Subsequent Events

Restructuring Support Agreement

On October 20, 2016, the Company entered into the RSA with the Noteholders to support a restructuring on the terms of the Plan. The RSA contemplates that the Company will file for voluntary relief under chapter 11 of the Bankruptcy Code in a Bankruptcy Court on or before December 9, 2016 to implement the Plan in accordance with the term sheet annexed to the RSA (the “Term Sheet”).

The RSA would become effective upon (i) execution by the Company and Noteholders holding, in the aggregate, at least two-thirds of the outstanding aggregate principal amount of the Notes, and (ii) Stone having entered into a PSA for the sale of Properties for a cash purchase price of at least $350 million. Both conditions were satisfied, with Noteholders holding approximately 85.4% of the aggregate principal amount of the Notes executing the RSA and Stone signing the PSA, as indicated below. Pursuant to the terms of the RSA and the Term Sheet, Noteholders and other interest holders will receive treatment under the Plan summarized as follows:


•	The Noteholders will receive their pro rata share of (a) $150 million of the net cash proceeds from the sale of the Properties plus 85% of the net cash proceeds from the sale of the Properties in excess of $350 million, if any, (b) 95% of the common stock in reorganized Stone and (c) $225 million of new 7.5% second lien notes due 2022.


•	Existing common stockholders of Stone will receive their pro rata share of 5% of the common stock in reorganized Stone and warrants for up to 15% of the post-petition equity exercisable upon the Company reaching certain benchmarks pursuant to the terms of the proposed new warrants.


•	All claims of creditors with unsecured claims other than claims by the Noteholders, including vendors, shall be unaltered and will be paid in full in the ordinary course of business to the extent such claims are undisputed. Stone estimates that such unsecured claims are in the range of approximately $17 million to $27 million in the aggregate.

•

Holders of claims arising on account of Stone’s existing revolving credit facility will receive (a)(i) if such holders vote, as a class, to accept the Plan, commitments on terms set forth on Exhibit 1(a) to the Term Sheet, on a pro rata basis, under an amended revolving credit facility, or (ii) if such holders, as a class, do not vote to accept the Plan (or are deemed to reject the Plan), a term loan on terms set forth on Exhibit 1(b) to the Term Sheet, or (b) such other treatment as is acceptable to the Company and the Noteholders and consistent with the Bankruptcy Code, including, but not limited to, section 1129(b) of the Bankruptcy Code.

Each of the foregoing common equity percentages in reorganized Stone is subject to dilution from the exercise of the new warrants described above and a management incentive plan.

The Company has been engaged in discussions and has exchanged proposals with the lenders under its bank credit facility with respect to the treatment of the bank credit facility in a chapter 11 proceeding and a related amendment to the bank credit facility; however, no agreement has been reached. While the Company expects to continue discussions and related negotiations with the lenders under its bank credit facility, there can be no assurance that an agreement will be reached.

The RSA contains certain covenants on the part of the Company and the Noteholders who are signatories to the RSA, including that such Noteholders will vote in favor of the Plan, support the sale of the Properties and otherwise facilitate the restructuring transaction, in each case subject to certain terms and conditions in the RSA. The consummation of the Plan will be subject to customary conditions and other requirements, as well as the sale by Stone of the Properties for a cash purchase price of at least $350 million and approval of the Bankruptcy Court. The RSA also provides for termination by each party, or by either party, upon the occurrence of certain events, including without limitation, termination by the Noteholders upon the failure of the Company to achieve certain milestones set forth in Schedule 1 to the RSA.

Assuming implementation of the Plan, Stone expects that it will eliminate approximately $850 million in principal of outstanding debt and reduce its annual interest payment burden by approximately $46 million.

On November 4, 2016 the Company and the Noteholders entered into the RSA Amendment pursuant to which:

•

Stone will be obligated to, at any time upon the written request of the Noteholders or their counsel, provide in writing to counsel to the Noteholders the good faith estimate of Stone – together with documentation requested by the Noteholders or their counsel – of any cure amounts or other payment obligations of Stone arising or resulting from the assumption of executory contracts or unexpired leases on both a “per contract” basis and in the aggregate;


•	The Noteholders will have the option to terminate the RSA at any time that the Noteholders determine, in their sole discretion, that the total amount of all such payments exceeds an amount acceptable to the Noteholders;


•	The Noteholders will have the unilateral right to extend the automatic termination of the RSA if the restructuring transactions contemplated by the RSA are not consummated by the one-hundredth (100th) calendar day after the Company files for chapter 11 bankruptcy; and


•	Solicitation of noteholders in support of the Plan will commence by November 10, 2016.

Although the Company intends to pursue the restructuring in accordance with the terms set forth in the RSA and the RSA Amendment, there can be no assurance that the Company will be successful in completing a restructuring or any other similar transaction on the terms set forth in the RSA and the RSA Amendment, on different terms or at all.

Purchase and Sale Agreement

On October 20, 2016 (the “Execution Date”), Stone entered into the PSA with Tug Hill. Pursuant to the terms of the PSA, Stone agreed to sell the Properties to Tug Hill (the “Disposition”) for $360 million in cash, subject to customary purchase price adjustments (the “Purchase Price”).

The Disposition has an effective date of June 1, 2016. In connection with the execution of the PSA, Tug Hill deposited $5.0 million in escrow, which amount may be supplemented by an additional $31 million at a later date on certain conditions being met. Upon a closing, the deposit will be credited against the Purchase Price. From the Execution Date through December 19, 2016 (the “Diligence Period”), Tug Hill intends to conduct customary due diligence to assess the aggregate dollar value of any title and environmental defects associated with the Properties. The parties expect to close the Disposition by February 25, 2017, subject to customary closing conditions and approval by the Bankruptcy Court.

The PSA contains customary representations, warranties and covenants. From and after the closing of the Disposition, Stone and Tug Hill, respectively, have agreed to indemnify each other and their respective affiliates against certain losses resulting from any breach of their representations, warranties or covenants contained in the PSA, subject to certain customary limitations and survival periods. Additionally, from and after closing of the Disposition, Stone has agreed to indemnify Tug Hill for certain identified retained liabilities related to the Properties, subject to certain survival periods, and Tug Hill has agreed to indemnify Stone for certain assumed obligations related to the Properties.

The PSA may be terminated, subject to certain exceptions, (i) upon mutual written consent, (ii) if the closing has not occurred by March 1, 2017, (iii) for certain material breaches of representations and warranties or covenants that remain uncured, (iv) if, on or prior to the end of the Diligence Period, title and environmental defect amounts (after application of customary thresholds and deductibles), casualty losses and the value of any assets excluded from the Properties due to the exercise of preferential purchase rights or consents equal or exceed $10 million in the aggregate, (v) if Stone fails to file for bankruptcy on or before December 9, 2016, (vi) if the Bankruptcy Court does not enter an order approving Stone’s assumption of the PSA and certain other matters within 30 days of Stone filing for bankruptcy, (vii) if the Bankruptcy Court does not enter a sale order for the Disposition by February 10, 2017, and (viii) upon the occurrence of certain other events specified in the PSA.