bar Date was published in the Wall Street
Journal (Global Edition) covering the United States, Europe, Asia and Central
America, and in local newspapers for each geographical area in which the Debtors
conduct business.
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EXTENSION OF TIME TO ASSUME/REJECT LEASES
By motion dated November 24, 1999, the Debtors sought a Court order
extending their time to assume or reject unexpired real property leases that the
Debtors had not previously rejected or assumed, to the earlier of the
Confirmation Date and March 11, 2000. Leases relating to twenty-four locations
where the Debtors continue to operate theme restaurants and merchandise store
units were identified on Exhibit A to the Motion. These leases are currently
viewed as being integral to the Debtors' on-going operations and constitute
assets of the Estates. The Debtors believe that until the Plan is confirmed,
they need to be able to retain their flexibility in respect of which locations
to assume, assume and assign to third parties, or reject. On December 9, 1999,
the Bankruptcy Court approved the Motion.
MOTION TO ASSUME CERTAIN LEASES
By motion dated November 24, 1999 the Debtors sought a Court order
authorizing their assumption of leases located at the following locations:
Planet Hollywood and Official All Star Cafe, Myrtle Beach, S.C.; Planet
Hollywood Mall of America, Bloomington, Minnesota; Planet Hollywood, Lake Tahoe,
Nevada; Planet Hollywood, Baltimore, Maryland; Planet Hollywood, Honolulu,
Hawaii; Planet Hollywood, San Diego, California; and Planet Hollywood, Seattle,
Washington. Each of these leases is the subject of a favorable modification
which the applicable Debtor and the landlord negotiated prior to the Petition
Date. On December 9, 1999, the Bankruptcy Court approved the assumption motion.
In addition, the Debtors intend to file a Motion to assume certain of their
Leases with Walt Disney World Co. and related entities.
SUPPLEMENTAL MOTION EXTENDING TIME TO ASSUME/REJECT LEASES NOT INCLUDED WITHIN
THE INITIAL LEASE EXTENSION MOTION
On December 7, 1999, the Debtors filed with the Court a supplemental
motion seeking to extend the time to assume or reject nine (9) additional
unexpired leases regarding non-residential real property (the "Supplemental
Motion"). These nine locations were unintentionally omitted from the Debtors'
prior motion to extend the time to assume or reject such leases before
expiration of the sixty (60) day period under Section 365 of the Bankruptcy
Code. The hearing on the Supplemental Motion is currently scheduled for December
17, 1999. In the Supplemental Motion, the Debtors are seeking to extend through
Confirmation the time to assume or reject the leases designated therein (with
the exception of the Planet Hollywood Beverly Hills, California location as to
which the Debtors have determined not to extend the time, and to allow the Lease
to be deemed rejected), along with any other unexpired real property leases to
which the Debtors were a party on the Petition Date.
B. STORE CLOSINGS
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
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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. On November 23, 1999, Alliant resigned from the
Creditors' Committee. 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 have filed a Motion seeking authorization to transfer
before the last day of their current taxable year (i.e., December 26, 1999),
certain 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 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
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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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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)
<TABLE>
<CAPTION>
PROJECTED
PLAN
EMERGENCE
DATE PROJECTED FISCAL YEARS ENDING DECEMBER 31,
ADJUSTMENTS -------------------------------------------------------------------------
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
Operations of All Star
Units -- 23 -- -- -- --
(Gain)/Loss on Sale
and Write-off of Assets 17,643 106 -- -- -- --
(Gain)/Loss on
Extinguishment of
Debt/Claims (181,609) -- -- -- -- --
Interest Expense -- 10,985 11,240 11,024 10,400 10,396
Interest (Income) -- (714) (306) (336) (393) (438)
--------- --------- --------- --------- --------- ---------
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
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.
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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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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)
<TABLE>
<CAPTION>
PROJECT
PLAN
EMERGENCE
DATE
ADJUSTMENT
PROJECTED PLAN
EMERGENCE
DATE PROJECTED FISCAL YEARS ENDING DECEMBER 31
ADJUSTMENTS --------------------------------------------------------------------
JAN 1, 2000 2000 2001 2002 2003 2004
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 950 $ 7,898 $ 9,025 $ 11,688 $ 10,496 $ 18,398
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 INVESTING
ACTIVITIES -- 38,000 (6,000) (6,000) (6,000) (6,000)
-------- -------- -------- -------- -------- --------
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 -- -- -- -- --
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Payment of
Administrative/Priority
Claims (5,950) -- -- -- -- --
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:(1)
PH Atlanta PH Myrtle Beach PH Seattle
PH Atlantic City PH Nashville PH St. Louis
PH Baltimore PH New York (3) PH Washington DC
PH Dallas PH Orlando(4) PH South Beach(5)
PH Honolulu PH Reno CP Anaheim
PH Lake Tahoe PH San Antonio CP Santa Monica
PH Las Vegas(2) PH San Diego OASC Disney(6)
PH Mall of America PH San Francisco OASC Myrtle Beach (7)
- ---------------
(1) In addition, the Company operates the Worldwide Warehouse Store in
Orlando, FL, which is expected to continue operating after the
Effective Date. Due to the immaterial nature of its operations, this
location has not been included in the Company's projections.
(2) This location includes the PH Las Vegas restaurant as well as the PH
Las Vegas Superstore.
(3) This location includes the PH New York restaurant and retail store. It
is anticipated that these units will be moved to the current location
of the OASC New York restaurant. See footnote (6).
(4) This location includes the PH Orlando restaurant and the PH Orlando
Superstore.
(5) It is anticipated that OASC units will be converted to PH units in the
first quarter of Fiscal Year 2000.
(6) This location includes the OASC Orlando restaurant and the OASC Gear
Superstore. It is anticipated that OASC Orlando restaurant will be sold
or otherwise disposed of in Fiscal Year 2000.
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(7) It is anticipated that OASC Myrtle Beach will be sold or otherwise
disposed of in Fiscal year 2000.
The "Non-Debtor Entities," referred to herein, are units not included in the
bankruptcy and are assumed to continue operating as company-owned units after
the Effective Date. These entities include the following operating units:
PH Cannes PH Gatwick PH Paris(9)
PH EuroDisney PH London(8) Planet Movies
(8) This location includes the PH London restaurant and the London
Superstore.
(9) This location includes the PH Paris restaurant and the Notre Dame
retail store.
For presentation purposes, the projected operating results of the Debtor
Entities and those of the Non-Debtor Entities are shown on a consolidated basis.
Cure costs relating to the assumption of unexpired leases are included in the
estimate of $1.45 million for administrative cure costs.
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
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.
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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 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
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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
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
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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. INFORMATION REGARDING EXECUTIVE OFFICERS AND DIRECTORS
a. POST-CONFIRMATION 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. The identity of additional officers and
directors is not yet finally determined but PHI believes the selections will be
consistent with the best interest of the Debtors, their Creditors, and
consistent with public policy. 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. Post-Confirmation compensation of such officers
and directors including the terms of any new employment agreements have not been
finally determined, but are not expected to differ materially from current
levels and terms of compensation for the various positions.
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<PAGE>
Certain biographical information relating to Mr. Earl is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL OCCUPATION
<S> <C>
Robert Earl, Chairman and Chief Mr. Earl has been Chief Executive Officer of the Company
Executive Officer of PHI. 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.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
B. CURRENT EXECUTIVE OFFICERS AND DIRECTORS
The current executive officers and directors of the Company and their
ages and positions are listed below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NAME AGE POSITION/PRINCIPAL OCCUPATION
<S> <C> <C>
Robert Earl 47 Chairman of the Board since November, 1998,
President and Chief Executive 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
- -------------------------------------------------------------------------------------------------------------
</TABLE>
C. CURRENT DIRECTOR COMPENSATION AND SHAREHOLDER INTERESTS
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
48
<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.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP OF CLASS A
NAME COMMON STOCK PERCENT OF CLASS (%)
- ---- ------------ --------------------
<S> <C> <C>
Robert Earl 22,876,367 23.51
Michael Tarnopol 22,6662. <1
Thomas Avallone 226,2323. <1
Mark McCormack 16,6664. <1
Claudio Gonzalez 61,1115. <1
Michael Montague 26,6676. <1
(recently deceased)
Ong Beng Seng 12,050,3357. 12.4
</TABLE>
- -------------------
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.
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<PAGE>
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. CURRENT EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth, as to PHI's Chief
Executive Officer and the other two 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.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------------------
FISCAL ANNUAL COMPENSATION OTHER ANNUAL ALL OTHER
NAME AND POSITION YEAR SALARY ($) ANNUAL BONUS ($) COMPENSATION STOCK OPTIONS (#) COMPENSATION
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert I. Earl 1997 $600,000 -- 4419 --
Chief Executive 1998 600,000 -- 6309 --
Officer and 1999 600,000 -- 6309 --
Chairman of the (estimated)
Board
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
FISCAL ANNUAL COMPENSATION OTHER ANNUAL ALL OTHER
NAME AND POSITION YEAR SALARY ($) ANNUAL BONUS ($) COMPENSATION STOCK OPTIONS (#) COMPENSATION
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas Avallone 1997 $300,000 -- 8854 --
Executive Vice 1998 375,000 75,000 8228 100,000 --
President and 1999 375,000 -- 8228
Chief Financial (estimated)
Officer
- ---------------------------------------------------------------------------------------------------------------------------------
Scott E. Johnson 1997 $200,000 -- 7,506 --
Executive Vice 1998 250,000 40,385 8,436 70,000 --
President, General 1999 250,000 -- 8436
Counsel and (estimated)
Secretary
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
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<PAGE>
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.
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 (as amended on April 13, 1999) 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
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<PAGE>
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 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.
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<PAGE>
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.
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. Since over two thirds in face amount have agreed to
the Plan treatment, it is anticipated (subject to the "numerosity" requirement
that more than one-half in number of those voting accept the Plan) that Class 5
will accept 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
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<PAGE>
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 several 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 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
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<PAGE>
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 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
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<PAGE>
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 January 20, 2000 at 2:00 p.m. 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 January 14, 2000, 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;
(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
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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.
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
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("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. With respect to a
dissenting Class of Interests the "fair and equitable" standard requires that
the Plan contain one of two elements. It must provide either (i) that each
Holder of an Interest in the Class receive or retain property having a value, as
of the Effective Date, equal to the greater of the Allowed amount of any fixed
liquidation preference to which such Holder is entitled, or the value of such
Interests or (ii) that no Holder of an Interest in any junior Class may receive
or retain any property on account of such 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."
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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 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
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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.
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
</TABLE>
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<TABLE>
<S> <C> <C>
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 PAR ESTIMATED
CLAIMS UNDER THE PLAN 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,
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due to the impact that such a large stock sale would have on ECE's share price.
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
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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.
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 December 6, 1999 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 (Claims for
Issuance of Old Common Stock) 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".
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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., 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 December 6, 1999 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
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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 ("Nominees"). If such Nominees 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 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
NOMINEE 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 Nominee; and
c. return the completed Ballot to the Nominee in the
self-addressed, stamped envelope enclosed with the Ballot, in sufficient time to
enable such Nominee 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
Nominee for instructions.
The Nominee will be responsible for completing a Master Ballot
reflecting its vote and the votes of other beneficial owners for which the
Nominee 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 Nominee will not be counted unless such Nominee 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
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MUST SUBMIT ITS OWN BALLOT. DO NOT RETURN THE CERTIFICATES REPRESENTING YOUR
CLAIMS WITH YOUR BALLOTS.
Each Holder of an Old Senior Subordinated Notes Claim may elect in
writing, at the appropriate place on the Ballot, to participate Pro Rata in the
distribution, if any, of up to $25 million of New Senior Secured Notes, $625,000
Cash and 350,000 shares of New Class A Common Stock as provided for by the Plan.
Only Holders of Class 5 Claims that make such election on a validly executed
ballot and whose election is included in a Master Ballot timely delivered to the
Balloting Agent may be treated as an Electing Holder of Class 5 Claims.
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 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 5:00
P.M. EASTERN TIME ON JANUARY 14, 2000 (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.
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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
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 later of the Effective
Date, the date of allowance of their Reclamation Claims, or such other date as
shall be approved by an order of the 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).
Administrative Reclamation Claims are expected to total approximately $600,000.
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CURE COST CLAIMS. Claims relating to cure costs in connection with
contracts or leases assumed by the Debtors under 11 U.S.C. ss. 365 are entitled
to Administrative Expense status. Such Claims shall be paid on the later of the
Effective Date, the date of Allowance of a cure cost Claim, or such other date
as shall be approved by order of the Bankruptcy Court. Cure cost Claims are
expected to total approximately $1.45 million.
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 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
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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.
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
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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 later of the Effective Date, the date of allowance of its
Convenience Class Claim, or such other date as shall be approved by an order of
the Court, 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, (ii) $60 million of New Secured PIK Notes; and
(iii) 2.65 million shares of New Class A Common Stock. If, prior to the
Confirmation Date, PHI has entered into the Bay Harbour Agreement, then PHI
shall deliver to Electing Holders of Class 5 Claims in lieu of payment of up to
$25 million Cash and, if applicable, any unsubscribed amount to Bay Harbour
under the
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Bay Harbour Agreement, their respective Pro Rata shares of up to $25 million of
New Senior Secured Notes having the principal economic terms set forth in Annex
A to the Plan, or other terms not materially more adverse to any Class under the
Plan, plus their Pro Rata Share of a fee consisting of $625,000 Cash and 350,000
shares of New Class A Common Stock. 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. Failure of a Class 5 Claim holder to check the
appropriate box on the Ballot will preclude them from receiving a distribution
of New Senior Secured Notes under 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.
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CLASS 7. LANDLORD SETTLEMENT AGREEMENT CLAIMS.
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
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extinguished on the Effective Date.
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.
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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 and any applicable fee in Cash and/or New Common
Stock to third party lenders and/or to Bay Harbor and Electing 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. Reorganized 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
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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 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 approval of a majority of the members (including at least one
Class A Director) 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.
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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 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.
STOCK OPTION PLANS. The Company shall execute on the Effective Date two
stock option plans, one for management and one for Celebrities. The terms of
those plans as developed to date are set forth in Section II of this Disclosure
Statement, "Summary Terms of New Stock Option Plans". The options to be issued
under the plans are exercisable into shares of New Class A Common Stock. A
committee to be appointed by the Board of Directors will determine the exercise
price and exercise term of the options. PHI shall reserve for issuance upon
exercise of the options a total of 1 million shares of New Class A Common Stock,
representing 10% of all issued and outstanding shares of New Common Stock as of
the Effective Date. Holdings of New Class A Common Stock are subject to dilution
upon exercise of the options. The stock options will be issued pursuant to an
exemption from the registration requirements under the Securities Act of 1933,
as amended (the "Securities Act") provided by Section 4(2) thereof or pursuant
to a Form S-8 filing by Reorganized PHI.
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
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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. Guarantees by the
Debtors, non- Debtor affiliates or any officers or directors or other third
parties or their affiliates of leases or contracts that are assumed by the
Debtors on or prior to the Effective Date shall remain in existence and shall
not be discharged or extinguished.
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 corporation duly organized under the laws
of Delaware, 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 entities duly organized under the laws of their respective
states of incorporation or organization. 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 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
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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; provided, however, that any distributions
of New Senior Secured Notes shall be made only to Electing Holders of Class 5
Claims. 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.
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
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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 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
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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
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(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 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
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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
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
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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.
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 those Plan Securities that are issued in exchange for a Claim against,
an interest in, or a Claim for an administrative expense against the Debtors, or
principally in such exchange and partly for cash or property, are exempt from
registration pursuant to Section 1145(a) of the Bankruptcy Code and that those
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. With respect to Plan Securities issued to the New Money Investors,
or to a purchaser of the New Senior Secured Notes that is not exchanging Claims
for such securities, the Company does not rely on Section 1145 for an initial
exemption from registration, but rather intends to utilize a private placement
exemption provided by Section 4(2) of the Securities Act.
The Company is presently negotiating with several individual and
institutional potential purchasers of the New Senior Secured Notes. No final
agreement has been reached as yet. If no such agreement is finalized, the
Debtors intend to ask the Holders of Old Senior Subordinated Notes Claims to
take the New Senior Secured Notes in lieu of a portion of the Cash otherwise
distributable to Class 5. The Company recognizes that the New Senior Secured
Notes (if issued to the Holders of Old Senior Subordinated Notes Claims) and the
New Secured PIK Notes, will need to have indentures that are qualified under the
Trust Indenture Act. The Company intends, if possible, to file the necessary
application(s) for such qualifications at or prior to the time of commencement
of the solicitation of votes on the Plan. However, such application may be
amended as the terms of the Indentures are finalized.
(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
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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 Senior Secured Notes, 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, 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,
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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.
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
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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 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.
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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 Investors 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 Bay Harbour Management, L.C. or
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;
(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;
(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;
(d) The Effective Date shall have occurred no later than
February 29, 2000; and
(e) All actions and documents necessary to implement the
provisions of the
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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, existing provisions of the by-laws, the Old Senior
Subordinated Notes Indenture or other applicable laws, corporate documents or
agreements of the Debtors or any Foreign Subsidiary or Domestic Subsidiary
providing for the indemnification of 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 Indenture or other applicable law,
corporate documents or agreements will expressly survive Confirmation of the
Plan and be binding on and enforceable
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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, financial advisor,
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 or Interest 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 or Interests in 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
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with the provisions of the Plan and orders of the Bankruptcy Court; PROVIDED,
HOWEVER, that each Holder of a Claim or Interest 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 or Interest in the
Bankruptcy Court or any other court of competent jurisdiction, and all Holders
of Claims or Interests will be entitled to enforce their rights under the Plan
and the Plan Documents; PROVIDED FURTHER, HOWEVER, that nothing herein shall
restrain and enjoin all Entities who received or are Holders of Plan Securities
and all Holders of Claims against or Interests in the Estates from taking any
action to enforce liability arising from acts or omissions which are the result
of gross negligence or willful misconduct.
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;
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(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;
(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
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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 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.
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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, 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.
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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.
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
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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 Bay Harbour Management, L.C., or one or more third-party lenders on terms
acceptable to the lender(s), the Debtors and the Creditors' Committee. 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 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.
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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.
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.
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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.
Additionally, December 13, 1999 is the Bar Date for certain
non-governmental Claims to be filed against the Debtors. The Debtors have given
extensive notice through direct mailings and world-wide publication of the
pendency of these Chapter 11 Cases and of the Bar Date for Claims. While the
Debtors believe that they have an adequate grasp of all Claims likely to be
asserted prior to the Bar Date, it is possible that Claims exist or will be
asserted of which the Debtors are unaware. In addition, certain Claims will be
asserted in amounts which are disputed or unliquidated, and which may far exceed
the levels at which the Debtors believe they should be Allowed. The Claims of
AEA described in more detail in Section III. E. of this Disclosure Statement are
a case in point. Nonetheless, the Debtors have taken and will take aggressive
action to liquidate such Claims to an appropriate level, and as of now, with the
exception of AEA, are aware of no Claims that would materially adversely affect
the Plan assumptions and projections.
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
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the Plan is the best alternative and will enable the Holders of Claims and
Interests to obtain the maximum value possible.
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 to Creditors or shareholders in exchange
for their Claims against or Interests in the Company. 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)
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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 to Holders of Class 5 and Class 6 pursuant to the
Plan will satisfy the requirements of Section 1145(a)(1).
With respect to Plan Securities issued to the New Money Investors, or
to a purchaser of the New Senior Secured Notes that is not exchanging Claims for
such securities, the Company does not rely on Section 1145 for an initial
exemption from registration, but rather intends to utilize a private placement
exemption provided by Section 4(2) of the Securities Act.
Recipients of Plan Securities issued in reliance upon the exemption
provided under Section 4(2) of the Securities Act should be advised that until
the Shelf Registration is declared effective by the Commission such Plan
Securities may not be offered, sold, pledged or otherwise transferred except in
compliance with the registration requirements of the Securities Act and other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.
The Plan Securities issued to Holders of Class 5 and Class 6 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
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"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
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.
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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 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.
THIS DISCUSSION DOES NOT ADDRESS ANY TAX LAWS OTHER THAN FEDERAL INCOME
TAX LAWS. 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 FEDERAL ESTATE, 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
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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 tax 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 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
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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 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.
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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 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
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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 Claims 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 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
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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 issue 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
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Notes. Further, since interest on the New Senior Secured Notes will be paid
currently in Cash, all such interest will be treated as qualified stated
interest and will not be included in the 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
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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.
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 EBITDA, 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 te 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
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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.
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 of the Code 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 and 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.
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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 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.
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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 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).
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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 ("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 Section 108(a) of the Code. Consequently, any COD income
attributable to the Plan will be excluded from the Debtors' taxable income.
However, Section 108(b) of the Code 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 Section 108(a) of the Code. 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
Section 108(b) of the Code 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 $182 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
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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).
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 Section 382 of the Code.
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 Section 382 of the Code.
If an ownership change occurs pursuant to the consummation of a
bankruptcy debt restructuring and Section 382(l)(5) of the Code (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
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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 its NOLs under the foregoing formula restriction is eliminated
entirely.
In addition, the Section 382 limitation of a loss corporation's group
is increased if and to the extent the group recognizes certain "built-in gains"
(generally the excess, at the time of the ownership change, 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) during the five-year period
beginning with the date of an ownership change (the "recognition period"), up to
the amount of the net unrealized built-in gain on the date of the ownership
change, provided that the amount of such net unrealized built-in gain exceeds
the lesser of $10,000,000 or 15% of the fair market value of the group's assets,
excluding Cash and certain other assets. Conversely, if a corporation has a net
unrealized built-in loss exceeding 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) of the Code 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) of the Code is applicable and is
applied, a second ownership change within two years will result in Section
382(l)(5) of the Code being inapplicable 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) of the Code will be satisfied in connection with the
anticipated ownership change resulting from
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the consummation of the Plan. Prior to the time prescribed for electing not to
apply Section 382(l)(5) of the Code, 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) of the Code.
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 rate
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 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 5:00 p.m., Eastern Time, on January 14, 2000.
Dated: December 13, 1999
Orlando, Florida
Respectfully submitted,
PLANET HOLLYWOOD COOL PLANET, INC.
INTERNATIONAL, INC.
By: By:
-------------------------------- ------------------------------
Name: Name:
Title: Title:
COOL PLANET II, INC. PLANET HOLLYWOOD (ASPEN), INC.
By: By:
-------------------------------- ------------------------------
Name: Name:
Title: Title:
PLANET HOLLYWOOD (ATLANTIC CITY), INC. PLANET HOLLYWOOD (CHICAGO), INC.
By: By:
-------------------------------- ------------------------------
Name: Name:
Title: Title:
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PLANET HOLLYWOOD (HONOLULU), INC. PLANET HOLLYWOOD (LP), INC.
By: By:
-------------------------------- ------------------------------
Name: Name:
Title: Title:
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:
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PLANET HOLLYWOOD (REGION V), INC. PLANET HOLLYWOOD (REGION VI), INC.
By: By:
-------------------------------- ------------------------------
Name: Name:
Title: Title:
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:
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EXHIBIT 1
TO
FIRST AMENDED DISCLOSURE STATEMENT FOR THE
FIRST AMENDED JOINT REORGANIZATION PLAN OF
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
FIRST AMENDED JOINT PLAN OF REORGANIZATION
<PAGE>
EXHIBIT 2
TO
FIRST AMENDED DISCLOSURE STATEMENT FOR THE
FIRST AMENDED JOINT REORGANIZATION PLAN OF
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
LIST OF LICENSED OR FRANCHISED UNITS
<PAGE>
EXHIBIT 2
LIST OF LICENSED OR FRANCHISED UNITS
PLANET HOLLYWOOD UNITS
Cancun, Mexico Puerto Vallarta, Mexico
Jakarta, Indonesia Moscow, Russia
Sydney, Australia Cape Town, South Africa
Acapulco, Mexico Dubai, United Arab Emirates
Bangkok, Thailand Tel Aviv, Israel
Beirut, Lebanon Guam
Singapore Melbourne, Australia
Kuala Lumpur, Malaysia Rome, Italy
Madrid, Spain Gold Coast, Australia
Taipei, Taiwan Sao Paulo, Brazil
Montreal, Canada Niagara Falls, Canada
Vancouver, Canada Toronto, Canada
Hong Kong New Orleans, Louisiana
Barcelona, Spain
OFFICIAL ALL STAR CAFE UNITS
Mexico City, Mexico Melbourne, Australia
Atlantic City, New Jersey Honolulu, Hawaii
126
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EXHIBIT 3
TO
FIRST AMENDED DISCLOSURE STATEMENT FOR THE
FIRST AMENDED JOINT REORGANIZATION PLAN OF
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
LIST OF LOCATIONS CLOSED SINCE JANUARY 1, 1999
<PAGE>
EXHIBIT 3
LIST OF LOCATIONS CLOSED SINCE JANUARY 1, 1999
PLANET HOLLYWOOD UNITS
Houston, Texas Edmonton, Canada
Miami, Florida Chicago, Illinois
Ft. Lauderdale, Florida Gurnee Mills, Illinois
Prague, Czech Republic Maui, Hawaii
Helsinki, Finland Phoenix Arizona
Aspen, Colorado Costa Mesa, California
Zurich, Switzerland
Indianapolis, Indiana
OFFICIAL ALL STAR CAFE UNITS
Atlanta, Georgia
SOUND REPUBLIC UNITS
London, England
COOL PLANET UNITS
Irvine, California
<PAGE>
EXHIBIT 4
TO
FIRST AMENDED DISCLOSURE STATEMENT FOR THE
FIRST AMENDED JOINT REORGANIZATION PLAN OF
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
LIST OF LOCATIONS SUBJECT TO LANDLORD SETTLEMENT AGREEMENTS
<PAGE>
EXHIBIT 4
LIST OF LOCATIONS SUBJECT TO
LANDLORD SETTLEMENT AGREEMENTS
MODIFIED LEASES AGREED TO
- -------------------------
PLANET HOLLYWOOD UNITS
Atlantic City, New Jersey
Myrtle Beach, South Carolina
Washington, D.C.
Mall of America, Minnesota
Gatwick, England
Lake Tahoe, Nevada
Baltimore, Maryland
Atlanta, Georgia
Honolulu, Hawaii
Nashville, Tennessee
San Diego, California
Seattle, Washington
UNITS FRANCHISED/LICENSED TO THIRD PARTIES
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PLANET HOLLYWOOD UNITS
New Orleans, Louisiana
Montreal, Canada
Toronto, Canada
Vancouver, Canada
OFFICIAL ALL STAR CAFE UNITS
Atlantic City, New Jersey
Honolulu, Hawaii
<PAGE>
EXHIBIT 5
TO
FIRST AMENDED DISCLOSURE STATEMENT FOR THE
FIRST AMENDED JOINT REORGANIZATION PLAN OF
PLANET HOLLYWOOD INTERNATIONAL INC.
AND CERTAIN OF ITS SUBSIDIARIES
HISTORICAL FINANCIAL INFORMATION
(1) Section 1124(2) of the Bankruptcy Code provides that a claim is
unimpaired if the plan:
(A) cures any such default that occurred 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.
EXHIBIT 99.2
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)
)
Debtors. ) (Jointly Administered)
ORDER CONFIRMING THE FIRST AMENDED JOINT PLAN OF
REORGANIZATION DATED DECEMBER 13, 1999 OF PLANET HOLLYWOOD
INTERNATIONAL, INC. AND CERTAIN OF ITS SUBSIDIARIES
---------------------------------------------------
Planet Hollywood International, Inc. ("PHI") and twenty-five of its
affiliates that are debtors and debtors-in-possession herein (collectively with
PHI, the "Debtors") having filed their First Amended Joint Plan of
Reorganization dated December 13, 1999 (the "Plan") in accordance with Section
1121 of Title 11 of the United States Code (the "Bankruptcy Code"), 11 U.S.C.
ss.1121, and their First Amended Disclosure Statement pursuant to Section 1125
of the Bankruptcy Code relating to the Plan dated December 13, 1999 (the
"Disclosure Statement"); and the Court by order dated December 14, 1999 (the
"December 14 Order") having approved the Disclosure Statement as containing
adequate information, and the December 14 Order having, INTER ALIA, (i) approved
the procedures for the solicitation and tabulation of votes to accept or reject
the Plan, (ii) established deadlines for voting on and objecting to the Plan,
and (iii) established January 20, 2000 as the date for commencement of the
hearing, pursuant to Section 1129 of the Bankruptcy Code, 11 U.S.C. ss.1129, to
consider confirmation of the Plan (the "Confirmation Hearing"); and the
transmittal of materials to Holders(1) of Claims, Interests and other
parties-in-interest, and the solicitation of acceptances from Holders of
Claims in Class
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(1) All capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Plan or, to the extent not inconsistent
therewith, in the December 14 Order.
<PAGE>
5 and Class 6, having been made within the time and in the manner required by
the December 14 Order; and affidavits of publication having been filed with the
Court evidencing that the Confirmation Procedures Notice was published in
accordance with the provisions of the December 14 Order (the "Publication
Affidavits"); and an affidavit of service having been filed with respect to the
mailing of the Confirmation Procedures Notice (the "Mailing Affidavit"); and
objections to confirmation of the Plan having been filed by (i) Simon Property
Group, L.P. ("Simon")(subsequently withdrawn), (ii) 270, L.P. ("270")
(subsequently withdrawn), (iii) M. Caransa, b.v. ("Caransa")(subsequently
withdrawn), (iv) Wilroad Associates Limited Partnership ("Wilroad"), (v) State
of New Jersey, Division of Taxation ("NJ Tax Division"), (vi) United States of
America for the Internal Revenue Service ("IRS"), (vii) Stanley Goldich
("Goldich")(subsequently withdrawn in part), (viii) Joseph Mele
("Mele")(subsequently withdrawn); (ix) Al O'Rourke ("O'Rourke"), (x) 601 Pine
Street, L.P. ("601") and (xi) Karen Hojniak (collectively, the "Confirmation
Objections"); and the Court having considered and approved the Stipulation
between the Debtors and America Europe Asia International Trade and Management
Consultants, Ltd. ("AEA") (the "AEA Stipulation") providing, INTER ALIA, for AEA
to vote its $7,000,000 Class 6 Claim in favor of the Plan; and 270 having
elected to change its vote in Class 6 from a rejection to an acceptance of the
Plan; and the Debtors having moved for modification of the Plan pursuant to 11
U.S.C. ss. 1127(a) (the "Modification Motion"); and a hearing having been held
on January 20, 2000 (the "Confirmation Hearing") where the Court considered (i)
confirmation of the Plan (as amended by the modifications), (ii) the withdrawal
or settlement of Confirmation Objections, (iii) the Confirmation Objections not
otherwise withdrawn or settled, (iv) the fairness and appropriateness of
substantively consolidating the Debtors' Estates, and (v) the fairness and
reasonableness of the settlements embodied in the Plan; and notice of the
Confirmation Hearing being deemed good and sufficient notice of the
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<PAGE>
Modification Motion; and upon the entire record of the Debtors' Chapter 11
Cases, including, without limitation, the record made at the Confirmation
Hearing; and after finding that due, sufficient and adequate notice of the
Confirmation Hearing, the substantive consolidation of the Debtors' Estates, the
AEA Stipulation and the settlements and compromises embodied in the Plan has
been given to Holders of Claims, Interests and to all parties-in-interest, and
after due deliberation, the Court makes the following findings of fact and
conclusions of law:(2)
FINDINGS OF FACT AND CONCLUSIONS OF LAW:
A. The District Court has jurisdiction over the Chapter 11 Cases
pursuant to 28 U.S.C.ss.ss.157(1) and 1334(a). Venue of these proceedings and
the Chapter 11 Cases in this district is proper pursuant to 28 U.S.C.ss.ss.1408
and 1409. Confirmation of the Plan is a core proceeding pursuant to 28
U.S.C.ss.157(b) and this Court has jurisdiction to enter a final order with
respect thereto.
B. Due, timely, sufficient and adequate notice of the Plan, the
Confirmation Hearing, the Modification Motion and the deadlines for voting on,
and filing objections to, the Plan has been given to all known Holders of Claims
and Interests and other parties-in-interest in accordance with the procedures
established by the December 14 Order, the Bankruptcy Code, the Bankruptcy Rules,
the local rules of the Court and all other applicable laws, rules and
regulations.
C. The solicitation by the Debtors of votes accepting or rejecting the
Plan was proposed and conducted in good faith and complied with Sections 1125
and 1126 of the Bankruptcy Code, Bankruptcy Rules 3017 and 3018, the December 14
Order and all other
- --------------
(2) This Confirmation Order constitutes the Court's findings of fact and
conclusions of law under Federal Rules of Civil Procedure 52, as made
applicable by Bankruptcy Rules 7052 and 9014. Any finding of fact shall
constitute a finding of fact even if it is stated as a conclusion of law,
and any conclusion of law shall constitute a conclusion of law even if it
stated as a finding of fact when necessary and appropriate.
3
<PAGE>
applicable provisions of the Bankruptcy Code and all other applicable laws,
rules and regulations.
D. The procedures by which the ballots and master ballots, as
applicable, were distributed to Holders of Claims against the Debtors in Class 5
and Class 6 under the Plan entitled to vote on the Plan and tabulated were fair,
properly conducted and in accordance with the Bankruptcy Code, the Bankruptcy
Rules, the local rules of this Court, the December 14 Order and all other
applicable laws, rules and regulations.
E. The Class 6 ballot cast by AEA in accordance with the AEA
Stipulation in the amount of $7.0 million to accept the Plan (the "AEA Ballot")
shall be included in the final tabulation of the Class 6 Claims voting on the
Plan. 270 has changed its Class 6 vote rejecting the Plan to an acceptance of
the Plan, and shall be counted as such.
F. As evidenced by the Affidavit of Carole Donlin dated January 19,
2000 certifying the method and results of the ballot tabulation (the "Plan Vote
Certification"), the AEA Ballot and the testimony of Thomas Avallone at the
Confirmation Hearing, (i) at least two-thirds in amount and more than one-half
in number of the Holders of Claims in Class 5 (Old Senior Subordinated Notes
Claims), and Class 6 (General Unsecured Claims) voting on the Plan accepted the
Plan without including the votes of insiders.
G. The classification scheme of Claims and Interests in the Plan is
reasonable and complies with the requirements of ss.ss.1122 and 1123 of the
Bankruptcy Code. Claims or Interests in each particular Class are substantially
similar to other Claims contained in such Class. In addition, consistent with
Section 1122(b), the Plan contains a convenience class (Class 4) encompassing
Holders of Allowed Claims in an amount of $2000 or less and each Holder of a
General Unsecured Claim that has elected on its Class 6 ballot to reduce the
Allowed amount of its Claim to $2000 or less. The inclusion of a convenience
class in the Plan is reasonable and
4
<PAGE>
appropriate for administrative convenience.
H. Classes 1, 2, 3, 4, 7, 10 and 11 are not impaired under the Plan
and, therefore, such Classes are deemed to have accepted the Plan pursuant to
Section 1126(f) of the Bankruptcy Code.
I. Classes 8 and 9 are impaired under the Plan and are deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
J. As required by Section 1129(a)(1) of the Bankruptcy Code, the Plan
complies with all applicable provisions of the Bankruptcy Code.
K. As required by and in compliance with Sections 1123(a)(1), (a)(2)
and (a)(3) of the Bankruptcy Code, the Plan (i) identifies the Classes of Claims
against and Interests in the Debtors, (ii) specifies the Classes of Claims and
Interests that are not impaired under the Plan as well as those that are
impaired under the Plan, and (iii) specifies the treatment of each Class of
Claims or Interests under the Plan.
L. Consistent with Section 1123(a)(4) of the Bankruptcy Code, the Plan
provides the same treatment for each Claim or Interest in a particular Class,
unless a Holder of a Claim or Interest has agreed with the Debtor to a less
favorable treatment.
M. As required by Section 1123(a)(5) of the Bankruptcy Code, the Plan
contemplates adequate means for its execution and implementation including, but
not limited to, (i) the substantive consolidation of the Chapter 11 Cases; (ii)
the utilization of available Cash on hand plus (a) $30 million Cash from the New
Money Investors, (b) an amount not to exceed $25 million as consideration for
the purchase of New Senior Secured Notes or a comparable debt instrument to be
issued by Reorganized PHI on the Effective Date, (c) up to $15.0 million under
the terms of the Working Capital Facility, and (d) proceeds of asset sales;
(iii) the adoption by Reorganized PHI of the Amended PHI By-Laws and Amended PHI
Articles and the filing of the
5
<PAGE>
Amended PHI Articles pursuant to Section 6.2.3 of the Plan; (iv) the issuance by
Reorganized PHI of the New Secured PIK Notes, the New Warrants, the New Common
Stock and the New Options; and (v) the vesting in the applicable Reorganized
Debtor of all property of the Consolidated Estates, and any property and assets
acquired by the Debtors or the Reorganized Debtors under the Plan.
N. As required by Section 1123(a)(6) of the Bankruptcy Code, the Plan
provides for the inclusion in the Amended Articles of a provision prohibiting
the issuance of non-voting equity securities and for an appropriate distribution
of voting power among New Class A Common Stock and New Class B Common Stock. The
provisions of the Amended By- Laws and the Plan with respect to the manner of
selection of the directors after the Effective Date were the product of good
faith negotiations among the Debtors, the Creditors' Committee and the New Money
Investors and are necessary for the implementation of the Plan.
O. Consistent with Section 1123(a)(7) of the Bankruptcy Code, the Plan
provides for Robert Earl to be chief executive officer of PHI and for the manner
by which the other officers and directors of Reorganized PHI and the other
Reorganized Debtors are to be chosen. The designation of Robert Earl as chief
executive officer on and after the Effective Date, and the manner of selection
and/or designation of the other officers and the directors of the Reorganized
Debtors, as applicable, provided for by the Plan are consistent with the
interests of Holders of Claims and Interests and public policy.
P. Consistent with Sections 1123(b)(1) and (b)(2) of the Bankruptcy
Code, the Plan impairs or leaves unimpaired, as the case may be, each Class of
Claims or Interests, and provides for the assumption, assignment or rejection of
each of the Debtors' executory contracts and unexpired leases which have not
been previously assumed or rejected pursuant to Section 365 of the Bankruptcy
Code, by prior order of the Court as of the Confirmation Hearing.
6
<PAGE>
Q. Consistent with Section 1123 (b)(3) of the Bankruptcy Code, the Plan
provides for either (i) the settlement or adjustment, or (ii) retention and
enforcement by Reorganized PHI, of any claims, demands, rights and causes of
action that any of the Consolidated Debtors or the Consolidated Estates may hold
against any Entity, other than claims that are released by virtue of Section
12.1 of the Plan.
R. As required by Section 1129(a)(2), the Debtors have complied with
all of the applicable provisions of the Bankruptcy Code including the disclosure
and solicitation requirements of Sections 1125 and 1126 of the Bankruptcy Code.
The Debtors transmitted solicitation materials including ballots to the Holders
of Claims in Classes 5 and 6 entitled to vote on the Plan, and non-voting
materials including the Plan Summary to the Holders of Interests, only after the
Court approved the Disclosure Statement and Plan Summary as containing adequate
information and related materials for distribution in compliance with the
requirements of the December 14 Order.
S. As required by Section 1129(a)(3), the Plan has been proposed in
good faith and not by any means forbidden by law. The Debtors' objectives in
proposing the Plan were for the valid business purpose of resolving disputes and
restructuring substantial obligations of the Debtors.
T. As required by Section 1129(a)(4) of the Bankruptcy Code, any
payment made or to be made by the Debtors for services or for costs and expenses
in connection with these Chapter 11 Cases, or in connection with the Plan, other
than those incurred in the ordinary course of business has been approved by this
Court or is subject to the approval by this Court as being reasonable.
U. The Debtors have disclosed their designation of Robert Earl,
presently the President and chief executive officer of PHI, to continue as chief
executive officer of PHI on and
7
<PAGE>
after the Effective Date, and have disclosed the identity of those persons who
shall be executive officers and directors of Reorganized PHI on and after the
Effective Date to the extent now known. The officers and directors for each of
the Reorganized Debtors other than PHI are to be designated on and after the
Effective Date by the Board of Directors of Reorganized PHI.
V. Section 1129(a)(6) of the Bankruptcy Code is inapplicable as there
is no governmental regulatory commission with jurisdiction over any rates
charged by the Debtors.
W. As required by Section 1129(a)(7) of the Bankruptcy Code, with
respect to each impaired Class of Claims, and each impaired Class of Interests,
each Holder of a Claim or Interest of such Class has either accepted the Plan or
will receive or retain under the Plan on account of such Claim or Interest
property of a value, as of the Effective Date, that is not less than the amount
such Holder would receive or retain if the Debtors were liquidated on the
Effective Date under Chapter 7 of the Bankruptcy Code.
X. The Debtors have requested that the Court confirm the Plan under
Section 1129(b) as to Classes 8 and 9.
Y. The Plan is fair and equitable with respect to the Holders of Class
8 Interests as no Class junior to Class 8 under the Plan will receive or retain
any property under the Plan on account of such junior Interest. In addition, the
Plan is fair and equitable with respect to the Holders of Class 9 Claims as no
Class junior to Class 9 under the Plan will receive or retain any property under
the Plan on account of such junior Claim, and the Plan does not discriminate
unfairly with respect to impaired, non-accepting Classes of Claims and
Interests.
Z. The Plan provides for the treatment of Allowed Administrative
Expense Claims and Allowed Priority Claims pursuant to Sections 507(a)(1),
(a)(3), and (a)(8) of the Bankruptcy Code, in accordance with Section 1129(a)(9)
of the Bankruptcy Code, except to the extent that the Holder of a particular
Claim has agreed in writing to a different treatment.
8
<PAGE>
Administrative Expense Claims incurred in the ordinary course of the Debtors'
business shall be paid or performed in accordance with the terms and conditions
of the parties' agreement.
AA. The rate of post-Effective Date interest to be paid on account of
Allowed Priority Tax Claims, if any, as provided for by Section 4.5 of the Plan,
is proper under Section 1129(a)(9) of the Bankruptcy Code and shall be the
Treasury Rate except as to the State of New Jersey, Division of Taxation, as to
which the rate shall be the prime rate plus three (3%) percent.
BB. As required by Section 1129(a)(10) of the Bankruptcy Code, and as
demonstrated by the Plan Vote Certification, at least one impaired Class of
Claims has accepted the Plan, determined without including any acceptance of the
Plan by any insider.
CC. The Plan is feasible. The Debtors have demonstrated that on and
after the Effective Date they will have the ability to meet their financial
obligations under the Plan and continue their business in the ordinary course.
As required by Section 1129(a)(11) of the Bankruptcy Code, confirmation of the
Plan is not likely to be followed by the liquidation or the need for further
financial reorganization of the Debtors.
DD. As required by Section 1129(a)(12) of the Bankruptcy Code, all fees
payable under 28 U.S.C. ss.1930, which are unpaid and due to be paid as of
the Effective Date, shall be paid in Cash on or before the Effective Date.
EE. Consistent with Section 1129(a)(13) of the Bankruptcy Code, Section
6.5 of the Plan provides for Reorganized PHI to continue to pay all retiree
benefits (as defined in Section 1114(a) of the Bankruptcy Code), if any,
maintained or established by the Debtors prior to the Confirmation Date.
FF. Based on the record of the Confirmation Hearing, the Old Common
Stock had no value as of the Petition Date.
9
<PAGE>
GG. The substantive consolidation of the Debtors as provided for by
Section 6.2.6 of the Plan will facilitate the consummation and implementation of
the Plan, is integral to the treatment provided to Creditors under the Plan,
will not prejudice any Creditor of the Estates and is appropriate under the
circumstances.
HH. The Plan is the only plan of reorganization for the Debtors pending
before this or any other Court.
II. The primary purpose of the Plan is not the avoidance of taxes or
the avoidance of the application of Section 5 of the Securities Act of 1933, as
amended (15 U.S.C. ss.77e).
JJ. By order dated January 18, 2000, this Court has approved the
Debtors' execution of a Commitment Letter and Term Sheet dated January 18, 2000
(the "Revolver Commitment") with The CIT Group/Business Credit, Inc. and
Rothschild Recovery Fund (together, the "Working Capital Lenders"), which sets
forth the material terms and conditions of a commitment by the Working Capital
Lenders to provide to PHI and other specified PHI affiliates, subject to the
execution of definitive documentation and satisfaction of other conditions, a
revolving credit facility in an aggregate principal amount not to exceed $15.0
million to become effective upon the Effective Date.
KK. PHI has entered into Subscription Agreements with the New Money
Investors (the "Investor Agreements") pursuant to which the New Money Investors
have agreed to acquire 70 million shares of Reorganized PHI's New Class B Common
Stock for $30.0 million. In accordance with the terms of the Investor
Agreements, the New Money Investors previously made a $5.0 million good faith
deposit into escrow, which money will be applied toward their $30.0 million
funding obligation if the Effective Date of the Plan occurs not later than
February 29, 2000.
10
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LL. The Debtors have presented evidence of the likelihood that they
will execute a senior secured loan agreement or comparable agreement for a $22
million term loan (the "Bridge Loan") as contemplated by Section 6.1 of the
Plan.
MM. The record established at the Confirmation Hearing demonstrates
that all conditions precedent to confirmation of the Plan have been satisfied,
or are concurrently satisfied by entry of this Confirmation Order, or have been
waived.
NN. The Debtors have stated that they believe that conditions precedent
to the Effective Date of the Plan, as set forth in Section 10.2 of the Plan,
will occur or be duly waived.
OO. Pursuant to Section 1125(e) of the Bankruptcy Code, the Debtors and
the Releasees shall not be liable on account of their solicitation of
acceptances of the Plan and Reorganized PHI's issuance and/or the Reorganized
Debtors' distribution of Plan Securities pursuant to the Plan in good faith and
in compliance with the applicable provisions of the Bankruptcy Code, for any
violation of applicable law, rule or regulation governing the solicitation of
acceptances of a plan of reorganization or the offer, issuance, sale or purchase
of securities.
PP. Pursuant to Section 1145(a)(1) of the Bankruptcy Code, the offer
and sale of those Plan Securities issued by Reorganized PHI and distributed to
Holders of Allowed Class 5 and Class 6 Claims and Class 8 Interests, in exchange
for or principally in exchange for a Claim against, or an Interest in, the
Debtors shall be exempt from Section 5 of the Securities Act, and any state or
local law requiring registration prior to the offering, issuance, distribution
or sale of securities. The resale of Plan Securities initially distributed to
such Entities pursuant to the Plan, shall be exempt from Section 5 of the
Securities Act and any state or local law requiring registration prior to the
offering, issuance, distribution or sale of securities.
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QQ. The Plan Securities issued to the New Money Investors, to the
Lenders on account of the Term Loan, or to any other Entity not exchanging
Claims or Interests for such securities shall be issued pursuant to the
exemption provided by Section 4(2) of the Securities Act.
RR. For all purposes under the Plan, the record established at the
Confirmation Hearing demonstrates that the New Secured PIK Notes have an
aggregate value as of the Confirmation Date of approximately their face amount.
SS. For all purposes under the Plan, the record established at the
Confirmation Hearing demonstrates that the New Class A Common Stock and the New
Class B Common Stock each have a value of approximately $4.2857 per share.
TT. As indicated by the Plan Vote Certification, Holders of Class 5
Claims in the aggregate approximate principal amount of $123.7 million have
elected to receive their Pro Rata Share of New Senior Secured Notes, a Cash fee
and New Class A Common Stock as provided for by the Plan if Bay Harbour executes
an agreement with the Debtors to acquire the New Senior Secured Notes.
UU. As indicated by the Plan Vote Certification, Holders of Class 6
Claims in the aggregate approximate amount of $9.36 million have elected on
their Class 6 ballots to be treated as Class 4 (Convenience Class) Claims.
VV. Absent the funds to be provided by the Working Capital Lenders
pursuant to the Working Capital Facility, the Plan could not be consummated. The
Working Capital Lenders will not provide such funds absent the findings of fact
and conclusions of law set forth in this Confirmation Order. The Working Capital
Lenders are explicitly relying on the findings of fact and conclusions of law
set forth in this Confirmation Order in determining to provide funds pursuant to
the Working Capital Facility. Each of the Reorganized Debtors will receive
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<PAGE>
the benefits directly or indirectly from the Working Capital Facility in the
form of revolving credit loans and letters of credit.
WW. On a consolidated basis, as of the Effective Date, and after giving
effect to the agreements and transactions contemplated by the Plan on such date
the Reorganized Debtors (i) are adequately capitalized and solvent and the sum
of their property, at a fair valuation, is greater than the sum of their debts,
(ii) are not engaged or to be engaged in business or any transaction for which
their capital is unreasonably small, and (iii) do not intend, or believe, that
they will incur debts beyond their to pay as such debts mature.
XX. The making, delivery, issuance, transfer, assignment, exchange,
filing or recording at any time of any deed, bill of sale, mortgage, leasehold
mortgage, deed of trust, memorandum of lease, assignment, leasehold assignment,
security agreement, lien, financing statement, negative pledge or other
instrument of absolute or collateral transfer by the Debtors and/or Reorganized
Debtors in connection with the consummation of the Plan shall be, and hereby is,
"under a plan confirmed under section 1129 of [the Bankruptcy Code]" within the
meaning of that phrase in section 1146(c) of the Bankruptcy Code.
MODIFICATIONS TO THE PLAN
YY. The modifications to the Plan proposed by the Debtors prior to, at
or in connection with the Confirmation Hearing as set forth below in this
Confirmation Order (the "Plan Modifications") have been reviewed by and
consented to by the Creditors' Committee. The Plan Modifications do not
adversely change the treatment of the Holders of Claims against, or Interests
in, the Debtors. Consequently, in accordance with Section 1127 of the Bankruptcy
Code and Bankruptcy Rule 3019, the Plan as amended is deemed accepted by each
Holder of a Claim against the Debtors that voted to accept the Plan, without the
need to resolicit the votes of
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such Creditors on the Plan as amended, and is deemed accepted by each Holder of
an unimpaired Claim deemed to have accepted the Plan in accordance with Section
1126(f) of the Bankruptcy Code.
FINDING THAT THE PLAN IS CONFIRMABLE BASED UPON, INTER ALIA, ALL OF THE
FOREGOING FINDINGS OF FACT AND CONCLUSIONS OF LAW, THE COURT ORDERS THAT:
1. The Plan and each of its provisions, as modified to the limited
extent set forth herein, are hereby confirmed in accordance with Sections
1129(a) and (b) of the Bankruptcy Code.
2. The Plan is hereby modified as follows:
(a) Article 1, Definitions and Rules of Construction, Intercreditor
and Collateral Agency Agreement
Section 1.61 of the Plan is hereby amended and modified by
replacing the definition in that Section with the following:
"means the agreement governing the respective rights in property
of the Debtors, securing parties to the Working Capital Facility, the New Senior
Secured Notes (or comparable debt instrument), and the New Secured PIK Notes
Indenture in the form acceptable to the Working Capital Lenders and consistent
with the Revolver Commitment and approved by the Court."
(b) Article 1, Definition and Rules of Construction, Treasury Rate
Section 1.123 of the Plan is hereby amended by replacing the
text in the parenthesis of the definition of "Treasury Rate" with the following:
"(as defined in Section 6621(a)(2) of the Internal Revenue Code
of 1986, as amended)"
(c) Article 1, Definition and Rules of Construction, Working Capital
Facility
Section 1.128 of the Plan is hereby amended and modified by
replacing the definition in that Section with the following:
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"means a post-Effective Date Working Capital Facility in an
amount not to exceed $15 million consistent with the terms and
conditions of the Revolver Commitment.
(d) Article 1, Definition and Rules of Construction, Working Capital
Facility Security and Pledge Agreement.
Section 1.129 of the Plan is hereby deleted in its entirety and
replaced by the following:
"1.129 "Working Capital Facility Loan Documents", means any and
all of the documents and instruments the Working Capital
Lenders require to be executed to evidence and give effect to
the Working Capital Facility, including without limitation, a
note, loan agreement, security agreements, pledge agreements,
mortgages, financing statements, and the Intercreditor and
Collateral Agency Agreement."
(e) SECTION 4.2 , ORDINARY COURSE LIABILITIES
Section 4.2 of the Plan is hereby amended and modified by adding a
new sentence at the end of such Section which states as follows:
"There shall be no bar date with respect to the Administrative
Claims of the Internal Revenue Service ("IRS") and the amount of
any Administrative Claim held by the IRS and the rights of the
IRS, 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 IRS 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 Administrative 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."
(f) Section 6.2.6, Substantive Consolidation
Section 6.2.6 of the Plan is hereby amended and modified by
inserting the following text at the beginning of the first sentence of such
Section:
"Except as otherwise provided in Section 6.2.8 hereof, the"
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Section 6.2.6 of the Plan is hereby further amended by deleting the
words "Pursuant to the Confirmation Order," from the beginning of the second
sentence of such Section and instead beginning the second sentence of such
Section with "On the Confirmation Date, ..."
(g) Section 6.2.8, Continued Corporate Existence
Section 6.2.8 of the Plan is hereby amended by deleting the
words "Except as otherwise provided in the Plan," from the beginning of the
third sentence of that Section and instead beginning the third sentence of such
Section with "On or after the Effective Date, ..."
(h) Section 10.2, Conditions to the Occurrence of the Effective
Date.
Section 10.2 of the Plan is hereby amended by adding the
following text as a new subsection (f) to that Section:
"(f) The Working Capital Facility Loan Documents shall have been
approved by Order of the Bankruptcy Court together with a
finding as to the applicability of 11 U.S.C. ss. 364(e). The
conditions to the effectiveness of the Working Capital
Facility and the New Senior Secured Notes (or comparable debt
instrument) shall have been satisfied. This condition cannot be
waived by the Debtors without the consent of the Working Capital
Lenders, the Holders of the New Senior Secured Notes (or
comparable debt instrument) and the Creditors' Committee.
(i) SECTION 12.1, RELEASES
Section 12.1 of the Plan is hereby amended and modified by replacing
the second full paragraph of that Section with the following:
On the Effective Date, each Holder of a Claim or Interest 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
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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 fraud, gross negligence,
willful misconduct or willful violation of the securities laws
or the Internal Revenue Code. The releases provided for herein
shall not preclude police, federal tax, or regulatory agencies
from fulfilling their statutory duties. Notwithstanding anything
to the contrary in the Plan or the Confirmation Order, the
releases provided for herein shall not apply to the Claims, if
any, of the United States."
(j) SECTION 12.4, GENERAL INJUNCTION
Section 12.4 of the Plan is hereby amended and modified by replacing
both provisos at the end of this Section with the following:
"PROVIDED, HOWEVER, that each Holder of a Claim or Interest 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 or Interest in the Bankruptcy
Court or any other court of competent jurisdiction, and all
Holders of Claims or Interests shall be entitled to enforce
their rights under the Plan and the Plan Documents, PROVIDED
FURTHER, HOWEVER, that nothing in the Plan shall restrain and
enjoin all Entities who received or are Holders of Plan
Securities and all Holders of Claims against and Interests in
the Estates from taking any action to enforce liability arising
from acts or omissions which are the result of fraud, gross
negligence, willful misconduct or willful violation of the
securities laws or the Internal Revenue Code. The injunction
provided for herein shall not preclude police, federal tax, or
regulatory agencies from fulfilling their statutory duties.
Notwithstanding anything to the contrary in the Plan or the
Confirmation Order the injunction provided for herein shall not
apply to bar the Claims, if any, of the United States."
3. For the reasons set forth on the record of the Confirmation Hearing,
each and every Confirmation Objection, to the extent not withdrawn or resolved
pursuant to the terms of this Confirmation Order, including the Plan
Modifications set forth herein, is overruled.
4. Subject to the provisions of the Plan (including any Plan Document)
and this Confirmation Order, the Debtors will, as Reorganized Debtors, continue
to exist after the
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Effective Date, with all the powers of a corporation or
partnership, as applicable, under applicable law and without prejudice to any
right to alter or terminate such existence (whether by merger or otherwise)
under applicable law.
5. Consistent with the Plan, the following agreements and documents,
substantially in the form of those filed with the Court at or after the
Confirmation Hearing, as they may be modified by the Debtors with the consent of
the Creditors' Committee including all the annexes and exhibits thereto, and all
terms and provisions thereof (collectively, the "Plan Documents") are hereby
approved in all respects:
a. Amended and Restated PHI Certificate of Incorporation (the "Amended
PHI Articles");
b. Amended and Restated PHI By-Laws (the "Amended PHI By-Laws");
c. New Warrant Agreement; and New Warrants; and
d. Registration Rights Agreement.
6. PHI, the other Debtors, Reorganized PHI, the other Reorganized
Debtors and their directors, officers and agents are hereby authorized to enter
into, execute, deliver, file and/or implement the Plan Documents and other
documents and instruments substantially consistent therewith or incidental
thereto and any amendments, supplements or modifications to such Plan Documents
as may be appropriate, and to take such other steps and perform such other acts
as may be necessary to implement and effectuate the Plan, the Plan Documents,
all other related instruments and documents and this Confirmation Order, and to
satisfy all other conditions precedent to the implementation and effectiveness
of the Plan.
7. The Plan and all other agreements provided for under the Plan,
including the Plan Documents, and all transactions, documents, instruments and
agreements referred to therein, contemplated thereunder or executed and
delivered in connection therewith, and any
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amendments or modifications thereto in substantial conformity therewith are
approved, and the Debtors are authorized and directed to enter into and to
perform such agreements according to their terms.
8. Pursuant to Section 6.2.4 of the Plan, on the Effective Date, the
following persons shall be appointed to the Board of Directors of PHI:
(a) Robert Earl
(b) Claudio Gonzalez
(c) Thomas Avallone
(d) Steven Grapstein
(e) Mustafa Al Heijelen
(f) two Creditors' Committee designees
The appointment of the foregoing persons to the Board of Directors of PHI is
consistent with the interest of Holders of Claims against, and Interests in, the
Debtors, and with public policy.
9. Pursuant to Section 6.2.4 of the Plan, on the Effective Date, Robert
Earl shall be the chief executive officer of PHI. The appointment of Robert Earl
as chief executive officer of PHI is consistent with the interests of Holders of
Claims against, and Interests in, the Debtors, and with public policy.
10. Reorganized PHI is authorized to issue the Plan Securities
consistent with the terms of the applicable Plan Documents.
SUBSTANTIVE CONSOLIDATION
11. Except as otherwise provided in Section 6.2.8 of the Plan, the
substantive consolidation of the Chapter 11 Cases into a single case solely for
purposes of confirmation and consummation of the Plan is hereby approved in
accordance with Section 105(a) of the Bankruptcy Code, and (i) all assets and
all proceeds thereof, and all liabilities of the
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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 obligations 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.
12. On and after the Effective Date, PHI shall exist as a corporation
duly organized under the laws of Delaware, and the other Reorganized Debtors
shall exist as entities duly organized under the laws of their respective states
of incorporation or organization with each such entity having assets and
liabilities separate and apart from and not merged with assets and liabilities
of the other Reorganized Debtors.
WORKING CAPITAL FACILITY
13. The Debtors, Reorganized PHI, the other Reorganized Debtors and
their directors, officers and agents are hereby authorized to enter into,
execute and deliver the Working Capital Facility Loan Documents to be negotiated
with the Working Capital Lenders if such documents are approved by the
Creditors' Committee and to take such other steps and perform such other acts as
may be necessary to effectuate the terms thereof, including, without limitation,
the payment of all appropriate fees and expenses to, the Working Capital
Lenders.
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All liens and security interests provided for therein shall be deemed to be
authorized and approved, without any further act required; provided, however,
that the Working Capital Lenders are authorized to file all documents and
instruments and to take all actions required under the Working Capital Facility
Loan Documents and each of the Reorganized Debtors are authorized and directed
to cooperate in connection with such actions.
NEW SENIOR SECURED NOTES
14. As of the Effective Date, the Debtors shall have effectuated a sale
of up to $25 million of New Senior Secured Notes or other instruments on
comparable terms as provided in the Plan, or as modified by agreement between
the Debtors and the Creditors' Committee.
LIENS AND SECURITY INTERESTS
15. On the Effective Date, transfers of property by the Debtors
contemplated by the Plan, including with respect to the Working Capital
Facility, the New Senior Secured Notes (or comparable debt instruments) and the
other Plan Documents, will be legal, valid, binding and effective transfers of
property and will vest, to the fullest extent permitted by the Bankruptcy Code,
good title to such property in the respective transferee, free and clear of all
Liens, Claims and Encumbrances, except as otherwise provided by the Plan,
including as required to implement the New Senior Secured Note obligations, the
Working Capital Facility and the New Secured PIK Notes Indenture, and this
Confirmation Order.
16. On and after the Effective Date, the creation and perfection of the
Liens securing the New Senior Secured Note obligations, the Working Capital
Facility and the New Secured PIK Notes and the execution and delivery of
guarantees by any of the Debtors thereunder will not be made with actual intent
to hinder, delay or defraud any person, will be made for reasonably equivalent
value and fair consideration, will not result in the insolvency of any of the
Reorganized Debtors, will not leave any of the Reorganized Debtors with
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unreasonably small capital with which to conduct their businesses, will not be
made with the intent to, or belief that they will, incur debts that the
respective Reorganized Debtors would be unable to pay as they become due, nor
will such transfers or the incurring of such obligations in any manner
constitute fraudulent conveyances or transfers.
BINDING EFFECT
17. Pursuant to Section 1141(a) of the Bankruptcy Code, from and after
the Confirmation Date, the Plan shall be binding upon and inure to the benefit
of the Reorganized Debtors, all Holders of Claims against, and Interests in, the
Debtors and any other party-in- interest in these Chapter 11 Cases and their
respective successors and assigns, regardless of whether the Claims of such
Holders or obligations of any party-in-interest (i) are in a Class that is
impaired under the Plan, (ii) have accepted the Plan, or (ii) have filed a proof
of claim.
VESTING
18. 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 this Confirmation Order, upon the Effective
Date, all property of the Consolidated Estates shall vest in and be retained by
Reorganized PHI or the other Reorganized Debtors, as applicable, or distributed
to Creditors or Interest Holders as provided in the Plan, free and clear of all
Liens, Encumbrances and Interests of Creditors and Holders of Interests
expressly provided for in the Plan. On and after the Effective Date, the
Reorganized Debtors may operate their businesses and may use, acquire and
dispose of property and compromise and settle any Claims against them without
supervision or approval by this Court and free of any restrictions of the
Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly
imposed by the Plan and this Confirmation Order.
DISCHARGE
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19. Except as otherwise expressly provided in the Plan or this
Confirmation Order, as of the Effective Date there shall be discharged, pursuant
to Section 1141(d) of the Bankruptcy Code, existing debts of and Claims of any
kind, nature or description against the Debtors, any of their assets or
properties or any property dealt with under the Plan, and all obligations of the
Debtors, directly or as guarantors, under the SunTrust Agreements and the Old
Senior Subordinated Notes Indenture. Upon the Effective Date, the Debtors shall
be discharged and released to the extent permitted by Section 1141 of the
Bankruptcy Code from any and all Claims and all debts of the kind specified in
Sections 502(g), 502(h) and 502(i) of the Bankruptcy Code, whether or not a
proof of claim based upon such Claim is Filed or deemed Filed or the Holder of a
Claim based upon such debt has accepted the Plan.
INJUNCTION
20. Except as otherwise provided in the Plan or this Confirmation
Order, 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 or other 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. Except, as
otherwise provided in the Plan or this Confirmation Order, the discharge of all
existing debts and Claims effected hereby to the extent permitted by Section
1141 shall void any judgment against the Debtors obtained at any time 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.
21. Except as otherwise provided in the Plan or this Confirmation
Order, all Entities who received or are Holders of Plan Securities and all
Holders of Claims against, and
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Interests in, the Estates are permanently restrained and enjoined after the
Confirmation Date from commencing, continuing or taking any act, to enforce, or
from collecting or recovering by any manner or means, any right, claim or cause
of action related to any Old Security or any claim, against any of the Debtors
or any Foreign Subsidiary or Domestic Subsidiary.
22. Notwithstanding anything to the contrary in the Plan or this
Confirmation Order, the releases provided for in Section 12.1 of the Plan and
the injunction provided for in Section 12.4 of the Plan shall not apply to bar
or otherwise impair Caransa from (i) finalizing an agreement in principle
negotiated with PH Amsterdam B.V. ("PH Amsterdam"), an affiliate of PHI and a
Netherlands company, and the Trustee in the pending Netherlands insolvency
proceeding of PH Amsterdam, in respect of Caransa's claims under a lease with PH
Amsterdam and a certain loan agreement between Caransa and PH Amsterdam, and
(ii) otherwise pursuing its rights and claims as against PH Amsterdam in the
context of PH Amsterdam's Netherlands insolvency proceeding and otherwise
pursuant to Dutch law and in respect of the real property subject to the lease;
PROVIDED, HOWEVER, that Caransa will reduce the amount of its Claim against PHI
by the amount of any recovery obtained in PH Amsterdam's Netherlands insolvency
proceeding or otherwise pursuant to Dutch law.
23. The releases provided for in Section 12.1 of the Plan and the
injunction provided for in Section 12.4 of the Plan shall not prevent the NJ Tax
Division from pursuing recovery against the applicable Reorganized Debtors
either in the Bankruptcy Court or in the applicable non-bankruptcy court and
thereafter from pursuing collection of trust fund taxes from responsible persons
of the Debtors.
RELEASES
24. Except as otherwise provided for in the Plan or this Confirmation
Order, the Releases provided for in Sections 12.1 of the Plan and the General
Injunction provided for in
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Section 12.4 of the Plan are hereby approved and authorized and incorporated
herein as if fully set forth herein.
25. Except as otherwise provided for in the Plan or this Confirmation
Order, pursuant to Section 12.3 of the Plan, 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.
26. Nothing contained in the Plan, including, but not limited to,
Article 12, or in this Confirmation Order shall be construed to effect a waiver
of the rights of any party under Section 1125(e) of the Bankruptcy Code or the
waiver of the rights of any party to indemnification.
TRANSFER TAXES
27. Pursuant to Section 1146(c) of the Bankruptcy Code, neither (i) the
issuance, transfer or exchange of any security under the Plan, nor the making or
delivery of any instrument of transfer, nor the revesting, transfer or sale of
any real or personal property of the Debtors, (ii) the making, delivery,
creation, assignment, amendment or recording of any note or other obligation for
the payment of money, any deed or other instrument of transfer, in connection
with, or in furtherance of, the Plan, or as further provided under Section 14.8
of the Plan, including without limitation the sale of the Debtors' interests in
1567 Broadway, New York, New York, pursuant to the Purchase and Sale Agreement
dated January 4, 2000 between PH (Region III), Inc. and Intell 1567 LLC (the
"Agreement") and in connection with the
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Atlantic Transaction (as such term is defined in the Agreement), shall be
subject to any document recording tax, stamp tax, or other similar tax or
governmental assessment. Each and every recorder of deeds or similar official
for any county, city or governmental unit in which any instrument under, in
furtherance of, or in connection with the Plan, is to be recorded, is directed
to accept for filing or recording this Confirmation Order and any and all such
instruments, without requiring the payment of any documentary stamp tax, deed
stamps, stamp tax, transfer tax, intangible tax or other similar tax.
28. Distributions required to be made to the Holders of Allowed Claims
against, and Allowed Interests in, the Debtors shall be made to the Entities
entitled thereto as provided in the Plan. The record date for determining which
Holders of Allowed Claims and Allowed Interests are entitled to receive
distributions under the Plan shall be the fifth Business Day prior to the
Effective Date (the "Distribution Record Date"). Pursuant to Section 6.3.7 of
the Plan, the respective transfer registers for the Old Securities will be
closed, and Reorganized PHI, the Old Indenture Trustee, the Old Stock Transfer
Agent and their respective agents shall have no obligation to recognize the
transfer of any Old Securities occurring after the Distribution Record Date.
29. Notice of the date which shall be the Distribution Record Date
shall be provided to the Old Indenture Trustee, the Old Stock Transfer Agent and
their respective agents, if any, at least three (3) Business Days prior to the
Distribution Record Date.
30. Those Plan Securities that are issued by Reorganized PHI to the
Holders of Allowed Claims in Classes 5 and 6, and Allowed Interests in Class 8,
under the Plan in exchange for a Claim against, an Interest in, or an
Administrative Claim against the Debtors, or principally in such exchange and
partly for cash or property, are exempt from registration pursuant to Section
1145 of the Bankruptcy Code and those Plan Securities may be resold by
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such Holder without restriction except to the extent that such Holder is deemed
an underwriter with respect to those securities pursuant to Section 1145(b)(1)
of the Bankruptcy Code.
31. For purposes of distribution, multiple General Unsecured Claims (i)
Filed by a single Creditor against the same or multiple Debtors and/or (ii) of a
single Creditor scheduled by multiple Debtors, shall be aggregated for all
purposes under the Plan including, but not limited to, for purposes of
determining whether the Holder of such Allowed General Unsecured Claims shall be
treated as the Holder of a Class 4 Convenience Class Claim or as the Holder of a
Class 6 General Unsecured Claim.
32. The Debtors are hereby authorized to transmit a supplemental
Convenience Class Election form (the "Election Form"), substantially in the form
of that annexed to this Confirmation Order as Exhibit A, which form is hereby
approved, permitting Creditors to elect to be treated as Class 4 Claims under
the Plan, to those Creditors that were not previously forwarded a Class 6 ballot
to vote on the Plan and that (i) Filed a proof of claim against one or more of
the Debtors asserting a General Unsecured Claim either in the amount of $2,000
or less or which was received by the Balloting Agent after the December 6, 1999
Record Date previously established by the Court, and (ii) was scheduled by the
Debtors in the schedules of liabilities Filed with the Court. The Debtors may
make modifications to the Election Form with the consent of the Creditors'
Committee. Creditors entitled to receive the Election Form shall be given at
least 20 days from the date of transmittal by first class mail of the Election
Form to return the Election Form to the Balloting Agent in the manner provided
for on the face of the Election Form.
33. The Debtors are also authorized to prepare in consultation with the
Creditors' Committee and to send a notice to those Holders of General Unsecured
Claims with multiple proofs of claim Filed against the Debtors and/or scheduled
by multiple Debtors in their
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schedules of liabilities that elected on Class 6 ballots to be treated as
Convenience Claims under the Plan. The notice will inform each such Creditor
that all of its Allowed Class 6 Claims will be aggregated for purposes of
receiving one distribution from the Debtors, and accordingly, will provide such
Creditors with the opportunity to nullify the previous Convenience Class
Election such Creditor made. Creditors shall be provided with at least twenty
(20) days from the date of transmittal of the notice by first class mail to
notify the Balloting Agent, in the manner provided in the notice, of their
decisions to nullify their prior Convenience Class Election.
34. Without limiting the Registration Rights Agreement, Reorganized PHI
is authorized and directed to file, not later than 90 days after the Effective
Date, a shelf registration relating to the securities issued to the Holders of
the New Common Stock, the New Senior Secured Notes (or comparable debt
instruments), the New Secured PIK Notes and the New Warrants, and Reorganized
PHI is directed to use its reasonable best efforts to have such shelf
registration 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.
35. Confirmation of the Plan will not affect the valid set off rights,
if any, of the United States of America.
36. In addition to the SunTrust Agreements, the Debtors and SunTrust
are parties to a certain ACH Agreement (the "ACH Agreement") pursuant to which
SunTrust provides various payroll processing and payment services to the
Debtors. Pursuant to a Security Agreement dated April 22, 1999, PHI granted a
perfected first priority security interest in and lien on a renewable
certificate of deposit issued by SunTrust in the face amount of $895,000. The
Claims, if any, of SunTrust under the ACH Agreement shall be unimpaired and
treated as Class 3 (Miscellaneous Secured) Claims under the Plan. After the
Effective Date, the ACH Agreement shall continue in full force and effect unless
otherwise agreed by Sun Trust and the
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Debtors, and subject to the Debtors' rights of termination in accordance with
the ACH Agreement.
EXECUTORY CONTRACTS
37. Except as otherwise provided by orders of this Court, pursuant to
Section 9.1 of the Plan, and in accordance with Section 1123(b)(2) of the
Bankruptcy Code, the Debtors will be deemed to have rejected as of the Effective
Date each executory contract or unexpired lease that has not been previously
assumed or rejected pursuant to a prior order of this Court or which has not
been designated to be assumed by Reorganized PHI or any applicable other
Reorganized Debtor at or prior to the Confirmation Hearing.
38. Pursuant to Section 9.2 of the Plan, any Claim for damages arising
by reason of the rejection of an executory contract or unexpired lease pursuant
to the Plan, 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, the Reorganized Debtors or their successors or assigns or their
properties or agents, unless a proof of claim is filed with the Bankruptcy Court
and served within thirty (30) days after the later of (i) the entry of a Final
Order authorizing such rejection other than this Confirmation Order and (ii) the
Effective Date.
39. Pursuant to Section 9.3 of the Plan, each executory contract and
unexpired lease to be assumed pursuant to the Plan, including each Landlord
Settlement Agreement, 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 agreement approved by the Court, and the Debtors shall cure
or provide adequate assurance that they will cure any monetary defaults. The
Court retains jurisdiction to resolve disputes regarding the cure amount and the
Debtors' provision of adequate assurance of future performance.
FINAL COMPENSATION APPLICATIONS
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40. All applications for a final allowance of compensation and the
reimbursement of expenses pursuant to Sections 327, 328, 330, 331 or 503(b) of
the Bankruptcy Code Filed by Professionals (other than Professionals retained by
the Old Indenture Trustee) for services rendered before the Confirmation Date
(the "Final Compensation Application") shall be Filed and served on Reorganized
PHI, the Creditors' Committee and the United States Trustee no later than thirty
(30) days after the Effective Date or such later date as the Court shall
approve; PROVIDED HOWEVER, that any Professional or other person that fails to
timely file an application for allowance shall be forever barred from asserting
such Claims against the Reorganized Debtors. Objections to such Compensation
Applications shall be due no later than fifteen (15) days after service of the
related application. Hearings on the Compensation Applications shall be
established by the Court. After the Effective Date, each Professional may
receive payment for compensation earned and reimbursement of expenses incurred
subsequent to the Confirmation Date from Reorganized PHI relating to the
implementation and consummation of the Plan without the need for filing
applications for post-Confirmation Date services or obtaining approval of the
Court; PROVIDED HOWEVER, that no such fees and expenses shall be paid without
receipt by Reorganized PHI of a detailed written invoice from the Professional.
The Court shall retain jurisdiction to determine any disputes concerning
post-Confirmation Date fee requests related to the implementation of the Plan.
41. The requirement, set forth in the Court's October 13, 1999
Administrative Order with respect to compensation and reimbursement of
Professionals, that interim Professional fee applications for the period from
December 1, 1999 through December 31, 1999 be submitted by January 25, 2000 is
hereby waived, and all applications for approval of Professionals' fees for such
period and any subsequent periods may be included in such Professionals' Final
Compensation Application.
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BAR DATE FOR TAX CLAIMS OF GOVERNMENTAL UNITS
42. Pursuant to Section 502(b)(9) and Bankruptcy Rule 3003(c)(3), all
governmental units (as defined in Section 101(27) of the Bankruptcy Code)
seeking to have an Allowed Claim (as defined in Section 101(5) of the Bankruptcy
Code) in respect of taxes against any or all of the Debtors which arose prior to
the Petition Date, must file a written proof of such Claim with the Bankruptcy
Court that substantially conforms to Official Form No. 10, by sending an
original proof of claim to Donlin Recano & Company, Inc. As Agent for the United
States Bankruptcy Court (the "Claims Agent") re: Planet Hollywood International,
Inc. ET AL., P.O. Box 2089, Murray Hill Station, New York, New York 10156 or, if
by overnight courier or by hand to the Claims Agent at 419 Park Avenue South,
Suite 1206, New York, New York 10016 and serve copies upon (a) Planet Hollywood
International, Inc., 8669 Commodity Circle, Orlando, Florida 32819, Attention:
General Counsel; and (b) Debtors' Co-Counsel, Stroock & Stroock & Lavan LLP, 180
Maiden Lane, New York, New York 10038, Attention: Robin E. Keller, Esq. and
Young Conaway Stargatt & Taylor, LLP, Rodney Square North, Eleventh Floor,
Wilmington, Delaware 19899-0391, Attention: James L. Patton, Jr., Esq., so as to
be received on or before 4:00 p.m. Eastern Time on April 10, 2000, which is the
date 181 days after the Petition Date (the "Governmental Unit Claims Bar Date").
43. The Debtors shall give notice of the Governmental Unit Claims Bar
Date by forwarding a copy of a Notice, substantially in the form of that annexed
hereto as Exhibit B, the form of which is hereby approved, to each known
governmental unit at least 35 days before the Governmental Unit Claims Bar Date.
Notice in the manner provided for hereby shall be deemed good, adequate and
sufficient notice of the Governmental Unit Claims Bar Date if it is served,
together with a proof of claim form via the United States Mail, first class
postage prepaid.
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44. Any governmental unit that is required to File a timely proof of
claim against the Debtors in the form and manner specified by this Confirmation
Order and that fails to do so on or before the Governmental Unit Claims Bar Date
shall not, with respect to such Claims, receive or be entitled to receive any
payment or distribution of property from the Debtors, the Reorganized Debtors
or, their successors or assigns with respect to such Claims and shall be forever
barred, estopped and enjoined from asserting such Claims against the Debtors,
the Reorganized Debtor or their successors or assigns.
45. All objections to Tax Claims asserted by governmental units in
respect of the Governmental Unit Claims Bar Date shall be Filed and served upon
the Holder of such Claim on or prior to sixty (60) days after the Governmental
Unit Claims Bar Date; PROVIDED HOWEVER, that objections Filed by the Debtors
against the Tax Claims filed by the IRS shall be Filed and served upon the IRS
and its counsel on or after the later of (i) sixty (60) days after the
Governmental Unit Claims Bar Date or (ii) sixty (60) days after notification to
Reorganized PHI of the determination by the Joint Committee on Taxation of the
United States Congress with respect to a refund issued to the Debtors in
connection with the Debtors' 1996 and 1997 tax years.
JURISDICTION
46. Notwithstanding the entry of this Confirmation Order, the
occurrence of the Effective Date or substantial consummation of the Plan, the
Court will retain jurisdiction of all matters arising out of, or related to, the
Chapter 11 Cases as necessary to ensure that the purpose and the intent of the
Plan are carried out and otherwise to the full extent provided herein and in
Section 13.1 of the Plan.
DISSOLUTION OF THE COMMITTEE
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47. The Creditors' Committee will be deemed dissolved and the duties of
the Creditors' Committee and the Professionals retained thereby will thereupon
terminate in accordance with Section 14.12 of the Plan, except that counsel for
the Creditors' Committee shall have standing to object to any Final Compensation
Application Filed in these Chapter 11 Cases. The Professionals retained by the
Creditors' Committee and the members thereof shall not be entitled to
compensation or the reimbursement of expenses for any services rendered after
the Effective Date except with respect to any appeal pending on the Effective
Date of an Order entered in the Chapter 11 Cases or to the extent provided for
in Section 14.12 of the Plan.
48. If the Debtors are for any reason unable to consummate the Plan
after the Confirmation Date: (a) nothing contained herein shall be deemed to
constitute a waiver or release of any Claims by or against the Debtors or to
prejudice in any manner the rights of the Debtors or any Persons in any further
proceedings involving the Debtors; and (b) the result shall be the same as if
this Order were not entered, the Plan was not filed and no actions were taken to
effectuate it.
49. Failure specifically to include or reference particular sections or
provisions of the Plan or any related agreement in this Order shall not diminish
or impair the effectiveness of such sections or provisions, it being the intent
of the Court that the Plan be confirmed and such related agreements be approved
in their entirety.
50. To the extent of any inconsistency between the terms of the Plan
and this Confirmation Order, those of the Confirmation Order shall govern.
Dated: Wilmington, Delaware
January __, 2000
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Joseph J. Farnan, Jr.
Chief Judge, United States District Court
33
