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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 13, 1996
Stuart Entertainment, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-10737 84-0402207
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(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
3211 Nebraska Avenue
Council Bluffs, Iowa 51501
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (712) 323-1488
Not Applicable
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(Former name or former address, if changed since last report)
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Item 2. Acquisition and Disposition of Assets.
On November 13, 1996, Stuart Entertainment, Inc., a Delaware
corporation (the "Company") completed a private placement (the "Offering") in
reliance on Rule 144A of the Securities Act of 1933, as amended, of $100
million aggregate principal amount of its 12-1/2% Senior Subordinated Notes due
2004 (the "Notes"). Interest on the Notes will be payable semi-annually in
arrears on each May 15 and November 15 commending May 15, 1997. The Notes will
mature on November 15, 2004. The indenture governing the Notes imposes certain
limitations on the Company's ability to, among other things, incur additional
indebtedness, pay dividends or make certain other restricted payments and
consummate certain asset sales.
The Company used the net proceeds of the Offering (i) to repay in full
existing revolving credit and term facilities, at which time such facilities
will be cancelled, and certain other outstanding debt instruments, and (ii) to
acquire substantially all of the assets and assume certain liabilities (the
"Assets") of Trade Products, Inc., a Washington corporation ("Trade Products"),
as described in the Asset Purchase Agreement dated August 6, 1996 and amended
on October 10, 1996, between the Company, Trade Products, and Harry Poll,
Ronald G. Rudy and Harry Wirth as the shareholders of Trade Products
(collectively, the "Shareholders"). The Company purchased the Assets on
November 13, 1996, for a total purchase price of $37.2 million, subject to
certain post-closing adjustments, plus the issuance of warrants to purchase
300,000 shares of the Company's common stock. Neither Trade Products nor the
Shareholders were affiliated with the Company. The sale results in the
disposition of substantially all of Trade Product's assets.
The Assets purchased include equipment to manufacture pulltab tickets,
bingo paper, promotional games and other related gaming equipment, inventory,
intellectual property rights and generally all other assets that were necessary
to operate the business of Trade Products. Trade Products, a privately held
company based in Seattle and the nation's largest maker and marketer of pulltab
tickets, had 1995 sales of more than $36 million. Trade Products has been in
existence since 1974 and produces more than 2.3 million charitable gaming
tickets annually. The Company does not plan to make any material changes in
the day-to-day operation of Trade Products.
Item 5. Other Events.
On November 13, 1996, the Company also entered into an Amended and
Restated Credit Agreement with Bank of America National Trust and Savings
Association and other parties signatory thereto (the "Credit Agreement"), which
consists of a $30 million revolving credit facility. The Company may draw
under the new Credit Agreement subject to availability pursuant to borrowing
base requirements. The Company anticipates using the new credit facility to
support future growth opportunities.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Trade Products, Inc.
At this time it is impracticable for the Company to provide the
financial statements required by this item. The required financial statements
will be filed with the Securities and Exchange Commission by an amendment to
this Form 8-K not later than 60 days after the date on which this Current
Report on Form 8-K must be filed.
(b) Pro Forma Financial Information.
At this time it is impracticable for the Company to provide the
financial statements required by this item. The required financial statements
will be filed with the Securities and Exchange Commission by an amendment to
this Form 8-K not later than 60 days after the date on which this Current
Report on Form 8-K must be filed.
(c) Exhibits.
2.1 Asset Purchase Agreement dated August 6, 1996,
between the Company, Trade Products, Inc. and the
Shareholders of Trade Products, Inc., is incorporated
by reference to the Company's Current Report on Form
8-K, dated August 6, 1996.
2.2 First Amendment to Asset Purchase Agreement, dated as
of October 10, 1996.
4.1 Warrant to Purchase 300,000 Shares of Common Stock of
the Company dated November 13, 1996.
10.1 Employment Agreement dated November 13, 1996, between
the Company and Ronald G. Rudy.
20.1 Press Release dated November 13, 1996, relating to
the purchase of substantially all of the assets and
certain liabilities of Trade Products, Inc.
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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 thereunto duly authorized.
STUART ENTERTAINMENT, INC.
Date: November 27, 1996 By: /s/ Paul C. Tunink
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Paul C. Tunink, Vice President--Finance,
Treasurer and Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
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<S> <C>
2.1 Asset Purchase Agreement dated August 6, 1996,
between the Company, Trade Products, Inc. and the
Shareholders of Trade Products, Inc., is incorporated
by reference to the Company's Current Report on Form
8-K, dated August 6, 1996.
2.2 First Amendment to Asset Purchase Agreement, dated as
of October 10, 1996.
4.1 Warrant to Purchase 300,000 Shares of Common Stock of
the Company dated November 13, 1996.
10.1 Employment Agreement dated November 13, 1996, between
the Company and Ronald G. Rudy.
20.1 Press Release dated November 13, 1996, relating to
the purchase of substantially all of the assets and
certain liabilities of Trade Products, Inc.
</TABLE>
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EXHIBIT 2.2
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the "Amendment") is
entered into effective as of October 10, 1996 (the "Effective Date"), by and
among Stuart Entertainment, Inc., a Delaware corporation ("Purchaser"), Trade
Products, Inc., a Washington corporation ("Seller"), and the undersigned
shareholders of Seller ("Shareholders"). Purchaser, Seller and the
Shareholders are referred to collectively herein as the "Parties" and
individually as a "Party."
RECITALS
A. The Parties are bound by that certain Asset Purchase Agreement
dated August 6, 1996 (the "Agreement").
B. The Parties believe that it is in their best interests to
amend the Agreement pursuant to the terms and conditions set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the Recitals which are incorporated
by reference herein and which shall be deemed to be a substantive part of this
Amendment, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, agree as follows:
1. DEFINITIONS. Unless otherwise defined herein or the context
requires otherwise, terms which are used in this Amendment and which are
defined in the Agreement shall have the same meanings given to them in the
Agreement.
2. TABLE OF CONTENTS. The Table of Contents shall be deleted in
its entirety and the attached Amended Table of Contents shall be substituted in
lieu thereof.
3. DEFINITIONS - "CONSULTING AGREEMENT." The paragraph entitled
"Consulting Agreement" in Section 1.01 of the Agreement shall be deleted in its
entirety and the following new paragraph entitled "Consulting Agreement" shall
be substituted in lieu thereof:
"Consulting Agreement" means the Consulting Agreement, substantially
in the form of Amended Exhibit B hereto, to be entered into between
Purchaser and Harry Poll on the Closing Date.
4. DEFINITIONS - "NOTE." The paragraph entitled "Note" in
Section 1.01 of the Agreement shall be deleted in its entirety.
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5. DEFINITIONS - "SUBORDINATION AGREEMENT." The paragraph
entitled "Subordination Agreement" in Section 1.01 of the Agreement shall be
deleted in its entirety.
6. DEFINITIONS - "WARRANT." The paragraph entitled "Warrant" in
Section 1.01 of the Agreement shall be deleted in its entirety, and the
following new paragraph entitled "Warrant" shall be substituted in lieu
thereof.
"Warrant" means the Warrant to purchase 300,000 shares of Common
Stock, to be evidenced by a warrant certificate, substantially in the
form of Amended Exhibit F hereto, to be issued by Purchaser to Seller
on the Closing Date.
7. EXCLUDED ASSETS. Section 2.01(b)(iv) of the Agreement shall
be deleted in its entirety, and the following new Section 2.01(b)(iv) shall be
substituted in lieu thereof:
(iv) the assets, properties or rights set forth on
Schedule 2.01(b), including the rights of Seller in and to the
proceeds in the amount of $2,000,000 received by Seller in connection
with the settlement of the litigation styled Trade Products, Inc. v.
Battelle Memorial Institute, U.S. District Court for the Western
District of Washington, Cause No. C95-0968R.
8. PURCHASE PRICE. Section 2.03 of the Agreement shall be
deleted in its entirety, and the following new Section 2.03 shall be
substituted in lieu thereof:
(a) Cash. Thirty Seven Million Two Hundred Forty Nine
Thousand One Hundred Thirty Seven Dollars ($37,249,137) to be paid as
follows:
(i) $26,399,137 shall be paid to Seller in
immediately available funds by wire transfer to an account
designated by Seller. The account shall be designated by
Seller by notice to Purchaser not later than two business days
prior to the Closing Date (or if not so designated, then by
certified or official bank check payable in next day funds to
the order of Seller in such amount);
(ii) $9,100,000 shall be paid in immediately
available funds by wire transfer to an account designated by
U.S. Bank of Washington, National Association (the "Bank").
The account shall be designated by Bank by notice to Purchaser
not later than two business days prior to the Closing Date (or
if not so designated, then by certified or official bank check
payable in next day funds to the order of Bank in such
amount), in payment of Seller's existing bank debt.
(iii) $1,750,000 (the "Escrow Funds") shall be
placed in an escrow account (the "Escrow Account") with the
escrow agent ("Escrow Agent") pursuant to an Escrow Agreement
substantially in the form attached hereto and incorporated
herein as Exhibit K (the "Escrow Agreement")
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(b) Warrant. Purchaser shall issue and deliver the
Warrant to purchase 300,000 shares of Common Stock with an exercise
price of $7.75 per share to Seller.
(c) Purchase Price Adjustment. The Purchase Price shall
be increased or decreased to the extent Seller's total stockholder
equity, as reflected on Seller's audited financial statements as of
the Closing Date, is greater or less than Seller's total stockholder
equity as reflected on Seller's audited financial statements as of
September 30, 1996.
(d) Allocation of Purchase Price. The Purchase Price and
the liabilities assumed by Purchaser in accordance with Section 2.04
hereof and any non-recourse liabilities to which any Asset is subject
as finally determined shall be allocated among the Assets acquired
hereunder as described on Schedule 2.03(d) hereof. Seller and
Purchaser each hereby covenant and agree that it will not take a
position on any income tax return, before any governmental agency
charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the terms of this
Section 2.03(d).
9. CLOSING FINANCIAL STATEMENTS. The sixth full paragraph of
Section 2.05 of the Agreement shall be deleted in its entirety, and the
following new sixth full paragraph of Section 2.05 shall be substituted in lieu
thereof:
The amount of the Purchase Price adjustment shall be
determined in accordance with Section 2.03(c) hereof on the later of
the 15th day after delivery of the Report pursuant hereto, or the date
upon which any dispute concerning any GAAP Adjustment is resolved (the
"Adjustment Date"). Any increase to the Purchase Price shall be paid
by Purchaser to Seller and any decrease in the Purchase Price shall be
paid by Seller to Purchaser, in immediately available funds, by wire
transfer to the bank account designated by Purchaser or Seller, as the
case may be, within five business days (the "Due Date") of the
Adjustment Date. If Purchaser or Seller, as the case may be, fails to
make any payment required under this Section 2.05 in full on the Due
Date, Purchaser or Seller, as the case may be, shall pay to the other
interest on the amount outstanding on the Due Date until the actual
date of payment (both dates inclusive) at the rate of 5% over the U.S.
Prime Rate published by the Wall Street Journal on the Due Date to be
adjusted on each 6 month anniversary hereof until all payments
required to be made under this Section 2.05 shall be paid in full.
10. PURCHASER'S DELIVERIES AT CLOSING. Section 3.02(b) of the
Agreement shall be deleted in its entirety and the following new Section
3.02(b) shall be substituted in lieu thereof:
(b) Purchaser shall deliver to Seller the following:
(i) the cash portion of the Purchase Price;
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(ii) the Warrant; and
(iii) the Assignment and Assumption Agreement.
11. DELIVERIES AT CLOSING TO ESCROW AGENT. The following new
Section 3.02(d) shall be added to, and shall be deemed part of, the Agreement:
(d) At Closing, Seller and Purchaser shall deliver the Escrow
Agreement to the Escrow Agent, and Purchaser also shall deliver the
Escrow Funds to the Escrow Agent.
12. PURCHASE FOR INVESTMENT. Sections 4.30(b), (c) and (e) of the
Agreement shall be deleted in their entirety and the following new Sections
4.30(b), (c) and (e) shall be substituted in lieu thereof:
(b) Seller and the Shareholders understand that Purchaser proposes
to issue and deliver the Warrant to Seller and the Shareholders
pursuant to this Agreement without compliance with the registration
requirements of the 1933 Act; that for such purpose Purchaser will
rely upon the representations, warranties, covenants and agreements
contained herein; and that such non-compliance with registration is
not permissible unless such representations and warranties are correct
and such covenants and agreements performed. Seller and the
Shareholders are "accredited investors" as such term is defined in
Rule 501 under the 1933 Act.
(c) Seller and the Shareholders understand that, under existing
rules of the Securities and Exchange Commission (the "SEC"), Seller
and the Shareholders may be unable to sell the Warrant or the Common
Stock issuable thereunder except to the extent that the Warrant or the
Common Stock may be sold (i) pursuant to an effective registration
statement covering such securities pursuant to the 1933 Act or (ii) in
a bona fide private placement to a purchaser who shall be subject to
the same restrictions on any resale or (iii) subject to the
restrictions contained in Rule 144 under the 1933 Act.
***
(e) Seller and the Shareholders are purchasing the Warrant for
investment for their own accounts and not with a view to, or for sale
in connection with, the distribution thereof within the meaning of the
1933 Act.
13. CONDUCT OF BUSINESS UNTIL CLOSING DATE. The first full
paragraph of Section 6.02(a) shall be deleted in its entirety, and the
following new first full paragraph of Section 6.02(a) shall be substituted in
lieu thereof:
(a) Conduct of Business Until Closing Date. From the date of this
Agreement and until the Closing Date except with the prior written
consent of Purchaser and subject to the provisions of Section 6.02(h),
Seller shall conduct the Business in the ordinary course
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and consistent with past practices and use its best efforts to
preserve intact its business organization and goodwill, keep available
the services of its present officers and key employees and preserve
the goodwill and business relationships with suppliers, customers and
others having business relationships with it. Without limiting the
generality of the foregoing, Seller shall:
14. CESSATION OF LOS ANGELES OPERATIONS. The following new
Section 6.02(h) shall be added to, and shall be deemed part of, the Agreement:
(h) Notwithstanding any provision contained herein, on or before
December 31, 1996 (the "Termination Date"), Seller shall have ceased
and closed all of its operations in Los Angeles, California (the "Los
Angeles Operations") and shall have terminated all of the employees of
the Los Angeles Operation (the "Los Angeles Employees"), except for
Myrna Johnson, Sylvia Damien and Kimberly Choquette (collectively, the
"Retained Employees") who for purposes of this Section shall not be
deemed to be Los Angeles Employees, and in connection therewith,
Seller shall pay directly to each Los Angeles Employee all compen-
sation due to any Los Angeles Employee up and through the Termination
Date, as well as any severance pay and benefits due to each such Los
Angeles Employee, including without limitation, all benefits under any
Plan which have been accrued or reserved on Seller's financial
statements on behalf of any Los Angeles Employee (or is attributable
to expenses properly incurred for any such Los Angeles Employee), as
of the Closing Date, and Purchaser shall assume no liability therefore.
Notwithstanding any provision contained herein, Seller shall use its
best efforts to retain the services of the Retained Employees beyond
the date of Closing through the Termination Date.
15. SUBORDINATION AGREEMENT. Section 7.01(g) of the Agreement
shall be deleted in its entirety, and Section 7.01(h) of the Agreement shall
become new Section 7.01(g) of the Agreement.
16. INDEMNIFICATION PROCEDURES - ESCROW ACCOUNT. Section 8.03(b)
of the Agreement shall be deleted in its entirety and the following new Section
8.03(b) shall be substituted in lieu thereof:
(b) All payments for Damages pursuant to this Article
VIII shall be paid as follows: (i) First, from the Escrow Account to
the extent that funds held under the Escrow Agreement are sufficient
to pay such items; and (ii) Second, by Seller and Shareholders.
17. EQUITABLE RELIEF. Section 8.04 of the Agreement shall be
deleted in its entirety, and the following new Section 8.04 shall be
substituted in lieu thereof:
Section 8.04. EQUITABLE RELIEF. In the event of a breach or
threatened breach by Seller, Mr. Poll and/or Mr. Wirth of Section 9.08
hereof regarding noncompetition and nonsolicitation, Seller, Mr. Poll
and Mr. Wirth hereby consent and agree that Purchaser
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shall be entitled to an injunction or similar equitable relief
restraining the breaching party from committing or continuing any such
breach or threatened breach or granting specific performance of any
act required to be performed by Seller, Mr. Poll and/or Mr. Wirth
under any such provision, without the necessity of showing any actual
damage or that money damages would not afford an adequate remedy and
without the necessity of posting any bond or other security. Nothing
herein shall be construed as prohibiting or limiting Purchaser from
pursuing any other remedies at law or in equity which it may have.
18. NON-SOLICITATION; NONCOMPETITION. Section 9.08 of the
Agreement shall be deleted in its entirety, and the following new Section 9.08
shall be substituted in lieu thereof:
Section 9.08. NON-SOLICITATION; NONCOMPETITION. Seller, Mr.
Poll and Mr. Wirth acknowledge and recognize at all times for a period
of five years subsequent to the Closing Date as follows:
(a) That Seller, Mr. Poll and/or Mr. Wirth will
not directly or indirectly own, manage, operate, finance,
join, control or participate in the ownership, management,
organization, financing or control of, or be connected as an
officer, director, employee, partner, principal, agent,
representative, consultant or otherwise with any business or
enterprise engaged in a business the same as or similar to the
business of Purchaser except as a holder of fewer than 5% of
the outstanding shares or other equity interests of a company
whose shares or other equity interests are registered under
the 1934 Act; provided, however, that the restrictions in this
subparagraph shall not apply with respect to Seller's, Mr.
Poll's and/or Mr. Wirth's ownership of an interest in a
company that is engaged in the business of real estate
development or the building and development of mini-storage
units or bicycle-related products.
(b) That Seller, Mr. Poll and/or Mr. Wirth will
not directly or indirectly induce any employee of the Company
or any of its affiliates to engage in any activity in which
Seller, Mr. Poll and/or Mr. Wirth are prohibited from engaging
by this Section 9.08 or to terminate his employment with
Purchaser or any of its affiliates, and will not directly or
indirectly employ or offer employment to any person who was
employed by Purchaser or any of its affiliates unless such
person shall have been terminated without cause or ceased to
be employed by any such entity for a period of at least 12
months.
(c) That Seller, Mr. Poll and/or Mr. Wirth will
not use or permit its or their name to be used in connection
with any business or enterprise engaged in the business the
same as or similar to Purchaser or its Affiliates or any other
business engaged in by Purchaser or any of its Affiliates.
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(d) That Seller, Mr. Poll and/or Mr. Wirth will
not make any public statement, make any unprovoked statements
to regulatory agencies, nor take any such actions where the
primary purpose of such public statement, unprovoked statement
or action is intended to (i) impair the goodwill or the
business reputation of Purchaser or any of its Affiliates or
(ii) benefit a competitor of Purchaser or to be otherwise
detrimental to the material interests of Purchaser.
(e) That Seller, Mr. Poll and/or Mr. Wirth will
not (i) disclose any customer lists or any part thereof to any
person, firm, corporation, association or other entity for any
reason or purpose whatsoever; (ii) assist in obtaining any of
Purchaser's customers for any other similar business; (iii)
encourage any customer to terminate, change or modify its
relationship with Purchaser; or (iv) solicit or divert or
attempt to solicit or divert Purchaser's customers.
(f) Purchaser shall have the right, subject to
applicable law, to inform any other third party that Purchaser
reasonably believes to be, or to be contemplating
participating with Seller, Mr. Poll and/or Mr. Wirth or
receiving from Seller, Mr. Poll and/or Mr. Wirth in violation
of this Agreement and of the rights of Purchaser hereunder,
and that participation by any such third party with Seller,
Mr. Poll and/or Mr. Wirth in activities in violation of this
Section 9.08 may give rise to claims by Purchaser against such
third party.
The primary purpose of this Section 9.08 is Purchaser's
legitimate interest in protecting its economic welfare and business
goodwill. Purchaser, Seller, Mr. Poll and Mr. Wirth further agree
that this covenant shall in no way be construed as a mere limitation
on competition nor shall it be construed as a restraint on Seller's,
Mr. Poll's and/or Mr. Wirth's right to engage in a common calling.
It is expressly understood and agreed that although Purchaser,
Seller, Mr. Poll and Mr. Wirth consider the restrictions contained in
this Section 9.08 to be reasonable, if a final judicial determination
is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Section 9.08 is
an unenforceable restriction against Seller, Mr. Poll and/or Mr.
Wirth, the provisions of this Section 9.08 shall not be rendered void
but shall be deemed amended to apply as to such maximum time and
territory and to such maximum extent as such court may judicially
determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so
as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.
19. EXHIBIT B. Exhibit B to the Agreement shall be deleted in its
entirety and the attached Amended Exhibit B shall be substituted in lieu
thereof.
20. EXHIBIT D. Exhibit D to the Agreement shall be deleted in its
entirety.
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21. EXHIBIT E. Exhibit E to the Agreement shall be deleted in its
entirety.
22. EXHIBIT F. Exhibit F to the Agreement shall be deleted in its
entirety and the attached Amended Exhibit F shall be substituted in lieu
thereof.
23. EFFECT OF AMENDMENT. This Amendment is a modification of the
Agreement and is incorporated therein. Except as expressly set forth in this
Amendment, the Parties shall not be deemed to have amended or modified the
Agreement in any other respect.
24. FACSIMILE TRANSMISSION; COUNTERPARTS. Signatures on this
Amendment may be communicated by facsimile transmission and shall be binding
upon the Parties transmitting the same by facsimile transmission. Counterparts
with original signatures shall be provided within three (3) days of the
applicable facsimile transmission, provided, however, that the failure to
provide the original counterpart shall have no effect on the validity or the
binding nature of the Amendment. If executed in counterparts, the Amendment
shall be effective as if simultaneously executed.
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IN WITNESS WHEREOF, the Parties have duly executed this Amendment
effective as of the Effective Date.
PURCHASER:
STUART ENTERTAINMENT, INC.,
a Delaware corporation
By /S/ ALBERT F. BARBER
----------------------------------
Albert F. Barber, Vice Chairman
and Chief Executive Officer
Attest:
By /S/ MICHAEL A. SCHALK
---------------------------
Michael A. Schalk,
Corporate Secretary
SELLER:
TRADE PRODUCTS, INC.,
a Washington corporation
By /S/ HARRY POLL
----------------------------------
Harry Poll, Chairman and Chief
Executive Officer
Attest:
By /S/ TONDA L. SMITH
---------------------------
Tonda L. Smith,
Executive Assistant
SHAREHOLDERS:
/S/ HARRY POLL
------------------------------------
Harry Poll
/S/ RONALD G. RUDY
------------------------------------
Ronald G. Rudy
/S/ HARRY WIRTH
------------------------------------
Harry Wirth
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EXHIBIT 4.1
NEITHER THIS WARRANT NOR ANY SECURITY ISSUABLE UPON THE EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR
ANY SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED EXCEPT IF (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND REGISTERED AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS,
OR (B) THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT NO
REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED TO EFFECT SUCH
TRANSFER.
STUART ENTERTAINMENT INC.
300,000 Warrants each to Purchase one Share of
Common Stock of Stuart Entertainment, Inc.
FOR VALUE RECEIVED, Stuart Entertainment Inc., a Delaware corporation
(the "Company"), hereby certifies that Trade Products, Inc., or its successor
or assigns (the "Holder"), is entitled, subject to the provisions of this
Warrant, to purchase from the Company, at the times specified herein, 300,000
fully paid and non-assessable shares of common stock of the Company, par value
$.01 per share (the "Common Stock"), at a purchase price per share equal to the
Exercise Price (as hereinafter defined).
(a) DEFINITIONS. (1) The following terms, as used herein, have
the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person.
"ASSET PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as
of August 6, 1996, as amended by that certain First Amendment to Asset Purchase
Agreement (collectively, the "Asset Purchase Agreement"), among the Company,
Trade Products, Inc. and the Persons listed on the signature pages thereto.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"EXERCISE PRICE" means $7.75 per Warrant Share.
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"EXPIRATION DATE" means 5:00 p.m. New York time on the tenth
anniversary of the Closing Date.
"PERSON" means an individual, partnership, corporation, trust, joint
stock company, association, joint venture, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"WARRANT SHARES" means the shares of Common Stock deliverable upon
exercise of this Warrant, as the number of such shares shall be adjusted from
time to time as provided herein.
(2) Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the Asset Purchase
Agreement
(b) EXERCISE OF WARRANT.
(1) The Holder is entitled to exercise this Warrant in
whole or in part at any time, or from time to time, until the
Expiration Date or, if such day is not a Business Day, then on the
next succeeding day that shall be a Business Day. To exercise this
Warrant, the Holder shall execute and deliver to the Company a Warrant
Exercise Notice substantially in the form annexed hereto, together
with this Warrant Certificate and the payment of the applicable
Exercise Price in cash or by certified or official bank check or bank
cashier's check payable to the order of the Company or by any
combination thereof. Upon such delivery and payment, the Holder shall
be deemed to be the holder of record of the Warrant Shares subject to
such exercise, notwithstanding that the stock transfer books of the
Company shall then be closed or that certificates representing such
Warrant Shares shall not then be actually delivered to the Holder.
The Company shall pay any and all documentary, stamp or
similar issue or transfer taxes payable in respect of the issue or
delivery of the Warrant Shares.
(2) If the Holder exercises the Warrant in part, this
Warrant Certificate shall be surrendered by the Holder to the Company
and a new Warrant Certificate of the same tenor and for the
unexercised number of Warrant Shares shall be executed by the Company.
The Company shall register the new Warrant Certificate in the name of
the Holder or in such name or names of its transferee pursuant to
paragraph (f) hereof as may be directed in writing by the Holder and
deliver the new Warrant Certificate to the Person or Persons entitled
to receive the same.
(3) Upon surrender of this Warrant Certificate in
conformity with the foregoing provisions, the Company shall transfer
to the Holder of this Warrant Certificate appropriate evidence of
ownership of the shares of Common Stock or other securities or
property (including any money) to which the Holder is entitled,
registered or otherwise placed in, or payable to the order of, the
name or names of the Holder or such transferee as may be directed in
writing by the Holder, and shall deliver such
2
<PAGE> 3
evidence of ownership and any other securities or property (including
any money) to the Person or Persons entitled to receive the same,
together with an amount in cash in lieu of any fraction of a share as
provided in paragraph (e) below.
(c) RESTRICTIVE LEGEND. Unless the issuance of the Warrant Shares
shall have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), as a condition of its delivery of certificates for the
Warrant Shares or upon the split-up, combination, exchange or transfer of the
Warrant, the Company may require the Holder (including the transferee of the
Warrant in whose name the Warrant Shares are to be registered) to deliver to
the Company, in writing, representations regarding the Holder's sophistication,
investment intent, acquisition for such Holder's own account and such other
matters as are reasonable and customary for purchasers of securities in an
unregistered private offering. The Company may place conspicuously upon each
new Warrant and upon each certificate representing the Warrant Shares a legend
substantially in the form of the legend set forth on the first page of this
Warrant Certificate, the terms of which are agreed to by the Holder (including
each transferee).
(d) REPRESENTATIONS OF THE COMPANY.
(1) The execution and delivery by the Company of the
Warrant has been duly authorized by all necessary corporate action,
does not require any consent or approval (except those consents and
approvals already obtained), and does not and will not conflict with,
result in any violation of, or constitute any default under, any
provision of any contractual obligation of the Company or any law or
governmental regulation or court decree or order applicable to the
Company.
(2) The Company hereby agrees that at all times there
shall be reserved for issuance and delivery upon exercise of the
Warrant such number of its authorized but unissued shares of Common
Stock or other securities of the Company from time to time issuable
upon exercise of the Warrant as will be sufficient to permit the
exercise in full of the Warrant. All such shares shall be duly
authorized and, when issued upon such exercise, shall be validly
issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on
sale (other than those contemplated by paragraph (f)) and free and
clear of all preemptive rights.
(3) The Warrant will on the execution and delivery
thereof constitute the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with their
respective terms.
(e) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of the Warrant and in lieu
of delivery of any such fractional share upon any exercise hereof, the Company
shall pay to the Holder an amount in cash equal to such fraction multiplied by
the current market price per share of Common Stock at the date of such
exercise.
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<PAGE> 4
(f) EXCHANGE, TRANSFER OR ASSIGNMENT OF WARRANT. The holder of
this Warrant or of any Warrant Shares, by acceptance thereof, agrees to give
prior written notice to the Company of such holder's intention to transfer such
Warrant or the Warrant Shares relating thereto (or any portion thereof)
describing briefly the manner and circumstances of the proposed transfer.
Promptly after receiving such written notice, the Company shall present copies
thereof to Company counsel and to counsel designated by such holder, who may be
an employee of such holder. If in the opinion of each such counsel the
proposed transfer may be affected without registration or qualification of such
Warrant or the Warrant Shares under any Federal or State securities law, the
Company, as promptly as practicable, shall notify such holder of such opinion
and of the terms and conditions, if any, to be observed, whereupon such holder
shall be entitled to transfer such Warrant or Warrant Shares, all in accordance
with the terms of the notice delivered to such holder by the Company. If
either of such counsel is unable to render such an opinion (in which case said
counsel shall set forth in writing the basis for the legal conclusions in this
regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without
compliance with the conditions of an exemptive regulation of the Securities and
Exchange Commission and any applicable State securities regulatory authority.
Such holder shall not be entitled to effect such transfer until such
registration, qualification, exemption or other compliance has become
effective. All fees and expenses of counsel in connection with the rendition
of the opinions provided for in this subsection shall be paid by the holder
requesting the transfer. Subject to the preceding and paragraph (c) hereof,
upon surrender of this Warrant to the Company, together with the attached
Warrant Assignment Form duly executed, the Company shall, without charge,
execute and deliver a new warrant in the name of the assignee or assignees
named in such instrument of assignment and, if the Holder's entire interest is
not being assigned, in the name of the Holder and this Warrant shall promptly
be canceled. Notwithstanding the foregoing, except for the first sentence
hereof, the provisions of this paragraph (f) shall not apply to any transfer of
this Warrant or any Warrant Shares by the Holder to any of the Shareholders.
(g) LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company
of evidence satisfactory to it (in the exercise of its reasonable discretion)
of the loss, theft, destruction or mutilation of this Warrant Certificate, and
(in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company shall execute and deliver a new Warrant
Certificate of like tenor and date.
(h) ANTIDILUTION.
(1) In case the Company shall at any time after the date
hereof (i) declare a dividend or make a distribution on Common Stock
payable in Common Stock, (ii) subdivide or split the outstanding
Common Stock, (iii) combine or reclassify the outstanding Common Stock
into a smaller number of shares, or (iv) issue any shares of its
capital stock in a reclassification of Common Stock (including any
such reclassification in connection with a consolidation or merger in
which the Company is
4
<PAGE> 5
the continuing corporation), the Exercise Price in effect at the time
of the record date for such dividend or distribution or the effective
date of such subdivision, split, combination or reclassification shall
be proportionately adjusted so that, giving effect to paragraph (h)(2)
below, the exercise of the Warrant after such time shall entitle the
holder to receive the aggregate number of shares of Common Stock or
other securities of the Company (or shares of any security into which
such shares of Common Stock have been reclassified pursuant to clause
(iii) or (iv) above) which, if the Warrant had been exercised
immediately prior to such time, such holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
distribution, subdivision, split, combination or reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(2) Upon an adjustment in the Exercise Price as set forth
in paragraph (h)(1) above, the number of shares for which the Warrant
are exercisable immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of shares of Common Stock (calculated to
the nearest 1/100th of a share) obtained by (i) multiplying the number
of shares of Common Stock covered by the Warrant immediately prior to
this adjustment of the number of shares of Common Stock by the
Exercise Price in effect immediately prior to such adjustment of the
Exercise Price and (ii) dividing the product so obtained by the
Exercise Price in effect immediately after such adjustment of the
Exercise Price.
(i) CONSOLIDATION, MERGER, OR SALE OF ASSETS. In case of any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock) or any sale or transfer of
all or substantially all of the assets of the Company or of the Person formed
by such consolidation or resulting from such merger or which acquires such
assets, as the case may be, the Holder shall have the right thereafter to
exercise the Warrant for the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock for which the Warrant may have
been exercised immediately prior to such consolidation, merger, sale or
transfer, assuming (i) such holder of Common Stock is not a Person with which
the Company consolidated or into which the Company merged or which merged into
the Company or to which such sale or transfer was made, as the case may be
("Constituent Person"), or an Affiliate of a constituent Person and (ii) in the
case of a consolidation, merger, sale or transfer which includes an election as
to the consideration to be received by the holders, such holder of Common Stock
failed to exercise its rights of election, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer (provided that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer is
not the same for each share of Common Stock held immediately prior to such
consolidation, merger, sale or transfer by other than a Constituent Person or
an Affiliate thereof and in respect of which such rights of election shall not
have been exercised ("non-electing share"), then for the purpose of this
paragraph (i) the kind and amount
5
<PAGE> 6
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the non-electing
shares). Adjustments for events subsequent to the effective date of such a
consolidation, merger and sale of assets shall be as nearly equivalent as may
be practicable to the adjustments provided for in the Warrant. In any such
event, effective provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving corporation, in any contract of
sale, conveyance, lease or transfer or otherwise so that the provisions set
forth herein for the protection of the rights of the Holder shall thereafter
continue to be applicable; and any or surviving corporation shall expressly
assume obligation to deliver, upon exercise, such shares of stock, other
securities, cash and property. The provisions of this paragraph (i) shall
similarly apply to successive consolidations mergers, sales, leases or
transfers.
(j) INCIDENTAL REGISTRATION RIGHTS.
(1) The Company agrees that at any time it proposes to
register any of its Common Stock under the Securities Act on Form S-1
or any other form of registration statement then available for the
registration under the Securities Act of securities of the Company and
which is appropriate for the inclusion therein of the Warrant Shares
as herein contemplated, it will give written notice to the Holder of
its intention so to do and upon the written request of the Holder
given within 30 days after receipt of any such notice from the
Company, the Company will in each instance use its best efforts to
cause all Warrant Shares relating to the Warrant held by the Holder
(collectively, the "Eligible Securities") to be registered under said
Securities Act and registered or qualified under any State securities
law; provided, however, that the obligation to give such notice and to
use such best efforts shall not apply to any proposal of the Company
to register any of its securities under the Securities Act on Form S-4
or Form S-8 or any successor or similar forms; provided, however, that
the Company shall have the right to postpone or withdraw the
registration effected pursuant to this paragraph (j) without
obligation to any holder. The inclusion of the Eligible Securities
will be on the same terms and conditions as the comparable securities,
if any, otherwise being sold by underwriters under such registration,
or on terms and conditions comparable to those normally applicable to
offerings of such securities in reasonably similar circumstances in
the event that no securities comparable to the Eligible Securities are
being sold through underwriters under such registration; provided,
however, that if a greater number of Warrant Shares is offered for
participation in the proposed underwriting than, in the reasonable
opinion of the Company's underwriter can be accommodated without
adversely affecting the proposed underwriting, then the amount of
Warrant Shares proposed to be offered by such holders for
registration, as well as the number of Securities of any other selling
shareholders and the number of Securities being registered by the
Company shall be proportionately reduced to a number deemed to be
satisfactory to the managing underwriter. Nothing in this paragraph
(j) shall be deemed to require the Company to proceed with any
registration of its securities after giving the notice herein
provided.
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<PAGE> 7
(2) In connection with any offering involving an
underwriting, the Company shall not be required to include the Warrant
Shares in such offering unless the undersigned accepts the terms of
the underwriting as agreed upon between the Company and the
underwriters selected by it and then in only such quantity as will
not, in the opinion of the underwriters, jeopardize the success of the
offering by the Company.
(3) The Company will indemnify and hold harmless the
Holder participating in a registration of the Warrant Shares, and each
person, if any, who controls such a Holder from and against any and
all loss, damage, liability, cost, and expense to which such Holder or
controlling person may become subject under the Securities Act or
otherwise insofar as such any loss, damage, liability, cost, or
expense is caused by any untrue statement or alleged untrue statement
of any material fact in such registration statement, any prospectus
contained therein, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, damage,
liability, cost, or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
so made in conformity with information furnished by such Holder or
such controlling person in writing specifically for use in the
preparation thereof.
(4) The Holder participating in a registration hereunder
will indemnify and hold harmless the Company, any underwriter, and
each person, if any, who controls the Company or such underwriter from
and against any and all loss, damage, liability, cost, and expense to
which the Company or any such underwriter or controlling person
becomes subject under the Securities Act or otherwise insofar as such
loss, damage, liability, cost, or expense is caused by any untrue
statement of any material fact in such registration statement, any
prospectus contained therein, or any amendment or supplement thereto,
or arises out of or is based upon the omission or failure to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or omission was so made in reliance
upon and in conformity with written information furnished by such
Holder specifically for use in the preparation thereof; provided,
however, that the maximum liability of Holder hereunder shall not
exceed the maximum proceeds which could be received by Holder pursuant
to any registration.
(5) Promptly after receipt by an indemnified party of
notices of the commencement of any action for which the indemnified
party may be entitled to indemnification under the provisions of this
paragraph (i), such indemnified party will, if a claim therefor is to
be made against the indemnifying party under such provisions, promptly
notify the indemnifying part of the commencement thereof; but the
failure to so notify the indemnifying party will not relieve the
indemnifying party from any liability
7
<PAGE> 8
which it may have to indemnification under such provisions except to
the extent that such party is prejudiced by such failure. The
indemnifying party shall have the right to participate in and, to the
extent that it may wish, jointly with any other indemnifying party, to
assume the defense of such action with counsel satisfactory to such
indemnified party; provided, however, that if the defendants in any
action include both the indemnified party and the indemnifying party
and there is a conflict of interest which would prevent counsel for
the indemnifying party from also representing the indemnified party,
the indemnified party or parties shall have the right to select
separate counsel to participate in the defense of such action on
behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to
assume the defense of any such action, the indemnifying party will not
be liable to such indemnified party for any legal or other expense
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless
(A) the indemnified party shall have employed counsel in accordance
with the provisions of the preceding sentence, (B) the indemnifying
party shall not have employed counsel satisfactory to the indemnified
party to represent the indemnified party within a reasonable time
after the notice of the commencement of action, or (C) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
(6) In the event the indemnification provisions set forth
in this paragraph (j) are determined to be unenforceable by a court of
competent jurisdiction, the Company and the Holder shall have such
rights to contribution as they would have been entitled to receive
under applicable law; provided, however, that in no event will the
Holder participating in a registration hereunder be obligated to make
any contribution to the Company, any underwriter, or any person who
controls the Company or any underwriter except to the extent that
there is loss, damage, liability, cost, or expense caused by any
untrue statement of a material fact in a registration statement, any
prospectus contained therein, or any amendment or supplement thereto,
or arising out of or based upon the omission or failure to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading, and then only to the extent, that such untrue
statement or omission was so made in reliance upon and in conformity
with written information furnished by such Holder specifically for use
in the preparation thereof; and provided, further, that the maximum
liability of Holder hereunder shall not exceed the maximum proceeds
which could be received by Holder pursuant to the registration.
(7) All registration expenses will be paid by the
Company. For purposes of this paragraph (j), registration expenses
shall include (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the shares), (iii) printing expenses, (iv)
internal expenses of the Company (including, without limitation, all
salaries and expenses of its officers and employees performing legal
or accounting duties), (v) reasonable fees and disbursements of
counsel for the
8
<PAGE> 9
Company and customary fees and expenses for independent certified
public accountants retained by the Company, (vi) the reasonable fees
and expenses of any special experts retained by the Company in
connection with such registration; but shall not include any
underwriting fees, discounts or commissions attributable to the sale
of the Warrant Shares, or of any out-of-pocket expenses including
attorney's fees of the Holder (or the agents who manage their
accounts).
(k) NOTICES. The Company shall mail to each Holder a notice of
any proposed transaction which would require an adjustment pursuant to
paragraph (h) or paragraph (i) above. The Company shall mail such notice
stating the proposed record date (if any) or effective date for any such
transaction and briefly describing the transaction. The Company shall mail the
notice first class mail, postage prepaid, to the registered address of such
Holder on the books of the Company at least 10 days (or lesser number of days
if 10-day notice is not practicable) before such date, but failure to mail the
notice or of any Holder to receive the notice or any defect in the notice shall
not affect the legality or validity of any such transaction or the vote, if
any, upon any such transaction. Any notice, demand or delivery authorized by
this Warrant Certificate shall be in writing and shall be given to the Holder
or the Company, as the case may be, at its address (or telecopier number) set
forth below, or such other address (or telecopier number) as shall have been
furnished to the party giving or making such notice, demand or delivery:
If to the Company:
Stuart Entertainment Inc.
3211 Nebraska Avenue
Council Bluffs, Iowa 51501
Telecopy: (712) 323-3215
Attention: Chief Executive Officer
If to the Holder:
Trade Products, Inc.
2807 Lincoln Way
Lynnwood, Washington 98046
Telecopy: (206) 743-5224
Attention: President
Each such notice, demand or delivery shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the intended recipient confirms the receipt of such telecopy or (ii)
if given by any other means, when received at the address specified herein.
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<PAGE> 10
(l) RIGHTS OF THE HOLDER. Prior to the exercise of any Warrant,
the Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder of the Company, including, without limitation, the right to vote,
to receive dividends or other distributions, to exercise any preemptive right
or to receive any notice of meetings of shareholders or any notice of any
proceedings of the Company except as may be specifically provided for herein.
(m) WARRANT HOLDER REPRESENTATIONS. Notwithstanding anything to
the contrary herein, the Holder represents and warrants that (a) it
acknowledges that the Warrant and the Warrant Shares have not been registered
under the Securities Act or any state securities laws, (b) the Warrant and the
Warrant Shares (unless such Warrant and/or Warrant Shares, as the case may be,
are registered under the Securities Act and applicable state securities laws)
are being and will be issued pursuant to an exemption from registration for
nonpublic offerings or offerings to one or more accredited investors, (c) that
the Holder is acquiring the Warrant and will acquire the Warrant Shares (unless
such Warrant and/or Warrant Shares are registered under the Securities Act and
applicable state securities laws) for his own account and not with a view
toward their distribution, (d) the Holder is experienced in making investments
of this nature and has the necessary sophistication to be able to evaluate the
merits of this investment and (e) the Holder will not sell, offer for sale,
pledge or otherwise hypothecate the Warrant or the Warrant Shares (unless such
shares are registered under the Securities Act and applicable state securities
laws) unless such sale, offer for sale, pledge or hypothecation of the Warrant
and Warrant Shares is exempt from the registration and prospectus delivery
requirements of the Securities Act and applicable state securities laws.
(n) GOVERNING LAW. THIS WARRANT CERTIFICATE AND ALL RIGHTS
ARISING HEREUNDER SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF DELAWARE, AND THE PERFORMANCE THEREOF SHALL BE
GOVERNED AND ENFORCED IN ACCORDANCE WITH SUCH LAWS.
(o) AMENDMENTS; WAIVERS. Any provision of this Warrant
Certificate may be amended or waived if, and only if, such amendment or waiver
is in writing and signed, in the case of an amendment, by the Holder and the
Company, or in the case of a waiver, by the party against whom the waiver is to
be effective. No failure or delay by either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
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<PAGE> 11
IN WITNESS WHEREOF, the Company has duly caused this Warrant
Certificate to be signed by its duly authorized officer and to be dated as of
November 13, 1996.
STUART ENTERTAINMENT, INC.
By /S/ ALBERT F. BARBER
-------------------------------------
Albert F. Barber, Vice Chairman
and Chief Executive Officer
Acknowledged and Agreed:
TRADE PRODUCTS, INC.
By /S/ RONALD G. RUDY
-----------------------------
Ronald G. Rudy, President
11
<PAGE> 12
WARRANT EXERCISE NOTICE
(To be executed only upon exercise of the Warrant)
To: Stuart Entertainment Inc.
The undersigned irrevocably exercises the Warrant for the purchase of
_____ shares (the "Shares") of Common Stock, par value $.01 per share, of
Stuart Entertainment Inc. (the "Company") and agrees to make payment therefor
in the amount of $____________, all on the terms and conditions specified in
the within Warrant Certificate, surrenders this Warrant Certificate and directs
that the Shares deliverable upon the exercise of this Warrant be registered or
placed in the name and at the address specified below and delivered thereto.
Date: ____________, _____
------------------------------------------
(Signature of Owner)
------------------------------------------
(Street Address)
------------------------------------------
(City, State, Zip Code)
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Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised portion of the Warrant evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
13
<PAGE> 14
WARRANT ASSIGNMENT FORM
Dated ____________, _____
FOR VALUE RECEIVED, ____________________ hereby sells, assigns and
transfers unto ____________________ (the "Assignee"), (please type or print in
block letters)
________________________________________________________________________________
(insert address)
its right to purchase up to ______ shares of the common stock, $.01 par value
per share, of Stuart Entertainment, Inc. represented by this Warrant and does
hereby irrevocably constitute and appoint ____________________ Attorney, to
transfer the same on the books of the Company, with full power of substitution
in the premises.
Signature ____________________________________
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into as
of November 13, 1996, by and between STUART ENTERTAINMENT, INC. (the
"Company"), a Delaware corporation, and RONALD G. RUDY, an individual with his
principal business address at 2807 Lincoln Way, Lynnwood, Washington 98046 (the
"Executive");
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive as Executive Vice
President and Chief Operating Officer of the Trade Products Division of the
Company (the "Trade Products Division"); and
WHEREAS, the Executive desires to accept such employment offered by
the Company;
NOW, THEREFORE, in consideration for the mutual obligations contained
herein, the Company and the Executive, each intending to be legally bound,
hereby mutually covenant and agree as follows:
1. EMPLOYMENT AND TERM.
(a) Employment. The Company hereby employs the Executive
and the Executive hereby accepts such employment, in the capacity of
Executive Vice President and Chief Operating Officer of the Trade
Products Division to act in accordance with the terms and conditions
hereinafter set forth.
(b) Term. The employment hereunder shall be for a term
commencing on the date of acquisition by the Company of the assets of
Trade Products, Inc. (the "Employment Date"), and terminating on the
third anniversary of the Employment Date (the "Term").
(c) Location of Services. Effective upon the Employment
Date, and through the Term, the Executive's services will be performed
in the Seattle, Washington area. At such location the Company shall
provide the Executive with an office and a support staff sufficient to
enable the Executive to render the services to be provided by the
Executive under this Agreement. It is also anticipated that the
Executive may be reasonably required, at the Company's expense, to
travel to and render services in different locations from time to
time, incident to the performance of the Executive's duties.
<PAGE> 2
2. DUTIES.
(a) During the Term as provided in Section 1(b) hereof,
the Executive shall serve as Executive Vice President of the Company
and Chief Operating Officer of the Trade Products Division, and shall
have all powers and duties consistent with such position and Executive
agrees to perform the duties and services incident to that position,
or such other duties and services of a similar nature as may
reasonably be required of him by the Board of Directors ("Board") or
the Board's designated officer. The Executive agrees to serve as an
officer of the Company and of any subsidiary of the Company or
affiliated company, without additional compensation.
(b) The Executive shall devote substantially his entire
time and shall use his best efforts to fulfill faithfully, responsibly
and to the best of his ability his duties hereunder and to the
promotion of the business and interests of the Company and any
subsidiaries or affiliated companies.
(c) The Executive shall be appointed to the Board of the
Company for a term expiring at the next annual meeting of the
stockholders of the Company following the Employment Date. The
Executive shall receive no compensation for such service.
3. COMPENSATION.
(a) Base Salary. The Company shall pay the Executive an
initial base salary of $200,000 (the "Base Salary"), payable in
accordance with the Company's normal payroll payment procedures. On
the second and third anniversary date of the Employment Date, the Base
Salary shall be increased to $210,000 and $220,000, respectively. Any
compensation that may be paid to the Executive under any additional
compensation or incentive plan of the Company, or that may be
otherwise authorized from time to time by the Board, shall be in
addition to the Base Salary to which the Executive shall be entitled
under this Agreement.
(b) Performance Bonuses. For each calendar year during
the Term, commencing with calendar year 1996, the Executive shall be
eligible to receive a cash bonus (the "Performance Bonus") based upon
the Executive's performance and the Trade Products Division
achievement of certain targeted financial goals established at the
beginning of such year by the Board. The bonus payable for any
calendar year shall be paid to the Executive no later than the 15th
day of April of the following year and shall in no case be less than
$50,000 if the targeted financial objectives are met. This
Performance Bonus shall be in lieu of the Executive's participation in
any other cash bonus or incentive plan or arrangement of the Company;
provided, however, that the bonus program set forth herein may be
replaced with a different program approved by the Board with the
consent of the Executive. Notwithstanding the above, if the
performance of the Executive and the Trade Products Division does not
meet the goals
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<PAGE> 3
established by the Board, the Executive acknowledges and agrees that
nothing contained herein shall be deemed to entitle the Executive to a
Performance Bonus.
(c) Grant of Stock Options. The Executive shall be
granted options (the "Options") to purchase 250,000 shares of the $.01
par value common stock of the Company as follows: (i) an option for
50,000 shares at $5.00 per share; (ii) an option for 100,000 shares at
$10.00 per share; and (iii) an option for 100,000 shares at $15.00 per
share. Such Options shall be granted under and in accordance with the
Company's 1994 Performance Stock Option Plan.
(d) Tax Withholding. The Company shall provide for the
withholding of any taxes required to be withheld by federal, state and
local law with respect to any payment in cash, shares of capital stock
or other property made by or on behalf of the Company to or for the
benefit of the Executive under this Agreement or otherwise. The
Company may, at its option: (i) withhold such taxes from any cash
payments owing from the Company to the Executive, including any
payments owing under any other provision of this Agreement, (ii)
require the Executive to pay to the Company in cash such amount as may
be required to satisfy such withholding obligations or (iii) make
other satisfactory arrangements with the Executive to satisfy such
withholding obligations.
4. BENEFITS. In addition to the Base Salary, the Performance
Bonus, if any, and the Options, the Executive shall also be entitled to the
following:
(a) Participation in Benefit Plans. The Executive shall
be entitled to participate in the various retirement, welfare, fringe
benefit, group long term disability plans and other executive
prerequisite plans, programs and arrangements of the Company available
for senior executive level officers of the Company. The Executive and
his dependents, at the Executive's request, shall be enrolled in the
Company's health, life, disability and other insurance plans and
programs immediately upon his commencement of employment hereunder.
(b) Disability Insurance. The Company shall pay the
premiums on the Executive's existing disability insurance policy.
(c) Vacation and Sick Leave. The Executive shall be
entitled to four weeks of vacation during each calendar year during
which this Agreement is in effect, and to paid holidays given by the
Company to its domestic employees generally, without reduction in
salary or other benefits; provided, however, that Executive may take
in excess of four weeks vacation with the prior approval of the Chief
Executive Officer, which approval shall not be unreasonably withheld,
if it will not hinder the performance by Executive of his services
under this Agreement or the operation of the Trade Products Division.
The Executive shall also be entitled to sick leave according to the
sick leave policy which the Company may adopt from time to time.
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(d) Automobile. During the Term, the Company shall pay
or reimburse the Executive for all maintenance, repairs, insurance,
fuel (up to $100.00 per month) and other costs associated with the use
of an automobile designated by the Executive from time to time in
accordance with the Company's policies in effect from time to time.
(e) Expenses. The Company shall reimburse the Executive,
upon proper accounting, for reasonable business expenses and
disbursements incurred by him in the course of the performance of his
duties under this Agreement and in accordance with the Company's
expense authorization and approval procedures in effect from time to
time.
(f) Proration of Benefits. Any payments or benefits
hereunder, in any year during which the Executive is employed by the
Company for less than the entire year shall, unless otherwise provided
in the applicable plan or arrangement, be prorated in accordance with
the number of days in such year during which the Executive is employed
by the Company.
5. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE. The
Executive hereby represents and warrants to the Company that (i) the
Executive's execution and delivery of this Agreement and his performance of his
duties and obligations hereunder will not conflict with, or cause a default
under, or give any party a right to damages under, or to terminate, any other
agreement to which the Executive is a party or by which he is bound, and (ii)
there are no agreements or understandings that would make unlawful the
Executive's execution or delivery of this Agreement or his employment
hereunder.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Executive as follows:
(a) The Company is duly organized and established as a
corporation under the laws of the State of Delaware and has all
requisite power and authority to enter into this Agreement and to
perform its obligations hereunder. The consummation of the
transactions contemplated by this Agreement will neither violate nor
be in conflict with any agreement or instrument to which the Company
is a party or by which it is bound.
(b) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action on the part of
the Company and are valid, legal and binding obligations of the
Company, enforceable in accordance with their terms except as may be
limited by the laws of general application relating to bankruptcy,
insolvency, moratorium or other similar laws relating to or affecting
the enforcement of creditors' rights, and rules of law governing
specific performance, injunctive relief or other equitable remedies.
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7. TERMINATION.
(a) Cause. The Company may terminate the Executive's
employment at any time for Cause (as defined herein). For purposes
of this Agreement, "Cause" means:
(i) the Executive commits a breach of any
material term of this Agreement and such breach constitutes
gross negligence or wilful misconduct and, if such breach is
capable of being cured, the Executive fails to cure such
breach within 30 days of notice of such breach;
(ii) the Executive is convicted of, or pleads
guilty or nolo contendere to a felony or a crime involving
moral turpitude;
(iii) the Executive's commission of any intentional
act in violation of any applicable law or regulation where the
Company has a reasonable belief that such act shall be the
primary cause for a license of the Company or its subsidiaries
or affiliates to be revoked, suspended or not be renewed after
proper application, and such revocation, suspension or
non-renewal is likely to cause either (a) additional licenses
of the Company, its subsidiaries or affiliates to be
suspended, revoked or not be renewed after proper application,
or (b) a material adverse change in the operations of the
Company or the Trade Products Division;
(iv) habitual intoxication;
(v) habitual illegal drug use or drug addiction;
(vi) gross insubordination, gross negligence or
willful and knowing violation of any material rule or
regulation that may be established by the Company from
time-to-time for the conduct of the Company's business;
(vii) misappropriation of corporate funds or other
acts of dishonesty.
(b) Death. This Agreement shall terminate automatically
upon the Executive's death.
(c) Disability. This Agreement shall terminate
automatically upon the Executive's Disability. The term "Disability"
as used in connection with termination of the employment of the
Executive shall mean the inability of the Executive to substantially
perform his material duties hereunder due to physical or mental
disablement which continues for a period of six (6) consecutive
months, during the term of employment (during which six (6) month
period the Executive's salary and benefits shall continue) as
determined by an independent qualified physician mutually acceptable
to the Company and the Executive (or his personal representative).
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(d) Without Cause. The Company may, at its option,
terminate the Executive's employment without Cause at any time upon
written notice to the Executive.
(e) Date of Termination. For purposes of this Agreement,
the term "Date of Termination" shall mean the date that any party
gives notice, through action or otherwise, that it intends to
terminate this Agreement pursuant to the terms hereof or the date, if
any, specified by the terminating party in such notice as the
effective date of termination.
8. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Cause; Disability. If the Executive's employment
shall be terminated by the Company for "Cause" or by reason of
Disability, the Company shall continue to pay the Executive his Base
Salary through the Date of Termination at the rate in effect upon the
Date of Termination. Thereafter, the Company shall have no further
obligation to the Executive. Notwithstanding the above, in the event
of Disability, the Executive shall be entitled to participate in and
be covered by the Company's group health plan until the Executive is
able to obtain health insurance on substantially the same terms and
conditions as provided in the Company's group health plan; provided,
however, that if the Company's group health plan does not allow the
Executive and his dependents to continue coverage, then the Company
and the Executive agree to negotiate a mutually satisfactory
alternative to provide the Executive with the benefits intended by
this Section 8(a).
(b) Death. If the Executive's employment is terminated
by reason of the Executive's death, the Company shall pay to the
Executive's heirs or estate, the Base Salary at the rate in effect on
the day preceding death through the date of his death.
(c) Without Cause. If the Executive's employment is
terminated without Cause, the Company shall pay to the Executive the
greater of the following: (1) the Company shall continue to pay the
Executive in accordance with the Company's normal payroll payment
procedures his Base Salary at the rates provided in Section 3(a)
through the end of the Term; or (2) the Company shall pay the
Executive in accordance with the Company's normal payroll payment
procedures at the rate in effect at the Date of Termination for a
period of one year from the Date of Termination; provided, however,
that subject to the provisions of Section 9, the Company's obligation
to pay the Executive pursuant to this Section 8(c) shall automatically
terminate upon a breach by the Executive of the provisions of Section
9.
9. NONCOMPETITION.
(a) The Executive acknowledges and recognizes the highly
competitive nature of the business of the Company and its affiliates
and the Executive accordingly covenants and agrees, that at all times
for a period of twenty-four (24) consecutive months
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subsequent to the end of the Term (regardless of any prior termination
of the Agreement for any reason except that, upon termination for
"Cause" for 24 months from the Date of Termination only) as follows:
(i) The Executive will not directly or indirectly
own, manage, operate, finance, join, control or participate in
the ownership, management, organization, financing or control
of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or
otherwise with any business or enterprise engaged in a
business the same as or similar to the business of the Company
except as a holder of fewer than 5% of the outstanding shares
or other equity interests of a company whose shares or other
equity interests are registered under the Securities Exchange
Act of 1934, provided, however, that the restrictions in this
subparagraph shall not apply with respect to Executive's
ownership of an interest in a company that is engaged in the
business of real estate development or the building and
development of mini-storage units or bicycle related products.
(ii) The Executive will not (a) directly or
indirectly induce any employee of the Company or any of its
affiliates to engage in any activity in which the Executive is
prohibited from engaging by this Section 9 or to terminate his
employment with the Company or any of its affiliates or (b)
directly or indirectly employ or offer employment to any
person who was employed by the Company or any of its
affiliates unless such person shall have been terminated
without cause or ceased to be employed by any such entity for
a period of at least twelve months.
(iii) The Executive will not use or permit his name
to be used in connection with any business or enterprise
engaged in the business the same as or similar to Company or
its affiliates (or any other business engaged in by Company or
any of its affiliates).
(iv) The Executive will not use the name of the
Company or any name similar thereto, but nothing in this
clause shall be deemed, by implication, to authorize or permit
use of such name after expiration of such period.
(v) The Executive will not (a) use or disclose
any customer lists or any part thereof to any person, firm,
corporation, association or other entity for any reason or
purpose whatsoever; (b) assist in obtaining any of the
Company's customers for any other similar business; (c)
encourage any customer to terminate, change or modify its
relationship with the Company; or (d) solicit or divert or
attempt to solicit or divert the Company's customers.
(vi) The Company shall have the right, subject to
applicable law, to inform any other third party that the
Company reasonably believes to be, or to
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be contemplating participating with Executive or receiving
from the Executive in violation of this Agreement and of the
rights of the Company hereunder, that participation by any
such third party with the Executive in activities in violation
of this Section 9 may give rise to claims by the Company
against such third party.
(vii) The Executive will not make any public
statement, make any unprovoked statements to regulatory
agencies, nor take any such actions where the primary purpose
of such public statement, unprovoked statement or action is
intended to (a) impair the goodwill or the business reputation
of the Company or any of its affiliates or (b) benefit a
competitor of the Company or to be otherwise detrimental to
the material interests of the Company.
The primary purpose of this Section 9 is the Company's legitimate
interest in protecting its economic welfare and business goodwill. The Company
and the Executive further agree that this covenant shall in no way be construed
as a mere limitation on competition nor shall it be construed as a restraint on
the Executive's right to engage in a common calling.
It is expressly understood and agreed that although the Executive and
the Company consider the restrictions contained in this Section 9 to be
reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in
this Agreement is an unenforceable restriction against the Executive, the
provisions of this Agreement shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any
restriction contained in this Agreement is unenforceable, and such restriction
cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained herein.
The failure of the Executive to abide by the provisions of this
Section 9 shall be deemed a material breach of this Agreement and, if
applicable, shall also cause any payments being made by the Company to
Executive pursuant to Section 8(c) to immediately terminate. In the latter
event, the Company shall give notice to Executive stating that (i) Executive
has breached Section 9, and detailing the nature of such breach, and (ii) the
Company is terminating all payments due to Executive, if any, (the date of such
notice is referred to herein as the "Notification Date"). Upon written notice
from the Executive, received by the Company within five (5) days of the
Notification Date, of his intention to commence arbitration pursuant to Section
20 concerning such breach, then retroactive to the Notification Date, the
Company will pay all amounts due to Executive pursuant to Section 8(c), if any,
into an escrow account to be established at the Company's primary bank until
such time as a decision in the arbitration is made; provided, however, that in
the event Executive fails to initiate arbitration proceedings within thirty
(30) days after the Notification Date, the money placed in escrow shall be
immediately returned to the Company. Nothing herein shall be construed as
limiting or
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prohibiting the Company from pursuing any other remedies at law or in equity
which it may have.
10. PROPRIETARY INFORMATION. Through the second anniversary of
the Date of Termination, the Executive shall not use for his personal benefit,
or disclose, communicate or divulge to, or use for the direct or indirect
benefit of any person, firm, association or company other than the Company, any
Proprietary Information. "Proprietary Information" means information relating
to the properties, prospects, products, services, customers or operations of
the Company or any direct or indirect affiliate thereof that is not generally
known, is proprietary to the Company or such affiliate and is made known to the
Executive or learned or acquired by the Executive while in the employ of the
Company, including, without limitation, information concerning trade secrets of
the Company, or any of the Company's affiliates and any improvements relating
to the products of the Company in accounting, marketing, selling, leasing,
financing and other business methods and techniques. However, Proprietary
Information shall not include either (i) at the time of disclosure to the
Executive such information that was in the public domain or later entered the
public domain other than as a result of a breach of an obligation herein; or
(ii) subsequent to disclosure to the Executive, the Executive received such
information from a third party under no obligation to maintain such information
in confidence, and the third party came into possession of such information
other than as a result of a breach of an obligation herein.
11. OWNERSHIP OF PROPRIETARY INFORMATION. The Executive agrees
that all Proprietary Information shall be the sole property of the Company and
its assigns, and the Company and its assigns shall be the sole owner of all
licenses and other rights in connection with such Proprietary Information. At
all times, until the second anniversary of the Date of Termination, the
Executive will keep in the strictest confidence and trust all Proprietary
Information and will not use or disclose such Proprietary Information, or
anything relating to such information, without the prior written consent of the
Company, except as may be necessary in the ordinary course of performing his
duties under this Agreement.
12. DOCUMENTS AND OTHER PROPERTY. All materials or articles of
information of any kind furnished to the Executive in the course of his
employment hereunder are and shall remain the sole property of the Company; and
if the Company requests the return of such information at any time during, upon
or after the termination of the Executive's employment hereunder, the Executive
shall immediately deliver the same to the Company. The Executive will not,
without the prior written consent of the Company, retain any documents, data or
property, or any reproduction thereof of any description, belonging to the
Company or pertaining to any Proprietary Information.
13. THIRD-PARTY INFORMATION. The Company from time to time
receives from third parties confidential or proprietary information subject to
a duty on the Company's part to maintain the confidentiality of such
information and to use it only for certain limited purposes ("Third-Party
Information"). At all times, the Executive will hold Third-Party Information
in
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the strictest confidence and will not disclose or use Third-Party Information
except as permitted by the agreement between the Company and such third party.
14. INTELLECTUAL PROPERTY. Any and all products of the same type
as those or competitive with those sold by the Company ("Products") made,
developed or created by the Executive (whether at the request or suggestion of
the Company or otherwise, whether alone or in conjunction with others, and
whether during regular hours of work or otherwise) either (i) during the period
of this Agreement, or (ii) within a period of two years after the Date of
Termination, shall be promptly and fully disclosed by the Executive to the
Board and, if such intellectual property was made, developed or created other
than pursuant to the Executive's employment hereunder, the Executive shall
grant the Company a perpetual, royalty free license to such intellectual
property, and if such intellectual property was made, developed or created
pursuant to the Executive's employment hereunder, such intellectual property
shall be the Company's exclusive property as against the Executive, and the
Executive shall promptly deliver to an appropriate representative of the
Company as designated by the Board all papers, drawings, models, data and other
material relating to any invention made, developed or created by him as
aforesaid. The Executive shall, at the request of the Company and without any
payment therefor, execute any documents necessary or advisable in the opinion
of the Company's counsel to direct issuance of patents or copyrights to the
Company with respect to such Products as are to be the Company's exclusive
property as against the Executive or to vest in the Company title to such
Products as against the Executive. The expense of securing any such patent or
copyright shall be borne by the Company. Notwithstanding the above, this
Section 14 shall not apply to a Product for which no equipment, supplies,
facility, or trade secret information of the Company was used and which was
developed entirely on the Executive's own time, unless (a) the Product relates
(i) directly to the business of the Company, or (ii) to the Executive's actual
or demonstrably anticipated research or development, or (b) the Product results
from any work performed by the Executive for the Company.
15. EQUITABLE RELIEF. The Executive acknowledges that, in view of
the nature of the business in which the Company is engaged, the restrictions
contained in Sections 9 through 14, inclusive (the "Restrictions") are
reasonable and necessary in order to protect the legitimate interests of the
Company, and that any violation thereof would result in irreparable injuries to
the Company, and the Executive therefore further acknowledges that, if the
Executive violates, or threatens to violate, any of the Restrictions, the
Company shall be entitled to obtain from any court of competent jurisdiction,
without the posting of any bond or other security, preliminary and permanent
injunctive relief as well as damages and an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
shall be cumulative and in addition to any other rights or remedies in law or
equity to which the Company may be entitled.
16. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed within the continental United States
by first-class certified mail, return receipt requested, postage prepaid,
addressed as follows:
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(a) if to the Board or the Company, to:
Stuart Entertainment, Inc.
3211 Nebraska Avenue
Council Bluffs, Iowa 51501
Attention: President
(b) if to the Executive, to:
Ronald G. Rudy
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
17. NO ASSIGNMENT. Except as otherwise expressly provided herein,
this Agreement is not assignable by any party and no payment to be made
hereunder shall be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or other charge.
18. EXECUTION IN COUNTERPARTS. This Agreement may be executed by
the parties hereto in two or more counterparts, each of which shall be deemed
to be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
19. GOVERNING LAW. This Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of
Washington, other than the conflict of laws provisions of such laws.
20. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof (including the
arbitrability of any controversy or claim), shall be settled by arbitration in
the City of Seattle, Washington. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association. The
arbitration shall be presided over by three arbitrators who shall be selected
in accordance with the labor arbitration rules of the American Arbitration
Association. The cost of any arbitration proceeding hereunder shall be borne
equally by the Company and the Executive, subject to the arbitrators awarding
such costs otherwise. The award of the arbitrators shall be binding upon the
parties. Except where expressly authorized by statute, a party shall only be
entitled to be awarded damages for actual losses suffered by the injured party
plus reasonable costs (including reasonable attorney's fees). Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
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21. SEVERABILITY. If any provision of this Agreement shall be
adjudged by any court of competent jurisdiction to be invalid or unenforceable
for any reason, such judgment shall not affect, impair or invalidate the
remainder of this Agreement.
22. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement of the parties hereof, and supersedes all other oral or written
agreements or understandings between them regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by each of the parties hereto.
23. HEADINGS DESCRIPTIVE. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of any of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
STUART ENTERTAINMENT, INC.
By /S/ ALBERT F. BARBER
-----------------------------------------
Albert F. Barber, Vice Chairman and
Chief Executive Officer
EXECUTIVE
By /S/ RONALD G. RUDY
-----------------------------------------
Ronald G. Rudy
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EXHIBIT 20.1
[STUART ENTERTAINMENT, INC. LETTERHEAD]
STUART ENTERTAINMENT, INC.
[logo]
CONTACT: PAUL TUNINK
PHONE: 712-323-1488
FOR IMMEDIATE RELEASE
STUART ENTERTAINMENT COMPLETES TRADE PRODUCTS
ACQUISITION AND FINANCING ARRANGEMENTS
COUNCIL BLUFFS, IOWA, November 13, 1996 - Stuart Entertainment, Inc./dba Bingo
King (Nasdaq/STUA) today completed transactions for the acquisition of Trade
Products, Inc., the private placement of $100 million Senior Subordinated Notes
and the arrangement of a $30 million revolving credit facility.
The acquisition of Seattle-based Trade Products, the nation's largest maker and
marketer of pulltabs, significantly expands Stuart's existing gaming-ticket
capabilities and enhances marketing opportunities for both Trade Products and
Stuart's core product line of bingo paper, pulltabs and related products. In
this transaction, Stuart acquired substantially all of the assets and assumed
certain specified liabilities of Trade Products for a total purchase price of
$37.2 million, subject to adjustment, plus warrants to purchase 300,000 shares
of Stuart's common stock.
Trade Products is generally recognized in the industry as the low-cost, most
technologically advanced manufacturer of pulltab tickets and as the leader in
customer service. With this acquisition, the Company believes that, in
addition to being North America's leading manufacturer of a full line of bingo
and bingo-related products, it will also be North America's leading
manufacturer of pulltab tickets.
"We're pleased to combine our resources and capabilities with Stuart
Entertainment," said Ron Rudy, chief operating officer of Trade Products.
"This is a terrific opportunity for our employees to make a significant
contribution towards the future growth of the industry leader. We have known
the Stuart management for many years and believe that together we will create a
terrific team."
The Company also completed a debt refinancing through the issuance of $100
million Senior Subordinated Notes and a new $30 million revolving credit
facility. The 12.5% Senior Subordinated Notes mature November 15, 2004. The
net proceeds from the note offering will be used to pay the purchase price of
the Trade Products acquisition and repay in full all existing credit and term
facilities and certain other outstanding debt instruments.
The Company has also entered into a new Credit Agreement consisting of a $30
million revolving credit facility. The Company may draw amounts under the new
Credit Agreement, subject to availability pursuant to borrowing base
requirements. The Company anticipates using the new Credit Agreement to
support future growth opportunities. The Company has not drawn on this
facility at closing.
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Our growth strategy focuses on three areas - industry consolidation,
international opportunities and electronics products," observed Al Barber, vice
chairman and chief executive officer of Stuart Entertainment. "The transaction
announced today significantly enhance Stuart Entertainment's ability to quickly
capitalize on growth opportunities and enhance shareholder value. Our
leadership in our core products of bingo paper and pulltabs gives us a sold but
steady business base. With the Trade Products acquisition and the new
financing arrangements, we have greater flexibility to take advantage of
opportunities not only in North America, but also international markets, where
bingo is growing faster than in our primary markers, and in electronics
technology, a developing part of the bingo industry. This acquisition and the
new financing are key components in our going forward strategy," Barber said.
Barber expects a smooth transaction in blending the operations of Stuart and
Trade Products and achieving synergies as certain manufacturing operations and
administrative functions are consolidated. The Company currently expects the
consolidation activities to be substantially completed by the end of the second
quarter in 1997.
Stuart Entertainment, Inc. is the North America's largest manufacturer of bingo
paper, ink markers, and related gaming equipment and supplies, with locations
in the United States, Canada and Mexico. Its subsidiaries include Bazaar &
Novelty, Canada's largest supplier of bingo paper and related supplies, and
Video King, a major supplier of electronic bingo gaming systems, located in
Littleton, Colorado.
The various forward-looking statements contained herein are based on
management's beliefs and assumptions and upon information currently available
to management. Whether such forward-looking statements and information
ultimately prove to be accurate depends on various uncertainties and future
developments that cannot be predicted. The Company undertakes no duty to
update the forward-looking statements.
