-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ACm9DLvp3+jMZ72D18fJXNaWfydFSw5qNhZdx1jcqlo4EjyOjhBdEOSXa1KrPF00 o4C66efIl2PwjTOUfjIx6w== 0000950129-96-003207.txt : 19961202 0000950129-96-003207.hdr.sgml : 19961202 ACCESSION NUMBER: 0000950129-96-003207 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961113 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961127 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STUART ENTERTAINMENT INC CENTRAL INDEX KEY: 0000355142 STANDARD INDUSTRIAL CLASSIFICATION: GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944] IRS NUMBER: 840402207 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-10737 FILM NUMBER: 96673784 BUSINESS ADDRESS: STREET 1: 3211 NEBRASKA AVENUE CITY: COUNCIL BLUFFS STATE: IA ZIP: 51501 BUSINESS PHONE: 7123231488 MAIL ADDRESS: STREET 1: 3211 NEBRASKA AVENUE CITY: COUNCIL BLUFFS STATE: IA ZIP: 51501 FORMER COMPANY: FORMER CONFORMED NAME: BINGO KING CO INC DATE OF NAME CHANGE: 19910725 8-K 1 STUART ENTERTAINMENT, INC. - DATED 11/13/96 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 13, 1996 Stuart Entertainment, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 0-10737 84-0402207 ---------------- --------------- ------------------ (State or other jurisdiction of (Commission (IRS Employer incorporation) File Number) Identification No.) 3211 Nebraska Avenue Council Bluffs, Iowa 51501 ---------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (712) 323-1488 Not Applicable ------------------------------------------------------------- (Former name or former address, if changed since last report) 2 Item 2. Acquisition and Disposition of Assets. On November 13, 1996, Stuart Entertainment, Inc., a Delaware corporation (the "Company") completed a private placement (the "Offering") in reliance on Rule 144A of the Securities Act of 1933, as amended, of $100 million aggregate principal amount of its 12-1/2% Senior Subordinated Notes due 2004 (the "Notes"). Interest on the Notes will be payable semi-annually in arrears on each May 15 and November 15 commending May 15, 1997. The Notes will mature on November 15, 2004. The indenture governing the Notes imposes certain limitations on the Company's ability to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments and consummate certain asset sales. The Company used the net proceeds of the Offering (i) to repay in full existing revolving credit and term facilities, at which time such facilities will be cancelled, and certain other outstanding debt instruments, and (ii) to acquire substantially all of the assets and assume certain liabilities (the "Assets") of Trade Products, Inc., a Washington corporation ("Trade Products"), as described in the Asset Purchase Agreement dated August 6, 1996 and amended on October 10, 1996, between the Company, Trade Products, and Harry Poll, Ronald G. Rudy and Harry Wirth as the shareholders of Trade Products (collectively, the "Shareholders"). The Company purchased the Assets on November 13, 1996, for a total purchase price of $37.2 million, subject to certain post-closing adjustments, plus the issuance of warrants to purchase 300,000 shares of the Company's common stock. Neither Trade Products nor the Shareholders were affiliated with the Company. The sale results in the disposition of substantially all of Trade Product's assets. The Assets purchased include equipment to manufacture pulltab tickets, bingo paper, promotional games and other related gaming equipment, inventory, intellectual property rights and generally all other assets that were necessary to operate the business of Trade Products. Trade Products, a privately held company based in Seattle and the nation's largest maker and marketer of pulltab tickets, had 1995 sales of more than $36 million. Trade Products has been in existence since 1974 and produces more than 2.3 million charitable gaming tickets annually. The Company does not plan to make any material changes in the day-to-day operation of Trade Products. Item 5. Other Events. On November 13, 1996, the Company also entered into an Amended and Restated Credit Agreement with Bank of America National Trust and Savings Association and other parties signatory thereto (the "Credit Agreement"), which consists of a $30 million revolving credit facility. The Company may draw under the new Credit Agreement subject to availability pursuant to borrowing base requirements. The Company anticipates using the new credit facility to support future growth opportunities. 3 Item 7. Financial Statements and Exhibits. (a) Financial Statements of Trade Products, Inc. At this time it is impracticable for the Company to provide the financial statements required by this item. The required financial statements will be filed with the Securities and Exchange Commission by an amendment to this Form 8-K not later than 60 days after the date on which this Current Report on Form 8-K must be filed. (b) Pro Forma Financial Information. At this time it is impracticable for the Company to provide the financial statements required by this item. The required financial statements will be filed with the Securities and Exchange Commission by an amendment to this Form 8-K not later than 60 days after the date on which this Current Report on Form 8-K must be filed. (c) Exhibits. 2.1 Asset Purchase Agreement dated August 6, 1996, between the Company, Trade Products, Inc. and the Shareholders of Trade Products, Inc., is incorporated by reference to the Company's Current Report on Form 8-K, dated August 6, 1996. 2.2 First Amendment to Asset Purchase Agreement, dated as of October 10, 1996. 4.1 Warrant to Purchase 300,000 Shares of Common Stock of the Company dated November 13, 1996. 10.1 Employment Agreement dated November 13, 1996, between the Company and Ronald G. Rudy. 20.1 Press Release dated November 13, 1996, relating to the purchase of substantially all of the assets and certain liabilities of Trade Products, Inc. 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STUART ENTERTAINMENT, INC. Date: November 27, 1996 By: /s/ Paul C. Tunink --------------------------------------- Paul C. Tunink, Vice President--Finance, Treasurer and Chief Financial Officer 5 EXHIBIT INDEX
Exhibit No. Exhibit Description ----------- ------------------- 2.1 Asset Purchase Agreement dated August 6, 1996, between the Company, Trade Products, Inc. and the Shareholders of Trade Products, Inc., is incorporated by reference to the Company's Current Report on Form 8-K, dated August 6, 1996. 2.2 First Amendment to Asset Purchase Agreement, dated as of October 10, 1996. 4.1 Warrant to Purchase 300,000 Shares of Common Stock of the Company dated November 13, 1996. 10.1 Employment Agreement dated November 13, 1996, between the Company and Ronald G. Rudy. 20.1 Press Release dated November 13, 1996, relating to the purchase of substantially all of the assets and certain liabilities of Trade Products, Inc.
EX-2.2 2 1ST AMEND. TO ASSET PURCHASE AGREEMENT 1 EXHIBIT 2.2 FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the "Amendment") is entered into effective as of October 10, 1996 (the "Effective Date"), by and among Stuart Entertainment, Inc., a Delaware corporation ("Purchaser"), Trade Products, Inc., a Washington corporation ("Seller"), and the undersigned shareholders of Seller ("Shareholders"). Purchaser, Seller and the Shareholders are referred to collectively herein as the "Parties" and individually as a "Party." RECITALS A. The Parties are bound by that certain Asset Purchase Agreement dated August 6, 1996 (the "Agreement"). B. The Parties believe that it is in their best interests to amend the Agreement pursuant to the terms and conditions set forth herein. AGREEMENT NOW THEREFORE, in consideration of the Recitals which are incorporated by reference herein and which shall be deemed to be a substantive part of this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows: 1. DEFINITIONS. Unless otherwise defined herein or the context requires otherwise, terms which are used in this Amendment and which are defined in the Agreement shall have the same meanings given to them in the Agreement. 2. TABLE OF CONTENTS. The Table of Contents shall be deleted in its entirety and the attached Amended Table of Contents shall be substituted in lieu thereof. 3. DEFINITIONS - "CONSULTING AGREEMENT." The paragraph entitled "Consulting Agreement" in Section 1.01 of the Agreement shall be deleted in its entirety and the following new paragraph entitled "Consulting Agreement" shall be substituted in lieu thereof: "Consulting Agreement" means the Consulting Agreement, substantially in the form of Amended Exhibit B hereto, to be entered into between Purchaser and Harry Poll on the Closing Date. 4. DEFINITIONS - "NOTE." The paragraph entitled "Note" in Section 1.01 of the Agreement shall be deleted in its entirety. 2 5. DEFINITIONS - "SUBORDINATION AGREEMENT." The paragraph entitled "Subordination Agreement" in Section 1.01 of the Agreement shall be deleted in its entirety. 6. DEFINITIONS - "WARRANT." The paragraph entitled "Warrant" in Section 1.01 of the Agreement shall be deleted in its entirety, and the following new paragraph entitled "Warrant" shall be substituted in lieu thereof. "Warrant" means the Warrant to purchase 300,000 shares of Common Stock, to be evidenced by a warrant certificate, substantially in the form of Amended Exhibit F hereto, to be issued by Purchaser to Seller on the Closing Date. 7. EXCLUDED ASSETS. Section 2.01(b)(iv) of the Agreement shall be deleted in its entirety, and the following new Section 2.01(b)(iv) shall be substituted in lieu thereof: (iv) the assets, properties or rights set forth on Schedule 2.01(b), including the rights of Seller in and to the proceeds in the amount of $2,000,000 received by Seller in connection with the settlement of the litigation styled Trade Products, Inc. v. Battelle Memorial Institute, U.S. District Court for the Western District of Washington, Cause No. C95-0968R. 8. PURCHASE PRICE. Section 2.03 of the Agreement shall be deleted in its entirety, and the following new Section 2.03 shall be substituted in lieu thereof: (a) Cash. Thirty Seven Million Two Hundred Forty Nine Thousand One Hundred Thirty Seven Dollars ($37,249,137) to be paid as follows: (i) $26,399,137 shall be paid to Seller in immediately available funds by wire transfer to an account designated by Seller. The account shall be designated by Seller by notice to Purchaser not later than two business days prior to the Closing Date (or if not so designated, then by certified or official bank check payable in next day funds to the order of Seller in such amount); (ii) $9,100,000 shall be paid in immediately available funds by wire transfer to an account designated by U.S. Bank of Washington, National Association (the "Bank"). The account shall be designated by Bank by notice to Purchaser not later than two business days prior to the Closing Date (or if not so designated, then by certified or official bank check payable in next day funds to the order of Bank in such amount), in payment of Seller's existing bank debt. (iii) $1,750,000 (the "Escrow Funds") shall be placed in an escrow account (the "Escrow Account") with the escrow agent ("Escrow Agent") pursuant to an Escrow Agreement substantially in the form attached hereto and incorporated herein as Exhibit K (the "Escrow Agreement") 2 3 (b) Warrant. Purchaser shall issue and deliver the Warrant to purchase 300,000 shares of Common Stock with an exercise price of $7.75 per share to Seller. (c) Purchase Price Adjustment. The Purchase Price shall be increased or decreased to the extent Seller's total stockholder equity, as reflected on Seller's audited financial statements as of the Closing Date, is greater or less than Seller's total stockholder equity as reflected on Seller's audited financial statements as of September 30, 1996. (d) Allocation of Purchase Price. The Purchase Price and the liabilities assumed by Purchaser in accordance with Section 2.04 hereof and any non-recourse liabilities to which any Asset is subject as finally determined shall be allocated among the Assets acquired hereunder as described on Schedule 2.03(d) hereof. Seller and Purchaser each hereby covenant and agree that it will not take a position on any income tax return, before any governmental agency charged with the collection of any income tax, or in any judicial proceeding that is in any way inconsistent with the terms of this Section 2.03(d). 9. CLOSING FINANCIAL STATEMENTS. The sixth full paragraph of Section 2.05 of the Agreement shall be deleted in its entirety, and the following new sixth full paragraph of Section 2.05 shall be substituted in lieu thereof: The amount of the Purchase Price adjustment shall be determined in accordance with Section 2.03(c) hereof on the later of the 15th day after delivery of the Report pursuant hereto, or the date upon which any dispute concerning any GAAP Adjustment is resolved (the "Adjustment Date"). Any increase to the Purchase Price shall be paid by Purchaser to Seller and any decrease in the Purchase Price shall be paid by Seller to Purchaser, in immediately available funds, by wire transfer to the bank account designated by Purchaser or Seller, as the case may be, within five business days (the "Due Date") of the Adjustment Date. If Purchaser or Seller, as the case may be, fails to make any payment required under this Section 2.05 in full on the Due Date, Purchaser or Seller, as the case may be, shall pay to the other interest on the amount outstanding on the Due Date until the actual date of payment (both dates inclusive) at the rate of 5% over the U.S. Prime Rate published by the Wall Street Journal on the Due Date to be adjusted on each 6 month anniversary hereof until all payments required to be made under this Section 2.05 shall be paid in full. 10. PURCHASER'S DELIVERIES AT CLOSING. Section 3.02(b) of the Agreement shall be deleted in its entirety and the following new Section 3.02(b) shall be substituted in lieu thereof: (b) Purchaser shall deliver to Seller the following: (i) the cash portion of the Purchase Price; 3 4 (ii) the Warrant; and (iii) the Assignment and Assumption Agreement. 11. DELIVERIES AT CLOSING TO ESCROW AGENT. The following new Section 3.02(d) shall be added to, and shall be deemed part of, the Agreement: (d) At Closing, Seller and Purchaser shall deliver the Escrow Agreement to the Escrow Agent, and Purchaser also shall deliver the Escrow Funds to the Escrow Agent. 12. PURCHASE FOR INVESTMENT. Sections 4.30(b), (c) and (e) of the Agreement shall be deleted in their entirety and the following new Sections 4.30(b), (c) and (e) shall be substituted in lieu thereof: (b) Seller and the Shareholders understand that Purchaser proposes to issue and deliver the Warrant to Seller and the Shareholders pursuant to this Agreement without compliance with the registration requirements of the 1933 Act; that for such purpose Purchaser will rely upon the representations, warranties, covenants and agreements contained herein; and that such non-compliance with registration is not permissible unless such representations and warranties are correct and such covenants and agreements performed. Seller and the Shareholders are "accredited investors" as such term is defined in Rule 501 under the 1933 Act. (c) Seller and the Shareholders understand that, under existing rules of the Securities and Exchange Commission (the "SEC"), Seller and the Shareholders may be unable to sell the Warrant or the Common Stock issuable thereunder except to the extent that the Warrant or the Common Stock may be sold (i) pursuant to an effective registration statement covering such securities pursuant to the 1933 Act or (ii) in a bona fide private placement to a purchaser who shall be subject to the same restrictions on any resale or (iii) subject to the restrictions contained in Rule 144 under the 1933 Act. *** (e) Seller and the Shareholders are purchasing the Warrant for investment for their own accounts and not with a view to, or for sale in connection with, the distribution thereof within the meaning of the 1933 Act. 13. CONDUCT OF BUSINESS UNTIL CLOSING DATE. The first full paragraph of Section 6.02(a) shall be deleted in its entirety, and the following new first full paragraph of Section 6.02(a) shall be substituted in lieu thereof: (a) Conduct of Business Until Closing Date. From the date of this Agreement and until the Closing Date except with the prior written consent of Purchaser and subject to the provisions of Section 6.02(h), Seller shall conduct the Business in the ordinary course 4 5 and consistent with past practices and use its best efforts to preserve intact its business organization and goodwill, keep available the services of its present officers and key employees and preserve the goodwill and business relationships with suppliers, customers and others having business relationships with it. Without limiting the generality of the foregoing, Seller shall: 14. CESSATION OF LOS ANGELES OPERATIONS. The following new Section 6.02(h) shall be added to, and shall be deemed part of, the Agreement: (h) Notwithstanding any provision contained herein, on or before December 31, 1996 (the "Termination Date"), Seller shall have ceased and closed all of its operations in Los Angeles, California (the "Los Angeles Operations") and shall have terminated all of the employees of the Los Angeles Operation (the "Los Angeles Employees"), except for Myrna Johnson, Sylvia Damien and Kimberly Choquette (collectively, the "Retained Employees") who for purposes of this Section shall not be deemed to be Los Angeles Employees, and in connection therewith, Seller shall pay directly to each Los Angeles Employee all compen- sation due to any Los Angeles Employee up and through the Termination Date, as well as any severance pay and benefits due to each such Los Angeles Employee, including without limitation, all benefits under any Plan which have been accrued or reserved on Seller's financial statements on behalf of any Los Angeles Employee (or is attributable to expenses properly incurred for any such Los Angeles Employee), as of the Closing Date, and Purchaser shall assume no liability therefore. Notwithstanding any provision contained herein, Seller shall use its best efforts to retain the services of the Retained Employees beyond the date of Closing through the Termination Date. 15. SUBORDINATION AGREEMENT. Section 7.01(g) of the Agreement shall be deleted in its entirety, and Section 7.01(h) of the Agreement shall become new Section 7.01(g) of the Agreement. 16. INDEMNIFICATION PROCEDURES - ESCROW ACCOUNT. Section 8.03(b) of the Agreement shall be deleted in its entirety and the following new Section 8.03(b) shall be substituted in lieu thereof: (b) All payments for Damages pursuant to this Article VIII shall be paid as follows: (i) First, from the Escrow Account to the extent that funds held under the Escrow Agreement are sufficient to pay such items; and (ii) Second, by Seller and Shareholders. 17. EQUITABLE RELIEF. Section 8.04 of the Agreement shall be deleted in its entirety, and the following new Section 8.04 shall be substituted in lieu thereof: Section 8.04. EQUITABLE RELIEF. In the event of a breach or threatened breach by Seller, Mr. Poll and/or Mr. Wirth of Section 9.08 hereof regarding noncompetition and nonsolicitation, Seller, Mr. Poll and Mr. Wirth hereby consent and agree that Purchaser 5 6 shall be entitled to an injunction or similar equitable relief restraining the breaching party from committing or continuing any such breach or threatened breach or granting specific performance of any act required to be performed by Seller, Mr. Poll and/or Mr. Wirth under any such provision, without the necessity of showing any actual damage or that money damages would not afford an adequate remedy and without the necessity of posting any bond or other security. Nothing herein shall be construed as prohibiting or limiting Purchaser from pursuing any other remedies at law or in equity which it may have. 18. NON-SOLICITATION; NONCOMPETITION. Section 9.08 of the Agreement shall be deleted in its entirety, and the following new Section 9.08 shall be substituted in lieu thereof: Section 9.08. NON-SOLICITATION; NONCOMPETITION. Seller, Mr. Poll and Mr. Wirth acknowledge and recognize at all times for a period of five years subsequent to the Closing Date as follows: (a) That Seller, Mr. Poll and/or Mr. Wirth will not directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, organization, financing or control of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with any business or enterprise engaged in a business the same as or similar to the business of Purchaser except as a holder of fewer than 5% of the outstanding shares or other equity interests of a company whose shares or other equity interests are registered under the 1934 Act; provided, however, that the restrictions in this subparagraph shall not apply with respect to Seller's, Mr. Poll's and/or Mr. Wirth's ownership of an interest in a company that is engaged in the business of real estate development or the building and development of mini-storage units or bicycle-related products. (b) That Seller, Mr. Poll and/or Mr. Wirth will not directly or indirectly induce any employee of the Company or any of its affiliates to engage in any activity in which Seller, Mr. Poll and/or Mr. Wirth are prohibited from engaging by this Section 9.08 or to terminate his employment with Purchaser or any of its affiliates, and will not directly or indirectly employ or offer employment to any person who was employed by Purchaser or any of its affiliates unless such person shall have been terminated without cause or ceased to be employed by any such entity for a period of at least 12 months. (c) That Seller, Mr. Poll and/or Mr. Wirth will not use or permit its or their name to be used in connection with any business or enterprise engaged in the business the same as or similar to Purchaser or its Affiliates or any other business engaged in by Purchaser or any of its Affiliates. 6 7 (d) That Seller, Mr. Poll and/or Mr. Wirth will not make any public statement, make any unprovoked statements to regulatory agencies, nor take any such actions where the primary purpose of such public statement, unprovoked statement or action is intended to (i) impair the goodwill or the business reputation of Purchaser or any of its Affiliates or (ii) benefit a competitor of Purchaser or to be otherwise detrimental to the material interests of Purchaser. (e) That Seller, Mr. Poll and/or Mr. Wirth will not (i) disclose any customer lists or any part thereof to any person, firm, corporation, association or other entity for any reason or purpose whatsoever; (ii) assist in obtaining any of Purchaser's customers for any other similar business; (iii) encourage any customer to terminate, change or modify its relationship with Purchaser; or (iv) solicit or divert or attempt to solicit or divert Purchaser's customers. (f) Purchaser shall have the right, subject to applicable law, to inform any other third party that Purchaser reasonably believes to be, or to be contemplating participating with Seller, Mr. Poll and/or Mr. Wirth or receiving from Seller, Mr. Poll and/or Mr. Wirth in violation of this Agreement and of the rights of Purchaser hereunder, and that participation by any such third party with Seller, Mr. Poll and/or Mr. Wirth in activities in violation of this Section 9.08 may give rise to claims by Purchaser against such third party. The primary purpose of this Section 9.08 is Purchaser's legitimate interest in protecting its economic welfare and business goodwill. Purchaser, Seller, Mr. Poll and Mr. Wirth further agree that this covenant shall in no way be construed as a mere limitation on competition nor shall it be construed as a restraint on Seller's, Mr. Poll's and/or Mr. Wirth's right to engage in a common calling. It is expressly understood and agreed that although Purchaser, Seller, Mr. Poll and Mr. Wirth consider the restrictions contained in this Section 9.08 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Section 9.08 is an unenforceable restriction against Seller, Mr. Poll and/or Mr. Wirth, the provisions of this Section 9.08 shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. 19. EXHIBIT B. Exhibit B to the Agreement shall be deleted in its entirety and the attached Amended Exhibit B shall be substituted in lieu thereof. 20. EXHIBIT D. Exhibit D to the Agreement shall be deleted in its entirety. 7 8 21. EXHIBIT E. Exhibit E to the Agreement shall be deleted in its entirety. 22. EXHIBIT F. Exhibit F to the Agreement shall be deleted in its entirety and the attached Amended Exhibit F shall be substituted in lieu thereof. 23. EFFECT OF AMENDMENT. This Amendment is a modification of the Agreement and is incorporated therein. Except as expressly set forth in this Amendment, the Parties shall not be deemed to have amended or modified the Agreement in any other respect. 24. FACSIMILE TRANSMISSION; COUNTERPARTS. Signatures on this Amendment may be communicated by facsimile transmission and shall be binding upon the Parties transmitting the same by facsimile transmission. Counterparts with original signatures shall be provided within three (3) days of the applicable facsimile transmission, provided, however, that the failure to provide the original counterpart shall have no effect on the validity or the binding nature of the Amendment. If executed in counterparts, the Amendment shall be effective as if simultaneously executed. 8 9 IN WITNESS WHEREOF, the Parties have duly executed this Amendment effective as of the Effective Date. PURCHASER: STUART ENTERTAINMENT, INC., a Delaware corporation By /S/ ALBERT F. BARBER ---------------------------------- Albert F. Barber, Vice Chairman and Chief Executive Officer Attest: By /S/ MICHAEL A. SCHALK --------------------------- Michael A. Schalk, Corporate Secretary SELLER: TRADE PRODUCTS, INC., a Washington corporation By /S/ HARRY POLL ---------------------------------- Harry Poll, Chairman and Chief Executive Officer Attest: By /S/ TONDA L. SMITH --------------------------- Tonda L. Smith, Executive Assistant SHAREHOLDERS: /S/ HARRY POLL ------------------------------------ Harry Poll /S/ RONALD G. RUDY ------------------------------------ Ronald G. Rudy /S/ HARRY WIRTH ------------------------------------ Harry Wirth 9 EX-4.1 3 WARRANT TO PURCHASE 300,000 SHARES COMMON STOCK 1 EXHIBIT 4.1 NEITHER THIS WARRANT NOR ANY SECURITY ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR ANY SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IF (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND REGISTERED AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR (B) THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT NO REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED TO EFFECT SUCH TRANSFER. STUART ENTERTAINMENT INC. 300,000 Warrants each to Purchase one Share of Common Stock of Stuart Entertainment, Inc. FOR VALUE RECEIVED, Stuart Entertainment Inc., a Delaware corporation (the "Company"), hereby certifies that Trade Products, Inc., or its successor or assigns (the "Holder"), is entitled, subject to the provisions of this Warrant, to purchase from the Company, at the times specified herein, 300,000 fully paid and non-assessable shares of common stock of the Company, par value $.01 per share (the "Common Stock"), at a purchase price per share equal to the Exercise Price (as hereinafter defined). (a) DEFINITIONS. (1) The following terms, as used herein, have the following meanings: "AFFILIATE" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. "ASSET PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as of August 6, 1996, as amended by that certain First Amendment to Asset Purchase Agreement (collectively, the "Asset Purchase Agreement"), among the Company, Trade Products, Inc. and the Persons listed on the signature pages thereto. "BUSINESS DAY" means any day except a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized by law to close. "EXERCISE PRICE" means $7.75 per Warrant Share. 2 "EXPIRATION DATE" means 5:00 p.m. New York time on the tenth anniversary of the Closing Date. "PERSON" means an individual, partnership, corporation, trust, joint stock company, association, joint venture, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "WARRANT SHARES" means the shares of Common Stock deliverable upon exercise of this Warrant, as the number of such shares shall be adjusted from time to time as provided herein. (2) Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Asset Purchase Agreement (b) EXERCISE OF WARRANT. (1) The Holder is entitled to exercise this Warrant in whole or in part at any time, or from time to time, until the Expiration Date or, if such day is not a Business Day, then on the next succeeding day that shall be a Business Day. To exercise this Warrant, the Holder shall execute and deliver to the Company a Warrant Exercise Notice substantially in the form annexed hereto, together with this Warrant Certificate and the payment of the applicable Exercise Price in cash or by certified or official bank check or bank cashier's check payable to the order of the Company or by any combination thereof. Upon such delivery and payment, the Holder shall be deemed to be the holder of record of the Warrant Shares subject to such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Holder. The Company shall pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of the Warrant Shares. (2) If the Holder exercises the Warrant in part, this Warrant Certificate shall be surrendered by the Holder to the Company and a new Warrant Certificate of the same tenor and for the unexercised number of Warrant Shares shall be executed by the Company. The Company shall register the new Warrant Certificate in the name of the Holder or in such name or names of its transferee pursuant to paragraph (f) hereof as may be directed in writing by the Holder and deliver the new Warrant Certificate to the Person or Persons entitled to receive the same. (3) Upon surrender of this Warrant Certificate in conformity with the foregoing provisions, the Company shall transfer to the Holder of this Warrant Certificate appropriate evidence of ownership of the shares of Common Stock or other securities or property (including any money) to which the Holder is entitled, registered or otherwise placed in, or payable to the order of, the name or names of the Holder or such transferee as may be directed in writing by the Holder, and shall deliver such 2 3 evidence of ownership and any other securities or property (including any money) to the Person or Persons entitled to receive the same, together with an amount in cash in lieu of any fraction of a share as provided in paragraph (e) below. (c) RESTRICTIVE LEGEND. Unless the issuance of the Warrant Shares shall have been registered under the Securities Act of 1933, as amended (the "Securities Act"), as a condition of its delivery of certificates for the Warrant Shares or upon the split-up, combination, exchange or transfer of the Warrant, the Company may require the Holder (including the transferee of the Warrant in whose name the Warrant Shares are to be registered) to deliver to the Company, in writing, representations regarding the Holder's sophistication, investment intent, acquisition for such Holder's own account and such other matters as are reasonable and customary for purchasers of securities in an unregistered private offering. The Company may place conspicuously upon each new Warrant and upon each certificate representing the Warrant Shares a legend substantially in the form of the legend set forth on the first page of this Warrant Certificate, the terms of which are agreed to by the Holder (including each transferee). (d) REPRESENTATIONS OF THE COMPANY. (1) The execution and delivery by the Company of the Warrant has been duly authorized by all necessary corporate action, does not require any consent or approval (except those consents and approvals already obtained), and does not and will not conflict with, result in any violation of, or constitute any default under, any provision of any contractual obligation of the Company or any law or governmental regulation or court decree or order applicable to the Company. (2) The Company hereby agrees that at all times there shall be reserved for issuance and delivery upon exercise of the Warrant such number of its authorized but unissued shares of Common Stock or other securities of the Company from time to time issuable upon exercise of the Warrant as will be sufficient to permit the exercise in full of the Warrant. All such shares shall be duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and non-assessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale (other than those contemplated by paragraph (f)) and free and clear of all preemptive rights. (3) The Warrant will on the execution and delivery thereof constitute the legal, valid and binding obligation of the Company enforceable against the Company in accordance with their respective terms. (e) FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrant and in lieu of delivery of any such fractional share upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market price per share of Common Stock at the date of such exercise. 3 4 (f) EXCHANGE, TRANSFER OR ASSIGNMENT OF WARRANT. The holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees to give prior written notice to the Company of such holder's intention to transfer such Warrant or the Warrant Shares relating thereto (or any portion thereof) describing briefly the manner and circumstances of the proposed transfer. Promptly after receiving such written notice, the Company shall present copies thereof to Company counsel and to counsel designated by such holder, who may be an employee of such holder. If in the opinion of each such counsel the proposed transfer may be affected without registration or qualification of such Warrant or the Warrant Shares under any Federal or State securities law, the Company, as promptly as practicable, shall notify such holder of such opinion and of the terms and conditions, if any, to be observed, whereupon such holder shall be entitled to transfer such Warrant or Warrant Shares, all in accordance with the terms of the notice delivered to such holder by the Company. If either of such counsel is unable to render such an opinion (in which case said counsel shall set forth in writing the basis for the legal conclusions in this regard), the Company shall promptly notify such holder that the proposed transfer described in the written notice given pursuant to this subsection may not be effected without such registration or qualification or without compliance with the conditions of an exemptive regulation of the Securities and Exchange Commission and any applicable State securities regulatory authority. Such holder shall not be entitled to effect such transfer until such registration, qualification, exemption or other compliance has become effective. All fees and expenses of counsel in connection with the rendition of the opinions provided for in this subsection shall be paid by the holder requesting the transfer. Subject to the preceding and paragraph (c) hereof, upon surrender of this Warrant to the Company, together with the attached Warrant Assignment Form duly executed, the Company shall, without charge, execute and deliver a new warrant in the name of the assignee or assignees named in such instrument of assignment and, if the Holder's entire interest is not being assigned, in the name of the Holder and this Warrant shall promptly be canceled. Notwithstanding the foregoing, except for the first sentence hereof, the provisions of this paragraph (f) shall not apply to any transfer of this Warrant or any Warrant Shares by the Holder to any of the Shareholders. (g) LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company of evidence satisfactory to it (in the exercise of its reasonable discretion) of the loss, theft, destruction or mutilation of this Warrant Certificate, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant Certificate, if mutilated, the Company shall execute and deliver a new Warrant Certificate of like tenor and date. (h) ANTIDILUTION. (1) In case the Company shall at any time after the date hereof (i) declare a dividend or make a distribution on Common Stock payable in Common Stock, (ii) subdivide or split the outstanding Common Stock, (iii) combine or reclassify the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is 4 5 the continuing corporation), the Exercise Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, split, combination or reclassification shall be proportionately adjusted so that, giving effect to paragraph (h)(2) below, the exercise of the Warrant after such time shall entitle the holder to receive the aggregate number of shares of Common Stock or other securities of the Company (or shares of any security into which such shares of Common Stock have been reclassified pursuant to clause (iii) or (iv) above) which, if the Warrant had been exercised immediately prior to such time, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, distribution, subdivision, split, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. (2) Upon an adjustment in the Exercise Price as set forth in paragraph (h)(1) above, the number of shares for which the Warrant are exercisable immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by (i) multiplying the number of shares of Common Stock covered by the Warrant immediately prior to this adjustment of the number of shares of Common Stock by the Exercise Price in effect immediately prior to such adjustment of the Exercise Price and (ii) dividing the product so obtained by the Exercise Price in effect immediately after such adjustment of the Exercise Price. (i) CONSOLIDATION, MERGER, OR SALE OF ASSETS. In case of any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock) or any sale or transfer of all or substantially all of the assets of the Company or of the Person formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, the Holder shall have the right thereafter to exercise the Warrant for the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale or transfer by a holder of the number of shares of Common Stock for which the Warrant may have been exercised immediately prior to such consolidation, merger, sale or transfer, assuming (i) such holder of Common Stock is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale or transfer was made, as the case may be ("Constituent Person"), or an Affiliate of a constituent Person and (ii) in the case of a consolidation, merger, sale or transfer which includes an election as to the consideration to be received by the holders, such holder of Common Stock failed to exercise its rights of election, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, sale or transfer (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, sale or transfer is not the same for each share of Common Stock held immediately prior to such consolidation, merger, sale or transfer by other than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing share"), then for the purpose of this paragraph (i) the kind and amount 5 6 of securities, cash and other property receivable upon such consolidation, merger, sale or transfer by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). Adjustments for events subsequent to the effective date of such a consolidation, merger and sale of assets shall be as nearly equivalent as may be practicable to the adjustments provided for in the Warrant. In any such event, effective provisions shall be made in the certificate or articles of incorporation of the resulting or surviving corporation, in any contract of sale, conveyance, lease or transfer or otherwise so that the provisions set forth herein for the protection of the rights of the Holder shall thereafter continue to be applicable; and any or surviving corporation shall expressly assume obligation to deliver, upon exercise, such shares of stock, other securities, cash and property. The provisions of this paragraph (i) shall similarly apply to successive consolidations mergers, sales, leases or transfers. (j) INCIDENTAL REGISTRATION RIGHTS. (1) The Company agrees that at any time it proposes to register any of its Common Stock under the Securities Act on Form S-1 or any other form of registration statement then available for the registration under the Securities Act of securities of the Company and which is appropriate for the inclusion therein of the Warrant Shares as herein contemplated, it will give written notice to the Holder of its intention so to do and upon the written request of the Holder given within 30 days after receipt of any such notice from the Company, the Company will in each instance use its best efforts to cause all Warrant Shares relating to the Warrant held by the Holder (collectively, the "Eligible Securities") to be registered under said Securities Act and registered or qualified under any State securities law; provided, however, that the obligation to give such notice and to use such best efforts shall not apply to any proposal of the Company to register any of its securities under the Securities Act on Form S-4 or Form S-8 or any successor or similar forms; provided, however, that the Company shall have the right to postpone or withdraw the registration effected pursuant to this paragraph (j) without obligation to any holder. The inclusion of the Eligible Securities will be on the same terms and conditions as the comparable securities, if any, otherwise being sold by underwriters under such registration, or on terms and conditions comparable to those normally applicable to offerings of such securities in reasonably similar circumstances in the event that no securities comparable to the Eligible Securities are being sold through underwriters under such registration; provided, however, that if a greater number of Warrant Shares is offered for participation in the proposed underwriting than, in the reasonable opinion of the Company's underwriter can be accommodated without adversely affecting the proposed underwriting, then the amount of Warrant Shares proposed to be offered by such holders for registration, as well as the number of Securities of any other selling shareholders and the number of Securities being registered by the Company shall be proportionately reduced to a number deemed to be satisfactory to the managing underwriter. Nothing in this paragraph (j) shall be deemed to require the Company to proceed with any registration of its securities after giving the notice herein provided. 6 7 (2) In connection with any offering involving an underwriting, the Company shall not be required to include the Warrant Shares in such offering unless the undersigned accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it and then in only such quantity as will not, in the opinion of the underwriters, jeopardize the success of the offering by the Company. (3) The Company will indemnify and hold harmless the Holder participating in a registration of the Warrant Shares, and each person, if any, who controls such a Holder from and against any and all loss, damage, liability, cost, and expense to which such Holder or controlling person may become subject under the Securities Act or otherwise insofar as such any loss, damage, liability, cost, or expense is caused by any untrue statement or alleged untrue statement of any material fact in such registration statement, any prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, damage, liability, cost, or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Holder or such controlling person in writing specifically for use in the preparation thereof. (4) The Holder participating in a registration hereunder will indemnify and hold harmless the Company, any underwriter, and each person, if any, who controls the Company or such underwriter from and against any and all loss, damage, liability, cost, and expense to which the Company or any such underwriter or controlling person becomes subject under the Securities Act or otherwise insofar as such loss, damage, liability, cost, or expense is caused by any untrue statement of any material fact in such registration statement, any prospectus contained therein, or any amendment or supplement thereto, or arises out of or is based upon the omission or failure to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission was so made in reliance upon and in conformity with written information furnished by such Holder specifically for use in the preparation thereof; provided, however, that the maximum liability of Holder hereunder shall not exceed the maximum proceeds which could be received by Holder pursuant to any registration. (5) Promptly after receipt by an indemnified party of notices of the commencement of any action for which the indemnified party may be entitled to indemnification under the provisions of this paragraph (i), such indemnified party will, if a claim therefor is to be made against the indemnifying party under such provisions, promptly notify the indemnifying part of the commencement thereof; but the failure to so notify the indemnifying party will not relieve the indemnifying party from any liability 7 8 which it may have to indemnification under such provisions except to the extent that such party is prejudiced by such failure. The indemnifying party shall have the right to participate in and, to the extent that it may wish, jointly with any other indemnifying party, to assume the defense of such action with counsel satisfactory to such indemnified party; provided, however, that if the defendants in any action include both the indemnified party and the indemnifying party and there is a conflict of interest which would prevent counsel for the indemnifying party from also representing the indemnified party, the indemnified party or parties shall have the right to select separate counsel to participate in the defense of such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense of any such action, the indemnifying party will not be liable to such indemnified party for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless (A) the indemnified party shall have employed counsel in accordance with the provisions of the preceding sentence, (B) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of action, or (C) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. (6) In the event the indemnification provisions set forth in this paragraph (j) are determined to be unenforceable by a court of competent jurisdiction, the Company and the Holder shall have such rights to contribution as they would have been entitled to receive under applicable law; provided, however, that in no event will the Holder participating in a registration hereunder be obligated to make any contribution to the Company, any underwriter, or any person who controls the Company or any underwriter except to the extent that there is loss, damage, liability, cost, or expense caused by any untrue statement of a material fact in a registration statement, any prospectus contained therein, or any amendment or supplement thereto, or arising out of or based upon the omission or failure to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and then only to the extent, that such untrue statement or omission was so made in reliance upon and in conformity with written information furnished by such Holder specifically for use in the preparation thereof; and provided, further, that the maximum liability of Holder hereunder shall not exceed the maximum proceeds which could be received by Holder pursuant to the registration. (7) All registration expenses will be paid by the Company. For purposes of this paragraph (j), registration expenses shall include (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the shares), (iii) printing expenses, (iv) internal expenses of the Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) reasonable fees and disbursements of counsel for the 8 9 Company and customary fees and expenses for independent certified public accountants retained by the Company, (vi) the reasonable fees and expenses of any special experts retained by the Company in connection with such registration; but shall not include any underwriting fees, discounts or commissions attributable to the sale of the Warrant Shares, or of any out-of-pocket expenses including attorney's fees of the Holder (or the agents who manage their accounts). (k) NOTICES. The Company shall mail to each Holder a notice of any proposed transaction which would require an adjustment pursuant to paragraph (h) or paragraph (i) above. The Company shall mail such notice stating the proposed record date (if any) or effective date for any such transaction and briefly describing the transaction. The Company shall mail the notice first class mail, postage prepaid, to the registered address of such Holder on the books of the Company at least 10 days (or lesser number of days if 10-day notice is not practicable) before such date, but failure to mail the notice or of any Holder to receive the notice or any defect in the notice shall not affect the legality or validity of any such transaction or the vote, if any, upon any such transaction. Any notice, demand or delivery authorized by this Warrant Certificate shall be in writing and shall be given to the Holder or the Company, as the case may be, at its address (or telecopier number) set forth below, or such other address (or telecopier number) as shall have been furnished to the party giving or making such notice, demand or delivery: If to the Company: Stuart Entertainment Inc. 3211 Nebraska Avenue Council Bluffs, Iowa 51501 Telecopy: (712) 323-3215 Attention: Chief Executive Officer If to the Holder: Trade Products, Inc. 2807 Lincoln Way Lynnwood, Washington 98046 Telecopy: (206) 743-5224 Attention: President Each such notice, demand or delivery shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified herein and the intended recipient confirms the receipt of such telecopy or (ii) if given by any other means, when received at the address specified herein. 9 10 (l) RIGHTS OF THE HOLDER. Prior to the exercise of any Warrant, the Holder shall not, by virtue hereof, be entitled to any rights of a shareholder of the Company, including, without limitation, the right to vote, to receive dividends or other distributions, to exercise any preemptive right or to receive any notice of meetings of shareholders or any notice of any proceedings of the Company except as may be specifically provided for herein. (m) WARRANT HOLDER REPRESENTATIONS. Notwithstanding anything to the contrary herein, the Holder represents and warrants that (a) it acknowledges that the Warrant and the Warrant Shares have not been registered under the Securities Act or any state securities laws, (b) the Warrant and the Warrant Shares (unless such Warrant and/or Warrant Shares, as the case may be, are registered under the Securities Act and applicable state securities laws) are being and will be issued pursuant to an exemption from registration for nonpublic offerings or offerings to one or more accredited investors, (c) that the Holder is acquiring the Warrant and will acquire the Warrant Shares (unless such Warrant and/or Warrant Shares are registered under the Securities Act and applicable state securities laws) for his own account and not with a view toward their distribution, (d) the Holder is experienced in making investments of this nature and has the necessary sophistication to be able to evaluate the merits of this investment and (e) the Holder will not sell, offer for sale, pledge or otherwise hypothecate the Warrant or the Warrant Shares (unless such shares are registered under the Securities Act and applicable state securities laws) unless such sale, offer for sale, pledge or hypothecation of the Warrant and Warrant Shares is exempt from the registration and prospectus delivery requirements of the Securities Act and applicable state securities laws. (n) GOVERNING LAW. THIS WARRANT CERTIFICATE AND ALL RIGHTS ARISING HEREUNDER SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND ENFORCED IN ACCORDANCE WITH SUCH LAWS. (o) AMENDMENTS; WAIVERS. Any provision of this Warrant Certificate may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Holder and the Company, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 10 11 IN WITNESS WHEREOF, the Company has duly caused this Warrant Certificate to be signed by its duly authorized officer and to be dated as of November 13, 1996. STUART ENTERTAINMENT, INC. By /S/ ALBERT F. BARBER ------------------------------------- Albert F. Barber, Vice Chairman and Chief Executive Officer Acknowledged and Agreed: TRADE PRODUCTS, INC. By /S/ RONALD G. RUDY ----------------------------- Ronald G. Rudy, President 11 12 WARRANT EXERCISE NOTICE (To be executed only upon exercise of the Warrant) To: Stuart Entertainment Inc. The undersigned irrevocably exercises the Warrant for the purchase of _____ shares (the "Shares") of Common Stock, par value $.01 per share, of Stuart Entertainment Inc. (the "Company") and agrees to make payment therefor in the amount of $____________, all on the terms and conditions specified in the within Warrant Certificate, surrenders this Warrant Certificate and directs that the Shares deliverable upon the exercise of this Warrant be registered or placed in the name and at the address specified below and delivered thereto. Date: ____________, _____ ------------------------------------------ (Signature of Owner) ------------------------------------------ (Street Address) ------------------------------------------ (City, State, Zip Code) 12 13 Securities and/or check to be issued to: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: Any unexercised portion of the Warrant evidenced by the within Warrant Certificate to be issued to: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: 13 14 WARRANT ASSIGNMENT FORM Dated ____________, _____ FOR VALUE RECEIVED, ____________________ hereby sells, assigns and transfers unto ____________________ (the "Assignee"), (please type or print in block letters) ________________________________________________________________________________ (insert address) its right to purchase up to ______ shares of the common stock, $.01 par value per share, of Stuart Entertainment, Inc. represented by this Warrant and does hereby irrevocably constitute and appoint ____________________ Attorney, to transfer the same on the books of the Company, with full power of substitution in the premises. Signature ____________________________________ 14 EX-10.1 4 EMPLOYMENT AGREEMENT - RONALD G. RUDY 1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into as of November 13, 1996, by and between STUART ENTERTAINMENT, INC. (the "Company"), a Delaware corporation, and RONALD G. RUDY, an individual with his principal business address at 2807 Lincoln Way, Lynnwood, Washington 98046 (the "Executive"); W I T N E S S E T H: WHEREAS, the Company desires to employ the Executive as Executive Vice President and Chief Operating Officer of the Trade Products Division of the Company (the "Trade Products Division"); and WHEREAS, the Executive desires to accept such employment offered by the Company; NOW, THEREFORE, in consideration for the mutual obligations contained herein, the Company and the Executive, each intending to be legally bound, hereby mutually covenant and agree as follows: 1. EMPLOYMENT AND TERM. (a) Employment. The Company hereby employs the Executive and the Executive hereby accepts such employment, in the capacity of Executive Vice President and Chief Operating Officer of the Trade Products Division to act in accordance with the terms and conditions hereinafter set forth. (b) Term. The employment hereunder shall be for a term commencing on the date of acquisition by the Company of the assets of Trade Products, Inc. (the "Employment Date"), and terminating on the third anniversary of the Employment Date (the "Term"). (c) Location of Services. Effective upon the Employment Date, and through the Term, the Executive's services will be performed in the Seattle, Washington area. At such location the Company shall provide the Executive with an office and a support staff sufficient to enable the Executive to render the services to be provided by the Executive under this Agreement. It is also anticipated that the Executive may be reasonably required, at the Company's expense, to travel to and render services in different locations from time to time, incident to the performance of the Executive's duties. 2 2. DUTIES. (a) During the Term as provided in Section 1(b) hereof, the Executive shall serve as Executive Vice President of the Company and Chief Operating Officer of the Trade Products Division, and shall have all powers and duties consistent with such position and Executive agrees to perform the duties and services incident to that position, or such other duties and services of a similar nature as may reasonably be required of him by the Board of Directors ("Board") or the Board's designated officer. The Executive agrees to serve as an officer of the Company and of any subsidiary of the Company or affiliated company, without additional compensation. (b) The Executive shall devote substantially his entire time and shall use his best efforts to fulfill faithfully, responsibly and to the best of his ability his duties hereunder and to the promotion of the business and interests of the Company and any subsidiaries or affiliated companies. (c) The Executive shall be appointed to the Board of the Company for a term expiring at the next annual meeting of the stockholders of the Company following the Employment Date. The Executive shall receive no compensation for such service. 3. COMPENSATION. (a) Base Salary. The Company shall pay the Executive an initial base salary of $200,000 (the "Base Salary"), payable in accordance with the Company's normal payroll payment procedures. On the second and third anniversary date of the Employment Date, the Base Salary shall be increased to $210,000 and $220,000, respectively. Any compensation that may be paid to the Executive under any additional compensation or incentive plan of the Company, or that may be otherwise authorized from time to time by the Board, shall be in addition to the Base Salary to which the Executive shall be entitled under this Agreement. (b) Performance Bonuses. For each calendar year during the Term, commencing with calendar year 1996, the Executive shall be eligible to receive a cash bonus (the "Performance Bonus") based upon the Executive's performance and the Trade Products Division achievement of certain targeted financial goals established at the beginning of such year by the Board. The bonus payable for any calendar year shall be paid to the Executive no later than the 15th day of April of the following year and shall in no case be less than $50,000 if the targeted financial objectives are met. This Performance Bonus shall be in lieu of the Executive's participation in any other cash bonus or incentive plan or arrangement of the Company; provided, however, that the bonus program set forth herein may be replaced with a different program approved by the Board with the consent of the Executive. Notwithstanding the above, if the performance of the Executive and the Trade Products Division does not meet the goals 2 3 established by the Board, the Executive acknowledges and agrees that nothing contained herein shall be deemed to entitle the Executive to a Performance Bonus. (c) Grant of Stock Options. The Executive shall be granted options (the "Options") to purchase 250,000 shares of the $.01 par value common stock of the Company as follows: (i) an option for 50,000 shares at $5.00 per share; (ii) an option for 100,000 shares at $10.00 per share; and (iii) an option for 100,000 shares at $15.00 per share. Such Options shall be granted under and in accordance with the Company's 1994 Performance Stock Option Plan. (d) Tax Withholding. The Company shall provide for the withholding of any taxes required to be withheld by federal, state and local law with respect to any payment in cash, shares of capital stock or other property made by or on behalf of the Company to or for the benefit of the Executive under this Agreement or otherwise. The Company may, at its option: (i) withhold such taxes from any cash payments owing from the Company to the Executive, including any payments owing under any other provision of this Agreement, (ii) require the Executive to pay to the Company in cash such amount as may be required to satisfy such withholding obligations or (iii) make other satisfactory arrangements with the Executive to satisfy such withholding obligations. 4. BENEFITS. In addition to the Base Salary, the Performance Bonus, if any, and the Options, the Executive shall also be entitled to the following: (a) Participation in Benefit Plans. The Executive shall be entitled to participate in the various retirement, welfare, fringe benefit, group long term disability plans and other executive prerequisite plans, programs and arrangements of the Company available for senior executive level officers of the Company. The Executive and his dependents, at the Executive's request, shall be enrolled in the Company's health, life, disability and other insurance plans and programs immediately upon his commencement of employment hereunder. (b) Disability Insurance. The Company shall pay the premiums on the Executive's existing disability insurance policy. (c) Vacation and Sick Leave. The Executive shall be entitled to four weeks of vacation during each calendar year during which this Agreement is in effect, and to paid holidays given by the Company to its domestic employees generally, without reduction in salary or other benefits; provided, however, that Executive may take in excess of four weeks vacation with the prior approval of the Chief Executive Officer, which approval shall not be unreasonably withheld, if it will not hinder the performance by Executive of his services under this Agreement or the operation of the Trade Products Division. The Executive shall also be entitled to sick leave according to the sick leave policy which the Company may adopt from time to time. 3 4 (d) Automobile. During the Term, the Company shall pay or reimburse the Executive for all maintenance, repairs, insurance, fuel (up to $100.00 per month) and other costs associated with the use of an automobile designated by the Executive from time to time in accordance with the Company's policies in effect from time to time. (e) Expenses. The Company shall reimburse the Executive, upon proper accounting, for reasonable business expenses and disbursements incurred by him in the course of the performance of his duties under this Agreement and in accordance with the Company's expense authorization and approval procedures in effect from time to time. (f) Proration of Benefits. Any payments or benefits hereunder, in any year during which the Executive is employed by the Company for less than the entire year shall, unless otherwise provided in the applicable plan or arrangement, be prorated in accordance with the number of days in such year during which the Executive is employed by the Company. 5. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE. The Executive hereby represents and warrants to the Company that (i) the Executive's execution and delivery of this Agreement and his performance of his duties and obligations hereunder will not conflict with, or cause a default under, or give any party a right to damages under, or to terminate, any other agreement to which the Executive is a party or by which he is bound, and (ii) there are no agreements or understandings that would make unlawful the Executive's execution or delivery of this Agreement or his employment hereunder. 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Executive as follows: (a) The Company is duly organized and established as a corporation under the laws of the State of Delaware and has all requisite power and authority to enter into this Agreement and to perform its obligations hereunder. The consummation of the transactions contemplated by this Agreement will neither violate nor be in conflict with any agreement or instrument to which the Company is a party or by which it is bound. (b) The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite corporate action on the part of the Company and are valid, legal and binding obligations of the Company, enforceable in accordance with their terms except as may be limited by the laws of general application relating to bankruptcy, insolvency, moratorium or other similar laws relating to or affecting the enforcement of creditors' rights, and rules of law governing specific performance, injunctive relief or other equitable remedies. 4 5 7. TERMINATION. (a) Cause. The Company may terminate the Executive's employment at any time for Cause (as defined herein). For purposes of this Agreement, "Cause" means: (i) the Executive commits a breach of any material term of this Agreement and such breach constitutes gross negligence or wilful misconduct and, if such breach is capable of being cured, the Executive fails to cure such breach within 30 days of notice of such breach; (ii) the Executive is convicted of, or pleads guilty or nolo contendere to a felony or a crime involving moral turpitude; (iii) the Executive's commission of any intentional act in violation of any applicable law or regulation where the Company has a reasonable belief that such act shall be the primary cause for a license of the Company or its subsidiaries or affiliates to be revoked, suspended or not be renewed after proper application, and such revocation, suspension or non-renewal is likely to cause either (a) additional licenses of the Company, its subsidiaries or affiliates to be suspended, revoked or not be renewed after proper application, or (b) a material adverse change in the operations of the Company or the Trade Products Division; (iv) habitual intoxication; (v) habitual illegal drug use or drug addiction; (vi) gross insubordination, gross negligence or willful and knowing violation of any material rule or regulation that may be established by the Company from time-to-time for the conduct of the Company's business; (vii) misappropriation of corporate funds or other acts of dishonesty. (b) Death. This Agreement shall terminate automatically upon the Executive's death. (c) Disability. This Agreement shall terminate automatically upon the Executive's Disability. The term "Disability" as used in connection with termination of the employment of the Executive shall mean the inability of the Executive to substantially perform his material duties hereunder due to physical or mental disablement which continues for a period of six (6) consecutive months, during the term of employment (during which six (6) month period the Executive's salary and benefits shall continue) as determined by an independent qualified physician mutually acceptable to the Company and the Executive (or his personal representative). 5 6 (d) Without Cause. The Company may, at its option, terminate the Executive's employment without Cause at any time upon written notice to the Executive. (e) Date of Termination. For purposes of this Agreement, the term "Date of Termination" shall mean the date that any party gives notice, through action or otherwise, that it intends to terminate this Agreement pursuant to the terms hereof or the date, if any, specified by the terminating party in such notice as the effective date of termination. 8. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) Cause; Disability. If the Executive's employment shall be terminated by the Company for "Cause" or by reason of Disability, the Company shall continue to pay the Executive his Base Salary through the Date of Termination at the rate in effect upon the Date of Termination. Thereafter, the Company shall have no further obligation to the Executive. Notwithstanding the above, in the event of Disability, the Executive shall be entitled to participate in and be covered by the Company's group health plan until the Executive is able to obtain health insurance on substantially the same terms and conditions as provided in the Company's group health plan; provided, however, that if the Company's group health plan does not allow the Executive and his dependents to continue coverage, then the Company and the Executive agree to negotiate a mutually satisfactory alternative to provide the Executive with the benefits intended by this Section 8(a). (b) Death. If the Executive's employment is terminated by reason of the Executive's death, the Company shall pay to the Executive's heirs or estate, the Base Salary at the rate in effect on the day preceding death through the date of his death. (c) Without Cause. If the Executive's employment is terminated without Cause, the Company shall pay to the Executive the greater of the following: (1) the Company shall continue to pay the Executive in accordance with the Company's normal payroll payment procedures his Base Salary at the rates provided in Section 3(a) through the end of the Term; or (2) the Company shall pay the Executive in accordance with the Company's normal payroll payment procedures at the rate in effect at the Date of Termination for a period of one year from the Date of Termination; provided, however, that subject to the provisions of Section 9, the Company's obligation to pay the Executive pursuant to this Section 8(c) shall automatically terminate upon a breach by the Executive of the provisions of Section 9. 9. NONCOMPETITION. (a) The Executive acknowledges and recognizes the highly competitive nature of the business of the Company and its affiliates and the Executive accordingly covenants and agrees, that at all times for a period of twenty-four (24) consecutive months 6 7 subsequent to the end of the Term (regardless of any prior termination of the Agreement for any reason except that, upon termination for "Cause" for 24 months from the Date of Termination only) as follows: (i) The Executive will not directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, organization, financing or control of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with any business or enterprise engaged in a business the same as or similar to the business of the Company except as a holder of fewer than 5% of the outstanding shares or other equity interests of a company whose shares or other equity interests are registered under the Securities Exchange Act of 1934, provided, however, that the restrictions in this subparagraph shall not apply with respect to Executive's ownership of an interest in a company that is engaged in the business of real estate development or the building and development of mini-storage units or bicycle related products. (ii) The Executive will not (a) directly or indirectly induce any employee of the Company or any of its affiliates to engage in any activity in which the Executive is prohibited from engaging by this Section 9 or to terminate his employment with the Company or any of its affiliates or (b) directly or indirectly employ or offer employment to any person who was employed by the Company or any of its affiliates unless such person shall have been terminated without cause or ceased to be employed by any such entity for a period of at least twelve months. (iii) The Executive will not use or permit his name to be used in connection with any business or enterprise engaged in the business the same as or similar to Company or its affiliates (or any other business engaged in by Company or any of its affiliates). (iv) The Executive will not use the name of the Company or any name similar thereto, but nothing in this clause shall be deemed, by implication, to authorize or permit use of such name after expiration of such period. (v) The Executive will not (a) use or disclose any customer lists or any part thereof to any person, firm, corporation, association or other entity for any reason or purpose whatsoever; (b) assist in obtaining any of the Company's customers for any other similar business; (c) encourage any customer to terminate, change or modify its relationship with the Company; or (d) solicit or divert or attempt to solicit or divert the Company's customers. (vi) The Company shall have the right, subject to applicable law, to inform any other third party that the Company reasonably believes to be, or to 7 8 be contemplating participating with Executive or receiving from the Executive in violation of this Agreement and of the rights of the Company hereunder, that participation by any such third party with the Executive in activities in violation of this Section 9 may give rise to claims by the Company against such third party. (vii) The Executive will not make any public statement, make any unprovoked statements to regulatory agencies, nor take any such actions where the primary purpose of such public statement, unprovoked statement or action is intended to (a) impair the goodwill or the business reputation of the Company or any of its affiliates or (b) benefit a competitor of the Company or to be otherwise detrimental to the material interests of the Company. The primary purpose of this Section 9 is the Company's legitimate interest in protecting its economic welfare and business goodwill. The Company and the Executive further agree that this covenant shall in no way be construed as a mere limitation on competition nor shall it be construed as a restraint on the Executive's right to engage in a common calling. It is expressly understood and agreed that although the Executive and the Company consider the restrictions contained in this Section 9 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against the Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. The failure of the Executive to abide by the provisions of this Section 9 shall be deemed a material breach of this Agreement and, if applicable, shall also cause any payments being made by the Company to Executive pursuant to Section 8(c) to immediately terminate. In the latter event, the Company shall give notice to Executive stating that (i) Executive has breached Section 9, and detailing the nature of such breach, and (ii) the Company is terminating all payments due to Executive, if any, (the date of such notice is referred to herein as the "Notification Date"). Upon written notice from the Executive, received by the Company within five (5) days of the Notification Date, of his intention to commence arbitration pursuant to Section 20 concerning such breach, then retroactive to the Notification Date, the Company will pay all amounts due to Executive pursuant to Section 8(c), if any, into an escrow account to be established at the Company's primary bank until such time as a decision in the arbitration is made; provided, however, that in the event Executive fails to initiate arbitration proceedings within thirty (30) days after the Notification Date, the money placed in escrow shall be immediately returned to the Company. Nothing herein shall be construed as limiting or 8 9 prohibiting the Company from pursuing any other remedies at law or in equity which it may have. 10. PROPRIETARY INFORMATION. Through the second anniversary of the Date of Termination, the Executive shall not use for his personal benefit, or disclose, communicate or divulge to, or use for the direct or indirect benefit of any person, firm, association or company other than the Company, any Proprietary Information. "Proprietary Information" means information relating to the properties, prospects, products, services, customers or operations of the Company or any direct or indirect affiliate thereof that is not generally known, is proprietary to the Company or such affiliate and is made known to the Executive or learned or acquired by the Executive while in the employ of the Company, including, without limitation, information concerning trade secrets of the Company, or any of the Company's affiliates and any improvements relating to the products of the Company in accounting, marketing, selling, leasing, financing and other business methods and techniques. However, Proprietary Information shall not include either (i) at the time of disclosure to the Executive such information that was in the public domain or later entered the public domain other than as a result of a breach of an obligation herein; or (ii) subsequent to disclosure to the Executive, the Executive received such information from a third party under no obligation to maintain such information in confidence, and the third party came into possession of such information other than as a result of a breach of an obligation herein. 11. OWNERSHIP OF PROPRIETARY INFORMATION. The Executive agrees that all Proprietary Information shall be the sole property of the Company and its assigns, and the Company and its assigns shall be the sole owner of all licenses and other rights in connection with such Proprietary Information. At all times, until the second anniversary of the Date of Termination, the Executive will keep in the strictest confidence and trust all Proprietary Information and will not use or disclose such Proprietary Information, or anything relating to such information, without the prior written consent of the Company, except as may be necessary in the ordinary course of performing his duties under this Agreement. 12. DOCUMENTS AND OTHER PROPERTY. All materials or articles of information of any kind furnished to the Executive in the course of his employment hereunder are and shall remain the sole property of the Company; and if the Company requests the return of such information at any time during, upon or after the termination of the Executive's employment hereunder, the Executive shall immediately deliver the same to the Company. The Executive will not, without the prior written consent of the Company, retain any documents, data or property, or any reproduction thereof of any description, belonging to the Company or pertaining to any Proprietary Information. 13. THIRD-PARTY INFORMATION. The Company from time to time receives from third parties confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes ("Third-Party Information"). At all times, the Executive will hold Third-Party Information in 9 10 the strictest confidence and will not disclose or use Third-Party Information except as permitted by the agreement between the Company and such third party. 14. INTELLECTUAL PROPERTY. Any and all products of the same type as those or competitive with those sold by the Company ("Products") made, developed or created by the Executive (whether at the request or suggestion of the Company or otherwise, whether alone or in conjunction with others, and whether during regular hours of work or otherwise) either (i) during the period of this Agreement, or (ii) within a period of two years after the Date of Termination, shall be promptly and fully disclosed by the Executive to the Board and, if such intellectual property was made, developed or created other than pursuant to the Executive's employment hereunder, the Executive shall grant the Company a perpetual, royalty free license to such intellectual property, and if such intellectual property was made, developed or created pursuant to the Executive's employment hereunder, such intellectual property shall be the Company's exclusive property as against the Executive, and the Executive shall promptly deliver to an appropriate representative of the Company as designated by the Board all papers, drawings, models, data and other material relating to any invention made, developed or created by him as aforesaid. The Executive shall, at the request of the Company and without any payment therefor, execute any documents necessary or advisable in the opinion of the Company's counsel to direct issuance of patents or copyrights to the Company with respect to such Products as are to be the Company's exclusive property as against the Executive or to vest in the Company title to such Products as against the Executive. The expense of securing any such patent or copyright shall be borne by the Company. Notwithstanding the above, this Section 14 shall not apply to a Product for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Executive's own time, unless (a) the Product relates (i) directly to the business of the Company, or (ii) to the Executive's actual or demonstrably anticipated research or development, or (b) the Product results from any work performed by the Executive for the Company. 15. EQUITABLE RELIEF. The Executive acknowledges that, in view of the nature of the business in which the Company is engaged, the restrictions contained in Sections 9 through 14, inclusive (the "Restrictions") are reasonable and necessary in order to protect the legitimate interests of the Company, and that any violation thereof would result in irreparable injuries to the Company, and the Executive therefore further acknowledges that, if the Executive violates, or threatens to violate, any of the Restrictions, the Company shall be entitled to obtain from any court of competent jurisdiction, without the posting of any bond or other security, preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies in law or equity to which the Company may be entitled. 16. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first-class certified mail, return receipt requested, postage prepaid, addressed as follows: 10 11 (a) if to the Board or the Company, to: Stuart Entertainment, Inc. 3211 Nebraska Avenue Council Bluffs, Iowa 51501 Attention: President (b) if to the Executive, to: Ronald G. Rudy Such addresses may be changed by written notice sent to the other party at the last recorded address of that party. 17. NO ASSIGNMENT. Except as otherwise expressly provided herein, this Agreement is not assignable by any party and no payment to be made hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or other charge. 18. EXECUTION IN COUNTERPARTS. This Agreement may be executed by the parties hereto in two or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. 19. GOVERNING LAW. This Agreement shall be construed and interpreted in accordance with and governed by the laws of the State of Washington, other than the conflict of laws provisions of such laws. 20. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out of or relating to this Agreement or the breach thereof (including the arbitrability of any controversy or claim), shall be settled by arbitration in the City of Seattle, Washington. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association. The arbitration shall be presided over by three arbitrators who shall be selected in accordance with the labor arbitration rules of the American Arbitration Association. The cost of any arbitration proceeding hereunder shall be borne equally by the Company and the Executive, subject to the arbitrators awarding such costs otherwise. The award of the arbitrators shall be binding upon the parties. Except where expressly authorized by statute, a party shall only be entitled to be awarded damages for actual losses suffered by the injured party plus reasonable costs (including reasonable attorney's fees). Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. 11 12 21. SEVERABILITY. If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement. 22. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the parties hereof, and supersedes all other oral or written agreements or understandings between them regarding the subject matter hereof. No change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto. 23. HEADINGS DESCRIPTIVE. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any of this Agreement. 12 13 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. STUART ENTERTAINMENT, INC. By /S/ ALBERT F. BARBER ----------------------------------------- Albert F. Barber, Vice Chairman and Chief Executive Officer EXECUTIVE By /S/ RONALD G. RUDY ----------------------------------------- Ronald G. Rudy 13 EX-20.1 5 PRESS RELEASE DATED 11/13/96 1 EXHIBIT 20.1 [STUART ENTERTAINMENT, INC. LETTERHEAD] STUART ENTERTAINMENT, INC. [logo] CONTACT: PAUL TUNINK PHONE: 712-323-1488 FOR IMMEDIATE RELEASE STUART ENTERTAINMENT COMPLETES TRADE PRODUCTS ACQUISITION AND FINANCING ARRANGEMENTS COUNCIL BLUFFS, IOWA, November 13, 1996 - Stuart Entertainment, Inc./dba Bingo King (Nasdaq/STUA) today completed transactions for the acquisition of Trade Products, Inc., the private placement of $100 million Senior Subordinated Notes and the arrangement of a $30 million revolving credit facility. The acquisition of Seattle-based Trade Products, the nation's largest maker and marketer of pulltabs, significantly expands Stuart's existing gaming-ticket capabilities and enhances marketing opportunities for both Trade Products and Stuart's core product line of bingo paper, pulltabs and related products. In this transaction, Stuart acquired substantially all of the assets and assumed certain specified liabilities of Trade Products for a total purchase price of $37.2 million, subject to adjustment, plus warrants to purchase 300,000 shares of Stuart's common stock. Trade Products is generally recognized in the industry as the low-cost, most technologically advanced manufacturer of pulltab tickets and as the leader in customer service. With this acquisition, the Company believes that, in addition to being North America's leading manufacturer of a full line of bingo and bingo-related products, it will also be North America's leading manufacturer of pulltab tickets. "We're pleased to combine our resources and capabilities with Stuart Entertainment," said Ron Rudy, chief operating officer of Trade Products. "This is a terrific opportunity for our employees to make a significant contribution towards the future growth of the industry leader. We have known the Stuart management for many years and believe that together we will create a terrific team." The Company also completed a debt refinancing through the issuance of $100 million Senior Subordinated Notes and a new $30 million revolving credit facility. The 12.5% Senior Subordinated Notes mature November 15, 2004. The net proceeds from the note offering will be used to pay the purchase price of the Trade Products acquisition and repay in full all existing credit and term facilities and certain other outstanding debt instruments. The Company has also entered into a new Credit Agreement consisting of a $30 million revolving credit facility. The Company may draw amounts under the new Credit Agreement, subject to availability pursuant to borrowing base requirements. The Company anticipates using the new Credit Agreement to support future growth opportunities. The Company has not drawn on this facility at closing. -more- 2 Our growth strategy focuses on three areas - industry consolidation, international opportunities and electronics products," observed Al Barber, vice chairman and chief executive officer of Stuart Entertainment. "The transaction announced today significantly enhance Stuart Entertainment's ability to quickly capitalize on growth opportunities and enhance shareholder value. Our leadership in our core products of bingo paper and pulltabs gives us a sold but steady business base. With the Trade Products acquisition and the new financing arrangements, we have greater flexibility to take advantage of opportunities not only in North America, but also international markets, where bingo is growing faster than in our primary markers, and in electronics technology, a developing part of the bingo industry. This acquisition and the new financing are key components in our going forward strategy," Barber said. Barber expects a smooth transaction in blending the operations of Stuart and Trade Products and achieving synergies as certain manufacturing operations and administrative functions are consolidated. The Company currently expects the consolidation activities to be substantially completed by the end of the second quarter in 1997. Stuart Entertainment, Inc. is the North America's largest manufacturer of bingo paper, ink markers, and related gaming equipment and supplies, with locations in the United States, Canada and Mexico. Its subsidiaries include Bazaar & Novelty, Canada's largest supplier of bingo paper and related supplies, and Video King, a major supplier of electronic bingo gaming systems, located in Littleton, Colorado. The various forward-looking statements contained herein are based on management's beliefs and assumptions and upon information currently available to management. Whether such forward-looking statements and information ultimately prove to be accurate depends on various uncertainties and future developments that cannot be predicted. The Company undertakes no duty to update the forward-looking statements. -----END PRIVACY-ENHANCED MESSAGE-----