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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: November 14, 1996
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(Date of the earliest event reported)
DISCOVERY ZONE, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 0-21854 36-3877601
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(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification Number)
110 East Broward Boulevard
Ft. Lauderdale, Florida 33301
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(Address of principal executive offices) (Zip Code)
954-627-2400
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Registrant's telephone number, including area code
Page 1 of 52
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Item 5. Other Events.
On November 14, 1996, Discovery Zone, Inc. and nineteen
subsidiaries (collectively, "Discovery Zone") and Birch
Holdings L.L.C. ("Birch"), the largest senior unsecured
creditor of Discovery Zone, filed a Joint Plan of
Reorganization (the "Joint Plan") for Discovery Zone, pursuant
to which Birch would become Discovery Zone's controlling
stockholder. The Joint Plan is subject to approval by the
United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court").
Under the Joint Plan, holders of Discovery Zone's bank debt,
holders of certain general unsecured claims, and holders of
Discovery Zone's Liquid Yield Option Notes would receive 100%
of the common stock of the reorganized Discovery Zone in
exchange for their claims, and Discovery Zone's existing
common stock would be extinguished. Certain trade creditors
which agree to provide goods or services to Discovery Zone on
credit after it emerges from its chapter 11 proceeding may
elect to receive a cash distribution in exchange for their
claims.
The Joint Plan was filed without an accompanying disclosure
statement (the "Disclosure Statement") pursuant to an order
(the "Order") of the Bankruptcy Court. The Order also extended
the period within which Discovery Zone is permitted to file
the Disclosure Statement with the Bankruptcy Court until
November 27, 1996.
The Joint Plan is filed as an exhibit hereto and is
incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The Joint Plan is filed as an exhibit hereto and is
incorporated by reference herein.
Page 2 of 52
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
DISCOVERY ZONE, INC.
By: /s/ David A. Barclay
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David A. Barclay
Vice President and General Counsel
Dated: November 15, 1996
Page 3 of 52
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DISCOVERY ZONE, INC.
Current Report on Form 8-K
Exhibit Index
Exhibit No. Description
2.1 Joint Plan of Reorganization dated as of November 14, 1996
Page 4 of 52
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
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IN RE :
:
DISCOVERY ZONE, INC., ET AL., : CHAPTER 11
: CASE NO. 96-411 (HSB)
:
:
DEBTORS. : (JOINTLY ADMINISTERED)
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JOINT PLAN OF REORGANIZATION
PURSUANT TO 11 U.S.C. Section 1129
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ARTICLE I
INTRODUCTION
Discovery Zone, Inc. and its affiliates listed in Schedule 1
hereto, debtors and debtors in possession in the above-captioned chapter 11
cases (collectively, the "Debtors"), and Birch Holdings LLC, a New York limited
liability company (collectively with the Debtors, the "Plan Proponents"),
propose this Joint Plan of Reorganization under chapter 11 of the United States
Bankruptcy Code pursuant to section 1121(a), title 11 of the United States Code
(this "Plan"). A Disclosure Statement, including the Exhibits thereto, will be
separately filed which sets forth a discussion of the Debtors' history,
business and a summary and analysis of this Plan.
ARTICLE II
DEFINITIONS; RULES OF INTERPRETATION
AND COMPUTATION OF TIME
Section 2.1. Scope of Definitions. For purposes of this
Plan, the following words or phrases shall have the meanings set forth below
(such meanings to be equally applicable to both the singular and plural forms
of the terms defined). Unless otherwise provided in this Plan, all terms used
herein shall have the meanings assigned to such terms in the Bankruptcy Code
(as hereinafter defined).
Section 2.2. Definitions.
"Administrative Expense Claim" means a Claim against the
Debtors or portion of a Claim against the Debtors for payment of an
administrative expense of a kind specified in section 503(b) of the Bankruptcy
Code, including, without limitation: (a) the actual and necessary costs and
expenses incurred after the commencement of the Cases of preserving the Estates
and operating the businesses of any Debtor, including wages, salaries or
commissions for services; (b) compensation for legal, financial, advisory,
accounting and other services and reimbursement of expenses allowed under
section 330(a) or 331 of the Bankruptcy Code; and (c) all charges assessed
against the Estates under chapter 123, title 28 of the United States Code.
"Administrative Expense Claim Bar Date" means the date set by
the Bankruptcy Court as the last day for the holders of Administrative Expense
Claims (other than professional fees and expenses) arising prior to the
Confirmation Date to file a request for payment of an Administrative Expense
Claim under section 503(a) of the Bankruptcy Code and after which date all such
Administrative Expense Claims as to which a request for payment has not been
made shall be forever barred.
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"Allowed Claim" or "Allowed Interest" or "Allowed" means a
Claim against or Interest in any of the Debtors, or any portion thereof, to the
extent that:
(a) proof of the Claim or Interest was:
(i) timely filed; or
(ii) deemed filed under applicable law or by
reason of an order of the Bankruptcy Court;
and
(b) (i) no Debtor, or any other party in interest
entitled to do so, has filed an objection
within a time fixed by the Bankruptcy Court;
or
(ii) the Claim or Interest is allowed by a Final
Order; and
(c) with respect to an application for compensation or
reimbursement of an Administrative Expense Claim, the
amount of such Administrative Expense Claim which has
been approved by the Bankruptcy Court.
"Ballot Date" means the date on which ballots accepting or
rejecting this Plan must be submitted pursuant to [Order], entered by the
Bankruptcy Court on [date].
"Bankruptcy Code" means title 11 of the United States Code, as
now in effect or hereafter amended.
"Bankruptcy Court" means the United States Bankruptcy Court
for the District of Delaware, in which these Cases are pending.
"Bankruptcy Rules" means, collectively, the Federal Rules of
Bankruptcy Procedure and the local rules of the Bankruptcy Court, as now in
effect or hereafter amended.
"Bar Date" means the applicable bar date by which a proof of
Claim must be filed, as established by order of the Bankruptcy Court, including
the Bar Date Order and the Confirmation Order.
"Bar Date Order" means the Order Pursuant to Bankruptcy Rule
3003(c)(3), Fixing November 29, 1996 As The Last Day For Filing Of Proofs Of
Claim Against The Debtors And Approving Form And Manner Of Notice Thereof,
entered by the Bankruptcy Court on August 16, 1996, as subsequently amended or
supplemented.
"Birch" means Birch Holdings LLC, a New York limited liability
company and its affiliates.
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"Business Day" means a day on which banks in New York City are
not required or authorized to be closed.
"Cases" means the jointly administered chapter 11 cases of
the Debtors.
"Cash" means lawful currency of the United States of America.
"Claim" means (a) a right to payment, whether or not such
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured; or (b) a right to an equitable remedy for breach of performance if
such breach gives rise to a right to payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured.
"Class" means a group of Claims or Interests consisting of
Claims or Interests, as the case may be, which are substantially similar to
each other within the meaning of the Bankruptcy Code, as classified pursuant to
Article III of this Plan.
"Class 7 and 8 Calculation Claims Amount" has the meaning set
forth in Section 5.5.
"Class 7 and 8 Distribution Percentage" has the meaning set
forth in Section 5.5.
"Class 8 Cash Distribution" has the meaning set forth in
Section 4.10.
"Class 8 Deferred Cash Distributions" has the meaning set
forth in Section 4.10.
"Class 8 Lump Sum Cash Distribution" has the meaning set forth
in Section 4.10.
"Class 9 Distribution Percentage" has the meaning set forth in Section 5.5.
"Confirmation Date" means the date on which the Bankruptcy
Court enters the Confirmation Order.
"Confirmation Fund" means a segregated bank account into which
shall be deposited Cash which is required to be distributed to holders of
Administrative Expense Claims and all holders of Allowed Claims which are
entitled to receive Cash distributions on the Effective Date.
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"Confirmation Order" means the order of the Bankruptcy Court
confirming this Plan pursuant to section 1129 of the Bankruptcy Code.
"Contingent or Unliquidated Claims" means the Claims that have
been filed as contingent or unliquidated with the Court prior to the Bar Date
or that are listed as contingent or unliquidated in the Debtors' Statements of
Financial Affairs filed with the Bankruptcy Court, as such statements may have
been or may be amended, supplemented or otherwise modified from time to time in
a filing with the Bankruptcy Court in accordance with the applicable Bankruptcy
Rules.
"Credit Agreement" means the certain Credit Agreement dated as
of December 22, 1994, as amended, by and among Discovery Zone, Inc., the
lenders named therein and NationsBank, N.A., as co-agent and Bank of Montreal
as co-agent.
"Creditor" means the holder of an Allowed Claim.
"Creditors' Committee" means the committee of unsecured
creditors of the Debtors officially appointed by the United States Trustee for
Region 3 in the Cases.
"Debtor" and "Debtors" means Discovery Zone, Inc., the
Subsidiary Debtors and the Partnership Debtors, each a Debtor and,
collectively, the Debtors.
"Deficiency Claim" means a Claim equal to the amount, if any,
by which the total Allowed Claim of any Creditor exceeds the sum of (i) any
setoff rights of the Creditor against any Debtor provided for by applicable law
and preserved by section 553 of the Bankruptcy Code plus (ii) the portion of
such Claim that is a Secured Claim; provided, however, that, if the holder of
such Claim makes the election provided for by section 1111(b)(2) of the
Bankruptcy Code, there shall be no Deficiency Claim in respect of such Claim.
"Disclosure Statement" means the Disclosure Statement for the
Debtors' Joint Plan of Reorganization dated as of November __ 1996, as such
Disclosure Statement may be modified or amended from time to time, prepared
pursuant to section 1125 of the Bankruptcy Code.
"Disputed Claim" or "Disputed Interest" means a Claim or
Interest with respect to which a proof of claim or interest, as the case may
be, has been timely filed or deemed timely filed under applicable law, and as
to which an objection, timely filed, has not been withdrawn on or before the
Effective Date or any date fixed for filing such objections by order of the
Bankruptcy Court, and has not been denied by a Final Order. If an objection
related to the allowance of only a part of a Claim or Interest has been timely
filed or deemed timely filed, such Claim or Interest shall be a Disputed Claim
or Disputed Interest, as the case may be, only to the extent of the objection.
Prior to the time that an objection has been or may be
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timely filed, a Claim or Interest shall be considered a Disputed Claim or
Disputed Interest if the amount of the Claim or Interest specified in the proof
of such Claim or Interest exceeds the amount of the Claim or Interest scheduled
by any of the Debtors (other than Claims or Interests scheduled by any of the
Debtors as disputed, contingent or unliquidated), or if such Claim or Interest
was not scheduled by any of the Debtors. For purposes of voting on this Plan,
prior to allowance or denial by Final Order, the holder of each Disputed Claim
scheduled by any of the Debtors shall be permitted to vote based on such
scheduled amount.
"Disputed Claims Reserve" has that meaning set forth in
Section 5.13.
"Effective Date" means a Business Day, as determined by the
Plan Proponents, that is as soon as reasonably practicable but that is at least
11 days after the Confirmation Date and not more than 14 days after the first
day on which (i) each of the conditions in Section 9.2 has either been
satisfied or duly waived, (ii) no stay of the Confirmation Order is in effect,
(iii) the Merger Transactions shall have been consummated, and (iv) Reorganized
Discovery Zone's amended and restated certificate of incorporation shall have
been filed with the Secretary of State of Delaware. Distributions to be made
under this Plan on the Effective Date shall be made on, or the first Business
Day after, the Effective Date.
"Employee Retention Plan" means the employee retention plan
which is described in Exhibit C to this Plan.
"Estates" means the estates created in the Cases by section
541 of the Bankruptcy Code.
"Existing Common Stock" means common stock issued by Discovery
Zone, Inc. and each Subsidiary Debtor and outstanding on the Petition Date.
"Existing Common Stock Options" means any and all rights,
warrants or options to purchase shares of Existing Common Stock outstanding on
the Petition Date.
"Existing Partnership Interests" means all general and limited
partnership interests in the Partnership Debtors outstanding on the Petition
Date.
"Fee Auditor" means the fee auditor appointed in these Cases,
Stuart, Maue, Mitchell & James, Ltd, and its counsel, Stone, Leyton & Gershman.
"Final Order" means an order or judgment of the Bankruptcy
Court the operation or effect of which has not been reversed, stayed, modified
or amended and as to which the time to appeal or to seek certiorari, review or
rehearing has expired and as to which no appeal or petition for certiorari,
review or rehearing is pending or as to which any right to appeal or seek
certiorari, review or rehearing has been waived in writing in a manner
satisfactory to the Plan Proponents or, if an appeal, reargument, petition for
certiorari or
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rehearing thereof has been sought, the order or judgment of the Bankruptcy
Court has not been stayed or has been affirmed by the highest court to which
the order was appealed or from which the reargument or rehearing was sought, or
certiorari has been denied, and the time to take any further appeal or to seek
certiorari or further reargument or rehearing has expired.
"Insurer" means any insurance company who has issued a policy
to the Debtors under which the Insurer may be responsible for any part of a
Personal Injury Disputed Claim.
"Intercompany Claims" means all Claims asserted by any Debtor
against any other Debtor.
"Interest" means any equity or partnership interest in any
Debtor.
"L&B Owned Properties" means (i) the fourteen (14) parcels of
real property which are owned by Leaps & Bounds and as to which McDonald's
holds valid and enforceable first priority mortgages and (ii) any proceeds
obtained from the sale of a parcel of undeveloped real property in Columbia,
Maryland which have not been applied, as of the Effective Date, against Claims
held by McDonald's pursuant to the McDonald's Stipulation.
"L&B Subleases" means the twenty-one (21) subleases of
nonresidential real property pursuant to which McDonald's is the sublandlord
and Leaps & Bounds is the sublessee.
"Leaps & Bounds" means Leaps & Bounds, Inc., a Delaware
corporation and a Debtor.
"LYONS" means, collectively, the Liquid Yield Option Notes,
due 2013, issued by Discovery Zone, Inc. on October 14, 1993 and outstanding as
of the Petition Date.
"LYONS Calculation Claims Amount" has the meaning set forth
in Section 5.5.
"McDonald's" means McDonald's Corporation, a Delaware
corporation.
"McDonald's Secured Rent Deferral Claims" means the Secured
Claims held by McDonald's as of the Effective Date in respect of rent deferrals
granted to the Debtors pursuant to the McDonald's Stipulation in respect of
obligations under certain of the L&B Subleases.
"McDonald's Stipulation" means the Stipulation and Order
Between Debtors and McDonald's Corporation Providing for the Resolution,
Settlement and Compromise of Disputes and For Rent Deferrals and Allowance of
Certain Claims, entered by the Bankruptcy Court on November __, 1996.
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"Merger Agreement" means the merger agreement attached as
Exhibit D to this Plan.
"Merger Transactions" means the transactions pursuant to which
each of the Reorganized Debtors, other than Reorganized Discovery Zone, will be
merged into Reorganized Discovery Zone pursuant to the Merger Agreement and
this Plan.
"New Common Stock" means common stock of Reorganized Discovery
Zone issued pursuant to this Plan.
"New Directors" means the members of the Board of Directors of
Reorganized Discovery Zone whose names, affiliations and backgrounds are set
forth in Exhibit 2 to the Disclosure Statement.
"New Warrants" means the Ten Year Reorganized DZ Warrants, the
Plan Proponent Reorganized DZ Warrants and the Reorganized DZ Management Team
Warrants.
"Partnership Debtors" means Discovery Zone L.P., a Delaware
limited partnership, and Tumble for Fun Limited Partnership, a Delaware limited
partnership.
"Per Claim Distribution" has the meaning set forth in Section
5.1.
"Person" has the meaning provided in section 101(41) of the
Bankruptcy Code and also means, without limitation, a joint venture, trust,
estate, an unincorporated association or organization, governmental entity or
political subdivision, agency or representative thereof, or any other entity.
"Personal Injury Disputed Claim" has the meaning set forth
in Section 6.1.
"Petition Date" means March 25, 1996.
"Plan" or "this Plan" has the meaning set forth in Article I.
"Plan Proponent Reorganized DZ Warrants" means the Series B
Warrants to be issued to the Plan Proponents (other than the Debtors) on the
Effective Date, a form of which is attached as Exhibit G to this Plan.
"Plan Proponents" has the meaning set forth in Article I.
"Prime Rate" means the rate of interest published by The Wall
Street Journal (Northeast Edition), from time to time, as the prime rate.
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"Priority Claim" means all Claims which are entitled to
priority under sections 507(a)(2)-(a)(7) and (a)(9) of the Bankruptcy Code.
"Professionals" means those persons retained pursuant to an
order of the Bankruptcy Court in accordance with section 327 or 1103 of the
Bankruptcy Code.
"Pro Rata" means the ratio of an Allowed Claim in a particular
Class to the aggregate principal amount of all Allowed Claims in that Class.
"Rent Deferral Secured Note" has that meaning set forth in
Section 4.6 of this Plan.
"Reorganized Debtors" means Reorganized Discovery Zone, the
Subsidiary Debtors and the Partnership Debtors on and after the Effective Date,
each a corporation or limited partnership under the laws of the state in which
such Debtor, as the case may be, is incorporated or organized on the Petition
Date.
"Reorganized Discovery Zone" means Discovery Zone, Inc., a
Delaware corporation, on and after the Effective Date.
"Reorganized Discovery Zone Management Team" means those
persons who will serve as officers of Reorganized Discovery Zone, and whose
names, affiliations and backgrounds are set forth in Exhibit 3 to the
Disclosure Statement.
"Reorganized Discovery Zone Supplier Credit Agreement" means
an agreement, substantially in the form of Exhibit H to this Plan, between
Reorganized Discovery Zone and an Unsecured Creditor pursuant to which such
Creditor agrees to provide Reorganized Discovery Zone with trade credit
following the Effective Date.
"Reorganized DZ Management Team Warrants" means the Series C
Warrants to be authorized as of the Effective Date and available for issuance
to members of the Reorganized Discovery Zone Management Team in the discretion
of the Board of Directors of Reorganized Discovery Zone. A form of Reorganized
DZ Management Team Warrant is attached as Exhibit F to this Plan.
"Reorganized DZ Unit" shall consist of (a) nine (9) shares of
New Common Stock and (b) one (1) Ten Year Reorganized DZ Warrant.
"Section 5.5 Claims Amount" has the meaning set forth in
Section 5.5.
"Section 5.5 Distribution Value" has the meaning set forth in
Section 5.5.
"Section 5.5 Ratio" has the meaning set forth in Section 5.5.
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"Secured Claim" means (a) that portion of a Claim equal to the
value of the interest of the holder of such Claim in the property of any of the
Debtors securing such Claim, as such value is determined by the Bankruptcy
Court pursuant to section 506(a) of the Bankruptcy Code and Bankruptcy Rule
3012 and (b) any other Claim allowed under this Plan as a Secured Claim.
"Subsidiary Debtors" means the Debtors other than Discovery
Zone, Inc. and the Partnership Debtors.
"Tax Claim" means that portion of any Claim for an amount
entitled to priority under section 507(a)(8) of the Bankruptcy Code, other than
a Claim for a penalty.
"Ten Year Reorganized DZ Warrants" means the Series A Warrants
to be issued to certain holders of Allowed Unsecured Claims, a form of which is
attached as Exhibit E to this Plan.
"Unsecured Calculation Claims" has the meaning set forth in
Section 5.1(d).
"Unsecured Claim" means an unsecured claim that is not an
Administrative Claim, a Secured Claim or a Priority Claim, an Intercompany
Claim, nor a Contingent or Unliquidated Claim, but includes all Deficiency
Claims and Claims arising as a result of the rejection of executory contracts
and unexpired leases pursuant to section 365 of the Bankruptcy Code.
"Unsecured Creditor" means a holder of an Allowed Unsecured
Claim.
Section 2.3. Rules of Interpretation. For purposes of this
Plan (a) any reference in this Plan to a contract, instrument, release,
indenture or other agreement or document being in a particular form or on
particular terms and conditions means that such document shall be substantially
in such form or substantially on such terms and conditions; (b) any reference
in this Plan to an existing document or exhibit filed or to be filed means such
document or exhibit, as it may have been or may be amended, modified or
supplemented; (c) unless otherwise specified, all references in this Plan to
Sections, Articles, Schedules and Exhibits are references to Sections,
Articles, Schedules and Exhibits of or to this Plan; (d) the words "herein" and
"hereto" refer to this Plan in its entirety rather than to a particular portion
of this Plan; (e) captions and headings to Articles and Sections are inserted
for convenience of reference only and are not intended to be a part of or to
affect the interpretation of this Plan; and (f) the rules of construction set
forth in section 102 of the Bankruptcy Code and in the Bankruptcy Rules shall
apply.
Section 2.4. Computation of Time. In computing any period of
time prescribed or allowed by this Plan, unless otherwise expressly provided,
the provisions of Bankruptcy Rule 9006 shall apply.
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ARTICLE III
CLASSIFICATION OF CLAIMS AND INTERESTS
The classification of Claims and Interests herein is made for
the purpose of voting on this Plan, making distributions hereunder and ease of
administration hereof. A Claim or Interest is in a particular Class only to
the extent that the Claim or Interest is an Allowed Claim or an Allowed
Interest that qualifies within the description of that Class and has not been
paid prior to the Effective Date.
Section 3.1. Class 1 - Administrative Expense Claims. Class
1 will consist of all Allowed Administrative Expense Claims.
Section 3.2. Class 1A - Small Claims. At the Plan
Proponents' election, which shall be made prior to the solicitation of
acceptances of this Plan, Class 1A may be created. If created, Class 1A will
consist of all Allowed Unsecured Claims, other than Claims classified in
Classes 9, 12A or 12B, in an amount of $1,000 or less, or which the holder
elects to reduce to $1,000.
Section 3.3. Class 2 - Tax Claims. Class 2 will consist of
all Allowed Tax Claims.
Section 3.4. Class 3 - Priority Claims. Class 3 will consist
of all Allowed Priority Claims.
Section 3.5. Class 4A - McDonald's Secured Claim. Class 4A
will consist of the Allowed Secured Claim of McDonald's other than the
McDonald's Secured Rent Deferral Claims.
Section 3.6. Class 4B - McDonald's Secured Rent Deferral
Claims. Class 4B will consist of the Allowed McDonald's Secured Rent Deferral
Claims.
Section 3.7. Class 5 - Miscellaneous Secured Claims. Class 5
will consist of all Allowed Secured Claims that are not otherwise classified in
Classes 4A or 4B. As set forth in Section 4.7 of this Plan, each Allowed Class
5 Claim shall be in its own subclass and each such Claim shall be treated as
being in a separate class for voting purposes.
Section 3.8. Class 6 - Credit Agreement Claims. Class 6 will
consist of all Allowed Claims arising under or related to the Credit Agreement.
Section 3.9. Class 7 - General Unsecured Claims. Class 7
will consist of all Allowed Unsecured Claims which arose prior to the Petition
Date and that are in respect of
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goods or services provided to any of the Debtors or under leases of
nonresidential real property to which any Debtor is a party.
Section 3.10. Class 8 - Qualified Trade Claims. Class 8 will
consist of all Allowed Unsecured Claims that are in respect of goods or
services provided to the Debtors before the Petition Date whose holders have
executed and delivered to the Debtors a Reorganized Discovery Zone Supplier
Credit Agreement prior to the Ballot Date. The Plan Proponents,
contemporaneously with the solicitation of acceptances of this Plan, will
provide a Reorganized Discovery Zone Supplier Credit Agreement to each Person
(i) which holds an Allowed Unsecured Claim that is in respect of goods or
services provided to the Debtors before the Petition Date and (ii) from whom
the Plan Proponents elect to obtain goods or services on behalf of Reorganized
Discovery Zone after the Effective Date.
Section 3.11. Class 9 - LYONS Claims. Class 9 will consist
of all Allowed Claims in respect of the LYONS.
Section 3.12. Class 10 - Other Unsecured Claims. Class 10
will consist of all Allowed Unsecured Claims which arose prior to the Petition
Date and that are not otherwise classified in Classes 1A, 6, 7, 8, 9, 12A or
12B.
Section 3.13. Class 11 - Contingent or Unliquidated Claims.
Class 11 will consist of all Allowed Contingent or Unliquidated Claims for
damages against which the Debtors are insured.
Section 3.14. Class 12A - Unsecured Claims Subordinated to
Class 6 Claims. Class 12A will consist of all Allowed Unsecured Claims, other
than Class 9 Claims, which are subordinated, whether by agreement or applicable
law, to Allowed Class 6 Claims only.
Section 3.15. Class 12B - Other Subordinated Unsecured
Claims. Class 12B will consist of all Allowed Unsecured Claims, other than
Class 9 Claims and Class 12A Claims, which are subordinated, whether by
agreement or applicable law, to Allowed Class 6, 7, 8, 9 or 10 Claims.
Section 3.16. Class 13 - Intercompany Claims. Class 13 will
consist of all Allowed Intercompany Claims.
Section 3.17. Class 14 - Common Stock and Partnership
Interests. Class 14 will consist of all Allowed Interests in respect of
Existing Common Stock, Existing Common Stock Options and Existing Partnership
Interests.
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ARTICLE IV
TREATMENT OF CLASSES
OF CLAIMS AND INTERESTS
Section 4.1. Class 1 - Administrative Expense Claims. Class
1 Claims are not impaired under this Plan. The holders of Allowed Class 1
Claims will be paid in full in Cash on the Effective Date or, if any Class 1
Claim becomes Allowed after the Effective Date, as soon as practicable after
such Claim becomes Allowed, or, if by its terms or by agreement with the holder
of such Allowed Class 1 Claim any such Allowed Class 1 Claim is payable on a
later date or dates, such Allowed Class 1 Claim will be paid in full in Cash on
such later date or dates.
Section 4.2. Class 1A - Small Claims. If the Plan Proponents
elect to create Class 1A as provided in Section 3.2, Class 1A Claims are
impaired under this Plan. Allowed Class 1A Claims will be paid in Cash in full
on the Effective Date or, if such Claim becomes Allowed after the Effective
Date, as soon as practicable after any such Claim becomes Allowed. Any holder
of a Claim classified in Classes 6, 7, 8 or 10 that would not otherwise have
been classified in Class 1A but for the election by such holder to reduce its
Claim to $1,000 will not receive any other distribution under this Plan on
account of such Claim.
Section 4.3. Class 2 - Tax Claims. Class 2 Claims are
impaired under this Plan. Unless any holder of a Class 2 Claim shall agree to
less favorable treatment, each holder of an Allowed Class 2 Claim shall be paid
in full in Cash in six equal annual installments commencing on the first
anniversary of the Effective Date or, if any such Claim becomes Allowed after
the Effective Date, as soon as practicable after such Claim becomes Allowed but
not before the first anniversary of the Effective Date, together with interest
accrued on the outstanding unpaid principal balance of such Allowed Class 2
Claim at a rate per annum equal to the Prime Rate or an alternate rate set by
the Court. Interest will be due and payable on the date on which each annual
installment is due. The Reorganized Debtors may elect to prepay without
penalty all or any portion of any Class 2 Claim.
Section 4.4. Class 3 - Priority Claims. Class 3 Claims are
not impaired under this Plan. The holders of allowed Class 3 Claims will be
paid in cash in full on the Effective Date or, if any such Claim becomes
Allowed after the Effective Date, as soon as practicable after such Claim
becomes Allowed or, if by its terms or by agreement with the holder of such
Allowed Class 3 Claim any such Allowed Class 3 Claim is payable on a later date
or dates, such Allowed Class 3 Claim will be paid in Cash in full on such later
date or dates.
Section 4.5. Class 4A - McDonald's Secured Claim. The Class
4A Claim is impaired under this Plan. McDonald's shall retain its liens
against the L&B Owned Properties to the extent of the amount of its Allowed
Class 4A Claim. McDonald's shall receive deferred Cash payments equal to the
value of the Class 4A Claim in equal payments over six (6) years
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beginning on the first anniversary of the Effective Date and thereafter on the
six (6) subsequent anniversaries of the Effective Date, with simple interest
from the Effective Date on the unpaid balance at the Prime Rate. The amount
owing and to be paid by the Reorganized Debtors in respect of such Claim may be
prepaid by the Reorganized Debtors in full or in part at any time without
penalty. Notwithstanding any provision of this Section 4.5, in the event that
the Reorganized Debtors sell any of the L&B Owned Properties after the
Effective Date, those proceeds will be immediately applied, to the extent
available, to satisfy McDonald's Class 4A Claim.
Section 4.6. Class 4B -- McDonald's Secured Rent Deferral
Claims. (a) McDonald's shall retain its liens against the L&B Owned
Properties to the extent of the amount of its Allowed Class 4B Claim. On the
Effective Date, McDonald's will receive a secured note (each, a "Rent Deferral
Secured Note") which corresponds to each L&B Sublease in respect of which
McDonald's has granted the Debtors a rent deferral under the McDonald's
Stipulation. On the Effective Date, the principal amount of each Rent Deferral
Secured Note will equal the aggregate amount of rent deferrals which have
accrued up to the Effective Date pursuant to the McDonald's Stipulation under
the applicable L&B Sublease. After the Effective Date, the principal amount of
each Rent Deferral Secured Note will increase by an amount equal to the rent
deferral for each month between the Effective Date and the termination of the
applicable L&B Sublease. Each Rent Deferral Secured Note will be due and
payable on the date on which the current term of the applicable L&B Sublease
expires, without giving effect to any unexercised right to extend or option to
renew such sublease.
(b) Each Rent Deferral Secured Note will bear interest at
a rate which is the greater of (i) the highest effective interest cost on a
yield to maturity basis in respect of any secured non-subordinated debt of
Reorganized Discovery Zone outstanding on the Effective Date which has a
maturity comparable to that of the Rent Deferral Secured Notes or (ii) a rate
which McDonald's and the Plan Proponents agree would ensure that the Rent
Deferral Secured Notes trade at par. In the event that the parties are unable
to agree as to the interest rate described under (ii) above, an independent
investment banker selected by the parties will provide an opinion as to such
rate. Interest will be payable upon maturity or acceleration of each Rent
Deferral Secured Note. On each anniversary of the Effective Date all accrued
interest not previously paid or capitalized will be capitalized and added to
the principal amount of the Rent Deferral Secured Note.
(c) The Rent Deferral Secured Notes will contain
cross-defaults to any other debt issued, or credit obtained, by any of the
Debtors or any successor entities, the aggregate principal amount of which is
equal to or greater than $2.5 million. Reorganized Discovery Zone will be in
default of the Rent Deferral Secured Notes in the event that McDonald's
terminates any two assumed L&B Subleases as result of Reorganized Discovery
Zone's breach of those subleases. In addition, the Rent Deferral Secured Notes
will contain terms, conditions and covenants of the type commonly contained in
notes issued pursuant to a plan of reorganization. A form of Rent Deferral
Secured Note is attached hereto as Exhibit I.
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Section 4.7. Class 5 - Miscellaneous Secured Claims. (a)
Class 5 Claims, other than those treated under (b)(ii) of this Section 4.7, are
impaired under this Plan. Each Allowed Class 5 Claim shall be in its own
subclass and each such Claim shall be treated as being in a separate Class for
voting purposes.
(b) Each holder of an Allowed Class 5 Claim shall receive
one of four forms of treatment under this Plan in respect of its Allowed Claim.
The Plan Proponents, contemporaneously with the solicitation of acceptances of
this Plan, shall select which treatment each holder is to receive. The Plan
Proponents' selection shall be made by the Debtors' filing of notice and
serving it on the holder of the Allowed Class 5 Claim so indicating their
selection contemporaneously with the solicitation of acceptances of this Plan.
If the Claim is a Disputed Claim at such time, the Debtors shall file and serve
the notice of selection contemporaneously with the solicitation of acceptances
of this Plan, notwithstanding the fact that the holder of a Disputed Class 5
Claim, unless otherwise ordered by the Bankruptcy Court, does not have the
ability to vote to accept or reject this Plan; provided, however, that in the
event that a holder of an Allowed Class 5 Claim secured by property of the
Debtors holds a Disputed Class 5 Claim which is also secured by such property,
the election which the Debtors make pursuant to this Section 4.7 with respect
to the Allowed Class 5 Claim shall also apply to the Disputed Class 5 Claim in
the event such Disputed Claim subsequently becomes an Allowed Class 5 Claim.
If no form of treatment is so selected, the first alternative described below
shall be applicable. The alternative treatments for any Allowed Class 5 Claims
are:
(i) Deferred Payments. Unless a holder of an Allowed
Class 5 Claim and the Debtors, prior to the Effective Date, or the
Reorganized Debtors, after the Effective Date, agree to less favorable
treatment, a holder of an Allowed Class 5 Claim shall retain its lien
securing its Allowed Class 5 Claim to the extent of the Allowed amount
of its Secured Claim. The holder of such Claim shall receive deferred
Cash payments equal to the value, as of the Effective Date, of such
holder's interest in the Debtor's interest in the property securing
such holder's Allowed Class 5 Claim, in equal payments over six (6)
years beginning on the first anniversary of the Effective Date or, if
any such Claim becomes Allowed after the Effective Date, as soon as
practicable after such Claim becomes Allowed, but not before the first
anniversary of the Effective Date, and thereafter on the six
subsequent anniversaries of the Effective Date, with simple interest
from the Effective Date on the unpaid balance at the Prime Rate. The
amounts owing and to be paid by the Reorganized Debtors in respect of
such Claims may be prepaid by the Reorganized Debtors in full or in
part at any time without penalty.
(ii) Maintain Existing Rights. Unless a holder of an
Allowed Class 5 Claim and the Debtors, prior to the Effective Date, or
the Reorganized Debtors, after the Effective Date, agree to less
favorable treatment, a holder of an Allowed Class 5 Claim shall retain
its lien securing its Allowed Class 5 Claim to the extent of the
Allowed
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amount of its Secured Claim. Additionally: (A) any default other
than a default of the kind specified in section 365(b)(2) of the
Bankruptcy Code shall be cured; (B) the maturity of the claim shall be
reinstated as the maturity that existed before any default; (C) the
holder of the Claim shall be compensated for any damages which
occurred as the result of any reasonable reliance by the holder on any
provision that entitled the holder to accelerate the maturing of the
Claim; and (D) the other legal, equitable and contractual rights
to which the Claim entitles the holder shall not otherwise be altered.
(iii) Present Full Payment. Unless an Allowed Class 5
Claim holder and the Debtors, prior to the Effective Date, or the
Reorganized Debtors, after the Effective Date, agree to less favorable
treatment, a holder of the Allowed Class 5 Claim shall receive Cash in
the amount of its Allowed Class 5 Claim on the Effective Date or, if
such Claim becomes Allowed after the Effective Date, as soon as
practicable after such Claim becomes Allowed.
(iv) Abandonment of Collateral. Unless an Allowed Class 5
Claim holder and the Debtors, prior to the Effective Date, or the
Reorganized Debtors, after the Effective Date, agree to less favorable
treatment, a holder of a Class 5 Claim shall receive back its
collateral in full satisfaction of its Class 5 Claim no later than ten
(10) Business Days after the Effective Date or, if such Claim becomes
Allowed after the Effective Date, as soon as practicable after such
Claim becomes Allowed. Pending the return of the collateral for the
Claim of such holder, such holder shall retain its liens securing its
Allowed Class 5 Claim to the extent of the Allowed amount of its
Secured Claim.
Section 4.8. Class 6 - Credit Agreement Claims. Class 6
Claims are impaired under this Plan. Each holder of an Allowed Class 6 Claim
will receive on the Effective Date or, if such Claim becomes Allowed after the
Effective Date, as soon as practicable after such Claim becomes Allowed, its
Pro Rata portion of Reorganized DZ Units distributed to holders of Class 6
Claims under this Plan.
Section 4.9. Class 7 - General Unsecured Claims. Class 7
Claims are impaired under this Plan. Each holder of an Allowed Class 7 Claim
will receive on, subject to Section 5.5(f), the Effective Date or, if such
Claim becomes Allowed after the Effective Date, as soon as practicable after
such Claim becomes Allowed, its Pro Rata portion of Reorganized DZ Units
distributed to holders of Class 7 Claims under this Plan.
Section 4.10. Class 8 - Qualified Trade Claims. (a) Class 8
Claims are impaired under this Plan. Each holder of an Allowed Class 8 Claim
may elect to receive either (i) its Pro Rata portion of Reorganized DZ Units
distributed to holders of Class 8 Claims under this Plan on, subject to Section
5.5(f), the Effective Date or, if such Claim becomes Allowed after the
Effective Date, as soon as such Claim becomes Allowed, or (ii) a cash
distribution (the "Class 8 Cash Distribution").
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(b) Holders of Allowed Class 8 Claims which elect to
receive a Class 8 Cash Distribution may further elect to receive either (i)
Class 8 Deferred Cash Distributions or (ii) a Class 8 Lump Sum Cash
Distribution. The Plan Proponents may determine to make the Class 8 Lump Sum
Cash Distribution available to Holders of Allowed Class 8 Claims. Any such
determination shall be made prior to the Confirmation Date. In the event that
the Plan Proponents do not make the Class 8 Lump Sum Cash Distribution
available, all holders of Allowed Class 8 Claims that elected to receive a
Class 8 Cash Distribution, including those that elected to receive the Class 8
Lump Sum Cash Distribution, shall receive Class 8 Deferred Cash Distributions.
(c) A holder of an Allowed Class 8 Claim which receives
Class 8 Deferred Cash Distributions shall receive thirty-three and one-third
percent (33 1/3%) of the Allowed amount of its Class 8 Claim in Cash in five
equal annual installments, payable beginning on the first anniversary of the
Effective Date or if such Claim becomes Allowed after the first anniversary of
the Effective Date as soon as practicable after such Claim becomes Allowed, and
thereafter on the four subsequent annual anniversaries of the Effective Date.
(d) A holder of an Allowed Class 8 Claim which receives a
Class 8 Lump Sum Cash Distribution shall receive a single Cash payment equal to
twenty percent (20%) of the Allowed Amount of its Class 8 Claim on the
Effective Date, or if such Claim becomes Allowed after the Effective Date as
soon as practicable after such Claim becomes Allowed.
Section 4.11. Class 9 - LYONS Claims. Class 9 Claims are
impaired under this Plan. Each holder of an Allowed Class 9 Claim will receive
on, subject to Section 5.5(f), the Effective Date or, if such Claim becomes
Allowed after the Effective Date as soon as practicable after such Claim
becomes Allowed, its Pro Rata portion of Reorganized DZ Units distributed to
holders of Class 9 Claims under this Plan. If, however, the holders of Allowed
Class 9 Claims reject this Plan, the subordination provisions under the LYONS
shall be enforced without exception and the holders of Allowed Class 9 Claims
shall not receive any distribution under this Plan.
Section 4.12. Class 10 - Other Unsecured Claims. Class 10
claims are impaired under this Plan. Each holder of an Allowed Class 10 Claim
will receive on the Effective Date, or if such Claim becomes Allowed after the
Effective Date as soon as practicable after such Claim becomes Allowed, its Pro
Rata portion of Reorganized DZ Units distributed to holders of Class 10 Claims
under this Plan.
Section 4.13. Class 11 - Contingent or Unliquidated Claims.
Class 11 Claims are not impaired under this Plan. The holders of Allowed Class
11 Claims will have recourse only to the proceeds of insurance coverage carried
by the Debtors.
Section 4.14. Class 12A - Unsecured Claims Subordinated to
Class 6 Claims. Class 12A Claims are impaired under this Plan. The
subordination provision under any
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applicable agreements or bankruptcy or nonbankruptcy law shall be enforced
without exception and the holders of Allowed Class 12A Claims shall not receive
any distribution under this Plan.
Section 4.15. Class 12B - Other Subordinated Unsecured
Claims. Class 12B Claims are impaired under this Plan. The subordination
provisions under any applicable agreements or bankruptcy or nonbankruptcy law
shall be enforced without exception and the holders of Allowed Class 12B Claims
shall not receive any distribution under this Plan.
Section 4.16. Class 13 - Intercompany Claims. Class 13
Claims are impaired under this Plan. On the Effective Date, all Intercompany
Claims shall be expunged, released and discharged, and the holders of such
Claims shall receive no distribution of any kind under this Plan.
Section 4.17. Class 14 - Common Stock and Partnership
Interests. Class 14 Interests are impaired under this Plan. All Existing
Common Stock, Existing Common Stock Options and Existing Partnership Interests
shall be cancelled, annulled and extinguished as of the Effective Date and each
holder of an Allowed Common Stock Interest, Existing Common Stock Option and
Existing Partnership Interest shall not be entitled to receive or retain any
property or interest in property on account of such Existing Common Stock,
Existing Common Stock Option or Existing Partnership Interest under this Plan.
Section 4.18. Nonconsensual Confirmation and Cramdown. In
the event that any impaired Class of Claims shall fail to accept this Plan in
accordance with section 1129(a)(8) of the Bankruptcy Code, the Plan Proponents
reserve the right to request that the Bankruptcy Court confirm this Plan in
accordance with section 1129(b) of the Bankruptcy Code or modify this Plan in
accordance with Section 11.5 of this Plan. The Plan Proponents will request
that the Bankruptcy Court confirm this Plan in accordance with section 1129(b)
of the Bankruptcy Code because the holders of Allowed Class 12A, 12B and 13
Claims and Allowed Class 14 Interests will receive no distribution under this
Plan in respect of such Allowed Claims and Interests and the holders of such
Allowed Claims and Interests are deemed to reject this Plan.
Section 4.19. Satisfaction of Claims and Interests. All
payments and distributions hereunder shall be in full and final satisfaction,
settlement, release and discharge of all Claims and Interests.
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ARTICLE V
MEANS FOR IMPLEMENTATION OF THIS PLAN
Section 5.1. Initial Calculation For Distribution of
Reorganized DZ Units. The number of Reorganized DZ Units which shall be
separately distributed in respect of Allowed Class 6, 7, 8 (whose holders have
elected to receive Reorganized DZ Units), 9 and 10 Claims will be calculated in
accordance with the following formula and any other applicable provisions of
this Plan. The number of Reorganized DZ Units that will be distributed in
respect of each dollar of applicable Allowed Unsecured Claims shall equal the
fraction obtained by dividing (x) the aggregate number of Reorganized DZ Units
to be distributed under this Plan, by (y) the sum of all Claims which are
classified in Classes 6, 7, 8 (but only to the extent the holders of Class 8
Claims have elected to receive Reorganized DZ Units), 9, 10 and 12A which are
either Allowed as of the Effective Date, or which the Plan Proponents or the
Bankruptcy Court estimates will be Allowed after the Effective Date (such
fraction being the "Per Claim Distribution"). This calculation will not be
affected by the acceptance or rejection of this Plan by holders of Class 7, 8
or 9 Claims.
Section 5.2 Distribution of Reorganized DZ Units to Class 6.
The aggregate number of Reorganized DZ Units which will be distributed to
holders of Allowed Class 6 Claims pursuant to Section 4.8 will be equal to the
difference of (i) the product of (x) the Per Claim Distribution multiplied by
(y) the sum of the Allowed amounts of Class 6, 9 and 12A Claims minus (ii) one
percent (1%) of the aggregate number of Reorganized DZ Units to be distributed
under this Plan; provided, however, that in the event that Class 9 rejects this
Plan, the aggregate number of Reorganized DZ Units distributed to holders of
Allowed Class 6 Claims will be equal to the product obtained in clause (i)
above without reduction.
Section 5.3 Distribution of Reorganized DZ Units to Classes 7
and 8. In the event that Classes 7 and 8 both accept this Plan, the aggregate
number of Reorganized DZ Units which will be distributed to holders of Class 7
and 8 Claims will be determined in accordance with the formulas set forth in
Section 5.5. In the event that either Class 7, 8 or 9 rejects this Plan, the
aggregate number of Reorganized DZ Units which will be distributed to holders
of Class 7 and Class 8 Claims pursuant to Sections 4.9 and 4.10, respectively,
will be equal to the product of (i) the Per Claim Distribution multiplied by
(ii) the sum of the Allowed amounts of Class 7 Claims and Class 8 Claims the
holders of which have elected a distribution of Reorganized DZ Units.
Section 5.4 Distribution of Reorganized DZ Units to Class 9.
In the event that Classes 7, 8 and 9 each accept this Plan, the aggregate
number of Reorganized DZ Units which will be distributed to holders of Class 9
Claims will be determined in accordance with the formulas set forth in Section
5.5. In the event that either Class 7 or Class 8 rejects this Plan, and Class
9 accepts this Plan, one percent (1%) of the aggregate number of Reorganized DZ
Units to be distributed under this Plan will be distributed to holders of Class
9 Claims. In
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the event that Class 9 rejects this Plan, no distribution will be made pursuant
to this Plan to holders of Class 9 Claims. The Reorganized DZ Units which are
not distributed to holders of Class 9 Claims because such holders reject this
Plan shall be distributed to the holders of Allowed Class 6 Claims.
Section 5.5. Calculations for Certain Distributions to
Classes 7, 8 and 9. (a) In the event that Classes 7, 8 and 9 accept this Plan,
the number of Reorganized DZ Units which will be distributed to holders of
Allowed Class 7, 8 and 9 Claims will be determined in accordance with the
formulas and calculations set forth in this Section 5.5.
(b) For the purpose of all calculations required by this
Section 5.5, the following defined terms will apply:
(i) "Class 7 and 8 Calculation Claims Amount" means the
aggregate amount of all (A) Allowed Class 7 and Disputed Class 7
Claims which the Plan Proponents or the Bankruptcy Court estimate will
become Allowed Class 7 Claims, and (B) Allowed Class 8 Claims the
holders of which have elected to receive Reorganized DZ Units and
Disputed Class 8 Claims which the Plan Proponents or the Bankruptcy
Court estimate will become Allowed Class 8 Claims and the holders of
which will elect to receive Reorganized DZ Units.
(ii) "LYONS Calculation Claims Amount" means the aggregate
amount of all (A) allowed Class 9 Claims and (B) Disputed Class 9
Claims which the Plan Proponents or the Bankruptcy Court estimate will
become Allowed Class 9 Claims.
(iii) "Section 5.5 Claims Amount" means the sum of (A) the
Class 7 and 8 Calculation Amount and (B) the LYONS Calculation Claims
Amount.
(iv) "Section 5.5 Distribution Value" means the sum of the
aggregate value of (A) an amount of Reorganized DZ Units which is
equal to the product of (I) the Per Claim Distribution multiplied by
(II) the Class 7 and 8 Calculation Claims Amount and (B) one percent
(1%) of the aggregate number of Reorganized DZ Units to be distributed
under this Plan.
(v) "Section 5.5 Ratio" shall be (A) ten (10) in the
event that the Section 5.5 Distribution Value is less than $9 million,
(B) eight (8) in the event that the Section 5.5 Distribution Value is
equal to or greater than $9 million or equal to or less than $12
million, and (C) three (3) to the extent that the Section 5.5
Distribution Value is greater than $12 million.
(c) The first step in determining the number of the
Reorganized DZ Units to be distributed to Classes 7, 8 and 9 under this Section
5.5 shall be determined by solving for X in the following equation: the sum of
(i) and (ii) equals one (1). For the purposes of this
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equation, (i) shall equal the product of (A) the product of the Section 5.5
Ratio and X and (B) the Class 7 and 8 Calculation Claims Amount divided by the
Section 5.5 Claims Amount. Furthermore, for the purposes of this equation,
(ii) shall mean the product of (A) the LYONS Calculation Claims Amount and (B)
X divided by the Section 5.5 Claims Amount. In the event that the Section 5.5
Distribution Value is greater than $12 million, the foregoing calculation must
be undertaken twice, first to determine the value of X where the Section 5.5
Distribution Value is $12 million and second to determine the value of X to the
extent that the Section 5.5 Distribution Value exceeds $12 million.
(d) The second step in determining the number of
Reorganized DZ Units to be distributed to Classes 7, 8 and 9 under this Section
5.5 is to conduct the following calculations. First, determine the product of
(i) the product of the Section 5.5 Ratio and X and (ii) the fraction obtained
by dividing the Class 7 and 8 Calculation Claims Amount by the Section 5.5
Claims Amount. Second, multiply this product by one hundred (100), and express
the resulting number as a percentage which will be referred to as the "Class 7
and 8 Distribution Percentage." Third, determine the sum of one hundred (100)
percent minus the Class 7 and 8 Distribution Percentage and express this sum as
a percentage which will be referred to as the "Class 9 Distribution
Percentage."
(e) The number of Reorganized DZ Units which will be
distributed Pro Rata to holders of Class 7 and 8 Claims which are entitled to
receive Reorganized DZ Units will be determined by multiplying the Class 7 and
8 Distribution Percentage and the Section 5.5 Distribution Value. The number
of Reorganized DZ Units which will be distributed to holders of Class 9 Claims
will be determined by multiplying the Class 9 Distribution Percentage and the
Section 5.5 Distribution Value.
(f) In the event that there is any dispute among and
between holders of Allowed Class 7, 8 or 9 Claims with respect to the value of
Reorganized DZ Units which comprise the Section 5.5 Distribution Value, the
parties shall attempt to resolve the dispute by mediation and Rothschild, Inc.,
the Creditors' Committee's co-financial advisors, shall serve as the mediator.
In the event that the Plan Proponents determine that the parties have not
resolved their dispute as of the Confirmation Date, the Bankruptcy Court shall
determine the value of Reorganized DZ Units which may be distributed in
accordance with this Section 5.5, and any calculations required by this Section
5.5 shall incorporate such value; provided, however, that in the event the
Bankruptcy Court does not make this determination on or before the Effective
Date, all Reorganized DZ Units which comprise the Section 5.5 Distribution
Value will be held in reserve pending the Bankruptcy Court's determination and
will thereafter be distributed in accordance with this Section 5.5.
Section 5.6. Distribution of DZ Units to Class 10. The
aggregate number of Reorganized DZ Units which will be distributed to holders
of Allowed Class 10 Claims pursuant to Section 4.13 will be equal to the
product of the Per Claim Distribution multiplied by the sum of the Allowed
amounts of Class 10 Claims.
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Section 5.7. Merger of Reorganized Debtors. Simultaneously
with the commencement of the Effective Date, the Reorganized Debtors will take
all such actions as may be necessary or appropriate to effect the Merger
Transactions on the terms and subject to the conditions set forth in the Merger
Agreement. Without limiting the generality of the foregoing sentence, promptly
upon the satisfaction or waiver of each of the conditions set forth in the
Merger Agreement, the Reorganized Debtors will cause the Merger Agreement, a
certificate of merger or other appropriate documentation conforming to the
applicable provisions of the laws of its jurisdiction of organization to be
appropriately filed in such jurisdiction pursuant to applicable provisions of
such laws and will take or cause to be taken all other actions, including
making appropriate filings or recordings, that may be required by such laws or
other applicable laws in connection with the Merger Transactions.
Section 5.8. Request for Substantive Consolidation. This
Plan is predicated on the substantive consolidation of the Debtors. The
Debtors request substantive consolidation on the grounds that (i) the Debtors'
Creditors did not deal with each Debtor as a single economic unit, but rather,
the Debtors were dealt with together as a single "Discovery Zone" entity and
(ii) the Claims against and the other affairs of the Debtors are so
intermingled that the denial of substantive consolidation would result in a
costly, time-consuming administrative burden.
Section 5.9. Employee Retention Plan. On the Effective Date
and thereafter, Reorganized Discovery Zone will implement and make those
payments required under the Employee Retention Plan.
Section 5.10. Reorganized DZ Management Team Warrants. The
Reorganized DZ Management Team Warrants will be authorized and reserved for
issuance to the members of the Reorganized Discovery Zone Management Team in
the discretion of the Board of Directors of Reorganized Discovery Zone.
Section 5.11. Plan Proponent Reorganized DZ Warrants. Birch,
in addition to all other distributions it is entitled to receive as a Creditor,
will receive the Plan Proponent Reorganized DZ Warrants.
Section 5.12. Subordination. In consideration of the
distributions to be made to the holders of Class 6 Allowed Claims under this
Plan, such holders shall each be deemed as of the Effective Date to have agreed
to limit the enforcement of any contractual or statutory subordination of which
they may be the beneficiaries to their right to receive the consideration to be
provided to them under this Plan and to have agreed to allow the holders of
Class 9 Allowed Claims to receive the consideration to be provided to them
under this Plan, free of any subordination claims that may otherwise be
applicable. If, however, the holders of Allowed Class 9 Claims reject this
Plan, the subordination provisions under the LYONS shall be enforced without
exception and the holders of Allowed Class 9 Claims shall not receive any
distribution under this Plan.
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Section 5.13. Disputed Claims. (a) Notwithstanding any
other provision of this Plan, no property shall be distributed under this Plan
on account of any Disputed Claim. Reorganized Discovery Zone shall establish,
and hold in trust, reserves (each being a "Disputed Claims Reserve") with
respect to each Class of Claims in which there exists a Disputed Claim and
place in each Disputed Claims Reserve property to be distributed on the later
of the Effective Date and the date such Claim becomes allowed on account of
such Claims to the extent such Claims become Allowed. Cash held in any
Disputed Claims Reserve shall be held in a segregated interest-bearing trust
account. To the extent practicable, Reorganized Discovery Zone may invest the
Cash in any Disputed Claims Reserve in a manner that will yield a reasonable
net return, taking into account the safety of the investment.
(b) The Bankruptcy Court will, on or prior to the
Confirmation Date, determine for each Class of Claims the amount of Cash and
the number of Reorganized DZ Units sufficient to fund the Disputed Claims
Reserve with respect to such Class. The Court may estimate the maximum amount
of Claims in each Class for which a Disputed Claims Reserve has been
established. In the event that the Cash or the Reorganized DZ Units which are
held in a Disputed Claims Reserve with respect to a Class are insufficient to
satisfy the Allowed Claims of such Class, Reorganized Discovery Zone shall
deposit into the applicable Disputed Claims Reserve Cash or Reorganized DZ
Units, as the case may be, necessary to satisfy such Allowed Claims as such
Claims become Allowed by Final Order.
(c) The property in each Disputed Claims Reserve,
including the allocable portion of the net return yielded from the investment
of any Cash in such Disputed Claims Reserve, if any, and all regular and
special dividends, if any, that would have been received by the holder of
shares of New Common Stock that were held in each Disputed Claims Reserve, will
be distributed by Reorganized Discovery Zone to the holders of the Disputed
Claims as such Claims become Allowed by Final Order.
(d) Any property in any Disputed Claims Reserve remaining
after the resolution of all disputes relating thereto shall become the property
of Reorganized Discovery Zone.
Section 5.14. Withholding of Taxes. To the extent required
by applicable law, there shall be withheld from any property distributed under
this Plan any property which must be withheld for taxes payable by the Person
entitled to such property to the extent required by applicable law.
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Section 5.15. Professional Fees and Expenses, Administrative
Expense Claims Bar Date. (a) Each Person retained or requesting compensation
and reimbursement in the Cases pursuant to section 327, 328, 330, 331, 503(b)
or 1103 of the Bankruptcy Code shall be entitled to file an application for
allowance of compensation and reimbursement of expenses incurred prior to the
Confirmation Date in the Cases on or before the Administrative Expense Claim
Bar Date. Objections to each such application other than objections submitted
by the Fee Auditor must be filed on or before the sixtieth (60th) day after the
Effective Date.
(b) The Confirmation Order shall contain the
Administrative Expense Claim Bar Date which shall be a date at least thirty
(30) days after the Effective Date.
(c) Liabilities incurred in Debtors' purchase, lease or
use of goods and services in the ordinary course of their business, including
Administrative Expense Claims for amounts due on account of services rendered
to the Debtors, including, without limitation, expenses incurred in accordance
with Section 11.5 of this Plan and other fees and expenses of professionals,
after the Confirmation Date shall be paid by the Reorganized Debtors pursuant
to the terms and conditions of the particular transaction giving rise to such
Claims, without any further action by the holders of such Claims.
Section 5.16. Transactions on Business Days. If the
Effective Date or any other date on which a transaction may occur under this
Plan is not a Business Day, the transactions contemplated by this Plan to occur
on such day shall occur instead on the next succeeding Business Day.
Section 5.17. Unclaimed Property. Notwithstanding section
1143 of the Bankruptcy Code, any Person who fails to claim any Cash, New Common
Stock or New Warrants within one (1) year from the Effective Date or from such
later date as a Claim becomes an Allowed Claim shall forfeit all rights to any
distribution under this Plan. Persons who fail to claim Cash, New Common Stock
or New Warrants forfeit their rights thereto and shall have no claim whatsoever
against the Debtors or Reorganized Debtors or any holder of an Allowed Claim to
whom distributions are made.
Section 5.18. Fractional Cents. When any payment of a
fraction of a cent would otherwise be called for, the actual payment shall
reflect a rounding of such fraction to the nearest whole cent (rounding down in
the case of .50 or less and rounding up in the case of more than .50).
Section 5.19. Fractional Distributions; Round Lots. Any
other provisions of this Plan notwithstanding, no factional shares of New
Common Stock or New Warrants shall be issued or distributed in connection with
this Plan. Whenever the issuance of a fractional share of New Common Stock or
New Warrants would otherwise be called for, the actual issuance shall reflect a
rounding down of such fraction to the nearest whole share or warrant,
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as the case may be, if the fraction is .50 or less and a rounding up of such
fraction of the nearest whole share or warrant, as the case may be, if the
fraction is greater than .50.
Section 5.20. Revesting of Assets. All property of each
Estate shall revest in the applicable Reorganized Debtor on the Effective Date
free and clear of all Claims, liens, charges, encumbrances and Interests,
except as otherwise provided in this Plan.
ARTICLE VI
METHOD OF RESOLUTION FOR PERSONAL INJURY DISPUTED CLAIMS
Section 6.1. Information Assembly. (a) Within thirty (30)
days after the Effective Date, Reorganized Discovery Zone shall mail to each
holder of a Disputed Claim relating to a personal injury (a "Personal Injury
Disputed Claim") a form prepared by Reorganized Discovery Zone, requesting such
information as it believes is necessary to evaluate such Personal Injury
Disputed Claim.
(b) No later than sixty (60) days after Reorganized
Discovery Zone mails such form to a holder of such a Personal Injury Disputed
Claim, the holder must return the completed form by properly addressed first
class mail, postage prepaid, to Reorganized Discovery Zone and any Insurer on
such Personal Injury Disputed Claim which is entitled to participate in the
settlement process pursuant to agreement or applicable law. The completed form
must be signed, under penalty of perjury, by the holder and the holder's
counsel, if any, and the signature of the holder must be notarized. Each form
must include documentation which sets forth (i) the cause of the injury, (ii)
the nature and extent of the injury and (iii) a detailed description of the
compensation sought by the holder of the Personal Injury Disputed Claim. This
documentation may include: (i) copies of all medical bills, (ii) copies of all
medical reports, (iii) copies of all expert reports, (iv) copies of all tax
returns for the time periods for which the holder of the Personal Injury
Disputed Claim is seeking compensation for lost wages, (v) copies of all
x-rays, (vi) copies of all MRIs, (vii) copies of all wage statements, W-2
forms, W-4 forms, and 1099 forms for the time periods for which the holder of
the Personal Injury Disputed Claim is seeking compensation for lost wages,
(viii) copies of all pictures of any accident scene, and (ix), in the case of
wrongful death claims, copies of all autopsy reports. If the form is not
returned in accordance herewith within the required sixty-day period, the
Personal Injury Disputed Claim shall be deemed disallowed.
Section 6.2. Settlement Offers. (a) Within ninety (90) days
from the date on which Reorganized Discovery Zone and the Insurer, if any,
receive the forms returned in accordance with Section 6.1, Reorganized
Discovery Zone or, if there is an Insurer, Reorganized Discovery Zone and/or
the Insurer shall do one of the following:
(i) offer to settle the Personal Injury Disputed Claim;
24
<PAGE> 26
(ii) deny the Personal Injury Disputed Claim; or
(iii) request additional information from the holder of the
Personal Injury Disputed Claim, including, without limitation,
submission to an independent medical examination.
(b) If an offer of settlement is made, the holder must
notify Reorganized Discovery Zone of its decision to accept or reject the offer
of settlement in a writing received by Reorganized Discovery Zone within thirty
(30) days after the offer of settlement is made. If the holder accepts the
offer of settlement, the Personal Injury Disputed Claim shall be deemed to be
Allowed on the date on which Reorganized Discovery Zone and/or the Insurer, as
the case may be, receives notice of such acceptance. If the offer of
settlement is not accepted or rejected within such thirty-day period, the offer
of settlement shall be deemed accepted.
(c) If additional information is requested, the holder
must provide such additional information to Reorganized Discovery Zone within
sixty (60) days of the request. If Reorganized Discovery Zone does not receive
such additional information within such sixty-day period, the Personal Injury
Disputed Claim shall be deemed disallowed. If the requested additional
information is provided within such sixty-day time period, Reorganized
Discovery Zone or, if there is an Insurer, Reorganized Discovery Zone and/or
the Insurer must make an offer of settlement or deny the Personal Injury
Disputed Claim within ninety (90) days after it receives such additional
information. If Reorganized Discovery Zone and/or the Insurer does not make an
offer of settlement or deny the Personal Injury Disputed Claim within such
ninety-day period, the Personal Injury Disputed Claim will be submitted to
mediation pursuant to Section 6.3.
(d) If a holder of a Personal Injury Disputed Claim
rejects an offer of settlement within thirty (30) days after the offer of
settlement is made or the Personal Injury Disputed Claim is denied, the
Personal Injury Disputed Claim shall be submitted to mediation pursuant to
Section 6.3 of this Plan.
Section 6.3. Mediation. (a) Each Personal Injury Disputed
Claim which is referred to mediation shall be submitted to mediation by a
mediator approved by Reorganized Discovery Zone and/or the Insurer, on the one
hand, and the holder of the Personal Injury Disputed Claim, on the other, or,
if these Persons cannot agree, by a mediator assigned by the Bankruptcy Court.
Such mediator shall work with all Persons involved, including, without
limitation, any Insurer, to negotiate a mutually satisfactory resolution with
respect to the Personal Injury Disputed Claim. Within thirty (30) days of the
date on which a mediator is appointed, the mediator shall schedule a mediation
conference in a place agreed to by each of the Persons involved, or if such
Persons cannot agree, at a place selected by the mediator at which all Persons
involved shall either (i) appear personally or (ii) be represented by a Person
authorized to enter into a binding settlement agreement on behalf of such
involved Person.
25
<PAGE> 27
The mediator shall give each such involved Person at least twenty (20) days'
prior written notice of the date, the time and the place of the conference. If
any Person which has received notice of such mediation (or his, her or its
designated representative) fails to appear at such mediation conference, any
other Person may petition the Bankruptcy Court for an award of costs,
including, without limitation, reasonable attorneys' fees against the
non-attending Person. In addition, if the holder or the holder's designated
representative, if any, fails to attend, the Personal Injury Disputed Claim
shall be deemed disallowed.
(b) At the conclusion of the mediation conference, each
Person (or its designated representative) shall sign before the mediator a
statement to the effect that (i) the Personal Injury Disputed Claim has been
resolved by mutual agreement (subject to approval of the Bankruptcy Court) and
the basis of such resolution, (ii) the Personal Injury Disputed Claim shall be
submitted to binding arbitration or (iii) the Personal Injury Disputed Claim
shall proceed before the district court for the district in which the Personal
Injury Disputed Claim arose.
Section 6.4. Arbitration and Trial. (a) If a Personal
Injury Disputed Claim is submitted to binding arbitration, the Personal Injury
Disputed Claim shall be resolved by binding arbitration conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
This binding arbitration shall be conducted in either a place agreed to by each
of the Persons involved, including, without limitation, any Insurer or, if such
Persons cannot agree, Reorganized Discovery Zone's corporate headquarters. No
Person involved in such arbitration shall be permitted to appeal any award
except as expressly permitted by Section 10 of the Federal Arbitration Act, as
amended, and there shall be no right to a de novo trial subsequent to the
arbitration.
(b) Upon compliance with the procedures set forth in this
Article VI, the holder of a Personal Injury Disputed Claim subject to this
Article VI shall have the right to pursue such Personal Injury Disputed Claim
in a federal district court in accordance with 28 U.S.C. Section 157(b)(5) and
the Federal Rules of Civil Procedure. Any case filed prior to the Petition
Date shall be transferred from the forum in which it is pending to the federal
district court for the district in which the Disputed Claim arose. The
Personal Injury Disputed Claim shall be prosecuted in that federal district
court.
ARTICLE VII
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES;
INDEMNIFICATION OBLIGATIONS
Section 7.1. Assumption and Rejection of Executory Contracts
and Unexpired Leases. Each executory contract or unexpired lease shall be
deemed assumed as of the Effective Date, except those executory contracts or
unexpired leases listed in Schedule 2 to
26
<PAGE> 28
this Plan, which the Debtors will reject on the Confirmation Date; provided,
however, that the Reorganized Debtors shall have the right, at any time prior
to sixty (60) days after the Effective Date, to amend Schedule 2; any executory
contract or unexpired lease added to or deleted from Schedule 2 will be assumed
or rejected, as of the date of such amendment.
Section 7.2. Cure of Defaults. All cure and other payments
required by section 365(b)(1) of the Bankruptcy Code under any executory
contract or unexpired lease which is assumed or assumed and assigned under this
Plan shall be made by the Reorganized Debtors. In the event of a dispute
regarding the amount of any cure or other payment, the ability of any
Reorganized Debtor or an assignee to provide adequate assurance of future
performance, or any other matter pertaining to assumption or assignment, the
Reorganized Debtors shall make such cure or other payments required by section
365(b)(1) of the Bankruptcy Code following the entry of a Final Order resolving
such dispute. The Reorganized Debtors shall cure all other defaults existing
under any executory contract or unexpired lease which is assumed under this
Plan.
Section 7.3. Claims for Damages. Each Person who is a party
to an executory contract or unexpired lease rejected pursuant to Section 7.1
shall be entitled to file, not later than thirty (30) days after such
rejection, a proof of claim for damages alleged to arise from the rejection of
such executory contract or unexpired lease to which such Person is a party.
Objections to any such proof of claim shall be filed not later than sixty (60)
days after such proof of claim is filed, and the Bankruptcy Court shall
determine any such objections. Payment of such Claim shall be made on the
later of (i) ten Business Days after the expiration of the sixty-day period for
filing an objection in respect of any proof of Claim filed pursuant to this
Section 7.3 and (ii) ten Business Days after the Claim has been Allowed by a
Final Order, provided that no such payments shall be made before the Effective
Date.
Section 7.4. Classification of Claim. Allowed Claims arising
out of the rejection of executory contracts or unexpired leases shall be Class
7 Claims.
Section 7.5. Indemnification Obligations. (a) Except as
limited below, the obligations of the Debtors to indemnify each Indemnified
Person pursuant to the Debtors' respective articles of incorporation, by-laws,
applicable state law or specific agreement shall survive confirmation of this
Plan and shall not be discharged pursuant to section 1141 of the Bankruptcy
Code, provided that, with respect to indemnification obligations incurred
before the Petition Date, the Claim of any Indemnified Person for any loss,
cost or expense with respect to occurrences before the Petition Date shall be
limited to the cost of defense and, to the extent that any amounts are paid as
a cost of defense of a claim with respect to occurrences before the Petition
Date which is adversely determined as to any Indemnified Person, such amounts
shall be returned by such Indemnified Person to the Reorganized Debtors
immediately after such adverse determination. Any Claim of any Person other
than an Indemnified Person based upon an indemnity obligation of
27
<PAGE> 29
the Debtors
shall be disallowed and any obligation of the Debtors to indemnify any such
Person shall terminate as of the day immediately preceding the Petition Date
and cease to be of any further force or effect.
(b) The term "Indemnified Person" means (i) each Person
serving as an officer or director of any of the Debtors on the Petition Date or
on the Effective Date, and each employee indemnified by a Debtor as of the
Confirmation Date pursuant to the applicable Debtor's articles of
incorporation, by-laws, applicable state law or specific agreement, and (ii)
professionals retained in these Cases and having an indemnity from the Debtors.
ARTICLE VIII
CERTIFICATE OF INCORPORATION;
CORPORATE GOVERNANCE
Section 8.1. Certificate of Incorporation. The Reorganized
Discovery Zone will amend and restate its existing Certificate of Incorporation
and By-Laws, in substantially the forms attached hereto as Exhibits A and B,
respectively. The amended and restated Certificate of Incorporation and
By-Laws will include (i) authorization to issue the New Common Stock and the
New Warrants in amounts sufficient to make the distributions contemplated by
this Plan, (ii) provision for restrictions on the issuance of nonvoting equity
securities to the extent required by section 1123(a)(6) of the Bankruptcy Code,
and (iii) such other provisions as may be consistent with the terms of this
Plan.
Section 8.2. New Board of Directors. The Reorganized
Discovery Zone's Board of Directors shall consist of five members. The Class 6
Creditors have nominated four of the New Directors and the Creditors' Committee
has nominated one of the New Directors. The names, affiliations and
backgrounds of the New Directors are set forth in Exhibit 2 to the Disclosure
Statement. The term in office of the New Directors will commence on the
Effective Date. Such directors may remain in office unless and until their
successors are duly elected or qualified or they are removed by the
stockholders of Reorganized Discovery Zone, in either case in accordance with
the Certificate of Incorporation and By-Laws of Reorganized Discovery Zone;
provided, however, that the New Director nominated by the Creditors' Committee
shall serve for a term of a least three (3) years, beginning on the Effective
Date.
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<PAGE> 30
ARTICLE IX
CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE
Section 9.1. Confirmation. The Court shall not enter the
Confirmation Order unless: (i) there shall be an aggregate of at least
$38,105,137 on deposit in the Confirmation Fund and/or available under a
working capital facility acceptable to the Plan Proponents; (ii) the aggregate
amount of Allowed Claims in Classes 7 and 8 and Disputed Claims in Classes 7
and 8 which the Plan Proponents or the Bankruptcy Court estimate will become
Allowed Claims shall not exceed $60,000,000; and (iii) the aggregate amount of
Allowed Class 8 Claims and Disputed Claims in Class 8 which the Plan Proponents
or the Bankruptcy Court estimate will become Allowed Claims shall not exceed
$15,000,000.
Section 9.2. Effective Date. The occurrence of the Effective
Date is subject to the following conditions precedent:
(a) The Plan Proponents shall have arranged and closed
under a working capital facility for Reorganized Discovery Zone in an amount
and on terms acceptable to the Plan Proponents.
(b) The Confirmation Order, in form and substance
satisfactory to the Plan Proponents, shall be a Final Order.
(c) All documents contemplated to be executed or
implemented in connection with the Plan, including, without limitation,
Exhibits 1 through 3 annexed to the Disclosure Statement and Exhibits A through
I to this Plan, shall be executed or implemented in a form satisfactory to the
Plan Proponents.
9.3 Waiver of Conditions. The Plan Proponents expressly
reserve the right to waive any of the conditions set forth in this Article IX.
ARTICLE X
RETENTION OF JURISDICTION
Section 10.1. Retention of Jurisdiction. Notwithstanding the
entry of the Confirmation Order or the Effective Date having occurred, the
Bankruptcy Court shall retain exclusive jurisdiction over all matters arising
out of or relating to the Cases, including, but not limited to, the following
matters:
(a) to determine the allowance or classification of
Claims or Interests and to determine any objections thereto;
29
<PAGE> 31
(b) to construe and take any action to enforce this Plan
and to issue such orders as may be necessary for the implementation,
execution and consummation of this Plan;
(c) to determine any and all applications for allowance
of compensation or reimbursement of expenses;
(d) to determine any other requests for payment of
Priority Claims;
(e) to determine any other request for payment of
Administrative Expense Claims;
(f) to resolve any dispute regarding the implementation
of this Plan;
(g) to determine any and all applications pending on the
Confirmation Date for the rejection, assumption or assignment of
executory contracts or unexpired leases and the allowance of any Claim
resulting therefrom;
(h) to determine all applications, motions, adversary
proceedings, contested matters and other litigated matters that may be
pending in the Court on or initiated after the Effective Date in
connection with the Cases;
(i) to determine such other matters and for such other
purposes as may be provided in the Confirmation Order;
(j) to modify the Plan pursuant to section 1127 of the
Bankruptcy Code, or to remedy any apparent non-material defect or
omission in this Plan, or to reconcile any non-material inconsistency
in the Plan so as to carry out its intent and purposes;
(k) to enter an order or final decree closing the Cases;
(l) to determine matters under section 505 of the
Bankruptcy Code relating to any tax, fine, penalty or addition to tax
for which any Debtor or the Estates may be liable, directly or
indirectly, or any refund to which any Debtor may be entitled;
(m) to consider and act on the compromise and settlement
or payment of any Claim against any Debtor or Estate;
(n) to determine all questions and disputes regarding
title to the assets of any Debtor or Estate;
30
<PAGE> 32
(o) to construe, enforce and resolve all questions and
disputes relating to employment agreements existing or approved by the
Bankruptcy Court at or prior to the Confirmation Date;
(p) to approve the surrender and abandonment of property
of any Debtor or Estate pursuant to the Bankruptcy Code;
(q) to issue injunctions, enter and implement other
orders or to take such other actions as may be necessary or
appropriate to restrain interference by any entity with consummation,
implementation or enforcement of the Plan or the Confirmation Order;
(r) to remedy any breach or default occurring under this
Plan; and
(s) to resolve and finally determine all disputes that
may relate to, impact on, or arise in connection with, this Plan.
ARTICLE XI
EFFECTS OF CONFIRMATION
Section 11.1. Discharge. The Confirmation Order shall
discharge each Debtor from any debt and liability that arose before
Confirmation, as provided in sections 524 and 1141 of the Bankruptcy Code, and
any debt and liability of a kind specified in section 502(g), 502(h) or 502(i)
of the Bankruptcy Code, whether or not:
(i) a proof of claim based on such debt or liability is
filed or deemed filed under section 501 of the Bankruptcy Code;
(ii) a Claim based on such debt or liability is Allowed; or
(iii) the holder of a Claim based on such debt or liability
has accepted this Plan.
Section 11.2. Limitation of Liability. Notwithstanding any
other provision of this Article XI, none of the directors, officers, agents,
representatives, financial advisors, attorneys or employees of (i) any Debtor,
(ii) any Reorganized Debtor, (iii) the Creditors' Committee, (iv) any member of
the Creditors' Committee, (v) Birch or (vi) any member of Birch and neither the
Debtors, the Reorganized Debtors, the Creditors' Committee, any member of the
Creditors' Committee, Birch nor any member of Birch shall have any liability
for actions taken or omitted to be taken in good faith under or in connection
with this Plan or in connection with the Cases or the operation of the Debtors
during the pendency of the Cases.
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<PAGE> 33
Section 11.3. Injunction. Except as otherwise expressly
provided in this Plan, the Confirmation Order will provide, among other things,
that all Persons who have held, hold or may hold Claims or who have held, hold
or may hold any Interest are permanently enjoined from and after the Effective
Date from (i) commencing or continuing in any manner any action or other
proceedings of any kind with respect to any such Claim or Interest against any
Debtor, any Reorganized Debtor, any Indemnified Person, any member of the
Creditors' Committee, Birch or any member of Birch or any of their respective
agents, employees, representatives, financial advisors or attorneys, (ii)
enforcing, attaching, collecting or recovering by any manner or means any
judgment, award, decree or order against any Debtor, any Reorganized Debtor,
any Indemnified Person, any member of the Creditors' Committee, Birch or any
member of Birch or any of their respective agents, employees, representatives,
financial advisors or attorneys, the property of any Debtor or any Reorganized
Debtor with respect to any such Claim, (iii) creating, perfecting or enforcing
any encumbrance of any kind against any Debtor, any Reorganized Debtor, any
Indemnified Person, any member of the Creditors' Committee, Birch or any member
of Birch or any of their respective agents, employees, representatives,
financial advisors or attorneys, or against the property of any Debtor, any
Reorganized Debtor, any Indemnified Person, any member of the Creditors'
Committee, Birch or any member of Birch with respect to any such Claim, except
that holders of security interests in or liens, charges or other encumbrances
on property may perfect such security interests, liens, charges or other
encumbrances, (iv) asserting any setoff, right of subrogation, or recoupment of
any kind against any obligation due any Debtor, any Reorganized Debtor, any
Indemnified Person, any member of the Creditors' Committee or Birch or any
member of Birch or against the property of any Debtor, any Reorganized Debtor,
any Indemnified Person, any member of the Creditors' Committee, Birch or any
member of Birch or any of their respective agents, employees, representatives,
financial advisors or attorneys, with respect to any such Claim, (v) commencing
or continuing in any manner any action or other proceeding of any kind with
respect to any Claim as to which such Person shall be deemed to have covenanted
not to sue as provided in this Section 11.3 and (vi) commencing any action,
collecting or recovering by any manner or means any judgment, award, decree or
order against the immediate or any mediate transferee of any property
distributed pursuant to this Plan or the securities issued hereunder based upon
a claim that the transferor's receipt of such property constituted a fraudulent
conveyance, preference, violation of a bulk sales law or based upon any other
claim that receipt and or distribution of property by transfer pursuant to this
Plan is wrongful.
Section 11.4. Modification and Revocation of this Plan. (a)
Subject to the restrictions and modifications set forth in section 1127 of the
Bankruptcy Code, the Plan Proponents reserve the right to alter, amend or
modify this Plan before its substantial consummation.
(b) The Plan Proponents reserve the right to revoke or
withdraw this Plan prior to the Confirmation Date and any Plan Proponent may
separately exercise this right. If a Plan Proponent revokes or withdraws this
Plan, or if Confirmation does not occur, this Plan
32
<PAGE> 34
shall be null and void in all respects, and nothing continued in this Plan
shall (i) constitute a waiver or release of any Claims by or against, or any
Interests in, the Debtors or (ii) prejudice in any manner the rights of the
Debtors.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1. Headings. The headings of the articles,
sections and subsections of this Plan are inserted for convenience only and
shall not affect the interpretation hereof.
Section 12.2. Construction. The rules of construction used
in section 102 of the Bankruptcy Code shall apply to the construction of this
Plan.
Section 12.3. Amendments. This Plan may not be altered,
amended, modified or withdrawn without the prior written consent of each of the
Plan Proponents.
Section 12.4. Notices. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered to the applicable party at its address.
Section 12.5. Committees. The Creditors' Committee shall
continue to have all the rights, powers and duties conferred upon it pursuant
to section 1103 of the Bankruptcy Code until the Effective Date. On the
Effective Date, the Creditors' Committee shall be disbanded and terminate.
Professionals employed by the Creditors' Committee shall be compensated for
services rendered and reimbursed for expenses incurred in accordance with
Section 5.15.
Section 12.6. Severability of Plan Provisions. If, on or
before the Confirmation Date, any term or provision of this Plan is held by the
Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court,
with the consent of the Plan Proponents, shall have the power to alter and
interpret such term or provision to make it valid or enforceable to the maximum
extent practicable, consistent with the original purpose of the term or
provision held to be invalid, void or unenforceable, and such term or provision
shall then be applicable as altered or interpreted. Notwithstanding any such
holding, alteration or interpretation, the remainder of the terms and
provisions of this Plan will remain in full force and effect and will in no way
be affected, impaired or invalidated by such holding, alteration or
interpretation. The Confirmation Order shall constitute a judicial
determination and shall provide that each term and provision of this Plan, as
it may have been altered or interpreted in accordance with the foregoing, is
valid and enforceable pursuant to its terms.
33
<PAGE> 35
Respectfully submitted,
DISCOVERY ZONE, INC.
BEAVERTON FUN FITNESS, INC.
DJM MANAGEMENT, INC.
DZ OF CONNECTICUT, INC.
DZ OF GEORGIA, INC.
DZ OF MASSACHUSETTS, INC.
DZ OF MISSOURI, INC.
DZ OF NEW YORK, INC.
DZ OF PENNSYLVANIA, INC.
DZ OF WISCONSIN, INC.
PORTLAND FUN FITNESS, INC.
VANCOUVER FUN FITNESS, INC.
DISCOVERY ZONE (PUERTO RICO),
INC.
LEAPS & BOUNDS, INC.
SEMBORG CORP.
DZGP, INC.
DISCOVERY ZONE CHILDREN'S
AMUSEMENT
CORPORATION
Debtors and
Debtors in possession
By:
----------------------------
David A. Barclay
Vice President and General Counsel
DZ PARTY, INC.
Debtor and
Debtor in possession
By:
----------------------------
David A. Barclay
President
<PAGE> 36
DISCOVERY ZONE L.P.
Debtor and
Debtor in possession
By: DZGP, Inc., its general partner
By:
----------------------------------
David A. Barclay
Vice President and General Counsel
TUMBLE FOR FUN LIMITED
PARTNERSHIP
Debtor and
Debtor in possession
By: Discovery Zone Children's
Amusement Corporation, its
general partner
By:
----------------------------------
David A. Barclay
Vice President and General Counsel
35
<PAGE> 37
Schedule 1
List of Debtors
Discovery Zone, Inc.
Subsidiary Debtors
Beaverton Fun Fitness, Inc.
DJM Management, Inc.
DZ of Connecticut, Inc.
DZ of Georgia, Inc.
DZ of Massachusetts, Inc.
DZ of Missouri, Inc.
DZ of New York, Inc.
DZ of Pennsylvania, Inc.
DZ of Wisconsin, Inc.
Portland Fun Fitness, Inc.
Vancouver Fun Fitness, Inc.
Discovery Zone (Puerto Rico), Inc.
Leaps & Bounds, Inc.
Semborg Corp.
DZ Party, Inc.
DZGP, Inc.
Discovery Zone Children's Amusement Corporation
Partnership Debtors
Discovery Zone L.P.
Tumble for Fun Limited Partnership
<PAGE> 38
Schedule 2
----------
Executory Contracts and Unexpired Leases to be Rejected
(TO BE SUPPLIED)
<PAGE> 39
Exhibit A
---------
Articles of Incorporation of Reorganized Discovery Zone
(TO BE SUPPLIED)
<PAGE> 40
Exhibit B
---------
By-Laws of Reorganized Discovery Zone
(TO BE SUPPLIED)
<PAGE> 41
Exhibit C
---------
Employee Retention Plan
(TO BE SUPPLIED)
<PAGE> 42
Exhibit D
---------
Merger Agreement
(TO BE SUPPLIED)
<PAGE> 43
Exhibit E
---------
Form of Ten Year Reorganized DZ Warrant
(TO BE SUPPLIED)
<PAGE> 44
Exhibit F
---------
Form of Reorganized DZ Management Team Warrant
(TO BE SUPPLIED)
<PAGE> 45
Exhibit G
---------
Form of Plan Proponent Reorganized DZ Warrant
(TO BE SUPPLIED)
<PAGE> 46
Exhibit H
---------
Form of Reorganized Discovery Zone Supplier Credit Agreement
(TO BE SUPPLIED)
<PAGE> 47
Exhibit I
---------
Form of Rent Deferral Secured Note
(TO BE SUPPLIED)
